GABRIEL DUERO v. CA AND BERNARDO A. ERADEL 373 SCRA 11; GRN. 131282; January 4, 2002; QUISUMBING, J. FACTS 1.

Sometime in 1988, according to petitioner, private respondent Bemardo Eradel entered and occupied petitioner's land in Baras, San Miguel, Surigao del Sur with an assessed value of P5,240. Petitioner politely informed private respondent that the land was his and requested the latter to vacate the land, but despite repeated demands, private respondent remained steadfast in his refusal to leave the land. On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of Possession and Ownership with Damages and Attorney's Fees against private respondent and two others, Apolinario and Inocencio Ruena. The counsel of the Ruenas asked for extension to file their Answer and was given until July 18, 1995. Meanwhile, petitioner and the Ruenas, entered into a Compromise Agreement in which tthe Ruenas recognized and bound themselves to respect the ownership and possession of Duero. Herein private respondent Eradel was not a party to the agreement. On January 12, 1996, Partial judgment was rendered on the basis of the compromise agreement. Private respondent Eradel was declared in default for failure to file his answer to the complaint. On February 13, 1996, petitioner presented his evidence ex parte. On May 8, 1996, judgment was rendered in favor of the petitioner, and private respondent was ordered to peacefully vacate and turn over the subject lot to petitioner. Private respondent received a copy of the decision on May 25, 1996. On June 10, 1996, private respondent filed a Motion for New Trial, alleging that he has been occupying the land as a tenant of Artemio Laurente, Sr., since 1958, and that he turned over the complaint and summons to Laurente in the honest belief that as landlord, the latter had a better right to the land and was responsible to defend any adverse claim on it. In that motion he stated that he had by then the evidence to prove that he had a better right than petitioner over the land because of his long, continuous and uninterrupted possession as bona-fide tenant-lessee of the land. However, the trial court denied the motion for new trial. Meanwhile, an administrative case between petitioner and applicant-contestants Romeo, Artemio and Jury Laurente, remained pending with the DENR Regional Office in Prosperidad, Agusan del Sur .

13. In a Motion for Reconsideration, private respondent alleged that the RTC had no jurisdiction over the case, since the value of the land was only P5,240 and therefore it was under the jurisdiction of the municipal trial court but the RTC denied the motion for reconsideration. 14. On January 22, 1997, petitioner filed a Motion for Execution, which the RTC granted on January 28. 15. On February 18, 1997, Entry of Judgment was made of record and a writ of execution was issued by the RTC on February 27,1997. 16. On March 12, 1997, private respondent filed his petition for certiorari before the CA. The CA gave due course to the petition, maintaining that private respondent is not estopped from assailing the jurisdiction 'of the RTC, Branch 27 in Tandag, Surigao del Sur, when private respondent filed with said court his Motion for Reconsideration And/Or Annulment of Judgment. Hence, this petition for certiorari. ISSUES 1. Whether the CA gravely abused its discretion when it held that the municipal trial court had jurisdiction, and that private respondent was not estopped from assailing the jurisdiction of the RTC after he had filed several motions before it. Whether the CA erred in holding that private respondent's failure to file an answer to the complaint was justified.

2.

3.

4.

5.

2. HELD

6. 7.

8.

By "grave abuse of discretion" is meant such capricious and whimsical exercise of judgment which is equivalent to an excess or a lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility. But here we find that in its decision holding that the municipal court has jurisdiction over the case and that private respondent was not estopped from questioning the jurisdiction of the RTC, respondent Court of Appeals discussed the facts on which its decision is grounded as well as the law and jurisprudence on the matter. Its action was neither whimsical nor capricious. Private respondent was not estopped from questioning the jurisdiction of the RTC. While participation in all stages of a case before the trial court, including invocation of its authority in asking for affirmative relief, effectively bars a party by estoppel from challenging the court's jurisdiction, estoppel has become an equitable defense that is both substantive and remedial and its successful invocation can bar a right and not merely its equitable enforcement. Hence, estoppel ought to be applied with caution. For estoppel to apply, the action giving rise thereto must be unequivocal and intentional because, if misapplied, estoppel may become a tool of injustice. Under these circumstances, we could not fault the CA in overruling the RTC and in holding that private respondent was not estopped from questioning the jurisdiction of the regional trial court. The fundamental rule is that, the lack of jurisdiction of the court over an action cannot be waived by the parties, or even cured by their silence, acquiescence or even by their express consent. Further, a party may assail the jurisdiction of the court over the action at any stage of the proceedings and even on appeal. The appellate court did not err in saying that the RTC should have declared itself barren of jurisdiction over the action. Even if private respondent actively

9.

10. On July 24, 1996, private respondent filed before the RTC a Petition for Relief from Judgment, reiterating the same allegation in his Motion for New Trial. He averred that he could not be made to vacate the land, pending the determination on who owned the land, and that the judgment of the trial court was void because the heirs of Artemio Laurente, Sr., who are indispensable parties, were not impleaded. 11. On September 24, 1996, Josephine, Ana Soledad and Virginia Laurente, grandchildren of Artemio who were claiming ownership of the land, filed a Motion for Intervention but the RTC denied the intervention. 12. On October 8, 1996, the trial court denied the Petition for Relief from Judgment.

participated in the proceedings before said court, the doctrine of estoppel cannot still be properly invoked against him because the question of lack of jurisdiction may be raised at anytime and at any stage of the action. Precedents tell us that as a general rule, the jurisdiction of a court is not a question of acquiescence as a matter of fact, but an issue of conferment as a matter of law. Also, neither waiver nor estoppel shall apply to confer jurisdiction upon a court, barring highly meritorious and exceptional circumstances. In Javier vs. Court of Appeals, x x x The point simply is that when a party commits error in filing his suit or proceeding in a court that lacks jurisdiction to take cognizance of the same, such act may not at once be deemed sufficient basis of estoppel. It could have been the result of an honest mistake, or of divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party taking such course of action, part of the blame should be placed on the court which shall entertain the suit, thereby lulling the parties into believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an action 'whenever it appears that the court has no jurisdiction over the subject matter.' (Sec. 2, Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction, such judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years from the finality of the same. Indeed, "...the trial court was duty-bound to take judicial notice of the parameters of its jurisdiction and its failure to do so, makes its decision a 'lawless' thing. Since a decision of a court without jurisdiction is null and void, it could logically never become final and executory, hence appeal therefrom by writ of error would be out of the question. Resort by private respondent to a petition for certiorari before the Court of Appeals was in order . In holding that estoppel did not prevent private respondent from questioning the RTC's jurisdiction, the appellate court reiterated the doctrine that estoppel must be applied only in exceptional cases, as its misapplication could result in a miscarriage of justice. Here, we find that petitioner, who claims ownership of a parcel of land, filed his complaint before a court without appropriate jurisdiction. Defendant, a farmer whose tenancy status is still pending before the proper administrative agency concerned, could have moved for dismissal of the case on jurisdictional grounds. But the farmer as defendant therein could not be expected to know the nuances of jurisdiction and related issues. This farmer, who is now the private respondent, ought not to be penalized when he claims that he made an honest mistake when he initially submitted his motions before the RTC, before he realized that the controversy was outside the RTC's cognizance but within the jurisdiction of the municipal trial court. To hold him in estoppel as the RTC did would amount to foreclosing his avenue to obtain a proper resolution of his case. Furthermore, if the RTC's order were to be sustained, he would be evicted from the land prematurely, while the administrative case would remain unresolved. Such eviction on a technicality if allowed could result in an injustice, if it is later found that he has a legal right to till the land he now occupies as tenant-lessee. Having determined that there was no grave abuse of discretion by the appellate court in ruling that private respondent was not estopped from questioning the jurisdiction of the RTC, we need not tarry to consider in detail the second issue. Suffice it to say that, given the circumstances in this case, no error was committed on this score by respondent appellate court. Since the RTC had no jurisdiction over the case, private respondent had justifiable reason in law not to file an answer, aside from the fact that he believed the suit was properly his landlord's concern. WHEREFORE, the petition is DISMISSED.

CEROFERR REALTY CORP. v. CA and ERNESTO SANTIAGO 376 SCRA 144; GRN. 139539; February 5, 2002; PARDO, J. FACTS 1. 2. On March 16, 1994, plaintiff Ceroferr Realty Corporation filed with the RTC a complaint against defendant Ernesto Santiago for damages and injunction, with preliminary injunction. In the complaint, Ceroferr prayed that Santiago and his agents be enjoined from claiming possession and ownership over Lot No. 68 of the Tala Estate Subdivision, Quezon City, that Santiago and his agents be prevented from making use of the vacant lot as a jeepney terminal; that Santiago be ordered to pay Ceroferr P650.00 daily as lost income for the use of the lot until possession is restored to the latter; In his answer, defendant Santiago alleged that the vacant lot referred to in the complaint was within Lot No. 90 of the Tala Estate Subdivision, that he was not claiming any portion of Lot No. 68 claimed by Ceroferr; that he had the legal right to fence Lot No. 90 since this belonged to him, and he had a permit for the purpose; that Ceroferr had no color of right over Lot No. 90 and, hence, was not entitled to an injunction to prevent Santiago from exercising acts of ownership thereon; and that the complaint did not state a cause of action. In the course of the proceedings, an important issue metamorphosed as a result of the conflicting claims of the parties over the vacant lot actually used as a jeepney terminal the exact identity and location thereof. There was a verification survey, followed by a relocation survey, whereby it would appear that the vacant lot is inside Lot No. 68. The outcome of the survey, however, was vigorously objected to by defendant who insisted that the area is inside his lot. Defendant, in his manifestation, adverted to the report of a geodetic engineer. Mariano V. Flotildes, to the effect that the disputed portion is inside the boundaries of Lot No. 90 of the Tala Estate Subdivision which is separate and distinct from Lot No. 68, and that the two lots are separated by a concrete fence. Because of the competing claims of ownership of the parties over the vacant lot, it became inevitable that the eye of the storm centered on the correctness of property boundaries which would necessarily result in an inquiry as to the regularity and validity of the respective titles of the parties. While both parties have been brandishing separate certificates of title, defendant asserted a superior claim as against that of the plaintiff in that, according to defendant, his title has been confirmed through judicial reconstitution proceedings, whereas plaintiffs title does not carry any technical description of the property except only as it is designated in the title as Lot No. 68 of the Tala Estate Subdivision. It thus became clear, at least from the viewpoint of defendant, that the case would no longer merely involve a simple case of collection of damages and injunction which was the main objective of the complaint - but a review of the title of defendant vis--vis that of plaintiff. At this point, defendant filed a motion to dismiss the complaint premised primarily on his contention that the trial court cannot adjudicate the issue of damages without passing over the conflicting claims of ownership of the parties over the disputed portion. On May 14, 1996, the trial court dismissed the case for lack of cause of action and lack of jurisdiction. The court held that plaintiff was in effect impugning the title of defendant which could not be done in the case for damages and injunction before it. The court cited the hoary rule that a Torens certificate of title cannot be the subject of collateral attack but can only be challenged through a direct proceeding. It concluded that it could not proceed to decide plaintiffs claim for damages and injunction for lack of jurisdiction because its judgment would depend upon a determination of the validity of defendants title and the identity of the 9. 10. 8.

land covered by it. The plaintiff appealed to the CA insisting that the complaint stated a valid cause of action which was determinable from the face thereof, and that, in any event, the trial court could proceed to try and decide the case before it since, under present law, there is now no substantial distinction between the general jurisdiction vested in a regional trial court and its limited jurisdiction when acting as a land registration court, citing Ignacio v. Court of Appeals 246 SCRA 242 (1995). On March 26, 1999, the CA dismissed the appeal. On May 13, 1999, petitioner filed with the CA a motion for reconsideration of the decision.

11. OnJuly 29, 1999, the CA denied petitioners motion for reconsideration for lack of merit. Hence, this appeal.

3.

ISSUES 1. 2. HELD The petition was granted. 1. The rules of procedure require that the complaint must state a concise statement of the ultimate facts or the essential facts constituting the plaintiffs cause of action. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action inadequate. A complaint states a cause of action only when it has its three indispensable elements, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. If these elements are not extant, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. These elements are present in the case at bar. The complaint alleged that petitioner Ceroferr owned Lot 68 and used a portion of it as a jeepney terminal. The complaint further alleged that respondent Santiago claimed the portion of Lot 68 used as a jeepney terminal since he claimed that the jeepney terminal was within Lot 90 owned by him. Despite clarification from petitioner Ceroferr that the jeepney terminal was within Lot 68 and not within Lot 90, respondent Santiago persisted in his plans to have the area fenced. He applied for and was issued a fencing permit by the Building Official, Quezon City. It was even alleged in the complaint that respondent- Santiago was preventing petitioner Ceroferr and its agents from entering the property under threats of bodily harm and destroying existing structures thereon. Whether Ceroferrs complaint states a sufficient cause of action. Whether the trial court has jurisdiction to determine the identity and location of the vacant lot involved in the case.

4.

5.

6.

7.

A defendant who moves to dismiss the complaint on the ground of lack of cause of action, as in this case, hypothetically admits all the averments thereof. The test of sufficiency of the facts found in a complaint as constituting a cause of action is whether or not admitting the facts alleged the court can render a valid judgement upon the same in accordance with the prayer thereof. The hypothetical admission extends to the relevant and material facts well pleaded in the complaint and inferences fairly deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by which the complaint can be maintained, the same should not be dismissed regardless of the defense that may be assessed by the defendants. In this case, petitioner Ceroferrs cause of action has been sufficiently averred in the complaint. If it were admitted that the right of ownership of petitioner Ceroferr to the peaceful use and possession of Lot 68 was violated by respondent Santiagos act of encroachment and fencing of the same, then petitioner Ceroferr would be entitled to damages. 2. On the issue of jurisdiction, we hold that the trial court has jurisdiction to determine the identity and location of the vacant lot in question. Jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. The jurisdiction of a court over the subject matter is determined by the allegations of the complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant. While the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless, the party raising such question may be estopped if he has actively taken part in the very proceedings which he questions and he only objects to the courts jurisdiction because the judgment or the order subsequently rendered is adverse to him. In this case, respondent Santiago may be considered estopped to question the jurisdiction of the trial court for he took an active part in the case. In his answer, respondent Santiago did not question the jurisdiction of the trial court to grant the reliefs prayed for in the complaint. His geodetic engineers were present in the first and second surveys that the LRA conducted. It was only when the second survey report showed results adverse to his case that he submitted a motion to dismiss. Both parties in this case claim that the vacant lot is within their property. This is an issue that can be best resolved by the trial court in the exercise of its general jurisdiction. After the land has been originally registered, the Court of Land Registration ceases to have jurisdiction over contests concerning the location of boundary lines. In such case, the action in personam has to be instituted before an ordinary court of general jurisdiction. The regional trial court has jurisdiction to determine the precise identity and location of the vacant lot used as a jeepney terminal.

Petitioner Antonio Donato is the registered owner of a real property in Ciriaco Tuason Street, San Andres, Manila, covered by Transfer Certificate of Title No. 131793 issued by the Register of Deeds of the City of Manila on November 24, 1978. On June 7, 1994, petitioner filed a complaint before the Metropolitan Trial Court (Branch 26) of Manila (MeTC) for forcible entry and unlawful detainer against 43 named defendants and all unknown occupants of the subject property.[3] Petitioner alleges that: private respondents had oral contracts of lease that expired at the end of each month but were impliedly renewed under the same terms by mere acquiescence or tolerance; sometime in 1992, they stopped paying rent; on April 7, 1994, petitioner sent them a written demand to vacate; the non-compliance with said demand letter constrained him to file the ejectment case against them.[4] Of the 43 named defendants, only 20 (private respondents,[5] for brevity) filed a consolidated Answer dated June 29, 1994 wherein they denied non-payment of rentals. They contend that they cannot be evicted because the Urban Land Reform Law guarantees security of tenure and priority right to purchase the subject property; and that there was a negotiation for the purchase of the lots occupied by them but when the negotiation reached a passive stage, they decided to continue payment of rentals and tendered payment to petitioners counsel and thereafter initiated a petition for consignation of the rentals in Civil Case No. 144049 while they await the outcome of the negotiation to purchase. Following trial under the Rule on Summary Procedure, the MeTC rendered judgment on September 19, 1994 against the 23 non-answering defendants, ordering them to vacate the premises occupied by each of them, and to pay jointly and severally P10,000.00 per month from the date they last paid their rent until the date they actually vacate, plus interest thereon at the legal rate allowed by law, as well asP10,000.00 as attorneys fees and the costs of the suit. As to the 20 private respondents, the MeTCissued a separate judgment[6] on the same day sustaining their rights under the Land Reform Law, declaring petitioners cause of action as not duly warranted by the facts and circumstances of the case and dismissing the case without prejudice. Not satisfied with the judgment dismissing the complaint as against the private respondents, petitioner appealed to the Regional Trial Court (Branch 47) of Manila (RTC).[7] In a Decision[8] dated July 5, 1996, the RTC sustained the decision of the MeTC. Undaunted, petitioner filed a petition for review with the Court of Appeals (CA for brevity), docketed as CA-G.R. SP No. 41394. In a Resolution dated March 21, 1997, the CA dismissed the petition on two grounds: (a) the certification of non-forum shopping was signed by petitioners counsel and not by petitioner himself, in violation of Revised Circular No. 28-91;[9] and, (b) the only annex to the petition is a certified copy of the questioned decision but copies of the pleadings and other material portions of the record as would support the allegations of the petition are not annexed, contrary to Section 3, paragraph b, Rule 6 of the Revised Internal Rules of the Court of Appeals (RIRCA).[10] On April 17, 1997, petitioner filed a Motion for Reconsideration,[11] attaching thereto a photocopy of the certification of non-forum shopping duly signed by petitioner himself[12] and the relevant records of the MeTC and the RTC.[13] Five days later, or on April 22, 1997, petitioner filed a Supplement[14] to his motion for reconsideration submitting the duly authenticated original of the certification of non-forum shopping signed by petitioner.[15] In a Resolution[16] dated June 23, 1997 the CA denied petitioners motion for reconsideration and its supplement, ruling that petitioners subsequent compliance did not cure the defect in the instant petition.[17] Hence, the present petition anchored on the following grounds:

ANTONIO T. DONATO v. CA, FILOMENO ARCEPE et al. 417 SCRA 216; G.R. No. 129638; December 8, 2003;AUSTRIA-MARTINEZ, J. Before us is a petition for review on certiorari filed on July 17, 1997 which should be a petition forcertiorari under Rule 65 of the Rules of Court. It assails the Resolutions[1] dated March 21, 1997 andJune 23, 1997 issued by the Court of Appeals in CA-G.R. SP No. 41394.[2] FACTS

I. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE PETITION BASED ON HYPER-TECHNICAL GROUNDS BECAUSE: A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SUPREME COURT CIRCULAR NO. 28-91. MORE, PETITIONER SUBSEQUENTLY SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS A DULY AUTHENTICATED CERTIFICATE OF NON-FORUM SHOPPING WHICH HE HIMSELF SIGNED AND EXECUTED IN THE UNITED STATES. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SECTION 3, RULE 6 OF THE REVISED INTERNAL RULES OF THE COURT OF APPEALS. MORE, PETITIONER SUBSEQUENTLY SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS COPIES OF THE RELEVANT DOCUMENTS IN THE CASES BELOW. PETITIONER HAS A MERITORIOUS APPEAL, AND HE STANDS TO LOSE SUBSTANTIAL PROPERTY IF THE APPEAL IS NOT GIVEN DUE COURSE. THE RULES OF PROCEDURE MUST BE LIBERALLY CONSTRUED TO DO SUBSTANTIAL JUSTICE. E.

THAT PRIVATE RESPONDENTS NON-COMPLIANCE WITH THE CONDITIONS UNDER THE LAW RESULT IN THE WAIVER OF PROTECTION AGAINST EVICTION. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN NOT RULING THAT PRIVATE RESPONDENTS CANNOT BE ENTITLED TO PROTECTION UNDER P.D. 2016 SINCE THE GOVERNMENT HAS NO INTENTION OF ACQUIRING THE SUBJECT PROPERTY. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN FINDING THAT THERE IS AN ON-GOING NEGOTIATION FOR THE SALE OF THE SUBJECT PROPERTY AND THAT IT RENDERS THE EVICTION OF PRIVATE RESPONDENTS PREMATURE. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED CASE FOR CONSIGNATION DOES NOT BAR THE EVICTION OF PRIVATE RESPONDENTS.

F.

B.

G.

C.

IV. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS SHOULD PAY PETITIONER A REASONABLE COMPENSATION FOR THEIR USE AND OCCUPANCY OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT LEAST P10,000.00 PER MONTH FROM THE DATE THEY LAST PAID RENT UNTIL THE TIME THEY ACTUALLY VACATE THE SAME, WITH LEGAL INTEREST AT THE MAXIMUM RATE ALLOWED BY LAW UNTIL PAID. V. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS SHOULD PAY PETITIONER ATTORNEYS FEES AND EXPENSES OF LITIGATION OF AT LEAST P20,000.00, PLUS COSTS.[18] Petitioner submits that a relaxation of the rigid rules of technical procedure is called for in view of the attendant circumstances showing that the objectives of the rule on certification of non-forum shopping and the rule requiring material portions of the record be attached to the petition have not been glaringly violated and, more importantly, the petition is meritorious. The proper recourse of an aggrieved party from a decision of the CA is a petition for review oncertiorari under Rule 45 of the Rules of Court. However, if the error, subject of the recourse, is one of jurisdiction, or the act complained of was perpetrated by a court with grave abuse of discretion amounting to lack or excess of jurisdiction, the proper remedy available to the aggrieved party is a petition for certiorari under Rule 65 of the said Rules. As enunciated by the Court in Fortich vs. Corona:[19] Anent the first issue, in order to determine whether the recourse of petitioners is proper or not, it is necessary to draw a line between an error of judgment and an error of jurisdiction. An error of judgment is one which the court may commit in the exercise of its jurisdiction, and which error is reviewable only by an appeal. On the other hand, an error of jurisdiction is one where the act complained of was issued by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack or in excess of jurisdiction. This error is correctible only by the extraordinary writ of certiorari.[20] (Emphasis supplied).

II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT ALL THE ELEMENTS OF UNLAWFUL DETAINER ARE PRESENT IN THE CASE AT BAR. III. RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT THE RTC MANILA, BRANCH 47, COMMITTED REVERSIBLE ERROR IN AFFIRMING THE FINDING OF MTC MANILA, BRANCH 26, THAT PRIVATE RESPONDENTS CANNOT BE EJECTED FROM THE SUBJECT PROPERTY WITHOUT VIOLATING THEIR SECURITY OF TENURE EVEN IF THE TERM OF THE LEASE IS MONTH-TO-MONTH WHICH EXPIRES AT THE END OF EACH MONTH. IN THIS REGARD, A. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN NOT RULING THAT TENANTS UNDER P.D. 1517 MAY BE EVICTED FOR NONPAYMENT OF RENT, TERMINATION OF LEASE OR OTHER GROUNDS FOR EJECTMENT. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED PRIORITY RIGHT TO BUY THE LOT THEY OCCUPY DOES NOT APPLY WHERE THE LANDOWNER DOES NOT INTEND TO SELL THE SUBJECT PROPERTY, AS IN THE CASE AT BAR. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN RULING THAT THE SUBJECT PROPERTY IS LOCATED WITHIN A ZONAL IMPROVEMENT AREA OR APD. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILACOMMITTED REVERSIBLE ERROR IN NOT RULING

B.

C.

D.

Inasmuch as the present petition principally assails the dismissal of the petition on ground of procedural flaws involving the jurisdiction of the court a quo to entertain the petition, it falls within the ambit of a special civil action for certiorari under Rule 65 of the Rules of Court. At the time the instant petition for certiorari was filed, i.e., on July 17, 1997, the prevailing rule is the newly promulgated 1997 Rules of Civil Procedure. However, considering that the CA Resolution being assailed was rendered on March 21, 1997, the applicable rule is the three-month reglementary period, established by jurisprudence.[21] Petitioner received notice of the assailed CA Resolution dismissing his petition for review on April 4, 1997. He filed his motion reconsideration on April 17, 1997, using up only thirteen days of the 90-day period. Petitioner received the CA Resolution denying his motion on July 3, 1997 and fourteen days later, or on July 17, 1997, he filed a motion for 30-day extension of time to file a petition for review which was granted by us; and petitioner duly filed his petition on August 15, 1997, which is well-within the period of extension granted to him. We now go to the merits of the case. We find the instant petition partly meritorious. The requirement regarding the need for a certification of non-forum shopping in cases filed before the CA and the corresponding sanction for non-compliance thereto are found in the then prevailing Revised Circular No. 28-91.[22] It provides that the petitioner himself must make the certification against forum shopping and a violation thereof shall be a cause for the summary dismissal of the multiple petition or complaint. The rationale for the rule of personal execution of the certification by the petitioner himself is that it is only the petitioner who has actual knowledge of whether or not he has initiated similar actions or proceedings in other courts or tribunals; even counsel of record may be unaware of such fact.[23] The Court has ruled that with respect to the contents of the certification, the rule on substantial compliance may be availed of. This is so because the requirement of strict compliance with the rule regarding the certification of non-forum shopping simply underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances.[24] The petition for review filed before the CA contains a certification against forum shopping but said certification was signed by petitioners counsel. In submitting the certification of non-forum shopping duly signed by himself in his motion for reconsideration,[25] petitioner has aptly drawn the Courts attention to the physical impossibility of filing the petition for review within the 15 -day reglementary period to appeal considering that he is a resident of 1125 South Jefferson Street, Roanoke, Virginia, U.S.A. were he to personally accomplish and sign the certification. We fully agree with petitioner that it was physically impossible for the petition to have been prepared and sent to the petitioner in the United States, for him to travel from Virginia, U.S.A. to the nearest Philippine Consulate in Washington, D.C., U.S.A., in order to sign the certification before the Philippine Consul, and for him to send back the petition to the Philippines within the 15dayreglementary period. Thus, we find that petitioner has adequately explained his failure to personally sign the certification which justifies relaxation of the rule. We have stressed that the rules on forum shopping, which were precisely designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective[26] which is simply to prohibit and penalize the evils of forum-shopping.[27] The subsequent filing of the certification duly signed by the petitioner himself should thus be deemed substantial compliance, pro hac vice. In like manner, the failure of the petitioner to comply with Section 3, paragraph b, Rule 6 of the

RIRCA, that is, to append to his petition copies of the pleadings and other material portions of the records as would support the petition, does not justify the outright dismissal of the petition. It must be emphasized that the RIRCA gives the appellate court a certain leeway to require parties to submit additional documents as may be necessary in the interest of substantial justice. Under Section 3, paragraph d of Rule 3 of the RIRCA,[28] the CA may require the parties to complete the annexes as the court deems necessary, and if the petition is given due course, the CA may require the elevation of a complete record of the case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA.[29] At any rate, petitioner attached copies of the pleadings and other material portions of the records below with his motion for reconsideration.[30] In Jaro vs. Court of Appeals,[31] the Court reiterated the doctrine laid down in Cusi-Hernandez vs. Diaz[32] and Piglas-Kamao vs. National Labor Relations Commission[33]that subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance which calls for the relaxation of the rules of procedure. We find no cogent reason to depart from this doctrine. Truly, in dismissing the petition for review, the CA had committed grave abuse of discretion amounting to lack of jurisdiction in putting a premium on technicalities at the expense of a just resolution of the case. Needless to stress, "a litigation is not a game of technicalities."[34] When technicality deserts its function of being an aid to justice, the Court is justified in exempting from its operations a particular case.[35] Technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable objective, granting substantial justice is an even more urgent ideal.[36] The Courts pronouncement in Republic vs. Court of Appeals[37] is worth echoing: cases should be determined on the merits, after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some procedural imperfections. In that way, the ends of justice would be better served.[38] Thus, what should guide judicial action is that a party litigant is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor or property on mere technicalities.[39] This guideline is especially true when the petitioner has satisfactorily explained the lapse and fulfilled the requirements in his motion for reconsideration,[40] as in this case. In addition, petitioner prays that we decide the present petition on the merits without need of remanding the case to the CA. He insists that all the elements of unlawful detainer are present in the case. He further argues that the alleged priority right to buy the lot they occupy does not apply where the landowner does not intend to sell the subject property, as in the case; that respondents cannot be entitled to protection under P.D. No. 2016 since the government has no intention of acquiring the subject property, nor is the subject property located within a zonal improvement area; and, that assuming that there is a negotiation for the sale of the subject property or a pending case for consignation of rentals, these do not bar the eviction of respondents. We are not persuaded. We shall refrain from ruling on the foregoing issues in the present petition forcertiorari. The issues involved are factual issues which inevitably require the weighing of evidence. These are matters that are beyond the province of this Court in a special civil action for certiorari. These issues are best addressed to the CA in the petition for review filed before it. As an appellate court, it is empowered to require parties to submit additional documents, as it may find necessary, or to receive evidence, to promote the ends of justice, pursuant to the last paragraph of Section 9, B.P.Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, to wit: The Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings.

WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated March 21, 1997 and June 23, 1997 of the Court of Appeals in CA-G.R. SP No. 41394 are REVERSED and SET ASIDE. The case is REMANDED to the Court of Appeals for further proceedings in CA-G.R. No. 41394, entitled, Antonio T.Donato vs. Hon. Judge of the Regional Trial Court of Manila, Branch 47, Filomeno Arcepe, et al. SO ORDERED. Puno, (Chairman), Quisumbing, Callejo, Sr., and Tinga, JJ., concur. ROXAS v. CA 391 SCRA 351 G.R. No. 138955 October 29, 2002

with malice afterthought; and by way of special and affirmative defense alleged that there is no cause of action and therefore, the complaint must be dismissed; and by way of counterclaim seeks moral and exemplary damages in the total amount of P200,000.00 and an award of attorneys fee in the amount of P50,000.00. After the requisite preliminary conference and the submission of affidavits and position papers by both parties, Hon. Judge Jerry B. Gonzales of MeTC, Marikina City, Branch 76, dismissed the complaint on the ground of lack of jurisdiction. In an order dated November 20, 1996, Judge Gonzales ratiocinated: This is a clear case of ejectment through accion publiciana, jurisdiction of which belongs to the Regional Trial Court because the cause of action is tolerance. The Honorable Supreme Court in the case of Magin vs. Avelino,4 127 SCRA 602, said: "Where the possession of the land by another is due to tolerance of owner the action for ejectment is accion publiciana, not unlawful detainer or forcible entry." Under the above doctrine, the demand being that of terminating possession allowed by tolerance of the alleged owner, this Court has no jurisdiction to try the case.5 Aggrieved, Manotok Realty, Inc. appealed the matter before the Regional Trial Court of Marikina, Branch 273. The RTC ruled for Manotok Realty, Inc. holding that the MeTC had jurisdiction to hear and decide the case as "the complaint is one for unlawful detainer" as clearly alleged in the complaint, "and not for accion publiciana as incorrectly ruled by the lower court."6 The RTC disposed of the case as follows: WHEREFORE, foregoing premises considered, the judgement appealed from is hereby REVERSED and SET ASIDE. Judgment is hereby rendered in favor of plaintiff-appellant and against defendant-appellee Amparo Roxas, ordering the latter and all persons claiming rights under her: 1) to immediately vacate and surrender the possession of the premises in question described in paragraph 3 of the complaint; 2) to pay plaintiff-appellant the amount of P2,000.00 per month as reasonable compensation for the use and occupation of the subject premises from November 4, 1995 up to the time the premises in question is fully vacated, and possession thereof is surrendered to plaintiff-appellant; 3) to pay plaintiff-appellant the sum of TEN THOUSAND (P10,000.00) PESOS as reasonable attorneys fees, and the costs of suit. SO ORDERED.7 The reversal of the MeTC order prompted Amparo Roxas to elevate the matter to the Court of Appeals for review under Rule 42. However, the appellate court affirmed the aforequoted RTC decision opining that Amparos reliance on Velez vs. Avelino 8 is misplaced for the latter partakes of a different factual setting. The RTC of Marikina had found, inter alia: In this particular case, the private respondents from the very beginning occupied the subject premises without any contract and constructed thereon houses sans any building permits. The Court described them as squatters and characterized their possession as one of tolerancein the case at bench, the petitioner was not a squatter but a lawful possessor of the property by virtue of a contract to sell duly entered into by the petitioner and private respondent. Her occupation became illegal only upon her refusal to vacate despite the cancellation of the contract to sell and a demand letter dated August 3, 1995 for her to vacate.

AMPARO ROXAS, petitioner, vs. HON. COURT OF APPEALS, and MANOTOK REALTY, INC., respondents. DECISION QUISUMBING, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the decision1 of the Honorable Court of Appeals in CA-G.R. SP No. 44650. The CA had affirmed that of the Regional Trial Court2 of Marikina, Branch 273, in SCA No. 97-198-MK, which earlier overturned the order3 of the Metropolitan Trial Court of Marikina, Branch 76, in Civil Case No. 966235, for unlawful detainer. The factual antecedents as found by the Court of Appeals are as follows: A complaint for unlawful detainer was filed by herein private respondent Manotok Realty, Inc. against herein petitioner Amparo Roxas before the Metropolitan Trial Court of Marikina, Branch 76. Manotok Realty, Inc. alleged in its complaint that: it is the registered owner of a parcel of land located at the Manotok-Ramos Subdivision IX, City of Marikina, Metro Manila, known as Lot 14, Block 9 duly covered under Transfer Certificate of Title No. 100498; that sometime on September 18, 1961, plaintiff and defendant entered into a Contract to Sell covering the subject property, however, on September 14, 1973, plaintiff notarially rescinded and cancelled the contract as of June 25, 1966 for defendants failure to comply with the terms thereof, specifically for her failure to pay the stipulated monthly payments; that despite receipt of said notice of cancellation however, defendant continued in her possession and occupation of subject parcel of land without any legal basis except by mere tolerance of plaintiff; that defendant since and from that time of the service of the notice of rescission and the demand to vacate on September 14, 1973, defendant has possessed and occupied said property without making any payment to plaintiff of such reasonable compensation for her use and occupancy thereof; that on August 3, 1995, plaintiff needing said property for its own use, made a final demand to defendant, through counsel, to vacate subject property within three (3) months from receipt thereof; that notwithstanding however her receipt of said final demand and the lapse of the three (3) months period within which to vacate, defendant unlawfully failed and refused to vacate the same without legal basis. In her answer, Amparo Roxas denied the material allegations of the complaint, and by way of special and affirmative defenses, alleged that the notice of cancellation has not been received by defendant hence, a condition precedent has not been complied with, thus subject to dismissal; that she has complied with all the terms and conditions of the Contract to Sell, but Manotok Realty, Inc. has not been recording defendants compliance, amounting to plaintiffs deali ng in bad faith and

While in the Velez case, supra, there was no contract, express or implied, at the start, in the case at bench, there was such an express contract to sell that governed the relationship between the petitioner and private respondent Accordingly, it is imperative in a case of unlawful detainer that the incipient occupancy is founded on some legal authority such as an express or implied contract, which however, has expired. In the Velez case supra, there was no expiration or termination to speak of because there was really no contract in the first place, whereas, in the instant case there was.9 The aforesaid finding was upheld by the Court of Appeals. Hence, this petition for review on certiorari raising the lone issue of: lawp!1.net WHETHER OR NOT THE REGULAR COURT HAS JURISDICTION TO TRY AND HEAR THE INSTANT CASE.10 While this petition for review does not assign any specific error committed by the court a quo in affirming the decision of the RTC, what petitioner raises is the question of jurisdiction of the regular courts of justice over the subject matter of this case. According to her petition,11 the matter involved in the present petition falls squarely within the jurisdiction of an administrative agency, namely the Housing and Land Use Regulatory Board (HLURB).12 She explains that "this is for the simple reason that the issue between the parties is the determination of whether or not the terms and conditions of their contract to sell are violated." She adds that she is one of the buyers on installment of a subdivision lot in private respondents subdivision. For Manotok Realty Inc. is the subdivision owner and/or developer. Consequently, according to petitioner, any question that may arise regarding their contract, be it for non-payment of amortization, specific performance, or in general, violation of any term or condition thereof, including a special instance of ejectment13 if proper, should be resolved before the HLURB by a proper initiatory pleading filed thereat.14 Moreover, petitioner Amparo Roxas reiterated in her memorandum15 that although the complaint has been framed to be one for unlawful detainer, the truth is that the matter involves a dispute between a subdivision owner/developer and a subdivision lot buyer. She further asserts that she could not be estopped from raising the question of lack of jurisdiction of the courts to try and hear the case because, in her position paper filed with the MeTC, she has already raised the argument that the matter was cognizable by the HLURB. Respondent Manotok Realty, Inc., maintains the contrary, to wit, that the settled rule is that the question of jurisdiction must be raised before the inferior court. Otherwise, petitioner is barred by estoppel or even laches. Respondent contends that in the determination of whether or not an inferior court has jurisdiction over ejectment suits, what determines the nature of the action as well as the court that has jurisdiction over the case are the allegations in the complaint. Citing Sumulong vs. CA,16 private respondent avers that the cause of action in a complaint is not what the designation of the complaint states, but what the allegations in the body of the complaint define or prescribe. Private respondent claims that the CA correctly pointed out that the complaint expressly provides that the case is one for unlawful detainer and not an accion publiciana. In our view, the following issues now appear for the Courts resolution: (1) whether petitioner could still raise the issue of jurisdiction at this stage of the proceedings; and (2) whether the instant case falls within the exclusive jurisdiction of the HLURB. Considering the circumstances of the cases, including the averments of the parties, we find the present petition without merit. On the first issue, we hold that petitioner is already estopped from raising the issue of jurisdiction. What she raised in her position paper as a special and affirmative defense was the purported failure of the complaint to state a cause of action, arising from an alleged failure to exhaust

administrative remedies before the HLURB as a condition precedent to filing a case in court. This is not an explicit attack on the courts jurisdiction over the subject matter of the complaint, but merely a claim for the need to go through an alleged jurisdictional requirement, namely exhaustion of administrative remedies. Granted that she placed MeTCs jurisdiction at issue, on the suppositio n that it is the HLURB that has jurisdiction over Manotoks complaint below, she abandoned her theory after she obtained a favorable judgment at the MeTC. She chose not to appeal the MeTCs decision and instead consistently adopted in her pleadings before the RTC and CA, the MeTCs ruling that the action is one for accion publiciana. Nowhere in her pleadings before the RTC and CA did she raise the argument that jurisdiction properly lies with the HLURB. As earlier mentioned, it was only in her present petition with this Court that she squarely asserted for the first time that the HLURB has exclusive jurisdiction over the instant case. Indeed, the general rule is that a question of jurisdiction may be raised at any time, even on appeal, provided that doing so does not result in a mockery of the tenets of fair play.17When, however, a party adopts a particular theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal.18Where the case was tried by the lower court and the parties on a certain theory, it will be reviewed and decided on that theory, insofar as the pleadings, liberally construed, permit, and not be approached from a different point of view.19 Petitioner is bound by the theory behind her arguments before the RTC and CA that the case is properly an accion publiciana as the cause of action arises from the termination of possession by mere tolerance. Her assertion now that the issue involves the determination of whether or not the terms and conditions of the contract to sell have been violated by private respondent, which must be decided by the HLURB, constitutes a change of theory that could require presentation of further evidence. Given this premise, the Court cannot countenance petitioners act of adopting inconsistent postures by attacking the jurisdiction of the regular courts to which she has submitted, voluntarily. Estoppel bars her from doing so.1avvphil.net Nevertheless, to avoid further delay in this case, let us resolve the second issue of whether the HLURB has the exclusive primary jurisdiction to try and hear the instant case.20 In support of her position, petitioner cites Sec. 1 of P.D. 1344,21 to wit: Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide the cases of the following nature: a. Unsound real estate business practices; b. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and c. Cases involving specific performance of contractual and statutory obligationsfiled by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. In our view, the mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have consistently held that the concerned administrative agency, the National Housing Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and statutory obligations.

Thus, in Arranza vs. B.F. Homes, Inc.,22 we sustained the HLURBs jurisdiction over petitioners complaint for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. Also, in Que vs. CA,23 we noted that: the complaint against Que is distinct from the complaint against GDREC and its officers before the HLURB. The first basically pertains to non-performance by the buyer of her obligations to Klaver, whereas the second deals with non-performance by the seller of its own obligations to the buyer, such that Klaver properly sued them before different fora. Accordingly, the second complaint by Klaver against GDREC and its officers for unsound real estate practices consisting in their unwarranted delay in the delivery of Unit No. 1902-A to him was properly lodged with the HLURB. Moreover, in Siasoco vs. Narvaja,24we ruled that it is the HLURB, not the trial court that has jurisdiction over complaints for specific performance filed against subdivision developers to compel the latter to execute deeds of absolute sale and to deliver the certificates of titles to buyers. But the antecedent circumstances to the present petition are in stark contrast to those in the cited cases of Arranza and Que. Perusal of paragraphs (a), (b), and (c) of Sec. 1, P.D. 1344 abovecited, vis-vis the allegations of the complaint25 for ejectment filed by Manotok Realty, Inc. with the MeTC, shows clearly that the HLURB has no jurisdiction over the complaint. Note particularly pars. (b) and (c) as worded, where the HLURBs jurisdiction concerns cases commenced by subdivision lot or condominium unit buyers. As to par. (a), concerning "unsound real estate practices," it would appear that the logical complainant would be the buyers and customers against the sellers (subdivision owners and developers or condominium builders and realtors), and not vice versa. Petitioners reliance on Francel Realty Corporation vs. CA, is misplaced. In that case, the complaint for unlawful detainer was premised on the "failure of the buyer on installment basis of real property to pay based on the right to stop paying monthly amortizations under P.D. 957."26 That involves, "a determinative questionexclusively cognizable by the HLURB," i.e., a determination of the rights and obligations of parties in a sale of real estate under P.D. 957, not P.D. 1344. Private respondent therein, Francisco Sycip, in fact, filed earlier a complaint against Francel Realty Corp. for "unsound real estate business practices" with the HLURB. Thus, per Mendoza, J., "Petitioners cause of action against private respondent [Sycip] should instead be filed as a counterclaim in HLURB Case No. REM-07-9004-80 in accordance with Rule 6, S.6 of the Rules of Court"27 That situation does not obtain in the present case. Petitioner Amparo Roxas attempt to bring the case within HLURBs jurisdiction, by belatedly asserting that the matter involved is the determination of whether or not the terms and conditions of the contract to sell between the parties have been violated, would contravene settled jural principles. First, the jurisdiction of a court over the subject matter is determined by the allegations of the complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant.28 Since there is no dispute that the allegations of the complaint filed below by Manotok Realty, Inc., sufficiently describe unlawful detainer, the MeTC of Marikina properly acquired jurisdiction over the subject matter thereof. Second, the cause of action for unlawful detainer between the present parties springs from the failure of petitioner to vacate the premises upon lawful demand of the owner, the private respondent. For petitioners possession of the land in question is allegedly by mere tolerance or permission. Our ruling in Banco de Oro Savings and Mortgage Bank vs. Court of Appeals29 is demonstrably applicable:

A person who occupies the land of another at the latters tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which, a summary action for ejectment is the proper remedy against him. WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 44650 is AFFIRMED. Costs against petitioner. SO ORDERED. Bellosillo, (Chairman), Mendoza, and Austria-Martinez, JJ., concur. Callejo, Sr., J., no part. Prior professional relationship to a party. ASIA'S EMERGING DRAGON v. DOTC 552 SCRA 59, 91

G.R. No. 169914

April 18, 2008

ASIA'S EMERGING DRAGON CORPORATION, petitioner, vs. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO R. MENDOZA and MANILA INTERNATIONAL AIRPORT AUTHORITY, respondents. x ----------------------------------------- x G.R. No. 174166 April 18, 2008

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON. COURT OF APPEALS and SALACNIB BATERINA, respondents. DECISION CHICO-NAZARIO, J.: This Court is still continuously besieged by Petitions arising from the awarding of the Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) Project to the Philippine International Air Terminals Co., Inc. (PIATCO), despite the promulgation by this Court of Decisions and Resolutions in two cases, Agan, Jr. v. Philippine International Air Terminals Co., Inc.1 and Republic v. Gingoyon,2 which already resolved the more basic and immediate issues arising from the said award. The sheer magnitude of the project, the substantial cost of its building, the expected high profits from its operations, and its remarkable impact on the Philippine economy, consequently raised significant interest in the project from various quarters. Once more, two new Petitions concerning the NAIA IPT III Project are before this Court. It is only appropriate, however, that the Court first recounts its factual and legal findings in Agan and Gingoyon to ascertain that its ruling in the Petitions at bar shall be consistent and in accordance therewith. Agan, Jr. v. Philippine International Air Terminals Co., Inc. (G.R. Nos. 155001, 155547, and 155661) Already established and incontrovertible are the following facts in Agan: In August 1989, the [Department of Trade and Communications (DOTC)] engaged the services of

Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans and development plans; and second, presentation of the preliminary design of the passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989. Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. To signify their commitment to pursue the project, they formed the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on September 15, 1993. On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/[Manila International Airport Authority (MIAA)] for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law). On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project. On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National Economic and Development Authority (NEDA). A revised proposal, however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment Coordinating Council (NEDA ICC) - Technical Board favorably endorsed the project to the ICC - Cabinet Committee which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III project. On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope the Financial Proposal of the proponent. On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents and the submission of the comparative bid proposals. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon submission of a written application and payment of a non-refundable fee of P50,000.00 (US$2,000). The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, operation, and maintenance phases of the project. The proponent would be evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to secure external financing for the project. On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference on July 29, 1996. On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The following amendments were made on the Bid Documents: a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial

proposal an additional percentage of gross revenue share of the Government, as follows: i. ii. iii. First 5 years Next 10 years Next 10 years 5.0% 7.5% 10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. Proponent may offer an Annual Guaranteed Payment which need not be of equal amount, but payment of which shall start upon site possession. c. The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, and/or operation and maintenance phases of the project as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of: i. Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity for the project; and ii. a letter testimonial from reputable banks attesting that the project proponent and/or the members of the consortium are banking with them, that the project proponent and/or the members are of good financial standing, and have adequate resources. d. The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial requirements provided in the Bid Documents and the [Implementing Rules and Regulations (IRR)] of the BOT Law. The minimum amount of equity shall be 30% of the Project Cost. e. Amendments to the draft Concession Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the challengers would be revealed to AEDC, and that the challengers' technical and financial proposals would remain confidential. The PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and that other revenue sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated as Public Utility Fees would be subject to regulation, and those charges which would be actually deemed Public Utility Fees could still be revised, depending on the outcome of PBAC's query on the matter with the Department of Justice. In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's responses were as follows: 1. It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements and needs of their current respective business undertaking/activities. In order to comply with this equity requirement, Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint Venture to just execute an agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture instead of increasing each corporation's current authorized capital stock just for prequalification purposes.

