The IBP Journal
INTEGRATED BAR OF THE PHILIPPINES
Board of Editors
Merlin M. Magallona
Editor-in-Chief
Eduardo A. Labitag
Managing Editor
Danilo L. Concepcion
Florin T. Hilbay
Sedfrey M. Candelaria
Nasser A. Marohomsalic
Oscar G. Raro
Amado D. Valdez
Vincent Pepito F. Yambao, Jr.
Associate Editor
Vivian C. Capiznon
Circulation Manager
Eumir C. Lambino
Layout/Design
VOLUME 38, NUMBER 1 & 2 (JANUARY - JUNE 2013)
IBP JOURNAL
Volume 38, Numbers 1 & 2
(January - June 2013)
Articles
The Internationalization of Philippine Territory: Question of Boundaries ............ 1
Merlin M. Magallona
Revisiting the Law on Search and Seizure ........................................................................ 24
Oscar G. Raro
Salient Features of the New Financial Rehabilitation Rules of Procedure ............... 69
Reynaldo Bautista Daway
Toward a More Forward-Looking Insolvency System .................................................. 88
Francisco Ed. Lim
Ethical Regulation on Post-Mediation Professional Relationship
of the Philippine Mediator / Lawyer: Is it Sufficient? ................................................... 114
Ma. Araceli B. Habaradas
Between Public Interest and Private Good: Protection of Third Parties
in Environmental Mediation and Consent Decrees in the Philippines .................. 127
Teresita Asuncion M. Lacandula-Rodriguez
Elementary Dilemmas in Philippine Tort Law ............................................................ 157
Rommel J. Casis
The Affordable Medicine Bill Advocacy:
A Case for State Regulation in Light of MNC Dominance
in the Pharmaceutical Industry in the Philippines .................................................... 182
Antonio P. Jamon, Jr.
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expressed therein.
Internationalization of Philippine Territory: The Question of Boundaries
Internationalization of Philippine Territory:
The Question of Boundaries*
Merlin M. Magallona**
I.
A GENERAL VIEW OF PHILIPPINE TERRITORY IN
INTERNATIONAL LAW
1. The formation of the Philippine statehood under general international law
entails the transformative process by which the Philippines Islands, together with
it population and government in its revolutionary stage, at the juncture of the
19th and 20th centuries, assumed independent status about fifty years later. Taking
the legal framework of the Montevideo Convention of the mid-twentieth century
as the basis, the elements of state formation in customary international law are
formulated as follows:
The State as a person of international law should possess the
following qualifications: (a) a permanent population; (b) a defined
territory; (c) government; and (d) capacity to enter into relations with
other States.1
Independence of the state’s government is a central criterion of statehood.2
Its territory, together with the population, was annexed by the Spanish Crown
under the 16th century international law of “Christian nations”. The elements
towards the formation of the Philippine statehood were spread through centuries,
the gestation process marked by the revolutionary war of the Filipino nation and
by the treaty of cession between two major powers, and finally arriving at the
grant of independence under general international law of the fourth decade of
the 20th century.
2. It is the cession of the Philippine Islands under the treaty of peace between
the United States and Spain, ending the Spanish-American War, that provides
some ground for evaluating the status of Philippine territory. With respect to the
Philippine Islands, the Treaty of Paris of 10 December 1898 reads in Article III:
Spain cedes to the United States the archipelago known as the
Philippine Islands, and comprehending the islands lying within the
following lines:
which lines would represent the boundary lines of the Philippine Archipelago,
together with the boundaries set forth in the treaty between the United States and
Spain on 7 November 1900 and the treaty between the United States and Great
Britain on 2 January 1930.
*
Published with the permission of Justice Adolfo Azcuna (Ret.) Chancellor, Philippine Judicial Academy and of
its Academic Council.
**
Professorial Lecturer and former Dean and Professor of Law, U.P. College of Law; Professor, San Beda Graduate School of Law.
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Merlin M. Magallona
Within the same lines, the Treaty sets forth the technical definition of the
territorial boundaries of the Philippine Archipelago, as follows:
A line running from west to east along or near the twentieth parallel
of north latitude, and through the middle of the navigable channel
of Bachi, from the one hundred and eighteenth (118th) to the one
hundred and twenty seventh (127th) degree meridian of longitude
east of Greenwich, thence along the one hundred and twentyseventh (127th) degree meridian of longitude east of Greenwich
to the parallel of four degrees and forty five minutes (4˚45’) north
latitude, thence along the parallel of four degrees and forty five
minutes (4˚45’) north latitude to its intersection with the meridian
of longitude one hundred and nineteen degrees and thirty five
minutes (119˚35’) east of Greenwich, thence along the meridian of
longitude one hundred and nineteen degrees and thirty five minutes
(119˚35’) east of Greenwich to the parallel of latitude seven degrees
and forty (7˚40’) north, thence along the parallel of latitude seven
degrees and forty minutes (7˚40’) north to its intersection with the
one hundred and sixteenth (116th) degree meridian of longitude east
of Greenwich, thence by a direct line to the intersection of the tenth
(10th) degree parallel of north latitude with the one hundred and
eighteenth (118th) degree meridian of longitude east of Greenwich,
and thence along the one hundred and eighteenth (118th) degree
meridian east of Greenwich to the point of beginning.
The Philippine Islands is characterized as an archipelago and thus is “essentially
a body of water studded with islands”.3 In addition, “by comprehending the
islands”, Article III therefore contemplates one whole territorial unit consisting of
both islands and waters that later comprised a state in one geographic and juridical
unity.
By technical definition, Article III of the Treaty of Paris as operative international
law identifies the territorial limits of the Philippines within which the United
States exercised sovereignty and jurisdiction as confirmed by Spain; and within
which the Philippines as a sovereign State was later to succeed by the title of
sovereignty upon recognition by the rest of the international community.
3. The acquisition of Philippine Islands by the United States from Spain by cession
may be surveyed from the perspective of general international law, beginning with
the legality of war by which the Philippine Islands was ceded. At the time, a State
may resort to war against any other state “without violating international law”4;
rather, in the settlement of international disputes war was a normal expression of
state sovereignty. As in the case of the belligerent states in the Spanish-American
War, the state of war was terminated by the Treaty of Paris. It is a treaty of peace
that went beyond the termination of the state of war; it dealt with the acquisition
of territories the validity of which is in accord with general international law at
the time.
4. As in the case of the Philippine Islands, the sphere of sovereignty of the United
States to which the Archipelago was ceded is determined by the Treaty of Paris as
2
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Internationalization of Philippine Territory: The Question of Boundaries
a source of law; in particular, the exclusive effectiveness of the sovereign authority
of the United States is defined by the boundaries in the treaty of cession by which
legal title was acquired against Spain as the ceding state. As affirmed by Kelsen,
In case a state confers upon another the right to exercise permanently
all functions of a State within a part of the former’s territory, including
the right to transfer this right to others, we speak of cession.5
5. It is to be assumed that the territory ceded by Spain under the Treaty of Paris
was by the principle of effectiveness in general international law, subject to the
exercise of its sovereignty and jurisdiction within the delimitation of the boundaries of
the Philippine Archipelago, as established in Article III of the said treaty.
At the time, general international law had no provision governing archipelagos;
hence, in supremacy was the particular international law constituted in the treaty
between states bound by the norm of pacta sunt servanda, such as the Treaty of
Paris of 10 December 1898.
6. By the treaty of cession, the rights and obligations of the United States inherent
in the acquisition of territory of the Philippine Archipelago are directly derived
from the binding character of the said treaty under general international law and
not by succession from Spain.
II.
BOUNDARIES: LEGAL STATUS AND FUNCTION
The term “boundary” in international law has been defined as “a line which
determines the limit of the territorial sphere of jurisdiction of States or other
entities having an international status”.6 Boundaries are described as “permanent
lines dividing sphere of de jure jurisdiction.” They are “imaginary lines on the
surface of the earth which separate the land or maritime territory … of one State
from that of another.”7
The Philippines, together with the boundaries forming part of its territory,
derives its international status from the fact and the law that it was the object
and purpose of the treaty as a source of law. The validity of the Treaty of Paris
is beyond question in establishing the rights and duties of the two great powers
at the time, gaining the general acquiescence of the international community
in the span of more than a century. Other than by treaty or other consensual
arrangement, there appears to be no general norm of international law governing
the determination of boundaries.
The cession of the Philippines by the Treaty of Paris with respect to the
determination of boundaries under its Article III was apparently left to the inter se
relations of the United States and Spain, as dictated by the results of the SpanishAmerican War. While there appears to be no duty under international law of
the 19th century prescribing as to how boundaries were to be determined in the
relevant circumstances, reasonably, there arises the presumption that Spain’s
cession of the Philippine Islands was on the basis of the scope of its territorial
sovereignty at the time, as delimited in Article III of the Treaty of Paris and as
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Merlin M. Magallona
supplemented by the Spain-United States Treaty of 7 November 1900.
As the outer limit of territorial sovereignty, the boundaries serve to maintain the
consistency and stability of the State’s territory as an element of statehood. As
delimited by its boundaries the State’s jurisdiction is applied with effectiveness
and for the protection of all inhabitants, both nationals and aliens. And thus
the boundaries of the Philippines as defined by Article III of the Treaty of Paris
are interconnected with Article IX which allows Spanish subjects who retained
allegiance to the Crown of Spain to remain in the Philippine Islands with all
rights recognized under the Treaty subject to the jurisdiction in the change of
sovereignty; under Article XI of the Treaty they “shall be subject in matters civil
as well as criminal” to the jurisdiction of the new sovereign.
In particular the waters of the Philippine Archipelago within the definition of
Article III of the Treaty appears to be integral to maritime jurisdiction such as
that involved in Article IV of the Treaty, by which the United States “admits
Spanish ships and merchandise to the ports of the Philippine Islands on the same
terms as ships and merchandise of the United States” for ten years from the date
of the ratification of the Treaty.
It deserves notice that of all territories ceded or relinquished by Spain to the
United States under the Treaty of Paris, only the Philippine Islands appears to
be requiring technical description in the manner provided by Article III of the
Treaty.
III.
BOUNDARIES OF PHILIPPINE ARCHIPELAGO IN THE
PRACTICE OF U.S. SOVEREIGNTY
The territorial sovereignty of the United States under the Treaty of Paris was
internalized in the Jones Law, enacted by the U.S. Congress as the Philippine
Autonomy Act of 1916. The enabling clause of this Act reads:
4
Be enacted by the Senate and House of Representatives of the
United States in Congress assembled, That the provisions of this
Act and the name “The Philippines” shall apply to and include the
Philippine Islands ceded to the Untied States Government by the
treaty of peace concluded between the United States and Spain on
the eleventh day of April, eighteen hundred and nineteen-nine, the
boundaries of which are set forth in Article III of said treaty, together with
those islands embraced in the treaty between Spain and the United
States concluded at Washington on the seventh of day of November,
nineteen hundred.
Further, the United States Congress enacted into law the Tydings-Mc-Duffie Act
providing for “complete independence” of the Philippine Islands, the adoption
of its Constitution as well as the Government of the Commonwealth of the
Philippines Islands, “which shall exercise jurisdiction over all territory ceded to the United
States by the treaty of peace concluded between the United States and Spain on the 10th day of
December 1898, the boundaries of which are set forth in article III of said treaty, together
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Internationalization of Philippine Territory: The Question of Boundaries
with those islands embraced in the treaty between Spain and the United States
concluded at Washington on the 7th day of November 1900….”8
An essential feature of the Tydings-McDuffie Act is the succession clause in
Section 5. This provides:
All the property and rights which may have been acquired in the
Philippine Islands by the United States under the treaties mentioned
in the first section of this Act, … are hereby granted to the government of
the Commonwealth of the Philippine Islands when constituted.9
The succession contemplates in the first place rights pertaining to the principle
of sovereignty, the application of which is circumscribed by the territorial
boundaries.
It may be recalled that prior to the Jones Law, Public Law No. 235 — or the
Philippine Bill of 1902 — was enacted by the U.S. Congress providing for the
creation of the Philippine Commission to exercise the powers of government, “to
be administered for the benefit of the inhabitants thereof ”. The scope of those
powers comprehends those within Section 12: “[A]ll the property and rights
which may have been acquired in the Philippine Islands by the United States
under the treaty of peace with Spain, signed December tenth, eighteen hundred
and ninety-eighteen hundred and ninety-eight.” This Act declares that those
property and rights are “hereby placed under the control of the government
of said islands.” The totality of rights thus contemplates the determination by
boundaries of the sphere of jurisdiction.
In the Administrative Code of 1916 (Act No. 2657) and as revised by the
Administrative Code of 1917 (Act No. 2711), the provisions on sovereignty are
in terms of the “distribution of powers of government” within the territorial
boundaries as spelled out in the aforesaid treaties. Section 16 of the Revised
Administrative Code of 1917 states:
Territorial jurisdiction and distribution of powers of Philippine Government. –
The territory over which the Government of the Philippine Islands
exercises jurisdiction consists of the entire Philippine Archipelago and is
comprised in the limits defined by treaties between the United States and Spain
respectively signed in the City of Paris on the tenth day of December,
eighteen hundred and ninety-eight and in the City of Washington on
the seventh day of November nineteen hundred.10
In 1932, the Philippine Commission enacted Act No. 4003 “to amend and
compile the laws relating to fish and other aquatic resources of the Philippine
Islands”. It occasioned the definition of “Philippine waters or territorial waters
of the Philippines”; section 6 of the Act construes this to mean
all waters pertaining to the Philippine Archipelago as defined in the treaties
between the United States and Spain, dated respectively the tenth of
December, eighteen hundred and ninety-eight, and the seventh of
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Merlin M. Magallona
November, nineteen hundred.11
The clause “[a]ll waters pertaining to the Philippine Archipelago as defined in
the [said] treaties” includes the following:
1. All waters forming part of the “archipelago known as the
Philippine Islands.
2. All waters within the line set forth in Article III of the Treaty of
Paris.
3. All waters within the jurisdiction of the islands relinquished
by Spain to the United States under the treaty concluded on
November 7, 1900 at Washington.
4. All waters within the boundaries drawn by the treaty concluded
by the United States and Great Britain on January 2, 1930,
between the Philippine Archipelago and the State of North
Borneo.
IV.
6
The foregoing considerations should dispel the objection of the United States
Government that the limits set by the Treaty of Paris are boundary lines.
It expressed the view that they constitute only a delimitation of geographical
area within which the land area belongs to the Philippines.12 In a protest to the
Declaration which the Philippine Delegation made when it signed and ratified
the UNCLOS, the United States stated that neither the treaties nor practice
“has conferred upon the United States, nor upon the Republic of the Philippines
as successor to the United States, greater rights in the waters surrounding the
Philippine Islands than are otherwise recognized in customary international
law.”13
STATEHOOD AND THE CONSTITUTIONALIZATION
OF BOUNDARIES
The Philippines as a State is a territorial unit in the international legal system;
its sovereignty is circumscribed by boundaries in which it possesses “the exclusive
right to display the activities of a State”.14 The Montevideo Convention on the
Rights and Duties of States mentioned earlier, provides in Article I that “as a
person of international law”, the State among other qualifications, should possess
“a defined territory”.
While possession of a defined territory is a basic criterion of statehood, the
International Court of Justice has expressed the view that there is “no rule that
the land frontiers of a State must be fully delimited and defined.”15 Quite apart
from this situation, the case of the Philippines has the benefit of delimitation by
boundaries of precise technical description.
The real function of the boundaries as drawn in Article III of the Treaty of
Paris, together with the supplementary agreements, has been historically
shown by application on the part of the United States and by the Philippine
Government as successor-in-interest. This continuity in succession assumed some
qualitative change when towards its independence the Philippines achieved the
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Internationalization of Philippine Territory: The Question of Boundaries
constitutionalization of the boundaries set forth in the international agreements.
It deserves emphasis that this fundamental law was approved by the President of
the United States, pursuant to the Tydings-McDuffie Act.
As transformed into Section 1, Article I of the 1935 Constitution, the definition
of territory spelled out in the said treaties reads:
The Philippines comprises all the territory ceded to the United States
by the Treaty of Paris concluded between the United States and
Spain on the tenth day of December, eighteen hundred and ninetyeight, the limits of which are set forth in Article III of the said treaty, together
with all the island in the treaty concluded at Washington between the
United States and Spain on the seventh day of November, nineteen
hundred, and the treaty concluded between the United States and
Great Britain on the second day of January, nineteen hundred and
thirty, and all territory over which he present Government of the
Philippine Islands exercises jurisdiction.
As an element of statehood, territory as defined primarily in Article III of
the Treaty of Paris thus assumed the character of a constitutional principle,
recognizing the roots of title to that territory in the international law of treaties.
In this sense, the “defined territory” of statehood maintains continuity through
changes in the fundamental law of the Philippines as an independent State.
Of paramount importance in the nature of Philippine territory is the geographical
fact that it is an archipelago, combined with jurisdictional competence within the
sphere of its boundaries. Represented in maps by “International Treaty Limits”
(ITL) enclosing the Philippine Archipelago, the boundaries appear as the outer
limit of territorial sovereignty, the elimination of which, as explained below,
destroys the character of the Philippines as a unity of land and water in the
archipelago, as a result of the internationalization of its waters “around, between,
and connecting the islands of the archipelago”, which the present Constitution
expressly characterizes as internal waters;.16 The vital center of the Philippine
Archipelago as a State lies in the nature of these internal waters as integral part
of its territorial sovereignty in the inter-connecting islands.
