1987 Constitution: Art 11, Sec 15 - No Prescription only for Civil Cases

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The Supreme Court recently affirmed the Office of the Ombudsman’s dismissal of graft and corruption charges under RA 3019, the Anti-Graft and Corrupt Practices Act, against, among others, Senate President Juan Ponce Enrile and Eduardo M. Cojuangco.

In an 11-page decision penned by Justice Roberto Abad, the Supreme Court En Banc, by a vote of six against three, junked the government’s petition. It ruled that Enrile, Cojuangco, and 16 others (Jose R. Eleazar Jr., Jose C. Concepcion, Rolando P. Dela Cuesta, Emmanuel M. Almeda, Hermenegildo C. Zayco, Narciso M. Pineda, Iñaki R. Mendezona, Danilo S. Ursua, Teodoro D. Regala, Victor P. Lazatin, Eleazar B. Reyes, Eduardo U. Escueta, Leo J. Palma, Douglas Lu Ym, Sigfredo Veloso, and Jaime Gandiaga) could no longer be prosecuted on the ground of prescription.

Justices Mariano C. Del Castillo, Lucas P. Bersamin, Martin S. Villarama Jr., Jose Portugal Perez, and Bienvenido L. Reyes concurred with the decision, while Justices Arturo D. Brion, Maria Lourdes P. A. Sereno, and Estela M. Perlas-Bernabe dissented. Acting Chief Justice Antonio T. Carpio, Justices Presbitero J. Velasco, Jr., Teresita J. Leonardo- De Castro, and Diosdado M. Peralta took no part in the proceedings, while Justice Jose Catral Mendoza was on official leave.

The Court held that although Section 15, Article XI of the 1987 Constitution provides that the right of the State to recover properties unlawfully acquired by public officials or employees is not barred by prescription, laches, or estoppel, the provision only applies to civil actions for recovery of ill-gotten wealth, not criminal cases such as the complaint against the respondents as settled in Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto.

The Court pointed out that because RA 3019 is a special law, the 10-year prescriptive period should be computed in accordance with Section 2 of Act 3326, which provides, “prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery therof and the institution of the judicial proceedings for its investigation and punishment.” The Court further explained that this provision provides “two rules for determining when the prescriptive period shall begin to run: first, from the day of the commission of the violation of the law, if such commission is known; and second, from its discovery, if not known, and the institution of judicial proceedings for its investigation and punishment.” 

On April 25, 1977, Regala, Lazatin Reyes, Escueta and Palma incorporated United Coconut Oil Mills, Inc. (UNICOM) with an authorized capital stock of P100 million.

On August 29, 1979, the Board of Directors of United Coconut Planters Bank (UCPB) composed of Cojuangco, Enrile, the late Maria Clara L. Lobregat, Eleazar, Concepcion, Dela Cuesta, Almeda, Zayco,   Pineda,  Mendezona,  and  Ursua approved a resolution authorizing UCPB, theAdministrator of the Coconut Industry Investment Fund (CII Fund), “to invest not more than P500 million from the fund in the equity of UNICOM for the benefit of the coconut farmers.”

On September 4, 1979, UNICOM increased its authorized capital stock to 10 million shares without par value to P495 million. This was then approved on September 18, 1979 by the new set of UNICOM directors which included Cojuangco, Enrile Lobregat, Eleazar, Concepcion, Almeda, Mendezona, Regala, Lu Ym, Veloso, and Gandiaga.

About 10 years later or on March 1, 1990, the Office of the Solicitor General (OSG) filed a complaint for violation of Section 3(e) of RA 3019 against the respondents before the Presidential Commission on Good Government (PCGG), alleging that UCPB’s investment in UNICOM was “manifestly and grossly disadvantageous to the government since UNICOM had a capitalization of P5 million and it had no track record of operation.” The PCGG then filed the case before the Office of the Ombudsman in line with the ruling in Cojuangco, Jr. v. Presidential Commission on Good Government, which had disqualified the PCGG from conducting preliminary investigation in the case.

