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AND COMMUNICATIONS TECHNOLOGY,

headed by its Chairman, RAMON P. SALES, THE
TELECOMMUNICATIONS OFFICE, BIDS AND
AWARDS FOR INFORMATION AND
COMMUNICATIONS TECHNOLOGY (ICT),
headed by DOTC ASSISTANT SECRETARY
ELMER A. SONEJA as Chairman, and the
TECHNICAL WORKING GROUP FOR ICT, AND
There is nothing wrong if the parties to a lease
DOTC ASSISTANT SECRETARY LORENZO
contract agreed on certain mandatory provisions
FORMOSO, AND ALL OTHER OPERATING
concerning their respective rights and obligations,
UNITS OF THE DOTC FOR INFORMATION
such as the procurement of the insurance and the
AND COM-
rescission clause, contracts being respected as the
law between the contracting parties who may
establish such stipulations, clauses, terms and
_______________
conditions as they may want to include. The law on
obligations and contracts does not prohibit parties * EN BANC.
from entering into an agreement providing that a
violation of the terms of the contract would cause its
cancellation even without judicial intervention. 330
(Heirs of the Late Justice Jose B. Reyes vs. Court of
Appeals, 338 SCRA 282 [2000])
330 SUPREME COURT REPORTS ANNOTATED
——o0o—— Suplico vs. National Economic and Development
Authority

G.R. No. 178830. July 14, 2008.*

MUNICATIONS TECHNOLOGY, and ZTE
CORPORATION, AMSTERDAM HOLDINGS,
ROLEX SUPLICO, petitioner, vs. NATIONAL INC., AND ALL PERSONS ACTING IN THEIR
ECONOMIC AND DEVELOPMENT BEHALF, respondents.
AUTHORITY, represented by NEDA SECRETARY
ROMULO L. NERI, and the NEDA-INVESTMENT
COORDINATION COMMITTEE, DEPARTMENT G.R. No. 179317. July 14, 2008.*
OF TRANSPORTATION AND
COMMUNICATIONS (DOTC), represented by AMSTERDAM HOLDINGS, INC., and
DOTC SECRETARY LEANDRO MENDOZA, NATHANIEL SAUZ, petitioners, vs.
including the COMMISSION ON INFORMATION DEPARTMENT OF TRANSPORTATION AND
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COMMUNICATIONS, SECRETARY LEANDRO facts without introduction of evidence. Since we consider

MENDOZA, COMMISSION ON INFORMATION the act of cancellation by President Macapagal-Arroyo of
AND COMMUNICATIONS TECHNOLOGY, and the proposed ZTE-NBN Project during the meeting of
ASSISTANT SECRETARY LORENZO FORMOSO
331
III, respondents.

VOL. 558, JULY 14, 2008 331

G.R. No. 179613. July 14, 2008.*
Suplico vs. National Economic and Development
Authority
GALELEO P. ANGELES, VICENTE C. ANGELES,
JOB FLORANTE L. CASTILLO, TRINI ANNE G.
NIEVA, ROY ALLAN T. ARELLANO, CARLO October 2, 2007 with the Chinese President in China as an
MAGNO M. REONAL, ETHEL B. REGADIO, official act of the executive department, the Court must
RAENAN B. MALIG, AND VINALYN M. POTOT, take judicial notice of such official act without need of
TOGETHER WITH LAWYERS AND evidence.
ADVOCATES FOR ACCOUNTABILITY, Same; Same; Same; Section 2, paragraph (m) of Rule
TRANSPARENCY, INTEGRITY AND GOOD 131 of the Rules of Court provides for the presumption of
GOVERNANCE (LATIGO), petitioners, vs. regularity of official acts which will be sustained absent
DEPARTMENT OF TRANSPORTATION AND any factual or legal basis to disregard the same.—Under
COMMUNICATIONS (DOTC), represented by Section 2, paragraph (m) of Rule 131 of the Rules of
DOTC SECRETARY LEANDRO MENDOZA, and Court, the official duty of the executive officials of
ZHONG XING EQUIPMENT (ZTE) COMPANY, informing this Court of the government’s decision not to
LTD., AND ANY AND ALL PERSONS ACTING continue with the ZTE-NBN Project is also presumed to
ON THEIR BEHALF, respondents. have been regularly performed, absent proof to the
contrary. Other than petitioner AHI’s unsavory insinuation
Courts; Evidence; Judicial Notice; Under the Rules of in its comment, the Court finds no factual or legal basis to
Court, it is mandatory for the Supreme Court to take disregard this disputable presumption in the present
judicial notice of the official acts of the President of the instance.
Philippines, who heads the executive branch of our Same; Moot and Academic Issues; Concomitant to its
government, without introduction of evidence.—Under the fundamental task as the ultimate citadel of justice and
rules, it is mandatory and the Court has no alternative but legitimacy is the judiciary’s role of strengthening political
to take judicial notice of the official acts of the President of stability indispensable to progress and national
the Philippines, who heads the executive branch of our development; Pontificating on issues which no longer
government. It is further provided in the above-quoted rule legitimately constitute an actual case or controversy will
that the court shall take judicial notice of the foregoing do more harm than good to the nation as a whole; Judicial
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power presupposes actual controversies; In the absence of disregard the foregoing considerations and brush aside
actual justiciable controversies or disputes, the Court mootness, the Court cannot completely rule on the merits
generally opts to refrain from deciding moot issues.— of the case because the resolution of the three petitions
Concomitant to its fundamental task as the ultimate citadel involves settling factual issues which definitely requires
of justice and legitimacy is the judiciary’s role of reception of evidence. There is not an iota of doubt that
strengthening political stability indispensable to progress this may not be done by this Court in the first instance
and national development. Pontificating on issues which because, as has been stated often enough, this Court is not
no longer legitimately constitute an actual case or a trier of facts.
controversy will do more harm than good to the nation as a Separation of Powers; It would be too presumptuous
whole. Wise exercise of judicial discretion militates on the part of the Supreme Court to summarily compel
against resolving the academic issues, as petitioners want public respondents to comply with pertinent provisions of
this Court to do. This is especially true where, as will be law regarding procurement of government infrastructure
further discussed, the legal issues raised cannot be resolved projects without any factual basis or prior determination
without previously establishing the factual basis or of very particular violations committed by specific
antecedents. Judicial power presupposes actual government officials of the executive branch—for the
controversies, the very antithesis of mootness. In the Court to do so would amount to a breach of the norms of
absence of actual justiciable controversies or disputes, the comity among co-equal branches of government.—
Court generally opts to refrain from deciding moot issues. Petitioner Suplico in G.R. No. 178830 prayed that this
Where there is no more live subject of controversy, the Court order “public respondents to forthwith comply with
Court ceases to have a reason to render any ruling or make pertinent provisions of law regarding procurement of
any pronouncement. government ICT contracts and public bidding for the NBN
Same; Same; Reception of Evidence; The Supreme Court is contract.” It would be too presumptuous on the part of the
not a trier of facts—it cannot completely rule on the merits Court to summarily compel public respondents to comply
of the case with pertinent provisions of law regarding procurement of
government infrastructure projects without any factual
332
basis or prior determination of very particular violations
committed by specific government officials of the
332 SUPREME COURT REPORTS ANNOTATED executive branch. For the Court to do so would amount to
a breach of the norms of comity among co-equal branches
Suplico vs. National Economic and Development of government. A perceived error cannot be corrected by
Authority committing another error. Without proper evidence, the
Court cannot just presume that the executive did not
because the resolution of the three petitions involves comply with procurement laws. Should the Court allow
settling factual issues which definitely requires reception of itself to fall into this trap, it would plainly commit grave
evidence.—Even assuming that the Court will choose to error itself.

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CARPIO, J., Dissenting Opinion: being resurrected.—Not only are the legal issues in this
case “capable of repetition yet evading review.” The ZTE
Courts; Moot and Academic Issues; This case is of Supply Contract itself is capable of being resurrected.
transcendental importance to the nation since it involves Public respondents merely stated that the Philippine
the constitutionality of a US$329.48 million Government would “not continue with the ZTE National
(approximately P14.82 billion) government procurement Broadband Network Project,” citing as basis the 1st
contract awarded and signed without an appropriation Indorsement dated 24 October 2007 from the DOTC.
from Congress and without public bidding—the Court has Public respondents did not manifest that the ZTE Supply
a duty to resolve the important issues in this case, Contract had been mutually cancelled by the parties to the
including the novel question on the status of executive contract.
agreements that conflict with national law,
Same; Same; Same; Contracts; Bilateral Contracts; It
333 is axiomatic that one party to a bilateral contract cannot
unilaterally declare a contract discontinued or cancelled—
the case is far from being moot.—Equally important,
VOL. 558, JULY 14, 2008 333
private respondent ZTE Corporation has not manifested to
Suplico vs. National Economic and Development this Court its consent to the discontinuance or cancellation
Authority of the ZTE Supply Contract. Indeed, private respondent
ZTE Corporation has not wavered from its position that
“the ZTE Supply Contract is entirely legal and proper.” It
to prevent a recurrence of government contracts that
is axiomatic that one party to a bilateral contract cannot
violate the Constitution and existing statutes.—This case is
unilaterally declare a contract discontinued or cancelled.
of transcendental importance to the nation since it involves
Clearly, this case is far from being moot.
the constitutionality of a US$329.48 million
(approximately P14.82 billion) government procurement Separation of Powers; Public Officers; Appropriations;
contract awarded and signed without an appropriation The Constitution and existing statutes prohibit public
from Congress and without public bidding. This case puts officers from disbursing public funds without the
to the test the efficacy of constitutional and statutory corresponding appropriation from Congress; Existing
proscriptions designed precisely to prevent such contracts. statutes also prohibit public officials from entering into
The Court has a duty to resolve the important issues in this procurement contracts without a certificate of
case, including the novel question on the status of appropriation
executive agreements that conflict with national law, to
334
prevent a recurrence of government contracts that violate
the Constitution and existing statutes.
Same; Same; ZTE Supply Contract; Not only are the 334 SUPREME COURT REPORTS ANNOTATED
legal issues in this case “capable of repetition yet evading Suplico vs. National Economic and Development
review”—the ZTE Supply Contract itself is capable of
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Authority Congress to authorize payment from funds in the National

Treasury—is lodged exclusively in Congress. One of the
and fund availability from the proper accounting and fundamental checks and balances finely crafted in the
auditing officials.—This Petition for the Issuance of a Constitution is that Congress authorizes the amount to be
Temporary Restraining Order and Writs of Prohibition spent, while the Executive spends the amount so
and/or Permanent Injunction, and Mandamus seeks, authorized. The Executive cannot authorize its own
among others, to annul the ZTE Supply Contract and to spending, and neither can Congress spend what it has
prohibit public respondents from disbursing public funds authorized. The rationale of this basic check and balance is
to implement the contract. The Constitution and existing to prevent abuse of discretion in the expenditure of public
statutes prohibit public officers from disbursing public funds. Thus, the Executive branch cannot spend a single
funds without the corresponding appropriation from centavo of government receipts, whether from taxes, sales,
Congress. Existing statutes also prohibit public officials donations, dividends, profits, loans, or from any other
from entering into procurement contracts without a source, unless there is an appropriation law authorizing the
certificate of appropriation and fund availability from the expenditure. Any government expenditure without the
proper accounting and auditing officials. It is the corresponding appropriation from Congress is
ministerial duty of public officials to not only desist from unconstitutional. There is
disbursing public funds without the corresponding 335
appropriation from Congress, but also to refrain from
signing and implementing procurement contracts without
the requisite certificate of appropriation and fund VOL. 558, JULY 14, 2008 335
availability. Indisputably, a petition for prohibition is a
Suplico vs. National Economic and Development
proper action to test the legality of such disbursement of Authority
public funds and the legality of the execution of such
procurement contracts.
no exception to this constitutional prohibition that “no
Same; Same; Same; Checks and Balances; The power of money shall be paid out of the Treasury except in
the purse—or the power of Congress to authorize payment pursuance of an appropriation made by law.” This
from funds in the National Treasury—is lodged exclusively constitutional prohibition is self-executory.
in Congress; The rationale of this basic check and balance
is to prevent abuse of discretion in the expenditure of Same; Same; Same; Administrative Code;
public funds; Any government expenditure without the Government Contracts; The Administrative Code of 1987
corresponding appropriation from Congress is expressly prohibits the entering into contracts involving
unconstitutional; There is no exception to this the expenditure of public funds unless two prior
constitutional prohibition that “no money shall be paid out requirements are satisfied—First, there must be an
of the Treasury except in pursuance of an appropriation appropriation law authorizing the expenditure required in
made by law.”—The power of the purse—or the power of the contract. Second, there must be attached to the

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contract a certification by the proper accounting official cannot be obligated in a procurement contract without a
and auditor that funds have been appropriated by law and prior appropriation from
such funds are available.—To further insure compliance
336
with Section 29(2), Article VI of the Constitution, the
Administrative Code of 1987 expressly prohibits the
entering into contracts involving the expenditure of public 336 SUPREME COURT REPORTS ANNOTATED
funds unless two prior requirements are satisfied. First,
there must be an appropriation law authorizing the Suplico vs. National Economic and Development
expenditure required in the contract. Second, there must be Authority
attached to the contract a certification by the proper
accounting official and auditor that funds have been Congress.—Public respondent National Economic and
appropriated by law and such funds are available. Failure Development Authority is fully aware that all proceeds of
to comply with any of these two requirements renders the loans and grants secured by the Philippine Government
contract void. cannot be disbursed without an appropriation from
Same; Same; Same; Same; Same; The law expressly Congress. Public respondent National Economic and
declares void a procurement contract that fails to comply Development Authority and its officials know, or ought to
with the two requirements, and the ZTE Supply Contract know by heart, that this is a fundamental requirement of
does not comply with any of these two requirements.—The the Constitution and existing statutes. The National
law expressly declares void a procurement contract that Economic and Development Authority has succinctly
fails to comply with the two requirements, namely, an summarized this fundamental rule in Section 5.1 of the
appropriation law funding the contract and a certification Implementing Rules and Regulations for the Official
of appropriation and fund availability. The clear purpose of Development Assistance (ODA) Act of 1996: Section 5.1.
these requirements is to insure that government contracts General Principles on Budget.—All expenditures,
are never signed unless supported by the corresponding inclusive of counterpart and proceeds of loans and loans
appropriation law and fund availability. The ZTE Supply and grant funds, must be included in the annual national
Contract does not comply with any of these two expenditure program to be submitted to Congress for
requirements. Thus, the ZTE Supply Contract is void for approval. (Emphasis supplied) There can be no dispute that
violation of Sections 46, 47 and 48, Chapter 8, Subtitle B, the proceeds of foreign loans, whether concluded or not,
Title I, Book V of the Administrative Code of 1987, as cannot be obligated in a procurement contract without a
well as Sections 85, 86 and 87 of the Government Auditing prior appropriation from Congress.
Code of the Philippines. These provisions of both Codes Same; Same; Same; When the Executive Branch
implement Section 29(2), Article VI of the Constitution. secures a loan to fund a procurement of goods or services,
Same; Same; Foreign Loans; There can be no dispute that the loan proceeds enter the National Treasury as part of
the proceeds of foreign loans, whether concluded or not, the general funds of the government, and Congress must
appropriate by law the loan proceeds to fund the