In prequalification, the agency is interested in one's financial capability at the time of prequalification, not future or potential capability. A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability. However, total financial capability of all member companies of the Consortium, to be established by submitting the respective companies' audited financial statements, shall be acceptable. 2. At present, Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the joint venture in the event that the Concessions Agreement (sic) is awarded to them. However, Paircargo is being required to submit a copy of the draft concession as one of the documentary requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time. A copy of the draft Concession Agreement is included in the Bid Documents. Any material changes would be made known to prospective challengers through bid bulletins. However, a final version will be issued before the award of contract. The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the required Bid Security. On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the prequalification documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the Paircargo Consortium. On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium, which include: a. The lack of corporate approvals and financial capability of PAIRCARGO; b. The lack of corporate approvals and financial capability of PAGS; c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount that Security Bank could legally invest in the project; d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for prequalification purposes; and e. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement in the operation of a public utility. The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised by the latter, and that based on the documents submitted by Paircargo and the established prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to undertake the project. The Secretary of the DOTC approved the finding of the PBAC. The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical Proposal. On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that it be

furnished with excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed. On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their respective financial proposals. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share in gross revenues for the last ten years of operation, in accordance with the Bid Documents. However, in addition to the foregoing, AEDC offered to pay the government a total of P135 million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period. Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to match the said bid, otherwise, the project would be awarded to Paircargo. As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal. On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., Inc. (PIATCO). AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO. On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of the NEDA-ICC. On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee. xxxx On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO. On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-andTransfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). x x x. On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). x x x. Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and the Third Supplement on June 22, 2001 (collectively, Supplements). xxxx Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other

services, to several international airlines at the NAIA. x x x. On September 17, 2002, the workers of the international airline service providers, claiming that they stand to lose their employment upon the implementation of the questioned agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said agreements. On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion for intervention and a petition-in-intervention. On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed a similar petition with this Court. On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of the various agreements. On December 11, 2002, another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying for the dismissal of the petitions. During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as) null and void."3 The Court first dispensed with the procedural issues raised in Agan, ruling that (a) the MIAA service providers and its employees, petitioners in G.R. Nos. 155001 and 155661, had the requisite standing since they had a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts which would affect their source of livelihood;4 and (b) the members of the House of Representatives, petitioners in G.R. No. 155547, were granted standing in view of the serious legal questions involved and their impact on public interest.5 As to the merits of the Petitions in Agan, the Court concluded that: In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void.6 Hence, the fallo of the Court's Decision in Agan reads: WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto are set aside for being null and void.7 In a Resolution8 dated 21 January 2004, the Court denied with finality the Motions for Reconsideration of its 5 May 2003 Decision in Agan filed by therein respondents PIATCO and Congressmen Paras, et al., and respondents-intervenors.9 Significantly, the Court declared in the same Resolution that:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.10 (Emphasis ours.) It is these afore-quoted pronouncements that gave rise to the Petition in Gingoyon. Republic v. Gingoyon (G.R. No. 166429) According to the statement of facts in Gingoyon: After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate operation. The Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities. It also appears that arbitral proceedings were commenced before the International Chamber of Commerce International Court of Arbitration and the International Centre for the Settlement of Investment Disputes, although the Government has raised jurisdictional questions before those two bodies. Then, on 21 December 2004, the Government filed a Complaint for expropriation with the Pasay City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate holding of a special raffle. The Government sought upon the filing of the complaint the issuance of a writ of possession authorizing it to take immediate possession and control over the NAIA 3 facilities. The Government also declared that it had deposited the amount of P3,002,125,000.00 (3 Billion) in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminal's assessed value for taxation purposes. The case was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that theComplaint was filed, the RTC issued an Order directing the issuance of a writ of possession to the Government, authorizing it to "take or enter upon the possession" of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano, the RTC noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint for expropriation sufficient in form and substance, and upon deposit made by the government of the amount equivalent to the assessed value of the property subject to expropriation. The RTC found these requisites present, particularly noting that "[t]he case record shows that [the Government has] deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary, as shown by the certification attached to their complaint." Also on the same day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take possession over the NAIA 3 facilities immediately after the Writ of Possession was issued. However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December 2004 Order and the Writ of Possession. In the 4 January 2005Order, now assailed in the present petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil Procedure. However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known as "An Act to Facilitate the Acquisition of Right-ofWay, Site or Location for National Government Infrastructure Projects and For Other Purposes" and its Implementing Rules and Regulations (Implementing Rules) had amended Rule 67 in many respects. There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to make immediate payment to

the property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required only to make an initial deposit with an authorized government depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value of the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using the replacement cost method. Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the Government "specifically made available for the purpose of this expropriation;" and such amount to be deducted from the amount of just compensation due PIATCO as eventually determined by the RTC. Second, the Government was directed to submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover the payment of just compensation. Third, the Government was directed "to maintain, preserve and safeguard" the NAIA 3 facilities or "perform such as acts or activities in preparation for their direct operation" of the airport terminal, pending expropriation proceedings and full payment of just compensation. However, the Government was prohibited "from performing acts of ownership like awarding concessions or leasing any part of [NAIA 3] to other parties." The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January 2005, the RTC issued another Order, the second now assailed before this Court, which appointed three (3) Commissioners to ascertain the amount of just compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for Inhibition of Hon. Gingoyon. The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005. On the same day, it denied these motions in an Omnibus Orderdated 10 January 2005. This is the third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted from affirmance "the superfluous part of the Orderprohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other parties." Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005. The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the expropriation case. A concurrent prayer for the issuance of a temporary restraining order and preliminary injunction was granted by this Court in a Resolution dated 14 January 2005.11 The Court resolved the Petition of the Republic of the Philippines and Manila International Airport Authority in Gingoyon in this wise: In conclusion, the Court summarizes its rulings as follows: (1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as pronounced in the Agan cases. (2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides

certain valuation standards or methods for the determination of just compensation. (3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law. (4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As prescribed by the Court, such authority encompasses "the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport." 5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from finality of this Decision. In doing so, the RTC is obliged to comply with the standards set under Rep. Act No. 8974 and its Implementing Rules. Considering that the NAIA 3 consists of structures and improvements, the valuation thereof shall be determined using the replacements cost method, as prescribed under Section 10 of the Implementing Rules. (6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court in Agan. (7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO immediately upon the finality of the said decision. (8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon. All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the nullification of the questioned orders. Nonetheless, portions of these orders should be modified to conform with law and the pronouncements made by the Court herein.12 The decretal portion of the Court's Decision in Gingoyon thus reads: WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS: 1) The implementation of the Writ of Possession dated 21 December 2004 is HELD IN ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the proffered value of the NAIA 3 facilities; 2) Petitioners, upon the effectivity of the Writ of Possession, are authorized [to] start the implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that are essential to the operation of the said International Airport Passenger Terminal project; 3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to determine the just compensation to be paid to PIATCO by the Government. The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to

the appointment of the commissioners decreed therein. The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED. No pronouncement as to costs.13 Motions for Partial Reconsideration of the foregoing Decision were filed by therein petitioners Republic and MIAA, as well as the three other parties who sought to intervene, namely, Asakihosan Corporation, Takenaka Corporation, and Congressman Baterina. In a Resolution dated 1 February 2006, this Court denied with finality the Motion for Partial Reconsideration of therein petitioners and remained faithful to its assailed Decision based on the following ratiocination: Admittedly, the 2004 Resolution in Agan could be construed as mandating the full payment of the final amount of just compensation before the Government may be permitted to take over the NAIA 3. However, the Decision ultimately rejected such a construction, acknowledging the public good that would result from the immediate operation of the NAIA 3. Instead, the Decision adopted an interpretation which is in consonance with Rep. Act No. 8974 and with equitable standards as well, that allowed the Government to take possession of the NAIA 3 after payment of the proffered value of the facilities to PIATCO. Such a reading is substantially compliant with the pronouncement in the 2004 Agan Resolution, and is in accord with law and equity. In contrast, the Government's position, hewing to the strict application of Rule 67, would permit the Government to acquire possession over the NAIA 3 and implement its operation without having to pay PIATCO a single centavo, a situation that is obviously unfair. Whatever animosity the Government may have towards PIATCO does not acquit it from settling its obligations to the latter, particularly those which had already been previously affirmed by this Court.14 The Court, in the same Resolution, denied all the three motions for intervention of Asakihosan Corporation, Takenaka Corporation, and Congressman Baterina, and ruled as follows: We now turn to the three (3) motions for intervention all of which were filed after the promulgation of the Court's Decision. All three (3) motions must be denied. Under Section 2, Rule 19 of the 1997 Rules of Civil Procedure the motion to intervene may be filed at any time before rendition of judgment by the court. Since this case originated from an original action filed before this Court, the appropriate time to file the motions-in-intervention in this case if ever was before and not after resolution of this case. To allow intervention at this juncture would be highly irregular. It is extremely improbable that the movants were unaware of the pendency of the present case before the Court, and indeed none of them allege such lack of knowledge. Takenaka and Asahikosan rely on Mago v. Court of Appeals wherein the Court took the extraordinary step of allowing the motion for intervention even after the challenged order of the trial court had already become final. Yet it was apparent inMago that the movants therein were not impleaded despite being indispensable parties, and had not even known of the existence of the case before the trial court, and the effect of the final order was to deprive the movants of their land. In this case, neither Takenaka nor Asahikosan stand to be dispossessed by reason of the Court's Decision. There is no palpable due process violation that would militate the suspension of the procedural rule. Moreover, the requisite legal interest required of a party-in-intervention has not been established so as to warrant the extra-ordinary step of allowing intervention at this late stage. As earlier noted, the claims of Takenaka and Asahikosan have not been judicially proved or conclusively established as fact by any trier of facts in this jurisdiction. Certainly, they could not be considered as indispensable parties to the petition for certiorari. In the case of Representative Baterina, he invokes his prerogative as legislator to curtail the disbursement without appropriation of public

funds to compensate PIATCO, as well as that as a taxpayer, as the basis of his legal standing to intervene. However, it should be noted that the amount which the Court directed to be paid by the Government to PIATCO was derived from the money deposited by the Manila International Airport Authority, an agency which enjoys corporate autonomy and possesses a legal personality separate and distinct from those of the National Government and agencies thereof whose budgets have to be approved by Congress. It is also observed that the interests of the movants-in-intervention may be duly litigated in proceedings which are extant before lower courts. There is no compelling reason to disregard the established rules and permit the interventions belatedly filed after the promulgation of the Court's Decision.15 Asia's Emerging Dragon Corporation v. Department of Transportation and Communications and Manila International Airport Authority (G.R. No. 169914) Banking on this Court's declaration in Agan that the award of the NAIA IPT III Project to PIATCO is null and void, Asia's Emerging Dragon Corporation (AEDC) filed before this Court the present Petition for Mandamus and Prohibition (with Application for Temporary Restraining Order), praying of this Court that: (1) After due hearing, judgment be rendered commanding the Respondents, their officers, agents, successors, representatives or persons or entities acting on their behalf, to formally award the NAIA-APT [sic] III PROJECT to Petitioner AEDC and to execute and formalize with Petitioner AEDC the approved Draft Concession Agreement embodying the agreed terms and conditions for the operation of the NAIA-IPT III Project and directing Respondents to cease and desist from awarding the NAIA-IPT Project to third parties or negotiating into any concession contract with third parties. (2) Pending resolution on the merits, a Temporary Restraining Order be issued enjoining Respondents, their officers, agents, successors or representatives or persons or entities acting on their behalf from negotiating, re-bidding, awarding or otherwise entering into any concession contract with PIATCO and other third parties for the operation of the NAIA-IPT III Project. Other relief and remedies, just and equitable under the premises, are likewise prayed for.16 AEDC bases its Petition on the following grounds: I. PETITIONER AEDC, BEING THE RECOGNIZED AND UNCHALLENGED ORIGINAL PROPONENT, HAS THE EXCLUSIVE, CLEAR AND VESTED STATUTORY RIGHT TO THE AWARD OF THE NAIA-IPT III PROJECT; II. RESPONDENTS HAVE A STATUTORY DUTY TO PROTECT PETITIONER AEDC AS THE UNCHALLENGED ORIGINAL PROPONENT AS A RESULT OF THE SUPREME COURT'S NULLIFICATION OF THE AWARD OF THE NAIA-IPT III PROJECT TO PIATCO[; and] III. RESPONDENTS HAVE NO LEGAL BASIS OR AUTHORITY TO TAKE OVER THE NAIA-IPT III PROJECT, TO THE EXCLUSION OF PETITIONER AEDC, OR TO AWARD THE PROJECT TO THIRD PARTIES.17 At the crux of the Petition of AEDC is its claim that, being the recognized and unchallenged original proponent of the NAIA IPT III Project, it has the exclusive, clear, and vested statutory right to the award thereof. However, the Petition of AEDC should be dismissed for lack of merit, being as it is, substantially and procedurally flawed. SUBSTANTIVE INFIRMITY

A petition for mandamus is governed by Section 3 of Rule 65 of the Rules of Civil Procedure, which reads SEC. 3. Petition for mandamus. When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent, immediately or some other time to be specified by the court, to do the act required to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts of the respondent. It is well-established in our jurisprudence that only specific legal rights are enforceable by mandamus, that the right sought to be enforced must be certain and clear, and that the writ will not issue in cases where the right is doubtful. Just as fundamental is the principle governing the issuance of mandamus that the duties to be performed must be such as are clearly and peremptorily enjoined by law or by reason of official station.18 A rule long familiar is that mandamus never issues in doubtful cases. It requires a showing of a complete and clear legal right in the petitioner to the performance of ministerial acts. In varying language, the principle echoed and reechoed is that legal rights may be enforced by mandamus only if those rights are well-defined, clear and certain. Otherwise, the mandamus petition must be dismissed.19 The right that AEDC is seeking to enforce is supposedly enjoined by Section 4-A of Republic Act No. 6957,20 as amended by Republic Act No. 7718, on unsolicited proposals, which provides SEC. 4-A. Unsolicited proposals. Unsolicited proposals for projects may be accepted by any government agency or local government unit on a negotiated basis: Provided, That, all the following conditions are met: (1) such projects involve a new concept or technology and/or are not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication, for three (3) consecutive weeks, in a newspaper of general circulation, comparative or competitive proposals and no other proposal is received for a period of sixty (60) working days: Provided, further, That in the event another proponent submits a lower price proposal, the original proponent shall have the right to match the price within thirty (30) working days. In furtherance of the afore-quoted provision, the Implementing Rules and Regulations (IRR) of Republic Act No. 6957, as amended by Republic Act No. 7718, devoted the entire Rule 10 to Unsolicited Proposals, pertinent portions of which are reproduced below Sec. 10.1. Requisites for Unsolicited Proposals. Any Agency/LGU may accept unsolicited proposals on a negotiated basis provided that all the following conditions are met: a. the project involves a new concept or technology and/or is not part of the list of priority projects; b. no direct government guarantee, subsidy or equity is required; and c. the Agency/LGU concerned has invited by publication, for three (3) consecutive weeks, in a newspaper of general circulation, comparative or competitive proposals and no other proposal is received for a period of sixty (60) working days. In the event that another project proponent submits a price proposal lower than that submitted by the original proponent, the latter shall have the right to match said price proposal within thirty (30) working days. Should the original proponent fail to match the lower price proposal submitted within the specified period, the

contract shall be awarded to the tenderer of the lowest price. On the other hand, if the original project proponent matches the submitted lowest price within the specified period, he shall be immediately be awarded the project. xxxx Sec. 10.6. Evaluation of Unsolicited Proposals. The Agency/LGU is tasked with the initial evaluation of the proposal. The Agency/LGU shall: 1) appraise the merits of the project; 2) evaluate the qualification of the proponent; and 3) assess the appropriateness of the contractual arrangement and reasonableness of the risk allocation. The Agency/LGU is given sixty (60) days to evaluate the proposal from the date of submission of the complete proposal. Within this 60-day period, the Agency/LGU, shall advise the proponent in writing whether it accepts or rejects the proposal. Acceptance means commitment of the Agency/LGU to pursue the project and recognition of the proponent as the "original proponent." At this point, the Agency/LGU will no longer entertain other similar proposals until the solicitation of comparative proposals. The implementation of the project, however, is still contingent primarily on the approval of the appropriate approving authorities consistent with Section 2.7 of these IRR, the agreement between the original proponent and the Agency/LGU of the contract terms, and the approval of the contract by the [Investment Coordination Committee (ICC)] or Local Sanggunian. xxxx Sec. 10.9. Negotiation With the Original Proponent. Immediately after ICC/Local Sanggunian's clearance of the project, the Agency/LGU shall proceed with the in-depth negotiation of the project scope, implementation arrangements and concession agreement, all of which will be used in the Terms of Reference for the solicitation of comparative proposals . The Agency/LGU and the proponent are given ninety (90) days upon receipt of ICC's approval of the project to conclude negotiations. The Agency/LGU and the original proponent shall negotiate in good faith. However, should there be unresolvable differences during the negotiations, the Agency/LGU shall have the option to reject the proposal and bid out the project. On the other hand, if the negotiation is successfully concluded, the original proponent shall then be required to reformat and resubmit its proposal in accordance with the requirements of the Terms of Reference to facilitate comparison with the comparative proposals. The Agency/LGU shall validate the reformatted proposal if it meets the requirements of the TOR prior to the issuance of the invitation for comparative proposals. xxxx Sec. 10.11. Invitation for Comparative Proposals. The Agency/LGU shall publish the invitation for comparative or competitive proposals only after ICC/Local Sanggunian issues a no objection clearance of the draft contract. The invitation for comparative or competitive proposals should be published at least once every week for three (3) weeks in at least one (1) newspaper of general circulation. It shall indicate the time, which should not be earlier than the last date of publication, and place where tender/bidding documents could be obtained. It shall likewise explicitly specify a time of sixty (60) working days reckoned from the date of issuance of the tender/bidding documents upon which proposals shall be received. Beyond said deadline, no proposals shall be accepted. A pre-bid conference shall be conducted ten (10) working days after the issuance of the tender/bidding documents. Sec. 10.12. Posting of Bid Bond by Original Proponent. The original proponent shall be required at the date of the first date of the publication of the invitation for comparative proposals to submit a bid bond equal to the amount and in the form required of the challengers. Sec. 10.13. Simultaneous Qualification of the Original Proponent. The Agency/LGU shall qualify the original proponent based on the provisions of Rule 5 hereof, within thirty (30) days from start

of negotiation. For consistency, the evaluation criteria used for qualifying the original proponent should be the same criteria used for qualifying the original proponent should be the criteria used in the Terms of Reference for the challengers. xxxx Sec. 10.16. Disclosure of the Price Proposal. The disclosure of the price proposal of the original proponent in the Tender Documents will be left to the discretion of the Agency/LGU. However, if it was not disclosed in the Tender Documents, the original proponent's price proposal should be revealed upon the opening of the financial proposals of the challengers. The right of the original proponent to match the best proposal within thirty (30) working days starts upon official notification by the Agency/LGU of the most advantageous financial proposal. (Emphasis ours.) In her sponsorship speech on Senate Bill No. 1586 (the precursor of Republic Act No. 7718), then Senator (now President of the Republic of the Philippines) Gloria Macapagal-Arroyo explained the reason behind the proposed amendment that would later become Section 4-A of Republic Act No. 6957, as amended by Republic Act No. 7718: The object of the amendment is to protect proponents which have already incurred costs in the conceptual design and in the preparation of the proposal, and which may have adopted an imaginative method of construction or innovative concept for the proposal. The amendment also aims to harness the ingenuity of the private sector to come up with solutions to the country's infrastructure problems.21 It is irrefragable that Section 4-A of Republic Act No. 6957, as amended by Republic Act No. 7718, and Section 10 of its IRR, accord certain rights or privileges to the original proponent of an unsolicited proposal for an infrastructure project. They are meant to encourage private sector initiative in conceptualizing infrastructure projects that would benefit the public. Nevertheless, none of these rights or privileges would justify the automatic award of the NAIA IPT III Project to AEDC after its previous award to PIATCO was declared null and void by this Court in Agan. The rights or privileges of an original proponent of an unsolicited proposal for an infrastructure project are never meant to be absolute. Otherwise, the original proponent can hold the Government hostage and secure the award of the infrastructure project based solely on the fact that it was the first to submit a proposal. The absurdity of such a situation becomes even more apparent when considering that the proposal is unsolicited by the Government. The rights or privileges of an original proponent depends on compliance with the procedure and conditions explicitly provided by the statutes and their IRR. An unsolicited proposal is subject to evaluation, after which, the government agency or local government unit (LGU) concerned may accept or reject the proposal outright. Under Section 10.6 of the IRR, the "acceptance" of the unsolicited proposal by the agency/LGU is limited to the "commitment of the [a]gency/LGU to pursue the project and recognition of the proponent as the 'original proponent.'" Upon acceptance then of the unsolicited proposal, the original proponent is recognized as such but no award is yet made to it. The commitment of the agency/LGU upon acceptance of the unsolicited proposal is to the pursuit of the project, regardless of to whom it shall subsequently award the same. The acceptance of the unsolicited proposal only precludes the agency/LGU from entertaining other similar proposals until the solicitation of comparative proposals. Consistent in both the statutes and the IRR is the requirement that invitations be published for comparative or competitive proposals. Therefore, it is mandatory that a public bidding be held before the awarding of the project. The negotiations between the agency/LGU and the original proponent, as provided in Section 10.9 of the IRR, is for the sole purpose of coming up with draft

agreements, which shall be used in the Terms of Reference (TOR) for the solicitation of comparative proposals. Even at this point, there is no definite commitment made to the original proponent as to the awarding of the project. In fact, the same IRR provision even gives the concerned agency/LGU, in case of unresolvable differences during the negotiations, the option to reject the original proponent's proposal and just bid out the project. Generally, in the course of processing an unsolicited proposal, the original proponent is treated in much the same way as all other prospective bidders for the proposed infrastructure project. It is required to reformat and resubmit its proposal in accordance with the requirements of the TOR.22 It must submit a bid bond equal to the amount and in the form required of the challengers.23 Its qualification shall be evaluated by the concerned agency/LGU, using evaluation criteria in accordance with Rule 524 of the IRR, and which shall be the same criteria to be used in the TOR for the challengers.25 These requirements ensure that the public bidding under Rule 10 of IRR on Unsolicited Proposals still remain in accord with the three principles in public bidding, which are: the offer to the public, an opportunity for competition, and a basis for exact comparison of bids.26 The special rights or privileges of an original proponent thus come into play only when there are other proposals submitted during the public bidding of the infrastructure project. As can be gleaned from the plain language of the statutes and the IRR, the original proponent has: (1) the right to match the lowest or most advantageous proposal within 30 working days from notice thereof, and (2) in the event that the original proponent is able to match the lowest or most advantageous proposal submitted, then it has the right to be awarded the project. The second right or privilege is contingent upon the actual exercise by the original proponent of the first right or privilege. Before the project could be awarded to the original proponent, he must have been able to match the lowest or most advantageous proposal within the prescribed period. Hence, when the original proponent is able to timely match the lowest or most advantageous proposal, with all things being equal, it shall enjoy preference in the awarding of the infrastructure project. This is the extent of the protection that Legislature intended to afford the original proponent, as supported by the exchange between Senators Neptali Gonzales and Sergio Osmea during the Second Reading of Senate Bill No. 1586: Senator Gonzales: xxxx The concept being that in case of an unsolicited proposal and nonetheless public bidding has been held, then [the original proponent] shall, in effect, be granted what is the equivalent of the right of first refusal by offering a bid which shall equal or better the bid of the winning bidder within a period of, let us say, 30 days from the date of bidding. Senator Osmea: xxxx To capture the tenor of the proposal of the distinguished Gentleman, a subsequent paragraph has to be added which says, "IF THERE IS A COMPETITIVE PROPOSAL, THE ORIGINAL PROPONENT SHALL HAVE THE RIGHT TO EQUAL THE TERMS AND CONDITIONS OF THE COMPETITIVE PROPOSAL." In other words, if there is nobody who will submit a competitive proposal, then nothing is lost. Everybody knows it, and it is open and transparent. But if somebody comes in with another proposal and because it was the idea of the original proponent that proponent now has the right to equal the terms of the original proposal.

SENATOR GONZALES: That is the idea, Mr. President. Because it seems to me that it is utterly unfair for one who has conceived an idea or a concept, spent and invested in feasibility studies, in the drawing of plans and specifications, and the project is submitted to a public bidding, then somebody will win on the basis of plans and specifications and concepts conceived by the original proponent. He should at least be given the right to submit an equalizing bid. x x x.27 (Emphasis ours.) As already found by this Court in the narration of facts in Agan, AEDC failed to match the more advantageous proposal submitted by PIATCO by the time the 30-day working period expired on 28 November 1996;28 and, without exercising its right to match the most advantageous proposal, it cannot now lay claim to the award of the project. The bidding process as to the NAIA IPT III Project was already over after the award thereof to PIATCO, even if eventually, the said award was nullified and voided. The nullification of the award to PIATCO did not revive the proposal nor re-open the bidding. AEDC cannot insist that this Court turn back the hands of time and award the NAIA IPT III Project to it, as if the bid of PIATCO never existed and the award of the project to PIATCO did not take place. Such is a simplistic approach to a very complex problem that is the NAIA IPT III Project. In his separate opinion in Agan, former Chief Justice Artemio V. Panganiban noted that "[T]here was effectively no public bidding to speak of, the entire bidding process having been flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's successor Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio. x x x.29" (Emphasis ours.) In consideration of such a declaration that the entire bidding process was flawed and tainted from the very beginning, then, it would be senseless to re-open the same to determine to whom the project should have been properly awarded to. The process and all proposals and bids submitted in participation thereof, and not just PIATCO's, were placed in doubt, and it would be foolhardy for the Government to rely on them again. At the very least, it may be declared that there was a failure of public bidding.30 In addition, PIATCO is already close to finishing the building of the structures comprising NAIA IPT III,31 a fact that this Court cannot simply ignore. The NAIA IPT III Project was proposed, subjected to bidding, and awarded as a build-operate-transfer (BOT) project. A BOT project is defined as A contractual arrangement whereby the project proponent undertakes theconstruction, including financing, of a given infrastructure facility, and the operation and maintenance thereof. The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency or local government unit concerned at the end of the fixed term that shall not exceed fifty (50) years. This shall include a supply-and-operate situation which is a contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process technology transfer and training to Filipino nationals.32 (Emphasis ours.) The original proposal of AEDC is for a BOT project, in which it undertook to build, operate, and transfer to the Government the NAIA IPT III facilities. This is clearly no longer applicable or practicable under the existing circumstances. It is undeniable that the physical structures comprising the NAIA IPT III Project are already substantially built, and there is almost nothing left for AEDC to construct. Hence, the project could no longer be awarded to AEDC based on the theory of legal impossibility of performance.

Neither can this Court revert to the original proposal of AEDC and award to it only the unexecuted components of the NAIA IPT III Project. Whoever shall assume the obligation to operate and maintain NAIA IPT III and to subsequently transfer the same to the Government (in case the operation is not assumed by the Government itself) shall have to do so on terms and conditions that would necessarily be different from the original proposal of AEDC. It will no longer include any undertaking to build or construct the structures. An amendment of the proposal of AEDC to address the present circumstances is out of the question since such an amendment would be substantive and tantamount to an entirely new proposal, which must again be subjected to competitive bidding. AEDC's offer to reimburse the Government the amount it shall pay to PIATCO for the NAIA IPT III Project facilities, as shall be determined in the ongoing expropriation proceedings before the RTC of Pasay City, cannot restore AEDC to its status and rights as the project proponent. It must be stressed that the law requires the project proponent to undertake the construction of the project, including financing; financing, thus, is but a component of the construction of the structures and not the entirety thereof. Moreover, this "reimbursement arrangement" may even result in the unjust enrichment of AEDC. In its original proposal, AEDC offered to construct the NAIA IPT III facilities for $350 million or P9 billion at that time. In exchange, AEDC would share a certain percentage of the gross revenues with, and pay a guaranteed annual income to the Government upon operation of the NAIA IPT III. In Gingoyon, the proferred value of the NAIA IPT III facilities was already determined to be P3 billion. It seems improbable at this point that the balance of the value of said facilities for which the Government is still obligated to pay PIATCO shall reach or exceed P6 billion. There is thus the possibility that the Government shall be required to pay PIATCO an amount less than P9 billion. If AEDC is to reimburse the Government only for the said amount, then it shall acquire the NAIA IPT III facilities for a price less than its original proposal of P9 billion. Yet, per the other terms of its original proposal, it may still recoup a capital investment of P9 billion plus a reasonable rate of return of investment. A change in the agreed value of the NAIA IPT III facilities already built cannot be done without a corresponding amendment in the other terms of the original proposal as regards profit sharing and length of operation; otherwise, AEDC will be unjustly enriched at the expense of the Government. Again, as aptly stated by former Chief Justice Panganiban, in his separate opinion inAgan: If the PIATCO contracts are junked altogether as I think they should be, should not AEDC automatically be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-cold 'No.' AEDC never won the bidding, never signed any contract, and never built any facility. Why should it be allowed toautomatically step in and benefit from the greed of another?33 The claim of AEDC to the award of the NAIA IPT III Project, after the award thereof to PIATCO was set aside for being null and void, grounded solely on its being the original proponent of the project, is specious and an apparent stretch in the interpretation of Section 4-A of Republic Act No. 6957, as amended by Republic Act No. 7718, and Rule 10 of the IRR. In all, just as AEDC has no legal right to the NAIA IPT III Project, corollarily, it has no legal right over the NAIA IPT III facility. AEDC does not own the NAIA IPT III facility, which this Court already recognized in Gingoyon as owned by PIATCO; nor does AEDC own the land on which NAIA IPT III stands, which is undisputedly owned by the Republic through the Bases Conversion Development Authority (BCDA). AEDC did not fund any portion of the construction of NAIA IPT III, which was entirely funded by PIATCO. AEDC also does not have any kind of lien over NAIA IPT III or any kind of legal entitlement to occupy the facility or the land on which it stands. Therefore, nothing that the Government has done or will do in relation to the project could

possibly prejudice or injure AEDC. AEDC then does not possess any legal personality to interfere with or restrain the activities of the Government as regards NAIA IPT III. Neither does it have the legal personality to demand that the Government deliver or sell to it the NAIA IPT III facility despite the express willingness of AEDC to reimburse the Government the proferred amount it had paid PIATCO and complete NAIA IPT III facility at its own cost. AEDC invokes the Memorandum of Agreement, purportedly executed between the DOTC and AEDC on 26 February 1996, following the approval of the NAIA IPT III Project by the National Economic Development Authority Board in a Resolution dated 13 February 1996, which provided for the following commitments by the parties: a. commitment of Respondent DOTC to target mid 1996 as the time frame for the formal award of the project and commencement of site preparation and construction activities with the view of a partial opening of the Terminal by the first quarter of 1998; b. commitment of Respondent DOTC to pursue the project envisioned in the unsolicited proposal and commence and conclude as soon as possible negotiations with Petitioner AEDC on the BOT contract; c. commitment of Respondent DOTC to make appropriate arrangements through which the formal award of the project can be affected[;] d. commitment of Petitioner AEDC to a fast track approach to project implementation and to commence negotiations with its financial partners, investors and creditors; e. commitment of Respondent DOTC and Petitioner AEDC to fast track evaluation of competitive proposals, screening and eliminating nuisance comparative bids;34 It is important to note, however, that the document attached as Annex "E" to the Petition of AEDC is a "certified photocopy of records on file." This Court cannot give much weight to said document considering that its existence and due execution have not been established. It is not notarized, so it does not enjoy the presumption of regularity of a public document. It is not even witnessed by anyone. It is not certified true by its supposed signatories, Secretary Jesus B. Garcia, Jr. for DOTC and Chairman Henry Sy, Sr. for AEDC, or by any government agency having its custody. It is certified as a photocopy of records on file by an Atty. Cecilia L. Pesayco, the Corporate Secretary, of an unidentified corporation. Even assuming for the sake of argument, that the said Memorandum of Agreement, is in existence and duly executed, it does little to support the claim of AEDC to the award of the NAIA IPT III Project. The commitments undertaken by the DOTC and AEDC in the Memorandum of Agreement may be simply summarized as a commitment to comply with the procedure and requirements provided in Rules 10 and 11 of the IRR. It bears no commitment on the part of the DOTC to award the NAIA IPT III Project to AEDC. On the contrary, the document includes express stipulations that negate any such government obligation. Thus, in the first clause,35 the DOTC affirmed its commitment to pursue, implement and complete the NAIA IPT III Project on or before 1998, noticeably without mentioning that such commitment was to pursue the project specifically with AEDC. Likewise, in the second clause,36 it was emphasized that the DOTC shall pursue the project under Rules 10 and 11 of the IRR of Republic Act No. 6957, as amended by Republic Act No. 7718. And most significantly, the tenth clause of the same document provided: 10. Nothing in this Memorandum of Understanding shall be understood, interpreted or construed as permitting, allowing or authorizing the circumvention of, or non-compliance with, or as waiving, the provisions of, and requirements and procedures under, existing laws, rules and regulations.37 AEDC further decries that:

24. In carrying out its commitments under the DOTC-AEDC MOU, Petitioner AEDC undertook the following activities, incurring in the process tremendous costs and expenses. a. pre-qualified 46 design and contractor firms to assist in the NAIA-IPT III Project; b. appointed a consortium of six (6) local banks as its financial advisor in June 1996; c. hired the services of GAIA South, Inc. to prepare the Project Description Report and to obtain the Environmental Clearance Certificate (ECC) for the NAIA-IPT III Project; d. coordinated with the Airline Operators Association, Bases Conversion Development Authority, Philippine Air Force, Bureau of Customs, Bureau of Immigration, relative to their particular requirements regarding the NAIA-IPT III [P]roject; and e. negotiated and entered into firm commitments with Ital Thai, Marubeni Corporation and Mitsui Corporation as equity partners.38 While the Court may concede that AEDC, as the original proponent, already expended resources in its preparation and negotiation of its unsolicited proposal, the mere fact thereof does not entitle it to the instant award of the NAIA IPT III Project. AEDC was aware that the said project would have to undergo public bidding, and there existed the possibility that another proponent may submit a more advantageous bid which it cannot match; in which case, the project shall be awarded to the other proponent and AEDC would then have no means to recover the costs and expenses it already incurred on its unsolicited proposal. It was a given business risk that AEDC knowingly undertook. Additionally, the very defect upon which this Court nullified the award of the NAIA IPT III Project to PIATCO similarly taints the unsolicited proposal of AEDC. This Court found Paircargo Consortium financially disqualified after striking down as incorrect the PBAC's assessment of the consortium's financial capability. According to the Court's ratio inAgan: As the minimum project cost was estimated to be US$350,000,000.00 or roughlyP9,183,650,000.00, the Paircargo Consortium had to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at least P2,755,095,000.00. xxxx Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering themaximum amounts that may be validly invested by each of its members isP558,384,871.55 or only 6.08% of the project cost, an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30% of the project cost. The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification. xxxx Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a

qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void.39 Pursuant to the above-quoted ruling, AEDC, like the Paircargo Consortium, would not be financially qualified to undertake the NAIA IPT III Project. Based on AEDC's own submissions to the Government, it had then a paid-in capital of only P150,000,000.00,40which was less than the P558,384,871.55 that Paircargo Consortium was capable of investing in the NAIA IPT III Project, and even far less that what this Court prescribed as the minimum equity investment required for the project in the amount ofP2,755,095,000.00 or 30% of the project cost. AEDC had not sufficiently demonstrated that it would have been financially qualified to undertake the project at the time of submission of the bids. Instead, AEDC took pains to present to this Court that allowing it to take over and operate NAIA IPT III at present would be beneficial to the Government. This Court must point out, however, that AEDC is precisely making a new proposal befitting the current status of the NAIA IPT III Project, contrary to its own argument that it is merely invoking its original BOT proposal. And it is not for this Court to evaluate AEDC's new proposal and assess whether it would truly be most beneficial for the Government, for the same is an executive function rather than judicial, for which the statutes and regulations have sufficiently provided standards and procedures for evaluation. It can even be said that if the award of the NAIA IPT III Project was merely a matter of choosing between PIATCO and AEDC (which it is not), there could be no doubt that PIATCO is more qualified to operate the structure that PIATCO itself built and PIATCO's offer of P17.75 Billion in annual guaranteed payments to the Government is far better that AEDC's offer of P135 Million. Hence, AEDC is not entitled to a writ of mandamus, there being no specific, certain, and clear legal right to be enforced, nor duty to be performed that is clearly and peremptorily enjoined by law or by reason of official station. PROCEDURAL LAPSES In addition to the substantive weaknesses of the Petition of AEDC, the said Petition also suffers from procedural defects. AEDC revived its hope to acquire the NAIA IPT III Project when this Court promulgated its Decision in Agan on 5 May 2003. The said Decision became final and executory on 17 February 2004 upon the denial by this Court of the Motion for Leave to File Second Motion for Reconsideration submitted by PIATCO. It is this Decision that declared the award of the NAIA IPT III Project to PIATCO as null and void; without the same, then the award of the NAIA IPT III Project to PIATCO would still subsist and other persons would remain precluded from acquiring rights thereto, including AEDC. Irrefutably, the present claim of AEDC is rooted in the Decision of this Court in Agan. However, AEDC filed the Petition at bar only 20 months after the promulgation of the Decision in Agan on 5 May 2003. It must be emphasized that under Sections 2 and 3, Rule 65 of the revised Rules of Civil Procedure, petitions for prohibition and mandamus, such as in the instant case, can only be resorted to when there is no other plain, speedy and adequate remedy for the party in the ordinary course of law. In Cruz v. Court of Appeals,41 this Court elucidates that Although Rule 65 does not specify any period for the filing of a petition for certiorari and mandamus, it must, nevertheless, be filed within a reasonable time. In certiorari cases, the definitive rule now is that such reasonable time is within three monthsfrom the commission of the complained act. The same rule should apply tomandamus cases.

The unreasonable delay in the filing of the petitioner's mandamus suit unerringly negates any claim that the application for the said extraordinary remedy was the most expeditious and speedy available to the petitioner. (Emphasis ours.) As the revised Rules now stand, a petition for certiorari may be filed within 60 days from notice of the judgment, order or resolution sought to be assailed.42 Reasonable time for filing a petition for mandamus should likewise be for the same period. The filing by the AEDC of its petition for mandamus 20 months after its supposed right to the project arose is evidently beyond reasonable time and negates any claim that the said petition for the extraordinary writ was the most expeditious and speedy remedy available to AEDC. AEDC contends that the "reasonable time" within which it should have filed its petition should be reckoned only from 21 September 2005, the date when AEDC received the letter from the Office of the Solicitor General refusing to recognize the rights of AEDC to provide the available funds for the completion of the NAIA IPT III Project and to reimburse the costs of the structures already built by PIATCO. It has been unmistakable that even long before said letter especially when the Government instituted with the RTC of Pasay City expropriation proceedings for the NAIA IPT III on 21 December 2004 that the Government would not recognize any right that AEDC purportedly had over the NAIA IPT III Project and that the Government is intent on taking over and operating the NAIA IPT III itself. Another strong argument against the AEDC's Petition is that it is already barred by res judicata. In Agan,43 it was noted that on 16 April 1997, the AEDC instituted before the RTC of Pasig City Civil Case No. 66213, a Petition for the Declaration of Nullity of the Proceedings,Mandamus and Injunction, against the DOTC Secretary and the PBAC Chairman and members. In Civil Case No. 66213, AEDC prayed for: i) the nullification of the proceedings before the DOTC-PBAC, including its decision to qualify Paircargo Consortium and to deny Petitioner AEDC's access to Paircargo Consortium's technical and financial bid documents; ii) the protection of Petitioner AEDC's right to match considering the void challenge bid of the Paircargo Consortium and the denial by DOTC-PBAC of access to information vital to the effective exercise of its right to match; iii) the declaration of the absence of any other qualified proponent submitting a competitive bid in an unsolicited proposal.44 Despite the pendency of Civil Case No. 66213, the DOTC issued the notice of award for the NAIA IPT III Project to PIATCO on 9 July 1997. The DOTC and PIATCO also executed on 12 July 1997 the 1997 Concession Agreement. AEDC then alleges that: k) On September 3, 1998, then Pres. Joseph Ejercito Estrada convened a meeting with the members of the Board of Petitioner AEDC to convey his "desire" for the dismissal of the mandamus case filed by Petition AEDC and in fact urged AEDC to immediately withdraw said case. l) The President's direct intervention in the disposition of this mandamus case was a clear imposition that Petitioner AEDC had not choice but to accept. To do otherwise was to take a confrontational stance against the most powerful man in the country then under the risk of catching his ire, which could have led to untold consequences upon the business interests of the stakeholders in AEDC. Thus, Petitioner AEDC was constrained to agree to the signing of a Joint Motion to Dismiss and to the filing of the same in court. m) Unbeknownst to AEDC at that time was that simultaneous with the signing of the July 12, 1997

Concession Agreement, the DOTC and PIATCO executed a secret side agreement grossly prejudicial and detrimental to the interest of Government. It stipulated that in the event that the Civil Case filed by AEDC on April 16, 1997 is not resolved in a manner favorable to the Government, PIATCO shall be entitled to full reimbursement for all costs and expenses it incurred in order to obtain the NAIA IPT III BOT project in an amount not less than One Hundred Eighty Million Pesos (Php 180,000,000.00). This was apparently the reason why the President was determined to have AEDC's case dismissed immediately. n) On February 9, 1999, after the Amended and Restated Concession Agreement (hereinafter referred to as "ARCA") was signed without Petitioner AEDC's knowledge, Petitioner AEDC signed a Joint Motion to Dismiss upon the representation of the DOTC that it would provide AEDC with a copy of the 1997 Concession Agreement. x x x.45 On 30 April 1999, the RTC of Pasig City issued an Order dismissing with prejudice Civil Case No. 66213 upon the execution by the parties of a Joint Motion to Dismiss. According to the Joint Motion to Dismiss The parties, assisted by their respective counsel, respectfully state: 1. Philippine International Air Terminals Company, Inc. ("PIATCO") and the respondents have submitted to petitioner, through the Office of the Executive Secretary, Malacaang, a copy of the Concession Agreement which they executed for the construction and operation of the Ninoy Aquino International Airport International Passenger Terminal III Project ("NAIA IPT III Project), which petitioner requested. 2. Consequently, the parties have decided to amicably settle the instant case andjointly move for the dismissal thereof without any of the parties admitting liability or conceding to the position taken by the other in the instant case. 3. Petitioner, on the other hand, and the respondents, on the other hand, herebyrelease and forever discharge each other from any and all liabilities, direct or indirect, whether criminal or civil, which arose in connection with the instant case. 4. The parties agree to bear the costs, attorney's fees and other expenses they respectively incurred in connection with the instant case. (Emphasis ours.) AEDC, however, invokes the purported pressure exerted upon it by then President Joseph E. Estrada, the alleged fraud committed by the DOTC, and paragraph 2 in the afore-quoted Joint Motion to Dismiss to justify the non-application of the doctrine of res judicata to its present Petition. The elements of res judicata, in its concept as a bar by former judgment, are as follows: (1) the former judgment or order must be final; (2) it must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial of the case; (3) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second actions, identity of parties, of subject matter and of cause of action.46 All of the elements are present herein so as to bar the present Petition. First, the Order of the RTC of Pasig City, dismissing Civil Case No. 66213, was issued on 30 April 1999. The Joint Motion to Dismiss, deemed a compromise agreement, once approved by the court is immediately executory and not appealable.47 Second, the Order of the RTC of Pasig City dismissing Civil Case No. 66213 pursuant to the Joint Motion to Dismiss filed by the parties constitutes a judgment on the merits. The Joint Motion to Dismiss stated that the parties were willing to settle the case amicably and,

consequently, moved for the dismissal thereof. It also contained a provision in which the parties the AEDC, on one hand, and the DOTC Secretary and PBAC, on the other released and forever discharged each other from any and all liabilities, whether criminal or civil, arising in connection with the case. It is undisputable that the parties entered into a compromise agreement, defined as "a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.48" Essentially, it is a contract perfected by mere consent, the latter being manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Once an agreement is stamped with judicial approval, it becomes more than a mere contract binding upon the parties; having the sanction of the court and entered as its determination of the controversy, it has the force and effect of any other judgment.49 Article 2037 of the Civil Code explicitly provides that a compromise has upon the parties the effect and authority of res judicata. Because of the compromise agreement among the parties, there was accordingly a judicial settlement of the controversy, and the Order, dated 30 April 1999, of the RTC of Pasig City was no less a judgment on the merits which may be annulled only upon the ground of extrinsic fraud.50 Thus, the RTC of Pasig City, in the same Order, correctly granted the dismissal of Civil Case No. 66213 with prejudice. A scrutiny of the Joint Motion to Dismiss submitted to the RTC of Pasig City would reveal that the parties agreed to discharge one another from any and all liabilities, whether criminal or civil, arising from the case, after AEDC was furnished with a copy of the 1997 Concession Agreement between the DOTC and PIATCO. This complete waiver was the reciprocal concession of the parties that puts to an end the present litigation, without any residual right in the parties to litigate the same in the future. Logically also, there was no more need for the parties to admit to any liability considering that they already agreed to absolutely discharge each other therefrom, without necessarily conceding to the other's position. For AEDC, it was a declaration that even if it was not conceding to the Government's position, it was nonetheless waiving any legal entitlement it might have to sue the Government on account of the NAIA IPT III Project. Conversely, for the Government, it was an avowal that even if it was not accepting AEDC's stance, it was all the same relinquishing its right to file any suit against AEDC in connection with the same project. That none of the parties admitted liability or conceded its position is without bearing on the validity or binding effect of the compromise agreement, considering that these were not essential to the said compromise. Third, there is no question as to the jurisdiction of the RTC of Pasig City over the subject matter and parties in Civil Case No. 66213. The RTC can exercise original jurisdiction over cases involving the issuance of writs of certiorari, prohibition, mandamus, quo warranto,habeas corpus and injunction.51 To recall, the Petition of AEDC before the RTC of Pasig City was for the declaration of nullity of proceedings, mandamus and injunction. The RTC of Pasig City likewise had jurisdiction over the parties, with the voluntary submission by AEDC and proper service of summons on the DOTC Secretary and the PBAC Chairman and members. Lastly, there is, between Civil Case No. 66213 before the RTC of Pasig City and the Petition now pending before this Court, an identity of parties, of subject matter, and of causes of action. There is an identity of parties. In both petitions, the AEDC is the petitioner. The respondents in Civil Case No. 66213 are the DOTC Secretary and the PBAC Chairman and members. The respondents in the instant Petition are the DOTC, the DOTC Secretary, and the Manila International Airport Authority (MIAA). While it may be conceded that MIAA was not a respondent and did not participate in Civil Case No. 66213, it may be considered a successor-ininterest of the PBAC. When Civil Case No. 66213 was initiated, PBAC was then in charge of the NAIA IPT III Project, and had the authority to evaluate the bids and award the project to the one

offering the lowest or most advantageous bid. Since the bidding is already over, and the structures comprising NAIA IPT III are now built, then MIAA has taken charge thereof. Furthermore, it is clear that it has been the intention of the AEDC to name as respondents in their two Petitions the government agency/ies and official/s who, at the moment each Petition was filed, had authority over the NAIA IPT III Project. There is an identity of subject matter because the two Petitions involve none other than the award and implementation of the NAIA IPT III Project. There is an identity of cause of action because, in both Petitions, AEDC is asserting the violation of its right to the award of the NAIA IPT III Project as the original proponent in the absence of any other qualified bidders. As early as in Civil Case No. 66213, AEDC already sought a declaration by the court of the absence of any other qualified proponent submitting a competitive bid for the NAIA IPT III Project, which, ultimately, would result in the award of the said project to it. AEDC attempts to evade the effects of its compromise agreement by alleging that it was compelled to enter into such an agreement when former President Joseph E. Estrada asserted his influence and intervened in Civil Case No. 66213. This allegation deserves scant consideration. Without any proof that such events did take place, such statements remain mere allegations that cannot be given weight. One who alleges any defect or the lack of a valid consent to a contract must establish the same by full, clear and convincing evidence, not merely by preponderance thereof.52 And, even assuming arguendo, that the consent of AEDC to the compromise agreement was indeed vitiated, then President Estrada was removed from office in January 2001. AEDC filed the present Petition only on 20 October 2005. The four-year prescriptive period, within which an action to annul a voidable contract may be brought, had already expired.53 The AEDC further claims that the DOTC committed fraud when, without AEDC's knowledge, the DOTC entered into an Amended and Restated Concession Agreement (ARCA) with PIATCO. The fraud on the part of the DOTC purportedly also vitiated AEDC's consent to the compromise agreement. It is true that a judicial compromise may be set aside if fraud vitiated the consent of a party thereof; and that the extrinsic fraud, which nullifies a compromise, likewise invalidates the decision approving it.54 However, once again, AEDC's allegations of fraud are unsubstantiated. There is no proof that the DOTC and PIATCO willfully and deliberately suppressed and kept the information on the execution of the ARCA from AEDC. The burden of proving that there indeed was fraud lies with the party making such allegation. Each party must prove his own affirmative allegations. The burden of proof lies on the party who would be defeated if no evidence were given on either side. In this jurisdiction, fraud is never presumed.55 Moreover, a judicial compromise may be rescinded or set aside on the ground of fraud in accordance with Rule 38 of the Rules on Civil Procedure on petition for relief from judgment. Section 3 thereof prescribes the periods within which the petition for relief must be filed: SEC. 3. Time for filing petition; contents and verification. A petition provided for in either of the preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final order or other proceeding to be set aside, and not more than six (6) months after such judgment or final order was entered, or such proceeding was taken, and must be accompanied with affidavits showing the fraud, accident, mistake or excusable negligence relied upon, and the facts constituting the petitioner's good and substantial cause of action or defense, as the case may be. According to this Court's ruling in Argana v. Republic,56 as applied to a judgment based on compromise, both the 60-day and six-month reglementary periods within which to file a petition for relief should be reckoned from the date when the decision approving the compromise agreement was rendered because such judgment is considered immediately executory and entered

on the date that it was approved by the court. In the present case, the Order of the RTC of Pasig City granting the Joint Motion to Dismiss filed by the parties in Civil Case No. 66213 was issued on 30 April 1999, yet AEDC only spoke of the alleged fraud which vitiated its consent thereto in its Petition before this Court filed on 20 October 2005, more than six years later. It is obvious that the assertion by AEDC of its vitiated consent to the Joint Motion to Dismiss Civil Case No. 66213 is nothing more than an after-thought and a desperate attempt to escape the legal implications thereof, including the barring of its present Petition on the ground of res judicata. It is also irrelevant to the legal position of AEDC that the Government asserted in Aganthat the award of the NAIA IPT III Project to PIATCO was void. That the Government eventually took such a position, which this Court subsequently upheld, does not affect AEDC's commitments and obligations under its judicially-approved compromise agreement in Civil Case No. 66213, which AEDC signed willingly, knowingly, and ably assisted by legal counsel. In addition, it cannot be said that there has been a fundamental change in the Government's position since Civil Case No. 66213, contrary to the allegation of AEDC. The Government then espoused that AEDC is not entitled to the award of the NAIA IPT III Project. The Government still maintains the exact same position presently. That the Government eventually reversed its position on the validity of its award of the project to PIATCO is not inconsistent with its position that neither should AEDC be awarded the project. For the foregoing substantive and procedural reasons, the instant Petition of AEDC should be dismissed. Republic of the Philippines v. Court of Appeals and Baterina (G.R. No. 174166) As mentioned in Gingoyon, expropriation proceedings for the NAIA IPT III was instituted by the Government with the RTC of Pasay City, docketed as Case No. 04-0876CFM. Congressman Baterina, together with other members of the House of Representatives, sought intervention in Case No. 04-0876CFM by filing a Petition for Prohibition in Intervention (with Application for Temporary Restraining Order and Writ of Preliminary Injunction). Baterina, et al. believe that the Government need not file expropriation proceedings to gain possession of NAIA IPT III and that PIATCO is not entitled to payment of just compensation, arguing thus A) Respondent PIATCO does not own Terminal III because BOT Contracts do not vest ownership in PIATCO. As such, neither PIATCO nor FRAPORT are entitled to compensation. B) Articles 448, ET SEQ., of the New Civil Code, as regards builders in good faith/bad faith, do not apply to PIATCO's Construction of Terminal III. C) Article 1412(2) of the New Civil Code allows the Government to demand the return of what it has given without any obligation to comply with its promise. D) The payment of compensation to PIATCO is unconstitutional, violative of the Build-OperateTransfer Law, and violates the Civil Code and other laws. 57 On 27 October 2005, the RTC of Pasay City issued an Order admitting the Petition in Intervention of Baterina, et al., as well as the Complaint in Intervention of Manuel L. Fortes, Jr. and the Answer in Intervention of Gina B. Alnas, et al. The Republic sought reconsideration of the 27 October 2005 Order of the RTC of Pasay City, which, in an Omnibus Order dated 13 December 2005, was denied by the RTC of Pasay City as regards the intervention of Baterina, et al. and Fortes, but granted as to the intervention of Alnas,et al. On 22 March 2006, Baterina, et al. filed with the RTC of Pasay City a Motion to Declare in Default and/or Motion for Summary Judgment considering that the Republic and PIATCO failed to file an answer or any responsive pleading to their Petition for Prohibition in