The Philippine State as an archipelago comprised in the 1935 Constitution has
maintained the same basic constituent geographic and juridical features as existing
at the time of cession, as affirmed by the long established practice of sovereignty
and jurisdiction. The scope of Philippine territory as a State is formally legislated
in Republic Act No. 3046, the Baseline Law of 1961 as amended by Republic Act
No. 5446, in its preambular paragraphs, as follows:
Whereas, the Constitution of the Philippines describes the national
territory as comprising all the territory ceded to the United States by
the Treaty of Paris concluded between the United States and Spain
on December 10, 1898, the limits of which are set forth in Article
III of said treaty, together with all the islands embraced in the treaty
concluded at Washington, between the United States and Spain on
November 7, 1900 and in the treaty concluded between the United
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Merlin M. Magallona
States and Great Britain on January 2, 1930, and all the territory
over which the Government of the Philippine Islands exercised
jurisdiction at the time of the adoption of the Constitution;
Whereas, all the waters within the limits set forth in the above-mentioned treaties
have always been regarded as part of the territory of the Philippines Islands;17
Whereas, all the waters around, between and connecting the various islands of
the Philippine archipelago, irrespective of their width or dimension, have always
been considered as necessary appurtenances of the land territory, forming part of
the inland or internal waters of the Philippines;18
Whereas, all the waters beyond the outermost islands of the archipelago but
within the limits of the boundaries set forth in the abovementioned treaties comprise
the territorial sea of the Philippines;19
Whereas, the baselines from which the territorial sea of the
Philippines is determined consist of straight lines joining appropriate
points of the outermost islands of the archipelago; [….]
The foregoing text is of vital importance for the following reasons:
(1) It provides the definition of Philippine territory as contained in
the 1935 Constitution and in the pertinent treaties as source of
international law.
(2) It is a synthesis of the dimension of Philippine territory as
communicated to the United Nations and to the international
community by the Philippine Government twice in formal note
verbale.
(3) It was initiated by the Philippine Delegation to the Second
UN Conference on the Law of the Sea of 1960 as a protective
measure vis-à-vis the trends in the conference proceedings that
may lead to adoption of doctrines inimical to the established
definition of Philippine territory.
(4) It embodies the position of the Philippine Delegation throughout
the proceedings of the Third UN Conference of the Law of the
Sea that adopted the UNCLOS, in particular the affirmation of
sovereignty over land area as extended to “all the waters around,
between, and connecting the islands of the archipelago” —
the principle that precludes the introduction of “archipelagic
waters”.
V.
INTERNATIONAL RECOGNITION OF PHILIPPINE TERRITORY
AND ITS BOUNDARY DELIMITATIONS
8
At the time the treaties concerning the Philippine Archipelago were concluded,
no objective standards existed under international law governing archipelagos,
particularly mid-ocean archipelagos in statehood. Indeed not until the First UN
Conference on the Law of the Sea in 1958 did the legal status of archipelagos
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Internationalization of Philippine Territory: The Question of Boundaries
came into diplomatic deliberations. And not until the adoption of the UN
Convention on the Law of the Sea in 1982 (UNCLOS) was the international law
of the archipelagic states formally constituted. The “International Treaty Limits”
of the Philippine Archipelago was left to be determined, as it was, to the relations
of the State Parties primarily of the Treaty of Paris, with the recognition of the
international community; the unity of its land areas and their connecting waters
was integral to its internal sovereignty in statehood as thus established.
At the time of the three UN conferences on the law of the sea, the “defined
territory” of the Philippines as an independent state was already well-established.
On the day its independence was proclaimed on July 4, 1946, the United States
concluded the Treaty of General Relations with the new republic in which it is
provided in Article VII that
The Republic of the Philippines agrees to assume all continuing
obligations assumed by the United States of America under the
Treaty of Paris between the United States of America and Spain
concluded at Paris on the 10th day of December 1898, by which
the Philippine Islands were ceded to United States of America, and
under the Treaty between the United States of America concluded
at Washington on the 7th day of November 1900.
Of special significance to the scope of territorial sovereignty under this succession
clause are the obligations arising from the aforementioned Article III of the
Treaty of Paris, as affirmed by practice in terms of acts of jurisdiction.
Inevitably, when the United States invited the Governments with which it had
diplomatic relations to “recognize the Republic of the Philippines as a member
of the family of nations”, it involved the recognition of its territorial boundaries
as set forth in treaties as a source of international law. This invitation is set forth in
Article II of the Provisional Agreement between the United States of America and
the Republic of the Philippines Concerning Friendly Relations and Diplomatic
and Consular Relations, signed at Manila, July 4, 1946. This provision reads:
The Government of the United States of America will notify
the Governments with which it has diplomatic relations of the
independence of the Republic of the Philippines and will invite
these Governments to recognize the Republic of the Philippines as a
member of the family of nations.
Communicated to the UN Secretary-General in a formal note verbale of 20
January 1956, was the response of the Permanent Representative of the Philippines
to the United Nations to the report of the International Law Commission on its
draft articles on the high seas and on the territorial sea. Among the key elements
of the territory emphasized in the note verbale is the character of the waters
around, between and connecting the islands of the Philippine Archipelago:
[1]All waters around, between and connecting different islands
belonging to the Philippine Archipelago, irrespective of their
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9
Merlin M. Magallona
width or dimensions, are necessary appurtenances of its land
territory, forming an integral part of the national or inland
waters subject to the exclusive sovereignty of the Philippines.
[…]
[2] All other water areas embraced within the lines described in the
Treaty of Paris of 10 December 1898, the Treaty concluded at
Washington, D.C., between the United States and Spain on 7
November 1900, the Agreement between the United States and
the United Kingdom of 2 January 1930.[…]
The proceedings on the breadth of the territorial sea in the 1960 UN Law of
the Sea Conference elicited questions as to the peculiarities of the legal regime
of the waters within the territorial boundaries of the Philippine Archipelago. In
response to these questions, the Philippine Delegation held on to the following
position:
[. . . .] The title of Philippines to a wider extent than twelve miles of
territorial sea, therefore, has both a legal and historic basis. Such title
cannot and should not be affected adversely by any new rule on the
breadth of territorial sea that may be adopted in this conference.
[. . . .]
*
10
*
*
The territorial sea of the Philippines, … over which my country
exercises sovereignty and jurisdiction by virtue of a legal and historic
title, is therefore, comprised of all the waters beyond the outermost
islands of the archipelago but within the boundaries set forth in the
Treaty of Paris. The case of the Philippines is thus sui generis, and
cannot be covered by a general rule that may not be formulated by
the breadth of the territorial sea. It is and will remain an exception,
and, it is our hope that this conference can look with sympathetic
consideration towards embodying a saving clause in any rule we may
adopt on the breadth of the territorial sea, which would expressly
recognize existing established rights which would include that of my
country. In view of the unique position of the Philippines, we have
no direct interest in the breadth of the territorial sea which may be
finally decided upon in this conference. [. . .]
The “legal and historic title” communicated and affirmed by the Philippine
Government in the foregoing statements primarily refer to the treaties as sources
of international law governing the Philippine Archipelago; they define the rights
and obligations of the States parties of those treaties, together with their binding
status on the international community at the time. The legal regime created by
this treaties has been internalized into the constitutional system of the Philippine
State through the 1935 Constitution and is perpetuated through changes in its
fundamental law. The survey presented above in Part I on the “General View of
Philippine Territory in International Law” substantiates the legal and historic
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Internationalization of Philippine Territory: The Question of Boundaries
title creative of territorial sovereignty, the acquisition and possession of which not
contrary to general norms of international law have become an integral element
of Philippine statehood.
VI.
INTERNATIONALIZATION OF PHILIPPINE TERRITORY:
IMPACT OF THE UN CONVENTION ON THE LAW OF THE SEA (UNCLOS)
For purposes of the present discussion, by the term “internationalization” is meant
the conditions of Philippine territory by which the international community of
States as a whole, in particular the State Parties to the UNCLOS, have acquired
rights in Philippine territory. And it becomes a matter of international obligation
on the part of the Philippines as a State Party to the UNCLOS, to comply with
the binding force of these undertakings.
Internationalization of Philippine territory means that what the Constitution
describes as “National Territory” has become the object of the rights of every
State Party or of their nationals, exercisable by them without the requirement of
express consent or prior authorization on the part of the Philippine government
in every instance.
Within the UNCLOS framework, the most disastrous terms of internationalization
that impact on Philippine territory consist of the rules governing Archipelagic
States in Part IV of the UNCLOS. These special rules have the effect of excluding
the Philippines as an archipelagic State from the application of the fundamental
principle in general international law codified in Article 2 of the UNCLOS,
which reads:
The sovereignty of a coastal State extends beyond its land territory and
internal waters and, and in case of archipelagic State, its archipelagic
waters, to an adjacent belt of sea, described as the territorial sea.20
This provision means that in general coastal States have sovereignty over their
land territory and internal waters, which sovereignty extends to other areas. This
general norm, however, cannot apply to the Philippines as an archipelagic state
because the category of internal waters mentioned in the aforesaid provision
refer to waters landward of the normal or straight baseline as established in Articles
7 or 8 of the UNCLOS. The Philippines does not possess internal waters of that
category; what it has landward of its archipelagic baseline under the UNCLOS are
archipelagic waters, which are subject to the right of innocent passage by ships of all
States. The so-called internal waters of the Philippines under the UNCLOS are
those referred to in Article 50, consisting of waters in mouth of rivers (in Article
9), in bays (in Article 10) and in harbor works in (Article 11).
The special rules consigning the Philippine territory to internationalization as an
archipelagic state spells the diminution or derogation of territorial sovereignty
in the impact of archipelagic waters; it has the effect of breaking up the unitary
character of the Philippine statehood as an archipelago, which is consolidated by
a continuum of land and waters in sovereignty. This is the core element in the
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Merlin M. Magallona
territory of the Philippine State as established by the Constitution when it ordains
in Article I that “[t]he waters around, between, and connecting the islands of
the archipelago, regardless of their breadth and dimensions, form part of the
internal waters of the Philippines,” and therefore these waters are integral part of
territorial sovereignty. The same premise underlies the general norm reflected in
Article 2 of the UNCLOS, mentioned above. All throughout the proceedings of
the Third UN Conference on the Law of the Sea which adopted the UNCLOS,
the Philippine Delegation consistently adhered to the same principled position
— the position written into the premises of the old Baseline Law of Republic Act
No. 3046, thus:
12
Whereas, all the waters around, between and connecting the various
islands of the Philippine archipelago, irrespective of their width or
dimension, have always been considered as necessary appurtenances
of the land territory forming part of the inland or internal waters of
the Philippines; [….]
The internationalization of the Philippine territory through the UNCLOS has
the effect of eliminating the legal status of the territorial boundaries of the
Philippines as established by the Treaty of Paris of 10 December 1898, together
with two related agreements mentioned above. The sovereign rights of the
Philippines as successor in interest to these treaties have lost legal status. The outer
limit of the Philippine State marked by International Treaty Limits (ITL) has lost
its legal function in defining the dimension of territorial sovereignty, resulting in
its collapse from the ITL to the outer limit of the territorial sea not exceeding 12
nautical miles from the baseline, as the outer limit of territorial sovereignty under
the UNCLOS.
Internal Waters under the Constitution
As characterized by the Constitution, internal waters are those “waters around,
between, and connecting the islands of the archipelago, regardless of their breadth
and dimensions.” Under domestic law internal waters are not open to navigation
of foreign ships without express consent of the Philippine government. Before
the UNCLOS, in practice the Philippines required prior authorization of foreign
ships for passage in its internal waters.
In this regard, Philippine law is in conformity with general international law;
internal waters are so closely linked to the land domain that both are subject to
the same legal regime.21 This close relationship is determined by the vital interests
of the territorial sovereign concerning the conditions of national and territorial
integrity, of defense, of commerce and of industry.22 Internal waters are in law
part of state territory such that other states may only use them “for navigation
or for other purposes with the agreement of the territorial sovereign”.23 In other
words, “As a general rule, there is no right of navigation for foreign ships through
internal waters”.24
The UNCLOS does not recognize internal waters as known in the Constitution
in the case of the Philippines as an archipelagic state. Instead, it has replaced
internal waters of such category with archipelagic waters. Virtually of the same
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Internationalization of Philippine Territory: The Question of Boundaries
dimension as the Constitutional internal waters, Article 49 of the UNCLOS goes
on to provide that archipelagic waters “extends to the waters enclosed by the
archipelagic baselines … regardless of their depth or distance from the coast.”
After declaring that the archipelagic state has sovereignty over archipelagic waters
in Articles 2 and 49, UNCLOS stipulates the limitation to that sovereignty; it
provides in Article 49(3) that “This sovereignty is exercised subject to this Part”,
which pertains in particular to Article 52 in providing that “ships of all States
enjoy the right of innocent passage through archipelagic waters.” In the case
of the Philippines, this right of innocent passage is exercisable as a matter of
objective right in the “waters around, between and connecting the islands of the
archipelago”.
In this vast expanse of waters characterized by the Constitution as internal
waters, what categories of ships of all States are entitled to exercise the right of
innocent passage under the UNCLOS? Generally, ships that may exercise the
right of innocent passage in the territorial sea are entitled to such passage in the
archipelagic waters. The following categories of foreign ships are so entitled:
(1)
(2)
(3)
(4)
Warships, pursuant to Articles 29 and 30 of the UNCLOS;
Submarines and other underwater vehicles, under Article 20;
Ships carrying nuclear materials or substances, under Article 22(2);
Ships carrying other inherently dangerous or noxious materials or
substances, under Article 22(2);
(5) Tankers, under Article 22(2);
(6) Nuclear-powered ships, under Article 22(2); and
(7) Other government ship operated for non-commercial purposes, under
Article 31.
Considering that entitlement to navigation is exercisable without need of express
permission or clearance, it is not easy to dispel the risk of some environmental
disasters, especially in the light of past experiences.
Baselines and Archipelagic Waters
For purposes of the present discussion, the UNCLOS identifies two categories of
baselines, namely:
(1) the normal baseline and the straight baseline provided respectively in
Articles 7 and 8 of the UNCLOS, which apply to all coastal States; and
(2) the archipelagic baseline in Article 47 of the UNCLOS, which specially
applies only to archipelagic states, such as the Philippines.
The distinction between these two categories of baselines lies in the legal status
of waters enclosed by, or landward of, the baseline. As regards the normal or
straight baseline, these waters are characterized as internal waters. Thus, Article
8 provides:
…[w]aters on the landward side of the baseline of the territorial sea form
part of the internal waters of the State.
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Merlin M. Magallona
But with respect to archipelagic baseline, the waters landward or within the
baseline are archipelagic waters. Article 49 of the UNCLOS provides:
On one hand, the status of internal waters in regard to coastal states in general is
unqualified as forming part of the sovereignty over land territory. Expressing the
general norm of international law, Article 2(1) of the UNCLOS reads:
The sovereignty of a coastal State extends beyond its land territory
and internal waters and, … to an adjacent belt of sea, described as
territorial sea.
On the other hand, with respect to archipelagic states, while the UNCLOS
describes archipelagic waters as area of sovereignty in Articles 2 and 49, this
sovereignty is subject to Article 52 which provides that
14
…[T]he waters enclosed by the archipelagic baselines [are] described as
archipelagic waters, regardless of their depth or distance from the coast.
…[S]hips of all States enjoy the right of innocent passage through
archipelagic waters, in accordance with Part III, section 3.
Reference to Part III, section of the UNCLOS, pertains to innocent passage in
the territorial sea.
As a consequence, in the case of the Philippines as an archipelagic State, the right
of innocent passage in the archipelagic waters is in continuity with the right of
innocent passage in the territorial sea.
Coastal states under the general norm of international law have the benefit of
sovereignty over their internal waters landward of the baseline, by prohibiting
navigation by foreign ships of all states without express permission. But by special
rules governing archipelagic states, what is defined as internal waters in general
international law — and under its own Constitution in the Philippine case —
are subject to the right of innocent passage of “ships of all States” under the
UNCLOS. The only internal waters left to the Philippines under the UNCLOS
are waters in mouths of rivers, in bays and in permanent harbor works identified
in respectively Articles 9, 10 and 11, pursuant to Article 50.
Right of Innocent Passage
When the baseline under Article 7 or 8 of the UNCLOS, reflecting general
international law, is drawn across bodies of water, it becomes a dividing line
between territorial sea subject to innocent passage of foreign ships, and internal
waters landward of the baseline as unqualified area of state sovereignty.
But with respect to the Philippines, as subject to special rules governing archipelagic
states, the baseline ceases to be a demarcation line between territorial sea and
waters landward of the Philippine archipelagic baseline, because the right of
innocent passage may be exercised in continuity from the territorial sea into the
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Internationalization of Philippine Territory: The Question of Boundaries
archipelagic waters, both regimes being of the same character, as indicated in
Article 52 of the UNCLOS which provides that innocent passage in archipelagic
waters is to be exercised in accordance with innocent passage in the territorial
sea.
Beside this common character of innocent passage in both regimes, there are
differences between them which are of crucial disadvantage to the Philippines
as an archipelagic state. In Article 18(2)(a), UNCLOS defines passage to be
characterized as innocent as meaning “navigation through the territorial sea for
the purpose of … traversing that sea without entering internal waters or calling of a
roadstead or port facility outside the internal waters.” With respect to the Philippines,
the right of innocent passage in the territorial sea has suffered a change adversed
to the Philippines in its exercise; for the reason that the qualification “without
entering internal waters” Article 18(2)(a) ceases to be prohibitive or becomes
inapplicable in the absence of internal waters landward of the archipelagic
baselines of the Philippines, internal waters having been replaced by archipelagic
waters. In effect, in place of this prohibitive qualification there is installed the
right of innocent passage in the archipelagic waters. Thus, that qualification has
become meaningless.