On March 15, 1999, the Office of the Special Prosecutor ruled that while “it found sufficient basis to indict respondents for violation of Section 3(e) of RA 3019, the action has already prescribed.” Subsequently, on May 14, 1999, the Office of the Ombudsman approved the recommendation. After the OSG’s motion for reconsideration was denied by the Ombudsman, the OSG filed the present petition.

The High Court explained that in the prosecution of behest loans, the prescriptive period must be reckoned “from the discovery of such loans.” The reason for this is that the government, as the aggrieved party could not have known that the loans existed when they were made. “They could only have been discovered after the 1986 EDSA Revolution when the people ousted President Marcos from office.” The Court, however, ruled that those circumstances were not present in this case.

“For one thing, what is questioned here is not the grant of behest loans that, by their nature, could be concealed from the public eye by the simple expedient of suppressing their documentations. What is rather involved here is UCPB’s investment in UNICOM, which corporation is allegedly owned by respondent Cojuangco, supposedly a Marcos crony. That investment does not, however, appear to have been withheld from the curious of from those who were minded to know like banks or competing businesses,” the Court held.

The Court noted that there was also no allegation that the Securities of Exchange Commission (SEC) denied the public access to UCPB’s investment in UNICOM during martial law.

It thus concluded that the last day for filing the action “was, at the latest, on February 8, 1990, about four years after martial law ended.” February 8, 1990 is 10 years from the date of registration with the SEC by UNICOM of the paid-up subscription of UCPB.

“Petitioner had known of the investment it now questions for a sufficiently long time yet it let those four years of the remaining period of prescription run its course before bringing the proper action,” the Court held. “Prescription of actions is a valued rule in all civilized states from the beginning of organized society. It is a rule of fairness,” it added.  (G.R. 139930, Republic of the Philippines v. Cojuanco, Enrile et al, June 26, 2012)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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SC: Calling Out Powers Exclusive to the President of the Philippines

The Court En Banc has unanimously declared null and void Proclamation No. 1 of Sulu Governor Abdusakur M. Tan declaring a state of emergency in the Province of Sulu and called on the Philippine National Police (PNP), Armed Forces of the Philipines (AFP) and Civilian Emergency Force (CEF) for assistance in providing peace and order in the vicinity.

In a 25-page decision penned by Justice Maria Lourdes P.A. Sereno, the Court granted the petition for certiorari and prohibition of certain Sulu residents assailing the said Proclamation and its implementing guidelines.

The Court stressed that the calling out powers contemplated under the Constitution is exclusive to the President of the Philippines as Commander-in-Chief and that a provincial governor is not endowed with the power to call upon the Armed Forces at its own bidding.

It ruled that only the President is authorized to exercise emergency powers as provided under Section 23, Article VI and the calling out powers under Section 7, Article VII of the 1987 Constitution. While the President exercises full supervision and control over the police, a local chief executive, such as a provincial governor, only exercises operational supervision over the police, and may exercise control only in day-to-day operations. As discussed in the deliberation of the Constitutional Commission, only the President has “full discretion to call the military when in his judgment it is necessary to do so in order to prevent or suppress lawless violence, invasion or rebellion,” the Court stressed.

The Court also held that Governor Tan’s reliance on Section 465 of the Local Government Code was unfounded because a kidnapping situation cannot be considered a calamity or disaster as contemplated by the Code, which allows the Chief Executive to “carry out emergency measures as may be necessary during and in the aftermath of a man-made and natural disasters and calamities”.

The Court likewise declared the creation of the CEF invalid as the Section 21 of Article XI of the Constitution does not authorize the provincial governor to organize private armed groups to help preserve the peace and order of a region, which is the responsibility of local police agencies as provided by law. The defense and security of the regions, on the other hand, shall be the responsibility of the National Government.

Governor Tan declared a state of emergency after the Abu Sayyaf Group (ASG) kidnapped three members of the International Committee of the Red Cross (ICRC) in Sulu and threatened to behead one of the hostages if the government continued to pursue their search and surround the ASG. An evacuation of the military camps and bases in the area was likewise demanded. In lieu of the state of emergency, Governor Tan authorized the set up of checkpoints and chokepoints, conduct general search and seizures including arrests and other actions necessary to ensure public safety pursuant to Section 465 of the Local Government Code. (GR No. 187298, Kulayan v. Tan, July 3, 2012).