Intervention. In the meantime, on 19 December 2005, the Court's Decision in Gingoyon was promulgated. Baterina also filed a Motion for Intervention in said case and sought reconsideration of the Decision therein. However, his Motion for Intervention was denied by this Court in a Resolution dated 1 February 2006. On 27 March 2006, the RTC of Pasay City issued an Order and Writ of Execution, the dispositive portion of which reads WHEREFORE, let a writ of execution be issued in this case directing the Sheriff of this court to immediately implement the Order dated January 4, 2005 and January 10, 2005, as affirmed by the Decision of the Supreme Court in G.R. No. 166429 in the above-entitled case dated December 19, 2005, in the following manner: 1. Ordering the General Manager, the Senior Assistant General Manager and the Vice President of Finance of the Manila International Airport Authority (MIAA) to immediately withdraw the amount of P3,002,125,000.00 from the above-mentioned Certificates of US Dollar Time Deposits with the Land Bank of the Philippines, Baclaran Branch; 2. Ordering the Branch Manager, Land Bank of the Philippines, Baclaran Branch to immediately release the sum of P3,002,125,000.00 to PIATCO; Return of Service of the Writs shall be made by the Sheriff of this court immediately thereafter;58 The RTC of Pasay City, in an Order, dated 15 June 2006, denied the Motions for Reconsideration of its Order and Writ of Execution filed by the Government and Fortes. Baterina, meanwhile, went before the Court of Appeals via a Petition for Certiorari and Prohibition (With Urgent Prayer for the Issuance of a Temporary Restraining Order and Writ of Preliminary Injunction), docketed as CAG.R. No. 95539, assailing the issuance, in grave abuse of discretion, by the RTC of Pasay City of its Orders dated 27 March 2006 and 15 June 2006 and Writ of Execution dated 27 March 2006. During the pendency of CA-G.R. No. 95539 with the Court of Appeals, the RTC of Pasay City issued an Order, dated 7 August 2006, denying the Urgent Manifestation and Motion filed by the Republic in which it relayed willingness to comply with the Order and Writ of Execution dated 27 March 2006, provided that the trial court shall issue an Order expressly authorizing the Republic to award concessions and lease portions of the NAIA IPT III to potential users. The following day, on 8 August 2006, the RTC of Pasay City issued an Order denying the intervention of Baterina, et al. and Fortes in Case No. 04-0876CFM. In a third Order, dated 9 August 2006, the RTC of Pasay City directed PIATCO to receive the amount of P3,002,125,000.00 from the Land Bank of the Philippines, Baclaran Branch. By 24 August 2006, the Republic was all set to comply with the 9 August 2006 Order of the RTC of Pasay City. Hence, the representatives of the Republic and PIATCO met before the RTC of Pasay City for the supposed payment by the former to the latter of the proferred amount. However, on the same day, the Court of Appeals, in CA G.R. No. 95539, issued a Temporary Restraining Order (TRO) enjoining, among other things, the RTC of Pasay City from implementing the questioned Orders, dated 27 March 2006 and 15 June 2006, or "from otherwise causing payment and from further proceeding with the determination of just compensation in the expropriation case involved herein, until such time that petitioner's motion to declare in default and motion for partial summary judgment shall have been resolved by the trial court; or it is clarified that PIATCO categorically disputes the proferred value for NAIA Terminal 3." The TRO was to be effective for 30 days. Two days later, on 26 August 2006, the Republic filed with the Court of Appeals an Urgent Motion to Lift Temporary Restraining Order, which the appellate court scheduled for hearing on 5 September 2006.

While the Urgent Motion to lift the TRO was still pending with the Court of Appeals, the Republic already filed the present Petition for Certiorari and Prohibition With Urgent Application for a Temporary Restraining Order and/or Writ of Preliminary Injunction, attributing to the Court of Appeals grave abuse of discretion in granting the TRO and seeking a writ of prohibition against the Court of Appeals to enjoin it from giving due course to Baterina's Petition in CA-G.R. No. 95539. The Republic thus raises before this Court the following arguments: I THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO AN EXCESS OR LACK OF JURISDICTION WHEN IT GRANTED THE TEMPORARY RESTRAINING ORDER. A. THIS HONORABLE COURT'S DECISION IN GINGOYON CONSTITUTES THE "LAW OF THE CASE". B. THE TRO IS IN DIRECT CONTRAVENTION OF THIS COURT'S DECISION WICH HAD ATTAINED FINALITY. II THE REPUBLIC IS SUFFERING IRREPARABLE DAMAGE. III THE COURT OF APPEALS MUST BE PROHIBITED FROM GIVING DUE COURSE TO A PETITION THAT IS DEFECTIVE IN FORM AND SUBSTANCE. A. PRIVATE RESPONDENT HAS NO LEGAL STANDING. 1. THIS HONORABLE COURT HAS RULED THAT PRIVATE RESPONDENT HAS NO LEGAL STANDING. 2. PRIVATE RESPONDENT HAS LOST HIS STANDING AS AN INTERVENOR. B. PRIVATE RESPONDENT FAILED TO DEMONSTRATE THAT HE IS ENTITLED TO THE INJUNCTIVE RELIEFS PRAYED FOR. C. THE BOND POSTED IS INSUFFICIENT. IV GRANTING ARGUENDO THAT PRIVATE RESPONDENT'S PETITION IS SUFFICIENT IN FORM AND SUBSTANCE, THE SAME HAS BECOME MOOT AND ACADEMIC. A. THE MOTION TO DECLARE IN DEFAULT AND/OR MOTION FOR PARTIAL SUMMARY JUDGMENT HAS ALREADY BEEN RESOLVED. B. PIATCO HAS CATEGORICALLY DISPUTED THE PROFFERED VALUE FOR NAIA TERMINAL III.59 The Republic prays of this Court that: (a) Pending the determination of the merits of this petition, a temporary restraining order and/or a writ of preliminary injunction be ISSUED restraining the Court of Appeals from implementing the writ of preliminary injunction in CA-G.R. SP No. 95539 and proceeding in said case such as hearing it on September 5, 2006. After both parties have been heard, the preliminary injunction be MADE PERMANENT;

(b) The Resolution date 24 August 2006 of the Court of Appeals be SET ASIDE; and (c) CA-G.R. SP No. 95539 be ORDERED DISMISSED. Other just and equitable reliefs are likewise prayed for.60 On 4 September 2006, the Republic filed a Manifestation and Motion to Withdraw Urgent Motion to Lift Temporary Restraining Order with the Court of Appeals stating, among other things, that it had decided to withdraw the said Motion as it had opted to avail of other options and remedies. Despite the Motion to Withdraw filed by the Government, the Court of Appeals issued a Resolution, dated 8 September 2006, lifting the TRO it issued, on the basis of the following In view of the pronouncement of the Supreme Court in the Gingoyon case upholding the right of PIATCO to be paid the proferred value in the amount ofP3,002,125,000.00 prior to the implementation of the writ of possession issued by the trial court on December 21, 2004 over the NAIA Passenger Terminal III, and directing the determination of just compensation, there is no practical and logical reason to maintain the effects of the Temporary Restraining Order contained in our Resolution dated August 24, 2006. Thus, We cannot continue restraining what has been mandated in a final and executory decision of the Supreme Court. WHEREFORE, Our Resolution dated 24 August 2006 be SET ASIDE. Consequently, the Motion to Withdraw the Motion to Lift the Temporary Restraining Order is rendered moot and academic.61 There being no more legal impediment, the Republic tendered on 11 September 2006 Land Bank check in the amount of P3,002,125,000.00 representing the proferred value of NAIA IPT III, which was received by a duly authorized representative of PIATCO. On 27 December 2006, the Court of Appeals rendered a Decision in CA G.R. No. 95539 dismissing Baterina's Petition. The latest developments before the Court of Appeals and the RTC of Pasay City render the present Petition of the Republic moot. Nonetheless, Baterina, as the private respondent in the instant Petition, presented his own prayer that a judgment be rendered as follows: A. For this Honorable Court, in the exercise of its judicial discretion to relax procedural rules consistent with Metropolitan Traffic Command v. Gonong and deem that justice would be better served if all legal issues involved in the expropriation case and in Baterina are resolved in this case once and for all, toDECLARE that: i. TERMINAL 3, as a matter of law, is public property and thus not a proper object of eminent domain proceedings; and ii. PIATCO, as a matter of law, is merely the builder of TERMINAL 3 and, as such, it may file a claim for recovery on quantum meruit with the Commission on Audi[t] for determination of the amount thereof, if any. B. To DIRECT the Regional Trial Court of Pasay City, Branch 117 to dismiss the expropriation case; C. To DISMISS the instant Petition and DENY The Republic's application for TRO and/or writ of preliminary injunction for lack of merit; D. To DECLARE that the P3 Billion (representing the proferred value of TERMINAL 3) paid to PIATCO on 11 September 2006 as funds held in trust by PIATCO for the benefit of the Republic and subject to the outcome of the proceedings for the determination of recovery on quantum meruit due to PIATCO, if any.

E. To DIRECT the Solicitor General to disclose the evidence it has gathered on corruption, bribery, fraud, bad faith, etc., to this Honorable Court and the Commission on Audit, and to DECLARE such evidence to be admissible in any proceeding for the determination of any compensation due to PIATCO, if any. [F]. In the alternative, to: i. SET ASIDE the trial court's Order dated 08 August 2006 denying Private Respondent's motion for intervention in the expropriation case, and ii. Should this Honorable Court lend credence to the argument of the Solicitor General in its Comment dated 20 April 2006 that "there are issues as to material fact that require presentation of evidence", to REMAND the resolution of the legal issues raised by Private Respondent to the trial court consistent with this Honorable Court's holding in the Gingoyon Resolution that "the interests of the movants-in-intervention [meaning Takenaka, Asahikosan, and herein Private Respondent] may be duly litigated in proceedings which are extant before the lower courts ."62 In essence, Baterina is opposing the expropriation proceedings on the ground that NAIA IPT III is already public property. Hence, PIATCO is not entitled to just compensation for NAIA IPT III. He is asking the Court to make a definitive ruling on this matter considering that it was not settled in either Agan or Gingoyon. We disagree. Contrary to Baterina's stance, PIATCO's entitlement to just and equitable consideration for its construction of NAIA IPT III and the propriety of the Republic's resort to expropriation proceedings were already recognized and upheld by this Court in Aganand Gingoyon. The Court's Decisions in both Agan and Gingoyon had attained finality, the former on 17 February 2004 and the latter on 17 March 2006. This Court already made an unequivocal pronouncement in its Resolution dated 21 January 2004 in Agan that for the Government of the Republic to take over the NAIA IPT III facility, it has to compensate PIATCO as a builder of the structures; and that "[t]he compensation must be just and in accordance with law and equity for the government cannot unjustly enrich itself at the expense of PIATCO and its investors."63 As between the Republic and PIATCO, the judgment on the need to compensate PIATCO before the Government may take over NAIA IPT III is already conclusive and beyond question. Hence, in Gingoyon, this Court declared that: This pronouncement contains the fundamental premises which permeate this decision of the Court. Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of the present petition must conform to the conditions laid down by the Court in its 2004 Resolution. xxxx The pronouncement in the 2004 Resolution is especially significant to this case in two aspects, namely: (i) that PIATCO must receive payment of just compensation determined in accordance with law and equity; and (ii) that the government is barred from taking over NAIA 3 until such just compensation is paid. The parties cannot be allowed to evade the directives laid down by this Court through any mode of judicial action, such as the complaint for eminent domain. It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of respondent judge under review, as well as the arguments of the parties must, to merit affirmation, pass the threshold test of whether such propositions are in accord with the 2004 Resolution.64

The Court then, in Gingoyon, directly addressed the issue on the appropriateness of the Republic's resort to expropriation proceedings: The Government has chosen to resort to expropriation, a remedy available under the law, which has the added benefit of an integrated process for the determination of just compensation and the payment thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the Government seeks to expropriate a building complex constructed on land which the State already owns. There is an inherent illogic in the resort to eminent domain on property already owned by the State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper remedy should be akin to an action for ejectment. However, the reason for the resort by the Government to expropriation proceedings is understandable in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover by the Government of NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the structures. xxxx The right of eminent domain extends to personal and real property, and the NAIA 3 structures, adhered as they are to the soil, are considered as real property. The public purpose for the expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in the name of the Republic of the Philippines, although occupied by private individuals, and in such case an averment to that effect should be made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex "stands on a parcel of land owned by the Bases Conversion Development Authority, another agency of [the Republic of the Philippines]." Admittedly, eminent domain is not the sole judicial recourse by which the Government may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain though may be the most effective, as well as the speediest means by which such goals may be accomplished. Not only does it enable immediate possession after satisfaction of the requisites under the law, it also has a built-in procedure through which just compensation may be ascertained. Thus, there should be no question as to the propriety of eminent domain proceedings in this case. Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or construe these rules in accordance with the Court's prescriptions in the 2004 Resolution to achieve the end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings of this Court will be severely diminished.65 (Emphasis ours.) The Court, also in Gingoyon, categorically recognized PIATCO's ownership over the structures it had built in NAIA IPT III, to wit: There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the Government resorted to eminent domain proceedings in the first place is a concession on its part of PIATCO's ownership. Indeed, if no such right is recognized, then there

should be no impediment for the Government to seize control of NAIA 3 through ordinary ejectment proceedings. xxxx Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by PIATCO. x x x (Emphasis ours.)66 It was further settled in Gingoyon that the expropriation proceedings shall be held in accordance with Republic Act No. 8974,67 thus: Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004 Resolution, which requires the payment of just compensation before any takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the extent such payment must be effected before the takeover, but it unquestionably requires at least some degree of payment to the private property owner before a writ of possession may issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it assures the private property owner the payment of, at the very least, the proffered value of the property to be seized. Such payment of the proffered value to the owner, followed by the issuance of the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one which facially complies with the prescription laid down in the 2004 Resolution. And finally, as to the determination of the amount due PIATCO, this Court ruled in Gingoyon that: Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/or structures as determined under Section 7. As stated above, the BIR zonal valuation cannot apply in this case, thus the amount subject to immediate payment should be limited to "the value of the improvements and/or structures as determined under Section 7," with Section 7 referring to the "implementing rules and regulations for the equitable valuation of the improvements and/or structures on the land." Under the present implementing rules in place, the valuation of the improvements/structures are to be based using "the replacement cost method." However, the replacement cost is only one of the factors to be considered in determining the just compensation. In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles of equity as well. Admittedly, there is no way, at least for the present, to immediately ascertain the value of the improvements and structures since such valuation is a matter for factual determination. Yet Rep. Act No. 8974 permits an expedited means by which the Government can immediately take possession of the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act No. 8974 states that "in case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proferred value, taking into consideration the standards prescribed in Section 5 [of the law]." The "proffered value" may strike as a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974 does provide relevant standards by which "proffered value" should be based, as well as the certainty of judicial determination of the propriety of the proffered value. In filing the complaint for expropriation, the Government alleged to have deposited the amount of P3 Billion earmarked for expropriation, representing the assessed value of the property. The

making of the deposit, including the determination of the amount of the deposit, was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the amount, the Court sees no impediment to recognize this sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value, the Government is not strictly required to adhere to any predetermined standards, although its proffered value may later be subjected to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974.68 Gingoyon constitutes as the law of the case for the expropriation proceedings, docketed as Case No. 04-0876CFM, before the RTC of Pasay City. Law of the case has been defined in the following manner By "law of the case" is meant that "whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case" so long as the "facts on which such decision was predicated continue to be the facts of the case before the court" (21 C.J.S. 330). And once the decision becomes final, it is binding on all inferior courts and hence beyond their power and authority to alter or modify (Kabigting vs. Acting Director of Prisons, G.R. L-15548, October 30, 1962).69 A ruling rendered on the first appeal, constitutes the law of the case, and, even if erroneous, it may no longer be disturbed or modified since it has become final long ago.70 The extensive excerpts from Gingoyon demonstrate and emphasize that the Court had already adjudged the issues raised by Baterina, which he either conveniently overlooked or stubbornly refused to accept. The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of the litigation. Thus, it extends to questions necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment , although no specific finding may have been made in reference thereto, and although such matters were directly referred to in the pleadings and were not actually or formally presented. Under this rule, if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties and if a judgment necessarily presupposes certain premises, they are as conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion and upon which such conclusion is based is as effectually passed upon as the ultimate question which is finally solved.71 Since the issues Baterina wishes to raise as an intervenor in Case No. 04-0876CFM were already settled with finality in both Agan and Gingoyon, then there is no point in still allowing his intervention. His Petition-in-Intervention would only be a relitigation of matters that had been previously adjudicated by no less than the Highest Court of the land. And, in no manner can the RTC of Pasay City in Case No. 04-0876CFM grant the reliefs he prayed for without departing from or running afoul of the final and executory Decisions of this Court in Agan and Gingoyon. While it is true that when this Court, in a Resolution dated 1 February 2006, dismissed the Motions for Intervention in Gingoyon, including that of Baterina, it also observed that the interests of the movants-in-intervention may be duly litigated in proceedings which are extant before the lower courts. This does not mean, however, that the said movants-in-interest were assured of being allowed as intervenors or that the reliefs they sought as such shall be granted by the trial courts. The fate of their intervention still rests on their interest or legal standing in the case and the merits of their arguments.

WHEREFORE, in view of the foregoing: a. The Petition in G.R. No. 169914 is hereby DISMISSED for lack of merit; and b. The Petition in G.R. No. 174166 is hereby likewise DISMISSED for being moot and academic. No costs. SO ORDERED. Puno, C.J., Quisumbing, Ynares-Santiago, Austria-Martinez, Corona, Carpio-Morales, Tinga, Velasco, Jr., Leonardo-de Castro, Brion, JJ., concur. Carpio, Azcuna, Nachura, Reyes, no part.

HANNAH EUNICE SERRANA v. SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES 542 SCRA 224; January 22, 2008; REYES, R.T., J. DECISION

REYES, R.T., J.:

CAN the Sandiganbayan try a government scholar** accused, along with her brother, of swindling government funds?

MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng bayan, at ang kanyang kapatid, na kapwa pinararatangan ng estafa ng pera ng bayan?

The jurisdictional question is posed in this petition for certiorari assailing the Resolutions[1] of the Sandiganbayan, Fifth Division, denying petitioners motion to quash the information and her motion for reconsideration.

The Antecedents

Sandiganbayan.[7] The Information reads: Petitioner Hannah Eunice D. Serana was a senior student of the University of the PhilippinesCebu. A student of a state university is known as a government scholar. She was appointed by then President Joseph Estrada on December 21, 1999as a student regent of UP, to serve a one-year term starting January 1, 2000 and ending on December 31, 2000. The undersigned Special Prosecution Officer III, Office of the Special Prosecutor, hereby accuses HANNAH EUNICE D. SERANA and JADE IAN D. SERANA of the crime ofEstafa, defined and penalized under Paragraph 2(a), Article 315 of the Revised Penal Code, as amended committed as follows: That on October, 24, 2000, or sometime prior or subsequent thereto, in Quezon City, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, HANNAH EUNICE D. SERANA, a high-ranking public officer, being then the Student Regent of the University of the Philippines, Diliman, Quezon City, while in the performance of her official functions, committing the offense in relation to her office and taking advantage of her position, with intent to gain,conspiring with her brother, JADE IAN D. SERANA, a private individual, did then and there wilfully, unlawfully and feloniously defraud the government by falsely and fraudulently representing to former President Joseph Ejercito Estrada that the renovation of the Vinzons Hall of the University of the Philippines will be renovated and renamed as President Joseph Ejercito Estrada Student Hall, and for which purpose accused HANNAH EUNICE D. SERANA requested the amount of FIFTEENMILLION PESOS (P15,000,000.00), Philippine Currency, from the Office of the President, and the latter relying and believing on said false pretenses and misrepresentation gave and delivered to said accused Land Bank Check No. 91353 dated October 24, 2000 in the amount of FIFTEEN MILLION PESOS (P15,000,000.00), which check was subsequently encashed by accused Jade Ian D. Serana on October 25, 2000 and misappropriated for their personal use and benefit, and despite repeated demands made upon the accused for them to return aforesaid amount, the said accused failed and refused to do so to the damage and prejudice of the government in the aforesaid amount.

In the early part of 2000, petitioner discussed with President Estrada the renovation of Vinzons Hall Annex in UP Diliman.[2] On September 4, 2000, petitioner, with her siblings and relatives, registered with the Securities and Exchange Commission the Office of the Student Regent Foundation, Inc. (OSRFI).[3]

One of the projects of the OSRFI was the renovation of the Vinzons Hall Annex.[4] President Estrada gave Fifteen Million Pesos (P15,000,000.00) to the OSRFI as financial assistance for the proposed renovation. The source of the funds, according to the information, was the Office of the President.

CONTRARY TO LAW. (Underscoring supplied) The renovation of Vinzons Hall Annex failed to materialize.[5] The succeeding student regent, Kristine Clare Bugayong, and Christine Jill De Guzman, Secretary General of the KASAMA sa U.P., a system-wide alliance of student councils within the state university, consequently filed a complaint for Malversation of Public Funds and Property with the Office of the Ombudsman.[6] Petitioner moved to quash the information. She claimed that the Sandiganbayan does not have any jurisdiction over the offense charged or over her person, in her capacity as UP student regent.

On July 3, 2003, the Ombudsman, after due investigation, found probable cause to indict petitioner and her brother Jade Ian D. Serana for estafa, docketed as Criminal Case No. 27819 of the Petitioner claimed that Republic Act (R.A.) No. 3019, as amended by R.A. No. 8249,

enumerates the crimes or offenses over which the Sandiganbayan has jurisdiction.[8] It has no jurisdiction over the crime of estafa.[9] It only has jurisdiction over crimes covered by Title VII, Chapter II, Section 2 (Crimes Committed by Public Officers), Book II of the Revised Penal Code (RPC). Estafafalling under Title X, Chapter VI (Crimes Against Property), Book II of the RPC is not within the Sandiganbayans jurisdiction.

office, thus, the Sandiganbayan has jurisdiction over the charges against petitioner. In the same breath, the prosecution countered that the source of the money is a matter of defense. It should be threshed out during a full-blown trial.[13]

According to the Ombudsman, petitioner, despite her protestations, was a public officer. As a member of the BOR, she had the general powers of administration and exercised the corporate She also argued that it was President Estrada, not the government, that was duped. Even assuming that she received the P15,000,000.00, that amount came from Estrada, not from the coffers of the government.[10] powers of UP. Based on Mechems definition of a public office, petitioners stance that she was not compensated, hence, not a public officer, is erroneous. Compensation is not an essential part of public office. Parenthetically, compensation has been interpreted to include allowances. By this definition, petitioner was compensated.[14]

Petitioner likewise posited that the Sandiganbayan had no jurisdiction over her person. As a student regent, she was not a public officer since she merely represented her peers, in contrast to the other regents who held their positions in an ex officio capacity. She added that she was a simple student and did not receive any salary as a student regent. In a Resolution dated November 14, 2003, the Sandiganbayan denied petitioners motion for lack of merit.[15] It ratiocinated: She further contended that she had no power or authority to receive monies or funds. Such power was vested with the Board of Regents (BOR) as a whole. Since it was not alleged in the information that it was among her functions or duties to receive funds, or that the crime was committed in connection with her official functions, the same is beyond the jurisdiction of the Sandiganbayan citing the case of Soller v. Sandiganbayan.[11] The focal point in controversy is the jurisdiction of the Sandiganbayan over this case. It is extremely erroneous to hold that only criminal offenses covered by Chapter II, Section 2, Title VII, Book II of the Revised Penal Code are within the jurisdiction of this Court. As correctly pointed out by the prosecution, Section 4(b) of R.A. 8249 provides that the Sandiganbayan also has jurisdiction over other offenses committed by public officials and employees in relation to their office. From this provision, there is no single doubt that this Court has jurisdiction over the offense of estafa committed by a public official in relation to his office. Accused-movants claim that being merely a member in representation of the student body, she was never a public officer since she never received any compensation nor does she fall under Salary Grade 27, is of no moment, in view Sandiganbayan Disposition

The Ombudsman opposed the motion.[12] It disputed petitioners interpretation of the law. Section 4(b) of Presidential Decree (P.D.) No. 1606 clearly contains the catch-all phrase in relation to

of the express provision of Section 4 of Republic Act No. 8249 which provides: Sec. 4. Jurisdiction The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving: (A) x x x

of a non-stock corporation. This draws to fore the conclusion that being a member of such board, accused-movant undoubtedly falls within the category of public officials upon whom this Court is vested with original exclusive jurisdiction, regardless of the fact that she does not occupy a position classified as Salary Grade 27 or higher under the Compensation and Position Classification Act of 1989. Finally, this court finds that accused-movants contention that the same of P15 Million was received from former President Estrada and not from the coffers of the government, is a matter a defense that should be properly ventilated during the trial on the merits of this case.[16]

(1) Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade 27 and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758), specifically including: xxxx (g) Presidents, directors or trustees, or managers of government-owned or controlled corporations, state universities or educational institutions or foundations.(Italics supplied)

On November 19, 2003, petitioner filed a motion for reconsideration.[17] The motion was denied with finality in a Resolution dated February 4, 2004.[18]

It is very clear from the aforequoted provision that the Sandiganbayan has original exclusive jurisdiction over all offenses involving the officials enumerated in subsection (g), irrespective of their salary grades, because the primordial consideration in the inclusion of these officials is the nature of their responsibilities and functions. Is accused-movant included in the contemplated provision of law? A meticulous review of the existing Charter of the University of the Philippines reveals that the Board of Regents, to which accused-movant belongs, exclusively exercises the general powers of administration and corporate powers in the university, such as: 1) To receive and appropriate to the ends specified by law such sums as may be provided by law for the support of the university; 2) To prescribe rules for its own government and to enact for the government of the university such general ordinances and regulations, not contrary to law, as are consistent with the purposes of the university; and 3) To appoint, on recommendation of the President of the University, professors, instructors, lecturers and other employees of the University; to fix their compensation, hours of service, and such other duties and conditions as it may deem proper; to grant to them in its discretion leave of absence under such regulations as it may promulgate, any other provisions of law to the contrary notwithstanding, and to remove them for cause after an investigation and hearing shall have been had. It is well-established in corporation law that the corporation can act only through its board of directors, or board of trustees in the case of non-stock corporations. The board of directors or trustees, therefore, is the governing body of the corporation. It is unmistakably evident that the Board of Regents of the University of thePhilippines is performing functions similar to those of the Board of Trustees

Issue

Petitioner is now before this Court, contending that THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION IN NOT QUASHING THE INFORMATION AND DISMISING THE CASE NOTWITHSTANDING THAT IS HAS NO JURISDICTION OVER THE OFFENSE CHARGED IN THE INFORMATION.[19]

In her discussion, she reiterates her four-fold argument below, namely: (a) the Sandiganbayan has no jurisdiction over estafa; (b) petitioner is not a public officer with Salary Grade 27 and she paid her tuition fees; (c) the offense charged was not committed in relation to her office; (d) the funds in question personally came from President Estrada, not from the government.

Our Ruling

undergo the ordeal and expense of a trial if the court has no jurisdiction over the subject matter or offense, or is not the court of proper venue, or if the denial of the motion to dismiss or motion to quash is made with grave abuse of discretion or a whimsical and capricious exercise of judgment. In such cases, the ordinary remedy of appeal cannot be plain and adequate. The following are a few examples of the exceptions to the general rule. In De Jesus v. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack of jurisdiction over the subject matter, this Court granted the petition forcertiorari and prohibition against the City Court of Manila and directed the respondent court to dismiss the case. In Lopez v. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of jurisdiction over the offense, this Court granted the petition for prohibition and enjoined the respondent court from further proceeding in the case.

The petition cannot be granted.

Preliminarily, the denial of a motion to quash is not correctible by certiorari.

We would ordinarily dismiss this petition for certiorari outright on procedural grounds. Well-established is the rule that when a motion to quash in a criminal case is denied, the remedy is not a petition for certiorari, but for petitioners to go to trial, without prejudice to reiterating the special defenses invoked in their motion to quash.[20] Remedial measures as regards interlocutory orders, such as a motion to quash, are frowned upon and often dismissed.[21] The evident reason for this rule is to avoid multiplicity of appeals in a single action.[22]

In Enriquez v. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on improper venue, this Court granted the petition for prohibition and enjoined the respondent judge from taking cognizance of the case except to dismiss the same. In Manalo v. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by prior judgment, this Court granted the petition for certiorari and directed the respondent judge to dismiss the case. In Yuviengco v. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on the Statute of Frauds, this Court granted the petition for certiorari and dismissed the amended complaint. In Tacas v. Cariaso (72 SCRA 527), this Court granted the petition for certiorariafter the motion to quash based on double jeopardy was denied by respondent judge and ordered him to desist from further action in the criminal case except to dismiss the same. In People v. Ramos (83 SCRA 11), the order denying the motion to quash based on prescription was set aside on certiorari and the criminal case was dismissed by this Court.[24] We do not find the Sandiganbayan to have committed a grave abuse of discretion.

In Newsweek, Inc. v. Intermediate Appellate Court,[23] the Court clearly explained and illustrated the rule and the exceptions, thus:

As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule 41). The ordinary procedure to be followed in such a case is to file an answer, go to trial and if the decision is adverse, reiterate the issue on appeal from the final judgment. The same rule applies to an order denying a motion to quash, except that instead of filing an answer a plea is entered and no appeal lies from a judgment of acquittal. This general rule is subject to certain exceptions. If the court, in denying the motion to dismiss or motion to quash, acts without or in excess of jurisdiction or with grave abuse of discretion, then certiorari or prohibition lies. The reason is that it would be unfair to require the defendant or accused to

The jurisdiction of the Sandiganbayan is set by P.D. No. 1606, as amended, not by R.A. No. 3019, as amended.

P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was promulgated on We first address petitioners contention that the jurisdiction of the Sandiganbayan is determined by Section 4 of R.A. No. 3019 (The Anti-Graft and Corrupt Practices Act, as amended). We note that petitioner refers to Section 4 of the said law yet quotes Section 4 of P.D. No. 1606, as amended, in her motion to quash before the Sandiganbayan.[25] She repeats the reference in the instant petition for certiorari[26] and in her memorandum of authorities.[27] P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983, further altering the Sandiganbayan jurisdiction. R.A. No. 7975 approved on March 30, 1995 made succeeding December 10, 1978. P.D. No. 1606 expanded the jurisdiction of the Sandiganbayan.[30]

amendments to P.D. No. 1606, which was again amended on February 5, 1997 by R.A. No. 8249. Section 4 of R.A. No. 8249 further modified the jurisdiction of the Sandiganbayan. As it now stands, the Sandiganbayan has jurisdiction over the following:

Sec. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving: A. Violations of Republic Act No. 3019, as amended, other known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the time of the commission of the offense: (1) Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade 27 and higher, of the Compensation and Position Classification Act of 989 (Republic Act No. 6758), specifically including: (a) Provincial governors, vice-governors, members of the sangguniang panlalawigan, and provincial treasurers, assessors, engineers, and other city department heads; (b) City mayor, vice-mayors, members of the sangguniang panlungsod, city treasurers, assessors, engineers, and other city department heads; (c) Officials of the diplomatic service occupying the position of consul and higher; (d) Philippine army and air force colonels, naval captains, and all officers of higher rank; (e) Officers of the Philippine National Police while occupying the position of provincial director and those holding the rank of senior superintended or higher;

We cannot bring ourselves to write this off as a mere clerical or typographical error. It bears stressing that petitioner repeated this claim twice despite corrections made by the Sandiganbayan.[28]

Her claim has no basis in law. It is P.D. No. 1606, as amended, rather than R.A. No. 3019, as amended, that determines the jurisdiction of the Sandiganbayan. A brief legislative history of the statute creating the Sandiganbayan is in order. The Sandiganbayan was created by P.D. No. 1486, promulgated by then President Ferdinand E. Marcos on June 11, 1978. It was promulgated to attain the highest norms of official conduct required of public officers and employees, based on the concept that public officers and employees shall serve with the highest degree of responsibility, integrity, loyalty and efficiency and shall remain at all times accountable to the people.[29]

(f) City and provincial prosecutors and their assistants, and officials and prosecutors in the Office of the Ombudsman and special prosecutor; (g) Presidents, directors or trustees, or managers of governmentowned or controlled corporations, state universities or educational institutions or foundations. (2) Members of Congress and officials thereof classified as Grade 27 and up under the Compensation and Position Classification Act of 1989; (3) Members of the judiciary without prejudice to the provisions of the Constitution; (4) Chairmen and members of Constitutional Commission, without prejudice to the provisions of the Constitution; and (5) All other national and local officials classified as Grade 27 and higher under the Compensation and Position Classification Act of 1989. B. Other offenses of felonies whether simple or complexed with other crimes committed by the public officials and employees mentioned in subsection a of this section in relation to their office. C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. In cases where none of the accused are occupying positions corresponding to Salary Grade 27 or higher, as prescribed in the said Republic Act No. 6758, or military and PNP officer mentioned above, exclusive original jurisdiction thereof shall be vested in the proper regional court, metropolitan trial court, municipal trial court, and municipal circuit trial court, as the case may be, pursuant to their respective jurisdictions as provided in Batas Pambansa Blg. 129, as amended. The Sandiganbayan shall exercise exclusive appellate jurisdiction over final judgments, resolutions or order of regional trial courts whether in the exercise of their own original jurisdiction or of their appellate jurisdiction as herein provided. The Sandiganbayan shall have exclusive original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes in aid of its appellate jurisdiction and over petitions of similar nature, including quo warranto, arising or that may arise in cases filed or which may be filed under Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the jurisdiction over these petitions shall not be exclusive of the Supreme Court. The procedure prescribed in Batas Pambansa Blg. 129, as well as the implementing rules that the Supreme Court has promulgated and may thereafter promulgate, relative to appeals/petitions for review to the Court of

Appeals, shall apply to appeals and petitions for review filed with the Sandiganbayan. In all cases elevated to the Sandiganbayan and from the Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. In case private individuals are charged as co-principals, accomplices or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees in the proper courts which shall exercise exclusive jurisdiction over them. Any provisions of law or Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability shall, at all times, be simultaneously instituted with, and jointly determined in, the same proceeding by the Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing such civil action separately from the criminal action shall be recognized: Provided, however, That where the civil action had heretofore been filed separately but judgment therein has not yet been rendered, and the criminal case is hereafter filed with the Sandiganbayan or the appropriate court, said civil action shall be transferred to the Sandiganbayan or the appropriate court, as the case may be, for consolidation and joint determination with the criminal action, otherwise the separate civil action shall be deemed abandoned.

Upon the other hand, R.A. No. 3019 is a penal statute approved on August 17, 1960. The said law represses certain acts of public officers and private persons alike which constitute graft or corrupt practices or which may lead thereto.[31] Pursuant to Section 10 of R.A. No. 3019, all prosecutions for violation of the said law should be filed with the Sandiganbayan.[32]

R.A. No. 3019 does not contain an enumeration of the cases over which the Sandiganbayan has jurisdiction. In fact, Section 4 of R.A. No. 3019 erroneously cited by petitioner, deals not with the jurisdiction of the Sandiganbayan but with prohibition on private individuals. We quote:

Section 4. Prohibition on private individuals. (a) It shall be unlawful for any person having family or close personal relation with any public official to

capitalize or exploit or take advantage of such family or close personal relation by directly or indirectly requesting or receiving any present, gift or material or pecuniary advantage from any other person having some business, transaction, application, request or contract with the government, in which such public official has to intervene. Family relation shall include the spouse or relatives by consanguinity or affinity in the third civil degree. The word close personal relation shall include close personal friendship, social and fraternal connections, and professional employment all giving rise to intimacy which assures free access to such public officer. (b) It shall be unlawful for any person knowingly to induce or cause any public official to commit any of the offenses defined in Section 3 hereof.

Every section, provision or clause of the statute must be expounded by reference to each other in order to arrive at the effect contemplated by the legislature.[34] The intention of the legislator must be ascertained from the whole text of the law and every part of the act is to be taken into view.[35] In other words, petitioners interpretation lies in direct opposition to the rule that a statute must be interpreted as a whole under the principle that the best interpreter of a statute is the statute itself.[36] Optima statuti interpretatrix est ipsum statutum. Ang isang batas ay marapat

In fine, the two statutes differ in that P.D. No. 1606, as amended, defines the jurisdiction of the Sandiganbayan while R.A. No. 3019, as amended, defines graft and corrupt practices and provides for their penalties.

na bigyan ng kahulugan sa kanyang kabuuan sa ilalim ng prinsipyo na ang pinakamainam na interpretasyon ay ang mismong batas.

Section 4(B) of P.D. No. 1606 reads: Sandiganbayan has jurisdiction over the offense of estafa. B. Other offenses or felonies whether simple or complexed with other crimes committed by the public officials and employees mentioned in subsection a of this section in relation to their office. Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is not among those crimes cognizable by the Sandiganbayan. We note that in hoisting this argument, petitioner Evidently, the Sandiganbayan has jurisdiction over other felonies committed by public officials in relation to their office. We see no plausible or sensible reason to exclude estafa as one of the offenses included in Section 4(B) of P.D. No. 1606. Plainly, estafa is one of those other felonies. The jurisdiction is simply subject to the twin requirements that (a) the offense is committed by The rule is well-established in this jurisdiction that statutes should receive a sensible construction so as to avoid an unjust or an absurd conclusion.[33] Interpretatio talis in ambiguis semper fienda est, ut evitetur inconveniens et absurdum. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. Kung saan mayroong kalabuan, ang pagpapaliwanag ay hindi dapat maging mahirap at katawa-tawa. In Perlas, Jr. v. People,[37] the Court had occasion to explain that the Sandiganbayan has public officials and employees mentioned in Section 4(A) of P.D. No. 1606, as amended, and that (b) the offense is committed in relation to their office.

isolated the first paragraph of Section 4 of P.D. No. 1606, without regard to the succeeding paragraphs of the said provision.

jurisdiction over an indictment for estafa versus a director of the National Parks Development Committee, a government instrumentality. The Court held then: Petitioner UP student regent is a public officer.

Petitioner also contends that she is not a public officer. She does not receive any salary or The National Parks Development Committee was created originally as an Executive Committee on January 14, 1963, for the development of the Quezon Memorial, Luneta and other national parks (Executive Order No. 30). It was later designated as the National Parks Development Committee (NPDC) on February 7, 1974(E.O. No. 69). On January 9, 1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and Vice-Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to the Bureau of Forest Development, Department of Natural Resources, on December 1, 1975 (Letter of Implementation No. 39, issued pursuant to PD No. 830, dated November 27, 1975), the NPDC has remained under the Office of the President (E.O. No. 709, dated July 27, 1981). Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular government agency under the Office of the President and allotments for its maintenance and operating expenses were issued direct to NPDC (Exh. 10-A, Perlas, Item Nos. 2, 3). remuneration as a UP student regent. This is not the first or likely the last time that We will be

called upon to define a public officer. In Khan, Jr. v. Office of the Ombudsman, We ruled that it is difficult to pin down the definition of a public officer.[39] The 1987 Constitution does not define who are public officers. Rather, the varied definitions and concepts are found in different statutes and jurisprudence.

In Aparri v. Court of Appeals,[40] the Court held that:

The Sandiganbayans jurisdiction over estafa was reiterated with greater firmness in Bondoc v. Sandiganbayan.[38] Pertinent parts of the Courts ruling in Bondoc read:

Furthermore, it is not legally possible to transfer Bondocs cases to the Regional Trial Court, for the simple reason that the latter would not have jurisdiction over the offenses. As already above intimated, the inability of the Sandiganbayan to hold a joint trial of Bondocs cases and those of the government employees separately charged for the same crimes, has not altered the nature of the offenses charged, asestafa thru falsification punishable by penalties higher than prision correccional or imprisonment of six years, or a fine of P6,000.00, committed by government employees in conspiracy with private persons, including Bondoc. These crimes are within the exclusive, original jurisdiction of the Sandiganbayan. They simply cannot be taken cognizance of by the regular courts, apart from the fact that even if the cases could be so transferred, a joint trial would nonetheless not be possible.

A public office is the right, authority, and duty created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercise by him for the benefit of the public ([Mechem Public Offices and Officers,] Sec. 1). The right to hold a public office under our political system is therefore not a natural right. It exists, when it exists at all only because and by virtue of some law expressly or impliedly creating and conferring it (Mechem Ibid., Sec. 64). There is no such thing as a vested interest or an estate in an office, or even an absolute right to hold office. Excepting constitutional offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in an office or its salary (42 Am. Jur. 881).

In Laurel v. Desierto,[41] the Court adopted the definition of Mechem of a public office:

A public office is the right, authority and duty, created and conferred

by law, by which, for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public. The individual so invested is a public officer.[42]

Delegation of sovereign functions is essential in the public office. An investment in an individual of some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public makes one a public officer.[48]

Petitioner claims that she is not a public officer with Salary Grade 27; she is, in fact, a regular tuition fee-paying student. This is likewise bereft of merit. It is not only the salary grade that determines the jurisdiction of the Sandiganbayan. The Sandiganbayan also has jurisdiction over other officers enumerated in P.D. No. 1606. In Geduspan v. People,[43] We held that while the first part of Section 4(A) covers only officials with Salary Grade 27 and higher, its second part specifically includes other executive officials whose positions may not be of Salary Grade 27 and higher but who are by express provision of law placed under the jurisdiction of the said court. Petitioner falls under the jurisdiction of the Sandiganbayan as she is placed there by express provision of law.[44] The offense charged was committed in relation to public office, according to the Information. The administration of the UP is a sovereign function in line with Article XIV of the Constitution. UP performs a legitimate governmental function by providing advanced instruction in literature, philosophy, the sciences, and arts, and giving professional and technical training.[49] Moreover, UP is maintained by the Government and it declares no dividends and is not a corporation created for profit.[50]

Section 4(A)(1)(g) of P.D. No. 1606 explictly vested the Sandiganbayan with jurisdiction over Presidents, directors or trustees, or managers of government-owned or controlled corporations, state universities or educational institutions or foundations. Petitioner falls under this category. As the Sandiganbayan pointed out, the BOR performs functions similar to those of a board of trustees of a non-stock corporation.[45] By express mandate of law, petitioner is, indeed, a public officer as contemplated by P.D. No. 1606. According to petitioner, she had no power or authority to act without the approval of the BOR. She adds there was no Board Resolution issued by the BOR authorizing her to contract with Moreover, it is well established that compensation is not an essential element of public office.[46] At most, it is merely incidental to the public office.[47] then President Estrada; and that her acts were not ratified by the governing body of the state university. Resultantly, her act was done in a private capacity and not in relation to public office. Petitioner likewise argues that even assuming that she is a public officer, the Sandiganbayan would still not have jurisdiction over the offense because it was not committed in relation to her office.