In another respect, the right of innocent passage in the archipelagic waters as
applied to the disadvantage of the Philippines differs from innocent passage in the
territorial sea, as shown in reference to Article 19(2) of the UNCLOS. Spelling
out the meaning of “innocent passage”, it enumerates activities of foreign ships
which are “considered to be prejudicial to peace, good order or security of the
coastal State.” Among these activities identified in Article 19(2)(e) and (f) are
“the launching, landing or taking on board of any aircraft” and “the launching,
landing or taking on board of any military device.”
What is prejudicial to coastal states in general may be prove to a normal activity
as regards the Philippines as an archipelagic state, when foreign warships exercise
the archipelagic sea lane passage. As provided in Article 53 of the UNCLOS, this
passage combines the right of navigation of foreign with the right of overflight
of foreign aircraft. In particular, the passage of aircraft carrier through the
Philippine archipelagic sea lane passage is likely to involve in normal operation
the landing or taking off of aircraft while in transit, or taking on board a military
device.
Moreover, the following acts considered to be prejudicial to peace or security of
the coastal states” under Article 19(2) of the UNCLOS may be reduced to futility
in the undetected passage of submarines in the archipelagic sea lanes in their
submerged or normal mode, as allowed under 53(3) of the UNCLOS:
(b) any exercise or practice of weapons of any kind;
(c) any act aimed at collecting information to the prejudice of the
defense or security of the coastal state;
*
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*
*
15
Merlin M. Magallona
(h) any act of willful pollution contrary to this Convention;
*
*
*
(j) the carrying out of research or survey activities
(k) any act aimed at interfering with any system of communication
or any other facilities or installations of the coastal State; ….
Archipelagic Sea lane Passage
Archipelagic sea lane passage under the UNCLOS combines the right of
navigation of all foreign ships and the right of overflight of all foreign aircraft,
as provided in Article 53 (1) and (2). It is an independent legal regime from, and
is an addition to, the right of innocent passage in the territorial sea and in the
archipelagic waters. No less then 50 nautical miles wide, archipelagic sea lanes
and air routes, as Article 53(4) of the UNCLOS prescribes, “shall traverse the
archipelagic waters and the adjacent territorial sea and shall include all normal
passage routes used as routes for international navigation or overflight through or
over archipelagic waters.”
Restriction to territorial sovereignty may be more extensive by the designation
of more than one archipelagic sea lanes and air routes. Moreover, UNCLOS
does not set a limit as to the kind of ships or aircraft which can pass through
the archipelagic sea lanes, implying that warships and military aircraft as well as
nuclear-powered ships or those carrying nuclear or other inherently dangerous or
noxious substances.
Customary international law does not allow overflight over the territorial sea
nor over archipelagic or internal waters. Codifying general international law,
Article 1 of the Chicago Convention on International Civil Aviation mandates
that “every State has complete and exclusive sovereignty over the airspace above
its territory.” In Article 3, the Convention prohibits every State aircraft to fly over
the territory of another State or land thereon “without authorization by special
agreement or otherwise and in accordance with the terms thereon”.
In instituting the archipelagic sea lane passage and overflight for archipelagic
states, including the Philippines, UNCLOS sets aside these norms of general
international law by providing the right of overflight across the territorial sea and
archipelagic waters.
Foremost in the function of the archipelagic sea lane passage is the militarystrategic interest. Judge Shigeru Oda of the International Court of Justice has
summarized this rationale as follows:
16
…[T]he new regime on the passage through straits and archipelagic
waters was introduced … in particular, to maintain uninterrupted
navigation of warships — including submarines — and the free
navigation of military aircraft …. The U.S. Navy would only accept
the archipelagic concept on the condition that the undetected
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Internationalization of Philippine Territory: The Question of Boundaries
and uninterrupted passage of submarines would be guaranteed
throughout archipelagic waters.25
On overflight over archipelagic sea lanes, Kwiatkowska explains that
The requirement that air routes must be above archipelagic sea lanes
was dictated not by need of civil air navigation but by necessity to
provide maneuvering possibilities for military aircraft while the naval forces of
a particular fleet are passing through the sea lanes.26
The military-security dimension of the archipelagic sea lane passage is qualitatively
magnified because of nuclear-armed submarines and the undersea deployment
or emplacement of nuclear-weapon deterrent systems. The strategic importance
of this factor to the major military powers should drive home the awareness as to
how the archipelagic sea lane passage could bring the Philippines to the brink of
disaster.
The military-strategic motive power that propelled the archipelagic sea lanes
passage into the mainstream of international law of the sea carries serious
implications on the security and integrity of the national community. In context,
it is most pertinent to inquire why the Philippines must pay such a heavy price in
the interest of the major military powers, such as the United States and China,
which might be brought to a sharper military competition sooner than in the
coming decade. Recently, by the time that a bill establishing the archipelagic sea
lane was filed in Congress, China announced the launching of its first aircraft
carrier.
As to submarines, an anomaly in the UNCLOS arises from the fact that in
Article 20 it requires submarines “in the territorial sea to navigate on the surface
and to show their flag”, but in archipelagic sea lane they are allowed passage in
their submerged state or “in the normal mode” under Article 53(3). And thus
Kwiatkowska is of the view that archipelagic sea lane passage is necessary “to
enable a submerged navigation of submarine and maneuvering of a military
aircraft which are not permissible under the innocent passage regime.”27 Larson
even thinks that the major naval powers may send the SSBNs [nuclear ballistic
missile submarines] or attack submarines through archipelagic waters in their
normal mode of operation.”28 These security concerns may find justification in
the United Nations study that
The sea has now become the operational environment of ballistic
missile submarines each of which has been estimated to be carrying
the equivalent of more explosive power than was used by all the
combatants in the Second World War.29
A report of the UN Department of Disarmament Affairs says that “a great
number of the ICBMs is sea-borne and more than 7,000 strategic nuclear
warheads are carried by submarines of … nuclear weapons status.30 And yet with
respect to passage through archipelagic sea lanes, UNCLOS does not require
prior authorization — or even just notification — for the passage of submarines
or warships carrying nuclear weapons or other dangerous or noxious cargoes. In
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Merlin M. Magallona
a move described by the state media as “unprecedented and necessary to show
other countries China’s striking capability as territorial tensions mount, Agence
France Presse reported from Beijing two weeks ago that China had put its nuclearpowered submarine fleet on public display.31
What may be the consequence if the Philippines decides not to designate the
archipelagic sea lanes? The result may be worse by virtue of the application of
paragraph 12 of Article 53 of the UNCLOS, as follows:
These routes may be interpreted to include archipelagic waters in which ships of
all States enjoy the right of innocent passage.
Of urgent relevance is the analysis of Churchill and Lowe as regards marine
pollution from ships in their innocent passage through waters interconnecting the
islands of the archipelagic state. The UNCLOS, according to them,
VII.
18
If an archipelagic State does not designate sea lanes or air routes, the
right of archipelagic sea lanes passage may be exercised through the
routes normally used for international navigation.
… in its provisions on pollution gives the coastal State additional
enforcement jurisdiction in respect of pollution over foreign vessels
in its territorial sea …. This additional jurisdiction does not apply in
archipelagic waters. The result, therefore, is that in its archipelagic
waters an archipelagic State has less enforcement jurisdiction over
foreign vessels in matters of pollution than a non-archipelagic State
in its territorial sea ….32
CONCLUDING STATEMENT: ENIGMAS AND CRISES
Schizophrenic Posture of the Philippine Delegation
Throughout the official proceedings of the Third UN Conference on the Law
of the Sea that adopted the UNCLOS, the Philippine Delegation consistently
emphasized its position on “the dominion and sovereignty of the archipelagic
state within the baselines, which were so drawn as to preserve the territorial
integrity of the archipelago by the inseparable unity of the land and water.”33
Yet the Delegation went on and signed the UNCLOS which contradicted — and
in effect nullified — that position by its provision on archipelago waters.
Later, in the face of that contradiction, the Delegation proceeded to have the
UNCLOS ratified, which was done to express the consent of the Philippines to
be bound by the UNCLOS.
Enigmatic is the fact that when it signed the UNCLOS on 10 December 1982,
the Delegation submitted a Declaration which “manifests that in signing the
1982 United Nations Convention on the Law of the Sea it does so with the
understandings embodied in this declaration.”
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Apparently the paragraph 1 of the Declaration intends to return to the effectivity
of the Constitution in defining internal waters and thus precludes the application
of the UNCLOS provision on archipelagic waters. This paragraph emphasizes
the position of the Delegation on the sovereignty of the Philippines with respect
to waters landward of the baselines. This paragraph reads:
1. The signing of the Convention by the Government of the
Republic of the Philippines shall not in any manner impair or
prejudice the sovereign rights of the Republic of the Philippines
under and arising from the Constitution of the Philippines.
Paragraph 2 of the Declaration appears to be of the necessary implication that
the entire Philippine territory, as presented in the foregoing discussion, is to be
excluded from the application of the UNCLOS and to restore the regime of the
Treaty of Paris as governing the definition of Philippine territory — certainly a
heretical view of a Delegation which had just signed the UNCLOS.
This paragraph stipulates as follows:
2. Such signing shall not in any manner affect the sovereign rights
of the Republic of the Philippines as successor of the United
States of America under and arising out of the Treaty of Paris
between Spain and the United States of America of December
10, 1898, and the Treaty of Washington between the United
States of America and Great Britain of January 2, 1930.
The Declaration in paragraph 5 prescribes that the UNCLOS shall not have
the effect of amending Philippine laws, apparently with respect to territory.
UNCLOS therefore is reduced to irrelevance as to the legal status of Philippine
territory, in particular as concerning the changes contemplated under Part IV of
the UNCLOS governing the Philippines as an archipelagic state. This paragraph
provides in part:
The Convention shall not be construed as amending in any manner
any pertinent laws and Presidential Decrees or Proclamations of the
Republic of the Philippines; ….
The Philippine Delegation justifies this Declaration under Article 310 of the
UNCLOS as a way of “harmonization of its laws and regulations with the
provisions of this Convention”. This justification fails because, contrary to Article
310, the Declaration “purport[s] to exclude or to modify the legal effect of the
provisions of this Convention in their application” to the Philippines.
A number of States Parties objected to the Philippine Declaration on the ground
that it is in the nature of reservation, which UNCLOS expressly prohibits in
Article 309.
2. Was the Declaration intended to prepare the way for the concurrence of the
UNCLOS by the Batasang Pambansa, in anticipation of constitutional objections
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Merlin M. Magallona
that may be raised?
If that were so, the sense of the Declaration as addressed to the Batasan for
purposes of concurrence on the UNCLOS may be interpreted as an assurance to
the Batasan that the UNCLOS would not be inimical to the Philippines because
(a) it would not impair the sovereign rights of the Philippines under the
Constitution;
(b) it would not affect the territorial rights of the Philippines as derived from
the Treaty of Paris and related treaties; and
(c) it would not be amending laws apparently in regard to the defined
territory of the Philippines.
However, all these undertakings under the Declaration have no legal ground
under the UNCLOS and the entire Declaration stands as a violation of the
UNCLOS. In other words, the Philippine Declaration is not binding on any
State Party of the UNCLOS. With respect to the impact of the UNCLOS on
Philippine territory, these undertakings would prove to be false.
At any rate, by Resolution No. 121, the Batasan expressed its concurrence in the
UNCLOS on 22 February 1984. It reads:
20
Resolved by the Batasang Pambansa, To concur, as it hereby
concurs, in the United Nations Convention on the Law of the Sea
entered into and signed by the Representative of the Republic of the
Philippines on December 10, 1982 at Montego Bay, Jamaica, with the
understanding embodied in the Declaration filed on behalf of the Republic
of the Philippines by the head of the Philippine delegation when he
signed the said Convention, — copy of which is attached as “annex A”.34
While the Declaration has no legal standing in the international plane and is not
binding in the relation between the Philippines and the other States Parties, in
domestic law, having been made an integral part of Resolution No. 121, as its
Annex, it is an enactment of the Batasang Pambansa within its constitutional
authority. Its legal significance lies in its disclosure of the fuller legislative intent
as to the limitations that will control the implementation or operation of the
UNCLOS in Philippine jurisdiction.
In this sense, the undertakings set forth in the Declaration appear to be in the
nature of conditions to concurrence. Thus, the Batasan expressed its concurrence,
subject to the undertakings stipulated in the Declaration, as explained above. This
would include the necessity of a continuing surveillance as to the implementation
of the UNCLOS in keeping with the undertakings required by the Declaration.
This interpretation raises the more basic question as to whether the Constitution
would accommodate a conditional concurrence. This line of reasoning finds a
fundamental obstacle because the Declaration is based on the supremacy of the
Constitution and the laws over the UNCLOS and hence the UNCLOS shall not
effect any change in the pertinent domestic law.
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Taken together, the undertakings under the Declaration necessarily imply that
it preclude the application of the UNCLOS in Philippine jurisdiction and
sovereignty as defined under the Constitution and the laws. Hence, conditional
concurrence may mean no concurrence at all.
The New Baseline Law
The New Baseline Law in Republic Act No. 9522 may prove to be a turning
point in the territorial sovereignty of the Philippines.
Earlier, it is explained that the scope of Philippine territorial sovereignty is
written into the Old Baseline Law in Republic Act No. 3046 as its preambular
paragraphs. The status of these paragraphs remains a mystifying enigma. RA
9522 provides in Section 1 that it is an amendment to RA 3046, and Section 8
reads as follows:
The provisions of Republic Act No. 3046, as amended by Republic
Act No. 5446, and all other laws, decrees, executive orders, rules and
issuances inconsistent with this Act are hereby amended or modified
accordingly.
How does RA 9522 affect the legal status of Philippine territory as defined in the
preambular paragraphs of RA 3046. In particular, how does Section 8 of the new
law amend or modify, if at all, the complex of territorial rights comprehended by
the preamble of RA 3046, as follows:
(a) those that are integral to the Treaty of Paris, together with the
two supplementary agreements, which at time of the enactment
of RA 3046 in 1961 were provided in the definition of National
Territory set forth in the 1935 Constitution;
(b)those pertaining to all the waters within the boundaries
established by these treaties; and
(c) those rights pertaining to “all the waters around, between and
connecting the various islands of the Philippine archipelago”.
Textually, it is not clear whether RA 9522 was enacted in implementation of the
UNCLOS, except that the manner by which it is entitled may suggest the intent
to that effect. Thus:
An Act to Amend Certain Provisions of Republic Act No. 3046,
as Amended by Republic Act No. 5446, to Define the Archipelagic
Baseline of the Philippines and For Other Purposes35
The term “archipelagic baseline” may have been derived from Article 47 of the
UNCLOS. This provides in part that “The archipelagic State may draw straight
archipelagic baselines joining the outermost points of the outermost islands and
drying reefs of the archipelago ….”
But it is the ponencia of the Supreme Court in Magallona vs. Ermita36 which clearly
indicates the decisive premise in our discussion that the New Baseline Law is
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Merlin M. Magallona
the legislated implementation of the UNCLOS, or its application, in the case of
the Philippines as an archipelagic state. The entire ponencia in fact is devoted to
the constitutionality of RA 9522 on the basis of the Court’s application of the
pertinent provision of Part IV of the UNCLOS which are specially constituted
to govern archipelagic states.
On the basis of the foregoing premise in regard to the status of the New Baseline
Law under the UNCLOS as applied to Philippine territory, the following
implications are submitted:
(a)the New Baseline Law represents the entry point of the
Philippines into the special rules of the UNCLOS governing
archipelagic states, signifying the status of the Philippines as an
archipelagic state;
(b) the application of the archipelagic baselines under Article 47
of the UNCLOS implies necessarily the application of the
other elements or features of the archipelagic state provided in
Part IV of the UNCLOS, namely, the archipelagic waters and
archipelagic sea lane passage;
(c) as a consequence of the totalizing coverage of the UNCLOS,
the entire Philippine territory is reorganized along the
characterization explained in our earlier discussion, including
the elimination of its boundaries established by the Treaty of
Paris and related international agreements.
•••
•••
END NOTES
1 Montevideo Convention on Rights and Duties of States (1933), Article I, 165 League
of Nations Treaty Series 19. See Hans Kelsen, Principles of International Law, 2nd
ed., revised and edited by Robert W. Tucker, 1967, p. 307: “Traditional doctrine
distinguishes three elements’ of the state: its territory, its people, and its power
exercised by an independent and effective government”.
2 James Crawford, The Creation of States in International Law, 1979, pp. 48-52;
Kelsen, op. cit., p. 307.
3 See Hiran W. Jayewardene, The Regime if Islands in International Law, 1989, pp.
104-105.
4 See Kelsen, op. cit., p. 29.
5Kelsen, op.cit., p. 319.
6 Michael, “Boundaries” in Rudolf L. Bindschedler (ed.) Encyclopedia of Public
International Law, Vol. 10, 1987, p. 17.
7 Ibid., p. 18.
22
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8 An Act to Declare the Purpose of the People of the United States as to the Future Political Status
of the People of the Philippine Islands and to Provide a More Autonomous Government for those
Islands. Emphasis added. The treaty referred to is meant to be the Treaty of Paris of
10 December 1898.
9 Article 1. Emphasis added.
10 Emphasis added.
11 Emphasis added.
12 Emphasis added.
13 4 Whiteman, Digest of International Law 283.
14 As quoted in Kwiatkowska, “An Assessment of National Legislation on Archipelagic
Waters”, 6 World Bulletin, 23,45.
15 See Island of Palmas Case, I RIAA 829, 839 (1928).
16See North Sea Continental Shelf Cases, ICJ Reports, 1969, pp. 3, 32.
