G.R.No.106064.October13,2005.

SPOUSES RENATO CONSTANTINO, JR. and LOURDES CONSTANTINO and

their minor children RENATO REDENTOR, ANNA MARIKA LISSA, NINA
ELISSA, and ANNA KARMINA, FREEDOM FROM DEBT COALITION, and
FILOMENOSTA.ANAIII,petitioners,vs.HON.JOSEB.CUISIA,inhiscapacity
asGovernoroftheCentralBank,HON.RAMONDELROSARIO,inhiscapacityas
SecretaryofFinance,HON.EMMANUELV.PELAEZ,inhiscapacityasPhilippine
DebtNegotiatingChairman,andtheNATIONALTREASURER,respondents.
Remedial Law;Actions;Parties;Ataxpayer is allowedto sue where there is a claim
thatpublicfundsareillegallydisbursed,orthatthepublicmoneyisbeingdeflectedtoany
improperpurpose,orthatthereisawastageofpublicfundsthroughtheenforcementofan
invalidorunconstitutionallaw.Therecenttrendonlocusstandi

_______________

ENBANC.
*

506
5 SUPREMECOURTREPORTSANNOTATED
06
Constantino,Jr.vs.Cuisia
hasveeredtowardsaliberaltreatmentintaxpayerssuits.InTatadv.Garcia,Jr.,this
Courtreiteratedthattheprevailingdoctrinesintaxpayerssuitsaretoallowtaxpayersto
question contracts entered into by the national government or government owned and
controlled corporations allegedly in contravention of law.A taxpayeris allowed to sue
wherethereisaclaimthatpublicfundsareillegallydisbursed,orthatpublicmoneyis
beingdeflectedtoanyimproperpurpose,orthatthereisawastageofpublicfundsthrough
theenforcementofaninvalidorunconstitutionallaw.Moreover,arulingontheissuesof
thiscasewillnotonlydeterminethevalidityorinvalidityofthesubjectpretermination
andbondconversionofforeigndebtsbutalsocreateaprecedentforotherdebtsordebt
relatedcontractsexecutedortobeexecutedinbehalfofthePresidentofthePhilippinesby
theSecretaryofFinance.ConsideringthereportedPhilippinedebtofP3.80trillionasof
November2004,theforeignpublicborrowingcomponentofwhichreachedP1.81trillionin
November, equivalent to 47.6% of total government borrowings, the importance of the
issuesraisedandthemagnitudeofthepublicinterestinvolvedareindubitable.
CivilLaw;Contracts;Loans;Fraudulentlycontractedloansarevoidableand,assuch,
validandenforceableuntilannulledbythecourts.Ontheotherhand,voidcontractsthat
have already been fulfilled must be declared void in view of the maxim that no one is
allowedtotakethelawinhisownhands.Fraudulentlycontractedloansarevoidableand,
as such, valid and enforceable until annulled by the courts. On the other hand, void
contractsthathavealreadybeenfulfilledmustbedeclaredvoidinviewofthemaximthat
nooneisallowedtotakethelawinhisownhands.Petitionerstheorydependsonaprior
annulmentordeclarationofnullityofthepreexistingloans,whichthusfarhavenotbeen
submittedtothisCourt.Additionally,voidcontractsareunratifiablebytheirverynature;
they are null and voidab initio. Consequently, from the viewpoint of civil law, what
petitioners present as the Republics right to repudiate is yet a contingent right, one
whichcannotbeallowedasananticipatorybasisforannullingthedebtreliefcontracts.
Petitionerscontentionthatthedebtreliefagreementsaretantamounttowaiversofthe
Republicsrighttorepudiatesocalledbehestloansiswithoutlegalfoundation.
507
VOL.472,OCTOBER13,2005 50
7
Constantino,Jr.vs.Cuisia
Same;Same;Same;Obligations;Itmaynotbeamisstorecognizethattherearemany
advocatesofthepositionthattheRepublicshouldrenegeonobligationsthatareconsidered
asillegitimate.Itmaynotbeamisstorecognizethattherearemanyadvocatesofthe
position that the Republic should renege on obligations that are considered as
illegitimate. However, should the executive branch unilaterally, and possibly even
withoutpriorcourtdeterminationofthevalidityorinvalidityofthesecontracts,repudiate
orotherwisedeclaretotheinternationalcommunityitsresolvenottorecognizeacertain
setofillegitimateloans,adverserepercussionswouldcomeintoplay.
Same;Same;Same;Same;Interests;Words and Phrases;Loans are transactions
wherein the owner of a property allows another party to use the property and where
customarily,thelatterpromisestoreturnthepropertyafteraspecifiedperiodwithpayment
foritsuse,calledinterest.Loansaretransactionswhereintheownerofapropertyallows
anotherpartytousethepropertyandwherecustomarily,thelatterpromisestoreturnthe
propertyafteraspecifiedperiodwithpayment foritsuse,calledinterest.Ontheother
hand, bonds are interestbearing or discounted government or corporate securities that
obligate the issuer to pay the bondholder a specified sum of money, usually at specific
intervals, and to repay the principal amount of the loan at maturity. The word bond
meanscontract,agreement,orguarantee.Allofthesetermsareapplicabletothesecurities
knownasbonds.Aninvestorwhopurchasesabondislendingmoneytotheissuer,andthe
bond represents the issuers contractual promise to pay interest and repay principal
accordingtospecificterms.Ashorttermbondisoftencalledanote.Thelanguageofthe
Constitution is simple and clear as it is broad. It allows the President to contract and
guaranteeforeignloans.Itmakesnoprohibitionontheissuanceofcertainkindsofloansor
distinctions as to which kinds of debt instruments are more onerous than others. This
CourtmaynotascribetotheConstitutionmeaningsandrestrictionsthatwouldunduly
burden thepowers of the President. The plain, clear and unambiguous languageof the
Constitutionshouldbeconstruedinasensethatwillallowthefullexerciseofthepower
providedtherein.Itwouldbetheworstkindofjudiciallegislationifthecourtswereto
misconstrueandchangethemeaningoftheorganicact.
508
5 SUPREMECOURTREPORTSANNOTATED
08
Constantino,Jr.vs.Cuisia
Same;Bonds;Loans;Statutes;TheSupremeCourtnotesthatR.A.No.245asamended
byP.D.No.142,s.1973,entitledAnActAuthorizingtheSecretaryofFinancetoBorrowto
MeetPublicExpendituresAuthorizedbyLaw,andforOtherPurposes,allowsforeignloans
tobecontractedintheformof,interalia,bonds.WenotethatRepublicAct(R.A.)No.245
as amended by Pres. Decree (P.D.) No. 142, s. 1973, entitledAn Act Authorizing the
SecretaryofFinancetoBorrowtoMeetPublicExpendituresAuthorizedbyLaw,andfor
OtherPurposes,allowsforeignloanstobecontractedintheformof,interalia,bonds.Thus:
Sec. 1. In order to meet public expenditures authorized by law or to provide for the
purchase,redemption,orrefundingofanyobligations,eitherdirectorguaranteedofthe
Philippine Government,the Secretary of Finance, with the approval of the
President of the Philippines, after consultation with the Monetary Board, is
authorized to borrow from time to time on the credit of the Republic of the
Philippinessuchsumorsumsasinhisjudgmentmaybenecessary,andtoissue
therefor evidences of indebtedness of the Philippine Government." Such
evidencesofindebtednessmaybeofthefollowingtypes:....c.Treasurybonds,
notes,securitiesorotherevidencesofindebtednesshavingmaturitiesofoneyear
or more but not exceeding twentyfive years from the date of issue.(Emphasis
supplied.) Under the foregoing provisions, sovereign bonds may be issued not only to
supplementgovernmentexpendituresbutalsotoprovideforthepurchase,redemption,or
refundingofanyobligation,eitherdirectorguaranteed,ofthePhilippineGovernment.
Same;Loans;Buyback;Words and Phrases;Buyback is a necessary power which
springs from the grant of the foreign borrowing power.Buyback is a necessary power
whichspringsfromthegrantoftheforeignborrowingpower.Everystatuteisunderstood,
byimplication,tocontainallsuchprovisionsasmaybenecessarytoeffectuateitsobject
andpurpose,ortomakeeffectiverights,powers,privilegesorjurisdictionwhichitgrants,
includingall suchcollateral andsubsidiary consequences asmaybe fairlyandlogically
inferred from its terms. ThePresident is not empoweredtoborrow money from foreign
banksandgovernmentsonthecreditoftheRepubliconlytobeleftbereftofauthorityto
implementthepaymentdespiteappropriationstherefor.
509
VOL.472,OCTOBER13,2005 50
9
Constantino,Jr.vs.Cuisia
ConstitutionalLaw;ExecutiveDepartment;QualifiedPoliticalAgency;Eachheadofa
department is, and must be, the Presidents alter ego in the matters of that department
wherethePresidentisrequiredbylawtoexerciseauthority.Necessitythusgavebirthto
the doctrine of qualified political agency, later adopted inVillena v. Secretary of the
InteriorfromAmericanjurisprudence,viz.:WithreferencetotheExecutiveDepartmentof
thegovernment,thereisonepurposewhichiscrystalclearandisreadilyvisiblewithout
theprojectionofjudicialsearchlight,andthatistheestablishmentofasingle,notplural,
Executive.ThefirstsectionofArticleVIIoftheConstitution,dealingwiththeExecutive
Department,beginswiththeenunciationoftheprinciplethatTheexecutivepowershall
be vested in a President of the Philippines. This means that the President of the
PhilippinesistheExecutiveoftheGovernmentofthePhilippines,andnoother.Theheads
of the executive departments occupy political positions and hold office in an advisory
capacity,and,inthelanguageofThomasJefferson,shouldbeofthePresident'sbosom
confidence(7Writings,Forded.,498),and,inthelanguageofAttorneyGeneralCushing
(7 Op., AttorneyGeneral, 453), are subject to the direction of the President. Without
minimizingtheimportanceoftheheadsofthevariousdepartments,theirpersonalityisin
reality but the projection of that of the President. Stated otherwise, and as forcibly
characterizedbyChiefJusticeTaftoftheSupremeCourtoftheUnitedStates,eachhead
ofadepartmentis,andmustbe,thePresidentsalteregointhemattersofthatdepartment
wherethePresidentisrequiredbylawtoexerciseauthority(Myersvs.UnitedStates,47
Sup.Ct.Rep.,21at30;272U.S.,52at133;71Law.ed.,160).
Same;Same;Same;TherearepowersvestedinthePresidentbytheConstitutionwhich
maynotbedelegatedtoorexercisedbyanagentoralteregoofthePresident.Thereare
powers vested in the President by the Constitution which may not be delegated to or
exercised by an agent oralter egoof the President. Justice Laurel, in
hisponenciainVillena,makesthisclear:Withal,atfirstblush,theargumentofratification
mayseemplausibleunderthecircumstances,itshouldbeobservedthattherearecertain
actswhich,bytheirverynature,cannotbevalidatedbysubsequentapprovalorratification
by the President. There arecertainconstitutional powers and prerogatives of theChief
Executive of the Nation which must be exercised by him in person and no amount of
approvalorratification
510
5 SUPREMECOURTREPORTSANNOTATED
10
Constantino,Jr.vs.Cuisia
will validate the exercise of any of those powers by any other person. Such, for
instance,inhispowertosuspendthewritofhabeascorpusandproclaimmartiallaw(PAR.
3,SEC.11,Art.VII)andtheexercisebyhimofthebenignprerogativeofmercy(par.6,sec.
11,Idem).
Same;Same;Same;Statutes;Section 1 of R.A. No. 245 empowers the Secretary of
FinancewiththeapprovalofthePresidentandafterconsultationoftheMonetaryBoard,to
borrowfromtimetotimeonthecreditoftheRepublicofthePhilippinessuchsumorsums
asinhisjudgmentmaybenecessary,andtoissuethereforevidencesofindebtednessofthe
PhilippineGovernment.Withconstitutionalparametersalreadyestablished,wemayalso
note,asasourceofsuppletoryguidance,theprovisionsofR.A.No.245.Theaforequoted
Section1thereofempowerstheSecretaryofFinancewiththeapprovalofthePresidentand
afterconsultationoftheMonetaryBoard,toborrowfromtimetotimeonthecreditofthe
RepublicofthePhilippinessuchsumorsumsasinhisjudgmentmaybenecessary,andto
issuethereforevidencesofindebtednessofthePhilippineGovernment.Ineluctablythen,
whilethePresidentwieldstheborrowingpoweritistheSecretaryofFinancewhonormally
carriesoutitsthrusts.
Same;Same;Same;The Constitution allocates to the President the exercise of the
foreignborrowingpowersubjecttosuchlimitationsasmaybeprovidedunderlaw.Said
presidentialprerogativemaybeexercisedbythePresidentsalterego,whointhiscaseisthe
SecretaryofFinance.Intheinstantcase,theConstitutionallocatestothePresidentthe
exerciseoftheforeignborrowingpowersubjecttosuchlimitations asmaybeprovided
underlaw.FollowingSouthernCross,butinlinewiththelimitationsasdefinedinVillena,
thepresidentialprerogativemaybeexercisedbythePresidentsalterego,whointhiscase
istheSecretaryofFinance.
Same;Remedial Law;Courts;Judicial Review;The exercise of the power of judicial
reviewismerelytochecknotsupplanttheExecutive,ortosimplyascertainwhetherhe
hasgonebeyondtheconstitutionallimitsofhisjurisdictionbutnottoexercisethepower
vestedinhimortodeterminethewisdomofhisact.Thatthemeansemployedtoachieve
thegoalofdebtreliefdonotsitwellwithpetitionersisbeyondthepowerofthisCourtto
remedy.Theexerciseofthepowerofjudicialreviewismerelytochecknotsupplantthe
Executive,ortosimplyascertainwhetherhehasgonebeyondthe
511
VOL.472,OCTOBER13,2005 51
1
Constantino,Jr.vs.Cuisia
constitutionallimitsofhisjurisdictionbutnottoexercisethepowervestedinhimorto
determine the wisdom of his act. In cases where the main purpose is to nullify
governmental acts whether as unconstitutional or done with grave abuse of discretion,
thereisastrongpresumptioninfavorofthevalidityoftheassailedacts.Theheavyonusis
inonpetitionerstoovercomethepresumptionofregularity.

