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REPUBLIC OF THE PHILIPPINES 

SUPREME COURT 

MANILA 

HERMINIO HARRY L. ROQUE, JR., JOEL 

R. BUTUYAN, ROGER R. RAYEL, GARY S. 

MALLARI, ROMEL R. BAGARES, 

CHRISTOPHER FRANCISCO C. BOLASTIG, 

DANILO M. CALDERON, MA. TERESA D. 

ZEPEDA, ANASTASIA D. ILUSTRE, 

NATIVIDAD S. PALLASIGUE, EMILY A. 

REALINO, LUCINIA C. DICHOS, SERGIO C. 

LEGASPI, JR., VICENTE C. ALBAN, 

CONCHITA G. GOZO, FELICIANO F. 

REYES, RICARDO D. LANOZO, JOSEFINA 

P. LANOZO, ADELAIDA P. PEN, 

Petitioners, 

Case No. ______________ 

-- versus -- 

HON. EXECUTIVE SECRETARY EDUARDO 

ERMITA, HONORABLE SECRETARY 

MARGARITO TEVES, DEPARTMENT OF 

FINANCE (DOF), HONORABLE SECRETARY 

ROMULO NERI, DEPARTMENT OF BUDGET 

AND MANAGEMENT (DBM), HONORABLE 

SECRETARY AUGUSTO SANTOS, 

NATIONAL ECONOMIC AND 

DEVELOPMENT AUTHORITY (NEDA), 

NORTH LUZON RAILWAYS CORPORATION, 

and CHINA NATIONAL MACHINERY AND 

EQUIPMENT CORPORATION, 

Respondents. 

x ---------------------------------------------------------x 

PETITION 

(For Certiorari and Prohibition with Prayer for the issuance of a Writ 

of Preliminary Injunction and/or Temporary Restraining Order) 

PETITIONERS, by counsel, most respectfully state that: 

1

NATURE OF THE PETITION 

1. This is a Petition for Certiorari and Prohibition seeking the 

nullification and immediate enjoinment of the implementation of: 1) the 

Contract Agreement (“Northrail Contract”) dated December 2003 between 

the North Luzon Railways Corporation (“Northrail”) and the China 

National Machinery and Equipment Corporation (“CNMEC”); and 2) 

Buyer Credit Loan Agreement No. BLA 04055 (“Loan Agreement”) dated 

26 February 2004 between the Export-Import Bank of China (“China 

EXIM Bank”) and the Government of the Republic of the Philippines 

(“Government”) for having been entered into in grave abuse of discretion 

amounting to lack or excess of jurisdiction by the officials involved. Said 

loan agreement and contract were executed in clear violation of the 

Constitution and the laws, to the great disadvantage of Filipino taxpayers 

and despite their implementation resulting in the displacement of 

thousands of families who dwell and derive income in the areas to be 

affected. 

THE PARTIES 

2. Petitioners Herminio Harry L. Roque, Jr., Joel R. Butuyan, 

Roger R. Rayel, Gary S. Mallari, Romel R. Bagares, Christopher Francisco 

C. Bolastig are all lawyers and taxpayers who stand to suffer direct 

injury as a result of the impending disbursement of public funds in order 

to enforce void and illegal contracts. Petitioners are concerned that, while 

the Government constantly devises ways to obtain more revenues from 

taxpayers to address a fiscal deficit, it sometimes puts public funds to 

unfair, inefficient, injudicious and illegal use. The Petitioner may be 

served with pertinent papers and processes through the Roque and 

2

Butuyan Law Offices, of which they are all part, at Unit 1904 Antel 

2000 Corporate Centre, 121 Valero Street, Salcedo Village, Makati 

City. For easy reference, a copy of one of Petitioners’ Income Tax Return 

is attached hereto as Annex “A.” 

3. Petitioners Danilo M. Calderon, Ma. Teresa D. Zepeda, 

Anastasia D. Ilustre, Natividad S. Pallasigue, Emily A. Realino, Lucinia C. 

Dichos, Sergio C. Legaspi, Jr., Vicente C. Alban, Conchita G. Gozo, 

Feliciano F. Reyes, Ricardo D. Lanozo, Josefina P. Lanozo, Adelaida P. 

Pen (“Petitioners Settlers”) are taxpayers and settlers who either reside or 

derive income from the areas that are set to be cleared in the 

implementation of the Northrail Contract involved in this case. As 

taxpayers, they are liable to suffer direct injury from the unscrupulous 

spending of scarce government resources, while as settlers in the areas 

affected, they stand to directly suffer material injury in terms of damaged 

property, lost income, and displacement if the questioned contract is 

implemented. They may be served with pertinent papers and processes 

through their counsel the Roque and Butuyan Law Offices, Unit 1904 

Antel 2000 Corporate Centre, 121 Valero Street, Salcedo Village, 

Makati City. 

4. Public Respondent Honorable Eduardo Ermita is impleaded 

in his capacity as Executive Secretary of the President of the Philippines. 

He may be served with pertinent papers and processes through the Office 

of the Executive Secretary, Malacañan Palace, City of Manila. 

5. Honorable Secretary Margarito Teves is being impleaded in 

his capacity as the Secretary of Department of Finance. He may be 

3

served with pertinent papers and processes at the Department of Finance 

Building, BSP Complex, Roxas Boulevard, Manila. 