17 Constitution (1987), Article I.
18 Emphasis added.
19 Emphasis added.
20 Emphasis added.
21 Emphasis added.
22See The Fisheries Case, ICJ Reports, 1951, pp. 46, 133.
23 See the North Atlantic Coast Fisheries ABritration Case, vol. 11, pp. 167, 196).
24 Ian Brownlie, Principles of Public International Law, 1998, pp. 116-117.
25 E.D. Brown, The International Law of the Sea, vol. I, 1994, pp. 38,40.
26 “The Passage of Warships Through Straights and Archipelagic Waters”, in J.U. van
Dyke, et als., (eds.), International Navigation: Rocks and Shoals, pp. 155-157, 260
(1988).
27 Barbara Kwiatkowska, “Evaluation of State Legislation on Archipelagic Waters, 6
World Bulletin 22, 23 (1990). Emphasis added.
28 Ibid., pp. 22-23.
29 D.L. Larson, “Security Issues and the Law of the Sea: A General Framework”, 15
Ocean Dev. & Int’l Law, 99, 118 (1985).
30 UN Dept. of Disarmament Affairs, The Naval Arms Race, 1986, p. 14.
31 See H.W. Jayewardene, The Regime of Islands in International Law, 1990, pp. 170171.
31a
Emphasis added.
32 “China flexes muscle, shows submarine fleet,” Philippine Star, October 30, 2013, p. 1.
33 R.R. Churchill and A.V. Lowe, The Law of the Sea, 1983, pp. 96-97.
34Kwiatkowska, op.cit., supra, note 24, p. 37, citing UNCLOS official records in vol. II,
paras. 61.2, 65 and 66.
35 Emphasis added.
36 G.R. No. 187167, August 18, 2011.
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23
Oscar G. Raro
Revisiting the Law on Search and Seizure*
Oscar G. Raro**
I.
OVERVIEW
The right against unreasonable search and seizure is no ordinary right which may
yield to the predilection of a police officer. It is a right guaranteed inviolable by the
Constitution.1 Thus, as early as 1904, at the outset of our recorded jurisprudential history,
the rule has been made that the “poorest and the most humble citizen or subject may, in
his cottage, no matter how frail or humble it is, bid defiance to all powers of the State;
the wind, the storm and the sunshine alike may enter through its weather-beaten parts,
but the king may not enter against its owner’s will; none of his forces dare to cross the
threshold of even the humblest tenement without its owner’s consent.”2 As it is to his
cottage, so it is to his person.3 This exemplified zone of privacy in the home is now
constitutionally4 strengthened and amplified in scope to cover not only the citizens’ right
to be let alone,5 but also the right to be secured in their “persons, houses, papers and effects”6
and “communication and correspondence.”7 The inviolability of these zones of privacy is
24
*
This article is a chapter in the author’s forthcoming book on Criminal Procedure tentatively titled Rights of the
Accused: A Treatise on Philippine Criminal Procedure.
**
A.B., University of Sto. Tomas; Ll.B., University of the Philippines, Ll.M. (candidate), San Beda Graduate
School of Law; Editor-in-Chief, San Beda Graduate School of Law Journal (2006-200).
1
CONST., Article III, Section 2: “The right of the people to be secure in THEIR PERSONS, house, papers,
and effects against unreasonable searches and seizures of whatever nature and for any purpose SHALL BE
INVIOLABLE xxx xxx.”
2
U.S. v. Arceo, G.R. No. 1491. March 5, 1904, 3 Phil. 381 [1904]; Ali v. Gastro, G.R. No. L-69401. June 23,
1987; The quote is actually a rephrase of William Pitt’s speech on the Excise Bill in the House of Commons in
March 1763 or a little less than a century and a half before: “The poorest man may in his cottage bid defiance
to all the force of the Crown. It may be frail; its roof may shake; the wind may blow through it; the storms may
enter, the rain may enter, — but the King of England cannot enter; all his forces dare not cross the threshold of
the ruined tenement.” (Pritchett, Herman C., Constitutional Civil Liberties 177 (1984 ed.). See J. Puno, concurring
opinion in Republic v. Sandiganbayan, G.R. No. 104768, July 21, 2003 for an excellent historical perspective of
the guarantee against unreasonable search and seizure.
3
CONST., Article III, Section 2.
4
Per J. Puno in Ople v. Torres, G.R. No. 127685, July 23, 1998, the right to privacy was given constitutional
foundation in Griswold v. Connecticut, 381 U.S. 479, 14 L. Ed. 2d 510 [1965] adopted in Morfe v. Mutuc, 22
SCRA 424, 444-445.
5
Per J. Bersamin, concurring and dissenting in Pollo v. Constantino-David, G.R. No. 181881, October 18, 2011,
the “right to be let alone” phrase is taken by Samuel Warren and Louis Brandeis in their co-written article in
1890 The Right to Privacy (4 Harvard Law Review 193-220 [1890]), from Judge Thomas M. Cooley’s 1888 treatise
The Law of Torts 29 (2d. 1888).
6
CONST., Article III, Section 2.
7
CONST., Article III, Section 3.
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Revisiting the Law on Search and Seizure
further fortified in our statutes8 and by the Universal Declaration of Human Rights which
mandates that “no one shall be subjected to arbitrary interference with his privacy” and
“everyone has the right to the protection of the law against such interference or attacks.”9
Any form of intrusion against these rights is “impermissible unless excused by law and in
accordance with customary legal process.”10
Thus, the general rule is that for a search or seizure to be valid, there must be a
search warrant validly issued by a judge,11 which seemingly suggests that the absence
of a warrant makes any arrest, search, and seizure unreasonable.12 Hence, “exceptions”
to this rule have always been allowed under the strictest of conditions, as it is “settled
jurisprudence that the Bill of Rights has been intended to protect the individual against
the forces of the state.”13
The constitutional provision on search and seizure,14 however, clearly contemplates
two independent situations when the right of the people to be secure in their persons,
houses, papers, and effects is deemed violated: (1) when the search and seizure without
warrant is unreasonable; and (2) when the search and seizure with a warrant was not founded on
judicially-determined probable cause. What would be “unreasonable” in cases of search
and seizure without warrant is not the fact of the absence of a warrant, but also the lack
of probable cause as deterrence against police arbitrariness. Thus, the Constitution does
not prohibit “all searches and seizures but only those which are ‘unreasonable’ searches
and seizures.”15
The provision does not state that any search without warrant, by that omission alone,
is unreasonable. The unreasonableness must be determined by the facts surrounding each
case. Had the reading been faithful to the contextual dichotomy between the reasonableness
8
Ople v. Torres, G.R. No. 127685, July 23, 1998: “Zones of privacy are likewise recognized and protected
in our laws. The Civil Code provides that “[e]very person shall respect the dignity, personality, privacy and
peace of mind of his neighbors and other persons” and punishes as actionable torts several acts by a person of
meddling and prying into the privacy of another (Article 26 of the Civil Code). It also holds a public officer or
employee or any private individual liable for damages for any violation of the rights and liberties of another
person (Article 32, Civil Code) and recognizes the privacy of letters and other private communications (Article
723, Civil Code). The Revised Penal Code makes a crime the violation of secrets by an officer (Article 229,
Revised Penal Code), the revelation of trade and industrial secrets (Articles 290-292, Revised Penal Code), and
trespass to dwelling (Article 280, Revised Penal Code). Invasion of privacy is an offense in special laws like the
Anti-Wiretapping Law (R.A. 4200), the Secrecy of Bank Deposits Act (R.A. 1405) and the Intellectual Property
Code (R.A. 8293). The Rules of Court on privileged communication likewise recognize the privacy of certain
information (Section 24, Rule 130 (c), Revised Rules on Evidence.”
9
Miguel v. Gordon, G.R. Nos. 174340, 174318 & 174177, October 17, 2008 citing Article 12 of the Universal
Declaration of Human Rights. See also Article 17 (1) and (2) of the International Covenant on Civil and
Political Rights.
10
Miguel v. Gordon, G.R. Nos. 174340, 174318 & 174177, October 17, 2008.
11
People v. Rodrigueza, 205 SCRA 791 [1992]
12
People v. Chua Hua San, G.R. No. 128222, June 17, 1999 citing People v. Barros, 231 SCRA 557, 565 [1994].
13
Protection of the Accused: A Human Right, p. 95 [1997 ed.]
14
1987 Const., Article III, Sec.2: “The right of the people to be secure in their persons, houses, papers, and
effects against unreasonable searches and seizure of whatever nature and for any purpose shall be inviolable,
and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally
by the judge after examination under oath or affirmation of the complainant and witnesses he may produce,
and particularly describing the place to be searched and the person or things to be seized.”
15
Pollo v. Constantino-David, G.R. No. 181881, October 18. 2011.
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Oscar G. Raro
command and the warrant requirement as independent of each other, the bewildering number
of “exceptions” would not be exceptions at all but simply reasonable searches and seizures,
which do not require a warrant.
The fact that no warrant is required at all in certain searches and seizures is selfevident in routine inspection of moving vehicles,16 customs and airport searches, stop and
frisk, and police checkpoints. The nature and purpose of these reasonable searches are not
dependent upon lack of time to secure a warrant or to make immediate arrest for fear of
escape by the suspect or destruction of evidence in his possession. That said, to require a
prior warrant in this kind of searches is self-defeating, if not a bizarre imposition. These
searches have no definite suspect, no targeted things, items, or articles to be seized and no
described place and particular person to be searched
II.
SEARCH WITH A WARRANT
A. Search Warrant: Meaning, Purpose and Nature
The meaning of a search warrant has not changed to any substantial degree from its
original formulation under Section 95 of General Orders No. 58, the forerunner of our
present laws of criminal procedure. As then and now, “[a] search warrant is an order in
writing issued in the name of the People of the Philippines, signed by a judge and directed
to a peace officer, commanding him to search for personal property described therein and
bring it before the court.”17
Its purpose is “to search for and seize personal property which is alleged to have been
stolen or embezzled, and other proceeds or fruits of the offense and property used or
intended to be used for committing an offense.”18 It cannot be used, however, as an excuse
for the sole purpose of obtaining evidence not particularly described therein, as it serves
a higher purpose of screening legitimate application from those which are not, mediated
by the magistrate, “an authority clothed with power to issue or refuse to issue search
warrants or warrants of arrest.”19
A search warrant is in the nature of a judicial process intended as a response to an
incident in the main case, if one is already pending, or in anticipation of a case.20 It
is in the nature of a special criminal process21 kindred to a writ of discovery, but not,
26
16
Extensive search under the moving vehicle exception, however, requires probable cause that the motorist is a
law-offender or that he carries evidence of a crime. (People v. Saycon, 110995, September 5, 1994 citing People
v. Bagista, 214 SCRA 63 (1992); Valmonte v. de Villa, 185 SCRA 665 [1990]).
17
Rules of Court, Rule 126, Section 1; Rodriguez v. Villamiel, G.R. No. 44328, December 23, 1937.
18
Amarga v. Abbas, G.R. No. 8666, March 28, 1956.
19
People v. Encinada, G.R. No. 116720, October 2, 1997.
20
Kho v. Lanzanas, G.R. No. 150877, May 4, 2006 citing People v. Chiu, G.R. Nos. 142915-16, February 27,
2004, 424 SCRA 72, 84 and Malaloan v. Court of Appeals, G.R. No. 104879, 6 May 1994, 232 SCRA 249,
257.
21
Worldwide Web Corporation v. People, G.R. No. 161106, January 13, 2014; Planet Internet Corporation v.
Philippine Long Distance Telephone Company, G.R. No. 161266, January 13, 2014.
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Revisiting the Law on Search and Seizure
standing alone, a criminal action.22 While it is a special and peculiar remedy, drastic in
its nature, and necessitated by public necessity23 or public welfare, it cannot be employed
to transgress “the constitutional rights of citizens.”24 Thus, both the law on search
warrant, in particular, and the law on search and seizure, in general, call for a dogged and
persistent effort at balancing the right of the individual and the interest of the State. In
the process though, the constitutional rights of the individual to personal security in his
person, papers, houses, and effects must be liberally construed while statutes or process
authorizing searches and seizures must be strictly construed.25 In short, in cases of doubt,
the tilt of the scale must always be in favor of the individual and against the State.
B. Where to Apply for Search Warrant
The application for search warrant shall be filed depending upon the place,
circumstances, and nature and stage of the offense. While there is no requirement in the
Rules that the application be accompanied by a certificate of non-forum shopping, the
applicant cannot shop for forum. Thus, “the policy against multiple court proceedings
clearly applies to application for search warrants.”26 It may be noted, however, that the
absence of the certification of non-forum shopping in the application for search warrant
and absent any actual conduct of shopping for forum — as when the applicant after
being denied in one court shall apply in another — will not result in the dismissal of the
application for search warrant, the application not being an initiatory pleading, but only
a process.27
The former holdings28 made before the effectivity of the 2000 Revised Rules of
Criminal Procedure — that an application for search warrant may be filed in a territorial
jurisdiction other than where the illegal articles sought to be seized are located due to the
regional scope of the Regional Trial Court’s jurisdiction29 — has been clarified. The rule
now is as follows:
1. In cases when the criminal action has not been filed, the application for
search warrant, as a general rule, shall be filed with the court within
whose territorial jurisdiction a crime was committed.30 It is only for
“compelling reasons,” which must be stated in the application, that
22
Malaloan v. Court of Appeals, G.R. No. 104879, 6 May 1994, 232 SCRA 249.
23
Id.
24
Rodriguez v. Villamiel, G.R. No. 44328, December 23, 1937 citing People v. Elias, 147 N. E., 472; Alvarez v.
Court of First Instance of Tayabas and Anti-Usury Board, 35 Off. Gaz., 1183.
25
People v. Lambujon, G.R. No. 89543, November 13, 1992; J. Feliciano, concurring and dissenting in In Re:
Umil v. Ramos, G.R. Nos. 81567, 84581-84, 85727, & 86332, October 3, 1991; Rodriguez v. Villamiel, G.R.
No. 44328, December 23, 1937 citing State v. Custer County, 198 Pac., 362; State v. McDaniel, 231 Pac., 965;
237 Pac., 373; Rose v. St. Clair, 28 Fed. [2d], 189; Leonard v. U. S., 6 Fed. [2d], 353; Perry v. U. S., 14 Fed. [2d],
88; Cofer v. State, 118 So., 613; Alvarez v. Court of First Instance of Tayabas and Anti-Usury Board, 35 Off.
Gaz., 1183.
26
Washington Distillers, Inc. v. Court of Appeals, G.R. No. 118151, August 22, 1996; Malaloan v. Court of
Appeals, 232 SCRA 249 [1994].
27
Savage v. Taypin, G.R. No. 134217, May 11, 2000.
28
Malaloan v. Court of Appeals, 232 SCRA 249 [1994]; Ilano v. Court of Appeals, 244 SCRA 346 [1995].
29
See People v. Chiu, G.R. Nos. 142915-16, February 27, 2004.
30
Rules of Court, Rule126, Section 2 (a).
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Oscar G. Raro
the application may be filed with any court within the judicial region
where the crime was committed if the place is known or within the
judicial region where the warrant shall be enforced.31 This will not
violate the rule that venue in criminal cases is jurisdictional since no
criminal action has been filed yet, a search warrant being merely a
process and not a criminal action by itself.
2. In cases when the “criminal action has already been filed, the
application shall only be made in the court where the criminal action
is pending.”32 This is, this time, in observance of the rule that venue
in criminal cases is jurisdictional, the criminal action having been
already filed. The wisdom of this rule has been illustrated in one
case when the Supreme Court sustained the acquittal of the accused
based on the nullification of a search warrant by the regional trial
court who heard the case despite a previous ruling by the another
branch of the same court who issued the warrant upholding its
validity.33
3. In cases involving continuing offense and before a criminal action
is filed, the application for search warrant may be filed in any court
where any of the elements of the alleged offense is committed.34
As an exception to this rule on venue of application, the executive judges and viceexecutive judges of the regional trial courts of Manila and Quezon City may issue search
warrants personally endorsed for filing by the heads of specified police enforcement
agencies and for equally specified crimes.35 Later, the Supreme Court allowed the heads
of these agencies to delegate to “their duly authorized officials” the endorsements for the
application of the search warrant.36
31
Rules of Court, Section 126, Section 2 (b).
32
Rules of Court, Section 126, Section 2 (last paragraph); See Nolasco v. Paño, 139 SCRA 152 [1985]
33
People v. Bans, G.R. No. 104147, December 8, 1994.
34
Sony Computer Entertainment, Inc. v. Supergreen, Inc., G.R. No. 161823, March 22, 2007 citing See also
A.M. No. 03-8-02-SC, which provides as follows:
Sec. 12.
Issuance of search warrants in special criminal cases by the Regional Trial Courts of Manila
and Quezon City. — The Executive Judges and, whenever they are on official leave of absence or are
not physically present in the station, the Vice-Executive Judges of the RTCs of Manila and Quezon
City shall have authority to act on applications filed by the National Bureau of Investigation (NBI),
the Philippine National Police (PNP) and the Anti-Crime Task Force (ACTAF), for search warrants
involving heinous crimes, illegal gambling, illegal possession of firearms and ammunitions as well
as violations of the Comprehensive Dangerous Drugs Act of 2002, the Intellectual Property Code,
the Anti-Money Laundering Act of 2001, the Tariff and Customs Code, as amended, and other
relevant laws that may hereafter be enacted by Congress, and included herein by the Supreme
Court.