PANGANIBAN,J.:SeparateOpinion:

ConstitutionalLaw;ExecutiveDepartment;Indubitably,formerPresidentCorazonC.
AquinosdecisiontohonortheoutstandingdebtsoftheRepublicatthetimesheassumedthe
presidencywasapolicymatterwellwithinherprerogative.FormerPresidentCorazonC.
AquinosdecisiontohonortheoutstandingdebtsoftheRepublicatthetimesheassumed
thepresidencywasapolicymatterwellwithinherprerogative.Itwaspurelyanexecutive
call; hence, beyond judicial scrutiny. The Petition has failed to show grave abuse of
discretion that would warrant judicial intervention. I agree with theponenciaof the
distinguished Mr. Justice Dante O. Tinga: not only was the act of President
Aquinoimpliedlygrantedviaher vast executive powers; it was alsoexplicitlyauthorized
underSection20ofArticleVIIoftheConstitution.
CivilLaw;CriminalLaw;Contracts;Loans;Unlesstheythemselvesareproventohave
participatedincorruptorunlawfulactsinobtainingtheloans,respondentsshouldnotbe
held criminally liable for the allegedly fraudulent contracts entered into by their
predecessorsinoffice.Unlessvoidedbythecourts,theloancontractsarepresumedvalid.
Moreover,unlesstheythemselvesareproventohaveparticipatedincorruptorunlawful
acts in obtaining the loans, respondents should not be held criminally liable for the
allegedly fraudulent contracts entered into by their predecessors in office. As it is, the
Petitiondoesnotevenallegethatanyofthemhadanyroleintheexecutionofanyofthe14
loansreportedbyCOAtobefraudulent.
 Criminal Law;The Supreme Court found that, contrary to the Office of the
Ombudsmans(OMB)findings,therewassufficientevidenceestablishingaprobablecause
for the filing of charges against Disini.The Court found that, contrary to the OMBs
findings, there was sufficient evidence establishing a probable cause for the filing of
chargesagainstDisini,whohadcapitalized,exploited
512
5 SUPREMECOURTREPORTSANNOTATED
12
Constantino,Jr.vs.Cuisia
andtakenadvantageofhisclosepersonalrelationswiththeformerPresidentxxx
[andhad]requestedandreceivedpecuniaryconsiderationsfromWestinghouseandBurns
& Roe, which were endeavoring to close the PNPP contract with the Philippine
government.

SPECIALCIVILACTIONintheSupremeCourt.Certiorari,Prohibitionand
Mandamus.

ThefactsarestatedintheopinionoftheCourt.
RubenC.Carranza,Jr.forpetitioners.
TheSolicitorGeneralforrespondents.

TINGA,J.:

Thequagmirethatistheforeigndebtproblemhasespeciallyconfoundeddeveloping
nationsaroundtheworldfordecades.Ithasdefiedeasysolutionsacceptablebothto
debtorcountriesandtheircreditors.Ithasalsoemergedascausecelebreforvarious
politicalmovementsandgrassrootsactivistsandthewellspringofmuchscholarly
thoughtanddebate.
Thepresentpetitionillustratessomeoftheideologicalandfunctionaldifferences
betweenexpertsonhowtoachievedebtrelief.However,thisbeingacourtoflaw,
notanacademicforumoraconventionondevelopmenteconomics,ourresolution
hastohingeonthepresentedlegalissueswhichcenterontheappreciationofthe
constitutional provision that empowers the President to contract and guarantee
foreign loans. The ultimate choice is between a restrictive reading of the
constitutional provision and an alimentative application thereof consistent with
timehonoredprinciplesonexecutivepowerandthealteregodoctrine.
ThisPetition for Certiorari, Prohibition and Mandamusassails said contracts
which were entered into pursuant to the Philippine Comprehensive Financing
Program for 1992 (Financing Program or Program). It seeks to enjoin
respondentsfromexecutingadditionaldebtreliefcontractspursuantthereto.Italso
urgestheCourttoissueanordercompelling
513
 VOL.472,OCTOBER13,2005 513
Constantino,Jr.vs.Cuisia
the Secretary of Justice to institute criminal and administrative cases against
respondents for acts which circumvent or negate the provisions Art. XII of the
Constitution. 1

PartiesandFacts
Thepetitionwasfiledon17July1992bypetitionersspousesRenatoConstantino,
Jr. and Lourdes Constantino and their minor children, Renato Redentor, Anna
Marika Lissa, Nina Elissa, and Anna Karmina, Filomeno Sta. Ana III, and the
FreedomfromDebtCoalition,anonstock,nonprofit,nongovernmentorganization
thatadvocatesapropeopleandjustPhilippinedebtpolicy. Namedrespondents 2

were the then Governor of the Bangko Sentral ng Pilipinas, the Secretary of
Finance,theNationalTreasurer,andthePhilippineDebtNegotiationChairman
EmmanuelV.Pelaez. AllrespondentsweremembersofthePhilippinepaneltasked
3

tonegotiatewiththecountrysforeigncreditorspursuanttotheFinancingProgram.
Theoperativefactsaresparseandthereislittleneedtoelaborateonthem.
The FinancingProgram was theculmination ofefforts that began duringthe
termofformerPresidentCorazonAquinotomanagethecountrysexternaldebt
problem through a negotiationoriented debt strategy involving cooperation and
negotiation with foreign creditors. Pursuant to this strategy, the Aquino
4

government entered into three restructuring agreements with representatives of

foreigncreditorgovernments
_______________

1
ActswhichunderSec.22,ArticleXIIoftheConstitutionshallbeconsideredinimicaltothenationalinterestandsubject
tocriminalandcivilsanctions,asmaybeprovidedbylaw.
2
Rollo,pp.34.
3
FormerVicePresidentofthePhilippines,sincedeceased.
4
Rollo,p.58.
514
514 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
duringtheperiodof1986to1991. Duringthesameperiod,threesimilarlyoriented
5

restructuringagreementswereexecutedwithcommercialbankcreditors. 6

On 28 February 1992, the Philippine Debt Negotiating Team, chaired by

respondent Pelaez, negotiated an agreement with the countrys Bank Advisory
Committee,representingallforeigncommercialbankcreditors,ontheFinancing
Program which respondents characterized as a multioption financing
package. The Program was scheduled to be executed on 24 July 1992 by
7

respondentsinbehalfoftheRepublic.Nonetheless,petitionersallegedthateven
prior to the execution of the Program respondents had already implemented its
buyback component when on 15 May 1992, the Philippines bought back P1.26
billionofexternaldebtspursuanttotheProgram. 8
 ThepetitionsoughttoenjointheratificationoftheProgram,buttheCourtdid
notissueanyinjunctiverelief.Hence,itcametopassthattheProgramwassigned
inLondonasscheduled.Thepetitionstillhastoberesolvedthoughaspetitioners
seektheannulmentofanyandallactsdonebyrespondents,theirsubordinates
and any other public officer pursuant to the agreement and program in
question. Even 9

_______________

5
Id.,atp.59.Accordingtorespondents,theseagreementsinvolvedthereschedulingofpublicsectordebtstobilateral
creditors, thereby lengthening thematurity for its repayments and whereby portions of interest of maturing debts were
capitalizedintheprocessofrescheduling.
6
Ibid.
7
Id.,atp.60.Perrespondents,thedealconsistedofthreedebtreliefagreements,thePrincipleCollateralizedInterest
Reduction Bond Issuance and Exchange Agreement, the Philippine Bond Issuance and Exchange Agreement, and the
InterestReductionBondIssuanceandExchangeAgreement.
8
Rollo,p.7citinganewspaperarticleintheDailyGlobedated15May1992.Petitionersmakenoindicationwhetherthe
loansidentifiedintheCOAreportareamongthoseincludedinthequestioneddebtreliefagreements.Cf:note17.
9
Id.,atp.25.
515
VOL.472,OCTOBER13,2005 515
Constantino,Jr.vs.Cuisia
afterthesigningoftheProgram,respondentsthemselvesacknowledgedthatthe
remainingprincipalobjectiveofthepetitionistosetasiderespondentsactions. 10