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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SC: Congress Entitled to Only One JBC Seat

Only one member of Congress can sit as representative in deliberations of the Judicial and Bar Council (JBC).

With a vote of 7-2 with five abstentions, the Supreme Court has granted the petition of former Solicitor General Francisco I. Chavez to declare unconstitutional the current numerical composition of the JBC.

In a 25-page decision penned by Justice Jose Catral Mendoza, the Court En Banc also directed the JBC to reconstitute itself so that only one member of Congress (either from the Upper House and Lower House, i.e., Senate or House of Representatives) will sit as a representative in the JBC proceedings in accordance with Section 8(1), Article VIII of the 1987 Constitution. Under the present JBC set-up, the Congress is represented by Senator Francis Joseph G. Escudero and Iloilo 5th District Rep. Niel C. Tupaz, Jr. with one vote each.

Concurring with Justice Mendoza were Justices Diosdado M. Peralta, Lucas P. Bersamin, Martin S. Villarama, Jr., Jose Portugal Perez, Bienvenido L. Reyes, and Estela M. Perlas-Bernabe.

Justice Roberto A. Abad wrote a dissenting opinion which was joined by Justice Mariano C. Del Castillo.
Acting Chief Justice Antonio T. Carpio and Justices Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, and Maria Lourdes P.A. Sereno took no part as they are among those considered for nomination by the JBC to the Chief Justice post. Justice Arturo D. Brion, also a nominee, did not take part as he was on leave.

The Court held that the use of the singular letter “a” preceding “representative of Congress” in Section 8(1), Article VIII of the 1987 Constitution is unequivocal and leaves no room for any other construction. The word “Congress” is used in its generic sense. Considering the language of the subject constitutional provision is clear and unambiguous, there is no need to resort to extrinsic aids such as the records of the Constitutional Commission.

The Court noted that the Framers of the Constitution intended to create a JBC as an innovative solution in response to the public clamor in favor of eliminating politics in the appointment of members of the Judiciary. To ensure judicial independence, they adopted a holistic approach and hoped that, in creating a JBC, the private sector and the three branches of government would have an active role and equal voice in the selection of the members of the Judiciary. “To allow the Legislature to have more quantitive influence in the JBC by having more than one voice speak, whether with one full vote or one-half a vote each, would, as one former congressman and member of the JBC put it, ‘negate the principle of equality among the three branches of government which is enshrined in the Constitution,’” declared the Court.

The Court also held that the JBC’s seven-member composition “serves a practical purpose, that is, to provide a solution should there be a stalemate in voting.”

It further held that under the doctrine of operative facts where actions prior to the declaration of unconstitutionality are legally recognized as a matter of equity and fair play, all JBC’s prior official acts are valid.

The Court ruled that it is not in a position to determine as to who should remain as sole representative of Congress in the JBC and that such is best left to the determination of Congress.

“Finally, while the Court finds wisdom in respondents’ contention that both the Senate and the House of Representatives should be equally represented in the JBC, the Court is not in a position to stamp its imprimatur on such a construction at the risk of expanding the meaning of the Constitution as currently worded. Needless to state, the remedy lies in the amendment of this constitutional provision. The courts merely give effect to the lawgiver’s intent. The solemn power and duty of the Court to interpret and apply the law does not include the power to correct, by reading into the law what is not written therein,” the Court held.

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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President's Power to Appoint a CJ; JBC to function without an ex-officio member

With regard to the JBC proceedings as to the Chief Justice vacancy, the Chair is SC Justice Peralta as the most senior SC Justice who is not a candidate for Chief Justice per the Court’s ruling in GR No. 202143, Dulay v. JBC, dated July 3, 2012.