35
Marimla v. People, G.R. No. 158467, October 16, 2009 citing A.M. No. 99-10-09-SC, Clarifying the Guidelines
on the Application for the Enforceability of Search Warrants
36
Re: Avenilino I. Razon, A.M. No. 08-4-4-SC, July 7, 2009 resulting in the amendment of A.M. No. 03-8-02SC, Sec. 12 to read: “Sec. 12. Issuance of search warrants in special criminal cases by the Regional Trial Courts of Manila
28
and Quezon City. — xxx xxx xxx
“The applications shall be endorsed by the heads of such agencies or their respective duly authorized officials and shall particularly
describe therein the places to be searched and/or the property or things to be seized as prescribed in the Rules of Court. The Executive
Judges and Vice-Executive Judges concerned shall issue the warrants, if justified, which may be served outside the territorial
jurisdiction of the said courts.”
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Revisiting the Law on Search and Seizure
C. Examination of Complainant and Witnesses
For purposes of determining probable cause before issuing the warrant, the judge
must personally examine — in the form of searching questions and answers and in writing
and under oath — the complainant and the witnesses he may produce on facts personally
known to them.37 There are two requirements here: (1) the judge, and no other, must
personally conduct the examination in the form of searching questions and answers;38 and (2)
the examination must be reduced in writing and executed under oath.
Mere affidavits, without the deposition taken by the judge personally of the
complainant and his witnesses, are not sufficient.39 The search warrant must be struck
down40 and the judge must be declared guilty of grave abuse of discretion41 if he fails to
personally examine the applicant and his witnesses.
When the examination is conducted, it must not be merely routine or pro forma, or
simply a rehash of the contents of the affidavit submitted. The examination must be
probing and exhaustive on the intent and justification of the application,.42 Leading
questions or questions conducted in a general manner would not satisfy the requirements
for issuance of a valid search warrant.43 The judge must be convinced, not the individual
making the affidavit and seeking for the issuance of the warrant, that probable cause
exists. Therefore, it cannot be issued on “loose, vague, or doubtful basis of fact, nor on
mere suspicion or belief.”44
Finally, the submitted sworn statements and affidavits, 45 together with the examination
on oath,46 shall be attached to the record. There could be no way by which an aggrieved
party may determine whether searching questions are conducted unless such written
examination of the witnesses on oath is attached to the record. Thus, when there is no
evidence in writing of the examination made by the judge, the warrant is void.47
37
Rules of Court, Rule 126, Sec. 5.
38
Pendon v. Court of Appeals, G.R. No. 84873, November 16, 1990, 191 SCRA 429 [1990].
39
Roan v. Gonzales, G.R. No. 71410, Nov. 25, 1986, 145 SCRA 687.
40
PICOP v. Asuncion, G.R. No. 122092, May 19, 1999.
41
Nolasco v. Paño, G.R. No. L-69803, 8 October 1985, 139 SCRA 152 citing Silva v. Presiding Judge, RTC of
Negros Oriental, Br. 33, G.R. No. 81756, 21 October 1991, 203 SCRA 140.
42
Uy v. BIR, G.R. No. 129651, October 20, 2000 citing Pendon v. Court of Appeals, 191 SCRA 429 (1990)
43
Id. citing Prudente v. Dayrit, 180 SCRA 69 (1989).
44
People v. Rubio, G.R. No. 35500, October 27, 1932; Cupcupin v. People, G.R. No. 132239, November 19,
2002; Quintero v. National Bureau of Investigation, G.R. No. 35149, June 23, 1988; Combia Pictures, Inc.
v. Court of Appeals, G.R. No. 110318, August 28, 1996; Republic v. Sandiganbayan, G.R. Nos. 112708-09,
March 29, 1996; Hon Ne Chan v. Honda Motor Co. Ltd., G.R. No. 172775. December 19, 2007; Uy v. BIR,
G.R. No. 129651, October 20, 2000.
45
Rules of Court, Rule 126, Sec. 5.
46
Balayon v. Dinopol, A.M. No. RTJ-06-1969, June 15, 2006 citing Mata v. Bayona, 213 Phil. 348, 352 [1984]:
“Mere affidavits of the complainant and his witnesses are thus not sufficient. The examining Judge has to make
searching questions and elicit answers of the complainant and the witnesses he may produce in writing and to
attach them to the record.”; Roan v. Gonzales, G.R. No. 71410, Nov. 25, 1986, 145 SCRA 687.
47
People v. Mamaril, G.R. No. 147607, January 22, 2004.
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D. Probable Cause and Its Determination
Before Issuing the Warrant
Probable cause for purposes of issuing the search warrant means “such facts and
circumstances which would lead a reasonably discreet and prudent man to believe that an
offense has been committed and that the objects sought in connection with the offense are
in the place sought to be searched.48
As one of the elements for a criminal search warrant,49 the determination of probable
cause must be in relation to an offense. A judge is guilty of incompetence and gross ignorance
of the law when he issued a search warrant where his examination centered on nonpayment of the purchase price of imported vehicles in an application for criminal
violation involving tax exemptions on the said vehicles.50
The basis of probable cause shall not be less than personal knowledge by the
complainant or his witnesses of the facts upon which the issuance of the warrant may be
justified.51 “Facts and circumstances” are not mere conclusions of law,” as when the affidavit
of the police officer during the application for search warrant for the crime of inciting
to sedition stated that “said periodicals, contain articles tending to incite distrust and
hatred for the Government of the Philippines or any of its duly constituted authorities”;52
or that the subject “is in possession or has in his control printing equipment and other
paraphernalia, news publications and other documents which were used and are all
continuously being used as a means of committing the offense of subversion.”53
The fact, however, that there is no probable cause for some items described in the
warrant, such as “drug paraphernalia,” as, in fact, none was found during the search,
does not invalidate the warrant as to the other items found where probable cause exists.54
The lack of probable cause on the drug paraphernalia would have been material only
if such were found during the search for if that be so, the warrant would have been
void, but only with respect to such items.55 In short, items described in the warrant are
30
48
Microsoft Corporation v. Maxicorp, Inc., G.R. No. 140946, 13 September 2004, 438 SCRA 224, 234-237;
Kho v. Lanzanas, G.R. No. 150877, May 4, 2006; Uy v. BIR, G.R. No. 129651, October 20, 2000 citing Pendon
v. Court of Appeals, 191 SCRA 429 (1990); Prudente v. Dayrit, 180 SCRA 69 (1989); Burgos v. Chief of Staff,
G.R. No. 64261, December 26, 1984; Del Castillo v. People, G.R. No. 185128, January 30, 2012 citing Santos
v. Pryce Gases, Inc., G.R. No. 165122, November 23, 2007, 538 SCRA 474, 484, citing Columbia Pictures, Inc.
v. Court of Appeals, 329 Phil. 875, 903 (1996).
49
As distinguished from a civil search warrant secured under A.M. No. 02-1-06-SC on 22 January 2002, Rule on
Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights (effective on 15 February
2002).
50
Dizon v. Veneracion, A.M. No. RTJ-97-1379, July 20, 2000.
51
Burgos v. Chief of Staff, G.R. No. 64261, December 26, 1984 relying on Alvarez v. Court of First Instance, 64
Phil. 33.
52
Corro v. Lising, G.R. No. 69899, July 15, 1985.
53
Burgos v. Chief of Staff, G.R. No. 64261, December 26, 1984.
54
People v. Salanguit, G.R. No. 1332254-55, April 19, 2001.
55
Id. citing Aday v. Superior Court, 55 Cal. 2d 789, 13 Cal.Rptr. 415, 362 P.2d 47 (1961) cited in WAYNE R.
LAFAVE, SEARCH AND SEIZURE, A TREATISE ON THE FOURTH AMENDMENT 258 (2d ed. 1987)
(“Although the warrant was defective in the respects noted, it does not follow that it was invalid as a whole. Such
a conclusion would mean that the seizure of certain articles, even though proper if viewed separately, must be
condemned merely because the warrant was defective with respect to other articles. The invalid portions of the
warrant are severable from the authorization relating to the named books, which formed the principal basis of
The IBP Journal
Revisiting the Law on Search and Seizure
severable between those supported and those that are not supported, by probable cause
which partial coverage does not invalidate the entire warrant in toto.
E. Objects of the Warrant
A search warrant may only be issued for search and seizure of personal properties
which are either the subject or fruits of the offense, stolen or embezzled and other proceeds,
or used or intended to be used as the means of committing an offense.56 But aside from the
objects being limited to personal properties, such objects must be specifically described.57
Such requirement for specificity is designed to prevent abuses and to “limit the things to
be seized to those, and only those, particularly described in the search warrant to leave
the officers of the law no discretion regarding what articles they shall seize.”58 A search
warrant is not a “sweeping authority empowering a raiding party to undertake a fishing
expedition to seize and confiscate any and all kinds of evidence or articles relating to a
crime” as the search is “limited in scope so as not to be general or exploratory.”59
Thus, a warrant issued for “books of accounts, financial records, vouchers, journals,
correspondence, receipts, ledgers, portfolios, credit journals, typewriters, and other
documents and/or paper showing all business transactions including disbursement
receipts, balance sheets and related profit and loss statements”60 or “certain accounting
books, documents and papers,”61 was held to be a general warrant. Such all-encompassing
description even without the phrase “all business transactions” still amounts to a general
warrant.62
Likewise, an order directing the “seizure of the documents and paraphernalia being
used or intended to be used as the means of committing illegal recruitment” is also
general which renders such order null and void for being unconstitutional.63 Similarly,
a search warrant which has for its objects methamphetamine hydrochloride (“shabu”)
and paraphernalia,” would not cover “lady’s wallet, cash, grinder, camera, component
speakers, electric planer, jigsaw, electric tester, saws, hammer, drill, and bolo” as they
cannot be “encompassed by the word paraphernalia as they bear no relation to the use or
manufacture of drugs.” These objects should be restored to the accused.64
the charge of obscenity. The search for and seizure of these books, if otherwise valid, were not rendered illegal
by the defects concerning other articles . . . In so holding we do not mean to suggest that invalid portions of a
warrant will be treated as severable under all circumstances. We recognize the danger that warrants might be
obtained which are essentially general in character but as to minor items meet the requirement of particularity,
and that wholesale seizures might be made under them, in the expectation that the seizure would in any event be
upheld as to the property specified. Such an abuse of the warrant procedure, of course, could not be tolerated.”
56
Rules of Court, rule 126, Section 3.
57
Rules of Court, Rule 126, Section 4.
58
Uy Kheytin v. Villareal, 42 Phil. 886, 896; Corro v. Lising, G.R. No. 69899, July 15, 1985; People v. Aruta, G.R.
No. 120915, April 13, 1998.
59
United Laboratories, Inc. v. Isip, G.R. No. 163858, June 28, 2005 citing People v. Go, G.R. No. 144639, 12
September 2003, 411 SCRA 81; People v. Nuñez, G.R. No. 177148, June 30, 2009.
60
Stonehill v. Diokno, L-19550, June 19, 1967,
61
Alvarez v. Court of First Instance of Tayabas, G.R. No. 45358, January 29, 1937, J. Laurel concurring.
62
Bache & co. (Phil), Inc. v. Ruiz, G.R. No. 32409, February 27, 1971.
63
Salazar v. Achacoso, G.R. No. 81510, March 14, 1990, where, also, the power of the Minister of Labor to issue
search and seizure order under Presidential Decree No. 2018 was likewise nullified as unconstitutional.
64
People v. Nuñez, G.R. No. 177148, June 30, 2009.
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The description “computer machine used in printing seditious or subversive literature,”
however, includes the diskettes where data are encoded and stored, and printing from
them may be allowed, except if shown that the contents have been tampered with.65
F. Subject of the Warrant
In one case, the Supreme Court stated that “[t]he Constitution requires search
warrants to particularly describe not only the place to be searched but also the persons
to be arrested.”66 However, one will note that there is nothing in the Rules67 requiring
the name or identity of the person to be stated in the search warrant; neither in the
definition,68 requisites for its issuance,69 nor in its form.70 The only mention of a person
subject of the search is when the things to be seized are “on the person or place ordered
to be searched,” to justify service of the warrant “at any time of the day or night.”71
But when a person is named, property belonging to another cannot be searched as, for
example, a cabinet which does not belong to the person subject of the search cannot be
searched, especially so that it belongs to a lawyer where he keeps his clients’ documents
which are confidential.72
That said, a mistake in the name of the person to be searched or seized does not
invalidate the warrant when the authorities had personal knowledge of his description
and criminal activities.73 Thus, as an exception, a person may be described as “John Doe,”
on the warrant if “descriptio personae is known such as will enable the officer to identify the
accused.”74 After all, a search warrant is “not directed against any person, but is solely for
the discovery and to get possession of personal property.”75 But, an error on the actual
resident in the house searched resulting in the arrest of a person who happened to be
present during the search, makes the search irregular, as it shows the authorities’ lack of
personal knowledge of the circumstances to justify the search.76
32
65
People v. Burgos, G.R. No. 92739, August 2, 1991.
66
People v. Del Norte, G.R. No. 149462, March 29, 2004.
67
Rules of Court, Rule 126.
68
Rules of Court, Rule 126, Sec. 1.
69
Rules of Court, Rule 126, Sec. 4.
70
Rules of Court, Rule 126, Sec. 6.
71
Rules of Court, Rule 126, Sec. 9.
72
People v. Sy Juco, G.R. No. 41957, August 28, 1937.
73
People v. Tiu Won Chua, G.R. No. 149878, July 1, 2003 citing 68 Am Jur 2d, Section 221 at 795 and 43
ALR5th, Section 2[b] at 27-28, citing State v. Tramantano, 28 Conn. Supp. 325, 260 A.2d 128 (Supr. Ct.
1969). In this case, the authorities even conducted a test-buy of prohibited substance from the subject before
they applied for a search warrant against him, even while they have erroneously stated the actual name, not the
actual person of the accused.
74
People v. Veloso, G.R. No. 23051, October 20, 1925.
75
United Laboratories, Inc. v. Isip, G.R. No. 163858, June 28, 2005.
76
People v. Del Norte, G.R. No. 149462, March 29, 2004 where the accused Priscilla Gutierrez, proved that she
does not reside in the place searched which belongs to one “Ising Gutierrez Diwa.”
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Revisiting the Law on Search and Seizure
G. One-Specific-Offense Rule
A warrant shall be issued in connection with one specific offense.77 So, a warrant
issued for more than one offense, known as a “scatter-shot” warrant, is void.78 Thus,
a warrant is void when issued to cover estafa, falsification, tax evasion, and insurance
fraud;79 to cover falsification of land titles under Article 171 and 213 of the Revised Penal
Code and violation of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices
Act;80 and to cover two specific laws for violations of Presidential Decree No. 1866 on
illegal possession of firearms, ammunition and explosives and of Republic Act No.
1700, the Anti-Subversion Law.81 A generic description of an offense as “illegal traffic of
narcotics and contraband” which “necessarily gives rise to more than one offense” makes
the warrant illegal.82
But an offense described as “violation of R.A. 6425,”or the Dangerous Drugs Act
of 1972,83 without specifying the specific provisions violated in the law, is sustained
because while “illegal possession of shabu, illegal possession of marijuana, and illegal
possession of paraphernalia are indeed covered by different articles and sections” in the
law, it is a “special law that deals specifically with dangerous drugs” and “defines and
penalizes categories of offenses which are closely related or which belong to the same
class or species.”84 In the same vein, a warrant is valid even when it failed to mention
any offense, but the application for the warrant reflected the crimes of “substituting
and altering trademarks, tradenames, or service marks” and “unfair competition and
fraudulent registration of trademark and tradename,” which acts defining said offenses,
while punishable separately under Articles 188 and 189 of the Revised Penal Code, are
“closely allied to each other” that the “punishable acts in one of them can be considered
as included in the other.”85
Still, a warrant is invalid where neither in the application for it nor on its face was any
offense shown at all.86 Thus, a warrant is also irregular when the space intended for the
nature of the offense on the face of the warrant was left blank (“indicating uncertainty as
to the crime committed”) and where on the body of the warrant was merely stated that
“transformers were stolen or embezzled and proceeds or fruits of the offense, used or
intended to be used as the means of committing the offense,” (which “could be anything
77
Rules of Court, Rule 126, Section 4. This one-offense rule does not exist before the effectivity of the Rules of
Court of January 1, 1964 in that in one case (Oca v. Maiquez, G.R. No. 20749, July 30, 1965), a search warrant
for the various “offenses of misappropriation of union funds, falsification of public and/or private documents,
defined and penalized by the Revised Penal Code, and violation of labor laws, rules and regulations,” was
sustained. .
78
People v. Simbahon, G.R. No. 132371, April 9, 2003 citing Tambasen v. People, 316 Phil. 237 [1995]; Stonehill
v. Diokno, L-19550, June 19, 1967.
79
Asian Surety & Insurance Company, Inc. v. Herrera, G.R. No. 25232, December 20, 1973.
80
Vallejo v. Court of Appeals, G.R. No. 156413, April 14, 2004;
81
Tambasen v. People, G.R. No. 89103, July 14, 1995.
82
Castro v. Pabalan, G.R. No. 28642, April 30, 1976.
83
This law was repealed by Republic Act No. 9165 otherwise known as the Comprehensive Dangerous Drugs Act
of 2002 dated June 7, 2002.
84
People v. Salanguit, G.R. No. 133254-55, April 19, 2001 relying on People v. Dichoso, 223 SCRA 174 [1993].
85
People v. Marcos, G.R. No. 31757, October 29, 1982.
86
Marcelo v. De Guzman, G.R. No. 29077, June 29, 1982.
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under the sun”87).
This one-specific-offense rule should not be confused with the number of counts
of a single offense such as a warrant for “several counts of the offense of copyright
infringement”88 or with the number of goods as “various electronic equipments like
cassette tape recorders, car stereos, phonograph needles (diamond), portable TV sets,
imported long playing records, spare parts of TVs and radios and other electrical
appliances” for having been imported in violation of Section 2536 of the Tariff and
Customs Code, as amended.89 In both cases, the warrants were sustained as there was
only one offense shown.