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procurement of goods or services, otherwise the loan infrastructure, goods and services. Section 10, Article IV
proceeds cannot be spent by the Executive branch, and of the Government Procurement Reform Act provides:
when the loan falls due, Congress must make another Section 10. Competitive Bidding.—All procurement shall
appropriation law authorizing the repayment of the loan be done through Competitive Bidding, except as
out of the general funds in the National Treasury.—The provided for in Article XVI of this Act. (Emphasis
OSG’s second argument betrays a lack of understanding of supplied) In addition, Section 4 of the Government
appropriations for payment of goods and services as Procurement Reform Act provides that the Act applies to
distinguished from appropriations for repayment of loans. government procurement “regardless of source of funds,
When the Executive branch secures a loan to fund a whether local or foreign.” Hence, the requirement of
procurement of goods or services, the loan proceeds enter public bidding applies to foreign-funded contracts like the
the National Treasury as part of the general funds of the ZTE Supply Contract.
government. Congress must appropriate by law the loan Same; Presidency; Executive Agreements; An
proceeds to fund the procurement of goods or services, executive agreement has the force and effect of law, just
otherwise the loan proceeds cannot be spent by the like implementing rules of executive agencies, but just like
Executive branch. When the loan falls due, Congress must implementing rules of executive agencies, executive
make another appropriation law authorizing the repayment agreements cannot amend or repeal prior laws but must
of the loan out of the general funds in the National comply with the laws they implement; Only a treaty, upon
Treasury. This appropriation for the repayment of the loan ratification by the Senate, acquires the status of a
is what is covered by the automatic appropriation in municipal law; An executive agreement, being an exclusive
Section 31 of PD No. 1177. It is not the appropriation act of the Executive branch, does not have the status of a
needed to fund a procurement contract. The OSG’s municipal law—acting alone, the Executive has no law-
arguments are clearly misplaced. making power; An executive agreement cannot amend or
337 repeal a prior law; An executive agreement must comply
with state policy embodied in existing municipal law;
Executive agreements are intended to carry out well-
VOL. 558, JULY 14, 2008 337 established national policies, and these are found in
statutes.—An executive agreement has the force and effect
Suplico vs. National Economic and Development
Authority of law, just like implementing rules of executive agencies.
However, just like implementing rules of executive
agencies, executive agreements cannot amend or repeal
Bids and Bidding; Government Procurement Reform prior laws but must comply with the laws they implement.
Act; The Government Procurement Reform Act requires Only a treaty, upon ratification by the Senate, acquires the
public bidding in all procurement of infrastructure, goods status of a municipal law. Thus, a treaty may amend or
and services.—The Government Procurement Reform Act repeal a prior law and vice versa. Hence, a treaty may
requires public bidding in all procurement of change state policy embodied in a prior law. In sharp

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contrast, an executive agreement, being an exclusive act of Supply Contract is part of the executive agreement
the Executive branch, does not have the status of a between China and the Philippines. This is plain error. An
municipal law. Acting alone, the Executive has no law- executive agreement is an agreement between
making power. While the Executive does possess rule- governments. The Executive branch has defined an
making power, such power must be exercised consistent “international agreement,” which includes an executive
with the law it seeks to implement. Consequently, an agreement, to refer to a contract or an understanding
executive agreement cannot amend or repeal a prior law. “entered into between the Philippines and another
An executive agreement must comply with state policy government.” That the Chinese Government handpicked
embodied in existing municipal law. This Court has the ZTE Corporation to supply the goods and services to
the Philippine Government does not make the ZTE Supply
338
Contract an executive agreement. ZTE Corporation is not a
government or even a government agency performing
338 SUPREME COURT REPORTS ANNOTATED governmental or developmental functions like the Export-
Import Bank of China or the Japan Bank for International
Suplico vs. National Economic and Development Cooperation, 515 SCRA 720 (2007), or a multilateral
Authority lending agency organized by governments like the World
Bank. ZTE Corporation is a business enterprise performing
declared: International agreements involving political purely commercial functions. ZTE Corporation is publicly
issues or changes of national policy and those involving listed in the Hong Kong and Shenzhen stock exchanges,
international arrangements of a permanent character with individual and juridical stockholders that receive
usually take the form of treaties. But international dividends from the corporation. Moreover, an executive
agreements embodying adjustments of detail carrying agreement is governed by international law. However, the
out well-established national policies and traditions and ZTE Supply Contract expressly provides that it shall be
those involving arrangements of a more or less governed by Philippine law. Thus, the ZTE Supply
temporary nature usually take the form of executive Contract is not an executive agreement but simply a
agreements. (Emphasis supplied) Executive agreements commercial contract, which must comply with public
are intended to carry out well-established national policies, bidding as mandated by the governing law, which is
and these are found in statutes. Philippine law.
Same; Same; Same; An executive agreement is an 339
agreement between governments, governed by
international law; That the Chinese Government
handpicked the ZTE Corporation to supply the goods and VOL. 558, JULY 14, 2008 339
services to the Philippine Government does not make the
Suplico vs. National Economic and Development
ZTE Supply Contract an executive agreement.—Private Authority
respondent ZTE Corporation further claims that the ZTE

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Same; Same; Same; Foreign Borrowings Act; The that deals with the President’s authority to waive or modify
phrase in Section 1 of the Foreign Borrowings Act “as restrictions on public bidding. Section 1 of the Act does
may be necessary and upon terms and conditions as may not deal with the requirement of public bidding. Besides, if
be agreed upon” means that the President has discretion to Section 1 is construed as granting the President full
decide the terms and conditions of the loan, such as the authority to waive or limit public bidding, Section 4
rate of interest, the maturity period, amortization amounts, becomes a superfluous provision.
and similar matters, but does not delegate to the President Same; Same; Same; Foreign-Funded Projects; Foreign-
the legislative power to amend or repeal mandatory funded projects of the government are not exempt from
provisions of law like compulsory public bidding of public bidding despite executive agreements entered into
government procurement contracts.—A solitary by the Philippines with creditor countries or lending
Department of Justice opinion has ventured that the phrase institutions.—Foreign-funded projects of the
“as may be necessary and upon terms and conditions as
340
may be agreed upon” serves as statutory basis for the
President to exempt foreign-funded government
procurement contracts from public bidding. This is a 340 SUPREME COURT REPORTS ANNOTATED
mistake. This phrase means that the President has
discretion to decide the terms and conditions of the loan, Suplico vs. National Economic and Development
such as the rate of interest, the maturity period, Authority
amortization amounts, and similar matters. This phrase
does not delegate to the President the legislative power to government are not exempt from public bidding despite
amend or repeal mandatory provisions of law like executive agreements entered into by the Philippines with
compulsory public bidding of government procurement creditor countries or lending institutions. In Abaya v.
contracts. Otherwise, this phrase would constitute undue Ebdane, Jr., 515 SCRA 720 (2007), the Court cited
delegation of legislative power since there are no standards Memorandum Circular No. 104 dated 21 August 1989
that would guide the President in exercising this alleged issued by the President: x x x it is hereby clarified that
delegated legislative power. foreign-assisted infrastructure projects may be exempted
Same; Same; Same; Same; What governs the waiver from the application of the pertinent provisions of the
or modification of restrictions on public bidding is Section Implementing Rules and Regulations (IRR) of Presidential
4-A of the Foreign Borrowings Act.—What governs the Decree (P.D.) No. 1594 relative to the method and
waiver or modification of restrictions on public bidding is procedure in the comparison of bids, which may be the
Section 4-A of the Foreign Borrowings Act, which subject of agreement between the infrastructure agency
authorizes the President to, “when necessary, agree to concerned and the lending institution. It should be made
modify the application of any law x x x imposing clear however that public bidding is still required and can
restrictions on international competitive bidding.” Section only be waived pursuant to existing laws. (Italicization in
4 is the specific provision of the Foreign Borrowings Act the original of the Memorandum Circular; boldfacing

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supplied) Executive agreements with lending institutions Authority

have never been understood to allow exemptions from
public bidding. What the executive agreements can modify
are the methods or procedures in the comparison of bids, Contracts; Void Contracts; The ZTE Supply Contract,
such as the adoption of the competitive bidding which is not funded by an appropriation law and does not
procedures or guidelines of the Japan Bank for have a certificate of appropriation and fund availability, is
International Cooperation or the World Bank on the not only void, but also void from the beginning under
method or procedure in the evaluation or comparison of Article 1409 of the Civil Code.—The ZTE Supply
bids. It is self-evident that these procedures or guidelines Contract, which is not funded by an appropriation law and
require public bidding. does not have a certificate of appropriation and fund
availability, is not only void, but also void from the
Same; Same; Same; Same; That the funding for the beginning under Article 1409 of the Civil Code. As the
ZTE Supply Contract will come from a foreign loan does Court held in COMELEC v. Quijano-Padilla, 389 SCRA
not negate the rationale for public bidding—the need to 353 (2002), which involved a procurement contract
safeguard public interest against anomalies exists in all without the requisite appropriation law and certificate of
government procurement contracts, regardless of the appropriation and fund availability: Verily, the contract, as
source of funding; Public bidding is the most effective expressly declared by law, is inexistent and void ab
means to prevent anomalies in the award of government initio. This is to say that the proposed contract is without
contracts.—That the funding for the ZTE Supply Contract force and effect from the very beginning or from its
will come from a foreign loan does not negate the rationale incipiency, as if it had never been entered into, and hence,
for public bidding. Filipino taxpayers will still pay for the cannot be validated either by lapse of time or ratification.
loan with interest. The need to safeguard public interest (Emphasis supplied)
against anomalies exists in all government procurement
contracts, regardless of the source of funding. Public Same; Same; A contract void from the beginning is
bidding is the most effective means to prevent anomalies legally non-existent—as such, it cannot be annulled
in the award of government contracts. Public bidding because to annul a contract assumes a voidable contract;
promotes transparency and honesty in the expenditure of The discontinuance or cancellation of the ZTE Supply
public funds. Public bidding is accepted as the best means Contract by the Philippine Government, apart from being
of securing the most advantageous price for the unilateral, had no legal effect and did not moot this
government, whether in procuring infrastructure, goods or petition.—A contract void from the beginning is legally
services, or in disposing off government assets. non-existent. As such, it cannot be annulled because to
annul a contract assumes a voidable contract. A
341 cancellation of a contract void from the beginning has no
legal effect because the contract is legally non-existent.
Any cancellation may simply be construed as an
VOL. 558, JULY 14, 2008 341
acknowledgment or admission that the contract is void
Suplico vs. National Economic and Development from the beginning. A contract void from the beginning
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can only be declared as such, that is, void from the dismissed on the ground of mootness. David v. Arroyo, 489
beginning. Thus, the discontinuance or cancellation of the SCRA 160 (2006) instructs: The moot and academic
ZTE Supply Contract by the Philippine Government, apart principle is not a magical formula that can automatically
from being unilateral, had no legal effect and did not moot dissuade the courts in resolving a case. Courts will decide
this petition. The members of this Court have the sworn cases, otherwise moot and academic, if: first, there is a
duty to uphold the system of checks and balances that is so grave violation of the Constitution; second, the exceptional
essential to our democratic system of government. In the character of the situation and the paramount public interest
present case, the members of this Court must uphold the is involved; third, when the constitutional issue raised
check and balance in the appropriation and expenditure of requires formulation of controlling principles to guide the
public funds as embodied in Section 29(2), Article VI of bench, the bar, and the public; and fourth, the case is
the Constitution and the statutes insuring its compliance. If capable of repetition yet evading review. (Italics supplied)
our democratic institutions are to be strengthened, this Same; Same; Same; Same; The legal issues raised in
Court must not shirk from its primordial duty to preserve the present case, by their very nature, are just as
and uphold the Constitution. important, if not even more so, and are susceptible of
342 recurrence; These issues also call for the formulation of
controlling principles for the guidance of all concerned.—
The legal issues raised in the present case, by their very
342 SUPREME COURT REPORTS ANNOTATED nature, are just as important, if not even more so, and are
susceptible of recurrence as those involved in the above-
Suplico vs. National Economic and Development
Authority cited cases. These issues also call for the formulation of
controlling principles for the guidance of all concerned.
That the contract subject of the present petitions has been
CARPIO-MORALES, J., Dissenting Opinion: cancelled is, therefore, not an excuse for the Court not to
decide the petitions on the merits.
Actions; Courts; Judicial Review; Moot and
Academic Questions; Courts will decide cases, otherwise AZCUNA, J., Separate Concurring Opinion:
moot and academic, if: first, there is a grave violation of Courts; Moot and Academic Issues; Where the resolution
the Constitution, second, the exceptional character of the of the case would partake of the nature of an advisory
situation and the paramount public interest is involved, opinion, the Court is not allowed to render the same.—I
third, when the constitutional issue raised requires find the points raised by Justice Antonio T. Carpio in his
formulation of controlling principles to guide the bench, dissenting opinion arguably sound, correct and almost
the bar, and the public, and fourth, the case is capable of unassailable as an abstract treatise in law. Nevertheless,
repetition yet evading review.—I believe these petitions
warrant a decision on the merits despite the 343
aforementioned declaration of the President. I share Justice
Carpio’s opinion that these petitions should not be
VOL. 558, JULY 14, 2008 343
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Angara, Abello, Concepcion, Regala and Cruz

Suplico vs. National Economic and Development
for private respondent Zhong Xing
Authority
Telecommunication Equipment (ZTE Corporation).