Petitioners characterize the Financing Program as a package offered to the

countrysforeigncreditorsconsistingoftwodebtreliefoptions. Thefirstoptionwas 11

acashbuybackofportionsofthePhilippineforeigndebtatadiscount. Thesecond 12

optionallowedcreditorstoconvertexistingPhilippinedebtinstrumentsintoanyof
threekindsofbonds/securities:(1)newmoneybondswithafiveyeargraceperiod
and 17 years finalmaturity,thepurchaseofwhichwouldallowthecreditorsto
convert their eligible debt papers into bearer bonds with the same terms; (2)
interestreductionbondswithamaturityof25years;and(3)principalcollateralized
interestreductionbondswithamaturityof25years. 13

Ontheotherhand,accordingtorespondentstheFinancingProgramwouldcover
about U.S. $5.3 billion of foreign commercial debts and it was expected to deal
comprehensivelywiththecommercialbankdebtproblemofthecountryandpave
thewayforthecountrysaccesstocapitalmarkets. TheyaddthattheProgram 14

carriedthreebasicoptionsfromwhichforeignbanklenderscouldchoose,namely:to
lend money, to exchange existing restructured Philippine debts with an interest
reductionbond;ortoexchangethesame
_______________

10
Id.,atp.58.
11
Id.,atp.5.
12
Ibid.
13
Ibid.,citingaNewsdayarticledated27April1992,AnnexAofthePetition.
 Rollo,p.60citingaspeechgivenbyformerCentralBankGovernorJoseL.Cuisia,Jr.atthejointmeetingofFINEX,
14

MakatiBusinessClubandManagementAssociationofthePhilippinesheldon19November1991attheGrandBallroomof
theHotelIntercontinentalManila.
516
516 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
Philippinedebtswithaprincipalcollateralizedinterestreductionbond. 15

IssuesforResolution
PetitionersraiseseveralissuesbeforethisCourt.
First, they object to the debtrelief contracts entered into pursuant to the
FinancingProgramasbeyondthepowersgrantedtothePresidentunderSection
20,ArticleVIIoftheConstitution. Theprovisionstates that the President may
16

contractorguaranteeforeignloansinbehalfoftheRepublic.Itisclaimedthatthe
buyback and securitization/bond conversion schemes are neither loans nor
guarantees,andhencebeyondthepowerofthePresidenttoexecute.
Second, according to petitioners even assuming that the contracts under the
FinancingProgramareconstitutionallypermissible,yetitisonlythePresidentwho
mayexercisethepowertoenterintothesecontractsandsuchpowermaynotbe
delegatedtorespondents.
Third, petitioners argue that the Financing Program violates several
constitutional policies and that contracts executed or to be executed pursuant
thereto were or will be done by respondents with grave abuse of discretion
amountingtolackorexcessofjurisdiction.
_______________

Ibid.
15

ThePresidentmay contractor guaranteeforeign loansin behalf of theRepublicofthePhilippineswith theprior

16

concurrenceoftheMonetaryBoardandsubjecttosuchlimitationsasmaybeprovidedunderlaw.TheMonetaryBoardshall,
withinthirtydaysfromtheendofeveryquarterofthecalendaryear,submittotheCongressacompletereportofitsdecisions
onapplicationsforloanstobecontractedorguaranteedbythegovernmentorgovernmentownedandcontrolledcorporations
whichwouldhavetheeffectofincreasingtheforeigndebt,andcontainingothermattersasmaybeprovidedbylaw.
517
VOL.472,OCTOBER13,2005 517
Constantino,Jr.vs.Cuisia
PetitionerscontendthattheFinancingProgramwasmadeavailablefordebtsthat
wereeitherfraudulentlycontractedorvoid.Inthis regard,petitioners relyona
1992CommissiononAudit(COA)reportwhichidentifiedseveralbehestloansas
eithercontractedorguaranteedfraudulentlyduringtheMarcosregime. Theyposit 17

thatsincetheseandothersimilardebts,suchastheonespertainingtotheBataan
NuclearPowerPlant, wereeligibleforbuybackorconversionundertheProgram,
18

theresultantreliefagreementspertainingtheretowouldbevoidforbeingwaivers
oftheRepublicsrighttorepudiatethevoidorfraudulentlycontractedloans.
 Fortheirpart,respondentsdisputethepointsraisedbypetitioners.Theyalso
question the standing of petitioners to institute the present petition and the
justiciabilityoftheissuespresented.
TheCourtshalltackletheproceduralquestionsaheadofthesubstantiveissues.
_______________

17

1. NorthDavaoMiningCorp. $117.712
(InmillionsofU.S.Dollars)
2. BukidnonSugarMillingCo.,Inc. 68.940
3. UnitedPlantersSugarMillingCo. 62.669
4. NorthernCotabatoSugarInd.Inc. 45.200
5. AsiaIndustriesInc. 25.000
6. DomesticSatellitePhilippines 18.540
7. PNBDepositFacility/AMEXCO 17.000
8. PamplonaRedwoodVeneerInc. 15.160
9. MindanaoCoconutOilMills 6.900
10. GovernmentServiceInsuranceSystem 10.650
11. PhilippinePhosphateFertilizerCorp. 565.514
12. PagdangananTimbreProductsInc. 13.500
13. MenziDevelopmentCorp. 13.000
14. SabenaMiningCorp. 27.500
Rollo,p.6.
18

518
518 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
TheCourtsRulings

StandingofPetitioners

The individual petitioners are suing as citizens of the Philippines; those among
themwhoareofagearesuingintheiradditionalcapacityastaxpayers. Itisnot 19

indicatedinwhatcapacitytheFreedomfromDebtCoalitionissuing.
Respondentspointoutthatpetitionershavenostandingtofilethepresentsuit
sincetheruleallowingtaxpayerstoassailexecutiveorlegislativeactshasbeen
appliedonlytocaseswheretheconstitutionalityofastatuteisinvolved.Atthe
sametime,however,theyurgethisCourttoexerciseitswidediscretionandwaive
petitioners lack of standing. They invoke the transcendental importance of
resolvingthevalidityofthequestioneddebtreliefcontractsandothersofsimilar
import.
The recent trend onlocus standihas veered towards a liberal treatment in
taxpayerssuits.InTatadv.GarciaJr., thisCourtreiteratedthattheprevailing
20

doctrinesintaxpayerssuitsaretoallowtaxpayerstoquestioncontractsentered
intobythenationalgovernmentorgovernmentownedandcontrolledcorporations
allegedlyincontraventionoflaw. Ataxpayerisallowedtosuewherethereisa
21

claimthatpublicfundsareillegallydisbursed,orthatpublicmoney
_______________

Id.,atp.4.
19

313Phil.296;243SCRA436(1995).
20

Id.,atp.320;p.455,citingKilosbayanv.Guingona,Jr.,G.R.No.113375,5May1994,232SCRA110,139.DelMarv.
21

PhilippineAmusementandGamingCorporation,346SCRA485,501(2000)citingKilosbayan,Inc.,etal.v.Morato,250SCRA
333(1976);Dumlao v. Commission on Elections,95 SCRA 392(1980);Sanidad v. Commission on Elections,73 SCRA
333(1976);Philconsav.Mathay,18SCRA300(1966);Pascualv.SecretaryofPublicWorks,110Phil.331(1960);Pelaezv.
AuditorGeneral,15SCRA569(1965);Philconsav.Gimenez,15SCRA479(1965);IloiloPalay&CornPlantersAssociationv.
Feliciano,13SCRA377(1965).
519
VOL.472,OCTOBER13,2005 519
Constantino,Jr.vs.Cuisia
is being deflected to anyimproper purpose,or that thereis a wastage ofpublic
fundsthroughtheenforcementofaninvalidorunconstitutionallaw. 22

Moreover,arulingontheissuesofthiscasewillnotonlydeterminethevalidity
orinvalidityofthesubjectpreterminationandbondconversionofforeigndebtsbut
alsocreateaprecedentforotherdebtsordebtrelatedcontractsexecutedortobe
executedinbehalfofthePresidentofthePhilippinesbytheSecretaryofFinance.
ConsideringthereportedPhilippinedebtofP3.80trillionasofNovember2004,the
foreignpublicborrowingcomponentofwhichreachedP1.81trillioninNovember,
equivalentto47.6%oftotalgovernmentborrowings, theimportanceoftheissues 23

raisedandthemagnitudeofthepublicinterestinvolvedareindubitable.
Thus,theCourtscognizanceofthispetitionisalsobasedontheconsideration
thatthedeterminationoftheissuespresentedwillhaveabearingonthestateof
the countrys economy, its international financial ratings, and perhaps even the
Filipinoswayoflife.Seeninthislight,thetranscendentalimportanceoftheissues
hereinpresentedcannotbedoubted.
_______________

22
Franciscov.HouseofRepresentatives,G.R.No.160405,November10,2003,415SCRA44,136.
23
<http://www.adb.org/documents/books/ado/2005/phi.asp>;Seealso newspaper article by Maricel E. Burgonio, GOVT
DEBTSREACHP4TINJANUARY,TheManilaTimes,April28,2005reportingthatthenationalgovernmentincurreda
totaloutstandingdebtofP4trillionasofJanuary2005,representinganincreaseof5.1percentfromthereportedP3.81
trillionasofend2004,perDepartmentofFinancedataandofthegovernmentstotaldebt,aboutP1.97trillionisowedto
foreign creditors; P2.04 trillion is owed to domestic creditors, http://www.manilatimes.net/national/2005/apr/28/yehey/
business/20050428bus2.html>, reported also in the news item site of the Department of Budget and Management,
<http://www.dbm.gov.ph/current_issues/pressrelease/2005/04april/press_042805ovt%20debts.htm>.
520
520 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
Where constitutional issues are properly raised in the context of alleged facts,
proceduralquestionsacquirearelativelyminorsignificance. Wethusholdthatby 24
theverynatureofthepowerwieldedbythePresident,theeffectofusingthispower
ontheeconomy,andthewellbeingingeneraloftheFilipinonation,theCourtmust
set aside the procedural barrier of standing and rule on the justiciable issues
presentedbytheparties.