H. Particularity of the Place to be Searched
The description of the place to be searched is sufficient if it points to a definitely
ascertainable place which excludes all others.90 The warrant officer need not be familiar
with the area as it suffices if he could, with reasonable effort, find and identify the place
described in the warrant91 as it is distinguishable enough from the other places in the
community where one will be led to it upon inquiry.92 If the address is a compound where
several structures are located, there is no need to particularize the areas to be searched
inside the compound as such structures are essential and necessary components of the
address of subject’s business where the things to be seized are located.93 The description
of the place to be searched is likewise sufficient when what are indicated are particular
offices of a building on its ground and second floors in a university compound despite the
fact that there are several rooms on these floors.94
The address indicated on the warrant governs. Thus the warrant is void when the
place was merely referred to as “premises” even when the exact address is indicated in
the application.”95 So also is the warrant void when an exact address is indicated in the
warrant which differs from that intended and mentioned in the affidavit in support of
the application. The peace officers cannot search the one intended than that indicated
in the warrant as they have no authority to change, enlarge, or amplify the place to be
searched.96 Thus, a search outside of the address indicated, as the one made in a nipa hut
located twenty meters away from the place described, is irregular and the items found
therein are considered fruits of an invalid warrantless search which are inadmissible in
34
87
People v. Court of Appeals, G.R. No. 94396, November 27, 1992.
88
Columbia Pictures, Inc. v. Court of Appeals, G.R. No. 110318, August 28, 1996.
89
Chia v. Acting Collector of Customs, G.R. No. 43810, September 26, 1989, a decision rendered under the 1973
Constitution when the Commissioner of Custom may issue search and seizure order under the deleted phrase
in Article III, Sec. 3 thereof where warrant may be issued not only by a judge, but by “such other responsible
officer as may be authorized by law.”
90
People v. Simbahon, G.R. No. 132371, April 9, 2003.
91
Id. citing People v. Veloso, 48 Phil. 169, 180 [1927].
92
Yao, Sr. v. People, G.R. No. 168306, June 19, 2007 citing Uy v. Bureau of Internal Revenue, 397 Phil. 892, 907908 (2000).
93
Yao, Sr. v. People, G.R. No. 168306, June 19, 2007.
94
Prudente v. Dayrit, G.R. NO. 82870, December 14, 1999.
95
People v. Simbahon, G.R. No. 132371, April 9, 2003
96
People v. Francisco, G.R. No. 129035, August 22, 2002; Paper Industries Corporation of the Philippines v.
Asuncion, 307 SCRA 273 (1999) citing People v. Court of Appeals, 291 SCRA 400 [1998].
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Revisiting the Law on Search and Seizure
evidence.97
I. Issuance and Form of Search Warrant
The search warrant, in summary, must strictly conform to the following requirements:
“(1) the warrant must be issued upon probable cause;
“(2) the probable cause must be determined by the judge himself and not
by the applicant or any other person;
“(3)in the determination of probable cause, the judge must examine,
under oath or affirmation, the complainant and such witnesses as the
latter may produce; and
“(4)the warrant issued must particularly describe the place to be searched
and persons or things to be seized.”98
“(5)the warrant must be issued in connection with one specific offense.”99
As already shown in the preceding discussion, the absence of any of these requirements
makes the search warrant void.100 But once the judge is satisfied that the requirements are
met, foremost among which is the existence of facts sufficient to pass muster the mandate
of probable cause, he shall issue the warrant.101
The form prescribed by the Supreme Court in the Rules of Court as Form 26 is as
follows:
THE PEOPLE OF THE
PHILIPPINES,
Plaintiff
- versus -
Criminal Case No. ______
For (State nature of the offense)
A. B.,
Accused.
--------------------------x
TO ANY PEACE OFFICER:
GREETINGS:
It appearing to the satisfaction of the undersigned after examining under
oath (name of applicant) and his witnesses (name of witness) that there is probable
cause to believe that (describe the act charged) has been committed or is about
to be committed and that there are good and sufficient reasons to believe that
(name of person or persons to be searched) has in his possession or control in (describe
97
Del Castillo v. People, G.R. No. 185128, January 30, 2012
98
Uy v. Bureau of Internal Revenue, G.R. No. 129651, October 20, 2000 citing Republic v. Sandiganbayan, 255
SCRA 438 (1996).
99
Rules of Court, Rule 126, Section 4; Also see discussion in §3.2.4. One-Specific-Offense Rule.
100
Uy v. Bureau of Internal Revenue, G.R. No. 129651, October 20, 2000 citing Republic v. Sandiganbayan, 255
SCRA 438 (1996).
101
Rules of Court, Rule 126, Section 6.
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Oscar G. Raro
premises) in (name of street), district of _______, (name property subject of the offense; or
stolen or embezzled and other proceeds or fruits of the offense; or used or intended to be used
as the means of committing an offense) which should be seized and brought to the undersigned.
(Cancel description not applicable.).
You are hereby commanded to make an immediate search at any time in
the day (or night) of the premises above described and forthwith seize and take
possession of the following personal property, to wit: (give a complete and detailed
description of the property to be seized) and bring said property to the undersigned to
be dealt with as the law directs.
WITNESS my hand this ___ day of _______, 20__.
Judge
This form, however, must further indicate until when the warrant shall be valid,102
which is ten days from its date.
J. Execution of the Search Warrant
a. Lifespan of a Search Warrant
Unlike a warrant of arrest,103 a search warrant shall be valid for a period of only ten
(10) days from its date and shall be void thereafter.104 The period cannot be extended.105
When its execution is commenced within the ten-day period and not completed or
interrupted on the day served, the search may be continued the following day provided it
is still within the ten-day period.106
b. Time to Make the Search
The warrant must direct that it be served in the daytime, unless the affidavit of the
applicant asserts that the property subject of the search is on the person or in the place
to be searched, in which case a further directive may be inserted that it be served at any
time of the day or night.107 Daytime search is the rule, nighttime search, the exception.108
Nighttime search, in the absence of specific judicial authorization, is prohibited in order
“to protect the public from the abrasiveness of official intrusion.”109 But within the time
of day or night authorized in the search warrant, the exact time of its execution is left to
36
102
Adm. Circular No. 13 of the Supreme Court dated October 1, 1985.
103
Which does not expire until served.
104
Rules of Court, Rule 126, Section 10.
105
Lacadin v. Mangino, A.M. No. MTJ-01-1346, July 9 (where lacking “ignominy or ill will, the judge who
extended the warrant, was exonerated).
106
Mustang Lumber, Inc. v. Court of Appeals, G.R. Nos. 104988, 106424, & 123784. June 18, 1996 citing Florenz
D. Regalado, Remedial Law Compendium, Vol. 2, Seventh Revised Ed. [1995], 526, citing Uy Kheytin v.
Villareal, 42 Phil. 886 [1920].
107
Rules of Court, Rule 126, Section 9.
108
People v. Court of Appeals, G.R. No. 117412, December 8, 2000.
109
Id. citing State v. Schmeets, 278 NW 2d 401.
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Revisiting the Law on Search and Seizure
the discretion of the law enforcement officer.110 Nighttime is from sunset to sunrise.111
There is an American authority to the effect that a search pursuant to a daytime warrant
is proper if it begins in the daytime even though it continues after dark.112
c. Knock-and-Announce Rule
Before entering the place to be searched, the officer should give notice of his purpose
and authority. Only when he is refused entry may he break open any outer or inner door
or window of the house to be searched or any of its part or anything therein to execute
the warrant.113 This required prior announcement of purpose and authority is known as
the “knock-and-announce” rule, its performance or non-performance being an important
consideration in assessing whether the subsequent entry by force is constitutionally
reasonable.114 In making the announcement, “no precise form of words is required as it is
sufficient that the accused has notice of the officers, their authority, and the purpose of the
search and the object to be seized.”115 Also, the rule is not absolute. Unannounced entry
is permissible when (a) a demand to open was made but the occupants refuse; (b) when
the occupants “already knew of the identity of the officers and of their authority and
persons; (c) when the officers are justified in the honest belief that there is an imminent
peril to life or limb; and (d) when those in the premises, aware of the presence of someone
outside (because, for example, there has been a knock at the door), are then engaged in
activity which justifies the officers to believe that an escape or the destruction of evidence
is being attempted.”116 Still, these exceptions are not exclusive. Any other unannounced
entry is not automatically impermissible. Other “law enforcement interests may establish
the reasonableness of an unannounced entry.” There is no formula for determining the
reasonableness for a “no-knock entry” as it may be judged by the facts and circumstances
obtaining in each case.117 Thus, when announcement of intent and authority would be
dangerous or futile, or that it would trigger destruction of the evidence by the occupants,
an unannounced entry is deemed reasonable. 118
When trapped or unlawfully detained inside, the officer may resort to the same mode
of breaking out any enclosure as when he is refused entry to liberate himself or any person
lawfully aiding him in the process.119 The required prior announcement of purpose is
110
Id. citing State v. Moreno, 222 Kan 149, 563 P2d 1056.
111
Civil Code, Article 13.
112
Torcia, Charles E., 1 Wharton’s Criminal Procedure 664-665 (13th ed.) citing United States v. Burgard (1977,
CA8 Mo) 551 F2d 190; United States v. Balsamo (1979, DC Me) 468 F Supp 1363 (search of residence and
dock area rented by suspected drug smugglers was not rendered invalid by the fact that an authorized daytime
search was not completed until after 10 p.m., absent showing of prejudice, where search properly began during
daytime).
113
Rules of Court, Rule 126, Section 7.
114
People v. Huang Zhen Hua, G.R. No. 139301, September 29, 2004.
115
Id.
116
People v. Huang Zhen Hua, G.R. No. 139301, September 29, 2004 citing People v. Maddox, 46 Cal. 2d 301,
294 P. 2d 6 [1956].
117
Id. citing U.S. v. Rabinowitz, 94 L Ed. 653 [1950].
118
Id. citing Richards v. Wisconsin, 137 L. Ed. 2d 615 [1997].
119
Rules of Court, Rule 126, Section 7.
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Oscar G. Raro
known as the “knock and announce” principle, its performance or non-performance
being an important consideration in assessing whether the subsequent entry by force is
constitutionally reasonable.”120
d. Conduct of the Search; Witness-to-Search Rule
No search may be conducted of a house, room, or any other premises except in the
presence of its lawful occupant or of any member of his family or in the absence of the
latter, of two witnesses of sufficient age and discretion residing in the same locality.121 The
order of preference cannot be disregarded, interchanged, or intercalated.
Thus, only in the absence of the lawful occupant and refusal of any member of his
family who were present to witness the search, may the police officers ask the bailiff of the
court and the barangay security officer to act as witnesses instead.122 In one case, however,
the Supreme Court upheld the validity of the search despite the unresolved factual issue
of whether the lawful occupant was outside or inside the house the house during the
search, reasoning that even if the occupant was outside the house, the search may be
conducted in his absence provided two witnesses are present.123 This ruling seems to be
a relaxation of the rule that search must be conducted in the presence of the occupant
of the house and only when absent may the substitute witnesses be allowed. In fact, the
search is void when an immediate member of the family of the occupant was prevented
from being a witness as he was handcuffed to a chair during the search,124 despite the
presence of two “barangay kagawads” as witnesses.
e. Receipt for the Property Seized
After seizure of properties under a warrant, the officer who made the seizure must
give a detailed receipt for the same to the lawful occupant of the premises when present
during the search. In his absence, but in the presence of two witnesses of sufficient age
and discretion, the receipt must be left in the premises where the properties were found.125
This duty of preparing and issuing a receipt is mandatory as it is required to preclude
substitution by interested parties of the items seized.126
There is definitely a constitutional issue involved here when the occupant is asked
to sign the receipt for the property seized in his place. For one, if said properties were
evidence of a crime, his signature on the receipt may be construed as an admission of
guilt or a confession made without the assistance of a counsel.
In one case, the receipt was ruled to be inadmissible when the officer failed to inform
the accused of his right to remain silent and to assistance of counsel and of his “right not
38
120
People v. Huang Zhen Hua, G.R. No. 139301, September 29, 2004 citing Wison v. Arkansas, 131 L.Ed. 2d. 976
[1995]; People v. Go, G.R. No. 144639, September 12, 2003.
121
Rules of Court, Rule 126, Section 8.
122
People v. Court of Appeals, G.R. No. 117412, December 8, 2000.
123
Valleno v. People, G.R. No. 192050, January 9, 2013.
124
People v. Go, G.R. No. 144639, September 12, 2003.
125
Rules of Court, Rule 126, Section 11.
126
People v. Gesmundo, G.R. No. 89373, March 9, 1993.
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Revisiting the Law on Search and Seizure
to sign the receipt.”127 In another, it was held that the signature on the receipt which was
prepared earlier than the actual date of seizure affects its integrity, especially so when it
was signed without the assistance of counsel, a violation of accused’s custodial rights.128
Thus, the practice of the police in inducing suspects to sign receipts for property allegedly
confiscated from their possession is unusual and unconstitutional.129
f. Specific Requirements for Narcotic Cases
In drug cases, the manner of search and preservation of evidence seized is specially
prescribed under Section 21, of Republic Act No. 9165:
Section 21. Custody and Disposition of Confiscated, Seized and/or Surrendered
Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and Essential
Chemicals, Instrument/Paraphernalia and/or Laboratory Equipment. — The
PDEA shall take charge and have custody of all dangerous drugs, plant
sources of dangerous drugs, controlled precursors and essential chemicals,
as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the
following manner:
(1) The apprehending team having initial custody and
control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the
same in the presence of the accused or the person/s from
whom such items were confiscated and/or seized, or his/
her representative or counsel, a representative from the
media and the Department of Justice (DOJ), and any elected
public official who shall be required to sign the copies of the
inventory and be given a copy thereof.
Article II, Section 21 (a) of the Implementing Rules and Regulations of R.A. 9165,
however, stated “that non-compliance with these requirements under justifiable grounds,
as long as the integrity and the evidentiary value of the seized items are properly preserved by the
apprehending officer/team, shall not render void and invalid such seizure of and custody
over the said items.”
Seemingly, compliance with Section 21 is still the rule in that “[w]hile the court allows
for [its] relaxation in some cases, there must be compelling and justifiable grounds for the same
and it must be shown that the integrity and evidentiary value of the seized items have
been properly preserved.”130
But in a number of cases, it was held that non-compliance with Section 21 on the duty
of the police officers to state and prove compelling and justifiable grounds, will not affect
the validity of the search if these “could no longer be determined due to the defense’s
127
People v. Go, G.R. No. 144639, September 12, 2003.
128
People v. Del Castillo, G.R. No. 153254, September 30, 2004.
129
People v. Policarpio, 158 SCRA 88 (1988).
130
People v. Nacua, G.R. No. 200165, January 30, 2013.
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Oscar G. Raro
failure to raise it as an issue during trial”131 (therefore, it cannot be raised for the first time
on appeal132). Effectively by this pronouncement, the burden on the justifiable grounds
for non-observance of Section 21 is unfairly placed upon the accused. This should not be
the case since such grounds or reasons are for the police officers to explain and prove, the
accused not being privy to their motives, reasons, and circumstances for such disregard,
non-observance, or omission.
What remains, therefore, of the requirements under Section 21 and its implementing
rule is only the caveat that the prosecution must “establish that the integrity and evidentiary
value of the seized items have been preserved,”133 which, in the first place, is the longstanding rule in the chain of custody of evidence in criminal cases, with or without
Section 21. But even this remaining requirement for the integrity of the evidence’s chain
of custody was further eroded in People v. Domado134 which held:
“From the point of view of jurisprudence, we are not beating any new
path by holding that the failure to undertake the required photography
and immediate marking of seized items may be excused by the unique
circumstances of a case. In People v. Resurreccion,135 we already stated that
“marking upon immediate confiscation” does not exclude the possibility
that marking can be at the police station or office of the apprehending
team. In the cases of People v. Rusiana,136 People v. Hernandez,137 and People v.
Gum-Oyen,138 the apprehending team marked the confiscated items at the
police station and not at the place of seizure. Nevertheless, we sustained
the conviction because the evidence showed that the integrity and
evidentiary value of the items seized had been preserved. To reiterate
what we have held in past cases, we are not always looking for the strict
step-by-step adherence to the procedural requirements; what is important
is to ensure the preservation of the integrity and the evidentiary value of
the seized items, as these would determine the guilt or innocence of the
accused. We succinctly explained this in People v. Del Monte139 when we
held:
40
131
People v. Mariacos, G.R. No. 188611, June 21, 2010 citing See People v. Pringas, G.R. No. 175928, August 31,
2007, 531 SCRA 828; People v. Sta. Maria, G.R. No. 171019, February 23, 2007, 516 SCRA 621, 633.
132 People v. Castillo, G.R. No. 190180; November 27, 2013; People v. Santos, G.R. No. 193190, November 13,
2013; People v. Robelo, G.R. No. 184181, November 26, 2012, 686 SCRA 417, 427-428; People v. Mateo, G.R.
No. 179478, July 28, 2008 citing People v. Sta. Maria, G.R. No. 171019, 23 February 2007, 516 SCRA 621;
People v. Hernandez, G.R. No. 184804, June 18, 2009, 589 SCRA 625, 645; People v. Lazaro, Jr., G.R. No.
186418, October 16, 2009, 604 SCRA 250, 274.
133
People v. Langcua, G.R. No. 190343, February 6, 2013 citing People v. Lorena, G.R. No. 184954, January 10,
2011, 639 SCRA 139; People v. Berdadero, G.R. No. 179710, June 29, 2010.