under the facts and pursuant to Article VIII, Section 1 of 344

the Constitution that defines judicial power as the duty of
the courts of justice to settle actual controversies involving
344 SUPREME COURT REPORTS ANNOTATED
rights which are legally demandable and enforceable, I am
of the view that the desistance from the agreement in Suplico vs. National Economic and Development
question renders the matter academic and moot, leaving no Authority
actual controversy calling for the exercise of judicial
power. The resolution of the issue in these proceedings RESOLUTION
would, therefore, partake of the nature of an advisory REYES, R.T., J.:
opinion which this Court is not allowed to render. Under consideration is the Manifestation and
Same; Same; The supply or procurement contract is
Motion1 dated October 26, 2007 of the Office of the
clearly an incomplete agreement and cannot stand alone
Solicitor General (OSG) which states:
without the companion and yet-to-be-agreed loan— “The Office of the Solicitor General (OSG) respectfully
desistance at this stage from further pursuing the project avers that in an Indorsement dated October 24, 2007, the
on the part of one party effectively prevents the contract Legal Service of the Department of Transportation and
from materializing.—The so-called supply or procurement Communications (DOTC) has informed it of the Philippine
contract is clearly an incomplete agreement and cannot Government’s decision not to continue with the ZTE
stand alone without the companion and yet-to-be-agreed National Broadband Network Project (see attachment2).
loan agreement. As such, desistance at this stage from That said, there is no more justiciable controversy for this
further pursuing the project on the part of one party
effectively prevents the contract from materializing.
_______________

MANIFESTATION AND MOTION of the Office of 1 Rollo (G.R. No. 178830), p. 1093.
the Solicitor General. 2 1st Indorsement dated October 24, 2007 from the DOTC signed by
The facts are stated in the resolution of the Court. Atty. Raquel Desiderio, Director III, Legal Service states:
Fortun, Narvaza & Salazar for petitioner Rolex Respectfully indorsed to SOLICITOR GENERAL AGNES VST
Suplico. DEVANADERA (Attention: ASSISTANT SOLICITOR GENERAL
Galileo P. Angeles, et al. for petitioners in G.R. AMPARO M. CABOTAJE-TANG), herein copy of the Highlights From
No. 179613. the Notes of the Meeting Between President Gloria Macapagal-Arroyo
Adrian S. Sugay, Marinelle B. O’ Santos and and Chinese President Hu Jintao which was held in Xi Jiao Guesthouse,
Sherald M. Santillan for petitioner Amsterdam Shanghai, The People’s Republic of China on 02 October 2007 as
Holdings, Inc.
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transmitted from the Office of the President as provided by the President Hu Jintao held 2 October 2007 were not
Department of Foreign Affairs (DFA). attached to the 26 October 2007 Manifestation and Motion
As per verbal request from your honorable office we are furnishing —thus depriving petitioners of the opportunity to comment
you a copy of the record of the said meeting which states in sum the thereon—a mere verbally requested 1st Indorsement is not
Philippine Government’s decision not to continue with the ZTE National sufficient basis for the conclusion that the ZTE-DOTC
Broadband Network Project due to several reasons and constraints. It is NBN deal has been permanently scrapped.
the understanding of the DOTC that this document will form part of the 67. Suffice to state, said 1st Indorsement is glaringly
evidence that will be submitted to the Honorable Supreme Court in self-serving, especially without the Notes of the Meeting
connection with the cases filed against the DOTC in relation to the NBN Between President Gloria Macapagal-Arroyo and Chinese
Project. President Hu Jintao to support its allegations or other
Kindly refer to the attached document and respectfully request proof of the supposed decision to cancel the ZTE-DOTC
appropriate action on the same. Thank you very much for your continued NBN deal. Public respondents can certainly do better than
support and assistance to the Department of Transportation and that.”4
Communications.
Petitioner Suplico further argues that:
345
“79. Assuming arguendo that some aspects of the
VOL. 558, JULY 14, 2008 345 present Petition have been rendered moot (which is
vehemently denied), this Honorable Court, consistent with
Suplico vs. National Economic and Development
well-entrenched jurisprudence, may still take cognizance
Authority
thereof.”5

Honorable Court to resolve. WHEREFORE, public

_______________
respondents respectfully pray that the present petitions be
DISMISSED.” 3 Rollo (G.R. No. 178830), p. 1124.
4 Id., at p. 1157.
On November 13, 2007, the Court noted the
5 Id., at p. 1160.
OSG’s manifestation and motion and required
petitioners in G.R. Nos. 178830, 179317, and 346
179613 to comment.
On December 6, 2007, Rolex Suplico, petitioner
in G.R. No. 178830, filed his Consolidated Reply 346 SUPREME COURT REPORTS ANNOTATED
and Opposition,3 opposing the aforequoted OSG Suplico vs. National Economic and Development
Manifestation and Motion, arguing that: Authority

“66. Aside from the fact that the Notes of the Meeting

Petitioner Suplico cites this Court’s rulings in
Between President Gloria Macapagal-Arroyo and Chinese
Gonzales v. Chavez,6 Rufino v. Endriga,7 and Alunan
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III v. Mirasol8 that despite their mootness, the Court On January 15, 2008, the Court required the OSG
nevertheless took cognizance of these cases and to file respondents’ reply to petitioners’ comments
ruled on the merits due to the Court’s symbolic on its manifestation and motion.
function of educating the bench and the bar by
formulating guiding and controlling principles, _______________
precepts, doctrines, and rules.
On January 31, 2008, Amsterdam Holdings, Inc. 6 G.R. No. 97351, February 4, 1992, 205 SCRA 816.
(AHI) and Nathaniel Sauz, petitioners in G.R. No. 7 G.R. No. 139554, July 21, 2006, 496 SCRA 13.
179317, also filed their comment expressing their 8 G.R. No. 108399, July 31, 1997, 276 SCRA 501.
sentiments, thus:
347
“3. First of all, the present administration has never
been known for candor. The present administration has a VOL. 558, JULY 14, 2008 347
very nasty habit of not keeping its word. It says one thing,
but does another. Suplico vs. National Economic and Development
4. This being the case, herein petitioners are unable to Authority
bring themselves to feel even a bit reassured that the
government, in the event that the above-captioned cases On April 18, 2008, the OSG filed respondents’
are dismissed, will not backtrack, re-transact, or even reply, reiterating their position that for a court to
resurrect the now infamous NBN-ZTE transaction. This is exercise its power of adjudication, there must be an
especially relevant since what was attached to the OSG’s actual case or controversy—one which involves a
Manifestation and Motion was a mere one (1) page written conflict of legal rights, an assertion of opposite legal
communication sent by the Department of Transportation claims susceptible of judicial resolution; the case
and Communications (DOTC) to the OSG, allegedly must not be moot or academic or based on extra-
relaying that the Philippine Government has decided not to legal or other similar considerations not cognizable
continue with the NBN project “x x x due to several by a court of justice.9
reasons and constraints.” Respondents also insist that there is no perfected
contract in this case that would prejudice the
Petitioners AHI and Sauz further contend that government or public interest. Explaining the nature
because of the transcendental importance of the of the NBN Project as an executive agreement,
issues raised in the petition, which among others, respondents stress that it remained in the negotiation
included the President’s use of the power to borrow, stage. The conditions precedent10 for the agreement
i.e., to enter into foreign loan agreements, this Court to become effective have not yet been complied
should take cognizance of this case despite its with.
apparent mootness. Respondents further oppose petitioners’ claim of
the right to information, which they contend is not an
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absolute right. judicial branch of government would generally

hesitate to pass upon.
_______________ On July 2, 2008, the OSG filed a Supplemental
Manifestation and Motion. Appended to it is the
9 Citing Republic v. Tan, G.R. No. 145255, March 30, 2004, Highlights from the Notes of Meeting between
426 SCRA 485, 492-493. President Gloria Macapagal-Arroyo and Chinese
10 (a)  Issuance of a Forward Obligation Authority (FOA) by President Hu Jintao, held in XI Jiao Guesthouse,
the Department of Budget and Management (DBM) of the Shanghai, China, on October 2, 2007. In the Notes of
Government of the Republic of the Philippines; Meeting, the Philippine Government conveyed its
(b)  Conclusion of the Loan Agreement between the Export- decision not to continue with the ZTE National
Import Bank of China and the Department of Finance (DOF) of Broadband Network Project due to several
the Government of the Republic of the Philippines; constraints. The same Notes likewise contained
(c)  Legal Opinion on the procurement process by the President Hu Jintao’s expression of understanding of
Department of Justice of the Government of the Republic of the the Philippine Government decision.
Philippines; We resolve to grant the motion.
(d)  The ratification by the Government of the Republic of Firstly, the Court notes the triple petitions to be
the Philippines and the People’s Republic of China of the for certiorari, prohibition and mandamus, with
Executive Agreement evidenced by the letter dated 02 December application for the issuance of a Temporary
2006 of Chinese Ambassador Li Jinjun to Presidential Chief of Restraining Order (TRO) and/or Preliminary
Staff Michael T. Defensor relating to the NBN project and the Injunction. The individual prayers in each of the
letter of the NEDA Secretary dated 20 April 2007 addressed to three (3) consolidated petitions are:
Honorable Minister Bo Xilai, Ministry of Commerce and
Honorable Li Rougu, Chairman and President of the Export- G.R. No. 178830
Import Bank of China, People’s Republic of China nominating the “WHEREFORE, it is respectfully prayed of this
NBN Project. Honorable Court:
1. Upon the filing of this Petition, pursuant to
348 the second paragraph of Rule 58, Section 5 of the
Rules of Court, issue forthwith an ex parte
348 SUPREME COURT REPORTS ANNOTATED temporary restraining order enjoining respondents,
their subordinates, agents, representatives and any
Suplico vs. National Economic and Development and all persons acting on their behalf from
Authority pursuing, entering into indebtedness, disbursing
funds, and implementing the ZTE-DOTC
They contend that the matters raised concern Broadband Deal;
executive policy, a political question which the 2. Compel respondents, upon Writ of
Mandamus, to forthwith produce and furnish
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petitioner or his undersigned counsel a certified with any kind, sort, or specie of activity in
true copy of the contract or agreement covering connection with the National Broadband
the NBN project as agreed upon with ZTE Network Project;
Corporation; B. the instant Petition for Mandamus be given
due course; and,
349
C. after due consideration of all relevant
issues, judgment be rendered directing respondents
VOL. 558, JULY 14, 2008 349 to allow herein petitioners access to all agreements
Suplico vs. National Economic and Development entered into with the Government of China, the
Authority ZTE Corporation, and/or other entities, government
instrumentalities, and/or individuals with regard to
3. Schedule Oral Arguments in the present the National Broadband Network Project.12
case pursuant to Rule 49 in relation to Section 2, (Emphasis supplied)
Rule 56 of the revised Rules of Court; and,
4. Annul and set aside the award of the _______________
ZTE-DOTC Broadband Deal, and compel public
11 Rollo (G.R. No. 178830), pp. 127-128.
respondents to forthwith comply with pertinent
12 Rollo (G.R. No. 179317), pp. 35-36.
provisions of law regarding procurement of
government ICT contracts and public bidding for 350
the NBN contract.”11 (Emphasis supplied)
G.R. No. 179317
350 SUPREME COURT REPORTS ANNOTATED
WHEREFORE, petitioners Amsterdam Holdings, Inc.,
and Nathaniel Sauz respectfully pray as follows: Suplico vs. National Economic and Development
A. upon the filing of this Petition for Authority
Mandamus and conditioned upon the posting of a
bond in such amount as the Honorable Court may G.R. No. 179613
fix, a temporary restraining order and/or writ of WHEREFORE, it is respectfully prayed of this
preliminary injunction be issued directing the Honorable Court to:
Department of Transportation and 1. Compel respondents, upon Writ of
Communication, the Commission on Information Mandamus, to forthwith produce and furnish
and Communications Technology, all other petitioner or his undersigned counsel a certified
government agencies and instrumentalities, their true copy of the contract or agreement covering
officers, employees, and/or other persons acting for the NBN project as agreed upon with ZTE
and on their behalf to desist during the pendency of Corporation;
the instant Petition for Mandamus from entering 2. Schedule Oral Arguments in the present
into any other agreements and from commencing case pursuant to Rule 49 in relation to Section 2,
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Rule 56 of the Revised Rules of Court; VOL. 558, JULY 14, 2008 351
3. Annul and set aside the award of the Suplico vs. National Economic and Development
contract for the national broadband network to Authority
respondent ZTE Corporation, upon the ground
that said contract, as well as the procedures resorted tions (DOTC), represented by DOTC Secretary
to preparatory to the execution thereof, is contrary Leandro Mendoza, including the Commission on
to the Constitution, to law and to public policy; Information and Communications Technology,
4. Compel public respondent to forthwith headed by its Chairman, Ramon P. Sales, The
comply with pertinent provisions of law Telecommunications Office, Bids and Awards for
regarding procurement of government Information and Communications Technology
infrastructure projects, including public bidding Committee (ICT), headed by DOTC Assistant
for said contract to undertake the construction of the Secretary Elmer A. Soneja as Chairman, and The
national broadband network.13 (Emphasis supplied) Technical Working Group for ICT, and DOTC
Assistant Secretary Lorenzo Formoso, and All
Other Operating Units of the DOTC for Information
On September 11, 2007, the Court issued a and Communications Technology, and ZTE
TRO14 in G.R. No. 178830, enjoining the parties Corporation, Amsterdam Holdings, Inc., and
from “pursuing, entering into indebtedness, ARESCOM, Inc.—Acting on the instant petition
disbursing funds, and implementing the ZTE-DOTC with prayer for temporary restraining order and/or
Broadband Deal and Project” as prayed for. Pertinent writ of preliminary injunction, the Court Resolved,
parts of the said Order read: without giving due course to the petition, to
xxxx
“WHEREAS, the Supreme Court, on 11 September
(d) Issue a TEMPORARY
2007, adopted a resolution in the above-entitled case, to
RESTRAINING ORDER, effective
wit:
immediately and continuing until further
“G.R. No. 178830 (Rolex Suplico vs. National
orders from this Court, enjoining the (i)
Economic and Development Authority, represented
National Economic and Development
by NEDA Secretary Romulo L. Neri, and the
Authority, (ii) NEDA-Investment
NEDA Investment Coordination Committee,
Coordination Committee, (iii) Department of
Department of Transportation and Communica-
Transportation and Communications,
Commission on Information and
_______________
Communications Technology, (iv)
13 Rollo (G.R. No. 179613), pp. 77-78. Telecommunications Office, Bids and
14 Rollo (G.R. No. 178830), p. 232. Awards for Information and
Communications Technology Committee
351
(ICT), (v) Technical Working Group for ICT,
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and all other Operating Units of the DOTC Petitioners in G.R. Nos. 178830 and 179613 pray
for Information and Communications that they be furnished certified true copies of the
Technology, (vi) ZTE Corporation; (vii) “contract or agreement covering the NBN project as
Amsterdam Holdings, Inc., and (viii) agreed upon with ZTE Corporation.” It appears that
ARESCOM, Inc., and any and all persons during one of the Senate hearings on the NBN
acting on their behalf from ‘pursuing, project, copies of the supply contract16 were readily
entering into indebtedness, disbursing funds, made available to petitioners.17 Evidently, the said
and implementing the ZTE-DOTC prayer has been complied with and is, thus, mooted.
Broadband Deal and Project’ as prayed for.” When President Gloria Macapagal-Arroyo, acting
NOW THEREFORE, effective immediately and in her official capacity during the meeting held on
continuing until further orders from this Court, You, October 2, 2007 in China, informed China’s
Respondents (i) National Economic and Development President Hu Jintao that the Philippine Government
Authority, (ii) NEDA-Investment Coordination had decided not to continue with the ZTE-National
Committee, (iii) Department of Transportation and Broadband Network (ZTE-NBN) Project due to
Communications, Commission on Information and several reasons and constraints, there is no doubt that
Communications Technology, (iv) Telecommunications all the other principal prayers in the three
Office, Bids and Awards for Information and petitions (to annul, set aside, and enjoin the
Communications Technology Committee (ICT), (v) implementation of the ZTE-NBN Project) had also
Technical Working Group for ICT, and all other Operating become moot.
Units of Contrary to petitioners’ contentions that these
declarations made by officials belonging to the
352
executive branch on the Philippine Government’s
decision not to continue with the
352 SUPREME COURT REPORTS ANNOTATED
Suplico vs. National Economic and Development _______________
Authority
15 Id., at pp. 233-235.
the DOTC for Information and Communications 16 Also attached to public respondents’ Comment in G.R. No.
Technology, (vi) ZTE Corporation; (vii) Amsterdam 178830 as Annex “LL.” Id., at p. 537.
Holdings, Inc., and (viii) ARESCOM, Inc., and any and all 17 Id., at pp. 589-590; Annex “OO.” Letter of Sec. Leandro
persons acting on their behalf are hereby ENJOINED from Mendoza, DOTC, to Sen. Allan Peter Cayetano dated September
“pursuing, entering into indebtedness, disbursing 25, 2007. In response to a request of the Senate Blue Ribbon
funds, and implementing the ZTE-DOTC Broadband Committee to be furnished with the copy of the supply contract,
Deal and Project” as prayed for.”15 (Emphasis supplied.) DOTC Secretary Mendoza informed Sen. Allan Peter Cayetano
that the pertinent documents were transmitted as publicly