It is axiomatic that jurisdiction is determined by the averments in the information.[51] More than that, jurisdiction is not affected by the pleas or the theories set up by defendant or respondent in an answer, a motion to dismiss, or a motion to quash.[52] Otherwise, jurisdiction would become dependent almost entirely upon the whims of defendant or respondent.[53]

Currency, from the Office of the President, and the latter relying and believing on said false pretenses and misrepresentation gave and delivered to said accused Land Bank Check No. 91353 dated October 24, 2000 in the amount of Fifteen Million Pesos (P15,000,000.00).

Again, the Court sustains the Sandiganbayan observation that the source of theP15,000,000 is In the case at bench, the information alleged, in no uncertain terms that petitioner, being then a student regent of U.P., while in the performance of her official functions, committing the offense in relation to her office and taking advantage of her position, with intent to gain, conspiring with her brother, JADEIAN D. SERANA, a private individual, did then and there wilfully, unlawfully and feloniously defraud the government x x x. (Underscoring supplied) A lawyer owes candor, fairness and honesty to the Court. a matter of defense that should be ventilated during the trial on the merits of the instant case.[54]

As a parting note, petitioners counsel, Renato G. dela Cruz, misrepresented his reference Clearly, there was no grave abuse of discretion on the part of the Sandiganbayan when it did not quash the information based on this ground. to Section 4 of P.D. No. 1606 as a quotation from Section 4 of R.A. No. 3019. A review of his motion to quash, the instant petition for certiorari and his memorandum, unveils the misquotation. We urge petitioners counsel to observe Canon 10 of the Code of Professional Responsibility, Source of funds is a defense that should be raised during trial on the merits. specifically Rule 10.02 of the Rules stating that a lawyer shall not misquote or misrepresent.

The Court stressed the importance of this rule in Pangan v. Ramos,[55] where Atty It is contended anew that the amount came from President Estradas private funds and not from the government coffers. Petitioner insists the charge has no leg to stand on. Dionisio D. Ramos used the name Pedro D.D. Ramos in connection with a criminal case. The Court ruled that Atty. Ramos resorted to deception by using a name different from that with which he was authorized. We severely reprimanded Atty. Ramos and warned that a repetition may warrant suspension or disbarment.[56] We cannot agree. The information alleges that the funds came from the Office of the

President and not its then occupant, President Joseph Ejercito Estrada. Under the information, it is averred that petitioner requested the amount of Fifteen Million Pesos (P15,000,000.00), Philippine We admonish petitioners counsel to be more careful and accurate in his citation. A

lawyers conduct before the court should be characterized by candor and fairness.[57]

The

administration of justice would gravely suffer if lawyers do not act with complete candor and honesty before the courts.[58]

of money with damages against Pan Asiatic Travel Corporation (PATC) and its president Nelida G. Galvez. Platinum sought to collect payment for the airline tickets which PATC bought from it. The case was docketed as Civil Case No. 94-1634. On October 24, 1994, the Regional Trial Court of Makati City, Branch 62, rendered a judgment[3] by default in favor of Platinum and ordered PATC and Nelida G. Galvez to solidarily pay Platinum actual damages of P 359,621.03 with legal interest, P 50,000 attorneys fees and cost of suit. On February 10, 1995, a writ of execution was issued on motion of Platinum. Pursuant to the writ, Manila Polo Club Proprietary Membership Certificate No. 2133 in the name of Nelida G. Galvez was levied upon and sold for P479,888.48 to a certain Ma. Rosario Khoo. On June 2, 1995, private respondent Jose M. Panlilio filed a motion to intervene in Civil Case No. 94-1634. Panlilio claimed that, in October 1992, Galvez had executed in his favor a chattel mortgage over her shares of stock in the Manila Polo Club to secure her P1 million loan and that Galvez had already delivered to him the stock certificates valued at P5 million. On June 9, 1995, the trial court denied Panlilios motion for intervention: Submitted for resolution is Jose M. Panlilios Motion for Intervention dated May 31, 1995. This Court has to deny the motion because (1) a decision had already been rendered in this case and that the only matters at issue is the propriety of the execution; (2) it will only delay or prejudice the adjudication of the rights of the original parties; and, (3) the Intervenors rights may be fully protected in a separate action.[4] On January 29, 1996, the trial court declared the execution sale null and void due to irregularities in the conduct thereof. On May 3, 1996, Panlilio filed against Galvez a collection case with application for a writ of preliminary attachment of the disputed Manila Polo Club shares, docketed as Civil Case No. 96-365. The case was raffled to Branch 146 of the Regional Trial Court of Makati City[5]. In the meantime, Panlilio again attempted to intervene in Civil Case No. 94-1634, this time by incorporating in his complaint a motion to consolidate Civil Case No. 96-365 and Civil Case No. 94-1634. On June 13, 1996, Judge Salvador Tensuan of Branch 146 granted the motion for consolidation on condition that Judge Roberto Diokno of Branch 62, who was trying Civil Case No. 94-1634, would not object thereto. Judge Diokno later issued an order, dated July 23, 1996, allowing the consolidation of the two cases and setting for hearing Panlilios application for a writ of preliminary attachment. Platinum, as plaintiff in Civil Case No. 94-1634, moved to reconsider the July 23, 1996 order of Judge Diokno but its motion was denied. On January 31, 1997, Platinum filed a petition for certiorari at the Court of Appeals assailing, among others, the July 23, 1996 order of Judge Diokno allowing the consolidation of Civil Case No. 96-365 and Civil Case No. 94-1634. In a decision dated January 15, 1998, the Court of Appeals annulled the assailed order but left it to Judge Diokno to decide whether to return Civil Case No. 96-365 to Judge Tensuan in Branch 146, or to keep it in his docket and decide it as a separate case. Platinum filed a motion for partial reconsideration of the decision of the Court of Appeals, praying that Civil Case No. 96-365 be returned to Branch 146 or re-raffled to another RTC Branch of Makati. However, the motion was denied by the Court of Appeals on April 2, 1998.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.

PLATINUM TOOLS AND TRAVEL INC. v. PANLILIO 411 SCRA142, 146

[G.R. No. 133365. September 16, 2003] PLATINUM TOURS AND TRAVEL, INCORPORATED, petitioner, vs. JOSE M. PANLILIO,respondent. DECISION CORONA, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the January 15, 1998 decision[1] of the Court of Appeals which ruled that: xxx Consequently, the respondent judge committed grave abuse of discretion in allowing the consolidation of Civil Case No. 96-635 with Civil Case No. 94-1634. x x x We also leave it to the respondent Judge to decide whether he will return Civil Case No. 96635 to Branch 146 or keep it in his docket but should he opt for the latter, he should act on it as a separate case from Civil Case No. 94-1634. WHEREFORE, the petition is partially granted and the assailed Orders dated July 23, 1996 and September 17, 1996, allowing the consolidation of Civil Case No. 96-635 with Civil Case No. 941634 and denying petitioners motion for reconsideration, respectively, are ANNULLED and SET ASIDE, with the consequent complete severance of the two (2) cases.[2] The facts follow: On April 27, 1994, petitioner Platinum Tours and Travel Inc. (Platinum) filed a complaint for a sum

In the instant petition, Platinum insists that the Makati RTC, Branch 62, has no jurisdiction to try Civil Case No. 96-365. It argues that, when Judge Dioknos July 23, 1996 order allowing the consolidation of the two cases was annulled and set aside, RTC Branch 62s basis for acquiring jurisdiction over Civil Case No. 96-365 was likewise extinguished. We disagree. Jurisdiction is the power and authority of the court to hear, try and decide a case.[6] In general, jurisdiction may either be over the nature of the action, over the subject matter, over the person of the defendants or over the issues framed in the pleadings. Jurisdiction over the nature of the action and subject matter is conferred by law. It is determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.[7] Jurisdiction over the person of the plaintiff is acquired from the time he files his complaint; while jurisdiction over the person of the defendant is acquired by his voluntary appearance in court and his submission to its authority, or by the coercive power of legal processes exerted over his person. Since jurisdiction is the power to hear and determine a particular case, it does not depend upon the regularity of the exercise by the court of that power or on the correctness of its decisions. In the case at bar, there is no doubt that Panlilios collection case docketed as Civil Case No. 96-365 falls within the jurisdiction of the RTC of Makati, Branch 62. The fact that the Court of Appeals subsequently annulled Judge Dioknos order granting the consolidation of Civil Case No. 96 -365 and Civil Case No. 94-1634, did not affect the jurisdiction of the court which issued the said order. Jurisdiction should be distinguished from the exercise of jurisdiction. Jurisdiction refers to the authority to decide a case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over the person and the subject matter, as in the instant case, the decision on all questions arising from the case is but an exercise of such jurisdiction. Any error that the court may commit in the exercise of its jurisdiction is merely an error of judgment which does not affect its authority to decide the case, much less divest the court of the jurisdiction over the case. We find no reversible error on the part of the Court of Appeals when it left to Judge Diokno of Branch 62 the discretion on whether to return Civil Case No. 96-365 to Branch 146 or to decide the same as a separate case in his own sala. Moreover, we find the instant petition premature and speculative. Had Platinum waited until Judge Diokno decided on what to do with Civil Case No. 96-365, the parties would have been spared the trouble and the expense of seeking recourse from this Court, which in turn would have had one petition less in its docket. The unfounded fear that Civil Case No. 96-365 would unduly delay the final resolution of Civil Case No. 94-1634, if the former were retained by Branch 62, made Platinum act with haste. In so doing, it wasted the precious time not only of the parties but also of this Court. All told, nothing legally prevents the RTC of Makati, Branch 62, from proceeding with Civil Case No. 96-365. Should it decide to retain the case, it is hereby directed to resolve the same with dispatch. WHEREFORE, petition is hereby DENIED. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

GSIS v. SANTIAGO 414 SCRA 563

G.R. No. 155206

October 28, 2003

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. EDUARDO M. SANTIAGO, substituted by his widow ROSARIO ENRIQUEZ VDA. DE SANTIAGO, respondent. DECISION CALLEJO, SR., J.: Before the Court is the petition for review on certiorari filed by the Government Service Insurance System (GSIS), seeking to reverse and set aside the Decision1 dated February 22, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 62309 and its Resolution dated September 5, 2002 denying its motion for reconsideration. The antecedent facts of the case, as culled from the assailed CA decision and that of the trial court, are as follows: Deceased spouses Jose C. Zulueta and Soledad Ramos obtained various loans from defendant GSIS for (the) period September, 1956 to October, 1957 in the total amount ofP3,117,000.00 secured by real estate mortgages over parcels of land covered by TCT Nos. 26105, 37177 and 50365. The Zuluetas failed to pay their loans to defendant GSIS and the latter foreclosed the real estate mortgages dated September 25, 1956, March 6, 1957, April 4, 1957 and October 15, 1957. On August 14, 1974, the mortgaged properties were sold at public auction by defendant GSIS submitting a bid price of P5,229,927.84. Not all lots covered by the mortgaged titles, however, were sold. Ninety-one (91) lots were expressly excluded from the auction since the lots were sufficient to pay for all the mortgage debts. A Certificate of Sale (Annex "F," Records, Vol. I, pp. 23-28) was issued by then Provincial Sheriff Nicanor D. Salaysay. The Certificate of Sale dated August 14, 1974 had been annotated and inscribed in TCT Nos. 26105, 37177 and 50356, with the following notations: "(T)he following lots which form part of this title (TCT No. 26105) are not covered by the mortgage contract due to sale to third parties and donation to the government: 50-H-5-C-9-J-65-H-8, 50-H-5-C-9J-M-7; 50-H-5-C-9-J-65-H-5; 1 lots Nos. 1 to 13, Block No. 1 -6,138 sq.m. 2. Lots Nos. 1 to 11, Block No. 2 4,660 sq.m. 3. Lot No. 15, Block No. 3 487 sq.m. 4. Lot No. 17, Block No. 4 263 sq.m. 5. Lot No. 1, Block No. 7 402 sq.m. 6. Road Lots Nos. 1, 2, 3, & 4 2,747 sq.m." In another "NOTE: The following lots in the Antonio Subdivision were already released by the GSIS and therefore are not included in this sale, namely: LOT NO. 1, 6, 7, 8, 9, 10, and 13 (Old Plan) Block I; 1, 3, 4, 5, 7, 8 and 10 (Old Plan) Block II; 3, 10, 12 and 13 (New Plan) Block I (Old Plan) Block III; 7, 14 and 20 (New Plan) Block III (Old Plan) Block V; 13 and 20 (New Plan) Block IV (Old Plan) Block VI; 1, 2, 3 and 10 (New Plan) Block V (Old Plan) Block VII; 1, 5, 8, 15, 26 and 27 (New Plan) Block VI (Old Plan) Block VIII; 7, 12 and 20 (New Plan) Block VII (Old Plan) Block II; 1, 4 and 6 (New Plan) Block VIII (Old Plan) Block X; 5 (New Plan) Block X (Old Plan) Block ZXII; 6 (New Plan) Block XI (Old Plan) Block XII; 1, Block 9; 12 Block 1; 11 Block 2; 19 Block 1; 10 Block 6; 23 Block 3." And the lots on "ADDITIONAL EXCLUSION FROM PUBLIC SALE" are "LOTS NO. 6 Block 4; 2 Block 2; 5 Block 5; 1, 2 and 3 Block 11, 1, 2, 3 and 4 Block 10; 5 Block 11 (New); 1 Block 3; 5 Block 1; 15 Block 7; 11 Block 9; 13 Block 5; 12 Block 5; 3 Block 10; 6."

On November 25, 1975, an Affidavit of Consolidation of Ownership (Annex "G," Records, Vol. I, pp. 29-31) was executed by defendant GSIS over Zuluetas lots, including the lots, which as earlier stated, were already excluded from the foreclosure. On March 6, 1980, defendant GSIS sold the foreclosed properties to Yorkstown Development Corporation which sale was disapproved by the Office of the President of the Philippines. The sold properties were returned to defendant GSIS. The Register of Deeds of Rizal cancelled the land titles issued to Yorkstown Development Corporation. On July 2, 1980, TCT No. 23552 was issued cancelling TCT No. 21926; TCT No. 23553 cancelled TCT No. 21925; and TCT No. 23554 cancelling TCT No. 21924, all in the name of defendant GSIS.1awphi1.nt After defendant GSIS had re-acquired the properties sold to Yorkstown Development Corporation, it began disposing the foreclosed lots including the excluded ones. On April 7, 1990, representative Eduardo Santiago and then plaintiff Antonio Vic Zulueta executed an agreement whereby Zulueta transferred all his rights and interests over the excluded lots. Plaintiff Eduardo Santiagos lawyer, Atty. Wenceslao B. Trinidad, wrote a demand letter dated May 11, 1989 (Annex "H," Records, Vol. I, pp. 32-33) to defendant GSIS asking for the return of the eighty-one (81) excluded lots.2 On May 7, 1990, Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed with the Regional Trial Court (RTC) of Pasig City, Branch 71, a complaint for reconveyance of real estate against the GSIS. Spouses Alfeo and Nenita Escasa, Manuel III and Sylvia G. Urbano, and Marciana P. Gonzales and the heirs of Mamerto Gonzales moved to be included as intervenors and filed their respective answers in intervention. Subsequently, the petitioner, as defendant therein, filed its answer alleging inter alia that the action was barred by the statute of limitations and/or laches and that the complaint stated no cause of action. Subsequently, Zulueta was substituted by Santiago as the plaintiff in the complaint a quo. Upon the death of Santiago on March 6, 1996, he was substituted by his widow, Rosario Enriquez Vda. de Santiago, as the plaintiff. After due trial, the RTC rendered judgment against the petitioner ordering it to reconvey to the respondent, Rosario Enriquez Vda. de Santiago, in substitution of her deceased husband Eduardo, the seventy-eight lots excluded from the foreclosure sale.1awphi1.nt The dispositive portion of the RTC decision reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant: 1. Ordering defendant to reconvey to plaintiff the seventy-eight (78) lots released and excluded from the foreclosure sale including the additional exclusion from the public sale, namely: a. Lot Nos. 1, 6, 7, 8, 0, 10, 13, Block I (Old Plan). b. Lot Nos. 1, 3, 4, 5, 7, 8 and 10, Block II (Old Plan). c. Lot Nos. 3, 10, 12, and 13, Block I (New Plan), Block III (Old Plan), d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan). e. Lot Nos. 13 and 20, Block IV (New Plan), Block VI (Old Plan). f. Lot Nos. 1, 2, 3 and 10, Block V (New Plan), Block VII (Old Plan). g. Lot Nos. 1, 5, 8, 15, 26 and 27, Block VI (New Plan), Block VIII (Old Plan). h. Lot Nos. 7 and 12, Block VII (New Plan), Block II (Old Plan).

i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan). j. Lot 5, Block X (New Plan), Block XII (Old Plan). k. Lot 6, Block XI (New Plan), Block XII (Old Plan). l. Lots 2, 5, 12 and 15, Block I. m. Lots 6, 9 and 11, Block 2. n. Lots 1, 5, 6, 7, 16 and 23, Block 3. o. Lot 6, Block 4. p. Lots 5, 12, 13 and 24, Block 5. q. Lots 10 and 16, Block 6. r. Lots 6 and 15, Block 7. s. Lots 13, 24, 28 and 29, Block 8. t. Lots 1, 11, 17 and 22, Block 9. u. Lots 1, 2, 3 and 4, Block 10. v. Lots 1, 2, 3 and 5 (New), Block 11. 2. Ordering defendant to pay plaintiff, if the seventy-eight (78) excluded lots could not be reconveyed, the fair market value of each of said lots. 3. Ordering the Registry of Deeds of Pasig City to cancel the land titles covering the excluded lots in the name of defendant or any of its successors-in-interest including all derivative titles therefrom and to issue new land titles in plaintiffs name. 4. Ordering the Registry of Deeds of Pasig City to cancel the Notices of Lis Pendens inscribed in TCT No. PT-80342 under Entry No. PT-12267/T-23554; TCT No. 81812 under Entry No. PT12267/T-23554; and TCT No. PT-84913 under Entry No. PT-12267/T-23554. 5. Costs of suit.3 The petitioner elevated the case to the CA which rendered the assailed decision affirming that of the RTC. The dispositive portion of the assailed decision reads: WHEREFORE, premises considered, the herein appeal is DISMISSED for lack of merit. The Decision of December 17, 1997 of Branch 71 of the Regional Trial Court of Pasig City is hereby AFFIRMED.4 The petitioner moved for a reconsideration of the aforesaid decision but the same was denied in the assailed CA Resolution of September 5, 2002. The petitioner now comes to this Court alleging that: THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT A) PETITIONER WAS GUILTY OF BAD FAITH WHEN IN TRUTH AND IN FACT, THERE WAS NO SUFFICIENT GROUND TO SUPPORT SUCH CONCLUSION; AND B) THERE WAS NO PRESCRIPTION IN THIS CASE.5 In its petition, the petitioner maintains that it did not act in bad faith when it erroneously included in its certificate of sale, and subsequently consolidated the titles in its name over the seventy-eight

lots ("subject lots") that were excluded from the foreclosure sale. There was no proof of bad faith nor could fraud or malice be attributed to the petitioner when it erroneously caused the issuance of certificates of title over the subject lots despite the fact that these were expressly excluded from the foreclosure sale. The petitioner asserts that the action for reconveyance instituted by the respondent had already prescribed after the lapse of ten years from November 25, 1975 when the petitioner consolidated its ownership over the subject lots. According to the petitioner, an action for reconveyance based on implied or constructive trust prescribes in ten years from the time of its creation or upon the alleged fraudulent registration of the property. In this case, when the action was instituted on May 7, 1990, more than fourteen years had already lapsed. Thus, the petitioner contends that the same was already barred by prescription as well as laches. The petitioner likewise takes exception to the holding of the trial court and the CA that it (the petitioner) failed to apprise or return to the Zuluetas, the respondents predecessors-in-interest, the seventy-eight lots excluded from the foreclosure sale because the petitioner had no such obligation under the pertinent loan and mortgage agreement. The petitioners arguments fail to persuade.1awphi1.nt At the outset, it bears emphasis that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, is limited to reviewing only errors of law. This Court is not a trier of facts. Case law has it that the findings of the trial court especially when affirmed by the CA are binding and conclusive upon this Court. Although there are exceptions to the said rule, we find no reason to deviate therefrom.6By assailing the findings of facts of the trial court as affirmed by the CA, that it acted in bad faith, the petitioner thereby raised questions of facts in its petition. Nonetheless, even if we indulged the petition and delved into the factual issues, we find the petition barren of merit. That the petitioner acted in bad faith in consolidating ownership and causing the issuance of titles in its name over the subject lots, notwithstanding that these were expressly excluded from the foreclosure sale was the uniform ruling of the trial court and appellate court. As declared by the CA: The acts of defendant-appellant GSIS in concealing from the Zuluetas [the respondents predecessors-in-interest] the existence of these lots, in failing to notify or apprise the spouses Zulueta about the excluded lots from the time it consolidated its titles on their foreclosed properties in 1975, in failing to inform them when it entered into a contract of sale of the foreclosed properties to Yorkstown Development Corporation in 1980 as well as when the said sale was revoked by then President Ferdinand E. Marcos during the same year demonstrated a clear effort on its part to defraud the spouses Zulueta and appropriate for itself the subject properties. Even if titles over the lots had been issued in the name of the defendant-appellant, still it could not legally claim ownership and absolute dominion over them because indefeasibility of title under the Torrens system does not attach to titles secured by fraud or misrepresentation. The fraud committed by defendant-appellant in the form of concealment of the existence of said lots and failure to return the same to the real owners after their exclusion from the foreclosure sale made defendant-appellant holders in bad faith. It is well-settled that a holder in bad faith of a certificate of title is not entitled to the protection of the law for the law cannot be used as a shield for fraud.7 The Court agrees with the findings and conclusion of the trial court and the CA. The petitioner is not an ordinary mortgagee. It is a government financial institution and, like banks, is expected to exercise greater care and prudence in its dealings, including those involving registered lands.8 The

Courts ruling in Rural Bank of Compostela v. CA9 is apropos: Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of land registration statute, Act [No.] 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description.10 Due diligence required of banks extend even to persons, or institutions like the petitioner, regularly engaged in the business of lending money secured by real estate mortgages.11 In this case, the petitioner executed an affidavit in consolidating its ownership and causing the issuance of titles in its name over the subject lots despite the fact that these were expressly excluded from the foreclosure sale. By so doing, the petitioner acted in gross and evident bad faith. It cannot feign ignorance of the fact that the subject lots were excluded from the sale at public auction. At the least, its act constituted gross negligence amounting to bad faith. Further, as found by the CA, the petitioners acts of concealing the existence of these lots, its failure to return them to the Zuluetas and even its attempt to sell them to a third party is proof of the petitioners intent to defraud the Zuluetas and appropriate for itself the subject lots. On the issue of prescription, generally, an action for reconveyance of real property based on fraud prescribes in four years from the discovery of fraud; such discovery is deemed to have taken place upon the issuance of the certificate of title over the property. Registration of real property is a constructive notice to all persons and, thus, the four-year period shall be counted therefrom.12 On the other hand, Article 1456 of the Civil Code provides: Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property.13 The petitioners defense of prescription is untenable. As held by the CA, the general rule that the discovery of fraud is deemed to have taken place upon the registration of real property because it is "considered a constructive notice to all persons" does not apply in this case. The CA correctly cited the cases of Adille v. Court of Appeals14 and Samonte v. Court of Appeals,15 where this Court reckoned the prescriptive period for the filing of the action for reconveyance based on implied trust from the actual discovery of fraud. In ruling that the action had not yet prescribed despite the fact that more than ten years had lapsed between the date of registration and the institution of the action for reconveyance, the Court in Adille ratiocinated: It is true that registration under the Torrens system is constructive notice of title, but it has likewise been our holding that the Torrens title does not furnish a shield for fraud. It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title. For the same reason, we cannot dismiss private respondents claims commenced in 1974 over the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years, reckoned from the date of the registration of the property, we, as we said, are not prepared to count the period from such a date in this case. We note the petitioners sub rosa efforts to get hold

of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence that he was able to secure title in his name [alone]." Accordingly, we hold that the right of the private respondents commenced from the time they actually discovered the petitioners act of defraudation. According to the respondent Court of Appeals, they "came to know [of it] apparently only during the progress of the litigation." Hence, prescription is not a bar.16 The above ruling was reiterated in the more recent case of Samonte. In this case, as established by the CA, the respondent actually discovered the fraudulent act of the petitioner only in 1989: ... [T]he prescriptive period of the action is to be reckoned from the time plaintiff-appellee (then Eduardo M. Santiago) had actually discovered the fraudulent act of defendant-appellant which was, as borne out by the records, only in 1989. Plaintiff-appellee Eduardo M. Santiago categorically testified (TSN of July 11, 1995, pp. 14-15) that he came to know that there were 91 excluded lots in Antonio Village which were foreclosed by the GSIS and included in its consolidation of ownership in 1975 when, in 1989, he and Antonio Vic Zulueta discussed it and he was given by Zulueta a special power of attorney to represent him to recover the subject properties from GSIS. The complaint for reconveyance was filed barely a year from the discovery of the fraud.17 Following the Courts pronouncements in Adille and Samonte, the institution of the action for reconveyance in the court a quo in 1990 was thus well within the prescriptive period. Having acted in bad faith in securing titles over the subject lots, the petitioner is a holder in bad faith of certificates of title over the subject lots. The petitioner is not entitled to the protection of the law for the law cannot be used as a shield for frauds.18 Contrary to its claim, the petitioner unarguably had the legal duty to return the subject lots to the Zuluetas. The petitioners attempts to justify its omission by insisting that it had no such duty under the mortgage contract is obviously clutching at straw. Article 22 of the Civil Code explicitly provides that "every person who, through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." WHEREFORE, the petition is DENIED for lack of merit.1a\^/phi1.net The assailed Decision dated February 22, 2002 and Resolution dated September 5, 2002 of the Court of Appeals in CA-G.R. CV No. 62309 are AFFIRMED IN TOTO. Costs against the petitioner. SO ORDERED. Bellosillo, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur. PECSON v. COMELEC 575 SCRA634, 649

This petition for certiorari - filed by Romulo F. Pecson (Pecson) under Rule 64, in relation with Rule 65 of the Revised Rules of Court - seeks to set aside and annul the Resolution dated May 21, 2008 of the Commission on Elections en banc (COMELEC) in SPR 60-2007.1 The assailed Resolution nullified the grant (via a Special Order) by the Regional Trial Court (RTC), Branch 56, Angeles City, of the execution pending appeal of its Decision in the election contest between Pecson and the private respondent Lyndon A. Cunanan (Cunanan), the proclaimed winner in the 2007 mayoralty election in Magalang, Pampanga. THE ANTECEDENTS Pecson and Cunanan were candidates for the mayoralty position in the Municipality of Magalang, Province of Pampanga in the May 2007 elections. On May 17, 2007, Cunanan was proclaimed the winning candidate, garnering a total of 12,592 votes as against Pecson's 12,531, or a margin of 61 votes. Cunanan took his oath and assumed the position of Mayor of Magalang. Soon thereafter, Pecson filed an election protest, docketed as EPE No. 07-51, with the RTC. On November 23, 2007, the RTC rendered a Decision in Pecson's favor. The RTC ruled that Pecson received a total of 14,897 votes as against Cunanan's 13,758 - a vote margin of 1,139. Cunanan received a copy of the Decision on November 26, 2007 and filed a Notice of Appeal the day after. The RTC issued on November 27, 2008 an Order noting the filing of the notice of appeal and the payment of appeal fee and directing the transmittal of the records of the case to the Electoral Contests Adjudication Department (ECAD) of the COMELEC. Pecson, on the other hand, filed on November 28, 2007 an Urgent Motion for Immediate Execution Pending Appeal, claiming that Section 11, Rule 14 of the Rules of Procedure in Election Contests before the Courts Involving Elective Municipal and Barangay Officials2 (Rules) allows this remedy. The RTC granted Pecson's motion for execution pending appeal via a Special Order dated December 3, 2007 (Special Order) but suspended, pursuant to the Rules, the actual issuance of the writ of execution for twenty (20) days. The Special Order states the following reasons: 1. The result of the judicial revision show[s] that the protestant garnered 14,897 votes as against protestee's 13,758 votes or a plurality of 1,139 votes. The victory of the protestant is clearly and manifestly established by the rulings and tabulation of results made by the Court x x x; 2. It is settled jurisprudence that execution pending appeal in election cases should be granted "to give as much recognition to the worth of a trial judge's decision as that which is initially ascribed by the law to the proclamation by the board of canvassers." The Court holds that this wisp of judicial wisdom of the Supreme Court enunciated in the Gahol case and subsequent cases citing it is borne by the recognition that the decision of the trial court in an election case is nothing but the court upholding the mandate of the voter, which has as its source no other than the exercise of the constitutional right to vote. While it is true that the protestee can avail of the remedy of appeal before the COMELEC, the Court is more convinced that between upholding the mandate of the electorate of Magalang, Pampanga which is the fruit of the exercise of the constitutional right to vote and a procedural remedy, the Court is more inclined to uphold and give effect to and actualize the mandate of the electorate of Magalang. To the mind of the Court, in granting execution pending appeal the Court is being true to its bounden duty to uphold the exercise of constitutional rights and gives flesh to the mandate of the people. The foregoing is, as far as the Court is concerned, considered far superior circumstance that convinces the Court to grant protestant's motion; 3. Public interest and the will of the electorate must be respected and given meaning; 4. In the case of Navarosa v. Comelec, the Supreme Court held that "In the Gaholcase, the Court gave an additional justification for allowing execution pending appeal of decisions of trial courts, thus:

G.R. No. 182865

December 24, 2008

ROMULO F. PECSON, petitioner, vs. COMMISSION ON ELECTIONS, DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT and LYNDON A. CUNANAN, respondents. DECISION BRION, J.:

Public policy underlies it, x x x [S]omething had to be done to strike the death blow at the pernicious grab-the-proclamation-prolong-the-protest technique often, if not invariably, resorted to by unscrupulous politicians who would render nugatory the people's verdict against them and persist in continuing in an office they very well know they have no legitimate right to hold. x x x." A primordial public interest is served by the grant of the protestant's motion,i.e., to obviate a hollow victory for the duly elected candidate. In the words of Chief Justice Cesar Bengzon, "The well known delay in the adjudication of election protests often gave the successful contestant a mere pyrrhic victory, i.e., a vindication when the term of office is about to expire or has expired." Expectedly, Cunanan moved to reconsider the Order, arguing that the RTC gravely abused its discretion: (1) in ruling that there were good reasons to issue a writ of execution pending appeal; and (2) in entertaining and subsequently granting the motion for execution pending appeal despite the issuance of an order transmitting the records of the case. Thereupon, Cunanan filed with the COMELEC a Petition for Application of Preliminary Injunction with Prayer for Status Quo Ante Order/Temporary Restraining Order (TRO) with Prayer for Immediate Raffle. He argued in his petition that: (1) the RTC Decision did not clearly establish Pecson's victory or his (Cunanan's) defeat - a requirement of Section 11, Rule 14 of the Rules; among other reasons, the number of votes the RTC tallied and tabulated exceeded the number of those who actually voted and the votes cast for the position of Mayor, and (2) the RTC had constructively relinquished its jurisdiction by the issuance of the Order dated November 27, 2007 directing the transmittal of the records of the case. The Second Division of the COMELEC issued on January 4, 2008 a 60-day TRO directing: (1) the RTC to cease and desist from issuing or causing the issuance of a writ of execution or implementing the Special Order; and (2) Cunanan to continue performing the functions of Mayor of Magalang. In his Answer and/or Opposition, with Prayer for Immediate Lifting of TRO, Pecson argued that: (1) preliminary injunction cannot exist except as part or incident of an independent action, being a mere ancillary remedy that exists only as an incident of the main proceeding; (2) the "petition for application of preliminary injunction," as an original action, should be dismissed outright; and (3) Cunanan is guilty of forum shopping, as he filed a motion for reconsideration of the Special Order simultaneously with the petition filed with the COMELEC. The COMELEC's Second Division denied Cunanan's petition in a Resolution dated March 6, 2008. It ruled that: (1) the resolution of the motion for execution pending appeal is part of the residual jurisdiction of the RTC to settle pending incidents; the motion was filed prior to the expiration of the period to appeal and while the RTC was still in possession of the original record; and (2) there is good reason to justify the execution of the Decision pending appeal, as Pecson's victory was clearly and manifestly established. Ruling on the alleged defect in the RTC count, the Second Division ruled: [A]fter a careful scrutiny of the Decision, We found that the error lies in the trial court's computation of the results. In its Decision, the trial court, to the votes obtained by the party (as per proclamation of the MBOC), deducted the votes per physical count after revision and deducted further the invalid/nullified ballots per the trial court's appreciation and thereafter added the valid claimed ballots per the trial court's appreciation, thus: Votes obtained per proclamation of the MBOC (-) Votes per physical count (-) Invalid or nullified ballots (+) Valid claimed ballots = Total Votes Obtained The formula used by the trial court is erroneous as it used as its reference the votes obtained by the parties as per the proclamation of the MBOC. It complicated an otherwise simple and

straightforward computation, thus leading to the error. The correct formula should have been as follows: Total Number of Uncontested Ballots (+) Valid Contested Ballots (+) Valid Claimed Ballots = Total Votes Obtained Using this formula and applying the figures in pages 744 and 745 of the trial court's Decision, the results will be as follows:

For the Petitioner Cunanan Total Number of Uncontested Ballots Add: Valid Contested Ballots Add: Valid Claimed Ballots Total Votes of Petitioner For the Private Respondent (Pecson) Total Number of Uncontested Ballots Add: Valid Contested Ballots Add: Valid Claimed Ballots Total Votes of Petitioner

9,656 2,058 36 11,750 9,271 2,827 39 12,134

Using the correct formula, private respondent still obtained a plurality of the votes cast and enjoys a margin of 384 votes over the petitioner. Although not as wide as the margin found by the trial court, We are nevertheless convinced that the victory of private respondent has been clearly established in the trial court's decision for the following reasons: First, the error lies merely in the computation and does not put in issue the appreciation and tabulation of votes. The error is purely mathematical which will not involve the opening of ballot boxes or an examination and appreciation of ballots. It is a matter of arithmetic which calls for the mere clerical act of reflecting the true and correct votes of the candidates . Second, the error did not affect the final outcome of the election protest as to which candidate obtained the plurality of the votes cast. We are likewise convinced that the assailed order states good or special reasons justifying the execution pending appeal, to wit: (1) The victory of the protestant was clearly and manifestly established; (2) Execution pending appeal in election cases should be granted to give as much recognition to the worth of a trial judge's decision as that which is initially ascribed by the law to the proclamation by the board of canvassers; (3) Public interest and the will of the electorate must be respected and given meaning; and (4) Public policy underlies it, as something had to be done to strike the death blow at the pernicious grab-the-proclamation-prolong-the-protest technique often, if not invariably resorted to by unscrupulous politicians. Such reasons to Our mind constitute superior circumstances as to warrant the execution of the trial court's decision pending appeal.

Pecson thus asked for the issuance of a writ of execution via an Ex-Parte Motion. Despite Cunanan's opposition, the RTC granted Pecson's motion and issued the writ of execution on March 11, 2008. Pecson thereafter assumed the duties and functions of Mayor of Magalang. The Assailed Resolution On Cunanan's motion, the COMELEC en banc issued its Resolution dated May 21, 2008 reversing the ruling of the Second Division insofar as it affirmed the RTC's findings of good reasons to execute the decision pending appeal. It affirmed the authority of the RTC to order execution pending appeal; it however nullified the March 11, 2008 writ of execution on the ground that the RTC could no longer issue the writ because it had lost jurisdiction over the case after transmittal of the records and the perfection of the appeals of both Cunanan and Pecson (to be accurate, the lapse of Pecson's period to appeal). On the propriety of executing the RTC Decision pending appeal, the COMELEC en bancruled that it was not convinced of the good reasons stated by the RTC in its Special Order. It ruled that recognition of the worth of a trial judge's decision, on the one hand, and the right to appeal, including the Commission's authority to review the decision of the trial court, on the other, requires a balancing act; and not every invocation of public interest will suffice to justify an execution pending appeal. It added that at a stage when the decision of the trial court has yet to attain finality, both the protestee and the protestant are to be considered "presumptive winners." It noted too that the Second Division already cast a doubt on the correctness of the number of votes obtained by the parties after the trial court's revision; thus, the resolution of the pending appeal becomes all the more important. Between two presumptive winners, considering the pending appeal of the election protest to the Commission and public service being the prime consideration, the balance should tilt in favor of non-disruption of government service. The execution of the RTC Decision pending appeal would necessarily entail the unseating of the protestee, resulting not only in the disruption of public service, but also in confusion in running the affairs of the government; a subsequent reversal too of the RTC Decision also results in the unseating of the protestant. This situation (i.e., the series of turn-over of the seat of power from one presumptive winner to another) cannot but cause irreparable damage to the people of Magalang, and overweighs the reasons asserted by the RTC in its Special Order. In the end, according to the COMELEC, public interest is best served when he who was really voted for the position is proclaimed and adjudged as winner with finality. The Petition and the Prayer for the issuance of a Status Quo Order In imputing grave abuse of discretion to the COMELEC en banc, Pecson argues that: (1) the RTC Decision clearly showed Pecson's victory; (2) the reasons for the reversal of the RTC Decision practically render impossible a grant of an execution pending appeal; and (3) the RTC correctly found the presence of the requisites for execution pending appeal. Threatened to be unseated, Pecson asked, as interim relief, for the issuance of a Status Quo Order. He claimed that: (1) the Department of Interior and Local Government already recognized (based on the issuance of the assailed Resolution) Cunanan's assumption of office even if the assailed Resolution had not attained finality; and (2) in order to prevent grave and irreparable injury to Pecson and the perpetuation of a travesty of justice, a Status Quo Order must immediately issue. THE COURT'S RULING We find the petition meritorious. The remedy of executing court decisions pending appeal in election contests is provided under the Rules as follows:

SEC. 11. Execution pending appeal. - On motion of the prevailing party with notice to the adverse party, the court, while still in possession of the original records, may, at its discretion, order the execution of the decision in an election contest before the expiration of the period to appeal, subject to the following rules: (a) There must be a motion by the prevailing party with three-day notice to the adverse party. Execution pending appeal shall not issue without prior notice and hearing. There must be good reasons for the execution pending appeal. The court, in a special order, must state the good or special reasons justifying the execution pending appeal. Such reasons must: (1) constitute superior circumstances demanding urgency that will outweigh the injury or damage should the losing party secure a reversal of the judgment on appeal; and (2) be manifest, in the decision sought to be executed, that the defeat of the protestee or the victory of the protestant has been clearly established. (b) If the court grants execution pending appeal, an aggrieved party shall have twenty working days from notice of the special order within which to secure a restraining order or status quo order from the Supreme Court of the Commission on Elections. The corresponding writ of execution shall issue after twenty days, if no restraining order or status quo order is issued. During such period, the writ of execution pending appeal shall be stayed. 3 This remedy is not new. Under prevailing jurisprudence,4 the remedy may be resorted to pursuant to the suppletory application of the Rules of Court, specifically its Section 2, Rule 39.5 What the Rules (A.M. No. 07-4-15-C) has done is to give the availability of the remedy the element of certainty. Significantly, the Rules similarly apply the good reason standard (in fact, the even greater superior circumstances standard) for execution pending appeal under the Rules of Court, making the remedy an exception rather than the rule. At the heart of the present controversy is the question of whether there has been compliance with the standards required for an execution pending appeal in an election contest. As heretofore cited, the RTC found all these requisites present. The Second Division of the COMELEC supported the RTC's ruling, but the COMELEC en banc held a contrary view and nullified the execution pending appeal. This en banc ruling is now before us. Our review of a COMELEC ruling or decision is via a petition for certiorari. This is a limited review on jurisdictional grounds, specifically of the question on whether the COMELEC has jurisdiction, or whether the assailed order or resolution is tainted with grave abuse of discretion amounting to lack or excess of jurisdiction. Correctly understood, grave abuse of discretion is such "capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or [an] exercise of power in an arbitrary and despotic manner by reason of passion or personal hostility, or an exercise of judgment so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined, or to act in a manner not at all in contemplation of law."6 Because this case is essentially about the implementation of an RTC decision pending appeal, we must first dwell on the writ the RTC issued. The COMELEC ruled in this regard that the writ of execution the RTC issued on March 11, 2008 was void; the RTC could no longer issue the writ because of the lapse of the period for appeal, and because the RTC no longer held the records of the election contest which had then been transmitted to the ECAD-COMELEC. Cunanan argues in his Comment that this ruling has become final and executory because Pecson did not question it in the present petition. In Cunanan's view, the finality of this aspect of the COMELEC ruling renders the issue of the nullification of the Special Order moot and academic, as any ruling we shall render would serve no practical purpose; it can no longer be implemented

since the means (obviously referring to the writ the RTC issued on March 11, 2008) of executing the RTC decision (i.e., seating Pecson as Mayor of Magalang) has, to all intents and purposes, been nullified and rendered ineffective. We see no merit in Cunanan's argument. The writ of execution issued by the RTC is a mere administrative enforcement medium of the Special Order - the main order supporting Pecson's motion for the issuance of a writ of execution. The writ itself cannot and does not assume a life of its own independent from the Special Order on which it is based. Certainly, its nullification does not carry with it the nullification of the Special Order. This consequence does not of course hold true in the reverse situation - the nullification of the Special Order effectively carries with it the nullification of its implementing writ and removes the basis for the issuance of another implementing writ. In the present case, the reality is that if and when we ultimately affirm the validity of the Special Order, nothing will thereafter prevent the RTC from issuing another writ. Another legal reality is that the COMELEC is wrong in its ruling that the RTC could no longer actually issue the writ on March 11, 2008 because it no longer had jurisdiction to do so after the appeal period lapsed and after the records were transmitted to the ECAD-COMELEC. That the RTC is still in possession of the records and that the period to appeal (of both contending parties) must have not lapsed are important for jurisdictional purposes if the issue is the authority of the RTC to grant a Special Order allowing execution pending appeal; they are requisite elements for the exercise by the RTC of its residual jurisdiction to validly order an execution pending appeal, not for the issuance of the writ itself. This is clearly evident from the cited provision of the Rules which does not require the issuance of the implementing writ within the above limited jurisdictional period. The RTC cannot legally issue the implementing writ within this limited period for two reasons: (1) the cited twenty-day waiting period under Section 11(b); and (2) the mandatory immediate transmittal of the records to the ECAD of the COMELEC under Section 10 of the Rules.7 On the substantive issue of whether a writ of execution pending appeal should issue, we do not agree with the COMELEC's view that there are "two presumptive winners" prior to its ruling on the protest case. We likewise cannot support its "balancing act" view that essentially posits that given the pendency of the appeal and the lack of finality of a decision in the election protest, the unseating of the protestee, and the need for continuity of public service, the balance should tilt in favor of continuity or non-disruption of public service; hence, the execution pending appeal should be denied. As Pecson correctly argued, this reasoning effectively prevents a winner (at the level of the courts) of an election protest from ever availing of an execution pending appeal; it gives too much emphasis to the COMELEC's authority to decide the election contest and the losing party's right to appeal. What is there to execute pending appeal if, as the COMELEC suggested, a party should await a COMELEC final ruling on the protest case? Effectively, the "two presumptive winners" and the "balancing act" views negate the execution pending appeal that we have categorically and unequivocally recognized in our rulings and in the Rules we issued. To be sure, the COMELEC cannot, on its own, render ineffective a rule of procedure we established by formulating its own ruling requiring a final determination at its level before an RTC decision in a protest case can be implemented. We additionally note that "disruption of public service" necessarily results from any order allowing execution pending appeal and is a concern that this Court was aware of when it expressly provided the remedy under the Rules. Such disruption is therefore an element that has been weighed and factored in and cannot be per se a basis to deny execution pending appeal. What comes out clearly from this examination of the COMELEC ruling is that it looked at the wrong material considerations when it nullified the RTC's Special Order. They are the wrong considerations because they are not the standards outlined under Section 11, Rule 14 of the Rules

against which the validity of a Special Order must be tested. Significantly, the use of wrong considerations in arriving at a decision constitutes grave abuse of discretion.8 The proper consideration that the COMELEC made relates to the correctness of the RTC's Decision in light of the Rules' requirement that the victory of the protestant and the defeat of the protestee be clearly established for execution pending appeal to issue. According to the COMELEC, no less than the Second Division cast a doubt on the correctness of the number of votes obtained by the parties after the revision of ballots when the Second Division proposed a mathematical formula to correct the RTC count. At the same time, the COMELEC noted that the Second Division could not have corrected the RTC count, as the petition before it was one for certiorari while the correction of errors in computation properly pertained to the resolution of Cunanan's pending appeal. To the COMELEC, all these showed that the correctness of the RTC Decision in favor of Pecson was far from clear and cannot support an execution pending appeal. We disagree once more with the COMELEC en banc in this conclusion, as it failed to accurately and completely appreciate the Second Division's findings. The RTC Decision, on its face, shows that Pecson garnered more valid votes than Cunanan after the revision of ballots. The Second Division properly recognized, however, that the RTC computation suffered from a facial defect that did not affect the final results; as Cunanan pointed out, the votes for Pecson and Cunanan, if totally summed up, exceeded the total number of valid votes for mayor. Duly alerted, the Second Division looked into the purported error, analyzed it, and found the error to be merely mathematical; the RTC formula would necessarily exceed the total number of votes cast for mayor because it counted some votes twice. In making this finding, the Second Division was guided by the rule that one of the requisites for an execution pending appeal is a clear showing in the decision of the protestant's victory and the protestee's defeat. Its examination of the RTC Decision was only for this limited purpose and this was what it did, no more no less. Specifically, it did not review the RTC's appreciation of the ballots on revision; it did not review the intrinsic merits of the RTC Decision - issues that properly belong to the appeal that is currently pending. It merely found that the defect Cunanan noted was actually inconsequential with respect to the results, thus showing Pecson's clear victory under the RTC Decision. In other words, the Second Division's corrected view of the RTC count confirmed, rather than contradicted or placed in doubt, the conclusion that Pecson won. Other than the clarity of Pecson's victory under the RTC Decision, the Special Order cited good and special reasons that justified an execution pending appeal, specifically: (1) the need to give as much recognition to the worth of a trial judge's decision as that which is initially given by the law to the proclamation by the board of canvassers; (2) public interest and/or respect for and giving meaning to the will of the electorate; and (3) public policy - something had to be done to deal a death blow to the pernicious grab-the-proclamation-prolong-the-protest technique often, if not invariably, resorted to by unscrupulous politicians who would render nugatory the people's verdict against them. Unfortunately, the COMELEC en banc simply glossed over the RTC's cited reasons and did not fully discuss why these reasons were not sufficient to justify execution pending appeal. A combination, however, of the reasons the RTC cited, to our mind, justifies execution of the RTC Decision pending appeal. A striking feature of the present case is the time element involved. We have time and again noted the well known delay in the adjudication of election contests that, more often than not, gives the protestant an empty or hollow victory in a long drawn-out legal battle.9 Some petitions before us involving election contests have been in fact dismissed for being moot, the term for the contested position having long expired before the final ruling on the merits came.10 In the present case, the term for mayor consists of only three (3) years. One year and six months has lapsed since the May