134
G.R. No. 172971, June 16, 2010.
135
G.R. No. 186380, October 12, 2009.
136
G.R. No. 186139, October 5, 2009.
137
G.R. No. 184804, June 18, 2009.
138
G.R. No. 182231, April 16, 2009, 585 SCRA 668.
139
G.R. No. 179940, April 23, 2008, 552 SCRA 627.
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We would like to add that non-compliance with Section
21 of said law, particularly the making of the inventory and
the photographing of the drugs confiscated and/or seized,
will not render the drugs inadmissible in evidence.
Under Section 3 of Rule 128 of the Rules of Court,
evidence is admissible when it is relevant to the issue and
is not excluded by the law or these rules. For evidence to be
inadmissible, there should be a law or rule which forbids its
reception. If there is no such law or rule, the evidence must
be admitted subject only to the evidentiary weight that will
[be] accorded it by the courts. . . .
We do not find any provision or statement in said
law or in any rule that will bring about the nonadmissibility of the confiscated and/or seized
drugs due to non-compliance with Section 21 of
Republic Act No. 9165. The issue therefore, if there is
non-compliance with said section, is not of admissibility, but
of weight — evidentiary merit or probative value — to be
given the evidence. The weight to be given by the courts
on said evidence depends on the circumstances obtaining in
each case.140”
For all practical purposes, the police officer can now cavalierly disregard Section 21
and does not even have to exert effort to prove unbroken chain of custody of the seized
items since “the evidence is presumed to have been preserved unless there is a showing
of bad faith, ill will, or proof that the evidence has been tampered with.”141 Again, with
this holding, the burden of proving corruption in the integrity of the evidence is unfairly
placed upon the accused and his constitutional right to presumption of innocence further
compromised. This should not be so.
Corpus delicti, a sine qua non for conviction in drug cases,142 consists of the seized
prohibited or regulated drug itself,143 presented in court with proof that its integrity has
not been corrupted.144 This preserved integrity of the drug is indispensable for its identity,
140
Id. at 637.
141
People v. De Mesa, G.R. No. 188570, July 6, 2010; People v. Manalao, G.R. No. 187496, February 6, 2013;
People v. De Jesus, G.R. No. 198794, February 6, 2013; People v. Florendo, G.R. No. 199219, April 3, 2013.
142
People v. Magat, G.R. No. 179939, September 29, 2008, 567 SCRA 86, 94.
143
People v. Suan, G.R. No. 184546, February 22, 2010.
144
Lopez v. People, G.R. No. 172953, April 30, 2008; Malillin v. People, G.R. No. 172953, April 30, 2008, 553
SCRA 619, 632-633 as quoted in People v. Martinez, G.R. No. 191366, December 13, 1010, where the
Supreme Court held that “As a method of authenticating evidence, the chain of custody rule requires that the
admission of an exhibit be preceded by evidence sufficient to support a finding that the matter in question is
what the proponent claims it to be. It would include testimony about every link in the chain, from
the moment the item was picked up to the time it is offered into evidence, in such a way that every
person who touched the exhibit would describe how and from whom it was received, where it was and what
happened to it while in the witnesses’ possession, the condition in which it was received and the condition in
which it was delivered to the next link in the chain. These witnesses would then describe the precautions taken
to ensure that there had been no change in the condition of the item and no opportunity for someone not in the
chain to have possession of the same.”
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which identity must be established beyond reasonable doubt.145 The identity of the drug is,
therefore, a burden that the prosecution must discharge as “the one who offers real evidence,
such as the narcotics in a trial of a drug case, who must account for the custody of the evidence
from the moment in which it reaches his custody until the moment in which it is offered
in evidence.”146 The proof of the chain must be one “with unwavering exactitude” and
not merely presumed from another presumption on the regularity in the performance of
duty:
It is essential that the prohibited drug confiscated or recovered from
the suspect is the very same substance offered in court as exhibit; and
that the identity of said drug be established with the same unwavering exactitude as
that requisite to make a finding of guilt.147 This, the prosecution failed to do. The
prosecution must offer the testimony of key witnesses to establish a sufficiently
complete chain of custody.148
Section 21 of Republic Act No. 9165 is a statutory requirement on the chain of custody
in drug cases and not merely a judge-made law. The reasoning for strict compliance with
the procedure prescribed by said law is necessitated by the fact “of the illegal drug’s
unique characteristic rendering it indistinct, not readily identifiable, and easily open to
tampering, alteration or substitution either by accident or otherwise.”149
The current trend in jurisprudence at relaxation, if not total disregard of Section 21,
defeats the reason for the requirement of said provision in the handling and custody of
confiscated drugs. In People v. Nacua,150 the Supreme Court, sounded the caveat that: “While
the Court allows for relaxation of the rules in some cases, there must be compelling and
justifiable grounds for the same and it must be shown that the integrity and evidentiary
value of the seized items have been properly preserved.” In short, relaxation in the
observance of Section 21 must be for “compelling and justifiable grounds” beyond
preservation of the integrity of the corpus delicti. Thus, in Nacua the accused was acquitted
because “the prosecution did not offer any explanation as to why the police officers
failed to strictly comply with the established procedure for the custody of the suspected
shabu, aside from its failure to also show that the integrity and evidentiary value of the
suspected drug has been properly preserved “from the time said item was transmitted to
the crime laboratory up to its presentation in court.” As Justice Perez puts it in one case:
Buy-bust operation being “susceptible to police abuse” and “usually used as a means
42
145
People v. Suan, G.R. No. 184546, February 22, 2010 citing Catuiran v. People, G.R. No. 175647, May 8, 2009,
587 SCRA 567. People v. Quimanlon, G.R. No. 191198, January 26, 2011 where it was held: “Indeed, in every
prosecution for illegal sale of prohibited drugs, the presentation in evidence of the seized drug, as an integral
part of the corpus delicti, is most material. Thus, it is vital that the identity of the prohibited drug be proved with
moral certainty. The fact that the substance bought or seized during the buy-bust operation is the same item
offered in court as exhibit must also be established with the same degree of certitude. It is in this respect
that the chain of custody requirement performs its function. It ensures that unnecessary doubts
concerning the identity of the evidence are removed (citations omitted).
146
People v. Pagaduan, G.R. No. 179029, August 9, 2010 citing Black’s Law Dictionary which cited Com. V.
White, 353 Mass. 409, 232 N.E.2d 335.
147
Citing Sales v. People, G.R. No. 182296, April 7, 2009, 584 SCRA 680 at 688-689.
148
People v. De la Cruz, G.R. No. 185717, June 8, 2011 citing Catuiran v. People, G.R. No. 175647, May 8, 2009,
587 SCRA 567, 580.
149
People v. Pagaduan, G.R. No. 179029, August 9, 2010 citing People v. Kamad, G.R. No. 174198, January 19,
2010.
150
G.R. No. 200165, January 30, 2013.
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for extortion” . . . “the Court must ensure that the enactment of R.A. 9165 providing
specific procedures to counter these abuses151 is not put to naught.”152 Justice Sereno, in People
v. Salonga,153 reiterated that “Section 21 of R.A. 9165 delineates the mandatory procedural
safeguards in buy-bust operations . . .” adding that “the presumption of regularity in the
performance of official duty cannot be invoked by the prosecution where the procedure
was tainted with material lapses.”
K. Delivery of Seized Items and Return on the Warrant
On the part of the seizing officer, he must forthwith deliver the seized property to the
judge who issued the warrant, together with a true inventory, duly verified under oath, of
the items seized.154 All these must be stated on the return on the warrant which shall be
filed and kept by the custodian of log book on search warrants, who shall enter therein the
date of the return, the result, and other actions of the judge.155 A violation of these duties
on the part of the concerned person shall constitute contempt of court.156
Delivery of the items seized to the court which issued the warrant is mandatory in
character.157 The danger sought to be avoided is to preclude substitution,158 tampering, or
loss of the items either by deliberate acts or by negligence.159 The officers who made the
search may, however, retain the items seized or deliver them to another agency, but only
with the approval of the court.160
On the part of the issuing judge, he should ascertain if the return has been made after
the lapse of ten days from issuance of the warrant, and if there is none, he should summon
the person to whom the warrant was issued and require him to explain why no return
was made.161 If the return has been made, the judge shall determine whether a detailed
receipt was issued for the properties seized to the lawful occupant if present during the
search, or if absent, was left in the place where the property was seized, witnessed by
at least two persons of sufficient age in discretion residing in the same locality.162 Also,
the judge shall require that the property seized be delivered to him together with a true
inventory of the property seized duly verified under oath,163 which, in the first place are
151
Citing Section 21, Article II of R.A. 9165.
152
People v. Secreto, G.R. No. 198115, February 27, 2013.
153
G.R. No. 194948, September 2, 2013.
154
Rules of Court, Rule 126, Section 12
155
Rules of Court, Rule 126, Section 12 (c).
156
Rules of Court, Rule 126, Section 12 (last paragraph).
157
Tenorio v. Court of Appeals, G.R. NO. 110604, October 10, 2003.
158
Santos v. Pryce Gases, Inc., G.R. No. 165122, November 23, 2007.
159
Tenorio v. Court of Appeals, G.R. NO. 110604, October 10, 2003 citing People v. Gesmundo, 219 SCRA 743
(1993).
160
Mallillin v. People, G.R. No. 172953, April 30, 2008; People v. Del Castillo, G.R. No. 153254, 20 September
2004, 439 SCRA 601, citing People v. Gesmundo, 219 SCRA 743 (1993); Yee Sue Koy, et al. v. Almeda, 70 Phil
141.
161
Rules of Court, Rule 126, Section 12 (b); Lacadin v. Mangino, A.M. No. MTJ-01-1346, July 9, 2003 citing
Guideline No. 5(g), Administrative Circular No. 13, issued on October 1, 1985
162
Rules of Court, Rule 126, Section 12 (b).
163
Rules of Court, Rule 126, Section 12 (b) last two sentences.
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imposed upon the police officers to do in making a return.
III.
REASONABLE WARRANTLESS SEARCH AND SEIZURE
Seemingly, the general rationale for warrantless searches starts from a “presumption
of guilt”:
“To hold that no criminal can, in any case, be arrested and searched for
the evidence and tokens of his crime without a warrant, would be to
leave society, to a large extent, at the mercy of the shrewdest, the most
expert, and the most depraved of criminals, facilitating their escape in
many instances.”164
But the impression is misplaced. While the general rule is that no search and seizure
may be effected without a valid search warrant, “exceptions” or reasonable warrantless
searches are crafted through the years in response to fact-specific situations to address both
criminality and public interest.165 These “exceptions,” except in the case of consented
warrantless search, may be loosely divided into probable-cause and regulatory searches.
Under probable-cause searches are: warrantless search incidental to a lawful arrest;
seizure of evidence in “plain view”; automobile search;166 and search dictated by exigent
and emergency circumstances.167 Under regulatory searches are: stop and frisk;168 customs
and airport searches;169 police and military checkpoints;170 and inspection of structures for
fire, sanitary, building,171 and environmental regulations. Consented warrantless search is
validated by consent and not by probable cause or regulation.
A. Warrantless Search Incidental to a Valid Arrest
The law requires that the search must be incidental to a lawful arrest in order that the
search itself may likewise be considered legal. Therefore, a lawful arrest must precede the
search. Generally, the process cannot be reversed;172 that is, an “illegal search cannot be
44
164
People v. Malasugui, 63 Phil. 221 at 228 as cited in People v. Gerente, G.R. Nos. 95847-48, March 10, 1993.
165
Ambait v. Court of Appeals, G.R. No. 164909, April 30, 2008 citing People v. Canton, G.R. No. 148825,
December 27, 2002, 394 SCRA 478, 485; People v. Aruta, G.R. No. 120915, April 13, 1998
166
Extensive search under the moving vehicle exception, requires probable cause that the motorist is a law-offender
or that he carries evidence of a crime. (People v. Saycon, 110995, September 5, 1994 citing People v. Bagista,
214 SCRA 63 (1992); Valmonte v. de Villa, 185 SCRA 665 [1990]).
167
People v. De Gracia, 233 SCRA 716 [1994].
168
People v. Solayao, 262 SCRA 255 [1996].
169
Padilla v. CA and People, G.R. No. 121917, March 12, 1997.
170
Valmonte v. De Villa, G.R. No. 83988, September 29, 1989; People v. Usana, 323 SCRA 754 (2000).
171
Valeroso v. Court of Appeals, G.R. No. 164815, September 3, 2009 citing Nachura, Antoio B. Outline Reviewer
in Political Law, 2009 pp. 139-142; People v. Abriol, G.R. No. 12337, October 17, 2001; People v. Compacion,
G.R. No. 124442 , July 20, 2001; Camara v. Municipal Court, 387 U.S. 523 (1967). But see discussion in §2.3.9.
Inspections For Compliance with Building, Fire, Sanitary, and Environmental Laws and Regulations hereof.
172
People v. Molina, G.R. No. 133917, February 19, 2001; Sy. V. People, G.R. No. 182178, August 15, 2011;
People v. Chua Ho San, G.R. No. 128222, June 17, 1999; Malacat v. Court of Appeals, G.R. No. 123595,
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Revisiting the Law on Search and Seizure
undertaken and then an arrest effected on the strength of the evidence yielded by the
search.”173 Where a search is first undertaken, and an arrest effected based on evidence
produced by such search, both the search and the arrest would be unlawful, for being
contrary to law.174
The lawful arrest contemplated here to justify warrantless search refers to (1) arrest in
flagrante delicto or “where the person to be arrested has committed, is actually committing,
or is attempting to commit an offense” (2) arrest effected in hot pursuit or “when an
offense has just been committed and the arresting officer has probable cause to believe,
based on personal knowledge, that the person to be arrested has committed it; and (3)
arrest of escaped prisoners.175 Therefore, the warrantless and incidental search validated
by the lawful arrest must not be “too remote in time or place”176 from the actual arrest to
render the term “incidental” detached and meaningless.
The propinquity required necessitates constriction in subject, time, and place.177 As
to subject, the warrantless search is only with respect to the suspect, and “dangerous
weapons,” or “anything which may be used as proof of the commission of the offense”178
to prevent concealment or destruction.179 As to time, the search must be contemporaneous
or at about the time of the arrest or immediately thereafter.180 As to place, the search
must be at the place of arrest which includes the premises or surroundings under the
suspect’s immediate control.181 Lack of evidence on the part of the prosecution to prove
compliance with these requirements of subject, time, and place makes the recovery of
evidence invalid under this incidental search exception.182
Thus, a person cannot be arrested to justify the search when he does not manifest
any suspicious behavior despite a prior “reliable information” that he was in possession
of a prohibited substance,183 as when he was innocently disembarking from a vessel with
the other passengers even if he was indeed found to be in possession of a prohibited
December 12, 1997 cited in the concurring and dissenting opinion of J. Panganiban in People v. Montilla, G.R.
No. 123872, January 30, 1998.
173
People v. Encinada, G.R. No. 116720, October 2, 1997; People v. Sarap, G.R. No. 132165, March 26, 2003.
174
People v. Aruta, G.R. No. 120915, April 3, 1998 citing People v. Cuizon, 256 SCRA 325 [1996].
175
Rules of Court, Rule 113, Sec. 5; People v. Chua Ho San @ Tsay Ho San, 308 SCRA 432, 444 [1999].
176
People v. Court of First Instance of Rizal, G.R. No. 41686, November 17, 1980, dissenting and concurring
opinion of Justice Teehankee.
177
People v. Che Chun Ting, G.R. No. 130568-69, March 21, 2000; Nolasco v. Paño. G.R. No. 69803, October 8,
1985, concurring and dissenting opinion of Justice Cuevas.
178
People v. Che Chun Ting, G.R. No. 130568-69, March 21, 2000; Nolasco v. Paño. G.R. No. 69803, October 8,
1985, concurring and dissenting opinion of Justice Cuevas.
179
Valeroso v. Court of Appeals, G.R. NO. 164815, September 3, 2008 citing People v. Estella, 443 Phil. 669 at
685 (2003). .
180
People v. Che Chun Ting, G.R. No. 130568-69, March 21, 2000; Nolasco v. Paño. G.R. No. 69803, October 8,
1985, concurring and dissenting opinion of Justice Cuevas
181
People v. Jerry Ting Uy, G.R. No. 144506-07, April 11, 2002; People v. Cubcubin, G.R. No. 136267, July 10,
2001.
182
People v. Salanguit, G.R. No. 133254-25, April 19, 2001.
183
People v. Laguio, G.R. No. 128587, March 16, 2007 citing People v. Binad Sy Chua, 444 Phil. 757 (2003), citing
People v. Molina, G.R. No. 133917, February 19, 2001, 352 SCRA 174.
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substance.184 However, in one case, the warrantless search was justified on the basis
of a tip-off when coupled with the fact of plain view since “leaves of marijuana was
jutting off out of the package carried by the accused.”185 Also, “a search substantially
contemporaneous with an arrest can precede the arrest if the police have probable cause to
make the arrest at the outset of the search.”186
The accused may waive the illegality of his arrest. Still, such waiver does not validate
the search conducted on his person thereafter, since the arrest was invalid at the time of the
occurrence of the warrantless search.187
B. Seizure of Evidence in Plain View
For seizure of evidence to be valid under the plain view doctrine, the following
elements must concur: “(a) a prior valid intrusion in which the police are legally present
in the pursuit of their official duties; (b) the evidence was inadvertently discovered by
the police who had the right to be where they are; (c) the evidence must be immediately
apparent to be evidence of a crime; and (d) the plain view justified mere seizure of
evidence without further search.”188
By the phrase itself, a warrantless search to be justified under the “plain view” doctrine
requires that the object seized must be immediately visible or “exposed to sight” or readily
apparent on its face to be illegal without requiring any further confirmatory act.189 Thus,
as a rule, where the object seized is wrapped without indication of contents190 or inside
a closed package or container,191 it is not in plain view and may not be seized without a
warrant such as also when the disputed evidence was found wrapped in plastic bag under
a table,192 under the bed wrapped in newspaper,193 or at the back of the house.194
However, “if the package proclaims its contents, whether by its distinctive
configuration, its transparency, or if its contents are obvious to an observer, then the
46
184
People v. Amminudin, 163 SCRA 402 [1988].