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requested, and the same were distributed to guests who requested Project during the meeting of October 2, 2007 with
a copy. the Chinese President in China as an official act of
the executive department, the Court must take
353
judicial notice of such official act without need of
evidence.
VOL. 558, JULY 14, 2008 353 In David v. Macapagal-Arroyo,18 We took
judicial notice of the announcement by the Office of
Suplico vs. National Economic and Development
the President banning all rallies and canceling all
Authority
permits for public assemblies following the issuance
of Presidential Proclamation No. 1017 and General
ZTE-NBN Project are self-serving, hence, Order No. 5.
inadmissible, the Court has no alternative but to take In Estrada v. Desierto,19 the Court also resorted
judicial notice of this official act of the President of to judicial notice in resolving the factual ingredient
the Philippines. of the petition.
Section 1, Rule 129 of the Rules of Court
provides:
_______________
“SECTION 1. Judicial Notice, when mandatory.—A
18 G.R. No. 171396, May 3, 2006, 489 SCRA 160.
court shall take judicial notice, without introduction of
19 G.R. No. 146710, March 2, 2001, 353 SCRA 452.
evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of 354
nationality, the law of nations, the admiralty and maritime
courts of the world and their seals, the political
constitution and history of the Philippines, the official acts 354 SUPREME COURT REPORTS ANNOTATED
of the legislative, executive and judicial departments of Suplico vs. National Economic and Development
the Philippines, the laws of nature, the measure of time, Authority
and the geographical divisions.” (Emphasis supplied)
Moreover, under Section 2, paragraph (m) of
Under the rules, it is mandatory and the Court
Rule 131 of the Rules of Court, the official duty of
has no alternative but to take judicial notice of the
the executive officials20 of informing this Court of
official acts of the President of the Philippines, who
the government’s decision not to continue with the
heads the executive branch of our government. It is
ZTE-NBN Project is also presumed to have been
further provided in the above-quoted rule that the
regularly performed, absent proof to the contrary.
court shall take judicial notice of the foregoing facts
Other than petitioner AHI’s unsavory insinuation in
without introduction of evidence. Since we
its comment, the Court finds no factual or legal basis
consider the act of cancellation by President
Macapagal-Arroyo of the proposed ZTE-NBN
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to disregard this disputable presumption in the 355

present instance.
Concomitant to its fundamental task as the
VOL. 558, JULY 14, 2008 355
ultimate citadel of justice and legitimacy is the
judiciary’s role of strengthening political stability Suplico vs. National Economic and Development
indispensable to progress and national development. Authority
Pontificating on issues which no longer legitimately
constitute an actual case or controversy will do more Kapag wala nang buhay na kaso, wala nang
harm than good to the nation as a whole. Wise dahilan para magdesisyon ang Husgado.
exercise of judicial discretion militates against In Republic Telecommunications Holdings, Inc. v.
resolving the academic issues, as petitioners want Santiago,21 the lone issue tackled by the Court of
this Court to do. This is especially true where, as will Appeals (CA) was whether the Securities
be further discussed, the legal issues raised cannot be Investigation and Clearing Department (SICD) and
resolved without previously establishing the factual Securities and Exchange Commission (SEC) en banc
basis or antecedents. committed reversible error in issuing and upholding,
Judicial power presupposes actual controversies, respectively, the writ of preliminary injunction. The
the very antithesis of mootness. In the absence of writ enjoined the execution of the questioned
actual justiciable controversies or disputes, the Court agreements between Qualcomm, Inc. and Republic
generally opts to refrain from deciding moot issues. Telecommunications Holdings, Inc. (RETELCOM).
Where there is no more live subject of controversy, The implementation of the agreements was
the Court ceases to have a reason to render any restrained through the assailed orders of the SICD
ruling or make any pronouncement. and the SEC en banc which, however, were nullified
by the CA decision. Thus, RETELCOM elevated the
_______________ matter to this Court praying for the reinstatement of
the writ of preliminary injunction of the SICD and
20 The Highlights from the notes of the meeting between the SEC en banc. However, before the matter was
President Gloria Macapagal-Arroyo and Chinese President Hu finally resolved, Qualcomm, Inc. withdrew from the
Jintao which was held in the Xi Jiao Guesthouse, Shanghai, China negotiating table. Its withdrawal had thwarted the
on October 2, 2007 was transmitted by the Office of the President execution and enforcement of the contracts. Thus,
through the Department of Foreign Affairs (DFA) to the the resolution of whether the implementation of said
Department of Transportation and Communications (DOTC), agreements should be enjoined became no longer
which in turn transmitted the communication through 1st necessary.
Indorsement dated October 24, 2007 (Rollo [G.R. No. 178830], p. Equally applicable to the present case is the Court
1097) to the Office of the Solicitor General, which in informed ruling in the above-cited Republic
this Court, through its Manifestation and Motion dated October Telecommunications. There We held, thus:
26, 2007 (Id., at p. 1093).

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“Indeed, the instant petition, insofar as it assails the entitled and which would be negated by the dismissal of
Court of Appeals’ Decision nullifying the orders of the the petition.
SEC en banc and the SICD, has been rendered moot and The Court likewise finds it unnecessary to rule whether
academic. To rule, one way or the other, on the correctness the assailed Court of Appeals’ Decision had the effect of
of the questioned orders of the SEC en banc and the SICD overruling the Court’s Resolution dated 29 January 1999,
will be indulging in a theoretical exercise that has no which set aside the TRO issued by the appellate court.
practical worth in view of the supervening event. A ruling on the matter practically partakes of a mere
The rule is well-settled that for a court to exercise its advisory opinion, which falls beyond the realm of judicial
power of adjudication, there must be an actual case or review. The exercise of the power of judicial review is
controversy—one which involves a conflict of legal rights, limited to actual cases and controversies. Courts have no
an assertion of opposite legal claims susceptible of judicial authority to pass upon issues through advisory opinions or
resolution; the case must not be moot or to resolve hypothetical or feigned problems.
While there were occasions when the Court passed
_______________ upon issues although supervening events had rendered
those petitions moot and academic, the instant case does
21 G.R. No. 140338, August 7, 2007, 529 SCRA 232.
not fall under the exceptional cases. In those cases, the
356
Court was persuaded to resolve moot and academic issues
to formulate guiding and controlling constitutional
principles, precepts, doctrines or rules for future guidance
356 SUPREME COURT REPORTS ANNOTATED
of both bench and bar.
Suplico vs. National Economic and Development In the case at bar, the resolution of whether a writ of
Authority preliminary injunction may be issued to prevent the
implementation of the assailed contracts calls for an
academic or based on extra-legal or other similar appraisal of factual considerations which are peculiar only
considerations not cognizable by a court of justice. Where to the transactions and parties involved in this controversy.
the issue has become moot and academic, there is no Except for the determination of whether petitioners are
justiciable controversy, and an adjudication thereon would entitled to a writ of preliminary injunction which is now
be of no practical use or value as courts do not sit to moot, the issues raised in this petition do not call for a
adjudicate mere academic questions to satisfy scholarly clarification of any
interest, however intellectually challenging.
In the ultimate analysis, petitioners are seeking the 357
reinstatement of the writ of injunction to prevent the
concerned parties from pushing through with transactions VOL. 558, JULY 14, 2008 357
with Qualcomm, Inc. Given that Qualcomm, Inc. is no Suplico vs. National Economic and Development
longer interested in pursuing the contracts, there is no Authority
actual substantial relief to which petitioners would be
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constitutional principle or the interpretation of any 22 Republic Telecommunications Holdings, Inc. v. Santiago, id., at pp.
statutory provision.”22 242-244.
23 Rollo (G.R. No. 178830), p. 676.
Secondly, even assuming that the Court will
choose to disregard the foregoing considerations and 358
brush aside mootness, the Court cannot completely
rule on the merits of the case because the resolution 358 SUPREME COURT REPORTS ANNOTATED
of the three petitions involves settling factual Suplico vs. National Economic and Development
issues which definitely requires reception of Authority
evidence. There is not an iota of doubt that this may
not be done by this Court in the first instance (4) Whether the Philippine government required that
because, as has been stated often enough, this Court the NBN Project be completed under a Build-Operate-and-
is not a trier of facts. Transfer Scheme;
Ang pagpapasiya sa tatlong petisyon ay (5) Whether the AHI proposal complied with the
nangangailangan ng paglilitis na hindi gawain ng requirements for an unsolicited proposal under the BOT
Hukumang ito. Law;
Respondent ZTE, in its Comment in G.R. No. (6) Whether the Philippine government has actually
178830,23 correctly pointed out that since petitioner earmarked public finds for disbursement under the ZTE
Suplico filed his petition directly with this Court, Supply Contract; and
without prior factual findings made by any lower (7) Whether the coverage of the NBN Project to be
court, a determination of pertinent and relevant facts supplied under the ZTE Supply Contract is more extensive
is needed. ZTE enumerated some of these factual than that under the AHI proposal or such other proposal
issues, to wit: submitted therefor.24

(1) Whether an executive agreement has been reached Definitely, some very specific reliefs prayed for
between the Philippine and Chinese governments over the in both G.R. Nos. 178830 and 179613 require prior
NBN Project; determination of facts before pertinent legal issues
(2) Whether the ZTE Supply Contract was entered could be resolved and specific reliefs granted.
into by the Republic of the Philippines, through the DOTC, In G.R. No. 178830, petitioner seeks to annul
and ZTE International pursuant to, and as an integral part and set aside the award of the ZTE-DOTC
of, the executive agreement; Broadband Deal and compel public respondents to
(3) Whether a loan agreement for the NBN Project forthwith comply with pertinent provisions of law
has actually been executed; regarding procurement of government ICT contracts
and public bidding for the NBN contract.
_______________ In G.R. No. 179613, petitioners also pray that the
Court annul and set aside the award of the contract
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for the national broadband network to respondent would be too presumptuous on the part of the
ZTE Corporation, upon the ground that said contract, Court to summarily compel public respondents to
as well as the procedures resorted to preparatory to comply with pertinent provisions of law regarding
the execution thereof, is contrary to the Constitution, procurement of government infrastructure projects
to law and to public policy. They also ask the Court without any factual basis or prior determination of
to compel public respondent to forthwith comply very particular violations committed by specific
with pertinent provisions of law regarding government officials of the executive branch. For the
procurement of government infrastructure projects, Court to do so would amount to a breach of the
including public bidding for said contract to norms of comity among co-equal branches of
undertake the construction of the national broadband government. A perceived error cannot be corrected
network. by committing another error. Without proper
It is simply impossible for this Court “to annul evidence, the Court cannot just presume that the
and set aside the award of the ZTE-DOTC executive did not comply with procurement laws.
Broadband Deal” without Should the Court allow itself to fall into this trap, it
would plainly commit grave error itself.
_______________ Magiging kapangahasan sa Hukumang ito na
pilitin ang mga pinipetisyon na tumalima sa batas
24 Id., at pp. 720-721. sa pangongontrata ng pamahalaan kung wala pang
pagtitiyak o angkop na ebidensiya ng nagawang
359
paglabag dito.
Let it be clarified that the Senate investigation in
VOL. 558, JULY 14, 2008 359 aid of legislation cannot be the basis of Our decision
which requires a judicial finding of facts.
Suplico vs. National Economic and Development
Justice Antonio T. Carpio takes the view that the
Authority
National Broadband Network Project should be
declared null and void. The foregoing threefold
any evidence to support a prior factual finding reasons would suffice to address the concern of Our
pointing to any violation of law that could lead to esteemed colleague.
such annulment order. For sure, the Supreme Court
is not the proper venue for this factual matter to be
_______________
threshed out.
Thirdly, petitioner Suplico in G.R. No. 178830 25 Id., at pp. 127-128.
prayed that this Court order “public respondents to
forthwith comply with pertinent provisions of law 360
regarding procurement of government ICT contracts
and public bidding for the NBN contract.”25 It
360 SUPREME COURT REPORTS ANNOTATED
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Suplico vs. National Economic and Development the ZTE Supply Contract is legally non-existent. The
Authority Philippine Government’s decision “not to