"Petitioner claims that the President of the Republic of the Philippines cannot legitimately, validly, and constitutionally appoint the Chief Justice of the Supreme Court, because the 1987 Constitution only empowers him to appoint members or Justices but not the Chief Justice.^[2] She adds that the Chief Justice should be replaced and designated exclusively from among their peers.^[3] Petitioner also contends that the JBC cannot be validly, legally and constitutionally headed by a retired Associate Justice of the Supreme Court, because the Constitution specifically provides that it be headed by the incumbent Chief Justice and no other.^[4]"

Simply stated, petitioner seeks the resolution of two substantive issues: (1) whether or not the President of the Philippines has the constitutional power to appoint the Chief Justice of the Supreme Court; and (2) whether or not the JBC can validly be headed by a person other than the incumbent Chief Justice. 

We answer in the affirmative to both questions.

Section 9. The Members of the Supreme Court  and judges of lower courts shall be appointed by the President from a list of at least three nominees prepared by the Judicial and Bar Council for every vacancy. Such appointments need no confirmation. x x x (Emphasis supplied)

 ... In interpreting the above-stated constitutional provision, petitioner considers only the Associate Justices as the "members of the Supreme Court" thereby excluding the Chief Justice from the President's appointing power. Said interpretation is baseless. 

We, likewise, do not agree with petitioner that the JBC can only be headed by the incumbent Chief Justice and no other. Petitioner, in effect, argues that the JBC cannot perform its task without an incumbent Chief Justice. To follow this logic would lead to an eventuality where a vacancy in the Judiciary will not be filled if a vacancy occurs in the JBC. We can likewise infer from this argument that if the Office of the Chief Justice is vacated, the same will not be filled because there will be no "incumbent Chief Justice" to act as Chairman of the JBC.

We definitely cannot sustain these arguments. The principal function of the JBC is to recommend appointees to the Judiciary.^[17] For every vacancy, the JBC submits to the President a list of at least three nominees and the President may not appoint anybody who is not in the list.^[18] Any vacancy in the Supreme Court is required by the Constitution to be filled within 90 days from the occurrence thereof.^[19]  This 90-day period is mandatory. It cannot, therefore, be compromised only because the constitutionally-named Chairman could not sit in the JBC. Although it would be preferable if the membership of the JBC is complete, the JBC can still operate to perform its mandated task of submitting the list of nominees to the President even if the constitutionally-named ex-officio Chairman does not sit in the JBC. This intention is evident from the exchanges among the Commissioners during the deliberations of the Constitutional Commission of 1986 ... 

The regular JBC members are retired SC Justice Regino C. Hermosisima (retired SC Justice), Atty. Jose V. Mejia (academe), Atty. Maria Milagros Nolasco Fernan-Cayosa (Integrated Bar of the Philippines), and retired CA Justice Aurora S. Lagman (private sector).

The Chief Justice is the ex officio chair of JBC, while the Supreme Court En Banc Clerk of Court Atty. Enriqueta E. Vidal is ex officio secretary.

Secretary De Lima, also an ex officio member but a candidate to the Chief Justice post, is replaced in the JBC proceedings to select the CJ nominees by Undersecretary Michael Frederick Musngi. Only Rep. Niel Tupas, Jr.  is seating in the panel conducting the interview for the next Chief Justice following the High Court’s ruling in GR No. 202242, Chavez v. JBC, dated July 17, 2012, which held that only one member of Congress can sit as representative in the JBC deliberations.

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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RA 9335: SC Upholds Attrition Act of 2005 Anew

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The Supreme Court, voting unanimously, upheld the constitutionality of RA 9335, the Attrition Act of 2005, enacted to optimize the revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

RA 9335 also intends to encourage BIR and BOC officials and employees to exceed their revenue targets by providing a system of rewards and sanctions through the creation of a Rewards and Incentives Fund and a Revenue Performance Evaluation Board and covers all BIR and BOC officials with at least six months of service, regardless of employment status.

In a 24-page decision penned by Justice Martin S. Villarama, Jr., the Court dismissed for lack of merit the petition for certiorari and prohibition of the Bureau of Customs Employees Association (BOCEA).