6. Public Respondent Department of Finance is the government 

agency that acts as custodian and manager of all financial resources of 

the government. It may be served with pertinent papers and processes at 

the Department of Finance Building, BSP Complex, Roxas Boulevard, 

Manila. 

7. Honorable Secretary Romulo Neri is being impleaded in his 

capacity as the Secretary of the Department of Budget and Management, 

the government agency that authorizes the release and disbursement of 

public funds. He may be served with pertinent papers and processes at 

the Department of Budget and Management, General Solano Street, San 

Miguel, Manila. 

8. Public Respondent Department of Budget and Management 

is the government agency that authorizes the release and disbursement 

of public funds. It may be served with pertinent papers and processes tat 

the Department of Budget and Management, General Solano Street, San 

Miguel, Manila. 

9. Honorable Secretary Augusto Santos is being impleaded in 

his capacity as Secretary of the National Economic and Development 

Authority. He may be served with pertinent papers and processes at the 

National Economic and Development Authority, 12 Saint Jose Maria 

Escriva Drive, Ortigas Center, Pasig City. 

4

10. Public Respondent National Economic and Development 

Authority is the primary agency tasked with formulating and 

implementing social and economic development policies including 

recommendations on priority infrastructure projects. It may be served 

with pertinent papers and processes at 12 Saint Jose Maria Escriva 

Drive, Ortigas Center, Pasig City. 

11. Private Respondent North Luzon Railways Corporation 

(“Northrail”) is a corporation organized and existing under the laws of the 

Philippines. It may be served with papers and other pertinent processes 

at its principal office address at the BCDA Corporate Center, Gozar 

corner Lucas Streets, Villamor Air Base, Pasay City. 

12. Private Respondent China National Machinery and 

Equipment Corporation (“CNMEC”) is a corporation purportedly 

organized and existing under the laws of the People’s Republic of China 

(“PROC”), with principal office address at 46 Sanlihe Road, West District, 

Beijing, China. It may be served with papers and other pertinent 

processes through its agents Mr. Ren Hongbin and/or Jibsen 

International Trading Corporation, 12 th Floor, Sage House, 110 Herrera 

Street, Legaspi Village, Makati City. 

5

STATEMENT OF FACTS 

13. On December 30, 2003, a Contract Agreement (“Northrail 

Contract”) was executed between North Luzon Railways Corporation 

(“Northrail”), a Philippine government owned and controlled corporation, 

and the China National Machinery & Equipment Corporation (“CNMEC”), 

a corporation purportedly organized and created under the laws of 

China. The contract involved Northrail employing CNMEC as prime 

contractor for the construction of railways from Caloocan City to Malolos, 

Bulacan (Section I, Phase I of Philippine North Luzon Railways Project). 

14. On February 26, 2004, a Buyer Credit Loan Agreement 

(“Loan Agreement”) was executed between the Export-Import Bank of 

China and the Government of the Republic of the Philippines. Among 

other things, the said Loan Agreement provided that China EXIM Bank, 

as the lender, will extend Four Hundred Million US Dollars 

(US$400,000,000.00) in loans called Preferential Buyer’s Credit, to the 

Government of the Republic of the Philippines. The loan will be for the 

financing of the construction of the Northrail Project Section I, Phase I. 

The Loan Agreement also mandated that CNMEC will act as the Prime 

Contractor for the project. 

15. Further documents reveal that the total project cost is Five 

Hundred and Three Million US Dollars (US$503,000,000.00), of which 

One Hundred Seven Million US Dollars (US$107,000,000.00) will be 

provided as counterpart funds by the Philippine Government, through 

the Northrail. 

6

16. The Northrail Contract and the Loan Agreement however 

appear to be illegal and void for not having complied with the following 

laws: 

1) REPUBLIC ACT NO. 9184; 

2) THE GOVERNMENT AUDITING CODE; 

3) THE ADMINISTRATIVE CODE OF 1987 

4) R.A. NO. 4566 OR THE CONTRACTOR’S LICENSE 

LAW; and 

5) THE PHILIPPINE CONSTITUTION. 

In particular, the Northrail Contract was awarded without compliance 

with a competitive bidding process. It is not supported with a proper 

certification of availability of funds and proof of CNMEC’s license to act 

as a contractor either. And the Loan Ageement does not appear to have 

had prior concurrence of the Monetary Board, in violation of the 

Constitution. The instruments are therefore invalid and should not be 

implemented, nor should they have any effects. 

17. Regardless of their invalidity, billions of pesos in public 

funds will be spent by the government pursuant to these instruments in 

the implementation of the Northrail project. These expenditures 

constitute illegal disbursements of public funds by government officials 

which should be corrected at the earliest possible time to avoid further 

unnecessary bleeding of government funds. The wasted funds will 

ultimately be shouldered by an already weary public who will later have 

to pay these through more taxes. 

7

18. Moreover, Petitioners Settlers all either reside or derive 

income from the project site in Bulacan which is to be cleared in the 

implementation of the Northrail Contract involved in this case. They have 

all peacefully existed on the land on which they have lived and worked 

for more than twenty years now and have a legal right to stay in said 

land and continue their livelihood until they are legally and validly 

relocated. They therefore stand to suffer direct material injury in terms of 

damaged property and lost income, and irreparable injury in the form of 

illegal displacement due to the implementation of the questioned 

contract. The implementation of the Northrail Contract, a void contract, 

will result in the demolition of their homes and their unjust dislocation 

and deprivation of livelihood. 