361
The Court is, therefore, constrained to dismiss the
petitions and deny them due course because of
mootness and because their resolution requires VOL. 558, JULY 14, 2008 361
reception of evidence which cannot be done in an Suplico vs. National Economic and Development
original petition brought before the Supreme Court. Authority
WHEREFORE, the petitions are DISMISSED.
The Temporary Restraining Order issued on continue with the ZTE National Broadband Network
September 11, 2007 is DISSOLVED. Project”1 during the pendency of this case, even if
SO ORDERED. deemed a cancellation of the ZTE Supply Contract,
had no legal effect on the status of the contract, and
Quisumbing, Corona, Tinga, Velasco, Jr.,
did not moot this petition.
Nachura, Leonardo-De Castro and Brion, JJ.,
This case is of transcendental importance to the
concur.
nation since it involves the constitutionality of a
Puno, C.J., I join J. Azcuna’s Separate
US$329.48 million (approximately P14.82 billion)
Concurring Opinion.
government procurement contract awarded and
Ynares-Santiago, J., I join J. Azcuna’s Separate
signed without an appropriation from Congress
opinion.
and without public bidding. This case puts to the
Carpio, J., See Dissenting Opinion.
test the efficacy of constitutional and statutory
Austria-Martinez, J., I join J. Carpio in his
proscriptions designed precisely to prevent such
dissenting opinion.
contracts. The Court has a duty to resolve the
Carpio-Morales, J., Please see my Dissenting
important issues in this case, including the novel
Opinion.
question on the status of executive agreements that
Azcuna, J., I concur in a separate opinion.
conflict with national law, to prevent a recurrence of
Chico-Nazario, J., On Official Leave.
government contracts that violate the Constitution
DISSENTING OPINION and existing statutes.
CARPIO, J.: Not only are the legal issues in this case “capable
I dissent on the ground that the ZTE Supply Contract of repetition yet evading review.”2 The ZTE Supply
is void from the beginning for being contrary to the Contract itself is capable of being resurrected. Public
Constitution, the Administrative Code of 1987, the respondents merely stated that the Philippine
Government Auditing Code of the Philippines, and Government would “not continue with the ZTE
the Government Procurement Reform Act. As such, National Broadband Network Project,” citing as
basis the 1st Indorsement dated 24 October 2007
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from the DOTC. Public respondents did not manifest In their Comment, public respondents attached
that the ZTE Supply Contract had been mutually the ZTE Supply Contract dated 21 April 2007, the
cancelled by the parties to the contract. Memorandum of Understanding on the
Equally important, private respondent ZTE Establishment of Philippines-China Economic
Corporation has not manifested to this Court its Partnership dated 5 June 2006, and the letters
consent to the discontinuance or cancellation of the between Philippine and Chinese officials relating to
ZTE Supply Contract. Indeed, private respondent the National Broadband Network Project. These
ZTE Corporation has not wavered from its position attachments mooted petitioner’s prayer for copies of
that “the ZTE Supply Contract is entirely legal and these documents, leaving as sole issue of this petition
the legal status of the ZTE Supply Contract.
_______________ This Petition for the Issuance of a Temporary
Restraining Order and Writs of Prohibition and/or
1 Rollo, p. 1093. Public respondents’ Manifestation and Permanent Injunction, and Mandamus seeks, among
Motion dated 26 October 2007. others, to annul the ZTE Supply Contract and to
2 Rufino v. Endriga, G.R. No. 139554, 21 July 2006, 496 prohibit public respondents from disbursing public
SCRA 13; Manalo v. Calderon, G.R. No. 178920, 15 October funds to implement the contract. The Constitution
2007, 536 SCRA 290. and existing statutes prohibit public officers from
disbursing public funds without the corresponding
362
appropriation from Congress. Existing statutes also
prohibit public officials from entering into
362 SUPREME COURT REPORTS ANNOTATED procurement contracts without a certificate of
appropriation and fund availability from the proper
Suplico vs. National Economic and Development
accounting and auditing officials. It is the ministerial
Authority
duty of public officials to not only desist from
disbursing public funds without the corresponding
proper.”3 It is axiomatic that one party to a bilateral appropriation from Congress, but also to refrain from
contract cannot unilaterally declare a contract signing and implementing procurement contracts
discontinued or cancelled. Clearly, this case is far without the requisite certificate of appropriation and
from being moot. fund availability. Indisputably, a petition for
Petitioner assails the ZTE Supply Contract as prohibition is a proper action to test the legality of
void from the beginning on two grounds. First, the such disbursement of pub-
contract has no appropriation from Congress,
violating Section 29(2), Article VI of the
_______________
Constitution. Second, the absence of public bidding
violates the Government Procurement Reform Act. 3 Private respondent ZTE Corporation’s Comment, p. 8.

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363 condition that the Equipment and Services to be procured from the
proceeds of the loan come from ZTE Corporation.” (Id., at p. 539) Public
respondents also attached to their Consolidated Comment the 2 December
VOL. 558, JULY 14, 2008 363
2006 letter (Annex “N”) of Chinese Ambassador Li Jinjun to Presidential
Suplico vs. National Economic and Development Chief of Staff Michael T. Defensor, stating: “It may interest Your
Authority Honorable to know that ZTE Corporation, a reputable and established
telecommunications company in China, responded to this worthwhile
lic funds and the legality of the execution of such undertaking and, consequently, the People’s Republic of China through
procurement contracts.4 the Chinese Ministry of Commerce designated it as the NBN project’s
From the admissions of respondents in their prime contractor.” (Id., at p. 472)
Consolidated Comment, the following facts are
364
undisputed:

“1. The ZTE Supply Contract, a procurement of 364 SUPREME COURT REPORTS ANNOTATED
goods and services for the Philippine Government, was Suplico vs. National Economic and Development
signed on 21 April 2007 by DOTC Secretary Leandro R. Authority
Mendoza and ZTE Corporation Vice President Yu Yong;5
2. There was no public bidding in the award of the 3. The ZTE Supply Contract is to be financed by a
contract to ZTE Corporation, and the Chinese Government loan from the Export-Import Bank of China to the
handpicked ZTE Corporation to supply the goods and Philippine Government;7
services to the Philippine Government;6 4.  The Loan Agreement to finance the ZTE Supply
Contract was not concluded before or after the signing of
_______________ the ZTE Supply Contract;8
5. There is no appropriation law enacted by Congress
4 Section 2, Rule 65 of the Rules of Court.
to fund the ZTE Supply Contract;9
5 Rollo, pp. 348-349. In their Consolidated Comment, public
6. A certificate of appropriation and fund availability
respondents attached as Annex “LL” a copy of the ZTE Supply Contract.
is not attached to the ZTE Supply Contract;10 and
Public respondents explained, “On April 21, 2007, Mendoza and ZTE
7. ZTE Corporation is publicly listed in the Hong
Corporation Vice President Yu Yong signed a US$329 million supply
Kong and Shenzhen stock exchanges.”11
contract for the NBN Project at the VIP room of the Haikou Meilan
International Airport of the People’s Republic of China.” In addition, the 2006 and 2007 General
6 The fourth whereas clause of the ZTE Supply Contract (Annex Appropriations Acts12 do not contain any
“LL”) states: “an Executive Agreement was entered into between the appropriation for a foreign-assisted National
Republic of the Philippines and the People’s Republic of China where the Broadband Network Project, under which the ZTE
latter agreed to finance the National Broadband Network Project through Supply Contract would fall.
a Loan Agreement with Export-Import Bank of China subject to the This case raises the following issues:
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1. Whether the ZTE Supply Contract is void from the law, a certificate of appropriation and fund
beginning in the absence of an appropriation by law to availability, and public bidding—renders the ZTE
fund the contract, and in the absence of a certificate of Supply Contract void from the beginning.
appropriation and fund availability; and Absence of an Appropriation Law
The Constitution requires an appropriation law
_______________ before public funds are spent for any purpose.
Section 29(2), Article VI of the Constitution
7 Id., at p. 369, fourth whereas clause of the ZTE Supply Contract. In
provides:
their Consolidated Comment, public respondents stated, “Among the
above-enumerated requisites (including the conclusion of the loan No money shall be paid out of the Treasury except in
agreement), only the issuance of a legal opinion from the DOJ had been pursuance of an appropriation made by law.13
complied with.”
8 Id., at p. 431. In their Consolidated Comment, public respondents The power of the purse—or the power of Congress
stated: “At the outset, there is no need yet for a budget allocation as the to authorize payment from funds in the National
loan agreement has yet to be concluded.” Treasury—is lodged exclusively in Congress. One of
9 Id. the fundamental checks and balances finely crafted
10 Supra, note 5. Annex “LL,” which is a copy of the ZTE Supply in the Constitution is that Congress authorizes the
Contract, does not have as attachment the certificate of appropriation and amount to be spent, while the Executive spends the
fund availability. amount so authorized. The Executive cannot
11 Rollo, p. 339. Consolidated Comment of public respondents, authorize its own spending, and neither can Congress
footnote 14. spend what it has authorized. The rationale of this
12 Republic Act No. 9336 (2005 reenacted for 2006) and Republic basic check and balance is to prevent abuse of
Act No. 9401, respectively. discretion in the expenditure of public funds.
Thus, the Executive branch cannot spend a single
365 centavo of government receipts, whether from taxes,
sales, donations, dividends, profits, loans, or from
VOL. 558, JULY 14, 2008 365 any other source, unless there is an appropriation law
Suplico vs. National Economic and Development authorizing the expenditure.
Authority
_______________
2. Whether the ZTE Supply Contract is void from the
13 This provision originated from the Jones Law, or the
beginning in the absence of a public bidding.
Philippine Bill of 1901. Section 5 of the Jones Law provides:
The simple answer to each question is yes, the “That no money shall be paid out of the Treasury except in
ZTE Supply Contract is void from the beginning. pursuance of an appropriation by law.” This provision was carried
The absence of any of the three—an appropriation over almost verbatim in the 1935, 1973 and 1987 Constitutions.

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366 which, free of other obligations, is sufficient to cover the

proposed expenditure; and
(2) Notwithstanding this provision, contracts for the
366 SUPREME COURT REPORTS ANNOTATED
procurement of supplies and materials to be carried in
Suplico vs. National Economic and Development stock may be entered into under regulations of the
Authority Commission provided that when issued, the supplies and
materials shall be charged to the proper appropriations
Any government expenditure without the account.
corresponding appropriation from Congress is SECTION 47. Certificate Showing Appropriation to
unconstitutional. There is no exception to this Meet Contract.—Except in the case of a contract for
constitutional prohibition that “no money shall be personal service, for supplies for current consumption or to
paid out of the Treasury except in pursuance of an be carried in stock not exceeding the estimated
appropriation made by law.” This constitutional consumption for three (3) months, or banking transactions
prohibition is self-executory. of government-owned or controlled banks, no contract
To further insure compliance with Section 29(2), involving the expenditure of public funds by any
Article VI of the Constitution, the Administrative government agency shall be entered into or authorized
Code of 1987 expressly prohibits the entering into unless the proper accounting official of the agency
contracts involving the expenditure of public funds concerned shall have certi-
unless two prior requirements are satisfied. First,
367
there must be an appropriation law authorizing
the expenditure required in the contract. Second,
there must be attached to the contract a VOL. 558, JULY 14, 2008 367
certification by the proper accounting official and Suplico vs. National Economic and Development
auditor that funds have been appropriated by law Authority
and such funds are available. Failure to comply
with any of these two requirements renders the fied to the officer entering into the obligation that funds
contract void. have been duly appropriated for the purpose and that
Thus, Sections 46, 47 and 48, Chapter 8, Subtitle the amount necessary to cover the proposed contract
B, Title I, Book V of the Administrative Code of for the current calendar year is available for
1987 provide: expenditure on account thereof, subject to verification by
the auditor concerned. The certificate signed by the proper
“SECTION 46. Appropriation Before Entering into accounting official and the auditor who verified it, shall be
Contract.—(1) No contract involving the expenditure attached to and become an integral part of the proposed
of public funds shall be entered into unless there is an contract, and the sum so certified shall not thereafter be
appropriation therefor, the unexpended balance of available for expenditure for any other purpose until the

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obligation of the government agency concerned under the government-owned or controlled banks no contract
contract is fully extinguished. involving the expenditure of public
SECTION 48. Void Contract and Liability of Officer.
368
—Any contract entered into contrary to the
requirements of the two (2) immediately preceding
sections shall be void, and the officer or officers entering 368 SUPREME COURT REPORTS ANNOTATED
into the contract shall be liable to the Government or other
Suplico vs. National Economic and Development
contracting party for any consequent damage to the same
Authority
extent as if the transaction had been wholly between
private parties.” (Emphasis supplied)
The Administrative Code of 1987 and the
Sections 85, 86 and 87 of the Government Auditing Government Auditing Code expressly mandate that
Code of the Philippines,14 an earlier law, contain the “[N]o contract involving the expenditure of public
same provisions. funds shall be entered into unless there is an
appropriation therefor.” The law prohibits the
_______________ mere entering into a contract without the
corresponding appropriation from Congress. It does
14 Presidential Decree No. 1445. Sections 85, 86 and 87 of this not matter whether the contract is subject to a
Decree provide: condition as to its effectivity, such as a subsequent
SECTION 85. Appropriation Before Entering into favorable legal opinion by the Department of
Contract.—(1)  No contract involving the expenditure of Justice,15 because even a contract with
public funds shall be entered into unless there is an
appropriation therefor, the unexpended balance of which, _______________
free of other obligations, is sufficient to cover the
proposed expenditure. funds by any government agency shall be entered into or
(2)  Notwithstanding this provision, contracts for the authorized unless the proper accounting official of the
procurement of supplies and materials to be carried in agency concerned shall have certified to the officer
stock may be entered into under regulations of the entering into the obligation that funds have been duly
Commission provided that when issued, the supplies and appropriated for the purpose and that the amount
materials shall be charged to the proper appropriation necessary to cover the proposed contract for the current
account. fiscal year is available for expenditure on account thereof,
SECTION 86. Certificate Showing Appropriation to subject to verification by the auditor concerned. The
Meet Contract.—Except in the case of a contract for certificate signed by the proper accounting official and the
personal service, for supplies for current consumption or auditor who verified it, shall be attached to and become an
to be carried in stock not exceeding the estimated integral part of the proposed contract, and the sum so
consumption for three months, or banking transactions of certified shall not thereafter be available for expenditure