“It must be noted that this is not the first time the constitutionality of R.A. No. 9335 and its IRR are being challenged. The Court already settled the majority of the same issued raised by BOCEA in our decision in Abakada, which attained finality on September 17, 2008. As such, our ruling therein is worthy of reiteration in this case,” the Court held.

The Court ruled that RA 9335 “read and appreciated in its entirety, is complete in all its essential terms and conditions, and that it contains sufficient standards as to negate BOCEA’s supposition of undue delegation of legislative power to the Board.”

On the argument that RA 9335 violates the equal protection clause, the Court reiterated its jurisprudence in Abakada where it held: “With respect to RA 9335, its expressed public policy is the optimization of the revenue-generation capability and collection of the BIR and the BOC. Since the subject of the law is the revenue-generation capability and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said agencies….Both the BIR and the BOC are bureaus under the [Department of Finance] DOF. They principally perform the special function of being the instrumentalities through which the State exercises one of its great inherent functions – taxation. Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection.”

Likewise, the Court reiterated that RA 9335 does not violate the security of tenure of officials and employees of the BIR and the BOC. The Court ruled that a BIR or BOC official or employee in this case cannot be arbitrarily removed from the service without according him his constitutional right to due process as no less than RA 9355 in accordance with the 1986 Constitution guarantees this.    
  
Furthermore, the Court ruled that RA 9335 is not a bill of attainder. A bill of attainder, the Court explained, is a legislative act which inflicts punishment on individuals or members of a particular group without a judicial trial. The Court held that RA 9335 does not possess the elements of a bill of attainder nor seek to inflict punishment without a judicial trial but merely lays down the grounds for the termination of a BIR or BOC official or employee and provides for the consequences thereof. The democratic processes are followed and the constitutional rights of the concerned employee are amply protected.

Lastly, the Court held that BOCEA’s petition was “replete with allegations of defects and anomalies in allocation, distribution and receipt of rewards. While BOCEA intimates that it intends to curb graft and corruption in the BOC in particular and in the government in general which is nothing but noble, these intentions do not actually pertain to the constitutionality of R.A. No. 9335 and its IRR, but rather in the faithful implementation thereof. R.A. No. 9335 itself does not tolerate these pernicious acts of graft and corruption.” (GR No. 181704, Bureau of Customs Employees Association v. Sec. Teves, December 6, 2011)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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Just Compensation: Excluded the Value of Excavated Soil from Payment

SC Excludes Value of Excavated Soil from Just Compensation Award

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The Supreme Court has excluded the value of excavated soil from the payment for just compensation to the owners of expropriated properties in Cotabato used by the National Irrigation Authority (NIA) for its Malitubog-Marigadao Irrigation Project in 1994.

In a 17-page decision penned by Justice Maria Lourdes P.A. Sereno, the Court’s Second Division, partially granting the petition, affirmed the Court of Appeals’ August 12, 2008 decision awarding just compensation to the defendants as owners of the expropriated properties and deleting the inclusion of the value of the excavated soil. However, the Court remanded the case to the Kabacan, Cotabato Regional Trial Court, Branch 22 for the reception of evidence to establish the present owner of Lot No. 3080, one of the three expropriated parcels of land.

The Court upheld the CA ruling which had deleted the inclusion of the value of the excavated soil in the payment for just compensation. It held that there was no legal basis to separate the value of the excavated soil from that of the expropriated properties as the soil has no value separate from that of the expropriated land. It ruled that “Just compensation ordinarily refers to the value of the land to compensate for what the owner actually loses. Such value could only be that which prevailed at the time of the taking.”


The Court also affirmed the appellate court’s ruling that the commissioners properly determined the just compensation to be awarded to the landowners whose properties were expropriated by petitioner.

It found that court records established that the RTC dutifully followed the procedure under Rule 67 of the 1997 Rules of Civil Procedure when it formed a committee that was tasked to determine the just compensation for the expropriated properties. The committee members based their recommendations on reliable data and, as aptly noted by the appellate court, considered various factors that affected the value of the land and the improvements.

