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REPUBLIC OF THE PHILIPPINES<br />
SUPREME COURT<br />
MANILA<br />
HERMINIO HARRY L. ROQUE, JR., JOEL<br />
R. BUTUYAN, ROGER R. RAYEL, GARY S.<br />
MALLARI, ROMEL R. BAGARES,<br />
CHRISTOPHER FRANCISCO C. BOLASTIG,<br />
DANILO M. CALDERON, MA. TERESA D.<br />
ZEPEDA, ANASTASIA D. ILUSTRE,<br />
NATIVIDAD S. PALLASIGUE, EMILY A.<br />
REALINO, LUCINIA C. DICHOS, SERGIO C.<br />
LEGASPI, JR., VICENTE C. ALBAN,<br />
CONCHITA G. GOZO, FELICIANO F.<br />
REYES, RICARDO D. LANOZO, JOSEFINA<br />
P. LANOZO, ADELAIDA P. PEN,<br />
Petitioners,<br />
Case No. ______________<br />
-- versus --<br />
HON. EXECUTIVE SECRETARY EDUARDO<br />
ERMITA, HONORABLE SECRETARY<br />
MARGARITO TEVES, DEPARTMENT OF<br />
FINANCE (DOF), HONORABLE SECRETARY<br />
ROMULO NERI, DEPARTMENT OF BUDGET<br />
AND MANAGEMENT (DBM), HONORABLE<br />
SECRETARY AUGUSTO SANTOS,<br />
NATIONAL ECONOMIC AND<br />
DEVELOPMENT AUTHORITY (NEDA),<br />
NORTH LUZON RAILWAYS CORPORATION,<br />
and CHINA NATIONAL MACHINERY AND<br />
EQUIPMENT CORPORATION,<br />
Respondents.<br />
x ---------------------------------------------------------x<br />
PETITION<br />
(For Certiorari and Prohibition with Prayer <strong>for</strong> <strong>the</strong> issuance <strong>of</strong> a Writ<br />
<strong>of</strong> Preliminary Injunction and/or Temporary Restraining Order)<br />
PETITIONERS, by counsel, most respectfully state that:<br />
1
NATURE OF THE PETITION<br />
1. This is a Petition <strong>for</strong> Certiorari and Prohibition seeking <strong>the</strong><br />
nullification and immediate enjoinment <strong>of</strong> <strong>the</strong> implementation <strong>of</strong>: 1) <strong>the</strong><br />
Contract Agreement (“Northrail Contract”) dated December 2003 between<br />
<strong>the</strong> North Luzon Railways Corporation (“Northrail”) and <strong>the</strong> China<br />
National Machinery and Equipment Corporation (“CNMEC”); and 2)<br />
Buyer Credit Loan Agreement No. BLA 04055 (“Loan Agreement”) dated<br />
26 February 2004 between <strong>the</strong> Export-Import Bank <strong>of</strong> China (“China<br />
EXIM Bank”) and <strong>the</strong> Government <strong>of</strong> <strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s<br />
(“Government”) <strong>for</strong> having been entered into in grave abuse <strong>of</strong> discretion<br />
amounting to lack or excess <strong>of</strong> jurisdiction by <strong>the</strong> <strong>of</strong>ficials involved. Said<br />
loan agreement and contract were executed in clear violation <strong>of</strong> <strong>the</strong><br />
Constitution and <strong>the</strong> laws, to <strong>the</strong> great disadvantage <strong>of</strong> Filipino taxpayers<br />
and despite <strong>the</strong>ir implementation resulting in <strong>the</strong> displacement <strong>of</strong><br />
thousands <strong>of</strong> families who dwell and derive income in <strong>the</strong> areas to be<br />
affected.<br />
THE PARTIES<br />
2. Petitioners Herminio Harry L. Roque, Jr., Joel R. Butuyan,<br />
Roger R. Rayel, Gary S. Mallari, Romel R. Bagares, Christopher Francisco<br />
C. Bolastig are all lawyers and taxpayers who stand to suffer direct<br />
injury as a result <strong>of</strong> <strong>the</strong> impending disbursement <strong>of</strong> public funds in order<br />
to en<strong>for</strong>ce void and illegal contracts. Petitioners are concerned that, while<br />
<strong>the</strong> Government constantly devises ways to obtain more revenues from<br />
taxpayers to address a fiscal deficit, it sometimes puts public funds to<br />
unfair, inefficient, injudicious and illegal use. The Petitioner may be<br />
served with pertinent papers and processes through <strong>the</strong> Roque and<br />
2
Butuyan Law Offices, <strong>of</strong> which <strong>the</strong>y are all part, at Unit 1904 Antel<br />
2000 Corporate Centre, 121 Valero Street, Salcedo Village, Makati<br />
City. For easy reference, a copy <strong>of</strong> one <strong>of</strong> Petitioners’ Income Tax Return<br />
is attached hereto as Annex “A.”<br />
3. Petitioners Danilo M. Calderon, Ma. Teresa D. Zepeda,<br />
Anastasia D. Ilustre, Natividad S. Pallasigue, Emily A. Realino, Lucinia C.<br />
Dichos, Sergio C. Legaspi, Jr., Vicente C. Alban, Conchita G. Gozo,<br />
Feliciano F. Reyes, Ricardo D. Lanozo, Josefina P. Lanozo, Adelaida P.<br />
Pen (“Petitioners Settlers”) are taxpayers and settlers who ei<strong>the</strong>r reside or<br />
derive income from <strong>the</strong> areas that are set to be cleared in <strong>the</strong><br />
implementation <strong>of</strong> <strong>the</strong> Northrail Contract involved in this case. As<br />
taxpayers, <strong>the</strong>y are liable to suffer direct injury from <strong>the</strong> unscrupulous<br />
spending <strong>of</strong> scarce government resources, while as settlers in <strong>the</strong> areas<br />
affected, <strong>the</strong>y stand to directly suffer material injury in terms <strong>of</strong> damaged<br />
property, lost income, and displacement if <strong>the</strong> questioned contract is<br />
implemented. They may be served with pertinent papers and processes<br />
through <strong>the</strong>ir counsel <strong>the</strong> Roque and Butuyan Law Offices, Unit 1904<br />
Antel 2000 Corporate Centre, 121 Valero Street, Salcedo Village,<br />
Makati City.<br />
4. Public Respondent Honorable Eduardo Ermita is impleaded<br />
in his capacity as Executive Secretary <strong>of</strong> <strong>the</strong> President <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s.<br />
He may be served with pertinent papers and processes through <strong>the</strong> Office<br />
<strong>of</strong> <strong>the</strong> Executive Secretary, Malacañan Palace, City <strong>of</strong> Manila.<br />
5. Honorable Secretary Margarito Teves is being impleaded in<br />
his capacity as <strong>the</strong> Secretary <strong>of</strong> Department <strong>of</strong> Finance. He may be<br />
3
served with pertinent papers and processes at <strong>the</strong> Department <strong>of</strong> Finance<br />
Building, BSP Complex, Roxas Boulevard, Manila.<br />
6. Public Respondent Department <strong>of</strong> Finance is <strong>the</strong> government<br />
agency that acts as custodian and manager <strong>of</strong> all financial resources <strong>of</strong><br />
<strong>the</strong> government. It may be served with pertinent papers and processes at<br />
<strong>the</strong> Department <strong>of</strong> Finance Building, BSP Complex, Roxas Boulevard,<br />
Manila.<br />
7. Honorable Secretary Romulo Neri is being impleaded in his<br />
capacity as <strong>the</strong> Secretary <strong>of</strong> <strong>the</strong> Department <strong>of</strong> Budget and Management,<br />
<strong>the</strong> government agency that authorizes <strong>the</strong> release and disbursement <strong>of</strong><br />
public funds. He may be served with pertinent papers and processes at<br />
<strong>the</strong> Department <strong>of</strong> Budget and Management, General Solano Street, San<br />
Miguel, Manila.<br />
8. Public Respondent Department <strong>of</strong> Budget and Management<br />
is <strong>the</strong> government agency that authorizes <strong>the</strong> release and disbursement<br />
<strong>of</strong> public funds. It may be served with pertinent papers and processes tat<br />
<strong>the</strong> Department <strong>of</strong> Budget and Management, General Solano Street, San<br />
Miguel, Manila.<br />
9. Honorable Secretary Augusto Santos is being impleaded in<br />
his capacity as Secretary <strong>of</strong> <strong>the</strong> National Economic and Development<br />
Authority. He may be served with pertinent papers and processes at <strong>the</strong><br />
National Economic and Development Authority, 12 Saint Jose Maria<br />
Escriva Drive, Ortigas <strong>Center</strong>, Pasig City.<br />
4
10. Public Respondent National Economic and Development<br />
Authority is <strong>the</strong> primary agency tasked with <strong>for</strong>mulating and<br />
implementing social and economic development policies including<br />
recommendations on priority infrastructure projects. It may be served<br />
with pertinent papers and processes at 12 Saint Jose Maria Escriva<br />
Drive, Ortigas <strong>Center</strong>, Pasig City.<br />
11. Private Respondent North Luzon Railways Corporation<br />
(“Northrail”) is a corporation organized and existing under <strong>the</strong> laws <strong>of</strong> <strong>the</strong><br />