2007 election; thus, less than two years are left of the elected mayor's term. The election protest, while already decided at the RTC level, is still at the execution-pending-appeal stage and is still far from the finality of any decision on the merits, given the available appellate remedies and the recourses available through special civil actions. To be sure, there is nothing definite in the horizon on who will finally be declared the lawfully elected mayor. Also, we reiterate here our consistent ruling that decisions of the courts in election protest cases, resulting as they do from a judicial evaluation of the ballots and after full-blown adversarial proceedings, should at least be given similar worth and recognition as decisions of the board of canvassers.11 This is especially true when attended by other equally weighty circumstances of the case, such as the shortness of the term of the contested elective office, of the case. In light of all these considerations, we conclude that the COMELEC erred in nullifying the RTC's Special Order in a manner sufficiently gross to affect its exercise of jurisdiction. Specifically, it committed grave abuse of discretion when it looked at wrong considerations and when it acted outside of the contemplation of the law in nullifying the Special Order. WHEREFORE, premises considered, we GRANT the petition and accordingly ANNUL the assailed COMELEC Resolution. GONZAGA v. CA 394 SCRA 472

with the Regional Trial Court of Iloilo City, Branch 36, which was docketed as Civil Case No. 17115. On January 15, 1998, the trial court2 rendered its decision dismissing the complaint for lack of merit and ordering herein petitioners to pay private respondent the amount ofP10,000 as moral damages and another P10,000 as attorneys fees. The pertinent conclusion of the trial court reads as follows: "Aware of such fact, the plaintiff nonetheless continued to stay in the premises of Lot 18 on the proposal that he would also buy the same. Plaintiff however failed to buy Lot 18 and likewise defaulted in the payment of his loan with the SSS involving Lot 19. Consequently Lot 19 was foreclosed and sold at public auction. Thereafter TCT No. T-29950 was cancelled and in lieu thereof TCT No. T-86612 (Exh. 9) was issued in favor of SSS. This being the situation obtaining, the reformation of instruments, even if allowed, or the swapping of Lot 18 and Lot 19 as earlier proposed by the plaintiff, is no longer feasible considering that plaintiff is no longer the owner of Lot 19, otherwise, defendant will be losing Lot 18 without any substitute therefore (sic). Upon the other hand, plaintiff will be unjustly enriching himself having in its favor both Lot 19 which was earlier mortgaged by him and subsequently foreclosed by SSS, as well as Lot 18 where his house is presently standing. "The logic and common sense of the situation lean heavily in favor of the defendant. It is evident that what plaintiff had bought from the defendant is Lot 19 covered by TCT No. 28254 which parcel of land has been properly indicated in the instruments and not Lot 18 as claimed by the plaintiff. The contracts being clear and unmistakable, they reflect the true intention of the parties, besides the plaintiff failed to assail the contracts on mutual mistake, hence the same need no longer be reformed."3 On June 22, 1998, a writ of execution was issued by the trial court. Thus, on September 17, 1998, petitioners filed an urgent motion to recall writ of execution, alleging that the court a quo had no jurisdiction to try the case as it was vested in the Housing and Land Use Regulatory Board (HLURB) pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). Conformably, petitioners filed a new complaint against private respondent with the HLURB. Likewise, on June 30, 1999, petitioner-spouses filed before the Court of Appeals a petition for annulment of judgment, premised on the ground that the trial court had no jurisdiction to try and decide Civil Case No. 17115. In a decision rendered on December 29, 1999, the Court of Appeals denied the petition for annulment of judgment, relying mainly on the jurisprudential doctrine of estoppel as laid down in the case of Tijam vs. Sibonghanoy.4 Their subsequent motion for reconsideration having been denied, petitioners filed this instant petition, contending that the Court of Appeals erred in dismissing the petition by applying the principle of estoppel, even if the Regional Trial Court, Branch 36 of Iloilo City had no jurisdiction to decide Civil Case No. 17115. At the outset, it should be stressed that petitioners are seeking from us the annulment of a trial court judgment based on lack of jurisdiction. Because it is not an appeal, the correctness of the judgment is not in issue here. Accordingly, there is no need to delve into the propriety of the decision rendered by the trial court. Petitioners claim that the recent decisions of this Court have already abandoned the doctrine laid down in Tijam vs. Sibonghanoy.5 We do not agree. In countless decisions, this Court has consistently held that, while an order or decision rendered without jurisdiction is a total nullity and may be assailed at any stage, active participation in the proceedings in the court which rendered the order or decision will bar such party from attacking its jurisdiction. As we held in the leading case of

G.R. No. 144025

December 27, 2002

SPS. RENE GONZAGA and LERIO GONZAGA, petitioners, vs. HON. COURT OF APPEALS, Second Division, Manila, HON. QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo City, and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as Manager,respondents. DECISION CORONA, J.: Before this Court is a petition for review on certiorari seeking the reversal of the decision1of the Court of Appeals dated December 29, 1999 and its resolution dated June 1, 2000 in CA-G.R. SP No. 54587. The records disclose that, sometime in 1970, petitioner-spouses purchased a parcel of land from private respondent Lucky Homes, Inc., situated in Iloilo and containing an area of 240 square meters. Said lot was specifically denominated as Lot No. 19 under Transfer Certificate of Title (TCT) No. 28254 and was mortgaged to the Social Security System (SSS) as security for their housing loan. Petitioners then started the construction of their house, not on Lot No. 19 but on Lot No. 18, as private respondent mistakenly identified Lot No. 18 as Lot No. 19. Upon realizing its error, private respondent, through its general manager, informed petitioners of such mistake but the latter offered to buy Lot No. 18 in order to widen their premises. Thus, petitioners continued with the construction of their house. However, petitioners defaulted in the payment of their housing loan from SSS. Consequently, Lot No. 19 was foreclosed by SSS and petitioners certificate of title was cancelled and a new one was issued in the name of SSS. After Lot No. 19 was foreclosed, petitioners offered to swap Lot Nos. 18 and 19 and demanded from private respondent that their contract of sale be reformed and another deed of sale be executed with respect to Lot No. 18, considering that their house was built therein. However, private respondent refused. This prompted petitioners to file, on June 13, 1996, an action for reformation of contract and damages

Tijam vs. Sibonghanoy:6 "A party may be estopped or barred from raising a question in different ways and for different reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches. xxx "It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate, or question that same jurisdiction x x x x [T]he question whether the court had jurisdiction either of the subject matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated obviously for reasons of public policy." Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of Appeals;7 Ang Ping vs. Court of Appeals;8 Salva vs. Court of Appeals;9 National Steel Corporation vs. Court of Appeals;10 Province of Bulacan vs. Court of Appeals;11 PNOC Shipping and Transport Corporation vs. Court of Appeals,12 this Court affirmed the rule that a partys active participation in all stages of the case before the trial court, which includes invoking the courts authority to grant affirmative relief, effectively estops such party from later challenging that same courts jurisdiction. In the case at bar, it was petitioners themselves who invoked the jurisdiction of the court a quo by instituting an action for reformation of contract against private respondents. It appears that, in the proceedings before the trial court, petitioners vigorously asserted their cause from start to finish. Not even once did petitioners ever raise the issue of the courts jurisdiction during the entire proceedings which lasted for two years. It was only after the trial court rendered its decision and issued a writ of execution against them in 1998 did petitioners first raise the issue of jurisdiction and it was only because said decision was unfavorable to them. Petitioners thus effectively waived their right to question the courts jurisdiction over the case they themselves filed. Petitioners should bear the consequence of their act. They cannot be allowed to profit from their omission to the damage and prejudice of the private respondent. This Court frowns upon the undesirable practice of a party submitting his case for decision and then accepting the judgment but only if favorable, and attacking it for lack of jurisdiction if not.13 Public policy dictates that this Court must strongly condemn any double-dealing by parties who are disposed to trifle with the courts by deliberately taking inconsistent positions, in utter disregard of the elementary principles of justice and good faith.14There is no denying that, in this case, petitioners never raised the issue of jurisdiction throughout the entire proceedings in the trial court. Instead, they voluntarily and willingly submitted themselves to the jurisdiction of said court. It is now too late in the day for them to repudiate the jurisdiction they were invoking all along. WHEREFORE, the petition for review is hereby DENIED. SO ORDERED.

ARNEL ESCOBAL, petitioner, vs. HON. FRANCIS GARCHITORENA, Presiding Justice of the Sandiganbayan, Atty. Luisabel Alfonso-Cortez, Executive Clerk of Court IV of the Sandiganbayan, Hon. David C. Naval, Presiding Judge of the Regional Trial Court of Naga City, Branch 21, Luz N. Nueca, respondents. DECISION CALLEJO, SR., J.: This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and preliminary injunction filed by Arnel Escobal seeking the nullification of the remand by the Presiding Justice of the Sandiganbayan of the records of Criminal Case No. 90-3184 to the Regional Trial Court (RTC) of Naga City, Branch 21. The petition at bench arose from the following milieu: The petitioner is a graduate of the Philippine Military Academy, a member of the Armed Forces of the Philippines and the Philippine Constabulary, as well as the Intelligence Group of the Philippine National Police. On March 16, 1990, the petitioner was conducting surveillance operations on drug trafficking at the Sa Harong Caf Bar and Restaurant located along Barlin St., Naga City. He somehow got involved in a shooting incident, resulting in the death of one Rodney Rafael N. Nueca. On February 6, 1991, an amended Information was filed with the RTC of Naga City, Branch 21, docketed as Criminal Case No. 90-3184 charging the petitioner and a certain Natividad Bombita, Jr. alias Jun Bombita with murder. The accusatory portion of the amended Information reads: That on or about March 16, 1990, in the City of Naga, Philippines, and within the jurisdiction of this Honorable Court by virtue of the Presidential Waiver, dated June 1, 1990, with intent to kill, conspiring and confederating together and mutually helping each other, did, then and there, willfully, unlawfully and feloniously attack, assault and maul one Rodney Nueca and accused 2Lt Arnel Escobal armed with a caliber .45 service pistol shoot said Rodney Nueca thereby inflicting upon him serious, mortal and fatal wounds which caused his death, and as a consequence thereof, complainant LUZ N. NUECA, mother of the deceased victim, suffered actual and compensatory damages in the amount of THREE HUNDRED SIXTY-SEVEN THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine Currency, and moral and exemplary damages in the amount of ONE HUNDRED THIRTY-FIVE THOUSAND (P135,000.00) PESOS, Philippine Currency.[1] On March 19, 1991, the RTC issued an Order preventively suspending the petitioner from the service under Presidential Decree No. 971, as amended by P.D. No. 1847. When apprised of the said order, the General Headquarters of the PNP issued on October 6, 1992 Special Order No. 91, preventively suspending the petitioner from the service until the case was terminated.[2] The petitioner was arrested by virtue of a warrant issued by the RTC, while accused Bombita remained at large. The petitioner posted bail and was granted temporary liberty. When arraigned on April 9, 1991,[3] the petitioner, assisted by counsel, pleaded not guilty to the offense charged. Thereafter, on December 23, 1991, the petitioner filed a Motion to Quash[4] the Information alleging that as mandated by Commonwealth Act No. 408,[5] in relation to Section 1, Presidential Decree No. 1822 and Section 95 of R.A. No. 6975, the court martial, not the RTC, had jurisdiction over criminal cases involving PNP members and officers. Pending the resolution of the motion, the petitioner on June 25, 1993 requested the Chief of the PNP for his reinstatement. He alleged that under R.A. No. 6975, his suspension should last for only 90 days, and, having served the same, he should now be reinstated. On September 23, 1993,[6] the PNP Region V Headquarters wrote Judge David C. Naval requesting information on whether he

ESCOBAL v. GARCHITORENA 422 SCRA 45

G.R. No. 124644. February 5, 2004]

issued an order lifting the petitioners suspension. The RTC did not reply. Thus, on February 22, 1994, the petitioner filed a motion in the RTC for the lifting of the order of suspension. He alleged that he had served the 90-day preventive suspension and pleaded for compassionate justice. The RTC denied the motion on March 9, 1994.[7] Trial thereafter proceeded, and the prosecution rested its case. The petitioner commenced the presentation of his evidence. On July 20, 1994, he filed a Motion to Dismiss[8] the case. Citing Republic of the Philippines v. Asuncion, et al.,[9] he argued that since he committed the crime in the performance of his duties, the Sandiganbayan had exclusive jurisdiction over the case. On October 28, 1994, the RTC issued an Order[10] denying the motion to dismiss. It, however, ordered the conduct of a preliminary hearing to determine whether or not the crime charged was committed by the petitioner in relation to his office as a member of the PNP. In the preliminary hearing, the prosecution manifested that it was no longer presenting any evidence in connection with the petitioners motion. It reasoned that it had already rested its case, and that its evidence showed that the petitioner did not commit the offense charged in connection with the performance of his duties as a member of the Philippine Constabulary. According to the prosecution, they were able to show the following facts: (a) the petitioner was not wearing his uniform during the incident; (b) the offense was committed just after midnight; (c) the petitioner was drunk when the crime was committed; (d) the petitioner was in the company of civilians; and, (e) the offense was committed in a beerhouse called Sa Harong Caf Bar and Restaurant.[11] For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990, he was at the Sa Harong Caf Bar and Restaurant at Barlin St., Naga City, to conduct surveillance on alleged drug trafficking, pursuant to Mission Order No. 03-04 issued by Police Superintendent Rufo R. Pulido. The petitioner adduced in evidence the sworn statements of Benjamin Cario and Roberto Fajardo who corroborated his testimony that he was on a surveillance mission on the aforestated date.[12] On July 31, 1995, the trial court issued an Order declaring that the petitioner committed the crime charged while not in the performance of his official function. The trial court added that upon the enactment of R.A. No. 7975,[13] the issue had become moot and academic. The amendatory law transferred the jurisdiction over the offense charged from the Sandiganbayan to the RTC since the petitioner did not have a salary grade of 27 as provided for in or by Section 4(a)(1), (3) thereof. The trial court nevertheless ordered the prosecution to amend the Information pursuant to the ruling inRepublic v. Asuncion[14] and R.A. No. 7975. The amendment consisted in the inclusion therein of an allegation that the offense charged was not committed by the petitioner in the performance of his duties/functions, nor in relation to his office. The petitioner filed a motion for the reconsideration[15] of the said order, reiterating that based on his testimony and those of Benjamin Cario and Roberto Fajardo, the offense charged was committed by him in relation to his official functions. He asserted that the trial court failed to consider the exceptions to the prohibition. He asserted that R.A. No. 7975, which was enacted on March 30, 1995, could not be applied retroactively.[16] The petitioner further alleged that Luz Nacario Nueca, the mother of the victim, through counsel, categorically and unequivocably admitted in her complaint filed with the Peoples Law Enforcement Board (PLEB) that he was on an official mission when the crime was committed. On November 24, 1995, the RTC made a volte face and issued an Order reversing and setting aside its July 31, 1995 Order. It declared that based on the petitioners evidence, he was on official mission when the shooting occurred. It concluded that the prosecution failed to adduce controverting evidence thereto. It likewise considered Luz Nacario Nuecas a dmission in her complaint before the PLEB that the petitioner was on official mission when the shooting happened.

The RTC ordered the public prosecutor to file a Re-Amended Information and to allege that the offense charged was committed by the petitioner in the performance of his duties/functions or in relation to his office; and, conformably to R.A. No. 7975, to thereafter transmit the same, as well as the complete records with the stenographic notes, to the Sandiganbayan, to wit: WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and RECONSIDERED, and it is hereby declared that after preliminary hearing, this Court has found that the offense charged in the Information herein was committed by the accused in his relation to his function and duty as member of the then Philippine Constabulary. Conformably with R.A. No. 7975 and the ruling of the Supreme Court in Republic v. Asuncion, et al., G.R. No. 180208, March 11, 1994: (1) The City Prosecutor is hereby ordered to file a Re-Amended Information alleging that the offense charged was committed by the Accused in the performance of his duties/functions or in relation to his office, within fifteen (15) days from receipt hereof; After the filing of the Re-Amended Information, the complete records of this case, together with the transcripts of the stenographic notes taken during the entire proceedings herein, are hereby ordered transmitted immediately to the Honorable Sandiganbayan, through its Clerk of Court, Manila, for appropriate proceedings.[17]

(2)

On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the Executive Clerk of Court IV, Atty. Luisabel Alfonso-Cortez, to return the records of Criminal Case No. 90-3184 to the court of origin, RTC of Naga City, Branch 21. It reasoned that under P.D. No. 1606, as amended by R.A. No. 7975,[18] the RTC retained jurisdiction over the case, considering that the petitioner had a salary grade of 23. Furthermore, the prosecution had already rested its case and the petitioner had commenced presenting his evidence in the RTC; following the rule on continuity of jurisdiction, the latter court should continue with the case and render judgment therein after trial. Upon the remand of the records, the RTC set the case for trial on May 3, 1996, for the petitioner to continue presenting his evidence. Instead of adducing his evidence, the petitioner filed a petition for certiorari, assailing the Order of the Presiding Justice of the Sandiganbayan remanding the records of the case to the RTC. The threshold issue for resolution is whether or not the Presiding Justice of the Sandiganbayan committed a grave abuse of his discretion amounting to excess or lack of jurisdiction in ordering the remand of the case to the RTC. The petitioner contends that when the amended information was filed with the RTC on February 6, 1991, P.D. No. 1606 was still in effect. Under Section 4(a) of the decree, the Sandiganbayan had exclusive jurisdiction over the case against him as he was charged with homicide with the imposable penalty of reclusion temporal, and the crime was committed while in the performance of his duties. He further asserts that although P.D. No. 1606, as amended by P.D. No. 1861 and by R.A. No. 7975 provides that crimes committed by members and officers of the PNP with a salary grade below 27 committed in relation to office are within the exclusive jurisdiction of the proper RTC, the amendment thus introduced by R.A. No. 7975 should not be applied retroactively. This is so, the petitioner asserts, because under Section 7 of R.A. No. 7975, only those cases where trial has not begun in the Sandiganbayan upon the effectivity of the law should be referred to the proper trial court. The private complainant agrees with the contention of the petitioner. In contrast, the Office of the Special Prosecutor contends that the Presiding Justice of the Sandiganbayan acted in accordance

with law when he ordered the remand of the case to the RTC. It asserts that R.A. No. 7975 should be applied retroactively. Although the Sandiganbayan had jurisdiction over the crime committed by the petitioner when the amended information was filed with the RTC, by the time it resolved petitioners motion to dismiss on July 31, 1995, R.A. No. 7975 had already taken effect. T hus, the law should be given retroactive effect. The Ruling of the Court The respondent Presiding Justice acted in accordance with law and the rulings of this Court when he ordered the remand of the case to the RTC, the court of origin. The jurisdiction of the court over criminal cases is determined by the allegations in the Information or the Complaint and the statute in effect at the time of the commencement of the action, unless such statute provides for a retroactive application thereof. The jurisdictional requirements must be alleged in the Information.[19] Such jurisdiction of the court acquired at the inception of the case continues until the case is terminated.[20] Under Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the Sandiganbayan had exclusive jurisdiction in all cases involving the following: (1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code; (2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correccionalor imprisonment for six (6) years, or a fine of P6,000.00 .[21] However, for the Sandiganbayan to have exclusive jurisdiction under the said law over crimes committed by public officers in relation to their office, it is essential that the facts showing the intimate relation between the office of the offender and the discharge of official duties must be alleged in the Information. It is not enough to merely allege in the Information that the crime charged was committed by the offender in relation to his office because that would be a conclusion of law.[22] The amended Information filed with the RTC against the petitioner does not contain any allegation showing the intimate relation between his office and the discharge of his duties. Hence, the RTC had jurisdiction over the offense charged when on November 24, 1995, it ordered the re-amendment of the Information to include therein an allegation that the petitioner committed the crime in relation to office. The trial court erred when it ordered the elevation of the records to the Sandiganbayan. It bears stressing that R.A. No. 7975 amending P.D. No. 1606 was already in effect and under Section 2 of the law: In cases where none of the principal accused are occupying positions corresponding to salary grade 27 or higher, as prescribed in the said Republic Act No. 6758, or PNP officers occupying the rank of superintendent or higher, or their equivalent, exclusive jurisdiction thereof shall be vested in the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court, and Municipal Circuit Trial Court, as the case may be, pursuant to their respective jurisdiction as provided in Batas Pambansa Blg. 129. Under the law, even if the offender committed the crime charged in relation to his office but occupies a position corresponding to a salary grade below 27, the proper Regional Trial Court or Municipal Trial Court, as the case may be, shall have exclusive jurisdiction over the case. In this case, the petitioner was a Police Senior Inspector, with salary grade 23. He was charged with homicide punishable by reclusion temporal. Hence, the RTC had exclusive jurisdiction over the crime charged conformably to Sections 20 and 32 of Batas Pambansa Blg. 129, as amended by

Section 2 of R.A. No. 7691. The petitioners contention that R.A. No. 7975 should not be applied retroactively has no legal basis. It bears stressing that R.A. No. 7975 is a substantive procedural law which may be applied retroactively.[23] IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No pronouncement as to costs. SO ORDERED.

AGAN JR. v. PHIL.INT'L AIR TERMINAL Co., INC.,420 SCRA 575

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 155001 May 5, 2003

DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL ANTONIO B. BOE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON, CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION - NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents, MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS CORPORATION,petitioners-in-intervention, x---------------------------------------------------------x G.R. No. 155547 May 5, 2003 SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA,petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, and SECRETARY SIMEON A. DATUMANONG, in his capacity as Head of the Department of Public Works and Highways, respondents, JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST

ABAYON, and BENASING O. MACARANBON, respondents-intervenors, x---------------------------------------------------------x G.R. No. 155661 May 5, 2003 CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents. PUNO, J.: Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and the Department of Transportation and Communications (DOTC) and its Secretary from implementing the following agreements executed by the Philippine Government through the DOTC and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement signed on July 12, 1997, (2) the Amended and Restated Concession Agreement dated November 26, 1999, (3) the First Supplement to the Amended and Restated Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended and Restated Concession Agreement dated September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession Agreement dated June 22, 2001 (collectively, the PIATCO Contracts). The facts are as follows: In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans and development plans; and second, presentation of the preliminary design of the passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989. Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. To signify their commitment to pursue the project, they formed the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on September 15, 1993. On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law).1 On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project. On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the

National Economic and Development Authority (NEDA). A revised proposal, however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment Coordinating Council (NEDA ICC) Technical Board favorably endorsed the project to the ICC Cabinet Committee which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III project. On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope the Financial Proposal of the proponent. On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents and the submission of the comparative bid proposals. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon submission of a written application and payment of a non-refundable fee of P50,000.00 (US$2,000). The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, operation, and maintenance phases of the project. The proponent would be evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to secure external financing for the project. On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference on July 29, 1996. On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The following amendments were made on the Bid Documents: a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial proposal an additional percentage of gross revenue share of the Government, as follows: i. First 5 years ii. Next 10 years

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. Proponent may offer an Annual Guaranteed Payment which need not be of equal amount, but payment of which shall start upon site possession. c. The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, and/or operation and maintenance phases of the project as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of: i. Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity for the project; and ii. a letter testimonial from reputable banks attesting that the project proponent and/or the members of the consortium are banking with them, that the project proponent and/or the members are of good financial standing, and have adequate resources.

d. The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial requirements provided in the Bid Documents and the IRR of the BOT Law. The minimum amount of equity shall be 30% of the Project Cost. e. Amendments to the draft Concession Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the challengers would be revealed to AEDC, and that the challengers' technical and financial proposals would remain confidential. The PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and that other revenue sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated as Public Utility Fees would be subject to regulation, and those charges which would be actually deemed Public Utility Fees could still be revised, depending on the outcome of PBAC's query on the matter with the Department of Justice. In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's responses were as follows: 1. It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements and needs of their current respective business undertaking/activities. In order to comply with this equity requirement, Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint Venture to just execute an agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture instead of increasing each corporation's current authorized capital stock just for prequalification purposes. In prequalification, the agency is interested in one's financial capability at the time of prequalification, not future or potential capability. A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability. However, total financial capability of all member companies of the Consortium, to be established by submitting the respective companies' audited financial statements, shall be acceptable. 2. At present, Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the joint venture in the event that the Concessions Agreement (sic) is awarded to them. However, Paircargo is being required to submit a copy of the draft concession as one of the documentary requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time. A copy of the draft Concession Agreement is included in the Bid Documents. Any material changes would be made known to prospective challengers through bid bulletins. However, a final version will be issued before the award of contract. The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the required Bid Security. On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc.

(Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the prequalification documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the Paircargo Consortium. On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium, which include: a. The lack of corporate approvals and financial capability of PAIRCARGO; b. The lack of corporate approvals and financial capability of PAGS; c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount that Security Bank could legally invest in the project; d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for prequalification purposes; and e. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement in the operation of a public utility. The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised by the latter, and that based on the documents submitted by Paircargo and the established prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to undertake the project. The Secretary of the DOTC approved the finding of the PBAC. The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical Proposal. On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that it be furnished with excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed. On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their respective financial proposals. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share in gross revenues for the last ten years of operation, in accordance with the Bid Documents. However, in addition to the foregoing, AEDC offered to pay the government a total of P135 million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period. Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to match the said bid, otherwise, the project would be awarded to Paircargo. As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal. On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., Inc. (PIATCO).

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO. On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of the NEDA-ICC. On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee. On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a noobjection basis, of the BOT agreement between the DOTC and PIATCO. As the ad referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted the agreement. On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO. On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-andTransfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the development facility to MIAA. On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility fees and charges; the entire Article VIII concerning the provisions on the termination of the contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy arises between the parties to the agreement. Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and the Third Supplement on June 22, 2001 (collectively, Supplements). The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds for the upkeep, maintenance, repair and/or replacement of all airport facilities and equipment which are owned or operated by MIAA; and further providing additional special obligations on the part of GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing Runway 13/31; the swapping of obligations between GRP and PIATCO regarding the improvement of Sales Road; and the changes in the timetable. It also amended Sec. 6.01 (c) of the ARCA pertaining to the

Disposition of Terminal Fees; Sec. 6.02 of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of Percentage Share in Gross Revenues. The Second Supplement to the ARCA contained provisions concerning the clearing, removal, demolition or disposal of subterranean structures uncovered or discovered at the site of the construction of the terminal by the Concessionaire. It defined the scope of works; it provided for the procedure for the demolition of the said structures and the consideration for the same which the GRP shall pay PIATCO; it provided for time extensions, incremental and consequential costs and losses consequent to the existence of such structures; and it provided for some additional obligations on the part of PIATCO as regards the said structures. Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the construction of the surface road connecting Terminals II and III. Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATA-Wings Aviation Systems Corp., and the MacroAsia Group. Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant players in the industry with an aggregate market share of 70%. On September 17, 2002, the workers of the international airline service providers, claiming that they stand to lose their employment upon the implementation of the questioned agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said agreements.2 On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion for intervention and a petition-in-intervention. On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed a similar petition with this Court.3 On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of the various agreements.4 On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying for the dismissal of the petitions. During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as) null and void."5 Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective Comments in behalf of the public respondents. On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the Court then resolved in open court to require the parties to file simultaneously their respective Memoranda in amplification of the issues heard in the oral arguments within 30 days and to explore the possibility of arbitration or mediation as provided in the challenged contracts.

In their consolidated Memorandum, the Office of the Solicitor General and the Office of the Government Corporate Counsel prayed that the present petitions be given due course and that judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and Regulations. On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO commenced arbitration proceedings before the International Chamber of Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the Government of the Republic of the Philippines acting through the DOTC and MIAA. In the present cases, the Court is again faced with the task of resolving complicated issues made difficult by their intersecting legal and economic implications. The Court is aware of the far reaching fall out effects of the ruling which it makes today. For more than a century and whenever the exigencies of the times demand it, this Court has never shirked from its solemn duty to dispense justice and resolve "actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction."6 To be sure, this Court will not begin to do otherwise today. We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will bar the resolution of the instant controversy. Petitioners' Legal Standing to File the present Petitions a. G.R. Nos. 155001 and 155661 In G.R. No. 155001 individual petitioners are employees of various service providers7having separate concession contracts with MIAA and continuing service agreements with various international airlines to provide in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services. Also included as petitioners are labor unions MIASCOR Workers Union-National Labor Union and Philippine Airlines Employees Association. These petitioners filed the instant action for prohibition as taxpayers and as parties whose rights and interests stand to be violated by the implementation of the PIATCO Contracts. Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine laws engaged in the business of providing in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services to several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors allege that as tax-paying international airline and airport-related service operators, each one of them stands to be irreparably injured by the implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate and subsisting concession agreements with MIAA and with various international airlines which they allege are being interfered with and violated by respondent PIATCO. In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive bargaining agent of all the employees in MIAA. Petitioners anchor their petition for prohibition on the nullity of the contracts entered into by the Government and PIATCO regarding the buildoperate-and-transfer of the NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to protect in the implementation of the PIATCO Contracts.

Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which directly contravene numerous provisions of the Constitution, specific provisions of the BOT Law and its Implementing Rules and Regulations, and public policy. Petitioners contend that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of discretion amounting to lack or excess of jurisdiction which can be remedied only by a writ of prohibition, there being no plain, speedy or adequate remedy in the ordinary course of law. In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which grant PIATCO the exclusive right to operate a commercial international passenger terminal within the Island of Luzon, except those international airports already existing at the time of the execution of the agreement. The contracts further provide that upon the commencement of operations at the NAIA IPT III, the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals I and II as international passenger terminals. With respect to existing concession agreements between MIAA and international airport service providers regarding certain services or operations, the 1997 Concession Agreement and the ARCA uniformly provide that such services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except through a separate agreement duly entered into with PIATCO.8 With respect to the petitioning service providers and their employees, upon the commencement of operations of the NAIA IPT III, they allege that they will be effectively barred from providing international airline airport services at the NAIA Terminals I and II as all international airlines and passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be compelled to contract with PIATCO alone for such services, with no assurance that subsisting contracts with MIAA and other international airlines will be respected. Petitioning service providers stress that despite the very competitive market, the substantial capital investments required and the high rate of fees, they entered into their respective contracts with the MIAA with the understanding that the said contracts will be in force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning service providers to recoup their investments and obtain a reasonable return thereon. Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the other hand allege that with the closure of the NAIA Terminals I and II as international passenger terminals under the PIATCO Contracts, they stand to lose employment. The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."9 Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must be able to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.10 We hold that petitioners have the requisite standing. In the above-mentioned cases, petitioners have a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which is zealously protected by the Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-intervenors and service contracts between international airlines and petitionersintervenors stand to be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO Contracts on petitioners

and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file the instant petitions. b. G.R. No. 155547 In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of Representatives, citizens and taxpayers. They allege that as members of the House of Representatives, they are especially interested in the PIATCO Contracts, because the contracts compel the Government and/or the House of Representatives to appropriate funds necessary to comply with the provisions therein.11 They cite provisions of the PIATCO Contracts which require disbursement of unappropriated amounts in compliance with the contractual obligations of the Government. They allege that the Government obligations in the PIATCO Contracts which compel government expenditure without appropriation is a curtailment of their prerogatives as legislators, contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation made by law."12 Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus13 and Gonzales v. Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately demandable, public interest demands that we take a more liberal view in determining whether the petitioners suing as legislators, taxpayers and citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona ,15 this Court held "[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities."16Further, "insofar as taxpayers' suits are concerned . . . (this Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". . . even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised."18 In view of the serious legal questions involved and their impact on public interest, we resolve to grant standing to the petitioners. Other Procedural Matters Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases as factual issues are involved which this Court is ill-equipped to resolve. Moreover, PIATCO alleges that submission of this controversy to this Court at the first instance is a violation of the rule on hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court with respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts, resort must first be had before the trial courts. After a thorough study and careful evaluation of the issues involved, this Court is of the view that the crux of the instant controversy involves significant legal questions. The facts necessary to resolve these legal questions are well established and, hence, need not be determined by a trial court. The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.19

It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Both petitioners and respondents agree that these cases are oftranscendental importance as they involve the construction and operation of the country's premier international airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the proper legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the controversy before the Court, procedural bars may be lowered to give way for the speedy disposition of the instant cases. Legal Effect of the Commencement of Arbitration Proceedings by PIATCO There is one more procedural obstacle which must be overcome. The Court is aware that arbitration proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar. In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration clause in the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts produce legal effect between the parties, their assigns and heirs, only the parties to the Distributorship Agreement are bound by its terms, including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called for but only with respect to the parties to the contract in question. Considering that there are parties to the case who are neither parties to the Distributorship Agreement nor heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others on the other hand would, in effect, result inmultiplicity of suits, duplicitous procedure and unnecessary delay.22 Thus, we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and complete proceeding. It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve. Now, to the merits of the instant controversy. I Is PIATCO a qualified bidder? Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly pre-qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo Consortium failed to meet the financial capability required under the BOT Law and the Bid Documents. They allege that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements for the project, the entire net worth of Security Bank, a member of the consortium,

should not be considered. PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996 issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is found to have a combined net worth of P3,900,000,000.00, sufficient to meet the equity requirements of the project. The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to President Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it does not have the financial resources to put up the required minimum equity of P2,700,000,000.00. This contention is based on the restriction under R.A. No. 337, as amended or the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount more than 15% of its net worth. In the said Memorandum, Undersecretary Cal opined: The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial capability will be evaluated based on total financial capability of all the member companies of the [Paircargo] Consortium. In this connection, the Challenger was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 Billion. It is not a requirement that the net worth must be "unrestricted." To impose that as a requirement now will be nothing less than unfair. The financial statement or the net worth is not the sole basis in establishing financial capability. As stated in Bid Bulletin No. 3, financial capability may also be established by testimonial letters issued by reputable banks. The Challenger has complied with this requirement. To recap, net worth reflected in the Financial Statement should not be taken as the amount of the money to be used to answer the required thirty percent (30%) equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same document).23 Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder "who, having satisfied the minimum financial, technical, organizational and legal standards" required by the law, has submitted the lowest bid and most favorable terms of the project.24 Further, the 1994 Implementing Rules and Regulations of the BOT Law provide: Section 5.4 Pre-qualification Requirements. xxx xxx xxx

6. Basis of Pre-qualification The basis for the pre-qualification shall be on the compliance of the proponent to the minimum technical and financial requirements provided in the Bid Documents and in the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718. The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt portion of the project financing should not exceed 70% of the actual project cost. Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the project cost through (i) proof of the ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. As the minimum project cost was estimated to be US$350,000,000.00 or roughly P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at least P2,755,095,000.00. Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial Statements as of 1995 indicate that it has approximately P26,735,700.00 to invest as its equity for the project.27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital funds in the amount of P3,523,504,377.00.28 We agree with public respondents that with respect to Security Bank, the entire amount of its net worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No. 337, as amended or the General Banking Act: Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding, the Monetary Board, whenever it shall deem appropriate and necessary to further national development objectives or support national priority projects, may authorize a commercial bank, a bank authorized to provide commercial banking services, as well as a government-owned and controlled bank, to operate under an expanded commercial banking authority and by virtue thereof exercise, in addition to powers authorized for commercial banks, the powers of an Investment House as provided in Presidential Decree No. 129, invest in the equity of a nonallied undertaking, or own a majority or all of the equity in a financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services: Provided, That(a) the total investment in equities shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity investment in any one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the net worth of the bank; (c) the equity investment of the bank, or of its wholly or majority-owned subsidiary, in a single non-allied undertaking shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise; and (d) the equity investment in other banks shall be deducted from the investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk assets. xxx xxx xxx

c. Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government agency/LGU concerned shall determine on a project-toproject basis and before pre-qualification, the minimum amount of equity needed. (emphasis supplied) Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending the financial capability requirements for pre-qualification of the project proponent as follows:

Further, the 1993 Manual of Regulations for Banks provides:

SECTION X383. Other Limitations and Restrictions. The following limitations and restrictions shall also apply regarding equity investments of banks. a. In any single enterprise. The equity investments of banks in any single enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the investing bank as defined in Sec. X106 and Subsec. X121.5. Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering the maximum amountsthat may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the project cost,29 an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30% of the project cost. The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification. The PBAC has determined that any prospective bidder for the construction, operation and maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should determine the maximum amounts that each member of the consortium may commit for the construction, operation and maintenance of the NAIA IPT III project at the time of prequalification. With respect to Security Bank, the maximum amount which may be invested by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the investment ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or legal restriction determines the true maximum amount which a bidder may invest in the project. Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on the required documents presented by the bidder. The PBAC should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents submitted. This would open doors to abuse and defeat the very purpose of a public bidding. This is especially true in the case at bar which involves the investment of billions of pesos by the project proponent. The relevant government authority is duty-bound to ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. To allow the PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. A restrictive and conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of the proceedings but also to ensure the financial and technical reliability of the project. It has been held that: The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding.30 Thus, if the maximum amount of equity that a bidder may invest in the project at the time the

bids are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void. While it would be proper at this juncture to end the resolution of the instant controversy, as the legal effects of the disqualification of respondent PIATCO's predecessor would come into play and necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the project, the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for a complete resolution thereof. II Is the 1997 Concession Agreement valid? Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it contains provisions that substantially depart from the draft Concession Agreement included in the Bid Documents. They maintain that a substantial departure from the draft Concession Agreement is a violation of public policy and renders the 1997 Concession Agreement null and void. PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is intended to be a draft, i.e., subject to change, alteration or modification, and that this intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued further that said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states: 6. Amendments to the Draft Concessions Agreement Amendments to the Draft Concessions Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. By its very nature, public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. Thus: Competition must be legitimate, fair and honest. In the field of government contract law, competition requires, not only `bidding upon a common standard, a common basis, upon the same thing, the same subject matter, the same undertaking,' but also that it be legitimate, fair and honest; and not designed to injure or defraud the government.31 An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders. Thus: It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings provide the common ground or basis for the bidders. The specifications should, accordingly, operate equally or indiscriminately upon all bidders.32 The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:

The law is well settled that where, as in this case, municipal authorities can only let a contract for public work to the lowest responsible bidder, the proposals and specifications therefore must be so framed as to permit free and full competition. Nor can they enter into a contract with the best bidder containing substantial provisions beneficial to him, not included or contemplated in the terms and specifications upon which the bids were invited.33 In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft concession agreement is subject to amendment, the pertinent portion of which was quoted above, the PBAC also clarified that "[s]aid amendments shall only cover items that would not materially affect the preparation of the proponent's proposal." While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms . Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon. In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with approval the ruling of the trial court that an amendment to a contract awarded through public bidding, when such subsequent amendment was made without a new public bidding, is null and void: The Court agrees with the contention of counsel for the plaintiffs that the due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwisewhat would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding.35 Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same agreement that was offered for public bidding, i.e., the draft Concession Agreement attached to the Bid Documents? A close comparison of the draft Concession Agreement attached to the Bid Documents and the 1997 Concession Agreement reveals that the documents differ in at least two material respects: a. Modification on the Public Utility Revenues and Non-Public Utility Revenues that may be collected by PIATCO The fees that may be imposed and collected by PIATCO under the draft Concession Agreement and the 1997 Concession Agreement may be classified into three distinct categories: (1) fees which are subject to periodic adjustment of once every two years in accordance with a prescribed

parametric formula and adjustments are made effective only upon written approval by MIAA; (2) fees other than those included in the first category which maybe adjusted by PIATCO whenever it deems necessary without need for consent of DOTC/MIAA; and (3) new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as amended. The glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie in the types of fees included in each category and the extent of the supervision and regulation which MIAA is allowed to exercise in relation thereto. For fees under the first category, i.e., those which are subject to periodic adjustment in accordance with a prescribed parametric formula and effective only upon written approval by MIAA, the draft Concession Agreement includes the following:36 (1) aircraft parking fees; (2) aircraft tacking fees; (3) groundhandling fees; (4) rentals and airline offices; (5) check-in counter rentals; and (6) porterage fees. Under the 1997 Concession Agreement, fees which are subject to adjustment and effective upon MIAA approval are classified as "Public Utility Revenues" and include:37 (1) aircraft parking fees; (2) aircraft tacking fees; (3) check-in counter fees; and (4) Terminal Fees. The implication of the reduced number of fees that are subject to MIAA approval is best appreciated in relation to fees included in the second category identified above. Under the1997 Concession Agreement, fees which PIATCO may adjust whenever it deems necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not classified as Public Utility Revenues derived from operations of the Terminal and the Terminal Complex."38 Thus, under the 1997 Concession Agreement, ground handling fees, rentals from airline offices and porterage fees are no longer subject to MIAA regulation. Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may be imposed by PIATCO. Such regulation may be made by periodic adjustment and is effective only upon written approval of MIAA. The full text of said provision is quoted below: Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices, check-in-counter rentals and porterage fees shall be allowed only once every two years and in accordance with the Parametric Formula attached hereto as Annex F. Provided that adjustments shall be made effective only after the written express approval of the MIAA. Provided, further, that such approval of the MIAA, shall be contingent only on the conformity of the adjustments with the above said parametric formula. The first adjustment shall be made prior to the In-Service Date of the Terminal.