19. Petitioners requested certified true copies of the Northrail 

Contract and the Loan Agreement from both Northrail and the Export- 

Import Bank of China, but their reasonable request for the production of 

certified true copies were denied by said companies. Petitioners therefore 

attach copies of the Northrail Contract and the Loan Agreement hereto as 

Annexes “B” and “C.” Petitioners also attach proof of their efforts at 

acquiring said certified true copies hereto as Annex “D.” As regards the 

fact that the total project cost is Five Hundred and Three Million US 

Dollars (US$503,000,000.00), this is contained in a letter dated January 

6, 2004 by Socioeconomic Planning Secretary Romulo L. Neri to Jose L. 

Cortes, President of Northrail, which letter is attached hereto as Annex 

“E.” 

20. On 29 September 2005, the Senate continued its 

investigation into the Northrail Agreements and invited resource persons 

8

from the University of the Philippines Law Center to present their 

findings regarding the validity of the agreements. Public Respondents 

were also invited to comment on said findings, but they refused to appear 

on orders of the President, who earlier issued Executive Order No. 464, 

prohibiting Cabinet officials from appearing in Senate investigations 

without prior clearance from the Chief Executive. Thus, Petitioners are 

compelled to air their grievances through this Petition, which is based 

primarily on the findings of the University of the Philippines Law Center 

that the Northrail Agreements are illegal, unconstitutional and void. 

21. Meanwhile, Respondents have begun the implementation of 

the Northrail Contract and Loan Agreement and have commenced the 

Northrail Project, thereby opening the channels of illegal disbursements 

in millions of pesos and threatening to immediately cause the demolition 

of Petitioner Settlers’ homes. Hence, Petitioners have no other recourse in 

law to prevent such illegal acts but to file the instant Petition. 

JURISDICTION OF THE SUPREME COURT 

22. Petitioners humbly beseech the Honorable Court to take 

cognizance of the instant case, invoking the Court’s power to set aside 

rules of procedure in assuming jurisdiction over matters of paramount 

public interest and when issues presented are of transcendental 

importance to the public. The Court, as the branch constitutionally 

tasked “to settle actual controversies involving rights which are legally 

demandable and enforceable, and to determine whether or not there has 

been a grave abuse of discretion amounting to lack or excess of 

jurisdiction on the part of any branch or instrumentality of the 

9

Government,” has historically and heroically performed this 

constitutional mandate by going beyond procedural restrictions in order 

to serve a higher public purpose. Such is the situation being presented 

by the Petitioners in the instant case. 

23. In Chavez vs. PCGG, 1 the Court upheld the right of a citizen 

to bring a taxpayer's suit on matters of transcendental importance to the 

public, especially when the matter involves the recovery of the ill-gotten 

wealth of the Marcoses. In Chavez vs. PEA, 2 the Court recognized a 

taxpayer’s right to bring suit to enforce the public’s right to information 

and to stop the government from alienating public land in violation of the 

Constitution. 

24. In the landmark Francisco vs. House of Representatives, 3 the 

Court cited numerous case in the past where the court “accorded 

standing to taxpayers, voters, concerned citizens, legislators in cases 

involving paramount public interest and transcendental importance,” 

and held that “procedural matters are subordinate to the need to 

determine whether or not the other branches of the government have 

kept themselves within the limits of the Constitution and the laws and 

that they have not abused the discretion given to them.” 4 

25. In addition, the court has already held that in the case of a 

taxpayer, he is allowed to sue where there is a claim that public funds 

are illegally disbursed, or that public money is being deflected to any 

1 Chavez v. PCGG, 299 SCRA 744 (1998). 

2 G.R. No. 133250, July 9, 2002. 

3 G.R. No. 160261, November 10, 2003. 

4 Citing Kilosbayan, Inc. v. Morato, 250 SCRA 130 (1995), Tatad v. Secretary of the 

Department of Energy, 281 SCRA 330 (1997), Kapatiran ng mga Naglilingkod sa 

Pamahalaan ng Pilipinas, 163 SCRA 371, 378 (1988). 

10

improper purpose, or that there is a wastage of public funds through the 

enforcement of an invalid or unconstitutional law. 5 In the discussion that 

follows, the Petitioners will establish that such is the situation in the 

instant case. 

26. Petitioners are also constrained to air their grievance and 

seek relief with this Honorable Court because of the provisions of 

Republic Act No. 8975, also known as “An Act to Ensure the Expeditious 

Implementation and Completion of Government Infrastructure Projects 

by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, 

Preliminary Injunctions or Preliminary Mandatory Injunctions.” The said 

Act, particularly Section 3 thereof, makes exclusive to the Supreme 

Court the issuance of temporary restraining orders, preliminary 

injunctions or preliminary mandatory injunctions on government 

infrastructure projects, which relief are being prayed for in the instant 

case. 6 

5 Del Mar v. PAGCOR 346 SCRA 485, 501 (2000) citing Kilosbayan, Inc., et.al. v. 

Morato, 250 SCRA 130 (1995); Dumlao v. COMELEC, 95 SCRA 392 (1980); Sanidad v. 

Comelec, 73 SCRA 333 (1976); Philconsa v. Mathay, 18 SCRA 300 (1966); Pascual v. 

Secretary of Public Works, 110 Phil 331 (1960); Vide Gonzales v. Narvasa, 337 SCRA 

733 (2000); Pelaez v. Auditor General, 15 SCRA 569 (1965); Philconsa v. Gimenez, 15 

SCRA 479 (1965); Iloilo Palay & Corn Planters Association v. Feliciano, 13 SCRA 377 

(1965). 