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for any other purpose until the obligation of the appropriated for the purpose and that the
government agency concerned under the contract is fully amount necessary to cover the proposed contract
extinguished. for the current fiscal year is available for
expenditure.” The law prohibits not only the
SECTION 87. Void Contract and Liability of
entering into the contract, but also authorizing the
Officer.—Any contract entered into contrary to the
entering into the contract without the certification
requirements of the two immediately preceding sections
from the proper accounting official. This means that
shall be void, and the officer or officers entering into the
the certificate of appropriation and fund availability
contract shall be liable to the government or other
must be issued before the signing of the contract.
contracting party for any consequent damage to the same
extent as if the transaction had been wholly between
_______________
private parties.
15 Rollo, pp. 572-573. The ZTE Supply Contract (Annex “LL” Conclusion of the Loan Agreement between Export-
of public respondents’ Consolidated Comment), on the paragraph Import Bank of China and the Department of Finance
Conditions for the Effectivity of the Contract, provides: (DOF) of the Government of the Republic of the
The Effectivity of this Contract shall be subject to the Philippines;
fulfillment of the following conditions precedent: Legal opinion on the procurement process by the
Issuance of a Forward Obligation Authority (FOA) by Department of Justice of the Government of the Republic
the Department of Budget and Management (DBM) of the of the Philippines.
Government of the Philippines; The ratification by the Government of the Republic of
the Philippines and the People’s Republic of China of the
369
Executive Agreement evidenced by the letter dated 02
December 2006 of Chinese Ambassador Li Jinjun to
VOL. 558, JULY 14, 2008 369 Presidential Chief of Staff Michael T. Defensor relating to

Suplico vs. National Economic and Development the NBN Project and the letter of NEDA Secretary dated
Authority 20 April 2007 addressed to Honorable Minister Bo XIII,
Ministry of Commerce and Honorable Li Ruogu,
16 Chairman and President, of the Export-Import Bank of
such condition is still a contract under the law.
China, People’s Republic of China nominating the NBN
Moreover, the Administrative Code of 1987 and
Project.
the Government Auditing Code expressly mandate
16 Article 1318 of the Civil Code provides: “There is no
that “[N]o contract involving the expenditure of
contract unless the following requisites concur: (1) Consent of the
public funds x x x shall be entered into or
contracting parties; (2) Object certain which is the subject of the
authorized unless the proper accounting official x
contract; (3) Cause of the obligation which is established.” Hence,
x x shall have certified to the officer entering into
once the three requisites concur, a contract arises, regardless of
the obligation that funds have been duly
any stipulation on conditional obligations.

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370 xxx
Petitioners are justified in refusing to formalize the
contract with PHOTOKINA. Prudence dictated them not
370 SUPREME COURT REPORTS ANNOTATED
to enter into a contract not backed up by sufficient
Suplico vs. National Economic and Development appropriation and available funds. Definitely, to act
Authority otherwise would be a futile exercise for the contract would
inevitably suffer the vice of nullity. In Osmeña vs.
In addition, the Administrative Code of 1987 and Commission on Audit, this Court held:
the Government Auditing Code expressly require
that the “certificate signed by the proper _______________
accounting official and the auditor who verified
17 438 Phil. 72; 389 SCRA 353 (2002). See also Osmeña v.
it, shall be attached to and become an integral
Commission on Audit, G.R. No. 98355, 2 March 1994, 230 SCRA 585;
part of the proposed contract.” The certificate of
Agan, Jr. v. Phil. International Air Terminals Co., Inc., 450 Phil. 744; 402
appropriation and fund availability must be attached
SCRA 612 (2003).
to the “proposed contract,” again clearly showing
that the certificate must be issued before the signing 371
of the contract.
In several cases, the Court had the occasion to
VOL. 558, JULY 14, 2008 371
apply these provisions of the Administrative Code of
1987 and the Government Auditing Code of the Suplico vs. National Economic and Development
Authority
Philippines. In these cases, the Court clearly ruled
that the two requirements—the existence of
appropriation and the attachment of the certification The Auditing Code of the Philippines (P.D. 1445)
—are “conditions sine qua non for the execution further provides that no contract involving the expenditure
of government contracts.” In COMELEC v. of public funds shall be entered into unless there is an
Quijano-Padilla,17 the Court ruled: appropriation therefor and the proper accounting official of
the agency concerned shall have certified to the officer
“It is quite evident from the tenor of the language of entering into the obligation that funds have been duly
the law that the existence of appropriations and the appropriated for the purpose and the amount necessary to
availability of funds are indispensable pre-requisites to cover the proposed contract for the current fiscal year is
or conditions sine qua non for the execution of available for expenditure on account thereof. Any contract
government contracts. The obvious intent is to impose entered into contrary to the foregoing requirements shall
such conditions as a priori requisites to the validity of be VOID.
the proposed contract. Using this as our premise, we Clearly then, the contract entered into by the former
cannot accede to PHOTOKINA’s contention that there is Mayor Duterte was void from the very beginning since the
already a perfected contract. x x x agreed cost for the project (P8,368,920.00) was way
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beyond the appropriated amount (P5,419,180.00) as Suplico vs. National Economic and Development
certified by the City Treasurer. Hence, the contract was Authority
properly declared void and unenforceable in COA’s 2nd
Indorsement, dated September 4, 1986. The COA declared appropriation and fund availability. The clear
and we agree, that: purpose of these requirements is to insure that
The prohibition contained in Sec. 85 of PD 1445 government contracts are never signed unless
(Government Auditing Code) is explicit and supported by the corresponding appropriation law
mandatory. Fund availability is, as it has always and fund availability.18 The ZTE Supply Contract
been, an indispensable prerequisite to the does not comply with any of these two
execution of any government contract involving requirements. Thus, the ZTE Supply Contract is
the expenditure of public funds by all void for violation of Sections 46, 47 and 48, Chapter
government agencies at all levels. Such contracts 8, Subtitle B, Title I, Book V of the Administrative
are not to be considered as final or binding unless Code of 1987, as well as Sections 85, 86 and 87 of
such a certification as to fund availability is issued the Government Auditing Code of the Philippines.
(Letter of Instruction No. 767, s. 1978). Antecedent These provisions of both Codes implement Section
of advance appropriation is thus essential to 29(2), Article VI of the Constitution.
government liability on contracts (Zobel vs. City of Public respondent National Economic and
Manila, 47 Phil. 169). This contract being violative Development Authority is fully aware that all
of the legal requirements aforequoted, the same proceeds of loans and grants secured by the
contravenes Sec. 85 of PD 1445 and is null and void Philippine Government cannot be disbursed without
by virtue of Sec. 87. an appropriation from Congress. Public respondent
Verily, the contract, as expressly declared by law, is National Economic and Development Authority and
inexistent and void ab initio. This is to say that the its officials know, or ought to know by heart, that
proposed contract is without force and effect from the very this is a fundamental requirement of the Constitution
beginning or from its incipiency, as if it had never been and existing statutes. The National Economic and
entered into, and hence, cannot be validated either by lapse Development Authority has succinctly summarized
of time or ratification.” (Emphasis supplied) this fundamental rule in Section 5.1 of the
Implementing Rules and Regulations for the Official
The law expressly declares void a procurement
Development Assistance (ODA) Act of 1996:
contract that fails to comply with the two
requirements, namely, an appropriation law funding “Section 5.1. General Principles on Budget.—All
the contract and a certification of expenditures, inclusive of counterpart and proceeds of
loans and loans and grant funds, must be included in the
372
annual national expenditure program to be submitted to
Congress for approval.” (Emphasis supplied)
372 SUPREME COURT REPORTS ANNOTATED
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There can be no dispute that the proceeds of foreign The OSG’s first argument is an admission that
loans, whether concluded or not, cannot be obligated when the ZTE Supply Contract was signed, there
in a procurement contract without a prior was no loan agreement, no loan proceeds, and no
appropriation from Congress. appropriation from Congress for the contract. This
The Office of the Solicitor General (OSG), only drives the last nail deeper into the coffin of the
representing the public respondents, advances two ZTE Supply Contract because the absence of an
arguments to justify the appropriation from Congress makes the signing of
the ZTE Supply Contract an unconstitutional and
_______________ unlawful act.
The OSG’s second argument betrays a lack of
18 Melchor v. Commission on Audit, G.R. No. 95398, 16 understanding of appropriations for payment of
August 1991, 200 SCRA 704. goods and services as distinguished from
appropriations for repayment of loans. When the
373
Executive branch secures a loan to fund a
procurement of goods or services, the loan proceeds
VOL. 558, JULY 14, 2008 373 enter the Na-
Suplico vs. National Economic and Development
Authority _______________

19 Section 31 of Presidential Decree No. 1177 provides:

absence of appropriation for the ZTE Supply SECTION 31. Automatic Appropriations.—All
Contract. First, there is no need for an appropriation expenditures for (a) personnel retirement premiums,
by law because the loan agreement has not been government service insurance, and other similar fixed
concluded. Second, the automatic appropriation for expenditures, (b) principal and interest on public debt,
payment of foreign loans under Section 31 of (c) national government guarantees of obligations which
Presidential Decree No. 117719 provides the are drawn upon, are automatically appropriated: provided,
appropriation cover to fund the ZTE Supply that no obligations shall be incurred or payments made
Contract. Thus, the OSG asserts: from funds thus automatically appropriated except as
issued in the form of regular budgetary allotments.
“At the outset, there is no need yet for a budget
(Emphasis supplied)
allocation as the loan agreement has yet to be concluded.
20 Rollo, p. 431. Consolidated Comment of public
Assuming arguendo that one has already been executed,
respondents.
the appropriation therefor is covered by the Executive
branch’s power of automatic appropriation for payment of 374
foreign loans contracted. x x x”20

374 SUPREME COURT REPORTS ANNOTATED

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Suplico vs. National Economic and Development do not claim that the ZTE Supply Contract falls
Authority under any of the exceptions to public bidding in
Article XVI of the Government Procurement Reform
tional Treasury as part of the general funds of the Act. Instead, private respondent ZTE Corporation
government. Congress must appropriate by law the claims
loan proceeds to fund the procurement of goods or
services, otherwise the loan proceeds cannot be spent _______________
by the Executive branch. When the loan falls due,
21 Guingona, Jr. v. Carague, G.R. No. 94571, 22 April 1991,
Congress must make another appropriation law
196 SCRA 221.
authorizing the repayment of the loan out of the
22 See also Section 6 of Presidential Decree No. 81, and
general funds in the National Treasury.21 This
Section 1 of Presidential Decree No. 1967.
appropriation for the repayment of the loan is what is
covered by the automatic appropriation in Section 31 375
of PD No. 1177.22 It is not the appropriation needed
to fund a procurement contract. The OSG’s
arguments are clearly misplaced. VOL. 558, JULY 14, 2008 375
Absence of Public Bidding Suplico vs. National Economic and Development
The Government Procurement Reform Act Authority
requires public bidding in all procurement of
infrastructure, goods and services. Section 10, that the ZTE Supply Contract, being part of an
Article IV of the Government Procurement Reform executive agreement, is exempt from public bidding
Act provides: under the last sentence of Section 4 of the
Government Procurement Reform Act. Thus, private
“Section 10. Competitive Bidding.—All
respondent ZTE Corporation argues:
procurement shall be done through Competitive
Bidding, except as provided for in Article XVI of this “x x x Section 4 of RA 9184 itself expressly provides
Act.” (Emphasis supplied) that executive agreements that deal on subject matters
covered by said law shall be observed. Hence, the
In addition, Section 4 of the Government
requirement of competitive bidding under Section 10 of
Procurement Reform Act provides that the Act
the law is not applicable. Section 4 of RA 9184 provides:
applies to government procurement “regardless of
Section 4. Scope and Application.—This Act
source of funds, whether local or foreign.” Hence,
shall apply to the procurement of Infrastructure
the requirement of public bidding applies to foreign-
Projects, Goods and Consulting Services, regardless
funded contracts like the ZTE Supply Contract.
of source of funds, whether local or foreign, by all
Respondents admit that there was no public
branches and instrumentalities of government, its
bidding for the ZTE Supply Contract. Respondents
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departments, offices and agencies, including Admittedly, an executive agreement has the force
government-owned and/or controlled corporations and effect of law, just like implementing rules of
and local government units, subject to the executive agencies. However, just like implementing
provisions of Commonwealth Act No. 138. Any rules of executive agencies, executive agreements
treaty or international or executive agreement cannot amend or repeal prior laws but must comply
affecting the subject matter of this Act to which with the laws they implement.23 Only a treaty, upon
the Philippine government is a signatory shall be ratification by the Senate, acquires the status of a
observed. municipal law. Thus, a treaty may amend or repeal a
xxx prior law and vice versa.24 Hence, a treaty may
There is no provision in the Executive change state policy embodied in a prior law.
Agreement that requires the conduct of In sharp contrast, an executive agreement, being
competitive public bidding before the award of an exclusive act of the Executive branch, does not
the NBN Project, or any project envisioned in have the status of a municipal law. Acting alone, the
the RP-China MNOU (sic) for that matter. The Executive has no law-making power. While the
subsequent exchange of notes between China Executive does possess rule-making power, such
and the Philippines clearly shows that ZTE was power must be exercised consistent with the law it
chosen as the contractor for the NBN Project. seeks to implement.
This was formalized through the DTI-ZTE MOU Consequently, an executive agreement cannot
and the ZTE Supply Contract. (Boldfacing and amend or repeal a prior law. An executive agreement
underlining in the original) must comply with state policy embodied in existing
municipal law. This Court has declared:
Private respondent ZTE Corporation’s argument
will hold water if an executive agreement can amend “International agreements involving political issues or
the mandatory statutory requirement of public changes of national policy and those involving
bidding in the Government Procurement Reform international arrangements of a permanent character
Act. In short, the issue turns on the novel question of usually take the form of treaties. But international
whether an executive agreement can amend or repeal agreements embodying adjustments of detail carrying
a prior law. The obvious answer is that an executive out well-established national policies and traditions and
agreement cannot amend or repeal a prior law. those involving arrangements of a more or less
temporary nature usually take the form of executive
376
agreements.”25 (Emphasis supplied)

376 SUPREME COURT REPORTS ANNOTATED _______________

Suplico vs. National Economic and Development 23 Land Bank of the Philippines v. Court of Appeals, 319 Phil.
Authority
246; 249 SCRA 149 (1995).