The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking fees and other new fees and charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the airport shall be deprived of a free option for the services they cover.39 On the other hand, the equivalent provision under the 1997 Concession Agreement reads: Section 6.03 Periodic Adjustment in Fees and Charges. xxx xxx xxx

(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/well wisher fee constitute Non-Public Utility Revenues of Concessionaire, GRP may intervene and require Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services.40 Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain and justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof while porterage fee is covered by the first paragraph of the same provision. There is an obvious relaxation of the extent of control and regulation by MIAA with respect to the particular fees that may be charged by PIATCO. Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, under Section 6.03 of the draft Concession Agreement MIAA has reserved the right to regulate the same under the same conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of once every two years in accordance with a prescribed parametric formula and effective only upon written approval by MIAA. However, under the 1997 Concession Agreement, adjustment of fees under the third category is not subject to MIAA regulation. With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was included within the category of "Public Utility Revenues" under the 1997 Concession Agreement. This classification is significant because under the 1997 Concession Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary events specified in the agreement.42 However, under the draft Concession Agreement, terminal fees are not included in the types of fees that may be subject to "Interim Adjustment."43 Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are denominated in US Dollars44 while payments to the Government are in Philippine Pesos. In the draft Concession Agreement, no such stipulation was included. By stipulating that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits of depreciations of the Philippine Peso, while being effectively insulated from the detrimental effects of exchange rate fluctuations. When taken as a whole, the changes under the 1997 Concession Agreement with respect to reduction in the types of fees that are subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession

Agreement, in this respect, clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract was bidded out. It is not very difficult to see that the changes in the 1997 Concession Agreement translate todirect and concrete financial advantages for PIATCO which were not available at the time the contract was offered for bidding. It cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation. Adjustments of all other fees imposed and collected by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the 1997 Concession Agreement, the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. Finally, the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit which was not available at the time of bidding. b. Assumption by the Government of the liabilities of PIATCO in the event of the latter's default thereof Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who have provided, loaned or advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. In fact, nowhere in the said contract does default of PIATCO's loans figure in the agreement. Such default does not directly result in any concomitant right or obligation in favor of the Government. However, the 1997 Concession Agreement provides: Section 4.04 Assignment. xxx xxx xxx

(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default has resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be substituted as concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. (c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to take over the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant Liabilities. The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:

Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors. Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the Government of the liability for the loans. Only in one instance may the Government escape the assumption of PIATCO's liabilities, i.e., when the Government so elects and allows a qualified operator to take over as Concessionaire. However, this circumstance is dependent on the existence and availability of a qualified operator who is willing to take over the rights and obligations of PIATCO under the contract, a circumstance that is not entirely within the control of the Government. Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has obtained to finance the project, an option that was not made available in the draft Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it grants PIATCO a financial advantage or benefit which was not previously made available during the bidding process. This financial advantage is a significant modification that translates to better terms and conditions for PIATCO. PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft Concession Agreement is subject to amendment because the Bid Documents permit financing or borrowing. They claim that it was the lenders who proposed the amendments to the draft Concession Agreement which resulted in the 1997 Concession Agreement. We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project proponent or the winning bidder to obtain financing for the project, especially in this case which involves the construction, operation and maintenance of the NAIA IPT III. Expectedly, compliance by the project proponent of its undertakings therein would involve a substantial amount of investment. It is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the project. Be that as it may, this Court maintains that amendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition.45 It has been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the 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.46 These are the basic parameters which every awardee of a contract bidded out must conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in this case, the contract signed by the government and the contract-awardee is an entirely different contract from the contract bidded, courts should not hesitate to strike down said contract in its entirety for violation of public policy on public bidding. A strict adherence on the principles, rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the procedure. Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other materials. It aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies and it places all bidders in equal footing.47

Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action. In view of the above discussion, the fact that the foregoing substantial amendments were made on the 1997 Concession Agreement renders the same null and void for beingcontrary to public policy. These amendments convert the 1997 Concession Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2) the assumption by the Government, under certain conditions, of the liabilities of PIATCOdirectly translates concrete financial advantages to PIATCO that were previously not available during the bidding process. These amendments cannot be taken as merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. The amendments discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical and financial parameters of other bidders had they known that such terms were available. III Direct Government Guarantee Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement provides: Section 4.04 Assignment xxx xxx xxx

(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall within one hundred eighty (180) days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as concessionaire and operator of the Development facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided, that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. (c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to takeover the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180day period take over the Development Facility and assume Attendant Liabilities . . Section 1.06. Attendant Liabilities Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or

advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.48 It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults in its loan obligations, is obligated to pay "all amounts recorded and from time to time outstanding from the books" of PIATCO which the latter owes to its creditors.49These amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses."50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over NAIA IPT III. It should be noted, however, that even if the Government chooses the second option, which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's creditors should the latter be unable to designate a qualified operator within the prescribed period.51 In effect, whatever option the Government chooses to take in the event of PIATCO's failure to fulfill its loan obligations, the Government is still at a risk of assuming PIATCO's outstanding loans. This is due to the fact that the Government would only be free from assuming PIATCO's debts if the unpaid creditors would be able to designate a qualified operator within the period provided for in the contract. Thus, the Government's assumption of liability is virtually out of its control. The Government under the circumstances provided for in the 1997 Concession Agreement is at the mercy of the existence, availability and willingness of a qualified operator. The above contractual provisions constitute a direct government guarantee which is prohibited by law. One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and development projects necessary for economic growth and development. This is why private sector resources are being tapped in order to finance these projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by way of incentives, such as minimizing the unstable flow of returns,52 provided that the government would not have to unnecessarily expend scarcely available funds for the project itself. As such, direct guarantee, subsidy and equity by the government in these projects are strictly prohibited.53 This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the private entity in the BOT projects, then the purpose of the law is subverted. Section 2(n) of the BOT Law defines direct guarantee as follows: (n) Direct government guarantee An agreement whereby the government or any of its agencies or local government units assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default. Clearly by providing that the Government "assumes" the attendant liabilities, which consists of PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. It is of no moment that the relevant sections are subsumed under the title of "assignment". The provisions providing for direct government guarantee which is prohibited by law is clear from the terms thereof. The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect. Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides: Section 4.04 Security xxx xxx xxx

agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard, inter alia, to the following parameters: xxx xxx xxx

(iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same, and without prejudice to any other rights of the Senior Lenders or any Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior Lenders), to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below; xxx xxx xxx

(vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are unable to designate a nominee or effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days after giving GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred eighty (180) days. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof theDevelopment Facility [NAIA Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater. Notwithstanding Section 8.01(c) hereof, this Agreement shall be deemed terminated upon the transfer of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto; xxx Section 1.06. Attendant Liabilities Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3], including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses(including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire [PIATCO] to its professional consultants and advisers, suppliers, contractors and sub-contractors.54 It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan obligations to its Senior Lenders, the Government is obligated to directly negotiate and enter into an agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. If the Senior Lenders and the Government are unable to enter into an agreement after the prescribed period, the Government must then pay PIATCO, upon transfer of NAIA IPT III to the Government, termination payment equal to the appraised value of the project or the value of the attendant liabilities whichever is greater. Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may xxx xxx

(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with the Senior Lenders, or with an agent of such Senior Lenders (which

be owed by PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons who may have loaned, advanced funds or provided any other type of financial facilities to PIATCO for NAIA IPT III. The amount of PIATCO's debt that the Government would have to pay as a result of PIATCO's default in its loan obligations -- in case no qualified nominee or transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between the Government and the Senior Lenders -includes, but is not limited to, "all principal, interest, associated fees, charges, reimbursements, and other related expenses . . . whether payable at maturity, by acceleration or otherwise."55 It is clear from the foregoing that the ARCA provides for a direct guarantee by the government to pay PIATCO's loans not only to its Senior Lenders but all other entities who provided PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that, should the conditions as stated in the contract occur, the ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in connection with NAIA IPT III. Worse, the conditions that would make the Government liable for PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to which loan contracts the Government was never a party to. The Government was not even given an option as to what course of action it should take in case PIATCO defaulted in the payment of its senior loans. The Government, upon PIATCO's default, would be merely notified by the Senior Lenders of the same and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee. Should the Senior Lenders fail to make such an appointment, the Government is then automatically obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or transferee to be appointed in place of PIATCO to continue the construction, operation and maintenance of NAIA IPT III. This "pre-condition", however, will not take the contract out of the ambit of a direct guarantee by the government as the existence, availability and willingness of a qualified nominee or transferee is totally out of the government's control. As such the Government is virtually at the mercy of PIATCO (that it would not default on its loan obligations to its Senior Lenders), the Senior Lenders (that they would appoint a qualified nominee or transferee or agree to some other arrangement with the Government) and the existence of a qualified nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III. The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise. This is a form of direct government guarantee. The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted, the following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same.56 The failure to meet any of the above conditions will result in the denial of the proposal. It is further provided that the presence of direct government guarantee, subsidy or equity will "necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal."57 The BOT Law clearly and strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that if a proposal can be denied by

reason of the existence of direct government guarantee, then its inclusion in the contract executed after the said proposal has been accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in the contract resulting from the said proposal. The basic rules of justice and fair play alone militate against such an occurrence and must not, therefore, be countenanced particularly in this instance where the government is exposed to the risk of shouldering hundreds of million of dollars in debt. This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly.58 To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not only make a mockery of what the BOT Law seeks to prevent -- which is to expose the government to the risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the Government is not a party to -- but would also render the BOT Law useless for what it seeks to achieve - to make use of the resources of the private sector in the "financing, operation and maintenance of infrastructure and development projects" 59 which are necessary for national growth and development but which the government, unfortunately, could ill-afford to finance at this point in time. IV Temporary takeover of business affected with public interest Article XII, Section 17 of the 1987 Constitution provides: Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest. The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to include threat from external aggression, calamities or national disasters, but not strikes "unless it is of such proportion that would paralyze government service."60 The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last.61 The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such the government is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police powerand not of its power of eminent domain. Article V, Section 5.10 (c) of the 1997 Concession Agreement provides: Section 5.10 Temporary Take-over of operations by GRP. . (c) In the event the development Facility or any part thereof and/or the operations of Concessionaire or any part thereof, become the subject matter of or be included in any notice, notification, or declaration concerning or relating to acquisition, seizure or appropriation by GRP in times of war or national emergency, GRP shall, by written notice to Concessionaire, immediately take over the operations of the Terminal and/or the Terminal Complex. During such take over by GRP, the Concession Period shall be suspended; provided, that upon termination of war, hostilities

or national emergency, the operations shall be returned to Concessionaire, at which time, the Concession period shall commence to run again. Concessionaire shall be entitled to reasonable compensation for the duration of the temporary take over by GRP, which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal Complex, (which is in the amount at least equal to the debt service requirements of Concessionaire, if the temporary take over should occur at the time when Concessionaire is still servicing debts owed to project lenders), any loss or damage to the Development Facility, and other consequential damages. If the parties cannot agree on the reasonable compensation of Concessionaire, or on the liability of GRP as aforesaid, the matter shall be resolved in accordance with Section 10.01 [Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall be offset from the amount next payable by Concessionaire to GRP.62 PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to "temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the "most essential, insistent, and illimitable of powers."64 Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise.65 Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution. V Regulation of Monopolies A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a particular article, or control the sale of a particular commodity."66The 1987 Constitution strictly regulates monopolies, whether private or public, and even provides for their prohibition if public interest so requires. Article XII, Section 19 of the 1987 Constitution states: Sec. 19. The state shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or to aid in the performance of various services and functions in the interest of the public.67 Nonetheless, a determination must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking. In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the "exclusive right to operate a commercial international passenger terminal within the Island of Luzon" at the NAIA IPT III.68 This is with the exception of already existing international airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City.69 As such, upon commencement of PIATCO's operation of NAIA IPT III, Terminals 1 and 2 of NAIA would cease to function as international passenger terminals. This, however, does not prevent MIAA to use Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem appropriate except those activities that

would compete with NAIA IPT III in the latter's operation as an international passenger terminal.70 The right granted to PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years from the In-Service Date71 and renewable for another twenty-five (25) years at the option of the government.72 Both the 1997 Concession Agreement and the ARCA further provide that, in view of the exclusive right granted to PIATCO, the concession contracts of the service providers currently servicing Terminals 1 and 2 would no longer be renewed and those concession contracts whose expiration are subsequent to the In-Service Date would cease to be effective on the said date.73 The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. In entering into a BuildOperate-and-Transfer contract for the construction, operation and maintenance of NAIA IPT III, the government has determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to operate be granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA, which is the government agency authorized to operate the NAIA complex, as well as DOTC, the department to which MIAA is attached.74 This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated.75 While it is the declared policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations,"76 the same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a public utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the detriment of the public which it seeks to serve. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal, the Government, through the MIAA, has the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties. Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide: 3.01 Concession Period xxx xxx xxx

(e) GRP confirms that certain concession agreements relative to certain services and operations currently being undertaken at the Ninoy Aquino International Airport passenger Terminal I have a validity period extending beyond the In-Service Date. GRP through DOTC/MIAA, confirms that these services and operations shall not be carried over to the Terminal and the Concessionaire is under no legal obligation to permit such carry-over except through a separate agreement duly entered into with Concessionaire. In the event Concessionaire becomes involved in any litigation initiated by any such concessionaire or operator, GRP undertakes and hereby holds Concessionaire free and harmless on full indemnity basis from and against any loss and/or any liability resulting from any such litigation, including the cost of litigation and the reasonable fees paid or payable to Concessionaire's counsel of choice, all such amounts shall be fully deductible by way of an offset from any amount which the Concessionaire is bound to pay GRP under this Agreement. During the oral arguments on December 10, 2002, the counsel for the petitioners-in-intervention for G.R. No. 155001 stated that there are two service providers whose contracts are still existing and whose validity extends beyond the In-Service Date. One contract remains valid until 2008 and the other until 2010.77 We hold that while the service providers presently operating at NAIA Terminal 1 do not have an

absolute right for the renewal or the extension of their respective contracts, those contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced. These contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot, by law and certainly not by contract, render a valid and binding contract nugatory. PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot require the Government to break its contractual obligations to the service providers. In contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. Lazaro78 whose contracts consist of temporary hold-over permits, the affected service providers in the cases at bar, have a valid and binding contract with the Government, through MIAA, whose period of effectivity, as well as the other terms and conditions thereof, cannot be violated. In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary government agency tasked with the job,79 it is MIAA's responsibility to ensure that whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and above all, the interest of the public. VI CONCLUSION In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void. WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto are set aside for being null and void. SO ORDERED. Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, and CarpioMorales, JJ., concur. Vitug, J., see separate (dissenting) opinion. Panganiban, J., please see separate opinion. Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in which he concurs. Carpio, J., no part. Callejo, Sr., J., also concur in the separate opinion of J. Panganiban. Azcuna, J., joins the separate opinion of J. Vitug.

Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases in question, although denominated to be petitions for prohibition, actually pray for the nullification of the PIATCO contracts and to restrain respondents from implementing said agreements for being illegal and unconstitutional. Section 2, Rule 65 of the Rules of Court states: "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 discretion amounting to lack or excess of jurisdiction, and there is no appeal or any 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 certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require." The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts.2 The parties allege, respectively, contentious evidentiary facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual submissions made by the parties.3 As the Court has so often exhorted, it is not a trier of facts. The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules of Court. The Rules provide that any person interested under a contract may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder.4 The Supreme Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional trial courts.5 As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs. Guingona, Jr.7 , the Supreme Court should not be thought of as having been tasked with the awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every affair of government. What significance can still then remain of the timehonored and widely acclaimed principle of separation of powers if, at every turn, the Court allows itself to pass upon at will the disposition of a co-equal, independent and coordinate branch in our system of government. I dread to think of the so varied uncertainties that such an undue interference can lead to. Accordingly, I vote for the dismissal of the petition. Quisumbing, and Azcuna, JJ., concur.

SEPARATE OPINIONS VITUG, J.: This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the

PANGANIBAN, J.: The five contracts for the construction and the operation of Ninoy Aquino International Airport (NAIA) Terminal III, the subject of the consolidated Petitions before the Court, are replete with

outright violations of law, public policy and the Constitution. The only proper thing to do is declare them all null and void ab initio and let the chips fall where they may. Fiat iustitia ruat coelum. The facts leading to this controversy are already well presented in the ponencia. I shall not burden the readers with a retelling thereof. Instead, I will cut to the chase and directly address the two sets of gut issues: 1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and decide the Petitions? Corollarily, do petitioners have locus standi and should this Court decide the cases without any mandatory referral to arbitration? 2. The second one is substantive in character: Did the subject contracts violate the Constitution, the laws, and public policy to such an extent as to render all of them void and inexistent? My answer to all the above questions is a firm "Yes." The Procedural Issue: Jurisdiction, Standing and Arbitration Definitely and surely, the issues involved in these Petitions are clearly of transcendental importance and of national interest. The subject contracts pertain to the construction and the operation of the country's premiere international airport terminal - an ultramodern world-class public utility that will play a major role in the country's economic development and serve to project a positive image of our country abroad. The five build-operate-&-transfer (BOT) contracts, while entailing the investment of billions of pesos in capital and the availment of several hundred millions of dollars in loans, contain provisions that tend to establish a monopoly, require the disbursements of public funds sans appropriations, and provide government guarantees in violation of statutory prohibitions, as well as other provisions equally offensive to law, public policy and the Constitution. Public interest will inevitably be affected thereby. Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or interest, being in the main procedural matters, must now be set aside, as they have been in past cases. This Court must be permitted to perform its constitutional duty of determining whether the other agencies of government have acted within the limits of the Constitution and the laws, or if they have gravely abused the discretion entrusted to them.1 Hierarchy of Courts The Court has, in the past, held that questions relating to gargantuan government contracts ought to be settled without delay.2 This holding applies with greater force to the instant cases. Respondent Piatco is partly correct in averring that petitioners can obtain relief from the regional trial courts via an action to annul the contracts. Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the parties and the general public. And, in light of the feared loss of jobs of the petitioning workers, consequent to the inevitable pretermination of contracts of the petitioning service providers that will follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus justified.3 Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require delving into factual questions,4 I submit that their disposition ultimately turns on questions of law.5 Further, many of the significant and relevant factual questions can be easily addressed by an

examination of the documents submitted by the parties. In any event, the Petitions raise some novel questions involving the application of the amended BOT Law, which this Court has seen fit to tackle. Arbitration Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco claims that Section 10.02 of the Amended and Restated Concession Agreement (ARCA) provides for arbitration under the auspices of the International Chamber of Commerce to settle any dispute or controversy or claim arising in connection with the Concession Agreement, its amendments and supplements. The government disagrees, however, insisting that there can be no arbitration based on Section 10.02 of the ARCA, since all the Piatco contracts are void ab initio. Therefore, all contractual provisions, including Section 10.02 of the ARCA, are likewise void, inexistent and inoperative. To support its stand, the government cites Chavez v. Presidential Commission on Good Government:6 "The void agreement will not be rendered operative by the parties' alleged performance (partial or full) of their respective prestations. A contract that violates the Constitution and the law is null and void ab initio and vests no rights and creates no obligations. It produces no legal effect at all ." As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitionersin-intervention have pointed out that, even granting arguendo that the arbitration clause remained a valid provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of the ARCA, to be undertaken by a panel of three (3) arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber of Commerce, will not be able to address, determine and definitively resolve the constitutional and legal questions that have been raised in the Petitions before us. Locus Standi Given this Court's previous decisions in cases of similar import, no one will seriously doubt that, being taxpayers and members of the House of Representatives, Petitioners Baterina et al. have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court held that the petitioner therein, suing as a citizen, taxpayer and member of the House of Representatives, was sufficiently clothed with standing to bring the suit questioning the validity of the assailed contract. The Court cited the fact that public interest was involved, in view of the important role of the Manila International Container Terminal (MICT) in the country's economic development and the magnitude of the financial consideration. This, notwithstanding the fact that expenditure of public funds was not required under the assailed contract. In the cases presently under consideration, petitioners' personal and substantial interest in the controversy is shown by the fact that certain provisions in the Piatco contracts create obligations on the part of government (through the DOTC and the MIAA) to disburse public funds without prior congressional appropriations. Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are prejudiced qua legislators, since the contractual provisions requiring the government to incur expenditures without appropriations also operate as limitations upon the exclusive power and prerogative of Congress over the public purse. As members of the House of Representatives, they are actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget is concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the institution of which they are members, petitioners-legislators have locus standi to bring suit.

Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees (or representatives of employees) of various service providers that have (1) existing concession agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2) service agreements to furnish essential support services to the international airlines operating at the NAIA. On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs and losing their means of livelihood when their employer-companies are forced to shut down or otherwise retrench and cut back on manpower. Such development would result from the imminent implementation of certain provisions in the contracts that tend toward the creation of a monopoly in favor of Piatco, its subsidiaries and related companies. Petitioners-in-intervention are service providers in the business of furnishing airport-related services to international airlines and passengers in the NAIA and are therefore competitors of Piatco as far as that line of business is concerned. On account of provisions in the Piatco contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as not to be shut out of NAIA Terminal III and barred from doing business there. Since there is no provision to ensure or safeguard free and fair competition, they are literally at its mercy. They claim injury on account of their deprivation of property (business) and of the liberty to contract, without due process of law. And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal standing, I have at the outset already established that, given its impact on the public and on national interest, this controversy is laden with transcendental importance and constitutional significance. Hence, I do not hesitate to adopt the same position as was enunciated in Kilosbayan v. Guingona Jr.8 that "in cases of transcendental importance, the Court may relax the standing requirements and allow a suit to prosper even when there is no direct injury to the party claiming the right of judicial review."9 The Substantive Issue: Violations of the Constitution and the Laws From the Outset, the Bidding Process Was Flawed and Tainted After studying the documents submitted and arguments advanced by the parties, I have no doubt that, right at the outset, Piatco was not qualified to participate in the bidding process for the Terminal III project, but was nevertheless permitted to do so. It even won the bidding and was helped along by what appears to be a series of collusive and corrosive acts. The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes under the category of an "unsolicited proposal," which is the subject of Section 4-A of the BOT Law.10 The unsolicited proposal was originally submitted by the Asia's Emerging Dragon Corporation (AEDC) to the Department of Transportation and Communications (DOTC) and the Manila International Airport Authority (MIAA), which reviewed and approved the proposal. The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was endorsed to the National Economic Development Authority (NEDA-ICC), which in turn reviewed it on the basis of its scope, economic viability, financial indicators and risks; and thereafter approved it for bidding. The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated Draft Concession Agreement, and published invitations for public bidding, i.e., for the submission of comparative or competitive proposals. Piatco's predecessor-in-interest, the Paircargo Consortium, was the only company that submitted a competitive bid or price challenge.

At this point, I must emphasize that the law requires the award of a BOT project to the bidder that has satisfied the minimum requirements; and met the technical, financial, organizational and legal standards provided in the BOT Law. Section 5 of this statute states: "Sec. 5. Public bidding of projects. - . . . "In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder who, having satisfied the minimum financial, technical, organizational and legal standards required by this Act, has submitted the lowest bid and most favorable terms for the project, based on the present value of its proposed tolls, fees, rentals and charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. . . ." (Emphasis supplied.) The same provision requires that the price challenge via public bidding "must be conducted under a two-envelope/two-stage system: the first envelope to contain the technical proposal and the second envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations (IRR) provide that only those bidders that have passed the prequalification stage are permitted to have their two envelopes reviewed. In other words, prospective bidders must prequalify by submitting their prequalification documents for evaluation; and only the pre-qualified bidders would be entitled to have their bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be informed of the reason for their disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I quote thus: "Prequalified proponents will be considered eligible to move to second stage technical proposal evaluation. The second and third envelopes of pre-disqualified proponents will be returned."11 Aside from complying with the legal and technical requirements (track record or experience of the firm and its key personnel), a project proponent desiring to prequalify must also demonstrate its financial capacity to undertake the project. To establish such capability, a proponent must prove that it is able to raise the minimum amount of equity required for the project and to procure the loans or financing needed for it. Section 5.4(c) of the 1994 IRR provides: "Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must comply with the following requirements: xxx xxx xxx

"c. Financial Capability. The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction, and/or operation and maintenance phases of the project, as the case may be. For purposes of prequalification, this capability shall be measured in terms of: (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government Agency/LGU concerned shall determine on a project-to-project basis, and before prequalification, the minimum amount of equity needed. . . . ." (Italics supplied) Since the minimum amount of equity for the project was set at 30 percent12 of the minimum project cost of US$350 million, the minimum amount of equity required of any proponent stood at US$105 million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000. However, the combined equity or net worth of the Paircargo consortium stood at only

P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost and very much short of the required minimum equity, which was equivalent to 30 percent of the project cost. Such deficiency should have immediately caused the disqualification of the Paircargo consortium. This matter was brought to the attention of the Prequalification and Bidding Committee (PBAC). Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair of the PBAC, declared in a Memorandum dated 14 October 1996 that " the Challenger (Paircargo consortium) was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 billion." To justify his conclusion, he asserted: "It is not a requirement that the networth must be `unrestricted'. To impose this as a requirement now will be nothing less than unfair ." He further opined, "(T)he networth reflected in the Financial Statement should not be taken as the amount of money to be used to answer the required thirty (30%) percent equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Sec. 12.1 of IRR of the BOT Law) but not for prequalification (Sec. 5.4 of same document)." On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed prequalified and thus permitted to proceed to the other stages of the bidding process. By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in effect relieved the consortium of the need to comply with the financial capability requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely at odds with the Supreme Court's consistent doctrine emphasizing the strict application of pertinent rules, regulations and guidelines for the public bidding process, in order to place each bidder - actual or potential - on the same footing. Thus, it is unarguably irregular and contrary to the very concept of public bidding to permit a variance between the conditions under which bids are invited and those under which proposals are submitted and approved. Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the conditions that impose some duty upon it, that bidder is not contracting in fair competition with those bidders that propose to be bound by all conditions. The essence of public bidding is, after all, an opportunity for fair competition and a basis for the precise comparison of bids.15 Thus, each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations. The desired result is to be able to determine the best offer or lowest bid, all things being equal. Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent of the minimum project cost, it should not have been prequalified or allowed to participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened the two envelopes of the consortium containing its technical and financial proposals; required AEDC to match the consortium's bid; 16 or awarded the Concession Agreement to the consortium's successor-in-interest, Piatco. As there was effectively no public bidding to speak of, the entire bidding process having been flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's successor Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio. For this reason, Piatco cannot and should not be allowed to benefit from that Agreement.17 AEDC Was Deprived of the Right to Match PIATCO's Price Challenge In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would be

permitted access only to the schedule of proposed Annual Guaranteed Payments submitted by Piatco, and not to the latter's financial and technical proposals that constituted the basis for the price challenge in the first place. This was supposedly in keeping with Section 11.6 of the 1994 IRR, which provides that proprietary information is to be respected, protected and treated with utmost confidentiality, and is therefore not to form part of the bidding/tender and related documents. This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The "proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary information of the originator of an unsolicited proposal, and not to those belonging to a challenger. The reason for the protection accorded proprietary information at all is the fact that, according to Section 4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when it pertains to a project that involves "a new concept or technology", and/or a project that is not on the government's list of priority projects. To be considered as utilizing a new concept or technology, a project must involve the possession of exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights over a design, methodology or engineering concept.18Patently, the intent of the BOT Law is to encourage individuals and groups to come up with creative innovations, fresh ideas and new technology. Hence, the significance and necessity of protecting proprietary information in connection with unsolicited proposals. And to make the encouragement real, the law also extends to such individuals and groups what amounts to a "right of first refusal" to undertake the project they conceptualized, involving the use of new technology or concepts, through the mechanism of matching a price challenge. A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying economic, financial, technical and other, factors; it is likewise based on certain assumptions as to the nature of the business, the market potentials, the probable demand for the product or service, the future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order to be able to intelligently match a bid or price challenge, a bidder must be given access to the assumptions and the calculations that went into crafting the competing bid. In this instance, the financial and technical proposals of Piatco would have provided AEDC with the necessary information to enable it to make a reasonably informed matching bid. To put it more simply, a bidder unable to access the competitor's assumptions will never figure out how the competing bid came about; requiring him to "counter-propose" is like having him shoot at a target in the dark while blindfolded. By withholding from AEDC the challenger's financial and technical proposals containing the critical information it needed, Undersecretary Cal actually and effectively deprived AEDC of the ability to match the price challenge. One could say that AEDC did not have the benefit of a "level playing field." It seems to me, though, that AEDC was actually shut out of the game altogether. At the end of the day, the bottom line is that the validity and the propriety of the award to Piatco had been irreparably impaired. Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within which the winner of the bidding (and therefore the prospective awardee) shall submit the prescribed performance security, proof of commitment of equity contributions, and indications of sources of financing (loans); and, in the case of joint ventures, an agreement showing that the members are jointly and severally responsible for the obligations of the project proponent under the contract. The purpose of having a definite and firm timetable for the submission of the aforementioned requirements is not only to prevent delays in the project implementation, but also to expose and

weed out unqualified proponents, who might have unceremoniously slipped through the earlier prequalification process, by compelling them to put their money where their mouths are, so to speak. Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of the Notice of Award, in order to give the favored proponent sufficient time to comply with the requirements. Hence, to avert or minimize the manipulation of the post-bidding process, the IRR not only set out the precise sequence of events occurring between the completion of the evaluation of the technical bids and the issuance of the Notice of Award, but also specified the timetables for each such event. Definite allowable extensions of time were provided for, as were the consequences of a failure to meet a particular deadline. In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the second-stage evaluation shall have been completed, the Committee must come to a decision whether or not to award the contract and, within 7 days therefrom, the Notice of Award must be approved by the head of agency or local government unit (LGU) concerned, and its issuance must follow within another 7 days thereafter. Section 9.2 of the IRR set the procedure applicable to projects involving substantial government undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government undertakings already previously approved, then the submission shall be for information only. However, should there be additional or new provisions different from the original government undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act thereon, and unless otherwise specified, its failure to act on the contract within the specified time frame signifies that the agency or LGU may proceed with the award. The head of agency or LGU shall approve the Notice of Award within seven days of the clearance by the ICC on a noobjection basis, and the Notice itself has to be issued within seven days thereafter. The highly regulated time-frames within which the agents of government were to act evinced the intent to impose upon them the duty to act expeditiously throughout the process, to the end that the project be prosecuted and implemented without delay. This regulated scenario was likewise intended to discourage collusion and substantially reduce the opportunity for agents of government to abuse their discretion in the course of the award process. Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred in the award process, as can be observed from the presentation made by the counsel for public respondents,19 quoted hereinbelow: "11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC failed to match and that negotiations preparatory to Notice of Award should be commenced. This was the decision to award that should have commenced the running of the 7-day period to approve the Notice of Award, as per Section 9.1 of the IRR, or to submit the draft contract to the ICC for approval conformably with Section 9.2. "01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession Agreement be submitted to the NEDA for clearance on a no-objection basis. This resolution came more than 3 months too late as it should have been made on the 20th of December 1996 at the latest. "16 April 1997 - The PBAC resolved that the period of signing the Concession Agreement be extended by 15 days. "18 April 1997 - NEDA approved the Concession Agreement. Again this is more than 3 months too

late as the NEDA's decision should have been released on the 16th of January 1997 or fifteen days after it should have been submitted to it for review. "09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions of the IRR, the Notice of Award should have been issued fourteen days after NEDA's approval, or the 28th of January 1997. In any case, even if it were to be assumed that the release of NEDA's approval on the 18th of April was timely, the Notice of Award should have been issued on the 9th of May 1997. In both cases, therefore, the release of the Notice of Award occurred in a decidedly less than timely fashion." This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the face of this Court's solemn pronouncement in Republic v. Capulong,20 that "strict observance of the rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding." From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR were repeatedly violated with unmitigated impunity - and by agents of government, no less! On account of such violation, the award of the contract to Piatco, which undoubtedly gained time and benefited from the delays, must be deemed null and void from the beginning. Further Amendments Resulted in a Substantially Different Contract, Awarded Without Public Bidding But the violations and desecrations did not stop there. After the PBAC made its decision on December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract bidded out and ended up with what amounts to a substantially new contractwithout any public bidding. This Contract was subsequently further amended four more times through negotiation and without any bidding. Thus, the contract actually executed between Piatco and DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from the contract bidded out (the draft concession agreement or "DCA") in the following very significant respects: 1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business of providing airport-related services for international airlines and passengers.21 2. The CA provided that government is to answer for Piatco's unpaid loans and debts (lumped under the term Attendant Liabilities) in the event Piatco fails to pay its senior lenders.22 3. The CA provided that in case of termination of the contract due to the fault of government, government shall pay all expenses that Piatco incurred for the project plus the appraised value of the Terminal.23 4. The CA imposed new and special obligations on government, including delivery of clean possession of the site for the terminal; acquisition of additional land at the government's expense for construction of road networks required by Piatco's approved plans and specifications; and assistance to Piatco in securing site utilities, as well as all necessary permits, licenses and authorizations.24 5. Where Section 3.02 of the DCA requires government to refrain from competing with the contractor with respect to the operation of NAIA Terminal III, Section 3.02(b) of the CA excludes and prohibits everyone, including government, from directly or indirectly competing with Piatco, with respect to the operation of, as well asoperations in, NAIA Terminal III. Operations in is sufficiently broad to encompass all retail and other commercial business enterprises operating within Terminal III, inclusive of the businesses of providing various airport-related services to international airlines, within the scope of the prohibition.

6. Under Section 6.01 of the DCA, the following fees are subject to the written approval of MIAA: lease/rental charges, concession privilege fees for passenger services, food services, transportation utility concessions, groundhandling, catering and miscellaneous concession fees, porterage fees, greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities fees and others. Moreover, adjustments to the groundhandling fees, rentals and porterage fees are permitted only once every two years and in accordance with a parametric formula, per DCA Section 6.03. However, the CA as executed with Piatco provides in Section 6.06 that all the aforesaid fees, rentals and charges may be adjusted without MIAA's approval or intervention. Neither are the adjustments to these fees and charges subject to or limited by any parametric formula.25 7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees, aircraft parking fees, check-in counter fees and other fees are to be quoted and paid in Philippine pesos. But per Section 1.33 of the CA, all the aforesaid fees save the terminal fee are denominated in US Dollars. 8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities pertinent to NAIA Terminal III, such as payment of lease rentals and performance of other obligations under the Land Lease Agreement; the obligations under the Tenant Agreements; and payment of all taxes, fees, charges and assessments of whatever kind that may be imposed on NAIA Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant Liabilities refers to unpaid debts of Piatco: "All amounts recorded and from time to time outstanding in the books of (Piatco) as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by [Piatco] to its suppliers, contractors and subcontractors." 9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the contractors breach, rescind the contract and select one of four options: (a) take over the terminal and assume all its attendant liabilities; (b) allow the contractor's creditors to assign the Project to another entity acceptable to DOTC/MIAA; (c) pay the contractor rent for the facilities and equipment the DOTC may utilize; or (d) purchase the terminal at a price established by independent appraisers. Depending on the option selected, government may take immediate possession and control of the terminal and its operations. Government will be obligated to compensate the contractor for the "equivalent or proportionate contract costs actually disbursed," but only where government is the one in breach of the contract. But under Section 8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to pay its creditors, government is obliged to either (a) take over Terminal III and assume all of Piatco's debts or (b) permit the qualified unpaid creditors to be substituted in place of Piatco or to designate a new operator. And in the event of government's breach of contract, Piatco may compel it to purchase the terminal at fair market value, per Section 8.06(b) of the CA. 10. Under the DCA, any delay by Piatco in the payment of the amounts due the government constitutes breach of contract. However, under the CA, such delay does not necessarily constitute breach of contract, since Piatco is permitted to suspend payments to the government in order to first satisfy the claims of its secured creditors, per Section 8.04(d) of the CA. It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession agreement) - in such substantial manner, without any public bidding, and after the bidding process had been concluded on December 11, 1996 - is violative of public policy on public biddings, as well as the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise was completely lost. Its very rationale was totally subverted by permitting Piatco to amend the contract for which public bidding had already been concluded. Competitive bidding aims to obtain the best deal possible by fostering transparency and preventing favoritism, collusion and fraud in the awarding of contracts. That is the reason why procedural rules pertaining to public bidding demand strict observance.26

In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that substantive amendments to a contract for which a public bidding has already been finished should only be awarded after another public bidding: "The due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding."28 The aforementioned case dealt with the unauthorized amendment of a contract executed after public bidding; in the situation before us, the amendments were made also after the bidding, but prior to execution. Be that as it may, the same rationale underlying Caltex applies to the present situation with equal force. Allowing the winning bidder to renegotiate the contract for which the bidding process has ended is tantamount to permitting it to put in anything it wants. Here, the winning bidder (Piatco) did not even bother to wait until after actual execution of the contract before rushing to amend it. Perhaps it believed that if the changes were made to a contract already won through bidding (DCA) instead of waiting until it is executed, the amendments would not be noticed or discovered by the public. In a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows: "It is true that modification of government contracts, after the same had been awarded after a public bidding, is not allowed because such modification serves to nullify the effects of the bidding and whatever advantages the Government had secured thereby and may also result in manifest injustice to the other bidders. This prohibition, however, refers to a change in vital and essential particulars of the agreement which results in a substantially new contract." Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that prohibited further negotiations and eventual amendments to the DCA even after the bidding had been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft Concession Agreement shall be issued from time to time. Said amendments will only cover items that would not materially affect the preparation of the proponent's proposal." I submit that accepting such warped argument will result in perverting the policy underlying public bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in a substantially new contract after the bidding process and price challenge had been concluded. In fact, the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal, accords its originator the privilege of matching the challenger's bid. Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and to the right of the original proponent "to match the price" of the challenger. Thus, only the price proposals are in play. The terms, conditions and stipulations in the contract for which public bidding has been concluded are understood to remain intact and not be subject to further negotiation. Otherwise, the very essence of public bidding will be destroyed - there will be no basis for an exact comparison between bids. Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The phraseamendments . . . from time to time refers only to those amendments to the draft concession agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not

include or permit amendments negotiated for and introduced after the bidding process, has been terminated. Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public Bidding Not satisfied with the Concession Agreement, Piatco - once more without bothering with public bidding - negotiated with government for still more substantial changes. The result was the Amended and Restated Concession Agreement (ARCA) executed on November 26, 1998. The following changes were introduced: 1. The definition of Attendant Liabilities was further amended with the result that the unpaid loans of Piatco, for which government may be required to answer, are no longer limited to only those loans recorded in Piatco's books or loans whose proceeds were actually used in the Terminal III project.30 2. Although the contract may be terminated due to breach by Piatco, it will not be liable to pay the government any Liquidated Damages if a new operator is designated to take over the operation of the terminal.31 3. The Liquidated Damages which government becomes liable for in case of its breach of contract were substantially increased.32 4. Government's right to appoint a comptroller for Piatco in case the latter encounters liquidity problems was deleted.33 5. Government is made liable for Incremental and Consequential Costs and Losses in case it fails to comply or cause any third party under its direct or indirect control to comply with the special obligations imposed on government.34 6. The insurance policies obtained by Piatco covering the terminal are now required to be assigned to the Senior Lenders as security for the loans; previously, their proceeds were to be used to repair and rehabilitate the facility in case of damage.35 7. Government bound itself to set the initial rate of the terminal fee, to be charged when Terminal III begins operations, at an amount higher than US$20.36 8. Government waived its defense of the illegality of the contract and even agreed to be liable to pay damages to Piatco in the event the contract was declared illegal.37 9. Even though government may be entitled to terminate the ARCA on account of breach by Piatco, government is still liable to pay Piatco the appraised value of Terminal III or the Attendant Liabilities, if the termination occurs before the In-Service Date.38 This condition contravenes the BOT Law provision on termination compensation. 10. Government is obligated to take the administrative action required for Piatco's imposition, collection and application of all Public Utility Revenues.39 No such obligation existed previously. 11. Government is now also obligated to perform and cause other persons and entities under its direct or indirect control to perform all acts necessary to perfect the security interests to be created in favor of Piatco's Senior Lenders.40 No such obligation existed previously. 12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility Revenues become exorbitant or excessive has been removed.41 13. The illegality and unenforceability of the ARCA or any of its material provisions was made an event of default on the part of government only, thus constituting a ground for Piatco to terminate the ARCA.42

14. Amounts due from and payable by government under the contract were made payable on demand - net of taxes, levies, imposts, duties, charges or fees of any kind except as required by law.43 15. The Parametric Formula in the contract, which is utilized to compute for adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking fees, check-in counter fee and terminal fee), was revised to permit Piatco to input its more costly short-term borrowing rates instead of the longer-terms rates in the computations for adjustments, with the end result that the changes will redound to its greater financial benefit. 16. The Certificate of Completion simply deleted the successful performance-testing of the terminal facility in accordance with defined performance standards as a pre-condition for government's acceptance of the terminal facility.44 In sum, the foregoing revisions and amendments as embodied in the ARCA constitutevery material alterations of the terms and conditions of the CA, and give further manifestly undue advantage to Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by the demands of its foreign lenders. However,no proof whatsoever has been adduced to buttress this claim. In any event, it is quite patent that the sum total of the aforementioned changes resulted in drastically weakening the position of government to a degree that seems quite excessive, even from the standpoint of a businessperson who regularly transacts with banks and foreign lenders, is familiar with their mind-set, and understands what motivates them. On the other hand, whatever it was that impelled government officials concerned to accede to those grossly disadvantageous changes, I can only hazard a guess. There is no question in my mind that the ARCA was unauthorized and illegal for lack of public bidding and for being patently disadvantageous to government. The Three Supplements Imposed New Obligations on Government, Also Without Prior Public Bidding After Piatco had managed to breach the protective rampart of public bidding, it recklessly went on a rampage of further assaults on the ARCA. The First Supplement Is as Void as the ARCA In the First Supplement ("FS") executed on August 27, 1999, the following changes were made to the ARCA: 1. The amounts payable by Piatco to government were reduced by allowing additional exceptions to the Gross Revenues in which government is supposed to participate.45 2. Made part of the properties which government is obliged to construct and/or maintain and keep in good repair are (a) the access road connecting Terminals II and III - the construction of this access road is the obligation of Piatco, in lieu of its obligation to construct an Access Tunnel connecting Terminals II and III; and (b) the taxilane and taxiway - these are likewise part of Piatco's obligations, since they are part and parcel of the project as described in Clause 1.3 of the Bid Documents .46 3. The MIAA is obligated to provide funding for the maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control. It will also be liable to Piatco for the latter's losses, expenses and damages as well as liability to third persons, in case MIAA fails to perform such obligations. In addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default.47

4. The FS also imposed on government ten (10) "Additional Special Obligations," including the following: (a) Working for the removal of the general aviation traffic from the NAIA airport complex48 (b) Providing through MIAA the land required by Piatco for the taxilane and one taxiway at no cost to Piatco49 (c) Implementing the government's existing storm drainage master plan50 (d) Coordinating with DPWH the financing, the implementation and the completion of the following works before the In-Service Date: three left-turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.);51 and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenue.52 (e) Dealing directly with BCDA and the Phil. Air Force in acquiring additional land or right of way for the road upgrade and improvement program.53 5. Government is required to work for the immediate reversion to MIAA of the Nayong Pilipino National Park.54 6. Government's share in the terminal fees collected was revised from a flat rate of P180 to 36 percent thereof; together with government's percentage share in the gross revenues of Piatco, the amount will be remitted to government in pesos instead of US dollars.55 This amendment enables Piatco to benefit from the further erosion of the peso-dollar exchange rate, while preventing government from building up its foreign exchange reserves. 7. All payments from Piatco to government are now to be invoiced to MIAA, and payments are to accrue to the latter's exclusive benefit.56 This move appears to be in support of the funds MIAA advanced to DPWH. I must emphasize that the First Supplement is void in two respects. First, it is merely an amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not capable of being ratified or amended, it follows that the FS too is void, inexistent and inoperative. Second, even assuming arguendo that the ARCA is somehow remotely valid, nonetheless the FS, in imposing significant new obligations upon government, altered the fundamental terms and stipulations of the ARCA, thus necessitating a public bidding all over again. That the FS was entered into sans public bidding renders it utterly void and inoperative. The Second Supplement Is Similarly Void and Inexistent The Second Supplement ("SS") was executed between the government and Piatco on September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works contractor, to undertake - in the government's stead - the clearing, removal, demolition and disposal of improvements, subterranean obstructions and waste materials at the project site.57 The scope of the works, the procedures involved, and the obligations of the contractor are provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates per cubic meter of materials for each phase of the work - excavation, leveling, removal and disposal, backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual Guaranteed Payments it must pay government. Though denominated as Second Supplement, it was nothing less than an entirely new public works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void and

inoperative. Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly owned by a former high-ranking DOTC official. But that is another story altogether. The Third Supplement Is Likewise Void and Inexistent The Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001, passed on to the government certain obligations of Piatco as Terminal III concessionaire, with respect to the surface road connecting Terminals II and III. By way of background, at the inception of and forming part of the NAIA Terminal III project was the proposed construction of an access tunnel crossing Runway 13/31, which. would connect Terminal III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the said access tunnel was subject to further negotiation; but for purposes of the bidding, the proponent should submit a bid for it as well. Therefore, the tunnel was supposed to be part and parcel of the Terminal III project. However, in Section 5 of the First Supplement, the parties declared that the access tunnel was not economically viable at that time. In lieu thereof, the parties agreed that a surface access road (now called the T2-T3 Road) was to be constructed by Piatco to connect the two terminals. Since it was plainly in substitution of the tunnel, the surface road construction should likewise be considered part and parcel of the same project, and therefore part of Piatco's obligation as well. While the access tunnel was estimated to cost about P800 million, the surface road would have a price tag in the vicinity of about P100 million, thus producing significant savings for Piatco. Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road, nevertheless shifted to government some of the obligations pertaining to the former, as follows: 1. Government is now obliged to remove at its own expense all tenants, squatters, improvements and/or waste materials on the site where the T2-T3 road is to be constructed.58 There was no similar obligation on the part of government insofar as the access tunnel was concerned. 2. Should government fail to carry out its obligation as above described, Piatco may undertake it on government's behalf, subject to the terms and conditions (including compensation payments) contained in the Second Supplement.59 3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road.60 The TS depends upon and is intended to supplement the ARCA as well as the First Supplement, both of which are void and inexistent and not capable of being ratified or amended. It follows that the TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and FS are valid, still, the Third Supplement - imposing as it does significant new obligations upon government - would in effect alter the terms and stipulations of the ARCA in material respects, thus necessitating another public bidding. Since the TS was not subjected to public bidding, it is consequently utterly void as well. At any rate, the TS created new monetary obligations on the part of government, for which there were no prior appropriations. Hence it follows that the same is void ab initio. In patiently tracing the progress of the Piatco contracts from their inception up to the present, I noted that the whole process was riddled with significant lapses, if not outright irregularity and wholesale violations of law and public policy. The rationale of beginning at the beginning, so to speak, will become evident when the question of what to do with the five Piatco contracts is discussed later on. In the meantime, I shall take up specific, provisions or changes in the contracts and highlight the

more prominent objectionable features. Government Directly Guarantees Piatco Debts Certainly the most discussed provision in the parties' arguments is the one creating an unauthorized, direct government guarantee of Piatco's obligations in favor of the lenders. Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA Terminal III Project, may be accepted by government provided inter alia that no direct government guarantee, subsidy or equity is required. In short, such guarantee is prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct government guarantee as "an agreement whereby the government or any of its agencies or local government units (will) assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default." Both the CA and the ARCA have provisions that undeniably create such prohibited government guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA, provides thus: "(iv) that if Concessionaire is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same . . .; (v) . . . the Senior Lenders may after written notification to GRP, transfer the Concessionaire's rights and obligations to a transferee . . .; (vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the Senior Lenders shall endeavor . . . to enter into any other arrangement relating to the Development Facility . . . If no agreement relating to the Development Facility is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility shall be transferred by the Concessionaire to GRP or its designee and GRP shall make a termination payment to Concessionaire equal to the Appraised Value (as hereinafter defined) of the Development Facility or the sum of the Attendant Liabilities, if greater. . . ." In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows: "Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become, owing by Concessionaire to Senior Lenders or any other persons or entities who have provided, loaned or advanced funds or provided financial facilities to Concessionaire for the Project, including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire to its professional consultants and advisers, suppliers, contractors and sub-contractors." Government's agreement to pay becomes effective in the event of a default by Piatco on any of its loan obligations to the Senior Lenders, and the amount to be paid by government is the greater of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by Piatco - whether to the Senior Lenders or to other entities, including its suppliers, contractors and subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct government guarantee. It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's

rights to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other arrangement" with the government regarding the Terminal III facility, before government is required to make good on its guarantee. What is abundantly clear is the fact that, in the devious labyrinthine process detailed in the aforesaid section, it is entirely within the Senior Lenders' power, prerogative and control - exercisable via a mere refusal or inability to agree upon "a transferee" or "any other arrangement" regarding the terminal facility - to push the process forward to the ultimate contractual cul-de-sac, wherein government will be compelled to abjectly surrender and make good on its guarantee of payment. Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of government making the termination payment to Piatco, not to the lenders. However, it is almost a certainty that the Senior Lenders will already have made Piatco sign over to them, ahead of time, its right to receive such payments from government; and/or they may already have had themselves appointed its attorneys-in-fact for the purpose of collecting and receiving such payments. Nevertheless, as petitioners-in-intervention pointed out in their Memorandum,61 the termination payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the contract documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert the foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the interests of government at great risk. Indeed, if the unthinkable were to happen, government would be paying several hundreds of millions of dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders just the same. Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect government's interests. More accurately, the contracts would consistently weaken and do away with protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco and/or its Senior Lenders. While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from time to time outstanding in the books of the Concessionaire and actually used for the project. These phrases were eliminated from the ARCA's definition of Attendant Liabilities. Since no explanation has been forthcoming from Piatco as to the possible justification for such a drastic change, the only conclusion, possible is that it intends to have all of its debts covered by the guarantee, regardless of whether or not they are disclosed in its books. This has particular reference to those borrowings which were obtained in violation of the loan covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used for the project itself. This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which government has guaranteed to pay as termination payment is the greaterof either (i) the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their sum may greatly exceed the appraised value of the facility, and government may end up paying very much more than the real worth of Terminal III. (So why did government have to bother with public bidding anyway?) In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to

take on the burden and the risks of financing the construction, operation and maintenance of relevant infrastructure and development projects for the simple reason that government is not in a position to do so. By the same token, government guarantee was prohibited, since it would merely defeat the purpose and raison d'tre of a build-operate-and-transfer project to be undertaken by the private sector. To the extent that the project proponent is able to obtain loans to fund the project, those risks are shared between the project proponent on the one hand, and its banks and other lenders on the other. But where the proponent or its lenders manage to cajol or coerce the government into extending a guarantee of payment of the loan obligations, the risks assumed by the lenders are passed right back to government. I cannot understand why, in the instant case, government cheerfully assented to re-assuming the risks of the project when it gave the prohibited guarantee and thus simply negated the very purpose of the BOT Law and the protection it gives the government. Contract Termination Provisions in the Piatco Contracts Are Void The BOT Law as amended provides for contract termination as follows: "Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or terminated by the government through no fault of the project proponent or by mutual agreement, the Government shall compensate the said project proponent for its actual expenses incurred in the project plus a reasonable rate of return thereon not exceeding that stated in the contract as of the date of such revocation, cancellation or termination: Provided, That the interest of the Government in this instances [sic] shall be duly insured with the Government Service Insurance System or any other insurance entity duly accredited by the Office of the Insurance Commissioner: Provided, finally, That the cost of the insurance coverage shall be included in the terms and conditions of the bidding referred to above. "In the event that the government defaults on certain major obligations in the contract and such failure is not remediable or if remediable shall remain unremedied for an unreasonable length of time, the project proponent/contractor may, by prior notice to the concerned national government agency or local government unit specifying the turn-over date, terminate the contract. The project proponent/contractor shall be reasonably compensated by the Government for equivalent or proportionate contract cost as defined in the contract." The foregoing statutory provision in effect provides for the following limited instances when termination compensation may be allowed: 1. Termination by the government through no fault of the project proponent 2. Termination upon the parties' mutual agreement 3. Termination by the proponent due to government's default on certain major contractual obligations To emphasize, the law does not permit compensation for the project proponent when contract termination is due to the proponent's own fault or breach of contract. This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to pay termination compensation to Piatco even when termination is initiated by government for the following causes: "(i) Failure of Concessionaire to finish the Works in all material respects in accordance with the Tender Design and the Timetable;

(ii) Commission by Concessionaire of a material breach of this Agreement . . .; (iii) . . . a change in control of Concessionaire arising from the sale, assignment, transfer or other disposition of capital stock which results in an ownership structure violative of statutory or constitutional limitations; (iv) A pattern of continuing or repeated non-compliance, willful violation, or non-performance of other terms and conditions hereof which is hereby deemed a material breach of this Agreement . . ."62 As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject to Section 4.04." The effect of this insertion is that in those instances where government may terminate the contract on account of Piatco's breach, and it is nevertheless required under the ARCA to make termination compensation to Piatco even though unauthorized by law, such compensation is to be equivalent to the payment amount guaranteed by government - either a) the Appraised Value of the terminal facility or (b) the aggregate of the Attendant Liabilities, whichever amount is greater! Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project proponent to recover the actual expenses it incurred in the prosecution of the project plus a reasonable rate of return not in excess of that provided in the contract; or to be compensated for the equivalent or proportionate contract cost as defined in the contract, in case the government is in default on certain major contractual obligations. Furthermore, in those instances where such termination compensation is authorized by the BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such coverage is that of the Senior Lenders, not that of government. This can hardly be considered compliance with law. In essence, the ARCA provisions on termination compensation result in another unauthorized government guarantee, this time in favor of Piatco. A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the National Honor Still another contractual provision offensive to law and public policy is Section 8.01(d) of the ARCA, which is a "bolder and badder" version of Section 8.04(d) of the CA. It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b. iii. of the 1999 IRR defines a direct government subsidy as encompassing "an agreement whereby the Government . . . will . . . postpone any payments due from the proponent." Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus: "(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose of preventing a disruption of the operations in the Terminal and/or Terminal Complex, in the event that at any time Concessionaire is of the reasonable opinion that it shall be unable to meet a payment obligation owed to the Senior Lenders, Concessionaire shall give prompt notice to GRP, through DOTC/MIAA and to the Senior Lenders. In such circumstances, the Senior Lenders (or the Senior Lenders' Representative) may ensure that after making provision for administrative expenses and depreciation, the cash resources of Concessionaire shall first be used and applied to meet all payment obligations owed to the Senior Lenders. Any excess cash, after meeting such payment obligations, shall be earmarked for the payment of all sums payable by Concessionaire to GRP under this Agreement. If by

reason of the foregoing GRP should be unable to collect in full all payments due to GRP under this Agreement, then the unpaid balance shall be payable within a 90-day grace period counted from the relevant due date, with interest per annum at the rate equal to the average 91-day Treasury Bill Rate as of the auction date immediately preceding the relevant due date. If payment is not effected by Concessionaire within the grace period, then a spread of five (5%) percent over the applicable 91-day Treasury Bill Rate shall be added on the unpaid amount commencing on the expiry of the grace period up to the day of full payment. When the temporary illiquidity of Concessionaire shall have been corrected and the cash position of Concessionaire should indicate its ability to meet its maturing obligations, then the provisions set forth under this Section 8.01(d) shall cease to apply. The foregoing remedial measures shall be applicable only while there remains unpaid and outstanding amounts owed to the Senior Lenders." (Emphasis supplied) By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates the indefinite postponement of payment of all of Piatco's obligations to the government, in order to ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or less than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco will pay interest on the unpaid amounts owed to government does not change the situation or render the prohibited subsidy any less unacceptable. But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of the CA which gave government the right to appoint a financial controller to manage the cash position of Piatco during situations of financial distress. Not only has government been deprived of any means of monitoring and managing the situation; worse, as can be seen from Section 8.01(d) above-quoted, the Senior Lenders have effectively locked in on the right to exercise financial controllership over Piatco and to allocate its cash resources to the payment of all amounts owed to the Senior Lenders before allowing any payment to be made to government. In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power and the authority to determine how much (if at all) and when the Philippine government (as grantor of the franchise) may be allowed to receive from Piatco. In that situation, government will be at the mercy of the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law and to public policy. The aforesaid provision rouses mixed emotions - shame and disgust at the parties' (especially the government officials') docile submission and abject servitude and surrender to the imperious and excessive demands of the foreign lenders, on the one hand; and vehement outrage at the affront to the sovereignty of the Republic and to the national honor, on the other. It is indeed time to put an end to such an unbearable, dishonorable situation. The Piatco Contracts Unarguably Violate Constitutional Injunctions I will now discuss the manner in which the Piatco Contracts offended the Constitution. The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the Constitution While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and maintain the Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the entire term of the concession agreement, "the exclusive right to operate a commercial international passenger terminal within the Island of Luzon" with the exception of those three terminals already existing63 at the time of execution of the ARCA. Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or any other form of authorization for the operation of a public utility" that is "exclusive in character."