<strong>Philippine</strong>s. It may be served with papers and o<strong>the</strong>r pertinent processes<br />
at its principal <strong>of</strong>fice address at <strong>the</strong> BCDA Corporate <strong>Center</strong>, Gozar<br />
corner Lucas Streets, Villamor Air Base, Pasay City.<br />
12. Private Respondent China National Machinery and<br />
Equipment Corporation (“CNMEC”) is a corporation purportedly<br />
organized and existing under <strong>the</strong> laws <strong>of</strong> <strong>the</strong> People’s Republic <strong>of</strong> China<br />
(“PROC”), with principal <strong>of</strong>fice address at 46 Sanlihe Road, West District,<br />
Beijing, China. It may be served with papers and o<strong>the</strong>r pertinent<br />
processes through its agents Mr. Ren Hongbin and/or Jibsen<br />
International Trading Corporation, 12 th Floor, Sage House, 110 Herrera<br />
Street, Legaspi Village, Makati City.<br />
5
STATEMENT OF FACTS<br />
13. On December 30, 2003, a Contract Agreement (“Northrail<br />
Contract”) was executed between North Luzon Railways Corporation<br />
(“Northrail”), a <strong>Philippine</strong> government owned and controlled corporation,<br />
and <strong>the</strong> China National Machinery & Equipment Corporation (“CNMEC”),<br />
a corporation purportedly organized and created under <strong>the</strong> laws <strong>of</strong><br />
China. The contract involved Northrail employing CNMEC as prime<br />
contractor <strong>for</strong> <strong>the</strong> construction <strong>of</strong> railways from Caloocan City to Malolos,<br />
Bulacan (Section I, Phase I <strong>of</strong> <strong>Philippine</strong> North Luzon Railways Project).<br />
14. On February 26, 2004, a Buyer Credit Loan Agreement<br />
(“Loan Agreement”) was executed between <strong>the</strong> Export-Import Bank <strong>of</strong><br />
China and <strong>the</strong> Government <strong>of</strong> <strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s. Among<br />
o<strong>the</strong>r things, <strong>the</strong> said Loan Agreement provided that China EXIM Bank,<br />
as <strong>the</strong> lender, will extend Four Hundred Million US Dollars<br />
(US$400,000,000.00) in loans called Preferential Buyer’s Credit, to <strong>the</strong><br />
Government <strong>of</strong> <strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s. The loan will be <strong>for</strong> <strong>the</strong><br />
financing <strong>of</strong> <strong>the</strong> construction <strong>of</strong> <strong>the</strong> Northrail Project Section I, Phase I.<br />
The Loan Agreement also mandated that CNMEC will act as <strong>the</strong> Prime<br />
Contractor <strong>for</strong> <strong>the</strong> project.<br />
15. Fur<strong>the</strong>r documents reveal that <strong>the</strong> total project cost is Five<br />
Hundred and Three Million US Dollars (US$503,000,000.00), <strong>of</strong> which<br />
One Hundred Seven Million US Dollars (US$107,000,000.00) will be<br />
provided as counterpart funds by <strong>the</strong> <strong>Philippine</strong> Government, through<br />
<strong>the</strong> Northrail.<br />
6
16. The Northrail Contract and <strong>the</strong> Loan Agreement however<br />
appear to be illegal and void <strong>for</strong> not having complied with <strong>the</strong> following<br />
laws:<br />
1) REPUBLIC ACT NO. 9184;<br />
2) THE GOVERNMENT AUDITING CODE;<br />
3) THE ADMINISTRATIVE CODE OF 1987<br />
4) R.A. NO. 4566 OR THE CONTRACTOR’S LICENSE<br />
LAW; and<br />
5) THE PHILIPPINE CONSTITUTION.<br />
In particular, <strong>the</strong> Northrail Contract was awarded without compliance<br />
with a competitive bidding process. It is not supported with a proper<br />
certification <strong>of</strong> availability <strong>of</strong> funds and pro<strong>of</strong> <strong>of</strong> CNMEC’s license to act<br />
as a contractor ei<strong>the</strong>r. And <strong>the</strong> Loan Ageement does not appear to have<br />
had prior concurrence <strong>of</strong> <strong>the</strong> Monetary Board, in violation <strong>of</strong> <strong>the</strong><br />
Constitution. The instruments are <strong>the</strong>re<strong>for</strong>e invalid and should not be<br />
implemented, nor should <strong>the</strong>y have any effects.<br />
17. Regardless <strong>of</strong> <strong>the</strong>ir invalidity, billions <strong>of</strong> pesos in public<br />
funds will be spent by <strong>the</strong> government pursuant to <strong>the</strong>se instruments in<br />
<strong>the</strong> implementation <strong>of</strong> <strong>the</strong> Northrail project. These expenditures<br />
constitute illegal disbursements <strong>of</strong> public funds by government <strong>of</strong>ficials<br />
which should be corrected at <strong>the</strong> earliest possible time to avoid fur<strong>the</strong>r<br />
unnecessary bleeding <strong>of</strong> government funds. The wasted funds will<br />
ultimately be shouldered by an already weary public who will later have<br />
to pay <strong>the</strong>se through more taxes.<br />
7
18. Moreover, Petitioners Settlers all ei<strong>the</strong>r reside or derive<br />
income from <strong>the</strong> project site in Bulacan which is to be cleared in <strong>the</strong><br />
implementation <strong>of</strong> <strong>the</strong> Northrail Contract involved in this case. They have<br />
all peacefully existed on <strong>the</strong> land on which <strong>the</strong>y have lived and worked<br />
<strong>for</strong> more than twenty years now and have a legal right to stay in said<br />
land and continue <strong>the</strong>ir livelihood until <strong>the</strong>y are legally and validly<br />
relocated. They <strong>the</strong>re<strong>for</strong>e stand to suffer direct material injury in terms <strong>of</strong><br />
damaged property and lost income, and irreparable injury in <strong>the</strong> <strong>for</strong>m <strong>of</strong><br />
illegal displacement due to <strong>the</strong> implementation <strong>of</strong> <strong>the</strong> questioned<br />
contract. The implementation <strong>of</strong> <strong>the</strong> Northrail Contract, a void contract,<br />
will result in <strong>the</strong> demolition <strong>of</strong> <strong>the</strong>ir homes and <strong>the</strong>ir unjust dislocation<br />
and deprivation <strong>of</strong> livelihood.<br />
19. Petitioners requested certified true copies <strong>of</strong> <strong>the</strong> Northrail<br />
Contract and <strong>the</strong> Loan Agreement from both Northrail and <strong>the</strong> Export-<br />
Import Bank <strong>of</strong> China, but <strong>the</strong>ir reasonable request <strong>for</strong> <strong>the</strong> production <strong>of</strong><br />
certified true copies were denied by said companies. Petitioners <strong>the</strong>re<strong>for</strong>e<br />
attach copies <strong>of</strong> <strong>the</strong> Northrail Contract and <strong>the</strong> Loan Agreement hereto as<br />
Annexes “B” and “C.” Petitioners also attach pro<strong>of</strong> <strong>of</strong> <strong>the</strong>ir ef<strong>for</strong>ts at<br />
acquiring said certified true copies hereto as Annex “D.” As regards <strong>the</strong><br />
fact that <strong>the</strong> total project cost is Five Hundred and Three Million US<br />
Dollars (US$503,000,000.00), this is contained in a letter dated January<br />
6, 2004 by Socioeconomic Planning Secretary Romulo L. Neri to Jose L.<br />
Cortes, President <strong>of</strong> Northrail, which letter is attached hereto as Annex<br />
“E.”<br />
20. On 29 September 2005, <strong>the</strong> Senate continued its<br />
investigation into <strong>the</strong> Northrail Agreements and invited resource persons<br />
8
from <strong>the</strong> University <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s Law <strong>Center</strong> to present <strong>the</strong>ir<br />
findings regarding <strong>the</strong> validity <strong>of</strong> <strong>the</strong> agreements. Public Respondents<br />
were also invited to comment on said findings, but <strong>the</strong>y refused to appear<br />
on orders <strong>of</strong> <strong>the</strong> President, who earlier issued Executive Order No. 464,<br />
prohibiting Cabinet <strong>of</strong>ficials from appearing in Senate investigations<br />
without prior clearance from <strong>the</strong> Chief Executive. Thus, Petitioners are<br />
compelled to air <strong>the</strong>ir grievances through this Petition, which is based<br />