6 Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary 

Injunctions and Preliminary Mandatory Injunctions. -No court, except the Supreme 

Court, shall issue any temporary restraining order, preliminary injunction or 

preliminary mandatory injunction against the government, or any of its subdivisions, 

officials or any person or entity, whether public or private, acting under the 

government's direction, to restrain, prohibit or compel the following acts: 

(a) Acquisition, clearance and development of the right-of-way and/or 

site or location of any national government project; 

(b) Bidding or awarding of contract/project of the national 

government as defined under Section 2 hereof; 

(c) Commencement, prosecution, execution, implementation, 

operation of any such contract or project; 

(d) Termination or rescission of any such contract/project; and 

(e) The undertaking or authorization of any other lawful activity 

necessary for such contract/project. 

11

ISSUES 

I. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR 

HAVING BEEN AWARDED WITHOUT COMPETITIVE BIDDING, IN 

VIOLATION OF THE PROVISIONS OF REPUBLIC ACT NO. 9184; 

II. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR 

FAILURE TO COMPLY WITH THE PROVISIONS OF THE 

GOVERNMENT AUDITING CODE AND THE ADMINISTRATIVE 

CODE OF 1987; 

III. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR 

CNMEC’S FAILURE TO COMPLY WITH R.A. NO. 4566 OR THE 

“CONTRACTOR’S LICENSE LAW;” 

IV. WHETHER OR NOT THE LOAN AGREEMENT (BCLA No. BLA 

04055) IS VOID AB INITIO; 

V. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE 

ISSUANCE OF A WRIT OF CERTIORARI AND PROHIBITION TO 

DECLARE AS NULL AND VOID THE NORTHRAIL AGREEMENTS 

AND TO PERMANENTLY PROHIBIT THE IMPLEMENTATION OF 

THE SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR 

SUCH PURPOSE; 

VI. WHETHER OR NOT PETITIONERS ARE ENTITLED TO A 

PRELIMINARY INJUNCTION AND/OR A TEMPORARY 

RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLE- 

MENTATION OF THE NORTHRAIL CONTRACT AND THE LOAN 

AGREEMENT AND THE DISBURSEMENT OF PUBLIC FUNDS FOR 

SUCH PURPOSE, DURING THE PENDENCY OF THIS CASE. 

ARGUMENTS 

I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN 

AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION OF 

THE PROVISIONS OF REPUBLIC ACT NO. 9184; 

This prohibition shall apply in all cases, disputes or controversies instituted by a 

private party, including but not limited to cases filed by bidders or those claiming to 

have rights through such bidders involving such contract/project. This prohibition shall 

not apply when the matter is of extreme urgency involving a constitutional issue, such 

that unless a temporary restraining order is issued, grave injustice and irreparable 

injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, 

which bond shall accrue in favor of the government if the court should finally decide 

that the applicant was not entitled to the relief sought. 

If after due hearing the court finds that the award of the contract is null and 

void, the court may, if appropriate under the circumstances, award the contract to the 

qualified and winning bidder or order a rebidding of the same, without prejudice to any 

liability that the guilty party may incur under existing laws. 

12

II. THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO 

COMPLY WITH THE PROVISIONS OF THE GOVERNMENT 

AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987; 

III. THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE 

TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S 

LICENSE LAW;” 

IV. THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB 

INITIO; 

V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF 

CERTIORARI AND PROHIBITION TO DECLARE AS NULL AND 

VOID THE NORTHRAIL AGREEMENTS AND TO PERMANENTLY 

PROHIBIT THE IMPLEMENTATION OF THE SAME AND ANY 

DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE; 

VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY INJUNCTION 

AND/OR A TEMPORARY RESTRAINING ORDER IMMEDIATELY 

ENJOINING THE IMPLEMENTATION OF THE NORTHRAIL 

CONTRACT AND THE LOAN AGREEMENT AND THE 

DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE, 

DURING THE PENDENCY OF THIS CASE. 

DISCUSSION 

I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN 

AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION 

OF THE PROVISIONS OF REPUBLIC ACT NO. 9184. 

27. The Northrail Contract was awarded to CNMEC without 

competitive bidding, in violation of the provisions of Republic Act No. 

9184, otherwise known as the “Government Procurement Reform Act,” 

particularly Section 10 thereof, to wit: 

“Sec. 10. Competitive Bidding.- All Procurement shall 

be done through Competitive Bidding, except as provided for 

in Article XVI of this Act.” 

28. Under Section 4 of the Act, the law covers procurement of 

infrastructure projects, described under Section 5(k) as including “the 

13

construction, improvement, rehabilitation, demolition, repair, restoration 

or maintenance of roads and bridges, railways, airports, seaports, xxxx.” 

ab initio. 7 

29. From this alone, the said contract is already illegal and void 

The Contract was not awarded pursuant to any alternative method 

of procurement that falls under the exceptions provided in R.A. No. 

9184. 

30. The Northrail Contract purports to have been awarded 

pursuant to a negotiated procurement, which is an alternative method of 

procurement provided for in Section 48 of R.A. No. 9184. 8 This, however, 

7 Caltex v. Delgado Bros., 96 Phil. 368. Likewise, the Civil Code says: 

Art. 1409. The following contracts are inexistent and void from the beginning: 

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, 

public order or public policy; 

(2) Those which are absolutely simulated or fictitious; 

(3) Those whose cause or object did not exist at the time of the transaction; 

(4) Those whose object is outside the commerce of men; 

(5) Those which contemplate an impossible service; 

(6) Those where the intention of the parties relative to the principal object of the 

contract cannot be ascertained; 

(7) Those expressly prohibited or declared void by law." (Emphasis supplied.) 