Ripeness/ActualCaseDimension

Evenasrespondentsconcedethetranscendentalimportanceoftheissuesatbar,in
theirRejoinderthey askthis Court todismiss thePetition. Allegedly, petitioners
arguments are mere attempts at abstraction. Respondents are correct to some
25

degree. Several issues, as shall be discussed in due course, are not ripe for
adjudication.
TheallegationthatrespondentswaivedthePhilippinesrighttorepudiatevoid
and fraudulently contractedloans byexecuting thedebtreliefagreements is, on
manylevels,notjusticiable.
Inthefirstplace,recordsdonotshowwhetherthesocalledbehestloansor
otherallegedlyvoidorfraudulentlycontractedloansforthatmatterweresubject
ofthedebtreliefcontractsenteredintoundertheFinancingProgram.
Moreover,assertingarighttorepudiatevoidorfraudulentlycontractedloans
begs the question of whether indeed particular loans are void or fraudulently
contracted. Fraudulently contracted loans are voidable and, as such, valid and
enforceableuntilannulledbythecourts.Ontheotherhand,voidcontractsthat
havealreadybeenfulfilledmustbedeclaredvoidinviewofthemaximthatnoone
isallowedto
_______________

Guingona,Jr.v.Gonzales,G.R.No.106971,20October1992,214SCRA709,794.
24

Rollo,p.105.
25

521
VOL.472,OCTOBER13,2005 521
Constantino,Jr.vs.Cuisia
takethelawinhisownhands. Petitionerstheorydependsonapriorannulmentor
26

declaration of nullity of the preexisting loans, which thus far have not been
submittedtothisCourt.Additionally,voidcontractsareunratifiablebytheirvery
nature;theyarenullandvoidabinitio.Consequently,fromtheviewpointofcivil
law, what petitioners present as the Republics right to repudiate is yet a
contingentright,onewhichcannotbeallowedasananticipatorybasisforannulling
thedebtreliefcontracts.Petitionerscontentionthatthedebtreliefagreementsare
tantamounttowaiversoftheRepublicsrighttorepudiatesocalledbehestloans
iswithoutlegalfoundation.
Itmaynotbeamisstorecognizethattherearemanyadvocatesoftheposition
thattheRepublicshouldrenegeonobligationsthatareconsideredasillegitimate.
However,shouldtheexecutivebranchunilaterally,andpossiblyevenwithoutprior
court determination of the validity or invalidity of these contracts, repudiate or
otherwise declare to the international community its resolve not to recognize a
certainsetofillegitimateloans,adverserepercussions wouldcomeintoplay.Dr. 27

Felipe Medalla, former Director General of the National Economic Development

Authority,haswarned,thus:
Onewaytoreducedebtserviceistorepudiatedebts,totallyorselectively.Takentoitslimit,however,sucha
strategy would put the Philippines at such odds with too many enemies. Foreign commercial banks by
themselvesandwithoutthecooperationofcreditorgovernments,especiallytheUnitedStates,maynotbeina
position

_______________

SeeARTUROM.TOLENTINO,THECIVILCODE,Vol.IV,c.1987,p.632.
26

Amongtheconsequencesdiscussedhereunder,thestandardcrossdefaultprovisionsinPhilippineforeignloansmaycomeintoeffect,in
27

whichcase,defaulteveninoneloanwouldbeagroundforothercreditorstodeclaredefaultonotherloans.SeeINNOVATIVESOLUTIONSTO
THEPHILIPPINEDEBTPROBLEMbyGov.GabrielC.Singson,speakingatadebtforumheld28March2005,hostedbytheManagement
AssociationofthePhilippines.
522
522 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
toinflictmuchdamage,butconcertedsanctionsfromcommercialbanks,multilateralfinancialinstitutionsand
creditorgovernmentswouldaffectnotonlyoursourcesofcreditbutalsoouraccesstomarketsforourexports
andthelevelofdevelopmentassistance....[T]hecountrymightfaceconcertedsanctionsevenifdebtswere
repudiatedonlyselectively.
The point that must bestressed is that repudiation is notan attractive alternative if net payments to
creditorsintheshortandmediumruncanbereducedthroughanagreement(asopposedtoaunilaterallyset
ceiling on debt service payments) which provides for both rescheduling of principal and capitalization of
interest,oritsequivalentinnewloans,whichwouldmakeiteasierforthecountrytopayinterest. 28

Sovereign default is not new to the Philippine setting. In October 1983, the
Philippinesdeclaredamoratoriumonprincipalpaymentsonitsexternaldebtsthat
eventually lasted four years, that virtually closed the countrys access to new
29

foreign money and drove investors to leave the Philippine market, resulting in
30

somedevastatingconsequences. It 31

_______________

Dr.FelipeMedalla,TheManagementofExternalDebt,PIDSDEVELOPMENTRESEARCHNEWS,VolumeV,No.2,
28

(1987),p.2.Dr.MedallaisanAssociateProfessorattheSchoolofEconomics,UniversityofthePhilippines.
ExternalDebt:Developments,Issues,and Options,speechdeliveredby formerFinanceSecretaryVicenteR.Jayme
29

duringthegeneralmembershipmeetingoftheMakatiBusinessClubon31May1988,attheHotelInterContinental,Manila.
Thustheperiodthatfollowedwascharacterizedbystringentforeignexchangerationing.Seetalkdeliveredbyformer
30

FinanceSecretaryEdgardoB.EspirituattheFreedomFromDebtCoalitionsFiscalandDebtDiscussionattheUniversityof
thePhilippinesinDecember2002.
In less than a year after the country sought debt moratorium, the exchange rate went as high as 100 percent,
31

bellwetherinterestrateshotupto43percentandinflationsoaredto47.1percent,afterinvestorsracedeachotherinleaving
a deteriorating economy.Former Central Bank Governor Gabriel Singson in thenewsitem site of the Departmentof
BudgetandManagement,
523
VOL.472,OCTOBER13,2005 523
Constantino,Jr.vs.Cuisia
would appear then that this beguilingly attractive and dangerously simplistic
solutiondeservestheutmostcircumspectcogitationbeforeitisresortedto.
Inanyevent,thediscretiononthematterliesnotwiththecourtsbutwiththe
executive. Thus, the Program was conceptualized as an offshoot of the decision
madebythenPresidentAquinothatthePhilippinesshouldrecognizeitssovereign
debts despitethecontroversythatengulfedmanydebtsincurredduringtheMarcos
32

era. It is a scheme whereby the Philippines restructured its debts following a

negotiatedapproachinsteadofadefaultapproachtomanagethebleakPhilippine
debtsituation.
Asafinalpoint,petitionershavenorealbasistofretoverapossiblewaiverof
the right to repudiate void contracts. Even assuming that spurious loans had
becomethesubjectofdebt
_______________

http://www.map.com.ph/articles_innovative%20solution%20for%20phil%20problem.htm;Thusfar,thePhilippinesisthe
onlycountryinAsiathatexperiencedadebtmoratorium.Ibelievethatnosingleeventhasbroughtmoredamagetothe
economynoteventhe1997Asianfinancialcrisisthanthe1983debtmoratorium.P$exchangeratewentupbyalmost
100%fromP9.17onJanuary3,1983toP18.02tothedollaronJune6,1984,aperiodoflessthanoneyearandahalf;
interestrates.The91dayTbillhit43%inNov.1984;GNPin1984wasnegative9.11l;Inflationaverageinflationfor1984
jumpedto47.1%.AttheheightoftheAsianfinancialcrisisin1998theaverageinflationwas9.7%;thecountryhadnoaccess
tothevoluntarycapitalmarketsforalmost10years,1983to1992.SpeechofformerCentralBankGovernorGabrielC.
Singson,supranote27.
32
Thedebtcrisishaseffectivelysnaggedthedebtorcountriesinafinancialvise.Meanwhile,thecreditorsgenerallyinsist
ondebtservicepayment,ofteninamountsthatweregreaterthannationalspendingonhealthandeducation.Thecrisismust
beaddressedatthegloballevel.SeeJeffreySachs,THEENDOFPOVERTY,PenguinGroup(USA),Inc.,375HudsonSt.,New
York,N.Y.,10014,U.S.A.JeffreySachsistheDirectoroftheEarthInstitute,QueteletProfessorofSustainableDevelopment,
and Professor of Health Policy and Management at Columbia University as well as Special Advisor to United Nations
SecretaryGeneralKofiAnnan.
524
524 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
reliefcontracts,respondentsunequivocallyassertthattheRepublicdidnotwaive
anyrighttorepudiatevoidorfraudulentlycontractedloans,ithavingincorporated
anowaiverclauseintheagreements. 33

SubstantiveIssues

Itishelpfultoputthematterinperspectivebeforemovingontothemerits.The
Financing Program extinguished portions of the countrys preexisting loans
througheitherdebtbuybackorbondconversion.Thebuybackapproachessentially
preterminated portions of public debts while the bondconversion scheme
extinguished public debts through the obtention of a new loan by virtue of a
sovereignbondissuance,theproceedsofwhichinturnwereusedforterminating
theoriginalloan.
FirstIssue:TheScopeofSection20,ArticleVII
Fortheirfirstconstitutional argument,petitioners submitthat thebuybackand
bondconversion schemes do not constitute the loan contract or guarantee
contemplatedintheConstitutionandareconsequentlyprohibited.Sec.20,Art.VII
oftheConstitutionprovides,viz.:
ThePresidentmaycontractorguaranteeforeignloansinbehalfoftheRepublicofthePhilippineswiththe
priorconcurrenceoftheMonetaryBoardandsubjecttosuchlimitationsasmaybeprovidedunderlaw.The
MonetaryBoardshall,withinthirtydaysfromtheendofeveryquarterofthecalendaryear,submittothe
Congressacompletereportofitsdecisions onapplications forloans tobecontractedorguaranteedbythe
governmentorgovernmentownedandcontrolledcorporationswhichwouldhavetheeffectofincreasingthe
foreigndebt,andcontainingothermattersasmaybeprovidedbylaw.