primarily on <strong>the</strong> findings <strong>of</strong> <strong>the</strong> University <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s Law <strong>Center</strong><br />
that <strong>the</strong> Northrail Agreements are illegal, unconstitutional and void.<br />
21. Meanwhile, Respondents have begun <strong>the</strong> implementation <strong>of</strong><br />
<strong>the</strong> Northrail Contract and Loan Agreement and have commenced <strong>the</strong><br />
Northrail Project, <strong>the</strong>reby opening <strong>the</strong> channels <strong>of</strong> illegal disbursements<br />
in millions <strong>of</strong> pesos and threatening to immediately cause <strong>the</strong> demolition<br />
<strong>of</strong> Petitioner Settlers’ homes. Hence, Petitioners have no o<strong>the</strong>r recourse in<br />
law to prevent such illegal acts but to file <strong>the</strong> instant Petition.<br />
JURISDICTION OF THE SUPREME COURT<br />
22. Petitioners humbly beseech <strong>the</strong> Honorable Court to take<br />
cognizance <strong>of</strong> <strong>the</strong> instant case, invoking <strong>the</strong> Court’s power to set aside<br />
rules <strong>of</strong> procedure in assuming jurisdiction over matters <strong>of</strong> paramount<br />
public interest and when issues presented are <strong>of</strong> transcendental<br />
importance to <strong>the</strong> public. The Court, as <strong>the</strong> branch constitutionally<br />
tasked “to settle actual controversies involving rights which are legally<br />
demandable and en<strong>for</strong>ceable, and to determine whe<strong>the</strong>r or not <strong>the</strong>re has<br />
been a grave abuse <strong>of</strong> discretion amounting to lack or excess <strong>of</strong><br />
jurisdiction on <strong>the</strong> part <strong>of</strong> any branch or instrumentality <strong>of</strong> <strong>the</strong><br />
9
Government,” has historically and heroically per<strong>for</strong>med this<br />
constitutional mandate by going beyond procedural restrictions in order<br />
to serve a higher public purpose. Such is <strong>the</strong> situation being presented<br />
by <strong>the</strong> Petitioners in <strong>the</strong> instant case.<br />
23. In Chavez vs. PCGG, 1 <strong>the</strong> Court upheld <strong>the</strong> right <strong>of</strong> a citizen<br />
to bring a taxpayer's suit on matters <strong>of</strong> transcendental importance to <strong>the</strong><br />
public, especially when <strong>the</strong> matter involves <strong>the</strong> recovery <strong>of</strong> <strong>the</strong> ill-gotten<br />
wealth <strong>of</strong> <strong>the</strong> Marcoses. In Chavez vs. PEA, 2 <strong>the</strong> Court recognized a<br />
taxpayer’s right to bring suit to en<strong>for</strong>ce <strong>the</strong> public’s right to in<strong>for</strong>mation<br />
and to stop <strong>the</strong> government from alienating public land in violation <strong>of</strong> <strong>the</strong><br />
Constitution.<br />
24. In <strong>the</strong> landmark Francisco vs. House <strong>of</strong> Representatives, 3 <strong>the</strong><br />
Court cited numerous case in <strong>the</strong> past where <strong>the</strong> court “accorded<br />
standing to taxpayers, voters, concerned citizens, legislators in cases<br />
involving paramount public interest and transcendental importance,”<br />
and held that “procedural matters are subordinate to <strong>the</strong> need to<br />
determine whe<strong>the</strong>r or not <strong>the</strong> o<strong>the</strong>r branches <strong>of</strong> <strong>the</strong> government have<br />
kept <strong>the</strong>mselves within <strong>the</strong> limits <strong>of</strong> <strong>the</strong> Constitution and <strong>the</strong> laws and<br />
that <strong>the</strong>y have not abused <strong>the</strong> discretion given to <strong>the</strong>m.” 4<br />
25. In addition, <strong>the</strong> court has already held that in <strong>the</strong> case <strong>of</strong> a<br />
taxpayer, he is allowed to sue where <strong>the</strong>re is a claim that public funds<br />
are illegally disbursed, or that public money is being deflected to any<br />
1 Chavez v. PCGG, 299 SCRA 744 (1998).<br />
2 G.R. No. 133250, July 9, 2002.<br />
3 G.R. No. 160261, November 10, 2003.<br />
4 Citing Kilosbayan, Inc. v. Morato, 250 SCRA 130 (1995), Tatad v. Secretary <strong>of</strong> <strong>the</strong><br />
Department <strong>of</strong> Energy, 281 SCRA 330 (1997), Kapatiran ng mga Naglilingkod sa<br />
Pamahalaan ng Pilipinas, 163 SCRA 371, 378 (1988).<br />
10
improper purpose, or that <strong>the</strong>re is a wastage <strong>of</strong> public funds through <strong>the</strong><br />
en<strong>for</strong>cement <strong>of</strong> an invalid or unconstitutional law. 5 In <strong>the</strong> discussion that<br />
follows, <strong>the</strong> Petitioners will establish that such is <strong>the</strong> situation in <strong>the</strong><br />
instant case.<br />
26. Petitioners are also constrained to air <strong>the</strong>ir grievance and<br />
seek relief with this Honorable Court because <strong>of</strong> <strong>the</strong> provisions <strong>of</strong><br />
Republic Act No. 8975, also known as “An Act to Ensure <strong>the</strong> Expeditious<br />
Implementation and Completion <strong>of</strong> Government Infrastructure Projects<br />
by Prohibiting Lower Courts from Issuing Temporary Restraining Orders,<br />
Preliminary Injunctions or Preliminary Mandatory Injunctions.” The said<br />
Act, particularly Section 3 <strong>the</strong>re<strong>of</strong>, makes exclusive to <strong>the</strong> Supreme<br />
Court <strong>the</strong> issuance <strong>of</strong> temporary restraining orders, preliminary<br />
injunctions or preliminary mandatory injunctions on government<br />
infrastructure projects, which relief are being prayed <strong>for</strong> in <strong>the</strong> instant<br />
case. 6<br />
5 Del Mar v. PAGCOR 346 SCRA 485, 501 (2000) citing Kilosbayan, Inc., et.al. v.<br />
Morato, 250 SCRA 130 (1995); Dumlao v. COMELEC, 95 SCRA 392 (1980); Sanidad v.<br />
Comelec, 73 SCRA 333 (1976); Philconsa v. Mathay, 18 SCRA 300 (1966); Pascual v.<br />
Secretary <strong>of</strong> Public Works, 110 Phil 331 (1960); Vide Gonzales v. Narvasa, 337 SCRA<br />
733 (2000); Pelaez v. Auditor General, 15 SCRA 569 (1965); Philconsa v. Gimenez, 15<br />
SCRA 479 (1965); Iloilo Palay & Corn Planters Association v. Feliciano, 13 SCRA 377<br />
(1965).<br />
6 Sec. 3. Prohibition on <strong>the</strong> Issuance <strong>of</strong> Temporary Restraining Orders, Preliminary<br />
Injunctions and Preliminary Mandatory Injunctions. -No court, except <strong>the</strong> Supreme<br />
Court, shall issue any temporary restraining order, preliminary injunction or<br />
preliminary mandatory injunction against <strong>the</strong> government, or any <strong>of</strong> its subdivisions,<br />
<strong>of</strong>ficials or any person or entity, whe<strong>the</strong>r public or private, acting under <strong>the</strong><br />
government's direction, to restrain, prohibit or compel <strong>the</strong> following acts:<br />
(a) Acquisition, clearance and development <strong>of</strong> <strong>the</strong> right-<strong>of</strong>-way and/or<br />
site or location <strong>of</strong> any national government project;<br />
(b) Bidding or awarding <strong>of</strong> contract/project <strong>of</strong> <strong>the</strong> national<br />
government as defined under Section 2 here<strong>of</strong>;<br />
(c) Commencement, prosecution, execution, implementation,<br />
operation <strong>of</strong> any such contract or project;<br />
(d) Termination or rescission <strong>of</strong> any such contract/project; and<br />
(e) The undertaking or authorization <strong>of</strong> any o<strong>the</strong>r lawful activity<br />
necessary <strong>for</strong> such contract/project.<br />
11
ISSUES<br />
I. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR<br />
HAVING BEEN AWARDED WITHOUT COMPETITIVE BIDDING, IN<br />
VIOLATION OF THE PROVISIONS OF REPUBLIC ACT NO. 9184;<br />
II. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR<br />
FAILURE TO COMPLY WITH THE PROVISIONS OF THE<br />
GOVERNMENT AUDITING CODE AND THE ADMINISTRATIVE<br />
CODE OF 1987;<br />
III. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR<br />
CNMEC’S FAILURE TO COMPLY WITH R.A. NO. 4566 OR THE<br />
“CONTRACTOR’S LICENSE LAW;”<br />
IV. WHETHER OR NOT THE LOAN AGREEMENT (BCLA No. BLA<br />
04055) IS VOID AB INITIO;<br />
V. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE<br />