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24 Secretary of Justice v. Lantion, 379 Phil. 165; 343 SCRA constitutional provision or a federal statute, there
377 (2000). seems little basis for challenging the constitutionality
25 Commissioner of Customs v. Eastern Sea Trading, No. L- of an executive agreement.”28 In the United States,
14279, 31 October 1961, 3 SCRA 351, reiterated in Adolfo v. while an executive agreement cannot alter a federal
Court of First Instance of Zambales, 145 Phil. 264; 34 SCRA 166 law, an executive agreement prevails over state
(1970). law.29

377
_______________

VOL. 558, JULY 14, 2008 377 26 Made solely by the Executive, as distinguished from
executive-legislative agreements that are embodied in ordinary
Suplico vs. National Economic and Development legislation.
Authority 27 Prof. Edwin Borchard (Justus S. Hotchkiss Professor of
Law, Yale Law School), Treaties and Executive Agreements—A
Executive agreements are intended to carry out well- Reply, Yale Law Journal, June 1945, citing Current Information
established national policies, and these are found in Series, No. 1, 3 July 1934, quoted in 5 Hackworth, Digest of
statutes. International Law (1943) pp. 425-6.
In the United States, from where we adopted the 28 Constitutional Law: Principles and Polices, 2nd Edition
concept of executive agreements, the prevailing view (2002), p. 361.
is that executive agreements26 cannot alter existing 29 United States v. Pink, 315 U.S. 203 (1942); United States v.
law but must conform with all statutory Belmont, 301 U.S. 324 (1937).
requirements. The U.S. State Department has
explained the distinction between treaties and 378
executive agreements in this manner:

“x x x it may be desirable to point out here the well- 378 SUPREME COURT REPORTS ANNOTATED
recognized distinction between an executive agreement Suplico vs. National Economic and Development
and a treaty. In brief, it is that the former cannot alter the Authority
existing law and must conform to all statutory
enactments, whereas a treaty, if ratified by and with the Likewise, Professor Laurence H. Tribe states that
advice and consent of two-thirds of the Senate, as required an executive agreement cannot override a prior act of
by the Constitution, itself becomes the supreme law of the Congress even as it prevails over state law. Thus:
land and takes precedence over any prior statutory
enactments.”27 (Emphasis supplied) “x x x Although it seems clear that an unratified
executive agreement, unlike a treaty, cannot override a
As Professor Erwin Chemerinsksy states, “So prior act of Congress, executive agreements, even without
long as the (U.S.) president is not violating another
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Senate ratification, have the same weight as formal treaties 32 Section 2(a) of Executive Order No. 459 dated 25
in their effect upon conflicting state laws.”30 November 1997, entitled Providing for the Guidelines in the
Negotiation of
Professor Tribe cited United States v. Gary W.
Capps, Inc.,31 where the Court of Appeals (4th 379
Circuit) ruled that an unratified executive agreement
could not prevail over a conflicting federal law. The
VOL. 558, JULY 14, 2008 379
U.S. Supreme Court affirmed the appellate court’s
decision but on non-constitutional grounds. Suplico vs. National Economic and Development
Clearly, an executive agreement must comply Authority
with well-established state policies, and these state
policies are laid down in statutes. The Government That the Chinese Government handpicked the
Procurement Reform Act has laid down a categorical ZTE Corporation to supply the goods and services to
state policy—“All procurement shall be done the Philippine Government does not make the ZTE
through Competitive Bidding,” subject only to Supply Contract an executive agreement. ZTE
narrowly defined exceptions that respondents do not Corporation is not a government or even a
invoke here. Consequently, the executive agreement government agency performing governmental or
between China and the Philippines cannot exempt developmental functions like the Export-Import
the ZTE Supply Contract from the state policy of Bank of China or the Japan Bank for International
public bidding. Cooperation,33 or a multilateral lending agency
Private respondent ZTE Corporation further organized by governments like the World Bank.34
claims that the ZTE Supply Contract is part of the ZTE Corporation is a business enterprise performing
executive agreement between China and the purely commercial functions. ZTE Corporation is
Philippines. This is plain error. An executive publicly listed in the Hong Kong and Shenzhen stock
agreement is an agreement between governments. exchanges, with individual and juridical stockholders
The Executive branch has defined an “international that receive dividends from the corporation.
agreement,” which includes an executive agreement, Moreover, an executive agreement is governed by
to refer to a contract or an understanding “entered international law.35 However, the ZTE Supply
into between the Philippines and another Contract expressly provides that it shall be governed
government.”32 by Philippine law.36 Thus, the ZTE Supply Contract
is not an executive agreement but simply a
_______________ commercial contract, which must comply with public
bidding as mandated by the governing law, which is
30 American Constitutional Law, Vol. 1, 3rd Edition (2000), p. Philippine law.
648. Finally, respondents seek refuge in the second
31 204 F.2d 655 (4th Circuit, 1953). sentence of Section 4 of the Government
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Procurement Reform Act: government is a signatory shall be observed.”

(Emphasis supplied)
_______________
Respondents argue that the second sentence of
International Agreements and its Ratification, provides: Section 4 allows an executive agreement to override
“International agreement—shall refer to a contract or the mandatory public bidding in Section 10 of the
understanding, regardless of nomenclature, entered into between Government Procurement Reform Act.
the Philippines and another government in written form and Respondents’ argument is flawed. First, an
governed by international law, whether embodied in a single executive agreement, being an exclusive act of the
instrument or in two or more instruments.” (Emphasis supplied) Executive branch, cannot amend or repeal a
mandatory provision of law requiring public bidding
33 Abaya v. Ebdane, Jr., G.R. No. 167919, 14 February 2007, in government procurement contracts. To construe
515 SCRA 720. otherwise the second sentence of Section 4 would
34 DBM-Procurement Service v. Kolonwel Trading, G.R. Nos. constitute an undue delegation of legislative powers
175608, 175616 and 175659, 8 June 2007, 524 SCRA 591. to the President, making such sentence
35 Supra, note 32. unconstitutional. There are no standards prescribed
36 Article 33 of the ZTE Supply Contract provides: “The in the Government Procurement Reform Act that
Contract shall be governed by and construed in accordance with would guide the President in exercising such alleged
the laws of the Republic of the Philippines.” delegated legislative power. Thus, the second
sentence of Section 4 cannot be construed to
380
delegate to the President the legislative power to
amend or repeal mandatory requirements in the
380 SUPREME COURT REPORTS ANNOTATED Government Procurement Reform Act.
Suplico vs. National Economic and Development
Second, under Section 10 of the Government
Authority Procurement Reform Act, the only exceptions to
mandatory public bidding are those specified in
Article XVI of the Act. These specified exceptions
“Section 4. Scope and Application.—This Act shall
do not include purchases from foreign suppliers
apply to the Procurement of Infrastructure Projects, Goods
handpicked by foreign governments, or from
and Consulting Services, regardless of the source of funds,
suppliers owned or controlled by foreign
whether local or foreign, by all branches of the
governments. Moreover, Section 4 of the
government, its departments, offices and agencies,
Government Procurement Reform Act mandates that
including government-owned and/or-controlled
the “Act shall apply to the Procurement of
corporations and local government units, subject to the
Infrastructure Projects, Goods and Consulting
provisions of Commonwealth Act No. 138. Any treaty or
Services, regardless of source of funds, whether
international or executive agreement affecting the
local or foreign x x x.”
subject matter of this Act to which the Philippine
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381 Likewise, Section 4 of the Government

Procurement Reform Act should be read in
conjunction with Section 11-A of the Official
VOL. 558, JULY 14, 2008 381
Development Assistance Act of 1996:38
Suplico vs. National Economic and Development
Authority “Section 11-A. In the contracting of any loan, credit
or indebtedness under this Act or any law, the President
Third, the second sentence of Section 4 should be of the Philippines may, when necessary, agree to waive
read in conjunction with Section 4 of the Foreign or modify the application of any provision of law
Borrowings Act,37 which provides: granting preferences in connection with, or imposing
restrictions on, the procurement of goods or services:
“Section 4. In the contracting of any loan, credit or Provided, however, That as far as practicable, utilization of
indebtedness under this Act, the President of the the services of qualified Filipino citizens or
Philippines may, when necessary, agree to waive or
modify the application of any law granting preferences _______________
or imposing restrictions on international competitive
37 Republic Act No. 4860, as amended.
bidding, including among others, Act Numbered Four
38 Republic Act No. 8182, as amended.
Thousand Two Hundred Thirty-Nine, Commonwealth Act
Numbered One Hundred Thirty-Eight, the provisions of 382
Commonwealth Act Numbered Five Hundred Forty-One,
insofar as such provisions do not pertain to constructions
382 SUPREME COURT REPORTS ANNOTATED
primarily for national defense or security purposes,
Republic Act Numbered Five Thousand One Hundred Suplico vs. National Economic and Development
Authority
Eighty-Three: Provided, however, That as far as
practicable, utilization of the services of qualified domestic
firms in the prosecution of projects financed under this Act corporations or associations owned by such citizens in the
shall be encouraged: Provided, further, That in case where prosecution of projects financed under this Act shall be
international competitive bidding shall be conducted prepared on the basis of the standards set for a particular
preference of at least fifteen per centum shall be granted in project: Provided, further, That the matter of preference in
favor of articles, materials, or supplies of the growth, favor of articles, materials, or supplies of the growth,
production or manufacture of the Philippines: Provided, production or manufacture of the Philippines, including
finally, That the method and procedure in the the method or procedure in the comparison of bids for
comparison of bids shall be the subject of agreement purposes therefor, shall be the subject of agreement
between the Philippine Government and the lending between the Philippine Government and the lending
institution.” (Emphasis supplied) institution.” (Emphasis supplied)

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Consequently, as construed together, the Suplico vs. National Economic and Development
executive agreements mentioned in the second Authority
sentence of Section 4 of the Government
Procurement Reform Act should refer to executive Respondents, while not raising this argument,
agreements on (1) the waiver or modification of cannot also rely on Section 1 of the Foreign
preferences to local goods or domestic suppliers;39 Borrowings Act, which provides:
(2) the waiver or modification of restrictions on
international competitive bidding; and (3) the “Section 1. The President of the Philippines is hereby
method or procedure in the comparison of bids. authorized, in behalf of the Republic of the Philippines, to
The executive agreements cannot refer to the contract such loans, credits, including supplier’s credit,
waiver of public bidding for two reasons. First, the deferred payment arrangements, or indebtedness as may
law only allows the President to “waive or modify, be necessary and upon terms and conditions as may be
the application of any law x x x imposing agreed upon, not inconsistent with this Act, with
restrictions on international competitive bidding.” Governments of foreign countries with whom the
The law does not authorize the President to waive Philippines has diplomatic or trade relations or which are
entirely public bidding but only the restrictions on members of the United Nations, their agencies,
public bidding. Thus, the President may restrict the instrumentalities or financial institutions or with reputable
public bidding to suppliers domiciled in the country international organizations or non-governmental national
of the creditor. This is the usual modification on or international lending institutions or firms extending
restrictions imposed by creditor countries. Second, supplier’s credit deferred payment arrangements x x x.”
when the law speaks of executive agreements on the (Emphasis supplied)
method or procedure in the comparison of bids, the
obvious assumption is there will be competitive A solitary Department of Justice opinion40 has
bidding. Third, there is no provision of law allowing ventured that the phrase “as may be necessary and
waiver of public bidding outside of the well-defined upon terms and conditions as may be agreed upon”
exceptions in Article XVI of the Government serves as statutory basis for the President to exempt
Procurement Reform Act. foreign-funded government procurement contracts
from public bidding. This is a mistake. This phrase
means that the President has discretion to decide the
_______________
terms and conditions of the loan, such as the rate
39 Commonwealth Act No. 138, otherwise known as the Flag of interest, the maturity period, amortization
Law. amounts, and similar matters. This phrase does not
delegate to the President the legislative power to
383 amend or repeal mandatory provisions of law like
compulsory public bidding of government
VOL. 558, JULY 14, 2008 383 procurement contracts. Otherwise, this phrase would
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constitute undue delegation of legislative power reformed the laws regulating government
since there are no standards that would guide the procurement. The following provisions of the Act
President in exercising this alleged delegated clearly prescribe the rule that government
legislative power. procurement contracts shall be subject to mandatory
public bidding:
_______________
“Section 3. Governing Principles on Government
40 DOJ Opinion No. 143 dated 10 October 1991 issued by Procurement.—All procurement of the national
Acting Secretary Silvestre H. Bello III on the Municipal government, its departments, bureaus, offices and
Telephone Project funded by a French Financial Protocol loan of agencies, including state universities and colleges,
186.6 million French francs. government-owned and/or controlled corporations,
government financial institutions and local government
384 units shall, in all cases, be governed by these principles:
(a) Transparency in the procurement process x x x.
384 SUPREME COURT REPORTS ANNOTATED (b) Competitiveness by extending equal opportunity
to enable private contracting parties who are eligible and
Suplico vs. National Economic and Development qualified to participate in public bidding.
Authority x x x.
Section 4. Scope and Application.—This Act shall
What governs the waiver or modification of apply to the Procurement of Infrastructure Projects, Goods
restrictions on public bidding is Section 4-A of the and Consulting Services, regardless of source of funds,
Foreign Borrowings Act, which authorizes the whether local or foreign, by all branches and
President to, “when necessary, agree to modify the instrumentalities of government, its departments, offices
application of any law x x x imposing restrictions on and agencies, including government-owned and/or
international competitive bidding.” Section 4 is the controlled corporations and local government units, x x x.
specific provision of the Foreign Borrowings Act Section 10. Competitive Bidding.—All procurement
that deals with the President’s authority to waive or shall be done through Competitive Bidding, except as
modify restrictions on public bidding. Section 1 of provided for in Article XVI of this Act.” (Emphasis
the Act does not deal with the requirement of public supplied)
bidding. Besides, if Section 1 is construed as
granting the President full authority to waive or limit 385
public bidding, Section 4 becomes a superfluous
provision. VOL. 558, JULY 14, 2008 385
In any event, whatever doubt may have existed
before has been erased by the enactment in 2003 of Suplico vs. National Economic and Development
the Government Procurement Reform Act, which Authority