8 (R.A. No. 9184) Sec. 48. Alternative Methods. - Subject to the prior approval of the 

Head of the Procuring Entity or his duly authorized representative, and whenever 

justified by the conditions provided in this Act, the Procuring Entity may, in order to 

promote economy and efficiency, resort to any of the following alternative methods of 

Procurement: 

a. Limited Source Bidding, otherwise known as Selective Bidding - a method of 

Procurement that involves direct invitation to bid by the Procuring Entity from a 

set of pre-selected suppliers or consultants with known experience and proven 

capability relative to the requirements of a particular contract; 

b. Direct Contracting, otherwise known as Single Source Procurement - a method 

of Procurement that does not require elaborate Bidding Documents because the 

supplier is simply asked to submit a price quotation or a pro-forma voice 

together with the conditions of sale, which offer may be accepted immediately or 

after some negotiations; 

c. Repeat Order. - a method of Procurement that involves a direct Procurement of 

Goods from the previous winning bidder, whenever there is a need to replenish 

Goods procured under a contract previously awarded through Competitive 

Bidding; 

d. Shopping - a method of Procurement whereby the Procuring Entity simply 

requests for the submission of price quotations for readily available off-the-shelf 

Goods or ordinary/regular equipment to be procured directly from suppliers of 

known qualification; or 

e. Negotiated Procurement - a method of Procurement that may be resorted under 

the extraordinary circumstances provided for in Section 53 of this Act and other 

instances that shall be specified in the IRR, whereby the Procuring Entity 

14

is a defective contention because none of the conditions for a negotiated 

procurement, provided for in Section 53 of the law, exists in this case. 9 

31. Even the mere circumstance that the Northrail project is 

financed through a “tied loan” from EXIM Bank under an arrangement 

which requires EXIM Bank to nominate/select the contractor for the 

project to be financed by the loan does not help the Respondents. Such 

an arrangement is by no means among the alternative methods of 

procurement enumerated under Section 48 of R.A. No. 9184, which 

allows exceptions to the rule on public bidding; meanwhile, the law 

contemplates no other alternative method of procurement as an 

exception to the competitive public bidding requirement; hence, the time 

honored doctrine of expressio unius est exclusio alterius applies. 

directly negotiates a contract with a technically, legally and financially capable 

supplier, contractor or consultant. 

In all instances, the Procuring Entity shall ensure that the most advantageous price for 

the government is obtained. 

9 (R.A. No. 9184) Sec. 53. Negotiated Procurement. - Negotiated Procurement shall be 

allowed only in the following instances: 

a. In case of two (2) failed bidding as provided in Section 35 hereof; 

b. In case of imminent danger to life or property during a state of calamity, or 

when time is of the essence arising from natural or man-made calamities or 

other causes where immediate action is necessary to prevent damage to or loss 

of life or property, or to restore vital public services, infrastructure facilities and 

other public utilities; 

c. Take-over of contracts, which have been rescinded or terminated for causes 

provided for in the contract and existing laws, where immediate action is 

necessary to prevent damage to or loss of life or property, or to restore vital 

public services, infrastructure facilities and other public utilities; 

d. Where the subject contract is adjacent or contiguous to an on-going 

infrastructure project, as defined in the IRR: Provided, however, That the 

original contract is the result of a Competitive Bidding; the subject contract to 

be negotiated has similar or related scopes of work; it is within the contracting 

capacity of the contractor; the contractor uses the same prices or lower unit 

prices as in the original contract less mobilization cost; the amount involved 

does not exceed the amount of the ongoing project; and, the contractor has no 

negative slippage: Provided, further, That negotiations for the procurement are 

commenced before the expiry of the original contract. Wherever applicable, the 

principle shall also govern consultancy contract, where the consultants have 

unique experience and expertise to deliver the required service; or, 

e. Subject to the guidelines specified in the IRR, purchases of Goods from 

another agency of the government, such as the Procurement Service of the DBM, 

which is tasked with a centralized procurement of commonly used Goods for the 

government in accordance with Letters of Instruction No. 755 and Executive 

Order No. 359, series of 1989. 

15

None of the agreements is a treaty. 

32. Both the Northrail Contract and the Loan Agreement 

(collectively the “Northrail Agreements”) are not treaties, international 

agreements, or executive agreements, that fall under the exempting 

proviso of Section 4 of R.A. No. 9184, which mandates their effectivity 

although they run contrary to some provisions of the said law. 

33. First of all, Article 2(a) of the Vienna Convention of the Law 

of Treaties (“Vienna Convention”), defines a treaty as an international 

agreement concluded between states and governed by international 

law, to wit: 

“[T]reaty means an international agreement concluded 

between States in written form and governed by international 

law, whether embodied in a single instrument or two or more 

related instruments and whatever its particular 

designation[.]” 

By the legal standards set out in this provision, neither of the 

agreements in question qualifies as a treaty, because neither agreement 

is between states and because neither is governed by international law. 