ISSUANCE OF A WRIT OF CERTIORARI AND PROHIBITION TO<br />
DECLARE AS NULL AND VOID THE NORTHRAIL AGREEMENTS<br />
AND TO PERMANENTLY PROHIBIT THE IMPLEMENTATION OF<br />
THE SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR<br />
SUCH PURPOSE;<br />
VI. WHETHER OR NOT PETITIONERS ARE ENTITLED TO A<br />
PRELIMINARY INJUNCTION AND/OR A TEMPORARY<br />
RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLE-<br />
MENTATION OF THE NORTHRAIL CONTRACT AND THE LOAN<br />
AGREEMENT AND THE DISBURSEMENT OF PUBLIC FUNDS FOR<br />
SUCH PURPOSE, DURING THE PENDENCY OF THIS CASE.<br />
ARGUMENTS<br />
I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN<br />
AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION OF<br />
THE PROVISIONS OF REPUBLIC ACT NO. 9184;<br />
This prohibition shall apply in all cases, disputes or controversies instituted by a<br />
private party, including but not limited to cases filed by bidders or those claiming to<br />
have rights through such bidders involving such contract/project. This prohibition shall<br />
not apply when <strong>the</strong> matter is <strong>of</strong> extreme urgency involving a constitutional issue, such<br />
that unless a temporary restraining order is issued, grave injustice and irreparable<br />
injury will arise. The applicant shall file a bond, in an amount to be fixed by <strong>the</strong> court,<br />
which bond shall accrue in favor <strong>of</strong> <strong>the</strong> government if <strong>the</strong> court should finally decide<br />
that <strong>the</strong> applicant was not entitled to <strong>the</strong> relief sought.<br />
If after due hearing <strong>the</strong> court finds that <strong>the</strong> award <strong>of</strong> <strong>the</strong> contract is null and<br />
void, <strong>the</strong> court may, if appropriate under <strong>the</strong> circumstances, award <strong>the</strong> contract to <strong>the</strong><br />
qualified and winning bidder or order a rebidding <strong>of</strong> <strong>the</strong> same, without prejudice to any<br />
liability that <strong>the</strong> guilty party may incur under existing laws.<br />
12
II. THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO<br />
COMPLY WITH THE PROVISIONS OF THE GOVERNMENT<br />
AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987;<br />
III. THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE<br />
TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S<br />
LICENSE LAW;”<br />
IV. THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB<br />
INITIO;<br />
V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF<br />
CERTIORARI AND PROHIBITION TO DECLARE AS NULL AND<br />
VOID THE NORTHRAIL AGREEMENTS AND TO PERMANENTLY<br />
PROHIBIT THE IMPLEMENTATION OF THE SAME AND ANY<br />
DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE;<br />
VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY INJUNCTION<br />
AND/OR A TEMPORARY RESTRAINING ORDER IMMEDIATELY<br />
ENJOINING THE IMPLEMENTATION OF THE NORTHRAIL<br />
CONTRACT AND THE LOAN AGREEMENT AND THE<br />
DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE,<br />
DURING THE PENDENCY OF THIS CASE.<br />
DISCUSSION<br />
I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN<br />
AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION<br />
OF THE PROVISIONS OF REPUBLIC ACT NO. 9184.<br />
27. The Northrail Contract was awarded to CNMEC without<br />
competitive bidding, in violation <strong>of</strong> <strong>the</strong> provisions <strong>of</strong> Republic Act No.<br />
9184, o<strong>the</strong>rwise known as <strong>the</strong> “Government Procurement Re<strong>for</strong>m Act,”<br />
particularly Section 10 <strong>the</strong>re<strong>of</strong>, to wit:<br />
“Sec. 10. Competitive Bidding.- All Procurement shall<br />
be done through Competitive Bidding, except as provided <strong>for</strong><br />
in Article XVI <strong>of</strong> this Act.”<br />
28. Under Section 4 <strong>of</strong> <strong>the</strong> Act, <strong>the</strong> law covers procurement <strong>of</strong><br />
infrastructure projects, described under Section 5(k) as including “<strong>the</strong><br />
13
construction, improvement, rehabilitation, demolition, repair, restoration<br />
or maintenance <strong>of</strong> roads and bridges, railways, airports, seaports, xxxx.”<br />
ab initio. 7<br />
29. From this alone, <strong>the</strong> said contract is already illegal and void<br />
The Contract was not awarded pursuant to any alternative method<br />
<strong>of</strong> procurement that falls under <strong>the</strong> exceptions provided in R.A. No.<br />
9184.<br />
30. The Northrail Contract purports to have been awarded<br />
pursuant to a negotiated procurement, which is an alternative method <strong>of</strong><br />
procurement provided <strong>for</strong> in Section 48 <strong>of</strong> R.A. No. 9184. 8 This, however,<br />
7 Caltex v. Delgado Bros., 96 Phil. 368. Likewise, <strong>the</strong> Civil Code says:<br />
Art. 1409. The following contracts are inexistent and void from <strong>the</strong> beginning:<br />
(1) Those whose cause, object or purpose is contrary to law, morals, good customs,<br />
public order or public policy;<br />
(2) Those which are absolutely simulated or fictitious;<br />
(3) Those whose cause or object did not exist at <strong>the</strong> time <strong>of</strong> <strong>the</strong> transaction;<br />
(4) Those whose object is outside <strong>the</strong> commerce <strong>of</strong> men;<br />
(5) Those which contemplate an impossible service;<br />
(6) Those where <strong>the</strong> intention <strong>of</strong> <strong>the</strong> parties relative to <strong>the</strong> principal object <strong>of</strong> <strong>the</strong><br />
contract cannot be ascertained;<br />
(7) Those expressly prohibited or declared void by law." (Emphasis supplied.)<br />
8 (R.A. No. 9184) Sec. 48. Alternative Methods. - Subject to <strong>the</strong> prior approval <strong>of</strong> <strong>the</strong><br />
Head <strong>of</strong> <strong>the</strong> Procuring Entity or his duly authorized representative, and whenever<br />
justified by <strong>the</strong> conditions provided in this Act, <strong>the</strong> Procuring Entity may, in order to<br />
promote economy and efficiency, resort to any <strong>of</strong> <strong>the</strong> following alternative methods <strong>of</strong><br />
Procurement:<br />
a. Limited Source Bidding, o<strong>the</strong>rwise known as Selective Bidding - a method <strong>of</strong><br />
Procurement that involves direct invitation to bid by <strong>the</strong> Procuring Entity from a<br />
set <strong>of</strong> pre-selected suppliers or consultants with known experience and proven<br />
capability relative to <strong>the</strong> requirements <strong>of</strong> a particular contract;<br />
b. Direct Contracting, o<strong>the</strong>rwise known as Single Source Procurement - a method<br />
<strong>of</strong> Procurement that does not require elaborate Bidding Documents because <strong>the</strong><br />
supplier is simply asked to submit a price quotation or a pro-<strong>for</strong>ma voice<br />
toge<strong>the</strong>r with <strong>the</strong> conditions <strong>of</strong> sale, which <strong>of</strong>fer may be accepted immediately or<br />
after some negotiations;<br />
c. Repeat Order. - a method <strong>of</strong> Procurement that involves a direct Procurement <strong>of</strong><br />
Goods from <strong>the</strong> previous winning bidder, whenever <strong>the</strong>re is a need to replenish<br />
Goods procured under a contract previously awarded through Competitive<br />
Bidding;<br />
d. Shopping - a method <strong>of</strong> Procurement whereby <strong>the</strong> Procuring Entity simply<br />
requests <strong>for</strong> <strong>the</strong> submission <strong>of</strong> price quotations <strong>for</strong> readily available <strong>of</strong>f-<strong>the</strong>-shelf<br />
Goods or ordinary/regular equipment to be procured directly from suppliers <strong>of</strong><br />
known qualification; or<br />
e. Negotiated Procurement - a method <strong>of</strong> Procurement that may be resorted under<br />
<strong>the</strong> extraordinary circumstances provided <strong>for</strong> in Section 53 <strong>of</strong> this Act and o<strong>the</strong>r<br />
instances that shall be specified in <strong>the</strong> IRR, whereby <strong>the</strong> Procuring Entity<br />
14
is a defective contention because none <strong>of</strong> <strong>the</strong> conditions <strong>for</strong> a negotiated<br />