In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal III which . . . is a 'terminal for public use' is a public utility." Consequently, the constitutional prohibition against the exclusivity of a franchise applies to the franchise for the operation of NAIA Terminal III as well. What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an international passenger terminal within the "Island of Luzon." What this grant effectively means is that the government is now estopped from exercising its inherent power to award any other person another franchise or a right to operate such a public utility, in the event public interest in Luzon requires it. This restriction is highly detrimental to government and to the public interest. Former Secretary of Justice Hernando B. Perez expressed this point well in his Memorandum for the President dated 21 May 2002: "Section 3.02 on 'Exclusivity' "This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a commercial international airport within the Island of Luzon with the exception of those already existing at the time of the execution of the Agreement, such as the airports at Subic, Clark and Laoag City. In the case of the Clark International Airport, however, the provision restricts its operation beyond its design capacity of 850,000 passengers per annum and the operation of new terminal facilities therein until after the new NAIA Terminal III shall have consistently reached or exceeded its design capacity of ten (10) million passenger capacity per year for three (3) consecutive years during the concession period. "This is an onerous and disadvantageous provision. It effectively grants PIATCO amonopoly in Luzon and ties the hands of government in the matter of developing new airports which may be found expedient and necessary in carrying out any future plan for an inter-modal transportation system in Luzon. "Additionally, it imposes an unreasonable restriction on the operation of the Clark International Airport which could adversely affect the operation and development of the Clark Special Economic Zone to the economic prejudice of the local constituencies that are being benefited by its operation." (Emphasis supplied) While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a monopoly on account of the very nature of its business and the absence of competition, such a situation does not however constitute justification to violate the constitutional prohibition and grant an exclusive franchise or exclusive right to operate a public utility. Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As correctly argued,64 the existence of a monopoly by a public utility is a situation created by circumstances that do not encourage competition. This situation is different from the grant of a franchise to operate a public utility, a privilege granted by government. Of course, the grant of a franchise may result in a monopoly. But making such franchise exclusive is what is expressly proscribed by the Constitution. Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity; it also guaranteed that the government will not improve or expand the facilities at Clark - and in fact is required to put a cap on the latter's operations - until after Terminal III shall have been operated at or beyond its peak capacity for threeconsecutive years.65 As counsel for public respondents pointed out, in the real world where the rate of influx of international passengers can fluctuate substantially from year to year, it may take many years before Terminal III sees three consecutive years' operations at peak capacity. The Diosdado Macapagal International Airport may thus end up stagnating for a long time. Indeed, in order to ensure greater profits for Piatco, the economic

progress of a region has had to be sacrificed. The Piatco Contracts Violate the Time Limitation on Franchises Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other form of authorization for the operation of a public utility shall be . . . for a longer period than fifty years." After all, a franchise held for an unreasonably long time would likely give rise to the same evils as a monopoly. The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote thus: "Sec. 8.03. Termination Procedure and Consequences of Termination. a) x x x xxx xxx

in which are engaged many service providers (including the petitioners-in-intervention), who will be adversely affected upon full implementation of the Piatco Contracts, particularly Sections 3.01(d)69 and (e)70 of both the ARCA and the CA. On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international passenger terminal at the NAIA, and therefore the only place within the NAIA Complex where the business of providing airport-related services to international airlines may be conducted. On the other hand, Section 3.01(d) of the ARCA requires government, through the MIAA, not to allow service providers with expired MIAA contracts to renew or extend their contracts to render airport-related services to airlines. Meanwhile, Section 3.01(e) of the ARCA requires government, through the DOTC and MIAA, not to allow service providers - those with subsisting concession agreements for services and operations being conducted at Terminal I - to carry over their concession agreements, services and operations to Terminal III, unless they first enter into a separate agreement with Piatco. The aforementioned provisions vest in Piatco effective and exclusive control over which service provider may and may not operate at Terminal III and render the airport-related services needed by international airlines. It thereby possesses the power to exclude competition. By necessary implication, it also has effective control over the fees and charges that will be imposed and collected by these service providers. This intention is exceedingly clear in the declaration by Piatco that it is "completely within its rights to exclude any party that it has not contracted with from NAIA Terminal III."71 Worse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control or regulate the concessionaire's discretion and power to reject any service provider and/or impose any term or condition it may see fit in any contract it enters into with a service provider. In brief, there is no safeguard whatsoever to ensure free and fair competition in the service-provider sector. In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business opportunity. It announced72 that it has accredited three groundhandlers for Terminal III. Aside from the Philippine Airlines, the other accredited entities are the Philippine Airport and Ground Services Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit"). PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and Ground Services, Inc. or PAGS,73 while Orbit is a wholly-owned subsidiary of Friendship Holdings, Inc.,74 which is in turn owned 80 percent by PAGS.75PAGS is a service provider owned 60 percent by the Cheng Family;76 it is a stockholder of 35 percent of Piatco77 and is the latter's designated contractoroperator for NAIA Terminal III.78 Such entry into and domination of the airport-related services sector appear to be very much in line with the following provisions contained in the First Addendum to the Piatco Shareholders Agreement,79 executed on July 6, 1999, which appear to constitute a sort of master plan to create a monopoly and combinations in restraint of trade: "11. The Shareholders shall ensure: a. x x x xxx x x x.;

b) In the event the Agreement is terminated pursuant to Section 8.01 (b) hereof, Concessionaire shall be entitled to collect the Liquidated Damages specified in Annex 'G'. The full payment by GRP to Concessionaire of the Liquidated Damages shall be a condition precedent to the transfer by Concessionaire to GRP of the Development Facility. Prior to the full payment of the Liquidated Damages, Concessionaire shall to the extent practicable continue to operate the Terminal and the Terminal Complex and shall be entitled to retain and withhold all payments to GRP for the purpose of offsetting the same against the Liquidated Damages. Upon full payment of the Liquidated Damages, Concessionaire shall immediately transfer the Development Facility to GRP on 'as-is-where-is' basis." The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables government to avoid having to make outright payment of an obligation that will likely run into billions of pesos, this easy payment plan will nevertheless cost government considerable loss of income, which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be entitled to remain in the driver's seat and keep operating the terminal for an indefinite length of time. The Contracts Create Two Monopolies for Piatco By way of background, two monopolies were actually created by the Piatco contracts. The first and more obvious one refers to the business of operating an international passenger terminal in Luzon, the business end of which involves providing international airlines with parking space for their aircraft, and airline passengers with the use of departure and arrival areas, check-in counters, information systems, conveyor systems, security equipment and paraphernalia, immigrations and customs processing areas; and amenities such as comfort rooms, restaurants and shops. In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III will be the only facility to be operated as an international passenger terminal;66 that NAIA Terminals I and II will no longer be operated as such;67 and that no one (including the government) will be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA Complex.68 Given that, at this time, the government and Piatco are the only ones engaged in the business of operating an international passenger terminal, I am not acutely concerned with this particular monopolistic situation. There was however another monopoly within the NAIA created by the subject contracts for Piatco - in the business of providing international airlines with the following: groundhandling, in-flight catering, cargo handling, and aircraft repair and maintenance services. These are lines of business activity

b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates shall, at all times during the Concession Period, be exclusively authorized by (PIATCO) to engage in the provision of ground-handling, catering and fueling services within the Terminal Complex. c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession Period, be the only entities authorized to construct and operate a warehouse for all cargo handling and related services within the Site."

Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being fostered by the Piatco Contracts through the erection of barriers to the entry of other service providers into Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court ruled: ". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.' "A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. Combination in restraint of trade refers to the means while monopoly refers to the end. "x x x xxx xxx

It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy the government without fear of any sanction. Moreover, Section 6.06 - taken together with Section 6.03(c) of the ARCA - falls short of the standard set by the BOT Law as amended, which expressly requires in Section 2(b) that the project proponent is "allowed to charge facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract x x x." The Piatco Contracts Violate Constitutional Prohibitions Against Impairment of Contracts and Deprivation of Property Without Due Process Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires government, through DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations of certain service providers currently operating at Terminal I with subsisting contracts. By the In-Service Date, Terminal III shall be the only facility to be operated as an international passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer operate as such,86 and no one shall be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal where the business of providing airport-related services to international airlines and passengers may be conducted at all. Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing contracts with service providers after the In-Service Date, as they cannot be allowed to operate in Terminal III. In short, the CA and the ARCA obligate and constrain government to break its existing contracts with these service providers. Notably, government is not in a position to require Piatco to accommodate the displaced service providers, and it would be unrealistic to think that these service providers can perform their service contracts in some other international airport outside Luzon. Obviously, then, these displaced service providers are - to borrow a quaint expression -up the river without a paddle. In plainer terms, they will have lost their businesses entirely, in the blink of an eye. What we have here is a set of contractual provisions that impair the obligation of contracts and contravene the constitutional prohibition against deprivation of property without due process of law.88 Moreover, since the displaced service providers, being unable to operate, will be forced to close shop, their respective employees - among them Messrs. Agan and Lopez et al. - have very grave cause for concern, as they will find themselves out of employment and bereft of their means of livelihood. This situation comprises still another violation of the constitution prohibition against deprivation of property without due process. True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless, where that privilege has been availed of by the petitioners-in-intervention service providers for years on end, a situation arises, similar to that in American Inter-fashion v. GTEB.89 We held therein that a privilege enjoyed for seven years "evolved into some form of property right which should not be removed x x x arbitrarily and without due process ." Said pronouncement is particularly relevant and applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors are at stake. The Piatco Contracts Violate Constitutional Prohibition Against Deprivation of Liberty Without Due Process

"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of [S]ection 19, Article XII of our Constitution, . . ."81 Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be employed: "A 'monopoly' embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired."83 (Emphasis supplied) The Contracts Encourage Monopolistic Pricing, Too Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless power over the charging of fees, rentals and so forth. What little "oversight function" the government might be able and minded to exercise is less than sufficient to protect the public interest, as can be gleaned from the following provisions: "Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges "For fees, rentals and charges constituting Non-Public Utility Revenues, Concessionaire may make any adjustments it deems appropriate without need for the consent of GRP or any government agency subject to Sec. 6.03(c)." Section 6.03(c) in turn provides: "(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting NonPublic Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/wellwisher fee constitute NonPublic Utility Revenues of Concessionaire, GRP may require Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services."

The Piatco Contracts by locking out existing service providers from entry into Terminal III and restricting entry of future service providers, thereby infringed upon the freedom - guaranteed to and heretofore enjoyed by international airlines - to contract with local service providers of their choice, and vice versa. Both the service providers and their client airlines will be deprived of the right to liberty, which includes the right to enter into all contracts,90 and/or the right to make a contract in relation to one's business.91 By Creating New Financial Obligations for Government, Supplements to the ARCA Violate the Constitutional Ban on Disbursement of Public Funds Without Valid Appropriation Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except in pursuance of an appropriation made by law.92 The immediate effect of this constitutional ban is that all the various agencies of government are constrained to limit their expenditures to the amounts appropriated by law for each fiscal year; and to carefully count their cash before taking on contractual commitments. Giving flesh and form to the injunction of the fundamental law, Sections 46 and 47 of Executive Order 292, otherwise known as the Administrative Code of 1987, provide as follows: "Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure; and . . "Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three (3) months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished." Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract."93 Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents, the three Supplements to the ARCA, which were not approved by NEDA, imposed on government the additional burden of spending public moneys without prior appropriation. In the First Supplement ("FS") dated August 27, 1999, the following requirements were imposed on the government: To construct, maintain and keep in good repair and operating condition all airport support services, facilities, equipment and infrastructure owned and/or operated by MIAA, which are not part of the Project or which are located outside the Site, even though constructed by Concessionaire - including the access road connecting Terminals II and III and the taxilane, taxiways and runways

To obligate the MIAA to provide funding for the upkeep, maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control in order to ensure compliance with international standards; and holding MIAA liable to Piatco for the latter's losses, expenses and damages as well as for the latter's liability to third persons, in case MIAA fails to perform such obligations; in addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default. Section 4 of the FS imposed on government ten (10) "Additional Special Obligations," including the following:

Providing thru MIAA the land required by Piatco for the taxilane and one taxiway, at no cost to Piatco

Implementing the government's existing storm drainage master plan Coordinating with DPWH the financing, implementation and completion of the following works before the In-Service Date: three left-turning overpasses (Edsa to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.) and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenue

Dealing directly with BCDA and the Philippine Air Force in acquiring additional land or right of way for the road upgrade and improvement program Requiring government to work for the immediate reversion to MIAA of the Nayong Pilipino National Park, in order to permit the building of the second west parallel taxiway

Section 5 of the FS also provides that in l ieu of the access tunnel, a surface access road (T2-T3) will be constructed. This provision requires government to expend funds to purchase additional land from Nayong Pilipino and to clear the same in order to be able to deliver clean possession of the site to Piatco, as required in Section 5(c) of the FS. On the other hand, the Third Supplement ("TS") obligates the government to deliver, within 120 days from date thereof, clean possession of the land on which the T2-T3 Road is to be constructed. The foregoing contractual stipulations undeniably impose on government the expenditures of public funds not included in any congressional appropriation or authorized by any other statute. Piatco however attempts to take these stipulations out of the ambit of Sections 46 and 47 of the Administrative Code by characterizing them as stipulations for compliance on a "best-efforts basis" only. To determine whether the additional obligations under the Supplements may really be undertaken on a best-efforts basis only, the nature of each of these obligations must be examined in the context of its relevance and significance to the Terminal III Project, as well as of any adverse impact that may result if such obligation is not performed or undertaken on time. In short, the criteria for determining whether the best-efforts basis will apply is whether the obligations are critical to the success of the Project and, accordingly, whether failure to perform them (or to perform them on time) could result in a material breach of the contract. Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on a different aspect. In particular, each of the following may all be deemed to play a major role in the successful and timely prosecution of the Terminal III Project: the obtention of land required by

PIATCO for the taxilane and taxiway; the implementation of government's existing storm drainage master plan; and coordination with DPWH for the completion of the three left-turning overpasses before the In-Service Date, as well as acquisition and delivery of additional land for the construction of the T2-T3 access road. Conversely, failure to deliver on any of these obligations may conceivably result in substantial prejudice to the concessionaire, to such an extent as to constitute a material breach of the Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with Section 8.02(a) of the ARCA; or the concessionaire may instead require government to pay the Incremental and Consequential Losses under Section 1.23 of the ARCA.94 The logical conclusion then is that the obligations in the Supplements are not to be performed on a best-efforts basis only, but are unarguably mandatory in character. Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation of the road upgrading and improvement program for Sales, Andrews and Manlunas Roads (which provide access to the Terminal III site) prior to the In-Service Date, it is essential to take note of the fact that there was a pressing need to complete the program before the opening of Terminal III.95 For that reason, the MIAA was compelled to enter into a memorandum of agreement with the DPWH in order to ensure the timely completion of the road widening and improvement program. MIAA agreed to advance the total amount of P410.11 million to DPWH for the works, while the latter was committed to do the following: "2.2.8. Reimburse all advance payments to MIAA including but not limited to interest, fees, plus other costs of money within the periods CY2004 and CY2006 with payment of no less than One Hundred Million Pesos (PhP100M) every year. "2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget allocation the repayments for the advances made by MIAA, to ensure that the advances are fully repaid by CY2006. For this purpose, DPWH shall include the amounts to be appropriated for reimbursement to MIAA in the "Not Needing Clearance" column of their Agency Budget Matrix (ABM) submitted to the Department of Budget and Management." It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete the upgrading program for the crucially situated access roads prior to the targeted opening date of Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not have been able to complete the program on time. As a consequence, government would have been in breach of a material obligation. Hence, this particular undertaking of government may likewise not be construed as being for best-efforts compliance only. They also Infringe on the Legislative Prerogative and Power Over the Public Purse But the particularly sad thing about this transaction between MIAA and DPWH is the fact that both agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that purpose. The agreement would then be presented to Congress as a done deal. Congress would thus be obliged to uphold the agreement and support it with the necessary allocations and appropriations for three years, in order to enable DPWH to deliver on its committed repayments to MIAA. The net result is an infringement on the legislative power over the public purse and a diminution of Congress' control over expenditures of public funds - a development that would not have come about, were it not for the Supplements. Very clever but very illegal! EPILOGUE What Do We Do Now?

In the final analysis, there remains but one ultimate question, which I raised during the Oral Argument on December 10, 2002: What do we do with the Piatco Contracts and Terminal III?96 (Feeding directly into the resolution of the decisive question is the other nagging issue: Why should we bother with determining the legality and validity of these contracts, when the Terminal itself has already been built and is practically complete?) Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without exception, are void ab initio, and therefore inoperative. Even the very process by which the contracts came into being - the bidding and the award - has been riddled with irregularities galore and blatant violations of law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by some, of saving one (the original Concession Agreement) while junking all the rest. Neither is it possible to argue for the retention of the Draft Concession Agreement (referred to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the government executed was the Concession Agreement which is entirely different from the Draft Concession Agreement. Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of public policy and an insult to ourselves if we opt to keep in place a contract - any contract - for to do so would assume that we agree to having Piatco continue as the concessionaire for Terminal III. Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to operate and profit from Terminal III - instead of imposing upon it the stiffest sanctions permissible under the laws - is unconscionable. It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in place. For all it may care, we can do just as well without one, if we only let it continue and operate the facility. After all, the real money will come not from building the Terminal, but from actually operating it for fifty or more years and charging whatever it feels like, without any competition at all . This scenario must not be allowed to happen. If the Piatco contracts are junked altogether as I think they should be, should not AEDC automatically be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and never built any facility. Why should it be allowed to automatically step in and benefit from the greed of another? Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors - both local and foreign. After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government. In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was void, the principle of payment by quantum meruit was found applicable, and the contractor was allowed to recover the reasonable value of the thing or services rendered (regardless of any agreement as to the supposed value), in order to avoid unjust enrichment on the part of government. The principle of quantum meruit was likewise applied in Eslao v. Commission on Audit,98 because to deny payment for a building almost completed and already occupied would be to permit government to unjustly enrich itself at the expense of the contractor. The same principle was applied in Republic v. Court of

Appeals.99 One possible practical solution would be for government - in view of the nullity of the Piatco contracts and of the fact that Terminal III has already been built and is almost finished - to bid out the operation of the facility under the same or analogous principles as build-operate-and-transfer projects. To be imposed, however, is the condition that the winning bidder must pay the builder of the facility a price fixed by government based onquantum meruit; on the real, reasonable - not inflated - value of the built facility. How the payment or series of payments to the builder, funders, investors and contractors will be staggered and scheduled, will have to be built into the bids, along with the annual guaranteed payments to government. In this manner, this whole sordid mess could result in something truly beneficial for all, especially for the Filipino people. WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL andVOID. OMICTIN v. CA 512 SCRA 70

On June 4, 1999, private respondent filed a motion to recuse praying that Presiding Judge Reinato G. Quilala inhibit himself from hearing the case based on the following grounds: a) In an order, dated May 28, 1999, the presiding judge summarily denied respondents motion: 1) to defer issuance of the warrant of arrest; and 2) to order reinvestigation. b) Immediately before the issuance of the above-mentioned order, the presiding judge and Atty. Alex Y. Tan, SAAG Philippines, Inc.s Ad Interim President, were seen together.2 On June 24, 1999, private respondent filed a motion to suspend proceedings on the basis of a prejudicial question because of a pending petition with the Securities and Exchange Commission (SEC) involving the same parties. It appears that on January 7, 1999, private respondent filed SEC Case No. 01-99-6185 for the declaration of nullity of the respective appointments of Alex Y. Tan and petitioner as President Ad Interim and Operations Manager Ad Interim of Saag Phils., Inc., declaration of dividends, recovery of share in the profits, involuntary dissolution and the appointment of a receiver, recovery of damages and an application for a temporary restraining order (TRO) and injunction against Saag (S) Pte. Ltd., Nicholas Ng, Janifer Yeo, Tan and petitioner. 3 In the action before the SEC, private respondent averred that Saag (S) Pte. Ltd. is a foreign corporation organized and existing under the laws of Singapore, and is fully owned by Saag Corporation (Bhd). On July 1, 1994, he was appointed as Area Sales Manager in the Philippines by Thiang Shiang Hiang, Manager of Saag (S) Pte. Ltd. Pursuant to his appointment, respondent was authorized to organize a local joint venture corporation to be known as Saag Philippines, Inc. for the wholesale trade and service of industrial products for oil, gas and power industries in the Philippines. On September 9, 1994, Saag Philippines, Inc. was incorporated with Saag (S) Pte. Ltd. as the majority stockholder. Private respondent was appointed to the board of directors, along with Rommel I. Lagos, Jose E. Geronimo, Gan Ching Lai and Thiang Shiang Hiang, and was elected president of the domestic corporation. Later, due to intra-corporate disputes, Gan and Thiang resigned and divested their shares in Saag Corporation (Bhd), thereby resulting in a change in the controlling interest in Saag (S) Pte. Ltd. Barely three months after, or on June 23, 1998, private respondent resigned his post as president of Saag Phils., Inc. while still retaining his position as a director of the company.4 According to private respondent, the joint venture agreement (JVA) between him or Saag Phils., Inc. and Saag (S) Pte. Ltd. provided that should the controlling interest in the latter company, or its parent company Saag Corp. (Bhd), be acquired by any other person or entity without his prior consent, he has the option either to require the other stockholders to purchase his shares or to terminate the JVA and dissolve Saag Phils., Inc. altogether. Thus, pursuant to this provision, since private respondent did not give his consent as regards the transfer of shares made by Gan and Thiang, he made several requests to Nicholas Ng, who replaced Gan as director, and Janifer Yeo, Executive Director of Saag (S) Pte. Ltd., to call for a board meeting in order to discuss the following: a) implementation of the board resolution declaring dividends; b) acquisition of private respondents shares by Saag (S) Pte. Ltd.; c) dissolution of Saag Phils., Inc.; and d) the termination of the JVA. Ng and Yeo failed to appear, however, in the scheduled board meetings. Instead, on September 30, 1998 they issued a letter appointing Alex Y. Tan as President Ad Interim of Saag Phils., Inc. Tan, in turn, appointed petitioner Omictin as the companys Operations Manager Ad Interim. Citing as a reason the absence of a board resolution authorizing the continued operations of Saag Phils., Inc., private respondent retained his possession of the office equipment of the company in a

G.R. No.148004

January 22, 2007

VINCENT E. OMICTIN, Petitioner, vs. HON. COURT OF APPEALS (Special Twelfth Division) and GEORGE I. LAGOS,Respondents. DECISION AZCUNA, J.: This is a petition for certiorari1 with prayer for a writ of preliminary injunction seeking the nullification of the decision rendered by the Court of Appeals (CA) on June 30, 2000, and its resolution, dated March 5, 2001 in CA-G.R. SP No. 55834 entitled "George I. Lagos v. Hon. Reinato G. Quilala, Presiding Judge of RTC, Br. 57, Makati, Hon. Elizabeth Tayo Chua, Asst. City Prosecutor, Makati City, and Vincent E. Omictin." In its assailed decision, the CA declared the existence of a prejudicial question and ordered the suspension of the criminal proceedings initiated by petitioner Vincent E. Omictin on behalf of Saag Phils., Inc. against private respondent George I. Lagos, in view of a pending case before the Securities and Exchange Commission (SEC) filed by the latter against the former, Saag Pte. (S) Ltd., Nicholas Ng, Janifer Yeo and Alex Y. Tan. The facts are as follows: Petitioner Vincent E. Omictin, Operations Manager Ad Interim of Saag Phils., Inc., filed a complaint for two counts of estafa with the Office of the City Prosecutor of Makati against private respondent George I. Lagos. He alleged that private respondent, despite repeated demands, refused to return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc.. On February 26, 1999, public prosecutor Alex G. Bagaoisan recommended the indictment of private respondent, and on the same day, respondent was charged with the crime of estafa under Article 315, par. 1(b) of the Revised Penal Code before the Regional Trial Court (RTC), Branch 57 of Makati City. The case was docketed as Criminal Case No. 99-633, entitled "People of the Philippines v. George I. Lagos."

fiduciary capacity as director of the corporation pending its dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the locks of the offices of the company allegedly to prevent Tan and petitioner from seizing company property. Private respondent stressed that Tans appointment was invalid because it was in derogation of the company by-laws requiring that the president must be chosen from among the directors, and elected by the affirmative vote of a majority of all the members of the board of directors.5 As Tans appointment did not have the acquiescence of the board of directors, petitioners appointment by the former is likewise allegedly invalid. Thus, neither has the power or the authority to represent or act for Saag Phils., Inc. in any transaction or action before the SEC or any court of justice. The trial court, in an order dated September 8, 1999, denied respondents motion to suspend proceedings and motion to recuse. His motion for reconsideration having been denied by the trial court in its order issued on October 29, 1999, respondent filed with the CA the petition for certiorari[6] assailing the aforesaid orders. On June 30, 2000, the CA rendered its challenged decision. The pertinent portion reads: In a case for estafa, a valid demand made by an offended party is one of the essential elements. It appears from the records that the delay of delivery of the motor vehicles by petitioner to Saag Corporation is by reason of petitioners contention that the demand made by Omictin and Atty. Tan to him to return the subject vehicles is not a valid demand. As earlier mentioned, petitioner filed a case with the SEC questioning therein private respondents appointment. If the SEC should rule that the dissolution of Saag Phils. is proper, or that the appointments of private respondents are invalid, the criminal case will eventually be dismissed due to the absence of one of the essential elements of the crime of estafa. Based on the foregoing, it is clear that a prejudicial question exists which calls for the suspension of the criminal proceedings before the lower court. WHEREFORE, in view of the foregoing, the assailed Order of September 8, 1999 and October 29, 1999, are hereby MODIFIED. The motion to suspend proceedings is hereby GRANTED and respondent court is hereby enjoined from hearing Criminal Case No. 99-633, entitled "People of the Philippines v. George I. Lagos," until the termination of the case with the Securities and Exchange Commission. The denial of the motion to recuse is hereby AFFIRMED. SO ORDERED.7 Incidentally, on January 18, 2001, the SEC case8 was transferred to the Regional Trial Court (RTC) of Mandaluyong City, Branch 214, pursuant to A.M. No. 00-11-03-SC9implementing the Securities and Regulation Code (Republic Act No. 8799)10 enacted on July 19, 2000, vesting in the RTCs jurisdiction over intra-corporate disputes.11 Meanwhile, on March 5, 2001, the CA, addressing petitioners motion for reconsideration of the aforementioned decision, issued its assailed resolution: Considering that the petition for review on certiorari of the 30 June 2000 decision of this Court, filed by the Office of the Solicitor General before the Supreme Court has already TERMINATED on November 20, 2000 and a corresponding entry of judgment has already been issued by the High Court, that the same is final and executory, the private respondents motion for reconsideration of the decision 30 June 2000 before this Court is NOTED for being moot and academic. SO ORDERED.12

Hence, this petition raises the following issues: I RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION A) WHEN IT DECREED THAT A PREJUDICIAL QUESTION EXISTS IN THE SEC CASE FILED BY PRIVATE RESPONDENT AGAINST SAAG (S) PTE. LTD., A FOREIGN CORPORATION, ALTHOUGH THE PRIVATE COMPLAINANT IN THE CRIMINAL CASE FOR ESTAFA (WHERE PRIVATE RESPONDENT IS THE ACCUSED THEREIN) IS ACTUALLY SAAG PHILIPPINES, INC. A DOMESTIC CORPORATION WITH A SEPARATE JURIDICAL PERSONALITY OF ITS OWN AND WHICH IS NOT EVEN A PARTY IN THE SEC CASE; AND, B) WHEN IT ORDERED THE SUSPENSION OF THE PROCEEDINGS IN CRIMINAL CASE NO. 99-633 AGAINST PRIVATE RESPONDENT. II THIS PETITION FOR CERTIORARI IS THE ONLY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE PREMISES. In support of the above, petitioner argues, as follows: 1. The action before the SEC and the criminal case before the trial court do not involve any prejudicial question.13 SEC Case No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte. Ltd., the appointment of a receiver, the distribution of profits, and the authority of petitioner and Tan to represent Saag Phils., Inc. The entity which is being sued is Saag (S) Pte. Ltd., a foreign corporation over which the SEC has yet to acquire jurisdiction. Hence, any decision that may be rendered in the SEC case will neither be determinative of the innocence or guilt of the accused nor bind Saag Phils., Inc. because the same was not made a party to the action even if the former is its holding corporation; 2. Saag Phils., Inc. has a separate corporate existence and is to be treated as a separate entity from its holding or parent company, Saag (S) Pte. Ltd. The mere fact that one or more corporations are owned or controlled by the same or single stockholder is not a sufficient ground for disregarding separate corporate personalities; 3. Private respondents petition with the SEC seeks affirmative relief against Saag (S) Pte. Ltd. for the enforcement or application of the alleged terms of the joint venture agreement (JVA) that he purportedly entered into with the foreign corporation while he was still its Area Sales Manager in the Philippines. The foreign corporation is not licensed to do business in the Philippines, thus, a party to a contract with a foreign corporation doing business in the Philippines without a license is not entitled to relief from the latter; and 4. There is no pending civil or administrative case in SEC against Saag Phils., Inc. that warrants the application of a prejudicial question and the consequent suspension of the criminal action it has instituted against private respondent. If any, the action before the SEC was merely a ploy to delay the resolution of the criminal case and eventually frustrate the outcome of the estafa case. In sum, the main issue is whether or not a prejudicial question exists to warrant the suspension of the criminal proceedings pending the resolution of the intra-corporate controversy that was originally filed with the SEC. A prejudicial question is defined as that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another

tribunal.14 Here, the case which was lodged originally before the SEC and which is now pending before the RTC of Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately related to those upon which the criminal prosecution is based. Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt or innocence of private respondent in the crime of estafa filed against him by petitioner before the RTC of Makati. As correctly stated by the CA, one of the elements of the crime of estafa with abuse of confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended party to the offender: The elements of estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as follows: 1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return the same; 2. That there be misrepresentation or conversion of such money or property by the offender, or denial on his part of such receipt; 3. That such misappropriation or conversion or denial is to the prejudice of another; and 4. That there is a demand made by the offended party to the offender.15 Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity of the demand for the delivery of the subject vehicles rests upon the authority of the person making such a demand on the companys behalf. Private respondent is challenging petitioners authority to act for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong, Branch 214. Taken in this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever made, hence, the prosecution for estafa cannot prosper. Moreover, the mere failure to return the thing received for safekeeping or on commission, or for administration, or under any other obligation involving the duty to deliver or to return the same or deliver the value thereof to the owner could only give rise to a civil action and does not constitute the crime of estafa. This is because the crime is committed by misappropriating or converting money or goods received by the offender under a lawful transaction. As stated in the case of United States v. Bleibel:16 The crime of estafa is not committed by the failure to return the things received for sale on commission, or to deliver their value, but, as this class of crime is defined by law, by misappropriating or converting the money or goods received on commission. Delay in the fulfillment of a commission or in the delivery of the sum on such account received only involves civil liability. So long as the money that a person is under obligation to deliver is not demanded of him, and he fails to deliver it for having wrongfully disposed of it, there is no estafa, whatever be the cause of the debt. Likewise, by analogy, the doctrine of primary jurisdiction may be applied in this case. The issues raised by petitioner particularly the status of Saag Phils., Inc. vis--vis Saag (S) Pte. Ltd., as well as the question regarding the supposed authority of the latter to make a demand on behalf of the company, are proper subjects for the determination of the tribunal hearing the intra-corporate case which in this case is the RTC of Mandaluyong, Branch 214. These issues would have been referred to the expertise of the SEC in accordance with the doctrine of primary jurisdiction had the case not been transferred to the RTC of Mandaluyong. Strictly speaking, the objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative

agency has determined some question or some aspect of some question arising in the proceeding before the court.17 The court cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to resolving the same, where the question demands the exercise of sound administrative discretion requiring special knowledge, experience and services in determining technical and intricate matters of fact.18 While the above doctrine refers specifically to an administrative tribunal, the Court believes that the circumstances in the instant case do not proscribe the application of the doctrine, as the role of an administrative tribunal such as the SEC in determining technical and intricate matters of special competence has been taken on by specially designated RTCs by virtue of Republic Act No. 8799.19 Hence, the RTC of Mandaluyong where the intra-corporate case is pending has the primary jurisdiction to determine the issues under contention relating to the status of the domestic corporation, Saag Phils., Inc., vis--vis Saag Pte. Ltd.; and the authority of petitioner to act on behalf of the domestic corporation, the determination of which will have a direct bearing on the criminal case. The law recognizes that, in place of the SEC, the regular courts now have the legal competence to decide intra-corporate disputes.20 In view of the foregoing, the Court finds no substantial basis in petitioners contention that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction. Absent a showing of a despotic, whimsical and arbitrary exercise of power by the CA, the petition must fail. WHEREFORE, the petition is DISMISSED. The decision and resolution of the Court of Appeals in CA-G.R. SP No. 55834, dated June 30, 2000 and March 5, 2001, respectively, are AFFIRMED. No costs. SO ORDERED. LIGA NG MGA BARANGAY NATIONAL v. ATIENZA, JR. 20 SCRA 562

[G.R. No. 154599. January 21, 2004] THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs. THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF MANILA, respondents. DECISION DAVIDE, JR., C.J.: This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila City Ordinance No. 8039, Series of 2002,[1] and respondent City Mayors Executive Order No. 011, Series of 2002,[2] dated 15 August 2002 , for being patently contrary to law. The antecedents are as follows: Petitioner Liga ng mga Barangay National (Liga for brevity) is the national organization of all the barangays in the Philippines, which pursuant to Section 492 of Republic Act No. 7160, otherwise known as The Local Government Code of 1991, constitutes the duly elected presidents of highlyurbanized cities, provincial chapters, the metropolitan Manila Chapter, and metropolitan political subdivision chapters. Section 493 of that law provides that [t]he liga at the municipal, city, provincial, metropolitan

political subdivision, and national levels directly elect a president, a vice-president, and five (5) members of the board of directors. All other matters not provided for in the law affecting the internal organization of the leagues of local government units shall be governed by their respective constitution and by-laws, which must always conform to the provisions of the Constitution and existing laws.[3] On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern its internal organization.[4] Section 1, third paragraph, Article XI of said Constitution and By-Laws states: All other election matters not covered in this Article shall be governed by the Liga Election Code or such other rules as may be promulgated by the National Liga Executive Board in conformity with the provisions of existing laws. By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code.[5] Section 1.2, Article I of the Liga Election Code states: 1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall be nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC chapters to be held on the third Monday of the month immediately after the month when the synchronized elections in paragraph 1.1 above was held. The incumbent Liga chapter president concerned duly assisted by the proper government agency, office or department, e.g. Provincial/City/NCR/Regional Director, shall convene all the duly elected Component City/Municipal Chapter Presidents and all the current elected Punong Barangays (for HUC/ICC) of the respective chapters in any public place within its area of jurisdiction for the purpose of reorganizing and electing the officers and directors of the provincial, metropolitan or HUC/ICC Liga chapters. Said president duly assisted by the government officer aforementioned, shall notify, in writing, all the above concerned at least fifteen (15) days before the scheduled election meeting on the exact date, time, place and requirements of the said meeting. The Liga thereafter came out with its Calendar of Activities and Guidelines in the Implementation of the Liga Election Code of 2002,[6] setting on 21 October 2002 the synchronized elections for highly urbanized city chapters, such as the Liga Chapter of Manila, together with independent component city, provincial, and metropolitan chapters. On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of 2002,providing, among other things, for the election of representatives of the District Chapters in the City Chapter of Manila and setting the elections for both chapters thirty days after the barangay elections. Section 3 (A) and (B) of the assailed ordinance read: SEC. 3. Representation Chapters. Every Barangay shall be represented in the said Liga Chapters by the Punong Barangayor, in his absence or incapacity, by the kagawad duly elected for the purpose among its members. A. District Chapter

signature and approval. On 16 July 2002, upon being informed that the ordinance had been forwarded to the Office of the City Mayor, still unnumbered and yet to be officially released, the Liga sent respondent Mayor of Manila a letter requesting him that said ordinance be vetoed considering that it encroached upon, or even assumed, the functions of the Liga through legislation, a function which was clearly beyond the ambit of the powers of the City Council.[7] Respondent Mayor, however, signed and approved the assailed city ordinance and issued on 15 August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance. Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues: I WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION, WHEN IT ENACTED CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE ELECTIONS OF THE MANILA CHAPTER OF THE LIGA NG MGA BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF ELECTING ITS OFFICERS, DESPITE THE FACT THAT SAID CHAPTERS ELECTIONS, AND THE ELECTIONS OF ALL OTHER CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR THAT MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION CODE. II WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION WHEN HE ISSUED EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED CITY ORDINANCE NO. 8039 S. 2002. In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and Executive Order No. 011, Series of 2002, contradict the Liga Election Code and are therefore invalid. There exists neither rhyme nor reason, not to mention the absence of legal basis, for the Manila City Council to encroach upon, or even assume, the functions of the Liga by prescribing, through legislation, the manner of conducting the Liga elections other than what has been provided for by the Liga Constitution and By-laws and the Liga Election Code. Accordingly, the subject ordinance is anultra vires act of the respondents and, as such, should be declared null and void. As for its prayer for the issuance of a temporary restraining order, the petitioner cites as reason therefor the fact that under Section 5 of the assailed city ordinance, the Manila District Chapter elections would be held thirty days after the regular barangay elections. Hence, it argued that the issuance of a temporary restraining order and/or preliminary injunction would be imperative to prevent the implementation of the ordinance and executive order. On 12 September 2002, Barangay Chairman Arnel Pea, in his capacity as a member of the Liga ng mga Barangay in the City Chapter of Manila, filed a Complaint in Intervention with Urgent Motion for the Issuance of Temporary Restraining Order and/or Preliminary Injunction.[8] He supports the position of the Liga and prays for the declaration of the questioned ordinance and executive order, as well as the elections of the Liga ng mga Barangay pursuant thereto, to be null and void. The assailed ordinance prescribing for an indirect manner of election amended, in effect, the provisions of theLocal Government Code of 1991, which provides for the election of the Liga officers at large. It also violated and curtailed the rights of the petitioner and intervenor, as well as the other 896 Barangay Chairmen in the City of Manila, to vote and be voted upon in a direct election.

All elected Barangay Chairman in each District shall elect from among themselves the President, Vice-President and five (5) members of the Board. B. City Chapter

The District Chapter representatives shall automatically become members of the Board and they shall elect from among themselves a President, Vice-President, Secretary, Treasurer, Auditor and create other positions as it may deem necessary for the management of the chapter. The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza, Jr., for his

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of Comment.[9] It supports the petition of the Liga, arguing that the assailed city ordinance and executive order are clearly inconsistent with the express public policy enunciated in R.A. No. 7160. Local political subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the national legislature. They are mere agents vested with what is called the power of subordinate legislation. Thus, the enactments in question, which are local in origin, cannot prevail against the decree, which has the force and effect of law. On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG posits that technical rules of procedure should be relaxed in the instant petition. While Batas Pambansa Blg. 129, as amended, grants original jurisdiction over cases of this nature to the Regional Trial Court (RTC), the exigency of the present petition, however, calls for the relaxation of this rule. Section 496 (should be Section 491) of the Local Government Code of 1991 primarily intended that the Liga ng mga Barangay determine the representation of the Liga in the sanggunians for the immediate ventilation, articulation, and crystallization of issues affecting barangay government administration. Thus, the immediate resolution of this petition is a must. On the other hand, the respondents defend the validity of the assailed ordinance and executive order and pray for the dismissal of the present petition on the following grounds: (1) certiorari under Rule 65 of the Rules of Court is unavailing; (2) the petition should not be entertained by this Court in view of the pendency before the Regional Trial Court of Manila of two actions or petitions questioning the subject ordinance and executive order; (3) the petitioner is guilty of forum shopping; and (4) the act sought to be enjoined is fait accompli. The respondents maintain that certiorari is an extraordinary remedy available to one aggrieved by the decision of a tribunal, officer, or board exercising judicial or quasi-judicial functions. The City Council and City Mayor of Manila are not the board and officer contemplated in Rule 65 of the Rules of Court because both do not exercise judicial functions. The enactment of the subject ordinance and issuance of the questioned executive order are legislative and executive functions, respectively, and thus, do not fall within the ambit of judicial functions. They are both within the prerogatives, powers, and authority of the City Council and City Mayor of Manila, respectively. Furthermore, the petition failed to show with certainty that the respondents acted without or in excess of jurisdiction or with grave abuse of discretion. The respondents also asseverate that the petitioner cannot claim that it has no other recourse in addressing its grievance other than this petition for certiorari. As a matter of fact, there are two cases pending before Branches 33 and 51 of the RTC of Manila (one is for mandamus; the other, for declaratory relief) and three in the Court of Appeals (one is for prohibition; the two other cases, for quo warranto), which are all akin to the present petition in the sense that the relief being sought therein is the declaration of the invalidity of the subject ordinance. Clearly, the petitioner may ask the RTC or the Court of Appeals the relief being prayed for before this Court. Moreover, the petitioner failed to prove discernible compelling reasons attending the present petition that would warrant cognizance of the present petition by this Court. Besides, according to the respondents, the petitioner has transgressed the proscription against forum-shopping in filing the instant suit. Although the parties in the other pending cases and in this petition are different individuals or entities, they represent the same interest. With regard to petitioner's prayer for temporary restraining order and/ or preliminary injunction in its petition, the respondents maintain that the same had become moot and academic in view of the elections of officers of the City Liga ng mga Barangay on 15 September 2002 and their subsequent assumption to their respective offices.[10] Since the acts to be enjoined are now fait accompli, this petition for certiorari with an application for provisional remedies must necessarily fail. Thus, where the records show that during the pendency of the case certain events or

circumstances had taken place that render the case moot and academic, the petition for certiorari must be dismissed. After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari. First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal, board, or officer exercising judicial or quasi-judicial functions. Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides: SECTION 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any 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 certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties.[11] Quasi-judicial function, on the other hand, is a term which applies to the actions, discretion, etc., of public administrative officers or bodies 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.[12] Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that gives rise to some specific rights of persons or property under which adverse claims to such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and authority to determine the law and adjudicate the respective rights of the contending parties.[13] The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasijudicial functions. As correctly pointed out by the respondents, the enactment by the City Council of Manila of the assailed ordinance and the issuance by respondent Mayor of the questioned executive order were done in the exercise of legislative and executive functions, respectively, and not of judicial or quasi-judicial functions. On this score alone, certiorari will not lie. Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the declaration by this Court of the unconstitutionality or illegality of the questioned ordinance and executive order. It, thus, partakes of the nature of a petition for declaratory relief over which this Court has only appellate, not original, jurisdiction.[14] Section 5, Article VIII of the Constitution provides: Sec. 5. The Supreme Court shall have the following powers: (1) Exercise original jurisdiction over cases affecting ambassadors, other public

ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. (2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in: (a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. (Italics supplied). As such, this petition must necessary fail, as this Court does not have original jurisdiction over a petition for declaratory relief even if only questions of law are involved.[15] Third, even granting arguendo that the present petition is ripe for the extraordinary writ of certiorari, there is here a clear disregard of the hierarchy of courts. No special and important reason or exceptional and compelling circumstance has been adduced by the petitioner or the intervenor why direct recourse to this Court should be allowed. We have held that this Courts original jurisdiction to issue a writ of certiorari (as well as of prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive, but is concurrent with the Regional Trial Courts and the Court of Appeals in certain cases. As aptly stated inPeople v. Cuaresma:[16] This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor0 will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard of that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first 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 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 [an] established policy. It is a policy 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. As we have said in Santiago v. Vasquez,[17] the propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues because this Court is not a trier of facts. Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, and exceptional and compelling circumstances justify the availment of the extraordinary remedy of writ of certiorari, calling for the exercise of its primary jurisdiction.[18] Petitioners reliance on Pimentel v. Aguirre[19] is misplaced because the non-observance of the hierarchy-of-courts rule was not an issue therein. Besides, what was sought to be nullified in the petition for certiorari and prohibition therein was an act of the President of the Philippines, which would have greatly affected all local government units. We reiterated therein that when an act of the legislative department is seriously alleged to have infringed the Constitution, settling the controversy becomes the duty of this Court. The same is true when what is seriously alleged to be

unconstitutional is an act of the President, who in our constitutional scheme is coequal with Congress. We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. Forumshopping exists where the elements of litis pendentia are present or when a final judgment in one case will amount to res judicata in the other. For litis pendentia to exist, the following requisites must be present: (1) identity of parties, or at least such parties as are representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (3) identity with respect to the two preceding particulars in the two cases, such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other case.[20] In the instant petition, and as admitted by the respondents, the parties in this case and in the alleged other pending cases are different individuals or entities; thus, forum-shopping cannot be said to exist. Moreover, even assuming that those five petitions are indeed pending before the RTC of Manila and the Court of Appeals, we can only guess the causes of action and issues raised before those courts, considering that the respondents failed to furnish this Court with copies of the said petitions. WHEREFORE, the petition is DISMISSED. SO ORDERED. Davide, Jr., C.J., Puno, Vitug, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, AustriaMartinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur. Panganiban, J., in the result. RADIO COMMUNICATION OF THE PHIL., INC.v. CA 386 SCRA 67

[G.R. No. 136109. August 1, 2002] RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS and MANUEL DULAWON, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review of the decision of the Court of Appeals[1] in CA-G.R. SP No. 45987 dated April 30, 1998[2] and its resolution dated October 15, 1998[3] denying the motion for reconsideration. On June 18, 1997, private respondent Manuel Dulawon filed with the Regional Trial Court of Tabuk, Kalinga, Branch 25, a complaint for breach of contract of lease with damages against petitioner Radio Communications of the Philippines, Inc. (RCPI). Petitioner filed a motion to dismiss the complaint for lack of jurisdiction contending that it is the Municipal Trial Court which has jurisdiction as the complaint is basically one for collection of unpaid rentals in the sum of P84,000.00, which does not exceed the jurisdictional amount of P100,000.00 for Regional Trial Courts. The trial court denied the motion to dismiss,[4] as well as petitioners motion for

reconsideration.[5] Hence, petitioner went to the Court of Appeals on a petition for certiorari. On April 30, 1998, the Court of Appeals dismissed the petition. The dispositive portion thereof reads: WHEREFORE, the petition is hereby DENIED DUE COURSE and is DISMISSED. Costs against petitioner. SO ORDERED.[6] The motion for reconsideration of the foregoing decision was denied on October 15, 1998. Hence, this petition. The issue for resolution in this petition is whether or not the Regional Trial Court has jurisdiction over the complaint filed by private respondent. Pertinent portion of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, provides: SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: (1) xxx In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; xxx xxx

xxx

xxx

xxx

2. That sometime during the end of the year 1995, defendant through its appropriate officials negotiated with plaintiff the lease of a portion of the latters building x x x 3. That the lease contract was effective for a period of three (3) years of from January 1, 1996 to January 1, 1998 with advance payment for the year 1996. The advance was not however given in lump sum but on installment. One check that was given in payment of one months rental for 1996 was even stale and had to be changed only after demand; 4. That as per contract the monthly rental for 1997 was P3,300.00 while for 1998, it is P3,700.00;

5. That the defendant surreptitiously removed its equipments and other personalities from the leased premises and failed to pay rentals due for the months of January to March 1997 to the damage and prejudice of plaintiff; that this failure and refusal on the part of plaintiff accelerated the payment of all rentals for each month for the years 1997 and 1998; 6. That the acts of defendant amounts to a breach of contract which is unlawful and malicious, as in fact, it caused plaintiff serious anxiety, emotional stress, and sleepless nights for which he is entitled to moral damages; 7. That plaintiff conveyed his feelings to Mr. Ronald C. Manalastas as evidenced by a letter dated January 7, 1997 a copy of which is hereto attached to form part hereof as Annex B. This was later followed by a letter of plaintiffs counsel a machine copy of which is hereto attached to form part hereof and marked as Annex C. Both these letters landed on deaf ears thereby aggravating the worries/anxieties of plaintiff; 8. That the period agreed is for the benefit of both parties and any unilateral termination constitutes breach of contract; 9. That defendant actually used the leased premises during the year 1996; that had it not been for the contract, plaintiff could have leased the premises to other persons for business purposes; that this unlawful and malicious breach of contract cannot be lawfully countenanced hence defendant must be taught a lesson by being ordered to pay exemplary damages; xxx xxx x x x.[10]

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred thousand pesos (P200,000.00).[7] Corollary thereto, Administrative Circular No. 09-94, states: xxx xxx xxx

2. The exclusion of the term damages of whatever kind in determining the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court. xxx xxx x x x.