34. The Northrail Contract is an agreement between a 

government corporation (Northrail) created under the laws of the 

Republic of the Philippines, which has a separate juridical personality, 

and a state-corporation created under the laws of the People’s Republic 

of China, which also has a juridical personality of its own; while the Loan 

Agreement is an agreement between the Philippine Government and 

China EXIM Bank, a banking agency of the People’s Republic of China, 

16

which also has its own juridical personality. None of the contracts 

therefore is between states. 

35. Except for the Government as a party to the Loan 

Agreement, all parties to the Northrail Agreements are juridical persons 

under the national or internal law of either the Philippines or the PROC. 

They are not subjects or persons of international law. They do not have 

the competence to create international obligations, nor do they have the 

capacity to conclude treaties. They are not states. This being so, none of 

the agreements in question can be considered a treaty. 

36. It must be added that agreements concluded by states with 

individual or juridical persons are excluded from the coverage of the 

Vienna Convention. And, having been concluded by entities which are 

not international organizations under international law, the Northrail 

Agreements are likewise outside the purview of the Vienna Convention on 

the Law of Treaties between states and international organizations or 

between international organizations. 

37. Moreover, the Northrail Agreements themselves provide that 

they are not governed by international law, but by the national laws of 

either the Republic of the Philippines and of the PROC. Clearly, the 

Northrail Contract states that: 10 

“The Contract shall in all respects be read and 

construed in accordance with the laws of the Philippines.” 

10 Please see Clause 2. 

17

And the Loan Agreement likewise requires that: 11 

“This Agreement shall be governed by and construed 

in accordance with the laws of the People’s Republic of 

China.” 

Hence, neither constitutes an agreement governed by international law 

within the purview of the Vienna Convention. 

None of the agreements is an executive agreement 

38. None of the agreements can be considered an executive 

agreement either, which is defined in Executive Order No. 459 (dated 

November 25, 1997), Providing for the Guidelines in the Negotiation of 

International Agreements and its Ratification, as “similar to treaties 

except that they do not require legislative concurrence.” Said definition 

only relaxes the requirement of Senate concurrence which is required by 

the Constitution, but leaves in place the requirement that it be an 

international agreement entered into by the Philippines, i.e., that it be 

concluded between states in written form and governed by international 

law, as defined by the Vienna Convention. 

II. 

THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO 

COMPLY WITH THE PROVISIONS OF THE GOVERNMENT 

AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987; 

39. Both the Government Auditing Code of the Philippines 

(Presidential Decree No. 1445) and the Administrative Code of 1987 

(Executive Order No. 292) specifically proscribe the making of any 

contract by any government agency involving the expenditure of public 

11 Please see Section 15.1. 

18

funds unless there is an appropriation therefor and a proper certification 

thereof by the proper accounting official which should be attached to the 

proposed contract. A proposed government contract involving the 

expenditure of public funds that is unsupported by a certificate as to the 

existence of appropriation and the availability of the necessary funds, 

which is to be attached as an integral part of the proposed contract, is 

fatally defective and in the words of the Supreme Court, “suffers the vice 

of nullity.” Indeed, “fund availability is, as it has always been, an 

indispensable prerequisite to the execution of any government contract 

involving the expenditure of public funds by all government agencies at 

all levels.” 12 

40. From an examination of the records, it is also obvious that 

the Northrail Contract was executed prior to the execution of the Loan 

Agreement. The conclusion to be drawn, therefore, is that the Contract 

was perfected while it was still unfunded, thus it is contrary to the 

above-discussed law. 

41. As the Northrail Contract is not supported by the required 

certificate as to the availability of funds, and because it appears to have 

been executed with no funds to support it, it is illegal and void from the 

beginning. 

III. 

THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE 

TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S 

LICENSE LAW.” 

12 Osmeña vs. CA 230 SCRA 585. 

19

42. R.A. No. 4566 requires that any prospective contractor for 

infrastructure projects must obtain a Contractor’s License before it can 

engage in business as a contractor in the Philippines. In particular, 

Sections 20 and 23 thereof provide that: 

“Section 20. Qualifications of applicants for contractors' 

licenses. The Board shall require an applicant to show at 

least two years of experience in the construction industry, 

and knowledge of the building, safety, health and lien laws of 

the Republic of the Philippines and the rudimentary 

administrative principles of the contracting business as the 

Board deems necessary for the safety of the contracting 

business of the pubic. 

“For the purpose of this section, a partnership, 

corporation, or any other organization may qualify through 

its responsible managing officer appearing personally before 

the Board who shall prove that he is a bona fide responsible 

officer of such firm and that he exercises or is in a position 

to exercise authority over the contracting business of his 

principal or employer in the following manner: (1) to make 

technical and administrative decisions; and, (2) to hire, 

superintend, promote, transfer, lay off, discipline or 

discharge employees. 

(xxx) 

“Section 23. Issuance of licenses. Upon the payment of 

the corresponding fee and the filing of the application, and 

after examination and investigation as may be required, the 

Board within fifteen days after the approval of the 

application shall issue a license to the applicant permitting 

him to engage in business as a contractor under the terms of 

this Act for the remaining part of the fiscal year.” 

43. A Special License is required of a foreign contractor who 

wishes to participate in a foreign-funded project. One of the requirements 

for the grant of a Special License is that the foreign contractor must 

prove that it is a bona fide contractor in its home country. The 

information obtained by Petitioners is that CNMEC’s name in China is 

actually China National Machinery and Equipment Import and Export 

Corporation, which means that it is a mere trading company with no 

prior venture into railway construction, both at home and abroad. 