procurement, provided <strong>for</strong> in Section 53 <strong>of</strong> <strong>the</strong> law, exists in this case. 9<br />
31. Even <strong>the</strong> mere circumstance that <strong>the</strong> Northrail project is<br />
financed through a “tied loan” from EXIM Bank under an arrangement<br />
which requires EXIM Bank to nominate/select <strong>the</strong> contractor <strong>for</strong> <strong>the</strong><br />
project to be financed by <strong>the</strong> loan does not help <strong>the</strong> Respondents. Such<br />
an arrangement is by no means among <strong>the</strong> alternative methods <strong>of</strong><br />
procurement enumerated under Section 48 <strong>of</strong> R.A. No. 9184, which<br />
allows exceptions to <strong>the</strong> rule on public bidding; meanwhile, <strong>the</strong> law<br />
contemplates no o<strong>the</strong>r alternative method <strong>of</strong> procurement as an<br />
exception to <strong>the</strong> competitive public bidding requirement; hence, <strong>the</strong> time<br />
honored doctrine <strong>of</strong> expressio unius est exclusio alterius applies.<br />
directly negotiates a contract with a technically, legally and financially capable<br />
supplier, contractor or consultant.<br />
In all instances, <strong>the</strong> Procuring Entity shall ensure that <strong>the</strong> most advantageous price <strong>for</strong><br />
<strong>the</strong> government is obtained.<br />
9 (R.A. No. 9184) Sec. 53. Negotiated Procurement. - Negotiated Procurement shall be<br />
allowed only in <strong>the</strong> following instances:<br />
a. In case <strong>of</strong> two (2) failed bidding as provided in Section 35 here<strong>of</strong>;<br />
b. In case <strong>of</strong> imminent danger to life or property during a state <strong>of</strong> calamity, or<br />
when time is <strong>of</strong> <strong>the</strong> essence arising from natural or man-made calamities or<br />
o<strong>the</strong>r causes where immediate action is necessary to prevent damage to or loss<br />
<strong>of</strong> life or property, or to restore vital public services, infrastructure facilities and<br />
o<strong>the</strong>r public utilities;<br />
c. Take-over <strong>of</strong> contracts, which have been rescinded or terminated <strong>for</strong> causes<br />
provided <strong>for</strong> in <strong>the</strong> contract and existing laws, where immediate action is<br />
necessary to prevent damage to or loss <strong>of</strong> life or property, or to restore vital<br />
public services, infrastructure facilities and o<strong>the</strong>r public utilities;<br />
d. Where <strong>the</strong> subject contract is adjacent or contiguous to an on-going<br />
infrastructure project, as defined in <strong>the</strong> IRR: Provided, however, That <strong>the</strong><br />
original contract is <strong>the</strong> result <strong>of</strong> a Competitive Bidding; <strong>the</strong> subject contract to<br />
be negotiated has similar or related scopes <strong>of</strong> work; it is within <strong>the</strong> contracting<br />
capacity <strong>of</strong> <strong>the</strong> contractor; <strong>the</strong> contractor uses <strong>the</strong> same prices or lower unit<br />
prices as in <strong>the</strong> original contract less mobilization cost; <strong>the</strong> amount involved<br />
does not exceed <strong>the</strong> amount <strong>of</strong> <strong>the</strong> ongoing project; and, <strong>the</strong> contractor has no<br />
negative slippage: Provided, fur<strong>the</strong>r, That negotiations <strong>for</strong> <strong>the</strong> procurement are<br />
commenced be<strong>for</strong>e <strong>the</strong> expiry <strong>of</strong> <strong>the</strong> original contract. Wherever applicable, <strong>the</strong><br />
principle shall also govern consultancy contract, where <strong>the</strong> consultants have<br />
unique experience and expertise to deliver <strong>the</strong> required service; or,<br />
e. Subject to <strong>the</strong> guidelines specified in <strong>the</strong> IRR, purchases <strong>of</strong> Goods from<br />
ano<strong>the</strong>r agency <strong>of</strong> <strong>the</strong> government, such as <strong>the</strong> Procurement Service <strong>of</strong> <strong>the</strong> DBM,<br />
which is tasked with a centralized procurement <strong>of</strong> commonly used Goods <strong>for</strong> <strong>the</strong><br />
government in accordance with Letters <strong>of</strong> Instruction No. 755 and Executive<br />
Order No. 359, series <strong>of</strong> 1989.<br />
15
None <strong>of</strong> <strong>the</strong> agreements is a treaty.<br />
32. Both <strong>the</strong> Northrail Contract and <strong>the</strong> Loan Agreement<br />
(collectively <strong>the</strong> “Northrail Agreements”) are not treaties, international<br />
agreements, or executive agreements, that fall under <strong>the</strong> exempting<br />
proviso <strong>of</strong> Section 4 <strong>of</strong> R.A. No. 9184, which mandates <strong>the</strong>ir effectivity<br />
although <strong>the</strong>y run contrary to some provisions <strong>of</strong> <strong>the</strong> said law.<br />
33. First <strong>of</strong> all, Article 2(a) <strong>of</strong> <strong>the</strong> Vienna Convention <strong>of</strong> <strong>the</strong> Law<br />
<strong>of</strong> Treaties (“Vienna Convention”), defines a treaty as an international<br />
agreement concluded between states and governed by international<br />
law, to wit:<br />
“[T]reaty means an international agreement concluded<br />
between States in written <strong>for</strong>m and governed by international<br />
law, whe<strong>the</strong>r embodied in a single instrument or two or more<br />
related instruments and whatever its particular<br />
designation[.]”<br />
By <strong>the</strong> legal standards set out in this provision, nei<strong>the</strong>r <strong>of</strong> <strong>the</strong><br />
agreements in question qualifies as a treaty, because nei<strong>the</strong>r agreement<br />
is between states and because nei<strong>the</strong>r is governed by international law.<br />
34. The Northrail Contract is an agreement between a<br />
government corporation (Northrail) created under <strong>the</strong> laws <strong>of</strong> <strong>the</strong><br />
Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s, which has a separate juridical personality,<br />
and a state-corporation created under <strong>the</strong> laws <strong>of</strong> <strong>the</strong> People’s Republic<br />
<strong>of</strong> China, which also has a juridical personality <strong>of</strong> its own; while <strong>the</strong> Loan<br />
Agreement is an agreement between <strong>the</strong> <strong>Philippine</strong> Government and<br />
China EXIM Bank, a banking agency <strong>of</strong> <strong>the</strong> People’s Republic <strong>of</strong> China,<br />
16
which also has its own juridical personality. None <strong>of</strong> <strong>the</strong> contracts<br />
<strong>the</strong>re<strong>for</strong>e is between states.<br />
35. Except <strong>for</strong> <strong>the</strong> Government as a party to <strong>the</strong> Loan<br />
Agreement, all parties to <strong>the</strong> Northrail Agreements are juridical persons<br />
under <strong>the</strong> national or internal law <strong>of</strong> ei<strong>the</strong>r <strong>the</strong> <strong>Philippine</strong>s or <strong>the</strong> PROC.<br />
They are not subjects or persons <strong>of</strong> international law. They do not have<br />
<strong>the</strong> competence to create international obligations, nor do <strong>the</strong>y have <strong>the</strong><br />
capacity to conclude treaties. They are not states. This being so, none <strong>of</strong><br />
<strong>the</strong> agreements in question can be considered a treaty.<br />
36. It must be added that agreements concluded by states with<br />
individual or juridical persons are excluded from <strong>the</strong> coverage <strong>of</strong> <strong>the</strong><br />
Vienna Convention. And, having been concluded by entities which are<br />
not international organizations under international law, <strong>the</strong> Northrail<br />
Agreements are likewise outside <strong>the</strong> purview <strong>of</strong> <strong>the</strong> Vienna Convention on<br />
<strong>the</strong> Law <strong>of</strong> Treaties between states and international organizations or<br />
between international organizations.<br />
37. Moreover, <strong>the</strong> Northrail Agreements <strong>the</strong>mselves provide that<br />