In Russell, et al., v. Vestil, et al.,[8] the Court held that in determining whether an action is one the subject matter of which is not capable of pecuniary estimation, the nature of the principal action or remedy sought must first be ascertained. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and jurisdiction over the action will depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, the action is one where the subject of the litigation may not be estimated in terms of money, which is cognizable exclusively by Regional Trial Courts. It is axiomatic that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein.[9] In the case at bar, the allegations in the complaint plainly show that private respondents cause of action is breach of contract. The pertinent portion of the complaint recites:

It is settled that a breach of contract is a cause of action either for specific performance or rescission of contracts.[11] In Manufacturers Distributors, Inc. v. Siu Liong,[12] the Court held that actions for specific performance are incapable of pecuniary estimation and therefore fall under the jurisdiction of the Regional Trial Court.[13] Here, the averments in the complaint reveal that the suit filed by private respondent was primarily one for specific performance as it was aimed to enforce their three-year lease contract which would incidentally entitle him to monetary awards if the court should find that the subject contract of lease was breached. As alleged therein, petitioners failure to pay rentals due for the period from January to March 1997, constituted a violation of their contract which had the effect of accelerating the payment of monthly rentals for the years 1997 and 1998. The same complaint likewise implied a premature and unilateral termination of the term of the lease with the closure of and removal all communication equipment in the leased premises.[14] Under the circumstances, the court has to scrutinize the facts and the applicable laws in order to determine whether there was indeed a violation of their lease agreement that would justify the award of rentals and damages. The prayer, therefore, for the payment of unpaid rentals in the amount of P84,000.00 plus damages consequent to the breach is merely incidental to the main action for specific performance. Similarly, in Manufacturers Distributors Inc.,[15] the Court explained

xxx

xxx

xxx

That plaintiffs complaint also sought the payment by the defendant of P3,376.00, plus interest and attorneys fees, does not give a pecuniary estimation to the litigation, for the payment of such amounts can only be ordered as a consequence of the specific performance primarily sought. In other words, such payment would be but an incident or consequence of defendant's liability for specific performance. If no such liability is judicially declared, the payment can not be awarded. Hence, the amounts sought do not represent the value of the subject of litigation. Subject matter over which jurisdiction can not be conferred by consent, has reference, not to the res or property involved in the litigation nor to a particular case, but to the class of cases, the purported subject of litigation, the nature of the action and of the relief sought (Appeal of Maclain, 176 NW. 817). Specifically, it has been held that: The Court has no jurisdiction of a suit for specific performance of a contract, although the damages alleged for its breach, if permitted, are within the amount of which that court has jurisdiction. (Mebane Cotton Breeding Station. vs. Sides, 257 SW. 302; 21 C.J.S. 59, note). xxx xxx xxx

Bankers Life Insurance Corporation, petitioner, expressed his intention to purchase a condominium unit at Valle Verde Terraces. Subsequently or on December 5, 1988, respondent paid petitioner a reservation fee of P50,000.00 for the purchase of a 46-square meter condominium unit (Unit 703) valued at P860,922.00. On January 16, 1989, respondent paid 90% of the purchase price in the sum of P729,830.00. Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a Contract to Sell in favor of the respondent. The contract expressly states that the subject c ondominium unit shall substantially be completed and delivered to the respondent within fifteen (15) months from February 8, 1989 or on May 8, 1990, and that (S)hould there be no substantial completion and fail(ure) to deliver the unit on the date specified, a penalty of 1% of the total amount paid (by respondent) shall be charged against (petitioner). Considering that the stipulated 15-month period was at hand, respondent returned to thePhilippines sometime in April, 1990. In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-President, Mr. Mario G. Zavalla, informed respondent of the substantial completion of his condominium unit, however, due to various uncontrollable forces (such as coup d etat attempts, typhoon and steel and cement shortage), the final turnover is reset to May 31, 1990. Meanwhile, on July 5, 1990, upon receipt of petitioners notice of delivery dated May 31, 1990, respondent again flew back to Manila. He found the unit still uninhabitable for lack of water and electric facilities. Once more, petitioner issued another notice to move-in addressed to its building administrator advising the latter that respondent is scheduled to move in on August 22, 1990. On October 5, 1990, respondent returned to the Philippines only to find that his condominium unit was still unlivable. Exasperated, he was constrained to send petitioner a letter dated November 21, 1990 demanding payment for the damages he sustained. But petitioner ignored such demand, prompting respondent to file with the Regional Trial Court, Branch 150, Makati City, a complaint against the former for specific performance and damages, docketed as Civil Case No. 90-3440. Meanwhile, during the pendency of the case, respondent finally accepted the condominium unit and on April 12, 1991, occupied the same. Thus, respondents cause of action has been limited to his claim for damages.

Clearly, the action for specific performance case, irrespective of the amount of rentals and damages sought to be recovered, is incapable of pecuniary estimation, hence cognizable exclusively by the Regional Trial Court. The trial court, therefore, did not err in denying petitioners motion to dismiss. WHEREFORE, in view of all the foregoing, the petition is DENIED and the assailed decision of the Court of Appeals in CA-G.R. SP No. 45987 is AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Vitug, Kapunan, and Austria-Martinez, JJ., concur. MANILA BANKERS LIFE INSURANCE CORP. v. NG KOK WEI 418 SCRA 454

[G.R. No. 139791. December 12, 2003] MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner, vs. EDDY NG KOK WEI,respondent. DECISION SANDOVAL-GUTIERREZ, J.: Before us is a petition for review on certiorari assailing the Decision[1] dated March 26, 1999 and Resolution[2] dated August 5, 1999 of the Court of Appeals in CA-G.R. CV No. 40504, entitled Eddy Ng Kok Wei vs. Manila Bankers Life Insurance Corporation. The factual antecedents as borne by the records are: Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into investing in thePhilippines. On November 29, 1988, respondent, in a Letter of Intent addressed to Manila

On December 18, 1992, the trial court rendered a Decision[3] finding the petitioner liable for payment of damages due to the delay in the performance of its obligation to the respondent. The dispositive portion reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, ordering Manila Bankers Life Insurance Corporation to pay plaintiff Eddy Ng Kok Wei the following: 1. 2. 3. 4. One percent (1%) of the total amount plaintiff paid defendant; P100,000.00 as moral damages; P50,000.00 as exemplary damages; P25,000.00 by way of attorneys fees; and

Cost of suit. SO ORDERED.

On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in toto the trial courts award of damages in favor of the respondent. Unsatisfied, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated August 5, 1999. Hence, this petition for review on certiorari. Petitioner contends that the trial court has no jurisdiction over the instant case; and that the Court of Appeals erred in affirming the trial courts finding that petitioner incurred unreasonable delay in the delivery of the condominium unit to respondent. On petitioners contention that the trial court has no jurisdiction over the instant case, Section 1 (c) of Presidential Decree No. 1344, as amended, provides: SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority [now Housing and Land Use Regulatory Board (HLURB)][4] shall have exclusive jurisdiction to hear and decide cases of the following nature: xxx C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman. x x x. Pursuant to the above provisions, it is the HLURB which has jurisdiction over the instant case. We have consistently held that complaints for specific performance with damages by a lot or condominium unit buyer against the owner or developer falls under the exclusive jurisdiction of the HLURB.[5] While it may be true that the trial court is without jurisdiction over the case, petitioners active participation in the proceedings estopped it from assailing such lack of it. We have held that it is an undesirable practice of a party participating in the proceedings and submitting its case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse.[6] Here, petitioner failed to raise the question of jurisdiction before the trial court and the Appellate Court. In effect, petitioner confirmed and ratified the trial courts jurisdiction over this case. Certainly, it is now in estoppel and can no longer question the trial courts jurisdiction. On petitioners claim that it did not incur delay, suffice it to say that this is a factual issue. Time and again, we have ruled that the factual findings of the trial court are given weight when supported by substantial evidence and carries more weight when affirmed by the Court of Appeals.[7] Whether or not petitioner incurred delay and thus, liable to pay damages as a result thereof, are indeed factual questions. The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts.[8] These exceptions are not present here. WHEREFORE, the petition is DENIED. The assailed Decision dated March 26, 1999 and Resolution dated August 5, 1999 of the Court of Appeals are hereby AFFIRMED IN TOTO. Costs against the petitioner.

SO ORDERED. Vitug, (Chairman), Corona, and Carpio-Morales, JJ., concur.

OFFICE OF THE COURT ADMINISTRATORS v. SARDIDO 401 SCRA 583

[A.M. No. MTJ-01-1370. April 25, 2003] OFFICE OF THE COURT ADMINISTRATOR, complainant, vs. JUDGE AGUSTIN T. SARDIDO, Municipal Trial Court of Koronadal, South Cotabato, respondent. DECISION CARPIO, J.: The Case This is an administrative case against respondent Judge Agustin T. Sardido (Judge Sardido) formerly presiding judge of the Municipal Trial Court of Koronadal, South Cotabato, for gross ignorance of the law. Judge Sardido issued an Order dated 20 October 1998 excluding Judge Braulio Hurtado, Jr. (Judge Hurtado) of the Regional Trial Court of Kabacan, North Cotabato as one of the accused in an Amended Information.[1] Judge Sardido ruled that Supreme Court Circular No. 3-89 requires that Judge Hurtado be dropped from the Amended Information and his case be forwarded to the Court. The Facts Private complainant Teresita Aguirre Magbanua accused Oscar Pagunsan and Danilo Ong of the crime of Falsification by Private Individual and Use of Falsified Document.[2] The Amended Information included Judge Hurtado. The case, docketed as Criminal Case No. 14071, was raffled to Judge Sardido, then presiding judge of the Municipal Trial Court of Koronadal, South Cotabato (MTC-Koronadal). In a Deed of Absolute Sale dated 8 August 1993, private complainant Magbanua and six other vendors allegedly sold two parcels of land, covered by TCT Nos. 47873 and 33633 and located at the commercial district of Koronadal, to Davao Realty Development Corporation, represented by accused Ong, with co-accused Pagunsan, as broker. Judge Hurtado, who at that time was the Clerk of Court of RTC-Koronadal and ex-officio notary public, notarized the Deed of Absolute Sale. However, private complainant Magbanua denies signing the Deed of Absolute Sale dated 8 August 1993 which states that the consideration for the sale was only P600,000.00. Private complainant asserts that what she and the other vendors signed was a Deed of Absolute Sale dated 6 August 1996 for a consideration of P16,000,000.00. Under the terms of the sale, the vendee agreed to pay for the capital gains tax. The consideration in the 8 August 1993 Deed of Absolute Sale was apparently undervalued. Subsequently, the Bureau of Internal Revenue assessed the vendors a deficiency capital gains tax of P1,023,375.00. Judge Hurtado filed a motion praying that the criminal complaint against him be forwarded to the Supreme Court. Judge Hurtado claimed that Circular No. 3-89 dated 6 February 1989 requires all cases involving justices and judges of the lower courts, whether or not such complaints deal with acts apparently unrelated to the discharge of their official functions, such as acts of immorality,

estafa, crimes against persons and property, etc. to be forwarded to the Supreme Court. Judge Hurtado asserted that since the case against him is one involving a judge of a lower court, the same should be forwarded to the Supreme Court pursuant to Circular No. 3-89. The Provincial Prosecutor opposed Judge Hurtados motion, arguing that the case against Judge Hurtado is not within the scope of Circular No. 3-89 since it is not an IBP-initiated case. Moreover, the offense charged was committed in 1993 when Judge Hurtado was still a clerk of court and exofficionotary public. On 20 October 1998, Judge Sardido issued an Order, the pertinent portions of which read: The issue to be resolved in the instant case is, whether the case of Judge Hurtado, who is charged for acts committed prior to his appointment as an RTC Judge, falls within the purview of the aforesaid Circular No. 3-89. It is the humble submission of the Court that the case of Judge Hurtado, an RTC Judge of the Regional Trial Court of Kabacan, North Cotabato, falls within the meaning and intent of the said circular. For reasons being, firstly, the said circular provides that all cases involving justices and judges of lower courts shall be forwarded to the Supreme Court for appropriate action, whether or not such complaints deal with acts apparently unrelated to the discharge of their official functions, and regardless of the nature of the crime, without any qualification whether the crime was committed before or during his tenure of office. Under the law on Legal Hermeneutics, if the law does not qualify we must not qualify. Secondly, it would sound, to the mind of the Court, awkward for a first level court to be trying an incumbent judge of a second level court. For reasons afore-stated, this Court can not and shall not try this case as against Judge Hurtado, unless the Honorable Supreme Court would order otherwise. Wherefore, the foregoing premises duly considered, the name of Judge Braulio L. Hurtado, Jr. is ordered excluded from the amended information and the case against him is ordered forwarded to the Honorable Supreme Court, pursuant to the afore-said Circular No. 3-89 of the Supreme Court, dated February 9, 1989. Accordingly, Maxima S. Borja (Borja), Stenographer I and Acting Clerk of Court II of the MTCKoronadal, South Cotabato, wrote a letter dated 21 July 1999 forwarding the criminal case against Judge Hurtado to the Court Administrator for appropriate action. Then Court Administrator Alfredo L. Benipayo issued a Memorandum dated 25 October 2000 pointing out that Circular No. 3-89 refers only to administrative complaints filed with the IBP against justices and judges of lower courts. The Circular does not apply to criminal cases filed before trial courts against such justices and judges. Thus, in the Resolution of 6 December 2000, the Court directed that the letter of Acting Clerk of Court Borja be returned to the MTC-Koronadal together with the records of the criminal case. The Court directed Judge Sardido to explain in writing why he should not be held liable for gross ignorance of the law for excluding Judge Hurtado from the Amended Information and for transmitting the records of Judge Hurtados case to the Court. In his Explanation dated 26 January 2001, Judge Sardido reasoned out that he excluded Judge Hurtado because Circular No. 3-89 directs the IBP to forward to the Supreme Court for appropriate action all cases involving justices and judges of lower courts x x x. Judge Sardido claims that the Circular likewise applies to courts in cases involving justices or judges of the lower courts, especially so in this case where Judge Hurtado was charged with falsification of public

document as a notary public while he was still the Clerk of Court of the Regional Trial Court of the 11th Judicial Region in Koronadal, South Cotabato. In the Resolution of 28 March 2001, the Court referred this case to the Office of the Court Administrator (OCA) for evaluation, report and recommendation. On 10 July 2001, the OCA submitted a Memorandum recommending that this case be re-docketed as a regular administrative matter. Judge Sardido filed his Manifestation dated 20 September 2001 stating that he is submitting the case for decision based on the pleadings and records already filed. Judge Sardido insisted that he did what he had done in all honesty and good faith. OCAs Findings and Conclusions The OCA found that Judge Sardido erred in excluding Judge Hurtado as one of the accused in the Amended Information in Criminal Case No. 14071. The OCA held that Circular No. 3-89, which is Judge Sardidos basis in issuing the Order of 20 October 1998, refers to administrative complaints filed with the IBP against justices and judges of lower courts. The Circular does not apply to criminal cases filed against justices and judges of lower courts. The OCA recommended that a fine of P5,000.00 be imposed on Judge Sardido for gross ignorance of the law. The Courts Ruling The Court issued Circular No. 3-89 in response to a letter dated 19 December 1988 by then IBP President Leon M. Garcia, seeking clarification of the Courts En Banc Resolution of 29 November 1998 in RE: Letter of then Acting Presiding Justice Rodolfo A. Nocon[3] and Associate Justices Reynato Puno[4] and Alfredo Marigomen[5] of the Court of Appeals. A certain Atty. Eduardo R. Balaoing had filed a complaint against Court of Appeals Justices Nocon, Puno and Marigomen relating to a petition filed before their division. In its En Banc Resolution of 29 November 1988, the Court required the IBP to refer to the Supreme Court for appropriate action the complaint[6] filed by Atty. Balaoing with the IBP Commission on Bar Discipline. The Court stated that the power to discipline justices and judges of the lower courts is within the Courts exclusive power and authority as provided in Section 11, Article VII of the 1987 Constitution.[7] The Court Administrator publicized the En Banc Resolution of 29 November 1988 by issuing Circular No. 17 dated 20 December 1988. The Court issued Circular No. 3-89 on 6 February 1989 clarifying the En Banc Resolution of 29 November 1988. Circular No. 3-89 provides in part as follows: (1) The IBP (Board of Governors and Commission on Bar Discipline) shall forward to the Supreme Court for appropriate action all cases involving justices and judges of lower courts, whether or not such complaints deal with acts apparently unrelated to the discharge of their official functions, such as acts of immorality, estafa, crimes against persons and property, etc. x x x. (Emphasis supplied) Circular No. 3-89 clarified the second paragraph, Section 1 of Rule 139-B of the Rules of Court which states that: The IBP Board of Governors may, motu proprio or upon referral by the Supreme Court or by a Chapter Board of Officers, or at the instance of any person, initiate and prosecute proper charges against erringattorneys including those in the government service. (Emphasis supplied). As clarified, the phrase attorneys x x x in the government service in Section 1 of Rule 139 -B does not include justices of appellate courts and judges of lower courts who are not subject to the disciplining authority of the IBP. All administrative cases against justices of appellate courts and

judges of lower courts fall exclusively within the jurisdiction of the Supreme Court. However, Rule 139-B refers to Disbarment and Discipline of Attorneys which is administrative and not criminal in nature. The cases referred to in Circular No. 3-89 are administrative cases for disbarment, suspension or discipline of attorneys, including justices of appellate courts and judges of the lower courts. The Court has vested the IBP with the power to initiate and prosecute administrative cases against erring lawyers.[8] However, under Circular No. 3-89, the Court has directed the IBP to refer to the Supreme Court for appropriate action all administrative cases filed with IBP against justices of appellate courts and judges of the lower courts. As mandated by the Constitution, the Court exercises the exclusive power to discipline administratively justices of appellate courts and judges of lower courts. Circular No. 3-89 does not refer to criminal cases against erring justices of appellate courts or judges of lower courts. Trial courts retain jurisdiction over the criminal aspect of offenses committed by justices of appellate courts[9] and judges of lower courts. This is clear from the Circular directing the IBP, and not the trial courts, to refer all administrative cases filed against justices of appellate courts and judges of lower courts to the Supreme Court. The case filed against Judge Hurtado is not an administrative case filed with the IBP. It is a criminal case filed with the trial court under its jurisdiction as prescribed by law. The acts or omissions of a judge may well constitute at the same time both a criminal act and an administrative offense. Whether the criminal case against Judge Hurtado relates to an act committed before or after he became a judge is of no moment. Neither is it material that an MTC judge will be trying an RTC judge in the criminal case. A criminal case against an attorney or judge is distinct and separate from an administrative case against him. The dismissal of the criminal case does not warrant the dismissal of an administrative case arising from the same set of facts. The quantum of evidence that is required in the latter is only preponderance of evidence, and not proof beyond reasonable doubt which is required in criminal cases.[10] As held in Gatchalian Promotions Talents Pool, Inc. v. Naldoza:[11] Administrative cases against lawyers belong to a class of their own. They are distinct from and they may proceed independently of civil and criminal cases. The burden of proof for these types of cases differ. In a criminal case, proof beyond reasonable doubt is necessary; in an administrative case for disbarment or suspension, clearly preponderant evidence is all that is required. Thus, a criminal prosecution will not constitute a prejudicial question even if the same facts and circumstances are attendant in the administrative proceedings. It should be emphasized that a finding of guilt in the criminal case will not necessarily result in a finding of liability in the administrative case. Conversely, respondents acquittal does not necessarily exculpate him administratively. In the same vein, the trial courts finding of civil liability against the respondent will not inexorably lead to a similar finding in the administrative action before this Court. Neither will a favorable disposition in the civil action absolve the administrative liability of the lawyer. The basic premise is that criminal and civil cases are altogether different from administrative matters, such that the disposition in the first two will not inevitably govern the third and vice versa. For this reason, it would be well to remember the Courts ruling in In re Almacen, which we quote: x x x Disciplinary proceedings against lawyers are sui generis. Neither purely civil nor purely criminal, they do not involve a trial of an action or a suit, but are rather investigations by the Court into the conduct of one of its officers. Not being intended to inflict punishment, [they are] in no sense a criminal prosecution. Accordingly, there is neither a plaintiff nor a prosecutor therein. [They] may be initiated by the Court motu proprio. Public interest is [their] primary objective, and the real question for determination is whether or not the attorney is still a fit person to be allowed

the privileges as such. Hence, in the exercise of its disciplinary powers, the Court merely calls upon a member of the Bar to account for his actuations as an officer of the Court with the end in view of preserving the purity of the legal profession and the proper and honest administration of justice by purging the profession of members who by their misconduct have prove[n] themselves no longer worthy to be entrusted with the duties and responsibilities pertaining to the office of an attorney. x x x A judge is called upon to exhibit more than just a cursory acquaintance with statutes and procedural rules. He must be conversant with basic legal principles and well-settled doctrines. He should strive for excellence and seek the truth with passion.[12] Judge Sardido failed in this regard. He erred in excluding Judge Hurtado as one of the accused in the Amended Information and in forwarding the criminal case against Judge Hurtado to the Court. One last point. This administrative case against Judge Sardido started before the amendment[13] of Rule 140 classifying gross ignorance of the law a serious offense punishable by a fine of more thanP20,000.00 but not exceeding P40,000.00. The amendment cannot apply retroactively to Judge Sardidos case. However, the fine of P5,000.00 recommended by the OCA is too light a penalty considering that this is not the first offense of Judge Sardido. In RE: Hold Departure Order Issued by Judge Agustin T. Sardido,[14] the Court reprimanded Judge Sardido for issuing a hold-departure order contrary to Circular No. 39-97. In Cabilao v. Judge Sardido,[15] the Court fined Judge Sardido P5,000.00 for gross ignorance of the law, grave abuse of discretion and gross misconduct. The Court gave a stern warning to Judge Sardido that a commission of the same or similar act would be dealt with more severely. In Almeron v. Judge Sardido,[16] the Court imposed on Judge Sardido a stiffer fine of P10,000.00 for gross ignorance of the law. He was again sternly warned that the commission of the same or similar act in the future would be dealt with more severely including, if warranted, his dismissal from the service. In a more recent administrative case, Torcende v. Judge Sardido,[17] the Court found Judge Sardido again guilty of gross ignorance of the law and of gross misconduct. This time the Court dismissedJudge Sardido from the service with forfeiture of his retirement benefits, except accrued leave credits. The dismissal was with prejudice to reemployment in any branch of the government or any of its agencies or instrumentalities, including government-owned and controlled corporations. The records of the OCA further disclose that Judge Sardido has other similar administrative complaints[18] still pending against him. Such an unflattering service record erodes the peoples faith and confidence in the judiciary. It is the duty of every member of the bench to avoid any impression of impropriety to protect the image and integrity of the judiciary.[19] The Court may still impose a fine on Judge Sardido in the instant case despite his dismissal from the service. WHEREFORE, respondent Judge Agustin T. Sardido is FINED Ten Thousand Pesos (P10,000.00) for gross ignorance of the law. The fine may be deducted from his accrued leave credits. SO ORDERED. Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

KATON v. PALANCA 437 SCRA 565

G.R. No. 151149

September 7, 2004

GEORGE KATON, petitioner, vs. MANUEL PALANCA JR., LORENZO AGUSTIN, JESUS GAPILANGO and JUAN FRESNILLO,respondents. DECISION PANGANIBAN, J.: Where prescription, lack of jurisdiction or failure to state a cause of action clearly appear from the complaint filed with the trial court, the action may be dismissed motu proprio by the Court of Appeals, even if the case has been elevated for review on different grounds. Verily, the dismissal of such cases appropriately ends useless litigations. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the December 8, 2000 Decision2 and the November 20, 2001 Resolution3 of the Court of Appeals in CA-GR SP No. 57496. The assailed Decision disposed as follows: "Assuming that petitioner is correct in saying that he has the exclusive right in applying for the patent over the land in question, it appears that his action is already barred by laches because he slept on his alleged right for almost 23 years from the time the original certificate of title has been issued to respondent Manuel Palanca, Jr., or after 35 years from the time the land was certified as agricultural land. In addition, the proper party in the annulment of patents or titles acquired through fraud is the State; thus, the petitioners action is deemed misplaced as he really does not have any right to assert or protect. What he had during the time he requested for the reclassification of the land was the privilege of applying for the patent over the same upon the lands conversion from forest to agricultural. "WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to cost."4 The assailed Resolution, on the other hand, denied the Motion for Reconsideration filed by petitioner. It affirmed the RTCs dismissal of his Complaint in Civil Case No. 3231, not on the grounds relied upon by the trial court, but because of prescription and lack of jurisdiction. The Antecedent Facts The CA narrates the antecedent facts as follows: "On August 2, 1963, herein [P]etitioner [George Katon] filed a request with the District Office of the Bureau of Forestry in Puerto Princesa, Palawan, for the re-classification of a piece of real property known as Sombrero Island, located in Tagpait, Aborlan, Palawan, which consists of approximately 18 hectares. Said property is within Timberland Block of LC Project No. 10-C of Aborlan, Palawan, per BF Map LC No. 1582. "Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan, ordered the inspection, investigation and survey of the land subject of the petitioners request for eventual conversion or re-classification from forest to agricultural land, and thereafter for George Katon to apply for a homestead patent. "Gabriel Mandocdoc (now retired Land Classification Investigator) undertook the investigation, inspection and survey of the area in the presence of the petitioner, his brother Rodolfo Katon

(deceased) and his cousin, [R]espondent Manuel Palanca, Jr. During said survey, there were no actual occupants on the island but there were some coconut trees claimed to have been planted by petitioner and [R]espondent Manuel Palanca, Jr. (alleged overseer of petitioner) who went to the island from time to time to undertake development work, like planting of additional coconut trees. "The application for conversion of the whole Sombrero Island was favorably endorsed by the Forestry District Office of Puerto Princesa to its main office in Manila for appropriate action. The names of Felicisimo Corpuz, Clemente Magdayao and Jesus Gapilango and Juan Fresnillo were included in the endorsement as co-applicants of the petitioner. "In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L. Utleg informed the Director of Lands, Manila, that since the subject land was no longer needed for forest purposes, the same is therefore certified and released as agricultural land for disposition under the Public Land Act. "Petitioner contends that the whole area known as Sombrero Island had been classified from forest land to agricultural land and certified available for disposition upon his request and at his instance. However, Mr. Lucio Valera, then [l]and investigator of the District Land Office, Puerto Princesa, Palawan, favorably endorsed the request of [R]espondents Manuel Palanca Jr. and Lorenzo Agustin, for authority to survey on November 15, 1965. On November 22, a second endorsement was issued by Palawan District Officer Diomedes De Guzman with specific instruction to survey vacant portions of Sombrero Island for the respondents consisting of five (5) hectares each. On December 10, 1965, Survey Authority No. R III-342-65 was issued authorizing Deputy Public Land Surveyor Eduardo Salvador to survey ten (10) hectares of Sombrero Island for the respondents. On December 23, 1990, [R]espondent Lorenzo Agustin filed a homestead patent application for a portion of the subject island consisting of an area of 4.3 hectares. "Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a homestead patent application for a portion of the island comprising 8.5 hectares. Records also reveal that [R]espondent Jesus Gapilango filed a homestead application on June 8, 1972. Respondent Manuel Palanca, Jr. was issued Homestead Patent No. 145927 and OCT No. G-7089 on March 3, 19775 with an area of 6.84 hectares of Sombrero Island. "Petitioner assails the validity of the homestead patents and original certificates of title covering certain portions of Sombrero Island issued in favor of respondents on the ground that the same were obtained through fraud. Petitioner prays for the reconveyance of the whole island in his favor. "On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself requested for the reclassification of the island in dispute and that on or about the time of such request, [R]espondents Fresnillo, Palanca and Gapilango already occupied their respective areas and introduced numerous improvements. In addition, Palanca said that petitioner never filed any homestead application for the island. Respondents deny that Gabriel Mandocdoc undertook the inspection and survey of the island. "According to Mandocdoc, the island was uninhabited but the respondents insist that they already had their respective occupancy and improvements on the island. Palanca denies that he is a mere overseer of the petitioner because he said he was acting for himself in developing his own area and not as anybodys caretaker. "Respondents aver that they are all bona fide and lawful possessors of their respective portions and have declared said portions for taxation purposes and that they have been faithfully paying taxes thereon for twenty years. "Respondents contend that the petitioner has no legal capacity to sue insofar as the island is concerned because an action for reconveyance can only be brought by the owner and not a mere

homestead applicant and that petitioner is guilty of estoppel by laches for his failure to assert his right over the land for an unreasonable and unexplained period of time. "In the instant case, petitioner seeks to nullify the homestead patents and original certificates of title issued in favor of the respondents covering certain portions of the Sombrero Island as well as the reconveyance of the whole island in his favor. The petitioner claims that he has the exclusive right to file an application for homestead patent over the whole island since it was he who requested for its conversion from forest land to agricultural land."6 Respondents filed their Answer with Special and/or Affirmative Defenses and Counterclaim in due time. On June 30, 1999, they also filed a Motion to Dismiss on the ground of the alleged defiance by petitioner of the trial courts Order to amend his Complaint so he could thus effect a substitution by the legal heirs of the deceased, Respondent Gapilango. The Motion to Dismiss was granted by the RTC in its Order dated July 29, 1999. Petitioners Motion for Reconsideration of the July 29, 1999 Order was denied by the trial court in its Resolution dated December 17, 1999, for being a third and prohibited motion. In his Petition for Certiorari before the CA, petitioner charged the trial court with grave abuse of discretion on the ground that the denied Motion was his first and only Motion for Reconsideration of the aforesaid Order. Ruling of the Court of Appeals Instead of limiting itself to the allegation of grave abuse of discretion, the CA ruled on the merits. It held that while petitioner had caused the reclassification of Sombrero Island from forest to agricultural land, he never applied for a homestead patent under the Public Land Act. Hence, he never acquired title to that land. The CA added that the annulment and cancellation of a homestead patent and the reversion of the property to the State were matters between the latter and the homestead grantee. Unless and until the government takes steps to annul the grant, the homesteaders right thereto stands. Finally, granting arguendo that petitioner had the exclusive right to apply for a patent to the land in question, he was already barred by laches for having slept on his right for almost 23 years from the time Respondent Palancas title had been issued. In the Assailed Resolution, the CA acknowledged that it had erred when it ruled on the merits of the case. It agreed with petitioner that the trial court had acted without jurisdiction in perfunctorily dismissing his September 10, 1999 Motion for Reconsideration, on the erroneous ground that it was a third and prohibited motion when it was actually only his first motion. Nonetheless, the Complaint was dismissed motu proprio by the challenged Resolution of the CA Special Division of five members with two justices dissenting pursuant to its "residual prerogative" under Section 1 of Rule 9 of the Rules of Court. From the allegations of the Complaint, the appellate court opined that petitioner clearly had no standing to seek reconveyance of the disputed land, because he neither held title to it nor even applied for a homestead patent. It reiterated that only the State could sue for cancellation of the title issued upon a homestead patent, and for reversion of the land to the public domain. Finally, it ruled that prescription had already barred the action for reconveyance. First, petitioners action was brought 24 years after the issuance of Palancas homestead patent. Under the Public Land Act, such action should have been taken within ten years from the issuance of the homestead certificate of title. Second, it appears from the submission (Annex "F" of the Complaint) of petitioner himself that Respondents Fresnillo and Palanca had been occupying six hectares of the

island since 1965, or 33 years before he took legal steps to assert his right to the property. His action was filed beyond the 30-year prescriptive period under Articles 1141 and 1137 of the Civil Code. Hence, this Petition.7 Issues In his Memorandum, petitioner raises the following issues: "1. Is the Court of Appeals correct in resolving the Petition for Certiorari based on an issue not raised (the merits of the case) in the Petition? "2. Is the Court of Appeals correct in invoking its alleged residual prerogative under Section 1, Rule 9 of the 1997 Rules of Civil Procedure in resolving the Petition on an issue not raised in the Petition?"8 The Courts Ruling The Petition has no merit. First Issue: Propriety of Ruling on the Merits This is not the first time that petitioner has taken issue with the propriety of the CAs ruling on the merits. He raised it with the appellate court when he moved for reconsideration of its December 8, 2000 Decision. The CA even corrected itself in its November 20, 2001 Resolution, as follows: "Upon another review of the case, the Court concedes that it may indeed have lost its way and been waylaid by the variety, complexity and seeming importance of the interests and issues involved in the case below, the apparent reluctance of the judges, five in all, to hear the case, and the volume of the conflicting, often confusing, submissions bearing on incidental matters. We stand corrected."9 That explanation should have been enough to settle the issue. The CAs Resolution on this point has rendered petitioners issue moot. Hence, there is no need to discuss it further. Suffice it to say that the appellate court indeed acted ultra jurisdictio in ruling on the merits of the case when the only issue that could have been, and was in fact, raised was the alleged grave abuse of discretion committed by the trial court in denying petitioners Motion for Reconsideration. Settled is the doctrine that the sole office of a writ of certiorari is the correction of errors of jurisdiction. Such writ does not include a review of the evidence,10 more so when no determination of the merits has yet been made by the trial court, as in this case. Second Issue: Dismissal for Prescription and Lack of Jurisdiction Petitioner next submits that the CA erroneously invoked its "residual prerogatives" under Section 1 of Rule 9 of the Rules of Court when it motu proprio dismissed the Petition for lack of jurisdiction and prescription. According to him, residual prerogative refers to the power that the trial court, in the exercise of its original jurisdiction, may still validly exercise even after perfection of an appeal. It follows that such powers are not possessed by an appellate court. Petitioner has confused what the CA adverted to as its "residual prerogatives" under Section 1 of Rule 9 of the Rules of Court with the "residual jurisdiction" of trial courts over cases appealed to the CA. Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not pleaded either in a

motion to dismiss or in the answer are deemed waived, except when (1) lack of jurisdiction over the subject matter, (2) litis pendentia, (3) res judicata and (4) prescription are evident from the pleadings or the evidence on record. In the four excepted instances, the court shall motu proprio dismiss the claim or action. In Gumabon v. Larin11 we explained thus: "x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the court clearly had no jurisdiction over the subject matter and when the plaintiff did not appear during trial, failed to prosecute his action for an unreasonable length of time or neglected to comply with the rules or with any order of the court. Outside of these instances, any motu proprio dismissal would amount to a violation of the right of the plaintiff to be heard. Except for qualifying and expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the amendatory 1997 Rules of Civil Procedure brought about no radical change. Under the new rules, a court may motu proprio dismiss a claim when it appears from the pleadings or evidence on record that it has no jurisdiction over the subject matter; when there is another cause of action pending between the same parties for the same cause, or where the action is barred by a prior judgment or by statute of limitations. x x x."12(Italics supplied) On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule 41 of the Rules of Court, as follows: "SEC. 9. Perfection of appeal; effect thereof. A partys appeal by notice of appeal is deemed perfected as to him upon the filing of the notice of appeal in due time. "A partys appeal by record on appeal is deemed perfected as to him with respect to the subject matter thereof upon the approval of the record on appeal filed in due time. "In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection of the appeals filed in due time and the expiration of the time to appeal of the other parties. "In appeals by record on appeal, the court loses jurisdiction only over the subject matter thereof upon the approval of the records on appeal filed in due time and the expiration of the time to appeal of the other parties. "In either case, prior to the transmittal of the original record or the record on appeal, the court may issue orders for the protection and preservation of the rights of the parties which do not involve any matter litigated by the appeal, approve compromises, permit appeals of indigent litigants, order execution pending appeal in accordance with Section 2 of Rule 39, and allow withdrawal of the appeal." (Italics supplied) The "residual jurisdiction" of trial courts is available at a stage in which the court is normally deemed to have lost jurisdiction over the case or the subject matter involved in the appeal. This stage is reached upon the perfection of the appeals by the parties or upon the approval of the records on appeal, but prior to the transmittal of the original records or the records on appeal.13 In either instance, the trial court still retains its so-called residual jurisdiction to issue protective orders, approve compromises, permit appeals of indigent litigants, order execution pending appeal, and allow the withdrawal of the appeal. The CAs motu proprio dismissal of petitioners Complaint could not have been based, therefore, on residual jurisdiction under Rule 41. Undeniably, such order of dismissal was not one for the protection and preservation of the rights of the parties, pending the disposition of the case on appeal. What the CA referred to as residual prerogatives were the general residual powers of the courts to dismiss an action motu proprio upon the grounds mentioned in Section 1 of Rule 9 of the Rules of Court and under authority of Section 2 of Rule 114 of the same rules. To be sure, the CA had the excepted instances in mind when it dismissed the Complaint motu

proprio "on more fundamental grounds directly bearing on the lower courts lack of jurisdiction"15 and for prescription of the action. Indeed, when a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action.16 Jurisdiction over the subject matter is conferred by law and is determined by the allegations in the complaint and the character of the relief sought.17 In his Complaint for "Nullification of Applications for Homestead and Original Certificate of Title No. G-7089 and for Reconveyance of Title,"18 petitioner averred: "2. That on November 10, 1965, without the knowledge of [petitioner, Respondent] Manuel Palanca Jr., [petitioners] cousin, in connivance with his co -[respondent], Lorenzo Agustin, x x x fraudulently and in bad faith: 2.1. x x x made the request for authority to survey as a pre-requisite to the filing of an application for homestead patent in his name and that of his Co-[Respondent] Agustin, [despite being] fully aware that [Petitioner] KATON had previously applied or requested for re-classification and certification of the same land from forest land to agricultural land which request was favorably acted upon and approved as mentioned earlier; a clear case of intrinsic fraud and misrepresentation; xxx xxx xxx

2.3. In stating in his application for homestead patent that he was applying for the VACANT PORTION of Sombrero Island where there was none, the same constituted another clear case of fraud and misrepresentation; "3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089 in the name of [Respondent] Manuel Palanca Jr. and the filing of Homestead Patent Applications in the names of [respondents], Lorenzo Agustin, Jesus Gapilango and Juan Fresnillo[,] having been done fraudulently and in bad faith, are ipso facto null and void and of no effect whatsoever."19 xxx xxx xxx

"x x x. By a wrongful act or a willful omission and intending the effects with natural necessity arise knowing from such act or omission, [Respondent Palanca] on account of his blood relation, first degree cousins, trust, interdependence and intimacy is guilty of intrinsic fraud [sic]. x x x."20 Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the homestead patent applications of Respondents Agustin, Fresnillo and Gapilango as well as Homestead Patent No. 145927 and OCT No. G-7089 in the name of Respondent Palanca; and (2) ordering the director of the Land Management Bureau to reconvey the Sombrero Island to petitioner.21 The question is, did the Complaint sufficiently allege an action for declaration of nullity of the free patent and certificate of title or, alternatively, for reconveyance? Or did it plead merely for reversion? The Complaint did not sufficiently make a case for any of such actions, over which the trial court could have exercised jurisdiction. In an action for nullification of title or declaration of its nullity, the complaint must contain the following allegations: 1) that the contested land was privately owned by the plaintiff prior to the issuance of the assailed certificate of title to the defendant; and 2) that the defendant perpetuated a fraud or committed a mistake in obtaining a document of title over the parcel of land claimed by the plaintiff.22 In these cases, the nullity arises not from fraud or deceit, but from the fact that the director of the Land Management Bureau had no jurisdiction to bestow title; hence, the issued patent or certificate of title was void ab initio.23

In an alternative action for reconveyance, the certificate of title is also respected as incontrovertible, but the transfer of the property or title thereto is sought to be nullified on the ground that it was wrongfully or erroneously registered in the defendants name.24 As with an annulment of title, a complaint must allege two facts that, if admitted, would entitle the plaintiff to recover title to the disputed land: (1) that the plaintiff was the owner of the land, and (2) that the defendant illegally dispossessed the plaintiff of the property.25 Therefore, the defendant who acquired the property through mistake or fraud is bound to hold and reconvey to the plaintiff the property or the title thereto.26 In the present case, nowhere in the Complaint did petitioner allege that he had previously held title to the land in question. On the contrary, he acknowledged that the disputed island was public land,27 that it had never been privately titled in his name, and that he had not applied for a homestead under the provisions of the Public Land Act.28 This Court has held that a complaint by a private party who alleges that a homestead patent was obtained by fraudulent means, and who consequently prays for its annulment, does not state a cause of action; hence, such complaint must be dismissed.29 Neither can petitioners case be one for reversion. Section 101 of the Public Land Act categorically declares that only the solicitor general or the officer in his stead may institute such an action.30 A private person may not bring an action for reversion or any other action that would have the effect of canceling a free patent and its derivative title, with the result that the land thereby covered would again form part of the public domain.31 Thus, when the plaintiff admits in the complaint that the disputed land will revert to the public domain even if the title is canceled or amended, the action is for reversion; and the proper party who may bring action is the government, to which the property will revert.32A mere homestead applicant, not being the real party in interest, has no cause of action in a suit for reconveyance.33 As it is, vested rights over the land applied for under a homestead may be validly claimed only by the applicant, after approval by the director of the Land Management Bureau of the forme rs final proof of homestead patent.34 Consequently, the dismissal of the Complaint is proper not only because of lack of jurisdiction, but also because of the utter absence of a cause of action,35 a defense raised by respondents in their Answer.36 Section 2 of Rule 3 of the Rules of Court37ordains that every action must be prosecuted or defended in the name of the real party in interest, who stands to be benefited or injured by the judgment in the suit. Indeed, one who has no right or interest to protect has no cause of action by which to invoke, as a party-plaintiff, the jurisdiction of the court.38 Finally, assuming that petitioner is the proper party to bring the action for annulment of title or its reconveyance, the case should still be dismissed for being time-barred.39 It is not disputed that a homestead patent and an Original Certificate of Title was issued to Palanca on February 21, 1977,40 while the Complaint was filed only on October 6, 1998. Clearly, the suit was brought way past ten years from the date of the issuance of the Certificate, the prescriptive period for reconveyance of fraudulently registered real property.41 It must likewise be stressed that Palancas title -- which attained the status of indefeasibility one year from the issuance of the patent and the Certificate of Title in February 1977 -- is no longer open to review on the ground of actual fraud. Ybanez v. Intermediate Appellate Court42 ruled that a certificate of title, issued under an administrative proceeding pursuant to a homestead patent, is as indefeasible as one issued under a judicial registration proceeding one year from its issuance; provided, however, that the land covered by it is disposable public land, as in this case. In Aldovino v. Alunan,43 the Court has held that when the plaintiffs own complaint shows clearly that the action has prescribed, such action may be dismissed even if the defense of prescription has

not been invoked by the defendant. In Gicano v. Gegato,44 we also explained thus: "x x x [T]rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence."45 (Italics supplied) Clearly then, the CA did not err in dismissing the present case. After all, if and when they are able to do so, courts must endeavor to settle entire controversies before them to prevent future litigations.46 WHEREFORE, the Petition is hereby DENIED, and the assailed Resolution AFFIRMED. The dismissal of the Complaint in Civil Case No. 3231 is SUSTAINED on the grounds of lack of jurisdiction, failure to state a cause of action and prescription. Costs against petitioner. SO ORDERED. Sandoval-Gutierrez, Corona, and Carpio Morales*, JJ., concur.