_______________

AnnexDofComment,Id.,atp.130.
33

525
VOL.472,OCTOBER13,2005 525
Constantino,Jr.vs.Cuisia

OnBondConversion

Loansaretransactionswhereintheownerofapropertyallowsanotherpartytouse
thepropertyandwherecustomarily,thelatterpromisestoreturnthepropertyafter
a specified period with payment for its use, called interest. On the other hand,
34

bondsareinterestbearingordiscountedgovernmentorcorporatesecuritiesthat
obligate the issuer to pay the bondholder a specified sum of money, usually at
specificintervals,andtorepaytheprincipalamountoftheloanatmaturity. The 35

word bond means contract, agreement, or guarantee. All of these terms are
applicabletothesecuritiesknownasbonds.Aninvestorwhopurchasesabondis
lending money to the issuer, and the bond represents the issuers contractual
promisetopayinterestandrepayprincipalaccordingtospecificterms.Ashort
termbondisoftencalledanote. 36

ThelanguageoftheConstitutionissimpleandclearasitisbroad.Itallowsthe
Presidenttocontractandguaranteeforeignloans.Itmakesnoprohibitiononthe
issuance of certain kinds of loans or distinctions as to which kinds of debt
instruments are more onerous than others. This Court may not ascribe to the
Constitutionmeaningsandrestrictionsthatwouldundulyburdenthepowersofthe
President.Theplain,clearandunambiguouslanguageoftheConstitutionshouldbe
construedinasensethatwillallowthefullexerciseofthepowerprovidedtherein.
Itwouldbetheworstkindofjudiciallegislationifthecourtsweretomisconstrue
andchangethemeaningoftheorganicact.
The only restriction that the Constitution provides, aside from the prior
concurrenceoftheMonetaryBoard,isthatthe
_______________
 John Downes and Jordan Elliot Goodman,BARRONS FINANCIAL GUIDES DICTIONARY OF FINANCE AND
34

INVESTMENTTERMS,(2003,6thed.),p.389.
Id.,atp.70.
35

MarkLevinson,GUIDETOFINANCIALMARKETS,(3rded.),p.60.
36

526
526 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
loansmustbesubjecttolimitationsprovidedbylaw.Inthisregard,wenotethat
RepublicAct(R.A.)No.245asamendedbyPres.Decree(P.D.)No.142,s.1973,
entitledAn Act Authorizing the Secretary of Finance to Borrow to Meet Public
ExpendituresAuthorizedbyLaw,andforOtherPurposes,allowsforeignloanstobe
contractedintheformof,interalia,bonds.Thus:
Sec.1.Inordertomeetpublicexpendituresauthorizedbylawortoprovideforthepurchase,redemption,or
refunding of any obligations, either direct or guaranteed of the Philippine Government,the Secretary of
Finance, with the approval of the President of the Philippines, after consultation with the
MonetaryBoard,isauthorizedtoborrowfromtimetotimeonthecreditoftheRepublicofthe
Philippinessuchsumorsumsasinhisjudgmentmaybenecessary,andtoissuethereforevidences
of indebtedness of the Philippine Government. Such evidences of indebtedness may be of the
followingtypes:
....
c.Treasurybonds,notes,securitiesorotherevidencesofindebtednesshavingmaturitiesofone
yearormorebutnotexceedingtwentyfiveyearsfromthedateofissue.(Emphasissupplied.)
Under the foregoing provisions, sovereign bonds may be issued not only to
supplement government expenditures but also to provide for the
purchase, redemption, orrefund
37 38

_______________

PurchaseFundprovisioninsomePREFERREDSTOCKcontractsandBONDindenturesrequiringtheissuertouseits
37

besteffortstopurchaseaspecifiednumberofsharesorbondsannuallyatapricenottoexceedparvalue.UnlikeSINKING
FUNDprovisions,whichrequirethatacertainnumberofbondsberetiredannually,purchasefundsrequireonlythata
tenderofferbemade;ifnosecuritiesaretendered,noneareretired.Purchasefundissuedbenefittheinvestorinaperiodof
risingrateswhentheredemptionpriceishigherthanthemarketpriceandtheproceedscanbeputtoworkatahigher
return.BARRONSFINANCIALGUIDESDICTIONARYOFFINANCEANDINVESTMENTTERMS,supranote34AT548.
Redemptionrepayment of a dept security or preferred stock issue, at or before maturity, at PAR or a premium
38

price.Id.,atp.566.
527
VOL.472,OCTOBER13,2005 527
Constantino,Jr.vs.Cuisia
ing ofanyobligation,eitherdirectorguaranteed,ofthePhilippineGovernment.
39

Petitioners,however,pointoutthatasupposeddifferencebetweencontractinga
loan and issuing bonds is that the former creates a definite creditordebtor
relationship between the parties while the latter does not. They explain that a 40

contractofloanenablesthedebtortorestructureornovatetheloan,whichbenefit
islostupontheconversionofthedebtstobearerbondssuchthatthePhilippines
surrenders the novatable character of a loan contract for the irrevocable and
unpostponable demandability of a bearer bond. Allegedly, the Constitution 41
prohibits the President from issuing bonds which are far more onerous than
loans. 42

Thislineofthinkingisflawedtosaytheleast.Thenegotiablecharacterofthe
subjectbondsisnotmutuallyexclusivewiththeRepublicsfreedomtonegotiate
withbondholdersfortherevisionofthetermsofthedebt.Moreover,thesecurities
marketprovidessomeflexibilityifthePhilippineswantstopayinadvance,itcan
buyoutitsbondsinthemarket;ifinterestratesgodownbutthePhilippinesdoes
nothavemoneytoretirethebonds,itcanreplacetheoldbondswithnewones;ifit
defaults on the bonds, the bondholders shall organize and bring about a re
negotiationorsettlement. Infact, 43

_______________

Refundingreplacinganolddebtwithanewone,usuallyinordertolowertheinterestcostoftheissuer.Forinstance,a
39

corporationormunicipalitythathasissued10%bondsmaywanttorefundthembyissuing7%bondsifinterestrateshave
dropped.Id.,atp.567.
Rollo,p.10.
40

Id.,atp.11.
41

Id.,atp.12.
42

CESAR G.SALDAA,PH D.,AMARKETVALUATIONUNDERBARGAININGGAME PERSPECTIVE TOTHE

43

PHILIPPINE DEBT PACKAGE OF1991,apaper read beforethe SenateCommitteeon Economic Affairs atthe public
hearingonInquiry
528
528 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
severalcountrieshaverestructuredtheirsovereignbondsinvieweitherofinability
and/or unwillingness to pay the indebtedness. Petitioners have not presented a
44

plausible reason that would preclude the Philippines from acting in a similar
fashion,shoulditsoopt.
Thistheorymayevenbedismissedinaperfunctorymannersincepetitionersare
merelyexpectingthatthePhilippineswouldopttorestructurethebondsbutwith
thenegotiablecharacterofthebonds,wouldbepreventedfromsodoing.Thisisa
contingency which petitioners do not assert as having come to pass or even
imminent.ConsummatedactsoftheexecutivecannotbestruckdownbythisCourt
merelyonthebasisofpetitionersanticipatorycavils.

OntheBuybackScheme

IntheirComment,petitionersassertthatthepowertopaypublicdebtslieswith
CongressandwasdeliberatelywithheldbytheConstitutionfromthePresident. It 45

istruethatinthebalanceofpowerbetweenthethreebranchesofgovernment,itis
Congressthatmanagesthecountryscoffersbyvirtueof
_______________
 Into the Proposed Financial Debt Restructuring Package on Thursday, 16 January 1992 at the Executive House
Building,PhilippineSenate,Manila.Rollo,p.112.
Argentina began swapping defaulted bonds for new securities to restructure $104 billion of debt; CHARTS
44

INVESTMENTMANAGEMENTSERVICE LTD.,25May 2005, <http://www.charts.com.mt/news.asp?id=1379>;Pakistan

restructureditsbondswithnomajorsystemiceffects.IMFSTAFFSTUDY,BARDDISCUSSIONEXAMINEEXPERIENCE
WITH SOVEREIGN BOND RESTRUCTURINGS, IMF SURVEY Vol. 30 No. 4, 19 February 2001, p. 58,
<http://www.imf.org/external/pubs/ft/survey/2001/021901.pdf>;ThegovernmentofUruguayofficiallyacceptedtheoutcomeof
thesovereigndebtrestructuringinitiative,as90%ofthebondholdersparticipatedintheswap.LATINAMERICAWEEKLY
OUTLOOK,23May2003,<http://www.scotiabank.com.mx/resources/052303latin.pdf>.
Rollo,p.163.
45

529
VOL.472,OCTOBER13,2005 529
Constantino,Jr.vs.Cuisia
its taxing and spending powers. However, the lawmaking authority has
promulgated a law ordaining an automatic appropriations provision for debt
servicing byvirtueofwhichthePresidentisempoweredtoexecutedebtpayments
46

without the need for further appropriations. Regarding these legislative

enactments,thisCourthasheld,viz.:
CongressdeliberatesoractsonthebudgetproposalsofthePresident,andCongressintheexerciseofits
ownjudgmentandwisdomformulatesanappropriationactpreciselyfollowingtheprocessestablishedbythe
Constitution, which specifies that no money may be paid from the Treasury except in accordance with an
appropriationmadebylaw.
DebtserviceisnotincludedintheGeneralAppropriationAct,sinceauthorizationthereforalreadyexists
underRANos.4860and245,asamended,andPD1967.Preciselyinthelightofthissubsistingauthorization
asembodiedinsaidRepublicActsandPDfordebtservice,Congressdoesnotconcernitselfwithdetailsfor
implementationbytheExecutive,butlargelywithannuallevelsandapprovalthereofuponduedeliberationsas
partofthewholeobligationprogramfortheyear.Uponsuchapproval,Congresshasspokenandcannotbesaid
to have delegated its wisdom to the Executive, on whose part lies the implementation or execution of the
legislativewisdom. 47

SpecificlegalauthorityforthebuybackofloansisestablishedunderSection2of
RepublicAct(R.A.)No.240,viz.:
_______________

P.D.No.1177(July30,1977),SECTION31.AutomaticAppropriations.Allexpendituresfor(a)personnelretirement
46

premiums,governmentserviceinsurance,andothersimilarfixedexpenditures,(b)principalandinterestonpublicdebt,(c)
national government guarantees of obligations which are drawn upon, are automatically appropriated: provided, that no
obligationsshallbeincurredorpaymentsmadefromfundsthusautomaticallyappropriatedexceptasissuedintheformof
regularbudgetaryallotments.
Guingonav.Carague,G.R.No.94571,22April1991,196SCRA,221,236.
47

530
530 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
Sec.2.TheSecretaryofFinanceshallcausetobepaidoutofanymoneysintheNationalTreasury
not otherwise appropriated, or from any sinking funds provided for the purpose by law, any
interestfallingdue,oraccruing,onanyportionofthepublicdebtauthorizedbylaw.Heshallalso
causetobepaidoutofanysuchmoney,orfromanysuchsinkingfundstheprincipalamountofany
obligationswhichhavematured,orwhichhavebeencalledforredemptionorforwhichredemptionhas
beendemandedinaccordancewithtermsprescribedbyhimpriortodateofissue:Provided,however,Thathe
may, if he so chooses and if the holder is willing, exchange any such obligation with any other direct or
guaranteedobligationorobligationsofthePhilippineGovernmentofequivalentvalue.Inthecaseofinterest
bearingobligations,heshallpaynotlessthantheirfacevalue;inthecaseofobligationsissuedatadiscounthe
shallpaythefacevalueatmaturity;or,ifredeemedpriortomaturity,suchportionofthefacevalueas
is prescribed by the terms and conditions under which such obligations were originally issued.
(Emphasissupplied.)
TheaforequotedprovisionsoflawspecificallyallowthePresidenttopreterminate
debtswithoutfurtheractionfromCongress.
Petitioners claim that the buyback scheme is neither a guarantee nor a loan
since its underlying intent is to extinguish debts that are not yet due and
demandable. Thus, they suggest that contracts entered pursuant to the buyback
48

schemeareunconstitutionalfornotbeingamongthosecontemplatedinSec.20,Art.
VIIoftheConstitution.
Buyback is a necessary power which springs from the grant of the foreign
borrowingpower.Everystatuteisunderstood,byimplication,tocontainallsuch
provisions as may be necessary to effectuate its object and purpose, or to make
effectiverights,powers,privilegesorjurisdictionwhichitgrants,includingallsuch
collateralandsubsidiaryconsequencesas
_______________