20

44. CNMEC cannot therefore engage as a contractor in the 

Philippines and the Northrail Contract is therefore void for failure to 

comply with R.A. 4566. 

IV. 

THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB 

INITIO. 

45. Article VII, Section 20 of the Constitution provides: 

Section 20. The President may contract or guarantee 

foreign loans on behalf of the Republic of the Philippines 

with the prior concurrence of the Monetary Board, and 

subject to such limitations as may be provided by law. The 

Monetary Board shall, within thirty days from the end of 

every quarter of the calendar year, submit to the Congress a 

complete report of its decisions on applications for loans to 

be contracted or guaranteed by the Government or 

government-owned and controlled corporations which would 

have the effect of increasing the foreign debt, and containing 

other matters as may be provided by law. (Emphasis 

supplied.) 

46. The Loan Agreement as it stands, and its schedules and 

annexes, contains no certification that it has been approved or concurred 

to by the Monetary Board prior to its execution, a requirement that is 

unequivocally made in the above-quoted provision of the Constitution. 

This flaw renders the agreement not only illegal but unconstitutional, 

which renders it and other contracts flowing from it, such as the 

Northrail Contract, null and void. 

V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT 

OF CERTIORARI AND PROHIBITION TO DECLARE AS NULL 

AND VOID THE NORTHRAIL AGREEMENTS AND TO 

PERMANENTLY PROHIBIT THE IMPLEMENTATION OF THE 

21

SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR SUCH 

PURPOSE. 

47. The execution of the Northrail Agreements with grave abuse 

of discretion amounting to lack or excess of jurisdiction and in clear 

violation of the Constitution and the law, makes the same patently void 

ab initio. The public and private Respondents have commenced work on 

the Contract, some of which include the forced removal of settlers from 

the implementation areas. This too constitutes grave abuse of 

discretion amounting to lack or excess of jurisdiction on the part of 

Respondents. 

48. The continued implementation of the Northrail Agreements 

stands to cause grave and irreparable injury and damage to the 

Government and taxpayers as it will surely entail the expenditure of a 

huge amount of public funds for the execution of illegal and 

unconstitutional acts. In a climate where the Government imposes 

austerity measures and new taxes on the people to address a budget 

deficit, the expenditure of public money on contracts that are clearly 

illegal, unconstitutional and unfavorable to the Government is 

particularly unconscionable. 

49. A failure to nullify and prohibit the Northrail Agreements 

also stands to cause grave and irreparable injury to law-abiding citizens 

of the country such as Petitioners through the erosion of Rule of Law and 

the weakening of reformative laws such as R.A. No. 9184. 

50. The Petitioners as informal settlers in the project areas of 

implementation will also suffer grave and irreparable material injury in 

22

terms of lost homes, livelihoods and other property with the Northrail 

Contract’s implementation. 

51. Therefore, it is clear that Respondents are implementing the 

patently void Northrail Agreements in violation of the Petitioners’ rights 

as taxpayers and as law-abiding citizens, thereby causing them grave 

and irreparable injury. Unless Respondents are prohibited from 

continuing their acts, the taxpayers’ rights and the Republic’s welfare 

will be severely and permanently damaged. Hence, a Writ of Prohibition 

should immediately be issued to prohibit public and private Respondents 

from proceeding with the implementation of the questioned Northrail 

Agreements. The Writ should also prohibit the public Respondents from 

authorizing the release of public funds for the implementation of the 

agreements. 

VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY 

INJUNCTION AND/OR A TEMPORARY RESTRAINING ORDER 

IMMEDIATELY ENJOINING THE IMPLEMENTATION OF THE 

NORTHRAIL CONTRACT AND THE LOAN AGREEMENT AND 

THE DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE, 


52. Petitioners likewise pray for the immediate issuance of a 

Temporary Restraining Order enjoining public and private Respondents 

from implementing the Northrail Agreements. Such restraining order 

should also enjoin the disbursement of public funds by the public 

Respondents for the purpose. 



23



54. Already, work on the Northrail Contract has commenced and 

operational expenses amounting to millions of pesos in public money are 

already being spent for its implementation. 

55. Unless injunctive relief is immediately afforded to restrain 

the disbursement of public funds and the continued implementation of 

the Northrail Agreements, Petitioner’s rights, and the people’s welfare, 

will be severely and permanently damaged and the acts of the public and 

private Respondents will render any judgment that may be issued in this 

case ineffectual. It is therefore respectfully prayed for that a Preliminary 

Injunction and/or Temporary Restraining Order be immediately issued in 

this case. 

APPLICATION FOR PRELIMINARY INJUNCTION 

AND TEMPORARY RESTRAINING ORDER 

56. As previously stated, the continued implementation of the 

Northrail Agreements stands to cause grave and irreparable injury and 

damage to the Government and taxpayers as it will surely entail the 

expenditure of a huge amount of public funds for the execution of illegal 

and unconstitutional acts. It is unconscionable that the Government 

asks the people to observe austerity measures and demands from them 

new taxes while it spends public money on contracts that are clearly 

illegal, unconstitutional and unfavorable to the Government. 

24

57. A failure to stop the implementation of the Northrail 

Agreements also stands to cause grave and irreparable injury to lawabiding 

citizens of the country such as Petitioners through the erosion of 

Rule of Law and the weakening of reformative laws such as R.A. No. 

9184. 