<strong>the</strong>y are not governed by international law, but by <strong>the</strong> national laws <strong>of</strong><br />
ei<strong>the</strong>r <strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s and <strong>of</strong> <strong>the</strong> PROC. Clearly, <strong>the</strong><br />
Northrail Contract states that: 10<br />
“The Contract shall in all respects be read and<br />
construed in accordance with <strong>the</strong> laws <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s.”<br />
10 Please see Clause 2.<br />
17
And <strong>the</strong> Loan Agreement likewise requires that: 11<br />
“This Agreement shall be governed by and construed<br />
in accordance with <strong>the</strong> laws <strong>of</strong> <strong>the</strong> People’s Republic <strong>of</strong><br />
China.”<br />
Hence, nei<strong>the</strong>r constitutes an agreement governed by international law<br />
within <strong>the</strong> purview <strong>of</strong> <strong>the</strong> Vienna Convention.<br />
None <strong>of</strong> <strong>the</strong> agreements is an executive agreement<br />
38. None <strong>of</strong> <strong>the</strong> agreements can be considered an executive<br />
agreement ei<strong>the</strong>r, which is defined in Executive Order No. 459 (dated<br />
November 25, 1997), Providing <strong>for</strong> <strong>the</strong> Guidelines in <strong>the</strong> Negotiation <strong>of</strong><br />
International Agreements and its Ratification, as “similar to treaties<br />
except that <strong>the</strong>y do not require legislative concurrence.” Said definition<br />
only relaxes <strong>the</strong> requirement <strong>of</strong> Senate concurrence which is required by<br />
<strong>the</strong> Constitution, but leaves in place <strong>the</strong> requirement that it be an<br />
international agreement entered into by <strong>the</strong> <strong>Philippine</strong>s, i.e., that it be<br />
concluded between states in written <strong>for</strong>m and governed by international<br />
law, as defined by <strong>the</strong> Vienna Convention.<br />
II.<br />
THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO<br />
COMPLY WITH THE PROVISIONS OF THE GOVERNMENT<br />
AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987;<br />
39. Both <strong>the</strong> Government Auditing Code <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s<br />
(Presidential Decree No. 1445) and <strong>the</strong> Administrative Code <strong>of</strong> 1987<br />
(Executive Order No. 292) specifically proscribe <strong>the</strong> making <strong>of</strong> any<br />
contract by any government agency involving <strong>the</strong> expenditure <strong>of</strong> public<br />
11 Please see Section 15.1.<br />
18
funds unless <strong>the</strong>re is an appropriation <strong>the</strong>re<strong>for</strong> and a proper certification<br />
<strong>the</strong>re<strong>of</strong> by <strong>the</strong> proper accounting <strong>of</strong>ficial which should be attached to <strong>the</strong><br />
proposed contract. A proposed government contract involving <strong>the</strong><br />
expenditure <strong>of</strong> public funds that is unsupported by a certificate as to <strong>the</strong><br />
existence <strong>of</strong> appropriation and <strong>the</strong> availability <strong>of</strong> <strong>the</strong> necessary funds,<br />
which is to be attached as an integral part <strong>of</strong> <strong>the</strong> proposed contract, is<br />
fatally defective and in <strong>the</strong> words <strong>of</strong> <strong>the</strong> Supreme Court, “suffers <strong>the</strong> vice<br />
<strong>of</strong> nullity.” Indeed, “fund availability is, as it has always been, an<br />
indispensable prerequisite to <strong>the</strong> execution <strong>of</strong> any government contract<br />
involving <strong>the</strong> expenditure <strong>of</strong> public funds by all government agencies at<br />
all levels.” 12<br />
40. From an examination <strong>of</strong> <strong>the</strong> records, it is also obvious that<br />
<strong>the</strong> Northrail Contract was executed prior to <strong>the</strong> execution <strong>of</strong> <strong>the</strong> Loan<br />
Agreement. The conclusion to be drawn, <strong>the</strong>re<strong>for</strong>e, is that <strong>the</strong> Contract<br />
was perfected while it was still unfunded, thus it is contrary to <strong>the</strong><br />
above-discussed law.<br />
41. As <strong>the</strong> Northrail Contract is not supported by <strong>the</strong> required<br />
certificate as to <strong>the</strong> availability <strong>of</strong> funds, and because it appears to have<br />
been executed with no funds to support it, it is illegal and void from <strong>the</strong><br />
beginning.<br />
III.<br />
THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE<br />
TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S<br />
LICENSE LAW.”<br />
12 Osmeña vs. CA 230 SCRA 585.<br />
19
42. R.A. No. 4566 requires that any prospective contractor <strong>for</strong><br />
infrastructure projects must obtain a Contractor’s License be<strong>for</strong>e it can<br />
engage in business as a contractor in <strong>the</strong> <strong>Philippine</strong>s. In particular,<br />
Sections 20 and 23 <strong>the</strong>re<strong>of</strong> provide that:<br />
“Section 20. Qualifications <strong>of</strong> applicants <strong>for</strong> contractors'<br />
licenses. The Board shall require an applicant to show at<br />
least two years <strong>of</strong> experience in <strong>the</strong> construction industry,<br />
and knowledge <strong>of</strong> <strong>the</strong> building, safety, health and lien laws <strong>of</strong><br />
<strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s and <strong>the</strong> rudimentary<br />
administrative principles <strong>of</strong> <strong>the</strong> contracting business as <strong>the</strong><br />
Board deems necessary <strong>for</strong> <strong>the</strong> safety <strong>of</strong> <strong>the</strong> contracting<br />
business <strong>of</strong> <strong>the</strong> pubic.<br />
“For <strong>the</strong> purpose <strong>of</strong> this section, a partnership,<br />
corporation, or any o<strong>the</strong>r organization may qualify through<br />
its responsible managing <strong>of</strong>ficer appearing personally be<strong>for</strong>e<br />
<strong>the</strong> Board who shall prove that he is a bona fide responsible<br />
<strong>of</strong>ficer <strong>of</strong> such firm and that he exercises or is in a position<br />
to exercise authority over <strong>the</strong> contracting business <strong>of</strong> his<br />
principal or employer in <strong>the</strong> following manner: (1) to make<br />
technical and administrative decisions; and, (2) to hire,<br />
superintend, promote, transfer, lay <strong>of</strong>f, discipline or<br />
discharge employees.<br />
(xxx)<br />
“Section 23. Issuance <strong>of</strong> licenses. Upon <strong>the</strong> payment <strong>of</strong><br />
<strong>the</strong> corresponding fee and <strong>the</strong> filing <strong>of</strong> <strong>the</strong> application, and<br />
after examination and investigation as may be required, <strong>the</strong><br />
Board within fifteen days after <strong>the</strong> approval <strong>of</strong> <strong>the</strong><br />
application shall issue a license to <strong>the</strong> applicant permitting<br />
him to engage in business as a contractor under <strong>the</strong> terms <strong>of</strong><br />
this Act <strong>for</strong> <strong>the</strong> remaining part <strong>of</strong> <strong>the</strong> fiscal year.”<br />
43. A Special License is required <strong>of</strong> a <strong>for</strong>eign contractor who<br />
wishes to participate in a <strong>for</strong>eign-funded project. One <strong>of</strong> <strong>the</strong> requirements<br />
<strong>for</strong> <strong>the</strong> grant <strong>of</strong> a Special License is that <strong>the</strong> <strong>for</strong>eign contractor must<br />
prove that it is a bona fide contractor in its home country. The<br />
in<strong>for</strong>mation obtained by Petitioners is that CNMEC’s name in China is<br />
actually China National Machinery and Equipment Import and Export<br />
Corporation, which means that it is a mere trading company with no<br />
prior venture into railway construction, both at home and abroad.<br />
20
44. CNMEC cannot <strong>the</strong>re<strong>for</strong>e engage as a contractor in <strong>the</strong><br />