Rollo,p.10.
48

531
VOL.472,OCTOBER13,2005 531
Constantino,Jr.vs.Cuisia
maybefairlyandlogicallyinferredfromitsterms. ThePresidentisnotempowered
49

toborrowmoneyfromforeignbanksandgovernmentsonthecreditoftheRepublic
onlytobeleftbereftofauthoritytoimplementthepaymentdespiteappropriations
therefor.
Evenpetitionersconcedethat[t]heConstitution,asarule,doesnotenumerate
letaloneenumeratealltheactswhichthePresident(oranyotherpublicofficer)
may not do, and [t]he fact that the Constitution does not explicitly bar the
50

Presidentfromexercisingapowerdoesnotmeanthatheorshedoesnothavethat
power. It is inescapable from the standpoint of reason and necessity that the
51

authoritytocontractforeignloansandguaranteeswithoutrestrictionsonpayment
ormannerthereofcoupledwiththeavailabilityofthecorrespondingappropriations,
must include the power to effect payments or to make payments unavailing by
eitherrestructuringtheloansorevenrefusingtomakeanypaymentaltogether.
Morefundamentally,whentakeninthecontextofsovereigndebts,abuybackis
simplythepurchasebythesovereignissuerofitsowndebtsatadiscount.Clearly
then,theobjectiontothevalidityofthebuybackschemeiswithoutbasis.
SecondIssue:DelegationofPower
Petitionersstressthatunlikeotherpowerswhichmaybevalidlydelegatedbythe
President,thepowertoincurforeigndebtsisexpresslyreservedbytheConstitution
inthepersonofthePresident.Theyarguethatthegravitybywhichtheexerciseof
the powerwill affect theFilipino nation requires that the President alone must
exercisethispower.Theysubmitthattherequirementofpriorconcurrenceofan
entityspecificallynamedbytheConstitutiontheMonetaryBoard
_______________

49
GoChicov.Martinez,45Phil.256(1923).
50
Id.,atp.161.
51
Ibid.
532
532 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
reinforces the submission that not respondents but the President alone and
personallycanvalidlybindthecountry.
Petitioners position is negated both by explicit constitutional and 52

legal imprimaturs,aswellasthedoctrineofqualifiedpoliticalagency.
53

TheevidentexigencyofhavingtheSecretaryofFinanceimplementthedecision
ofthePresidenttoexecutethedebtreliefcontractsismademanifestbythefact
that the process of establishing and executing a strategy for managing the
governmentsdebtisdeepwithintherealmoftheexpertiseoftheDepartmentof
Finance,primedasitistoraisetherequiredamountoffunding,achieveitsrisk
andcostobjectives,andmeetanyothersovereigndebtmanagementgoals. 54

If,aspetitionerswouldhaveit,thePresidentweretopersonallyexerciseevery
aspectoftheforeignborrowingpower,he/shewouldhavetopausefromrunningthe
countrylongenoughtofocusonawelteroftimeconsumingdetailedactivitiesthe
proprietyofincurring/guaranteeingloans,studyingandchoosingamongthemany
methodsthatmaybetakentowardthisend,meetingcountlesstimeswithcreditor
representatives to negotiate, obtaining the concurrence of the Monetary Board,
explaininganddefendingthenegotiateddealtothepublic,andmoreoftenthannot,
flying to the agreed place of execution to sign the documents. This sort of
constitutionalinterpretationwouldnegatetheveryexistenceofcabinetpositions
and the respective expertise which the holders thereof are accorded and would
undulyhamperthePresidentseffectivityinrunningthegovernment.
_______________

Sec.20,Art.VII,1987CONST.
52

R.A.No.245,asamended.
53

GUIDELINES FOR PUBLIC DEBT MANAGEMENT, PREPARED BY THE STAFFS OF THE INTERNATIONAL
54

MONETARYFUNDANDTHEWORLDBANK,21March2001,<http://www.imf.org/external/np/mae/pdebt/2000/eng/>.
533
VOL.472,OCTOBER13,2005 533
Constantino,Jr.vs.Cuisia
Necessitythusgavebirthtothedoctrineofqualifiedpoliticalagency,lateradopted
inVillenav.SecretaryoftheInterior fromAmericanjurisprudence,viz.:
55
WithreferencetotheExecutiveDepartmentofthegovernment,thereisonepurposewhichiscrystalclearand
isreadilyvisiblewithouttheprojectionofjudicialsearchlight,andthatistheestablishmentofasingle,not
plural,Executive.ThefirstsectionofArticleVIIoftheConstitution,dealingwiththeExecutiveDepartment,
beginswiththeenunciationoftheprinciplethatTheexecutivepowershallbevestedinaPresidentofthe
Philippines. This means that the President of the Philippines is the Executive of the Government of the
Philippines,andnoother.Theheadsoftheexecutivedepartmentsoccupypoliticalpositionsandholdofficein
anadvisorycapacity,and,inthelanguageofThomasJefferson,shouldbeofthePresidentsbosomconfidence
(7Writings,Forded.,498),and,inthelanguageofAttorneyGeneralCushing(7Op.,AttorneyGeneral,453),
aresubjecttothedirectionofthePresident.Withoutminimizingtheimportanceoftheheadsofthevarious
departments,theirpersonalityisinrealitybuttheprojectionofthatofthePresident.Statedotherwise,andas
forcibly characterized by Chief Justice Taft of the Supreme Court of the United States, each head of a
departmentis,andmustbe,thePresidentsalteregointhemattersofthatdepartmentwherethePresidentis
requiredbylawtoexerciseauthority(Myersvs.UnitedStates,47Sup.Ct.Rep.,21at30;272U.S.,52at133;
71Law.ed.,160). 56

Asitwas,thebackdropconsistedofamajorpolicydeterminationmadebythen
PresidentAquinothatsovereigndebtshavetoberespectedandtheconcomitant
realitythatthePhilippinesdidnothaveenoughfundstopaythedebts.Inevitably,
itfellupontheSecretaryofFinance,asthealteregoofthePresidentregardingthe
soundandefficientmanagementofthefinancialresourcesoftheGovernment, to 57

formulatea
_______________

55
67Phil.451(1939).
56
Id.,atp.464.
57
THEADMINISTRATIVECODE,E.O.292,BookII,TitleII,Chapter1.
534
534 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
schemefortheimplementationofthepolicypubliclyexpressedbythePresident
herself.
Nevertheless,therearepowersvestedinthePresidentbytheConstitutionwhich
may not be delegated to or exercised by an agent oralter egoof the President.
JusticeLaurel,inhisponenciainVillena,makesthisclear:
Withal,atfirstblush,theargumentofratificationmayseemplausibleunderthecircumstances,itshouldbe
observedthattherearecertainactswhich,bytheirverynature,cannotbevalidatedbysubsequentapprovalor
ratificationbythePresident.TherearecertainconstitutionalpowersandprerogativesoftheChiefExecutiveof
theNationwhichmustbeexercisedbyhiminpersonandnoamountofapprovalorratificationwillvalidatethe
exerciseofanyofthosepowersbyanyotherperson.Such,forinstance,inhispowertosuspendthewritof
habeascorpusandproclaimmartiallaw(PAR.3,SEC.11,Art.VII)andtheexercisebyhimofthebenign
prerogativeofmercy(par.6,sec.11,Idem). 58

These distinctions hold true to this day. There are certain presidential powers
whichariseoutofexceptionalcircumstances,andifexercised,wouldinvolvethe
suspension of fundamental freedoms, or at least call for the supersedence of
executive prerogatives over those exercised by coequal branches of government.
Thedeclarationofmartiallaw,thesuspensionofthewritofhabeascorpus,andthe
exerciseofthepardoningpowernotwithstandingthejudicialdeterminationofguilt
oftheaccused,allfallwithinthisspecialclassthatdemandstheexclusiveexercise
by the President of the constitutionally vested power. The list is by no means
exclusive,buttheremustbeashowingthattheexecutivepowerinquestionisof
similargravitasandexceptionalimport.
Wecannot concludethat thepower of thePresident to contract or guarantee
foreigndebtsfallswithinthesameexceptionalclass.Indubitably,thedecisionto
contractorguarantee
_______________

58
Villenav.SecretaryoftheInterior,supranote44atpp.462463.
535
VOL.472,OCTOBER13,2005 535
Constantino,Jr.vs.Cuisia
foreigndebtsisofvitalpublicinterest,butonlyakintoanycontractualobligation
undertakenbythesovereign,whicharisesnotfromanyextraordinaryincident,but
fromtheestablishedfunctionsofgovernance.
Anotherimportantqualificationmustbemade.TheSecretaryofFinanceorany
designatedalteregoofthePresidentisboundtosecurethelatterspriorconsentto
orsubsequentratificationofhisacts.Inthematterofcontractingorguaranteeing
foreignloans,therepudiationbythePresidentoftheveryactsperformedinthis
regard bythealteregowilldefinitelyhavebindingeffect.Hadpetitionersherein
succeededindemonstratingthatthePresidentactuallywithheldapprovaland/or
repudiatedtheFinancingProgram,therecouldbeacauseofactiontonullifythe
acts of respondents. Notably though, petitioners do not assert that respondents
pursuedtheProgramwithoutpriorauthorizationofthePresidentorthattheterms
ofthecontractwereagreeduponwithoutthePresidentsauthorization.Congruent
with the avowed preference of then President Aquino to honor and restructure
existing foreign debts, the lack of showing that she countermanded the acts of
respondentsleadsustoconcludethatsaidactscarriedpresidentialapproval.
With constitutional parameters already established, we may also note, as a
source of suppletory guidance, the provisions ofR.A. No. 245. The aforequoted
Section 1 thereof empowers the Secretary of Finance with the approval of the
Presidentandafterconsultation oftheMonetaryBoard,toborrowfromtimeto
59

timeonthecreditoftheRepublicofthePhilippinessuchsumorsumsasinhis
judgmentmaybenecessary,andtoissuethereforevidencesofindebtednessofthe
PhilippineGovernment.Ineluctablythen,whilethePresidentwieldstheborrowing
poweritistheSecretaryofFinancewhonormallycarriesoutitsthrusts.
_______________

59
Nowconcurrenceunderthe1987Constitution.
536
536 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
In our recent rulings inSouthern Cross Cement Corporation v. The Philippine
Cement Manufacturers Corp., this Court had occasion to examine the authority
60

grantedbyCongresstotheDepartmentofTradeandIndustry(DTI)Secretaryto
imposesafeguardmeasurespursuanttotheSafeguardMeasuresAct.Indoingso,
theCourtwasimpelledtoconstrueSection28(2),ArticleVIoftheConstitution,
whichallowedCongress,bylaw,toauthorizethePresidenttofixwithinspecified
limits,andsubjecttosuchlimitationsandrestrictionsasitmayimpose,tariffrates,
importandexportquotas,tonnageandwharfagedues,andotherdutiesorimposts
withintheframeworkofthenationaldevelopmentprogramoftheGovernment. 61