59. Already, work on the Northrail Contract has commenced and 

operational expenses amounting to millions of pesos in public money are 

already being spent for its implementation. Moreover, said 

implementation threatens to immediately cause the demolition of 

Petitioner Settlers homes and unlawfully dislocate them and deprive 

them of their source of livelihood. Hence, Petitioners will suffer 

irreparable damage unless injunctive relief is had. 

60. Unless injunctive relief is immediately afforded to restrain 

the disbursement of public funds and the continued implementation of 

the Northrail Agreements, Petitioner’s rights, and the people’s welfare, 

will be severely and permanently damaged and the acts of the public and 

private Respondents will render any judgment that may be issued in this 

case ineffectual. It is therefore respectfully prayed for that a Preliminary 

Injunction and/or Temporary Restraining Order be immediately issued in 

this case. 

25

61. Hence, public and private Respondents should be stopped 

through the issuance of a Writ of Preliminary Injunction enjoining them 

from the implementation of the Northrail Contract and the Loan 

Agreement. Public Respondents should also be enjoined from disbursing 

public funds for such purpose. 

62. In this connection, Petitioners are willing and able to execute 

a bond in such reasonable amount to be fixed by the Court, to the effect 

that the Petitioners/Applicants will pay to such party or person all 

damages which it may sustain by reason of the injunction or temporary 

restraining order if the court should finally decide that the applicant was 

not entitled thereto. 

63. Petitioners likewise pray for the immediate issuance of a 

Temporary Restraining Order enjoining Respondents from proceeding 

with the implementation of the Northrail Contract and the Loan 

Agreement. Public Respondents should also be enjoined from disbursing 

public funds for such purpose. 

PRAYERS 

WHEREFORE, PREMISES CONSIDERED, it is hereby most 

respectfully prayed for that this Honorable Court issue: 

1) A WRIT OF CERTIORARI REVERSING AND 

SETTING ASIDE THE NORTHRAIL CONTRACT AND LOAN 

AGREEMENT BE ISSUED, for having been executed in 

grave abuse of discretion amounting to lack or excess of 

jurisdiction; 

26

2) AN ORDER DECLARING NULL AND VOID AB 

INITIO BOTH THE NORTHRAIL CONTRACT AND LOAN 

AGREEMENT, for being violative of the Constitution and 

the laws; 

3) A WRIT OF PROHIBITION PERPETUALLY 

PROHIBITING THE PUBLIC AND PRIVATE RESPONDENTS 

FROM IMPLEMENTING THE NORTHRAIL CONTRACT 

AND LOAN AGREEMENT AND FROM DISBURSING PUBLIC 

FUNDS FOR SUCH PURPOSE; 

4) A WRIT OF PRELIMINARY INJUNCTION 

AND/OR TEMPORARY RESTRAINING ORDER 

IMMEDIATELY ENJOINING THE IMPLEMENTATION OF 

THE NORTHRAIL CONTRACT AND LOAN AGREEMENT, 


Respectfully submitted. 

Makati City for Manila. 11 October 2005. 

ROQUE & BUTUYAN LAW OFFICES 

Unit 1904, Antel 2000 Corporate Centre 

121 Valero St., Salcedo Village 

Makati City 

27

ROQUE & BUTUYAN LAW OFFICES 

Unit 1904, Antel 2000 Corporate Centre 

121 Valero St., Salcedo Village 

Makati City 

By: 

H. HARRY L. ROQUE 

PTR No. 0008545, January 7, 2005, Makati 

IBP No. 499912, January 25, 2000, Lifetime, Makati 

Roll No. 36976 

JOEL RUIZ BUTUYAN 


IBP No. 500459, January 25, 2000, Lifetime, Q.C. 


ALFREDO C. LIGON, III 


IBP No. 638441, January 15, 2005, Makati 


GARY S. MALLARI 


IBP No. 638439, January 14, 2005, Q.C. 


28

COPY FURNISHED: 

Honorable Eduardo Ermita 

Office of the Executive Secretary 

Malacañan Palace, City of Manila 

Honorable Secretary Margarito Teves 

Office of the Secretary 

Department of Finance Building 

BSP Complex, Roxas Boulevard 

Manila 

Department of Finance 

Department of Finance Building 

BSP Complex, Roxas Boulevard 

Manila 

Honorable Secretary Romulo 


Department of Budget and Management 

General Solano Street, San Miguel 

Manila. 

Department of Budget and Management 

General Solano Street, San Miguel 

Manila. 

Honorable Secretary Augusto Santos 


National Development Authority 

12 Saint Jose Maria Escriva Drive 

Ortigas Center, Pasig City 

National Development Authority 

12 Saint Jose Maria Escriva Drive 

Ortigas Center, Pasig City 

North Luzon Railways Corporation 

BCDA Corporate Center 

Gozar corner Lucas Streets 

Villamor Air Base, Pasay City 

China National Machinery and Equipment Corporation 

c/o Mr. Ren Hongbin and/or Jibsen International Trading Corporation 

12 th Floor, Sage House, 110 Herrera Street, Legaspi Village 

Makati City 

Office of the Solicitor General 

Amorsolo Street, Makati City 

29

EXPLANATION 

Due to the shortage of messengerial services and lack of time this 

Petition is being served to the other parties by registered mail in 

accordance with Section 11, Rule 13 of the Revised Rules of Court. 

GARY S. MALLARI 

C:\Documents and Settings\Atty. Joan\My Documents\Gary\petition northrail.doc 

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