However, the Court held that the CA erred in affirming the ruling of the trial court, which had awarded the payment of just compensation – intended for Lot No. 3080 registered in the name of the Rural Bank of Kabacan – to the defendants-intervenors on the basis of the non-participation of the rural bank in the proceedings and the latter’s subsequent Manifestation that it was no longer the owner of that lot. The Court said that it has “scrupulously examined the records of the case and found no proof of conveyance or evidence of transfer of ownership of Lot No. 3080 from its registered owner, the Rural Bank of Kabacan, to defendants-intervenors [Margarita Tabaoda, et al].” Thus, the Court remanded case to the trial court for the reception of evidence to establish the present owner of Lot No. 3080 who will be entitled to receive the payment of just compensation.

In 1994, NIA, a government-owned-and-controlled corporation primarily responsible for irrigation development and management in the country, NIA filed with the RTC a complaint for the expropriation of a portion of three parcels of land (Lot No. 3080, Lot No. 455, and Lot No. 3039) covering a total of 14,497.91 square meters, which it needed for the construction the Malitubog-Marigadao Irrigation Project.

The RTC promulgated its judgment on August 31, 1999 which fixed the just compensation for the value of the land and improvements thereon that were expropriated by petitioner, but included the value of the excavated soil. On appeal, the CA affirmed with modification the RTC’s ruling prompting the government, through NIA, to elevate the case to the High Court. (GR No. 185124, Republic v. Rural Bank of Kabacan, Inc., January 25, 2012)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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Northrail Project is not an Executive Agreement

SC Rules China-Based Northrail Contractor Not Immune from Suit; Allows RTC to Hear Validity of Northrail Contract and Loan Agreements`

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The Supreme Court has unanimously held that the China National Machinery & Equipment Corp. Group (CNMEG)’s Contract Agreement with North Luzon Railways Corporation (Northrail) for the construction of a railway line from Manila to San Fernando, La Union (Northrail Project) is not an executive agreement and that CNMEG “is not entitled to immunity from suit.” Thus it remanded Civil Case No. 06-203 to the Makati Regional Trial Court (RTC), Branch 145 for further proceedings on the validity of the said Contract Agreement, as well as the counterpart financial agreement (Loan Agreement) between the Philippine government and the Export Import Bank of China (EXIM Bank).

In a 23-page decision penned by Justice Maria Lourdes P. A. Sereno, the Court En Banc denied CNMEG’s petition assailing the dismissal by the Court of Appeals of its (CNMEG’s) petition for certiorari assailing the RTC’s denial of its (CNMEG’s) motion to dismiss Civil Case No. 06-203 for lack of jurisdiction.

The Court stressed that the Contract Agreement was not concluded between the government of the Philippines and China but between Northrail and CNMEG, which is neither a government nor a government  agency of China but a corporation duly organized and created under the laws of the People’s Republic of China.

“Since the Contract Agreement explicitly provides that Philippine Law shall be applicable, the parties have effectively conceded that their rights and obligations thereunder are not governed by international law…It is therefore clear from therefore clear from the foregoing reasons that the Contract Agreement does not partake of the nature of an executive agreement. It is merely an ordinary commercial contract that can be questioned before the local courts,” the Court held.

The Court further ruled that CNMEG engaged in a propriety activity hence was not covered by sovereign immunity. The Memorandum of Understanding (MOU) between CNMEG and Northrail shows that CNMEG sought the construction of the Luzon Railways as a proprietary or commercial venture in the ordinary course of its business. “Clearly, it was CNMEG that initiated the undertaking, and not the Chinese government,” ruled the Court.

The Court further held that based on the MOU, the Loan Agreement, and the letter of Chinese Ambassador to the Philippines Wang Chungui stating CNMEG and not the Chinese government initiated the Northrail Project, it was clear that the Northrail Project was a purely commercial transaction.

The Court held that even assuming arguendo that CNMEG performs governmental functions, such claim does not automatically vest it with immunity. Following the Court’s ruling in Deutshe Gesellschaft Für Technische Zusammernarbeit v. CA, in the absence of evidence to the contrary, CNMEG is to be presumed as a government-owned and-controlled corporation without an original charter. As a result, it has the capacity to sue and be sued under Section 36 of the Corporation Code.  In this connection, the Court noted CNMEG failed to present a certification from the Department of Foreign Affairs that it is entitled to sovereign or diplomatic immunity.