WhiletheCourtrefusedtoupholdthebroadconstructionofthegrantofpoweras
preferredbytheDTISecretary,itnonethelesstacitlyacknowledgedthatCongress
coulddesignatetheDTISecretary,inhiscapacityasalteregoofthePresident,to
exercise the authority vested on the chief executive under Section 28(2), Article
VI. Atthesametime,theCourtemphasizedthatsinceSection28(2),ArticleVI
62

authorizedCongresstoimposelimitationsandrestrictionsontheauthorityofthe
President to impose tariffs and imposts, the DTI Secretary was necessarily
subjectedtothesamerestrictionsthatCongresscouldimposeonthePresidentin
theexerciseofthistaxingpower.
Similarly, in the instant case, the Constitution allocates to the President the
exerciseoftheforeignborrowingpower
_______________

60
G.R.No.158540,8July2004,434SCRA65.
61
Section28,ArticleVI....
2)TheCongressmay,bylaw,authorizethePresidenttofixwithinspecifiedlimits,andsubjecttosuchlimitationsandrestrictionsasitmay
impose,tariffrates,importandexportquotas,tonnageandwharfagedues,andotherdutiesorimpostswithintheframeworkofthenational
developmentprogramoftheGovernment.
62
1987CONST.
537
VOL.472,OCTOBER13,2005 537
Constantino,Jr.vs.Cuisia
subject to such limitations as may be provided under law. FollowingSouthern
Cross, but in line with the limitations as defined inVillena, the presidential
prerogativemaybeexercisedbythePresidentsalterego,whointhiscaseisthe
SecretaryofFinance.
It bears emphasis that apart from the Constitution, there is also a relevant
statute,R.A.No.245,thatestablishestheparametersbywhichthealteregomay
act in behalf of the President with respect to the borrowing power. This law
expresslyprovidesthattheSecretaryofFinancemayenterintoforeignborrowing
contracts.ThislawneitheramendsnorgoescontrarytotheConstitutionbutmerely
implementsthesubjectprovisioninamannerconsistentwiththestructureofthe
ExecutiveDepartmentandthealteregodoctrine.Inthisregard,respondentshave
declared that they have followed the restrictions provided under R.A. No.
245, which include the requisite presidential authorization and which, in the
63

absenceofproofandevenallegationtothecontrary,shouldberegardedinafashion
congruent with the presumption of regularity bestowed on acts done by public
officials.
Moreover, in praying that the acts of the respondents, especially that of the
SecretaryofFinance,benullifiedasbeinginviolationofarestrictiveconstitutional
interpretation, petitioners in effect would have this Court declareR.A. No.
245unconstitutional.Wewillnotstrikedownalaworprovisionsthereofwithoutso
much as a direct attack thereon when simple and logical statutory construction
wouldsuffice.
PetitionersalsosubmitthattheunrestrictedcharacteroftheFinancingProgram
violatestheframersintentbehindSection20,ArticleVIItorestrictthepowerof
thePresident.Thisintent,petitionersnote,isembodiedintheprovisoinSec.20,
Art.VII,whichstates thatsaidpowerissubject tosuchlimitations asmaybe
providedunderlaw.However,aspreviouslydiscussed,thedebtreliefcontractsare
governedby
_______________

63
Id.,atp.77.
538
538 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
thetermsofR.A.No.245,asamendedbyP.D.No.142s.1973,andthereforewere
notdevelopedinanunrestrictedsetting.
Third Issue: Grave Abuse of Discretion and
ViolationofConstitutionalPolicies
Wetreattheremainingissuesjointly,forinviewoftheforegoingdetermination,
thegeneralallegationofgraveabuseofdiscretiononthepartofrespondentswould
arise from the purported violation of various state policies as expressed in the
Constitution.
PetitionersallegethattheFinancingProgramviolatestheconstitutionalstate
policiestopromoteasocialorderthatwillensuretheprosperityandindependence
ofthenationandfreethepeoplefrompoverty, fostersocialjusticeinallphases
64

of national development, and develop a selfreliant and independent national

65

economyeffectivelycontrolledbyFilipinos; thus,thecontractsexecutedortobe
66

executedpursuanttheretowereorwouldbetaintedbyagraveabuseofdiscretion
amountingtolackorexcessofjurisdiction.
Respondents cite thefollowing insupport of thepropriety oftheiracts: (1)a 67

Department of Financestudy showingthat as aresult of theimplementation of

voluntarydebtreductionsschemes,thecountrysdebtstockwasreducedbyU.S.
$4.4billionasofDecember1991; (2)revelationsmadebyindependentindividuals
68
madeinahearingbeforetheSenateCommitteeonEconomicAffairsindicatingthat
theassailedagreementswouldbringaboutsubstantialbenefitsto
_______________

64
Sec.9,Art.II,1987CONST.
65
Sec.10,Id.
66
Sec.19,Id.
67
Id.,atpp.9597.
68
Rollo,p.96,referringtoAnnexEofRespondentsComment,Id.,atpp.131141.
539
VOL.472,OCTOBER13,2005 539
Constantino,Jr.vs.Cuisia
the country; and (3) the Joint LegislativeExecutive Foreign Debt Councils
69

endorsement of the approval of the financing package containing the debtrelief

agreementsandissuanceofaMotiontoUrgethePhilippineDebtNegotiatingPanel
tocontinuewiththenegotiationontheaforesaidpackage. 70

Evenwiththesejustifications,respondentsaverthattheiractsarewithinthe
arena of political questions which, based on the doctrine of separation of
powers, the judiciary must leave without interference lest the courts substitute
71

theirjudgmentforthatoftheofficialconcernedanddecideamatterwhichbyits
natureorlawisforthelatteralonetodecide. 72

Ontheotherhand,infurtheranceoftheirargumentonrespondentsviolationof
constitutional policies, petitioners cite an article of Jude Esguerra,The 1992
Buyback and Securitization Agreement with Philippine Commercial Bank
Creditors, in illustrating a bestcase scenario in entering the subject debtrelief
73

agreements.Thecomputationresultsinayieldof$218.99million,ratherthanthe
$2,041.00millionclaimedbythedebtnegotiators. Ontheotherhand,theworst 74

case
_______________

Rollo,p.96,referringtoAnnexesBandCofRespondentsComment,Id.,atpp.102120and121129respectively.
69

AnnexAofRespondentsComment,Id.,atp.101.
70

Id.,atpp.8793.
71

Id.,atp.95.
72

Rollo, pp. 4451, reprinted by the Freedom From Debt Coalition entitledCaught in a One Way Street and Feeling
73

Groovy,Rollo,pp.187194.
AccordingtoJudeEsguerra,applyingtheCentralBanksassumptionsandacriticismagainstmethodologydevisedby
74

ProfessorsPhilipMedallaandSolitaMonsodoftheUPSchoolofEconomics,thecostofthedebtreliefpackageoverthenext
sixyearscomesuptoonly$930.03million.Overthenextsixyearsandunderthemostoptimisticassumptionsthemostthat
canbeyieldedisallegedly$218.99million,not$2,041.00millionasclaimedbythedebtnegotiators.
540
540 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
scenarioallegedlyisthatanetamountof$1.638millionwillflowoutofthecountry
asaresultofthedebtpackage. 75
 Assumingtheaccuracyoftheforegoingforthenonce,despitethewatereddown
parametersofpetitionerscomputations,wecanmakenoconclusionotherthanthat
respondentseffortsweregearedtowardsdebtreliefwithmarkedpositiveresults
and towards achieving the constitutional policies which petitioners so hastily
declareashavingbeenviolatedbyrespondents.Werecognizethataswithother
schemes dependent on volatile market and economic structures, the contracts
enteredintobyrespondentsmaypossiblyhaveanetoutflowandthereforenegative
result. However, even petitioners call this latter event the worstcase scenario.
Plansareseldomfoolproof.ToasktheCourttostrikedowndebtreliefcontracts,
which, according to independent third party evaluations using historically
suggested rates would result in substantial debtrelief, based merely on the
76

possibilityofpetitionersworstcasescenarioprojection,hardlyseemsreasonable.
Moreover,thepoliciessetbytheConstitutionaslitanizedbypetitionersarenota
panaceathatcanannuleverygov
_______________

75
AccordingtoJudeEsguerra,usingascenariowhere:(1)theinterestrateassumptionsofGovernorCuisia(52%)inthe
firstyear,increasinggraduallyto7%bythe6thyear)turnouttobewrongandtheaverageinterestrateoverthenextsix
yearsisaround5.5%,and(2)thePhilippinesusesupitsowndollarreservesratherthanloansfromWB,JapanandtheIMF
topayforthecostsofthepackageoverthenextsixyears.
76
AMarketValuationUnderBargainingGamePerspectivetothePhilippineDebtPackageof1991byCesarG.Saldaa,
Ph.D.,apaperreadbeforetheSenateCommitteeonEconomicAffairsatthepublichearingonInquiryIntotheProposed
FinancialDebtRestructuringPackageonThursday,16January1992attheExecutiveHouseBuilding,PhilippineSenate,
Manila.Rollo,pp.102120;SeealsoStatementOnthePhilippineForeignDebtProblembyO.V.Espiritu,Presidentofthe
BankersAssociationofthePhilippinesandspeakinginbehalfthereof,Rollo,pp.121128.
541
VOL.472,OCTOBER13,2005 541
Constantino,Jr.vs.Cuisia
ernmental act sought to be struck down. The gist of petitioners arguments on
violationofconstitutionalpoliciesandgraveabuseofdiscretionboilsdowntotheir
allegation that the debtrelief agreements entered into by respondents do not
deliver the kind of debtrelief that petitioners would want. Petitioners cite the
aforementioned article in stating that that the agreement achieves little that
cannot be gained through less complicated means like postponing (rescheduling)
principalpayments, thus: 77

[T]hepriceofsuccessinputtingtogetherthisdebtreliefpackage(indicates)thepossibilitythatasimple
reschedulingagreementmaywellturnouttobelessexpensivethanthiscomprehensivedebtreliefpackage.
Thismeansthatinthenextsixyearsthehumbleandsimplereschedulingprocessmaywellbethelesserevil
becausethereisthatdistinctpossibilitythatlessmoneywillflowoutofthecountryasaresult.
Note must be taken that from these citations, petitioners submit that there
ispossiblyabetterwaytogoaboutdebtreschedulingand,onthatbasis,insistthat
theactsofrespondentsmustbestruckdown.Thesearerathertenuousgroundsto
condemnthesubjectagreementsasviolativeofconstitutionalprinciples.
Conclusion
Theraison d etreof the Financing Program is to manage debts incurred by the
PhilippinesinamannerthatwilllessentheburdenontheFilipinotaxpayersthus
thetermdebtreliefagreements.Themeasuresobjectedtobypetitionerswerenot
aimed at incurring more debts but at terminating preexisting debts and were
backedbytheknowhowofthecountryseconomicmanagersasaffirmedbythird
partyempiricalanalysis.
_______________