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The only exceptions to mandatory public bidding are _______________

procurements falling under any of the narrowly
41 Supra, note 33.
defined situations in Article XVI of the Act, which
42 Clarification on the Applicability of the Amended
respondents do not invoke.
Implementing Rules and Regulations (IRR) of Presidential Decree
Foreign-funded projects of the government are
No. 1595 relative to the Prosecution of Foreign-Assisted Projects.
not exempt from public bidding despite executive
43 Supra, note 33.
agreements entered into by the Philippines with
44 Supra, note 34.
creditor countries or lending institutions. In Abaya v.
Ebdane, Jr.,41 the Court cited Memorandum Circular 386
No. 104 dated 21 August 198942 issued by the
President:
386 SUPREME COURT REPORTS ANNOTATED
“x x x it is hereby clarified that foreign-assisted
Suplico vs. National Economic and Development
infrastructure projects may be exempted from the
Authority
application of the pertinent provisions of the Implementing
Rules and Regulations (IRR) of Presidential Decree (P.D.)
No. 1594 relative to the method and procedure in the
Even so-called tied loans from creditor countries
comparison of bids, which may be the subject of
cannot justify exemption from public bidding
agreement between the infrastructure agency concerned
although the bidders may be limited to suppliers
and the lending institution. It should be made clear
domiciled in the creditor countries. Such a
however that public bidding is still required and can only
geographic restriction on the domicile of suppliers
be waived pursuant to existing laws.” (Italization in the
can be the subject of an executive agreement as a
original of the Memorandum Circular; boldfacing
modification of restrictions on international
supplied)
competitive bidding. A publication issued by public
respondent National Economic and Development
Executive agreements with lending institutions have Authority summarizes the international practice on
never been understood to allow exemptions from tied loans with respect to public bidding:
public bidding. What the executive agreements can
“The conditions imposed by the donor on the recipient
modify are the methods or procedures in the
with respect to ODA utilization provide another basis for
comparison of bids, such as the adoption of the
differentiating ODA. In particular, restriction of the
competitive bidding procedures or guidelines of
geographic areas where procurement of goods and
the Japan Bank for International Cooperation43 or the
services are eligible for ODA funding make ODA
World Bank44 on the method or procedure in the
loan/grant tied or untied with respect to source of
evaluation or comparison of bids. It is self-evident
procurement. Usually, bilateral ODA is tied to the donor
that these procedures or guidelines require public
country in terms of procurement. While competitive
bidding.
bidding is still practiced, qualified bidders for the
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supply of goods and services are confined to those firms transparency and honesty in the expenditure of
which are owned or controlled by nationals of the public funds. Public bidding is accepted as the best
donor country. x x x”45 (Emphasis supplied) means of securing the most advantageous price for
the government, whether in procuring infrastructure,
Even for tied loans, the international practice still goods or services, or in disposing off government
requires public bidding although the public bidding assets.
is restricted only among suppliers that are nationals Even in a Build-Operate-Transfer project where
of the creditor country. In the present case, there was the proponent provides all the capital with no
no such public bidding because the Export-Import government guarantee on project loans, the law
Bank of China simply handpicked ZTE Corporation requires public bidding in the form of a Swiss
as the supplier of the goods and services to the challenge.46 With more reason should a project
Philippine Government. financed by a tied loan to the government be subject
That the funding for the ZTE Supply Contract to public bidding. There is no sound reason why the
will come from a foreign loan does not negate the Philippine government should allow its foreign
rationale for public bidding. Filipino taxpayers will creditor in an already tied loan to handpick the
still pay for the loan with interest. The need to supplier of goods and services.
safeguard public interest against anomalies exists in A tied loan, driven by a handpicked supplier,
all government procurement contracts, regardless of violates the principle of fair and open process in
the source of funding. Public bidding is the most government procurement transactions. Such a tied
loan, which arbitrarily reserves a contract to a pre-
_______________ determined supplier, will likely lead to anomalies.
This is contrary to the state policies enunciated in
45 Romeo A. Reyes, Official Development Assistance to the
Sections 27 and 28, Article II of the Constitution:
Philippines: A Study of Administrative Capacity and Performance,
published by National Economic and Development Authority, Section 27. The State shall maintain honesty and
1985. integrity in the public service and take positive and
effective measures against graft and corruption.
387

_______________
VOL. 558, JULY 14, 2008 387
46 Section 4-A, Republic Act No. 6957, as amended. A Swiss
Suplico vs. National Economic and Development challenge is a form of public procurement in some (usually lesser
Authority developed) jurisdictions which requires a public authority (usually an
agency of government) which has received an unsolicited bid for a public
effective means to prevent anomalies in the award of project (such as a port, road or railway) or services to be provided to
government contracts. Public bidding promotes government, to publish the bid and invite third parties to match or exceed

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it. x x x Some Swiss challenges also allow the entity which submitted the “SECTION 48. Void Contract and Liability of
unsolicited bid itself then to match or better the best bid which comes out Officer.—Any contract entered into contrary to the
of the Swiss challenge process. It is a form of regulating public requirements of the two (2) immediately preceding
procurement. http://en.wikipedia.org/wiki/Swiss_challenge. sections shall be void, x x x.” (Emphasis supplied)

388 The ZTE Supply Contract, which is not funded

by an appropriation law and does not have a
388 SUPREME COURT REPORTS ANNOTATED certificate of appropriation and fund availability, is
Suplico vs. National Economic and Development not only void, but also void from the beginning
Authority under Article 1409 of the Civil Code. As the Court
held in COMELEC v. Quijano-Padilla,47 which
Section 28. Subject to reasonable conditions involved a procurement contract without the
prescribed by law, the State adopts and implements a requisite appropriation law and certificate of
policy of full public disclosure of all its transactions appropriation and fund availability:
involving public interest.
_______________
ZTE Supply Contract is Void from the
Beginning 47 Supra, note 17.
Contracts expressly prohibited or declared void
389
by law are void from the beginning. Article 1409 of
the Civil Code provides:
VOL. 558, JULY 14, 2008 389
Article 1409. The following contracts are inexistent
and void from the beginning: Suplico vs. National Economic and Development
xxx Authority
(7) Those expressly prohibited or declared void by
law. “Verily, the contract, as expressly declared by law, is
x x x. (Emphasis supplied) inexistent and void ab initio. This is to say that the
proposed contract is without force and effect from the
Sections 46 and 47, Chapter 8, Subtitle B, Title I, very beginning or from its incipiency, as if it had never
Book V of the Administrative Code of 1987 been entered into, and hence, cannot be validated either by
expressly prohibit the entering into procurement lapse of time or ratification.” (Emphasis supplied)
contracts that are not funded by an appropriation law
and which do not have certificates of appropriation A contract void from the beginning is legally
and fund availability. Section 48 of the same law non-existent. As such, it cannot be annulled because
expressly declares such contracts void. To repeat, to annul a contract assumes a voidable contract.48 A
Section 48 provides: cancellation of a contract void from the beginning
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has no legal effect because the contract is legally 390 SUPREME COURT REPORTS ANNOTATED
non-existent. Any cancellation may simply be
Suplico vs. National Economic and Development
construed as an acknowledgment or admission that Authority
the contract is void from the beginning. A contract
void from the beginning can only be declared as
the required public bidding. This Court must
such, that is, void from the beginning.
categorically declare the ZTE Supply Contract void
Thus, the discontinuance or cancellation of the
from the beginning.
ZTE Supply Contract by the Philippine Government,
Accordingly, I vote to GRANT the petition and to
apart from being unilateral, had no legal effect and
DECLARE the ZTE Supply Contract VOID from the
did not moot this petition. The members of this
beginning.
Court have the sworn duty to uphold the system of
checks and balances that is so essential to our
DISSENTING OPINION
democratic system of government. In the present
case, the members of this Court must uphold the CARPIO-MORALES, J.:
check and balance in the appropriation and
expenditure of public funds as embodied in Section The majority opinion, acting on the October 26,
29(2), Article VI of the Constitution and the statutes 2007 Manifestation and Motion of the Office of the
insuring its compliance. If our democratic Solicitor General, resolved to dismiss the subject
institutions are to be strengthened, this Court must petitions on two grounds, namely, these petitions
not shirk from its primordial duty to preserve and have become moot in light of the declaration of the
uphold the Constitution. President that the government would no longer
It is time to put an end to government pursue the ZTE-National Broadband Network
procurement contracts, amounting to tens of billions project and, even assuming it were not moot, the
of pesos, exceeding even the annual budget of the resolution fo the same involves settling factual issues
Judiciary, that are awarded and signed without an which requires reception of evidence.
appropriation from Congress, and without I respectfully dissent.
I believe these petitions warrant a decision on the
_______________ merits despite the aforementioned declarations of the
President. I share Justice Carpio’s opinion that these
48 Article 1390 of the Civil Code provides that voidable petitions should not be dismissed on the ground of
contracts “are binding, unless they are annulled by a proper action mootness. David v. Arroyo1 instructs:
in court.” Of course, voidable contracts can also be annulled by
mutual agreement of the parties. “The moot and academic principle is not a magical
formula that can automatically dissuade the courts in
390 resolving a case. Courts will decide cases, otherwise moot
and academic, if: first, there is a grave violation of the
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Constitution; second, the exceptional character of the violation of the Constitution. Even in cases where supervening
situation and the paramount public interest is involved; events had made the cases moot, the Court did not hesitate to
third, when the constitutional issue raised requires resolve the legal or constitutional issues raised to formulate
formulation of controlling principles to guide the bench, controlling principles to guide the bench, bar and public.
the bar, and the public; and fourth, the case is capable of “Another reason justifying the resolution by this Court of the
repetition yet evading review.” (Italics supplied) substantive issue now before it is the rule that courts will decide a
question otherwise moot and academic if it is “capable of

_______________ repetition, yet evading review.” For the GAAs in the coming years
may contain provisos similar to those now being sought to be
1 G.R. Nos. 171396, 171409, 171485, 171483, 171400, invalidated, and yet, the question may not be decided before
171489 & 171424, May 3, 2006, 489 SCRA 160. another GAA is enacted. It, thus, behooves this Court to make a
categorical ruling on the substantive issue now.” (Italics supplied)
391
3 G.R. No. 178920, October 15, 2007, penned by Justice
Ruben T. Reyes. Manalo involved the habeas corpus petition field
VOL. 558, JULY 14, 2008 391 by the police officers implicated in the buring of an elementary
school in Batangas at the height of the May 2007 elections. This
Suplico vs. National Economic and Development
Court decided the case on the merits notwithstanding the recall by
Authority
the PNP of the restrictive custody orders against petitioners
therein. Citing David v. Arroyo, the Court ruled thus: “x x x Every
The reasons underlined above in David are just as bad, unusual incident where police officers figure in generates
applicable in the present case as they were, not only public interest and people watch what will be done or not done to
in David, but also in Province of Batangas v. them. Lack of disciplinary steps taken against them erode public
Romulo2 and Manalo v. Calderon,3 where the Court confidence in the police institution. As petitioners themselves
similarly decided the case on the merits, assert, the restrictive custody of policemen under investigation is
an existing practice, hence, the issue is bound to crop up every
_______________ now and then. The matter is capable of repetition or susceptible of
recurrence. It better be resolved now for the education and
2 G.R. No. 152774. May 27, 2004: “Granting arguendo that,
guidance of all concerned. (Italics supplied)
as contended by the respondents, the resolution of the case had
already been overtaken by supervening events as the IRA, 392
including the LGSEF, for 1999, 2000 and 2001, had already been
released and the government is now operating under a new
appropriations law, still, there is compelling reason for this court 392 SUPREME COURT REPORTS ANNOTATED
to resolve the substantive issue raised by the instant petition. Suplico vs. National Economic and Development
Supervening events, whether intended or accidental, cannot Authority
prevent the Court from entering a decision if there is a grave

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supervening events that would have ordinarily legally demandable and enforceable, I am of the
rendered the same moot notwithstanding. view that the desistance from the agreement in
The legal issues raised in the present case, by question renders the matter academic and moot,
their very nature, are just as important, if not even leaving no actual controversy calling for the exercise
more so, and are susceptible of recurrence as those of judicial power. The resolution of the issue in these
involved in the above-cited cases. These issues also proceedings would, therefore, partake of the
call for the formulation of controlling principles for
393
the guidance of all concerned. That the contract
subject of the present petitions has been cancelled is,
therefore, not an excuse for the Court not to decide VOL. 558, JULY 14, 2008 393
the petitions on the merits.
Suplico vs. National Economic and Development
Respecting the second ground cited by the
Authority
majority, namely, that the present petitions call for
the reception of evidence and may not, for that
reason, be entertained by this Court, I believe that nature of an advisory opinion which this Court is not
the admissions, both explicit and implicit, of allowed to render.
respondents in their Consolidated Comment— Furthermore, the so-called supply or procurement
pointed out by Justice Carpio in his Dissenting contract is clearly an incomplete agreement and
Opinion—suffice for this Court to render the cannot stand alone without the companion and yet-
substantial factual issues as established without need to-be-agreed loan agreement. As such, desistance at
of further evidence. this stage from further pursuing the project on the
For these reasons, I dissent from the Resolution part of one party effectively prevents the contract
of the majority dismissing the subject petitions on from materializing.
the therein proferred grounds. I, therefore, vote to DISMISS the petition for
being moot and academic, without prejudice to a
SEPARATE CONCURRING OPINION proper case to settle an actual controversy involving
rights that are legally demandable and enforceable, if
AZCUNA, J.: there be any, arising from the incomplete agreement.

I find the points raised by Justice Antonio T. Carpio Petitions dismissed.

in his dissenting opinion arguably sound, correct and
almost unassailable as an abstract treatise in law. Notes.—Judicial notice is a phrase sometimes
Nevertheless, under the facts and pursuant to Article used in a loose way to cover some other judicial
VIII, Section 1 of the Constitution that defines action—certain rules of Evidence, usually known
judicial power as the duty of the courts of justice to under other names, are frequently referred to in
settle actual controversies involving rights which are terms of judicial notice. The process by which the

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trier of facts judges a person’s age from his or her

appearance cannot be categorized as judicial notice.
(People vs. Rullepa, 398 SCRA 567 [2003])
Courts generally decline jurisdiction over such
case or dismiss it on the ground of mootness—save
when, among others, a compelling constitutional © Copyright 2021 Central Book Supply, Inc. All rights reserved.
issue raised requires the formulation of controlling
principles to guide the bench, the bar and the public,
or when the case is capable of repetition yet evading
judicial review. (Osmeña III vs. Social Security
System of the Philippines, 533 SCRA 313 [2007])
Advisory opinions fall beyond the realm of
judicial review—courts have no authority to pass
upon issues through advisory opinions or to resolve
hypothetical or feigned problems. (Republic
Telecommunications Holdings, Inc. vs. Santiago, 529
SCRA 232 [2007])

394

394 SUPREME COURT REPORTS ANNOTATED

Suplico vs. National Economic and Development
Authority

Nothing can be more empowering than to compel

access to all information relevant to the negotiation
of government contracts including but not limited to
evaluation reports, recommendations, legal and
expert opinions, minutes of meetings, terms of
reference and other documents attached to such
reports or minutes, all relating to any proposed
undertaking. (Bellosillo, J., separate opinion in
Chavez vs. Public Estates Authority, 403 SCRA 1
[2003])
——o0o——
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