The Court also held that an agreement to submit any dispute to arbitration may be construed as an implicit waiver of immunity from suit. Under the contract agreement, CNMEG and Northrail, if any dispute arises, are bound to submit the matter to the HKIAC for arbitration.

In September 2002, CNMEG entered into a MOU with Northrail for the conduct of a feasibility study on a possible railway line from Manila to San Fernando, La Union or known as the Northrail Project.

In August 2003, the EXIM Bank and the Department of Finance (DOF) entered into a MOU, wherein China agreed to extend Preferential Buyer’s Credit to the Philippine government to finance the Northrail Project. The Chinese government designated EXIM Bank as the lender, while the Philippine government named the DOF as the borrower. Under the August 30 MOU, EXIM Bank agreed to extend an amount not exceeding US$400,000,000 in favor of the DOF, payable in 20 years, with a 5-year grace period, and at the rate of 3% per annum.

In October 2003, Ambassador Wang wrote the DOF of CNMEG’s designation as the Prime Contractor for the Northrail Project.

On December 30, 2003, Northrail and CNMEG executive a Contract of Agreement for the Construction of Section 1, Phase 1 of the North Luzon Railway System from Caloocan to Malolos on a turnkey basis. The contract price for the Northrail Project was pegged at US$421,050,000.

On February 26, 2004, the Philippine government and EXIM Bank entered into a counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055, where EXIM Bank agreed to extend Preferential Buyer’s Credit in the amount of US$400M in favor of RP to finance the construction of Phase I of the Northrail Project.

On February 13, 2006, respondent taxpayers filed in the Makati RTC a complaint for annulment of contract and injunction against CNMEG, the Office of the Executive Secretary, the DOF, the Department of Budget and Management (DBM), the National Economic Development Authority (NEDA), and Northrail before the RTC. The RTC set the case for hearing on the issuance of injunctive reliefs, prompting CNMEG to file an Urgent Motion for Reconsideration of this order. Before the RTC could rule on this, CNMEG filed a motion to dismiss the case arguing the RTC did not have jurisdiction over it.

On May 15, 2007, the RTC issued an omnibus order denying CNMEG’s motion to dismiss eventually prompting CNMEG to elevate case to the CA. (GR No. 185572, China National Machinery & Equipment Corp. Group v. Judge Santamaria, February 7, 2012)

Emphasis, title and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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COA Appointment: 7-Year Aggregate Rule

SC Holds Unconstitutional Appointment of Reynaldo A. Villar as COA Chair

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The Supreme Court recently declared unconstitutional the appointment of then Commission on Audit (COA) Commissioner Reynaldo A. Villar to the position of COA Chair to replace Guillermo N. Carague who ended his seven-year term with the Commission.

In a 30-page decision penned by Justice Presbitero J. Velasco, Jr., the Court En Banc held that Villar’s appointment violated sec. 1(2), Art. IX(D) of the Constitution which reads: “The Chairman and Commissioners [on Audit] shall be appointed by the President with the consent of the Commission on Appointments for a term of seven years without reappointment….Appointment to any vacancy shall be only for the unexpired portion of the term of the predecessor.”

“[T]hen President Macapagal-Arroyo could not have had, under any circumstance, validly appointed Villar as COA Chairman, for a full 7-year appointment, as the Constitution decrees, was not legally feasible in light of the 7-year aggregate rule. Villar had already served 4 years of his 7-year term as COA Commissioner. A shorter term, however, to comply with said rule would also be invalid as the corresponding appointment would effectively breach the clear purpose of the Constitution of giving to every appointed so appointed subsequent to the first set of commissioners, a fixed term of office of 7 years. To recapitulate, a COA Commissioner like respondent Villar who serves for a period less than seven years cannot be appointed as chairman when such position became vacant as a result of the expiration of the 7-year term of the predecessor (Carague). Such appointment to a full term is not valid and constitutional, as the appointee will be allowed to serve more than seven years under the constitutional ban,” ruled the Court.