77
Rollo,p.183.
542
542 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
That the means employed to achieve the goal of debtrelief do not sit well with
petitionersisbeyondthepowerofthisCourttoremedy.Theexerciseofthepowerof
judicial review is merely to checknot supplantthe Executive, or to simply
ascertainwhetherhehasgonebeyondtheconstitutionallimitsofhisjurisdiction
but not to exercise the power vested in him or to determine the wisdom of his
act. Incaseswherethemainpurposeistonullifygovernmentalactswhetheras
78

unconstitutional or done with grave abuse of discretion, there is a strong

presumptioninfavorofthevalidityoftheassailedacts.Theheavyonusisinon
petitionerstoovercomethepresumptionofregularity.
WefindthatpetitionershavenotsufficientlyestablishedanybasisfortheCourt
todeclaretheactsofrespondentsasunconstitutional.
WHEREFOREthepetitionisherebyDISMISSED.Nocosts.
SOORDERED.
Quisumbing,YnaresSantiago,SandovalGutierrez,Carpio,Austria
Martinez,Corona,CarpioMorales,Callejo, Sr.,Azcuna,ChicoNazarioandGarcia,
JJ.,concur.
Davide,Jr.(C.J.)andPuno,J.,Intheresult.
Panganiban,J.,SeeSeparateOpinion.
SEPARATEOPINION

PANGANIBAN,J.:

I agree that the Petition should be dismissed, insofar as it seeks to nullify the
subject debtreliefContracts executed by respondents under the authority of the
President.
_______________

78
IntheMatterofthePetitionforHabeasCorpusofLansang,etal.,149Phil.547;42SCRA448(1971).
 543
VOL.472,OCTOBER13,2005 543
Constantino,Jr.vs.Cuisia

DecisiontoHonorDebts
anExecutiveCall

Indubitably, former President Corazon C. Aquinos decision to honor the

outstandingdebtsoftheRepublicatthetimesheassumedthepresidencywasa
policymatterwellwithinherprerogative.Itwaspurelyanexecutivecall;hence,
beyondjudicialscrutiny.ThePetitionhasfailedtoshowgraveabuseofdiscretion
that would warrant judicial intervention. I agree with theponenciaof the
distinguished Mr. Justice Dante O. Tinga: not only was the act of President
Aquinoimpliedlygrantedviaher vast executive powers; it was
alsoexplicitlyauthorizedunderSection20 ofArticleVIIoftheConstitution.
1

NoEvidenceSupportingCriminalor
AdministrativeChargesAgainstRespondents

For the above reasons, neither can respondents be faulted for drawing up and
implementing the Philippine Comprehensive Financing for 1992 (Financing
Program).TheProgramwasaproductofthenegotiatedorienteddebtstrategy
adoptedbytheAquinogovernment. Likewise,theassailed
2

_______________

1
Thisprovisionstates:ThePresidentmaycontractorguaranteeforeignloansonbehalfoftheRepublicofthePhilippines
withthepriorconcurrenceoftheMonetaryBoard,andsubjecttosuchlimitationsasmaybeprovidedbylaw.TheMonetary
Boardshall,withinthirtydaysfromtheendofeveryquarterofthecalendaryear,submittotheCongressacompletereportof
itsdecisionsonapplicationsforloanstobecontractedorguaranteedbytheGovernmentorgovernmentownedandcontrolled
corporationswhichwouldhavetheeffectofincreasingtheforeigndebt,andcontainingothermattersasmaybeprovidedby
law.
UntiltheCongressotherwiseprovides,theCentralBankofthePhilippines,operatingunderexistinglaws,shallfunction
asthecentralmonetaryauthority.
2
RespondentsComment,p.3;Rollo,p.58.
544
544 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
debt relief agreements were executed pursuant to that constitutional executive
policy.
In addition to questioning respondents authority to execute the subject
agreements,petitionersalsoclaimthatseveralforeignloansthatwereallegedly
fraudulent(ifnotvoidforbeingcontrarytopublicpolicy)wereamongthepublic
debtsassumedbythegovernmentandmadeeligibleforrestructuringunderthe
FinancingProgram.Specifically,theycontendthatthosedebtsincluded14loans
assumedbythegovernment,butwhichtheCommissiononAudit(COA)hadfound
tohavebeencontractedorguaranteedfraudulentlybyformerPresidentFerdinand
Marcosand/orhiscronies. 3

Allegedly, by borrowing new money to liquidate those fraudulent or behest

loans,thecountrysrighttorepudiate
_______________

AuditReportonthePhilipinePublicDebt,June1992,CommissiononAudit.AnnexBofthePetition.Amongthose
3

debtsandtheamountsinvolvedareasthefollowing:
Debtor Amount
($U.S.M.)
1. NorthDavaoMiningCorp. $117.712
2. BukidnonSugarMillingCo.,Inc. 68.940
3. UnitedPlantersSugarMillingCo. 62.669
4. NorthernCotabatoSugarInd.,Inc. 45.200
5. AsiaIndustries,Inc. 25.000
6. DomesticSatellitesPhilippines 18.540
7. PNBDepositFacility/AMEXCO 17.000
8. PamplonaRedwoodVeneer,Inc. 15.160
9. MindanaoCoconutOilMills 6.900
10. GovernmentServiceInsuranceSystem 10.650
11. PhilippinePhosphateFertilizerCorp. 565.514
12. PagdangananTimberProducts,Inc. 13.500
13. MenziDevelopmentCorp. 13.000
14. SabenaMiningCorp. 27.500
Total U.S.$1,007.285
545
VOL.472,OCTOBER13,2005 545
Constantino,Jr.vs.Cuisia
themweretherebywaivedbyrespondents.Thus,thefilingofadministrativeand
criminal charges against them are being sought by petitioners. Understandably,
theponenciadoes not address this argument, because the Petition has failed to
substantiatethecharges.
Aproperresolutionoftheseclaimsobviouslynecessitates,interalia,areviewof
the assailed contracts. Petitioners have failed, however, to furnish this Court
certifiedcopiesofthequestioneddebtreliefagreements.Hence,theCourthasno
validbasistodeterminewhetheramongthepublicdebtsassumedandrefinanced
by the government was any of the fraudulently contracted foreign loan. It is a
hornbookrulethatwhoeverallegesthefraudorinvalidityofapublicdocumenthas
theburdenofprovingtheallegationwithclear,convincingandmorethanmerely
preponderantevidence. Unfortunately,absolutelynoproofhasbeenofferedinthe
4

presentPetition.
 Atbottom,adeterminationofthevalidityofpetitionersallegationrequiresa
reviewoffactualmatters.Certiorariseeksonlytocorrecterrorsofjurisdictionor
graveabuseofdiscretionamountingtolackorexcessofjurisdiction. Ithasoften 5

beenrepeatedthattheSupremeCourtisnotatrieroffacts. Sincefactualbases 6

were needed, petitioners could have initially filed their Petition in the lower
courts, whichhadcon
7

_______________

Mendezonav.Ozamiz,426Phil.888;376SCRA482;Alonsov.CebuCountryClub,Inc.,417SCRA115,December5,
4

2003.
LandBankofthePhilippinesv.CourtofAppeals,409SCRA455,August25,2003;Oaminalv.Castillo,413SCRA189,
5

October8,2003.
Republic v. Sandiganbayan,402 SCRA 84, April 30, 2003;Samson v. Office of the Ombudsman,439 SCRA 315,
6

September29,2004;FirstPhilippineInternationalBankv.CourtofAppeals,252SCRA259,January24,1996.
TheSupremeCourtsoriginaljurisdictiontoissuewritsofcertiorariisconcurrentwiththejurisdictionsoftheCourtof
7

Appealsandtheregionaltrialcourtsinpropercaseswithintheirrespectiveregions.Ouanov.PGTTInternationalInvestment
Corp.,384SCRA
546
546 SUPREMECOURTREPORTSANNOTATED
Constantino,Jr.vs.Cuisia
current jurisdiction over the subject matter and which were better equipped to
conductafirsthandexaminationoffactualevidenceinsupportoftheirallegations.
Besides,asrespondentsstatedintheirComment,mostoftheloanscoveredby
theagreementhavenotyetbeenthesubjectofjudicialscrutinyastotheirvalidity.
Until annulled by proper court decree, such debts continue to be outstanding
obligations of the Republic. Unless voided by the courts, the loan contracts are
8

presumedvalid. Moreover,unlesstheythemselvesareproventohaveparticipated
9

incorruptorunlawfulactsinobtainingtheloans,respondentsshouldnotbeheld
criminally liable for the allegedly fraudulent contracts entered into by their
predecessorsinoffice.Asitis,thePetitiondoesnotevenallegethatanyofthem
had any role in the execution of any of the 14 loans reported by COA to be
fraudulent.
Thus,Ibelievethatunderthecircumstances,andinsofarasitseeksanorder
fromthisCourttohaverespondentsinvestigatedforanyadministrativeorcriminal
culpability in relation to the execution of the questioned contracts, the Petition
cannotbegranted.AsIsaidearlier,noevidenceatallhasbeenprofferedtowarrant
suchorder
Letmehastentostate,though,thatnothinghereshouldprecludethe
DepartmentofJustice(DOJ)ortheOfficeoftheOmbudsman(OMB)from
initiatinganinvestigationregardingthe14loansreportedbytheCOAto
havebeenfraudulentlycontractedduringtheMarcosregime.

_______________

589,July17,2002;Celestialv.Cachopero,413SCRA469,October15,2003.
 8
RespondentsComment,p.29.
9
Miailbev.CourtofAppeals,354SCRA675,March20,2001.
547
VOL.472,OCTOBER13,2005 547
Constantino,Jr.vs.Cuisia

CriminalProsecutionProper
WhenThereIsSufficientEvidence

Relevantly,mayIaddthatPCGGv.Desierto, whichIhadthehonorofwritingfor
10

the Court, had directed the OMB to file the necessary criminal charges aginst
Herminio T. Disini in relation to the awarding of the Philippine Nuclear Power
Plant(PNPP)project,whichisalsomentionedinthepresentcase.TheCourtfound
that,contrarytotheOMBsfindings,therewassufficientevidenceestablishinga
probable cause for the filing of charges against Disini, who had capitalized,
exploited and taken advantage of his close personal relations with the former
President xxx[andhad]requestedandreceived pecuniary considerations from
Westinghouse and Burns & Roe, which were endeavoring to close the PNPP
contractwiththePhilippinegovernment.
Includedintherecordsofthatcasewereaffidavitsofkeywitnessesandvarious
documentssupportingthechargesofcorruption,briberyandotherunlawfulacts
committedduringthenegotiationforandexecutionofthePNPPcontract.
The point is that this Court cannot order the prosecution of anyone
unlessprobablecauseisshown,asitwasinPCGGv.Desierto. 11

WHEREFORE,IvotetoDISMISSthePetition.
Petitiondismissed.
Note.Noteveryactionfiledbyataxpayercanqualifytochallengethelegality
ofactsdonebythegovernment.Itisonlywhenanactcomplainedofinvolvesthe
illegalexpenditureofpublicmoneythatthesocalledtaxpayersuitmaybeallowed.
(Uyvs.Sandiganbayan,433SCRA424[2004])

o0o