<strong>Philippine</strong>s and <strong>the</strong> Northrail Contract is <strong>the</strong>re<strong>for</strong>e void <strong>for</strong> failure to<br />
comply with R.A. 4566.<br />
IV.<br />
THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB<br />
INITIO.<br />
45. Article VII, Section 20 <strong>of</strong> <strong>the</strong> Constitution provides:<br />
Section 20. The President may contract or guarantee<br />
<strong>for</strong>eign loans on behalf <strong>of</strong> <strong>the</strong> Republic <strong>of</strong> <strong>the</strong> <strong>Philippine</strong>s<br />
with <strong>the</strong> prior concurrence <strong>of</strong> <strong>the</strong> Monetary Board, and<br />
subject to such limitations as may be provided by law. The<br />
Monetary Board shall, within thirty days from <strong>the</strong> end <strong>of</strong><br />
every quarter <strong>of</strong> <strong>the</strong> calendar year, submit to <strong>the</strong> Congress a<br />
complete report <strong>of</strong> its decisions on applications <strong>for</strong> loans to<br />
be contracted or guaranteed by <strong>the</strong> Government or<br />
government-owned and controlled corporations which would<br />
have <strong>the</strong> effect <strong>of</strong> increasing <strong>the</strong> <strong>for</strong>eign debt, and containing<br />
o<strong>the</strong>r matters as may be provided by law. (Emphasis<br />
supplied.)<br />
46. The Loan Agreement as it stands, and its schedules and<br />
annexes, contains no certification that it has been approved or concurred<br />
to by <strong>the</strong> Monetary Board prior to its execution, a requirement that is<br />
unequivocally made in <strong>the</strong> above-quoted provision <strong>of</strong> <strong>the</strong> Constitution.<br />
This flaw renders <strong>the</strong> agreement not only illegal but unconstitutional,<br />
which renders it and o<strong>the</strong>r contracts flowing from it, such as <strong>the</strong><br />
Northrail Contract, null and void.<br />
V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT<br />
OF CERTIORARI AND PROHIBITION TO DECLARE AS NULL<br />
AND VOID THE NORTHRAIL AGREEMENTS AND TO<br />
PERMANENTLY PROHIBIT THE IMPLEMENTATION OF THE<br />
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SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR SUCH<br />
PURPOSE.<br />
47. The execution <strong>of</strong> <strong>the</strong> Northrail Agreements with grave abuse<br />
<strong>of</strong> discretion amounting to lack or excess <strong>of</strong> jurisdiction and in clear<br />
violation <strong>of</strong> <strong>the</strong> Constitution and <strong>the</strong> law, makes <strong>the</strong> same patently void<br />
ab initio. The public and private Respondents have commenced work on<br />
<strong>the</strong> Contract, some <strong>of</strong> which include <strong>the</strong> <strong>for</strong>ced removal <strong>of</strong> settlers from<br />
<strong>the</strong> implementation areas. This too constitutes grave abuse <strong>of</strong><br />
discretion amounting to lack or excess <strong>of</strong> jurisdiction on <strong>the</strong> part <strong>of</strong><br />
Respondents.<br />
48. The continued implementation <strong>of</strong> <strong>the</strong> Northrail Agreements<br />
stands to cause grave and irreparable injury and damage to <strong>the</strong><br />
Government and taxpayers as it will surely entail <strong>the</strong> expenditure <strong>of</strong> a<br />
huge amount <strong>of</strong> public funds <strong>for</strong> <strong>the</strong> execution <strong>of</strong> illegal and<br />
unconstitutional acts. In a climate where <strong>the</strong> Government imposes<br />
austerity measures and new taxes on <strong>the</strong> people to address a budget<br />
deficit, <strong>the</strong> expenditure <strong>of</strong> public money on contracts that are clearly<br />
illegal, unconstitutional and unfavorable to <strong>the</strong> Government is<br />
particularly unconscionable.<br />
49. A failure to nullify and prohibit <strong>the</strong> Northrail Agreements<br />
also stands to cause grave and irreparable injury to law-abiding citizens<br />
<strong>of</strong> <strong>the</strong> country such as Petitioners through <strong>the</strong> erosion <strong>of</strong> Rule <strong>of</strong> Law and<br />
<strong>the</strong> weakening <strong>of</strong> re<strong>for</strong>mative laws such as R.A. No. 9184.<br />
50. The Petitioners as in<strong>for</strong>mal settlers in <strong>the</strong> project areas <strong>of</strong><br />
implementation will also suffer grave and irreparable material injury in<br />
22
terms <strong>of</strong> lost homes, livelihoods and o<strong>the</strong>r property with <strong>the</strong> Northrail<br />
Contract’s implementation.<br />
51. There<strong>for</strong>e, it is clear that Respondents are implementing <strong>the</strong><br />
patently void Northrail Agreements in violation <strong>of</strong> <strong>the</strong> Petitioners’ rights<br />
as taxpayers and as law-abiding citizens, <strong>the</strong>reby causing <strong>the</strong>m grave<br />
and irreparable injury. Unless Respondents are prohibited from<br />
continuing <strong>the</strong>ir acts, <strong>the</strong> taxpayers’ rights and <strong>the</strong> Republic’s welfare<br />
will be severely and permanently damaged. Hence, a Writ <strong>of</strong> Prohibition<br />
should immediately be issued to prohibit public and private Respondents<br />
from proceeding with <strong>the</strong> implementation <strong>of</strong> <strong>the</strong> questioned Northrail<br />
Agreements. The Writ should also prohibit <strong>the</strong> public Respondents from<br />
authorizing <strong>the</strong> release <strong>of</strong> public funds <strong>for</strong> <strong>the</strong> implementation <strong>of</strong> <strong>the</strong><br />
agreements.<br />
VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY<br />
INJUNCTION AND/OR A TEMPORARY RESTRAINING ORDER<br />
IMMEDIATELY ENJOINING THE IMPLEMENTATION OF THE<br />
NORTHRAIL CONTRACT AND THE LOAN AGREEMENT AND<br />
THE DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE,<br />
DURING THE PENDENCY OF THIS CASE.<br />
52. Petitioners likewise pray <strong>for</strong> <strong>the</strong> immediate issuance <strong>of</strong> a<br />
Temporary Restraining Order enjoining public and private Respondents<br />
from implementing <strong>the</strong> Northrail Agreements. Such restraining order<br />
should also enjoin <strong>the</strong> disbursement <strong>of</strong> public funds by <strong>the</strong> public<br />
Respondents <strong>for</strong> <strong>the</strong> purpose.<br />
53. The Petitioners as in<strong>for</strong>mal settlers in <strong>the</strong> project areas <strong>of</strong><br />
implementation will also suffer grave and irreparable material injury in<br />
23
terms <strong>of</strong> lost homes, livelihoods and o<strong>the</strong>r property with <strong>the</strong> Northrail<br />
Contract’s implementation.<br />
54. Already, work on <strong>the</strong> Northrail Contract has commenced and<br />
operational expenses amounting to millions <strong>of</strong> pesos in public money are<br />
already being spent <strong>for</strong> its implementation.<br />
55. Unless injunctive relief is immediately af<strong>for</strong>ded to restrain<br />
<strong>the</strong> disbursement <strong>of</strong> public funds and <strong>the</strong> continued implementation <strong>of</strong><br />
<strong>the</strong> Northrail Agreements, Petitioner’s rights, and <strong>the</strong> people’s welfare,<br />
will be severely and permanently damaged and <strong>the</strong> acts <strong>of</strong> <strong>the</strong> public and<br />
private Respondents will render any judgment that may be issued in this<br />
case ineffectual. It is <strong>the</strong>re<strong>for</strong>e respectfully prayed <strong>for</strong> that a Preliminary<br />
Injunction and/or Temporary Restraining Order be immediately issued in<br />
this case.<br />
APPLICATION FOR PRELIMINARY INJUNCTION<br />
AND TEMPORARY RESTRAINING ORDER<br />
56. As previously stated, <strong>the</strong> continued implementation <strong>of</strong> <strong>the</strong><br />
Northrail Agreements stands to cause grave and irreparable injury and<br />
damage to <strong>the</strong> Government and taxpayers as it will surely entail <strong>the</strong><br />
expenditure <strong>of</strong> a huge amount <strong>of</strong> public funds <strong>for</strong> <strong>the</strong> execution <strong>of</strong> illegal<br />