The Court construed Sec. 1(2), Art. IX(D) of the Constitution as follows:

The appointment of members of any of the three constitutional commissions, after the expiration of the uneven terms of office of the first set of commissioners, shall always be for a fixed term of seven years; an appointment for a lesser period is void and unconstitutional; the appointing authority cannot validly shorten the full term of seven years in case of the expiration of the term as this will result in the distortion of the rotational system prescribed by the Constitution;
Appointments to vacancies resulting from certain causes (death, resignation, disability or impeachment) shall only be for the unexpired portion of the term of the predecessors, but such appointments cannot be less than the unexpired portion as this will disrupt the staggering of terms laid down under Sec. 1(2), Art. IX(D);

Members of the Commission who were appointment for a full term of seven years and who served the entire period, are barred from reappointment to any position in the Commission;
A commissioner who resigns after serving in the Commission for less than seven years is eligible for an appointment to the position of Chair for the unexpired portion of the term of the departing chair. Such appointment is not covered by the ban on reappointment, provided that the aggregate period of the length of service as commissioners and the unexpired period of the term of the predecessor will not exceed seven years and provided further that the vacancy in the position of Char resulted from death, resignation, disability or removal by impeachment; and that

Any member of the Commission cannot be appointed or designated in a temporary or acting capacity.

• On February 15, 2001, then President Gloria Macapagal-Arroyo appointed Carague as COA Chair for a term of seven years, pursuant to the 1987 Constitution. 
• On February 7, 2004, Arroyo appointed Villar as third COA member for a seven-year term starting February 2, 2004 until February 2, 2011. 
• Following Carague’s retirement in 2008, Villar was designated as acting COA Chair and on the same year was nominated and appointed COA Chair. 

Villar, whose appointment was confirmed by the Commission on Appointments on June 11, 2008, was to serve as COA Chair, as expressly indicated in the appointment papers, until the expiration of the original term of his office as COA Commissioner or on February 2, 2011. However, Villar raised the matter to the High Court, arguing that his term of office as COA Chair is up to Feb 2, 2015, or seven years reckoned from February 2, 2008 when he was appointed to that position.

While his petition in the Court was still pending, Villar wrote President Benigno S. Aquino III on February 22, 2011 signifying his intention to step down from office upon the appointment of his replacement. Subsequently, he vacated his post upon appointment of Ma. Gracia Pulido-Tan.

While the case has been deemed moot due to the intervening appointment of Tan and resignation of Villar, the Court considered the instant case as falling within one of the requirements for review of a moot and academic case since the case is “of transcendental importance, since it obviously has ‘far-reaching implications,’ and there is a need to promulgate rules that will guide the bench, bar, and the public in future analogous cases.”

Senior Justice Antonio T. Carpio and Justice Jose Catral Mendoza wrote separate concurring and dissenting opinions. (See http://sc.judiciary.gov.ph/jurisprudence/2012/april2012/192791_mendoza.htm)

Justice Carpio voted to grant the petition and to declare Villar’s appointment as Acting Chair and Chair of COA unconstitutional, adding that Villar’s appointment as COA Chair is a reappointment prohibited by the Constitution. He opined that in order for Villar to take the position of COA Chair, he had to cut short his seven-year term, which means Villar resigned as COA Commissioner. After such resignation, Villar could no longer be reappointed to the COA, either as Commissioner or Chair.

For his part, Justice Mendoza opined that the promotion of Villar was legal but he could serve up to February 15, 2011 only because his tenure should not exceed seven years. He said that “The [majority] position that a commissioner cannot be promoted in case of expiration of a term of chairman has no clear and concrete constitutional basis. There is nothing at all in the subject constitutional provision which expressly or implied restricts the promotion of a commissioner in situations where the tenure of his predecessor is cut short by death, disability, resignation or impeachment only.” (GR No. 192791, Funa v. COA Chair, April 24, 2012 - http://elibrary.judiciary.gov.ph/decisions.php?doctype=Decisions%20/%20Signed%20Resolutions&docid=13403523741899327079)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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