and unconstitutional acts. It is unconscionable that <strong>the</strong> Government<br />
asks <strong>the</strong> people to observe austerity measures and demands from <strong>the</strong>m<br />
new taxes while it spends public money on contracts that are clearly<br />
illegal, unconstitutional and unfavorable to <strong>the</strong> Government.<br />
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57. A failure to stop <strong>the</strong> implementation <strong>of</strong> <strong>the</strong> Northrail<br />
Agreements also stands to cause grave and irreparable injury to lawabiding<br />
citizens <strong>of</strong> <strong>the</strong> country such as Petitioners through <strong>the</strong> erosion <strong>of</strong><br />
Rule <strong>of</strong> Law and <strong>the</strong> weakening <strong>of</strong> re<strong>for</strong>mative laws such as R.A. No.<br />
9184.<br />
58. The Petitioners as in<strong>for</strong>mal settlers in <strong>the</strong> project areas <strong>of</strong><br />
implementation will also suffer grave and irreparable material injury in<br />
terms <strong>of</strong> lost homes, livelihoods and o<strong>the</strong>r property with <strong>the</strong> Northrail<br />
Contract’s implementation.<br />
59. Already, work on <strong>the</strong> Northrail Contract has commenced and<br />
operational expenses amounting to millions <strong>of</strong> pesos in public money are<br />
already being spent <strong>for</strong> its implementation. Moreover, said<br />
implementation threatens to immediately cause <strong>the</strong> demolition <strong>of</strong><br />
Petitioner Settlers homes and unlawfully dislocate <strong>the</strong>m and deprive<br />
<strong>the</strong>m <strong>of</strong> <strong>the</strong>ir source <strong>of</strong> livelihood. Hence, Petitioners will suffer<br />
irreparable damage unless injunctive relief is had.<br />
60. Unless injunctive relief is immediately af<strong>for</strong>ded to restrain<br />
<strong>the</strong> disbursement <strong>of</strong> public funds and <strong>the</strong> continued implementation <strong>of</strong><br />
<strong>the</strong> Northrail Agreements, Petitioner’s rights, and <strong>the</strong> people’s welfare,<br />
will be severely and permanently damaged and <strong>the</strong> acts <strong>of</strong> <strong>the</strong> public and<br />
private Respondents will render any judgment that may be issued in this<br />
case ineffectual. It is <strong>the</strong>re<strong>for</strong>e respectfully prayed <strong>for</strong> that a Preliminary<br />
Injunction and/or Temporary Restraining Order be immediately issued in<br />
this case.<br />
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61. Hence, public and private Respondents should be stopped<br />
through <strong>the</strong> issuance <strong>of</strong> a Writ <strong>of</strong> Preliminary Injunction enjoining <strong>the</strong>m<br />
from <strong>the</strong> implementation <strong>of</strong> <strong>the</strong> Northrail Contract and <strong>the</strong> Loan<br />
Agreement. Public Respondents should also be enjoined from disbursing<br />
public funds <strong>for</strong> such purpose.<br />
62. In this connection, Petitioners are willing and able to execute<br />
a bond in such reasonable amount to be fixed by <strong>the</strong> Court, to <strong>the</strong> effect<br />
that <strong>the</strong> Petitioners/Applicants will pay to such party or person all<br />
damages which it may sustain by reason <strong>of</strong> <strong>the</strong> injunction or temporary<br />
restraining order if <strong>the</strong> court should finally decide that <strong>the</strong> applicant was<br />
not entitled <strong>the</strong>reto.<br />
63. Petitioners likewise pray <strong>for</strong> <strong>the</strong> immediate issuance <strong>of</strong> a<br />
Temporary Restraining Order enjoining Respondents from proceeding<br />
with <strong>the</strong> implementation <strong>of</strong> <strong>the</strong> Northrail Contract and <strong>the</strong> Loan<br />
Agreement. Public Respondents should also be enjoined from disbursing<br />
public funds <strong>for</strong> such purpose.<br />
PRAYERS<br />
WHEREFORE, PREMISES CONSIDERED, it is hereby most<br />
respectfully prayed <strong>for</strong> that this Honorable Court issue:<br />
1) A WRIT OF CERTIORARI REVERSING AND<br />
SETTING ASIDE THE NORTHRAIL CONTRACT AND LOAN<br />
AGREEMENT BE ISSUED, <strong>for</strong> having been executed in<br />
grave abuse <strong>of</strong> discretion amounting to lack or excess <strong>of</strong><br />
jurisdiction;<br />
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2) AN ORDER DECLARING NULL AND VOID AB<br />
INITIO BOTH THE NORTHRAIL CONTRACT AND LOAN<br />
AGREEMENT, <strong>for</strong> being violative <strong>of</strong> <strong>the</strong> Constitution and<br />
<strong>the</strong> laws;<br />
3) A WRIT OF PROHIBITION PERPETUALLY<br />
PROHIBITING THE PUBLIC AND PRIVATE RESPONDENTS<br />
FROM IMPLEMENTING THE NORTHRAIL CONTRACT<br />
AND LOAN AGREEMENT AND FROM DISBURSING PUBLIC<br />
FUNDS FOR SUCH PURPOSE;<br />
4) A WRIT OF PRELIMINARY INJUNCTION<br />
AND/OR TEMPORARY RESTRAINING ORDER<br />
IMMEDIATELY ENJOINING THE IMPLEMENTATION OF<br />
THE NORTHRAIL CONTRACT AND LOAN AGREEMENT,<br />
DURING THE PENDENCY OF THIS CASE.<br />
Respectfully submitted.<br />
Makati City <strong>for</strong> Manila. 11 October 2005.<br />
ROQUE & BUTUYAN LAW OFFICES<br />
Unit 1904, Antel 2000 Corporate Centre<br />
121 Valero St., Salcedo Village<br />
Makati City<br />
27
ROQUE & BUTUYAN LAW OFFICES<br />
Unit 1904, Antel 2000 Corporate Centre<br />
121 Valero St., Salcedo Village<br />
Makati City<br />
By:<br />
H. HARRY L. ROQUE<br />
PTR No. 0008545, January 7, 2005, Makati<br />
IBP No. 499912, January 25, 2000, Lifetime, Makati<br />
Roll No. 36976<br />
JOEL RUIZ BUTUYAN<br />
PTR No. 0008546, January 7, 2005, Makati<br />
IBP No. 500459, January 25, 2000, Lifetime, Q.C.<br />
Roll No. 36911<br />
ALFREDO C. LIGON, III<br />
PTR No. 0009175, January 7, 2004, Makati<br />
IBP No. 638441, January 15, 2005, Makati<br />
Roll No. 47533<br />
GARY S. MALLARI<br />
PTR No. 0009170, January 7, 2005, Makati<br />
IBP No. 638439, January 14, 2005, Q.C.<br />
Roll No. 48459<br />
28
COPY FURNISHED:<br />
Honorable Eduardo Ermita<br />
Office <strong>of</strong> <strong>the</strong> Executive Secretary<br />
Malacañan Palace, City <strong>of</strong> Manila<br />
Honorable Secretary Margarito Teves<br />
Office <strong>of</strong> <strong>the</strong> Secretary<br />
Department <strong>of</strong> Finance Building<br />
BSP Complex, Roxas Boulevard<br />
Manila<br />
Department <strong>of</strong> Finance<br />
Department <strong>of</strong> Finance Building<br />
BSP Complex, Roxas Boulevard<br />
Manila<br />
Honorable Secretary Romulo<br />
Office <strong>of</strong> <strong>the</strong> Secretary<br />
Department <strong>of</strong> Budget and Management<br />
General Solano Street, San Miguel<br />
Manila.<br />
Department <strong>of</strong> Budget and Management<br />
General Solano Street, San Miguel<br />
Manila.<br />
Honorable Secretary Augusto Santos<br />
Office <strong>of</strong> <strong>the</strong> Secretary<br />
National Development Authority<br />
12 Saint Jose Maria Escriva Drive<br />
Ortigas <strong>Center</strong>, Pasig City<br />
National Development Authority<br />
12 Saint Jose Maria Escriva Drive<br />
Ortigas <strong>Center</strong>, Pasig City<br />
North Luzon Railways Corporation<br />
BCDA Corporate <strong>Center</strong><br />
Gozar corner Lucas Streets<br />
Villamor Air Base, Pasay City<br />
China National Machinery and Equipment Corporation<br />
c/o Mr. Ren Hongbin and/or Jibsen International Trading Corporation<br />
12 th Floor, Sage House, 110 Herrera Street, Legaspi Village<br />
Makati City<br />
Office <strong>of</strong> <strong>the</strong> Solicitor General<br />
Amorsolo Street, Makati City<br />
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EXPLANATION<br />
Due to <strong>the</strong> shortage <strong>of</strong> messengerial services and lack <strong>of</strong> time this<br />
Petition is being served to <strong>the</strong> o<strong>the</strong>r parties by registered mail in<br />
accordance with Section 11, Rule 13 <strong>of</strong> <strong>the</strong> Revised Rules <strong>of</strong> Court.<br />
GARY S. MALLARI<br />
C:\Documents and Settings\Atty. Joan\My Documents\Gary\petition northrail.doc<br />
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