185
People v. Peñaflorida, G.R. No. 175604, April 10, 2008.
186
People v. Tudtud, G.R. No. 144037, September 26, 2003.
187
People v. Bacla-an, 445 Phil. 729, 746 (2003), citing People v. Mendoza, 327 SCRA 695 (2000). See also People
v. Sevilla, 394 Phil. 125 (2000); People v. Lapitaje, G.R. No. 132042, Feburary 19, 2003; People v. Chua Ho San,
308 SCRA 432, 444 [1999].
188
People v. Macalaba, G.R. No. 146284-86, January 20, 2003; People v. Bolasa, G.R. No. 125754, December 22,
1999.
189
People v. Benny Go, G.R. No. 144639, September 12, 2003: “However, the illegal character of said dry seals
and stamp pads cannot be said to have been immediately apparent. For SPO1 Fernandez had to first make an
impression of the dry seal on paper before he could determine that it purported to be the seal of the Bureau
of Immigration and Deportation. The counterfeit nature of the seals and stamps was in fact not established
until after they had been turned over to the Chinese embassy and Bureau of Immigration and Deportation
for verification. It is, therefore, incredible that SPO1 Fernandez could make such determination from a “plain
view” of the items from his vantage point in the sala.”
190
People v. Nuevas, G.R. No. 170233,February 22, 2007.
191
People v. Salanguit, G.R. Nos. 133254-55, April 19, 2001.
192
People v. Aspiras, G.R. No. 138382-84, February 12, 2002.
193
People v. Simbahon, G.R. No. 132371, April 9, 2003.
194
Nala v. Baroso, G.R. No. 153087, August 7, 2003.
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contents are in plain view and may be seized.195 Some illustrative examples would be
when edges of leaves of marijuana were jutting out of the package,196 when a revolver and
magazine were displayed tucked in accused’s waist when he raised his hand,197 and when
plastic sachets of “shabu” were seen while the accused was fumbling for the registration
papers of his car in his clutch bag.198
For warrantless seizure to be justified under the plain view doctrine, the discovery of
the item must be by “inadvertence”199 and therefore, the search conducted should not be
deliberate. The doctrine cannot be “used to launch unbridled searches and indiscriminate
seizures nor to extend a general exploratory search made solely to find evidence of
defendant’s guilt.200
C. Automobile Search
The basis of warrantless search of vehicles originated during the Prohibition in the
U.S. when in 1921 police officers searched a vehicle which occupants were suspected
of bootlegging in an area near the U.S. and Canadian border. The area was known for
traffic in illegal liquor. The search yielded sixty-nine quarts of bonded whiskey and gin
found in the upholstery of the vehicle seats. When the issue of the constitutionality of the
search was decided in 1925 in Carroll v. United States,201 the U. S. Supreme Court held the
search valid because “it is not practicable to secure a warrant because the vehicle can be
quickly moved out of the locality or jurisdiction in which the warrant must be sought.”
For a while, this justification for automobile searches had been referred to as the “Carroll
Doctrine.”202
Thus, when the vehicle is stationary and parked inside a driveway — and therefore,
no possible loss of jurisdiction is in the offing — this “automobile exception” will not
be sustained. In Coolidge v. New Hampshire,203 it was held that since there was already an
ample advance opportunity for the police officers to secure a warrant and there was no
indication that the vehicle will be driven away, a warrantless search on the vehicle will not
fall under this exception.204 This is how it should be since the very basis of the “moving
vehicle” exception (possible loss of jurisdiction) no longer obtains.
Automobile searches evolved over time to branch out into two kinds of searches:
routine search and extensive search where probable cause or lack of it determines the
validity of the search conducted.
195
Caballes v. Court ofAppeals, G.R. No. 136292, January 15, 2002 citing People v. Doria, 301 SCRA 668 [1999].
196
People v. Peñaflorida, G.R. No. 175604, April 10, 2008.
197
Padilla v. Court of Appeals, G.R. No. 121197, March 12, 1997.
198
People v. Macalaba, G.R. No. 146284-86, January 20, 2003
199
People v. Cubcubin, G.R. No. 136267, July 10, 2001 citing Coolidge v. New Hampshire, 403 U.S. 443, 29 L.Ed.
2d 564 (1971)] and Texas v. Brown, 460 U.S. 730, 75 L. Ed. 2d 502 (1983)].
200
People v. Musa, 217 SCRA 597 at 611 (1993) cited in Peole v. Cubcubin, G.R. No. 136267, July 10, 2001.
201
267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925)
202
M. Dee, Getting Back to the Fourth Amendment: Warrantless Cell Phone Searches, 56 N.Y. L. Rev. 1143 (2011/12)
203
403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564 [1971]
204
United States v. Sheperd, 714 F.2d 316 [1983].
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The first consists merely of routine inspection as when the peace officer “merely draws
aside the curtain of a vacant vehicle which is parked on the public fair grounds205 or
simply looks into a “vehicle,”206 flashes a light therein without opening the car door,207
does not subject the occupants to a physical or body search,208 and merely subject the
vehicle to visual search or visual inspection,209 or where the routine check is conducted
in a fixed area.210 Routine inspections are not regarded as violative of the right against
unreasonable search.211 However, the mere mobility of vehicles does not give the police
officers unlimited discretion to conduct indiscriminate searches without warrants if made
within the interior of the vehicle and in the absence of probable cause.212
The second consists of extensive search where the police officer has to reach inside
the vehicle or the entire vehicle is searched.213 This kind of search without warrant is
unreasonable if the officers conducting the search “do not have reasonable or probable
cause to believe, before the search, that either the motorist is a law-offender or the contents
or cargo of the vehicle are or have been instruments or the subject matter or the proceeds
of some criminal offense.”214 Physical intrusion by the peace officer inside the vehicle
without a warrant is, as a general rule, illegal.215 But if reasonable or probable cause exists
— as when the distinctive odor of marijuana emanated from a package inside the vehicle
and the police officers received confidential report beforehand that the accused was to
transport prohibited drugs and substances,216 or that an information was received in
advance that a particularly-described passenger jeepney is transporting illegal lumber217 —
the search on the vehicle is justified by the impossibility if not impracticability of securing
a warrant since the “vehicle can be quickly moved out of the locality or jurisdiction in
which the warrant must be sought.”218
48
205
Valmonte v. de Villa, 185 SCRA 665 [1990] citing People v. Case, 190 MW 289, 220 Mich. 379, 27 A.L.R. 686.
206
Valmonte v. de Villa, 185 SCRA 665 [1990] citing State v. Gaina, 97 SE 62, 111 S.C. 174, 3 A.L.R. 1500.
207
Id. citing Rowland v. Commonwealth, 259 SW 33, 202 Rg 92.
208
People v. Barros, G.R. No. 90640, March 29, 1994.
209
People v. Lacerna, 278 SCRA 561 (1997); People v. Libnao, G.R. No. 136860, January 20, 2003 citing People
v. Barros, supra.
210
People v. Escano, 323 SCRA 754 (2000).
211
Caballes v. Court of Appeals, G.R. No. 136292, January 15, 2002.
212
Id. citing People v. Malmstedt, 198 SCRA 401 [1991]; Obra v. Court of Appeals, G.R. No. 120852, October
28, 1999 citing People v. Bagista, 214 SCRA 63, 69 [1992].
213
People v. Barros, G.R. No. 90640, March 29, 1994; People v. Lapitaje, G.R. No. 132042, February 19, 2003.
214
People v. Saycon, 110995, September 5, 1994 citing People v. Bagista, 214 SCRA 63 (1992); Valmonte v. de
Villa, 185 SCRA 665 [1990].
215
Caballes v. Court of Appeals, G.R. No. 136292, January 15, 2002 citing United States v. Pierre 932 F. 2d 377
cited in Hermann, Search and Seizure Checklists, 1994 ed., p. 246.
216
People v. Barros, 231 SCRA 557 (1994); People v. Lacerna, 278 SCRA 561 (1997); Caballes v. Court of Appeals,
G.R. No. 136292, January 15, 2002; People v. Lo Ho Wing, 193 SCRA 122 (1991); People v. Balingan, G.R. No.
105834, February 13, 1995.
217
Epie, Jr. v. Ulat-Marredo, G.R. No. 148117, March 22, 2007.
218
People v. Lo Ho Wing, 193 SCRA 122 (1991) cited in People v. Bobbonan, G.R. No. 105834, February 13,
1995; Asuncion v. Court of Appeals, G.R. No. 125959, February 1, 1999.
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D.Stop-and-Frisk
“Stop-and-frisk” as a regulatory search has its origin in American jurisprudence,
seminally, in Terry v. Ohio.219 A Terry search is justified by an honest belief, supported by the
circumstances of the case, that the police officer is “dealing with an armed and dangerous
individual” and the search “is warranted in the belief that his safety or that of others was
in danger.” Probable cause that the suspect committed a crime is not required in stop
and frisk.220 That Terry contemplates a situation of danger to the police officer had been
settled in its companion case of Sibron v. New York221 stating that “[t]he search for weapons
approved in Terry consisted solely of a limited patting of the outer clothing of the suspect
for concealed objects which might be used as instruments of assault.”
A Terry search cannot be extended to a person found on the premises subject of a
search warrant when there is no reason to believe that he is connected with the crime
contemplated in such warranted search even if the illegally extended search to him yielded
a prohibited substance in his possession;222 or against persons in the said premises absent
any probable cause that they are committing a crime, since “a person’s mere propinquity
to others independently suspected of criminal activity does not give rise to probable cause
to search that person.”223
It may not be said that “danger to the police officer or that of the others” is the same
principle of limitation warranting stop-and-frisk in Philippine jurisprudence. The signals
in the application of this exception are mixed.
In the earlier applications by the Supreme Court of the principle of stop and frisk,
warrantless searches were validated without any mention as their basis any supposed
danger to the police or suspicion of dangerous weapons in the possession of the suspect.
Thus, searches by virtue of stop and frisk were sustained upon a suspect who was merely
acting suspiciously and who attempted to flee upon seeing the police officers as held in
Posadas v. Court of Appeals;224 on persons who appeared to be drunk, wearing a camouflage
uniform or a jungle suit and who also attempted to flee upon seeing the government
agents in People v. Solayao;225 on persons whose eyes are red and wobbling like a drunk,
characteristic of persons “high” on drugs in an area frequented by drug addicts, in Manalili
v. Court of Appeals. 226
These departures or excursions away from the essence of a Terry search was, however,
somehow corrected in Malacat v. Court of Appeals227 when the Supreme Court, invalidating
the search questioned in that case, restated the essence of Terry as follows:
219
392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968)
220
Malacat v. Court of Appeals, G.R. No. 123596, December 12, 1997.
221
392 U.S. 40, 64-66 [1968]
222
68 Am Jur 2d, Searches and Seizures, 78 citing State v. Fox, 283 Minn 176, 168 NW2d 260.
223
Ybarra v. Illinois, 444 U.S. 85, 100 S. Ct. 338, 62 L.Ed.2d 238 [1979])
224
Posadas v. Court of Appeals, 188 SCRA 188 (1990), G.R. No. 89139. August 2, 1990.
225
People v. Solayao, G.R. No. 119220. September 20, 1996
226
Manalili v. Court of Appeals , G.R. No. 113447. October 9, 1997.
227
G.R. No. 123596, December 12, 1997.
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“Other notable points of Terry are that while probable cause is not
required to conduct a “stop and frisk,” it nevertheless holds that mere
suspicion or a hunch will not validate a “stop and frisk.” A genuine reason
must exist, in light of the police officer’s experience and surrounding
conditions, to warrant the belief that the person detained has weapons
concealed about him. Finally, a “stop-and-frisk” serves a two-fold interest: (1)
the general interest of effective crime prevention and detection, which
underlies the recognition that a police officer may, under appropriate
circumstances and in an appropriate manner, approach a person for
purposes of investigating possible criminal behavior even without probable
cause; and (2) the more pressing interest of safety and self-preservation which
permit the police officer to take steps to assure himself that the person with whom he
deals is not armed with a deadly weapon that could unexpectedly and fatally be used
against the police officer.
..........
“. . . . there was at all no ground, probable or otherwise, to believe
that petitioner was armed with a deadly weapon. None was visible to Yu,
for as he admitted, the alleged grenade was “discovered” “inside the
front waistline” of petitioner, and from all indications as to the distance
between Yu and petitioner, any telltale bulge, assuming that petitioner
was indeed hiding a grenade, could not have been visible to Yu.” (Italics
ours)
In People v. Doria,228 however, the concurring opinion of Justice Panganiban seems
to be restating Posadas and Manalili when he said that the circumstances in those cases
prompted the “valid application of the doctrine” even while he quoted in length Malacat’s
application of stop and frisk to “persons who may be armed and presently dangerous.”
In People v. Binad Sy Chua,229 it was held that the “apprehending officer must have a genuine
reason in accordance with the police officer’s experience and the surrounding conditions,
to warrant the belief that the person to be held has a weapon (or contraband) concealed
about him.”
In Esquillo v. People,230 the Supreme Court, citing Malacat v. Court of Appeals, supra, stated
the principle that —
“. . . . Such a ‘stop-and-frisk’ practice serves a dual purpose: (1) the
general interest of effective crime prevention and detection, which
underlies the recognition that a police officer may, under appropriate
circumstances and in an appropriate manner, approach a person for
purposes of investigating possible criminal behavior even without
probable cause; and (2) the more pressing interest of safety and
50
228
301 SCRA 668, 705 (1999) G.R. No. 125299. January 22, 1999.
229
G.R. Nos. 136066-67, February 4, 2003
230
G.R. No. 182010, August 25, 2010.
The IBP Journal
Revisiting the Law on Search and Seizure
self-preservation which permit the police officer to take steps
to assure himself that the person with whom he deals is not
armed with a deadly weapon that could unexpectedly and
fatally be used against the police officer.
Esquillo, however, affirmed the conviction of the accused without any findings on the
danger to the police officer as basis but merely that the “search was undertaken after the
[accused] was interrogated on what she placed inside a cigarette case, after the police
officer introduced himself as such to accused, and, at the time of her arrest, accused
was exhibiting suspicious behavior and in fact attempted to flee after the police officer
had identified himself.” The dissenting opinion of Justice Bersamin in Esquillo reminded
the majority that: “a Terry protective search is strictly limited to what is necessary for the
discovery of weapons that may be used to harm the officer of the law or others nearby.
There must then be a genuine reason to believe that the accused is armed and presently
dangerous. Being an exception to the rule requiring a search warrant, a Terry protective
search is strictly construed; hence, it cannot go beyond what is necessary to determine
if the suspect is armed. Anything beyond is no longer valid and the fruits of the search
will be suppressed.” This is a faithful restatement of principle if a warrantless search will
continue to be justified under the guise or disguise of Terry.
E. Exigent and Emergency Circumstances
What is exigent and emergency is, of course, fact-specific. In one case, warrantless
search was justified of a building where large quantities of explosives and ammunitions
were found during a coup d’etat after intelligence reports showed that said building was
being used as headquarter of the plotters, where a surveillance team dispatched thereat
was fired at from the said building,231 and where the “[n]earby courts were closed and
general chaos and disorder prevailed.”232
Thus, one of the “exigent circumstances” contemplates a situation “in which police
action literally must be ‘now or never’ to preserve the evidence of the crime to permit
action without prior judicial evaluation.”233 This may also arise from the need to prevent
the offender’s escape, minimize the possibility of a violent confrontation that could cause
injury to the officers and the public, and, again, preserve evidence from destruction or
concealment.234 This may even cover situation when the exigency consisting of imminent
destruction of evidence is triggered or created by police presence. i.e. destruction of the
evidence inside an apartment occurs after the police officers announced their presence at
the door of the apartment immediately after a controlled buy of crack cocaine outside
the apartment complex.235 The exigency of the situation or circumstances must be objective
and not subjective, that is, not subject to the appraisal and opinion of the peace officer
alone but also of the fact of such exigency. It follows that this police-triggered exigency
231
People v. De Gracia, 233 SCRA 716 [1994] citing People v. Malmstedt, 198 SCRA 401 (1991) and Umil, et al.
v. Ramos, et al., 187 SCRA 311 (1990).
232
People v. Aruta, G.R. No. 120915, 3 April 1998, 288 SCRA 637-638.
233
Roaden v. Kentucky, 413 U.S. 496, 505 [1973].
234
State v. Berry, 2008 La. App. LEXIS 979 (La. App. 5 Cir. June 19, 2008); Blake v. State, 2008 Del. LEXIS 288
(June 24, 2008):
235
Kentucky v. King, No. 09-1272, May 16, 2011, 563 U.S.___(2011).
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must be preceded by probable cause belief that a crime is being committed.236
F. Customs and Airport Searches
The basis of customs searches as allowable warrantless searches is the enforcement
of the customs and tariff laws.237 Customs searches recognize the power of the State to
prevent any “fraudulent schemes resorted to by importers who evade payment of customs
duties” and to combat smuggling.238
As to airport searches, the justification, aside from Section 9239 of Republic Act No.
6235, is “their minimal intrusiveness, the gravity of the safety interests involved, and the
reduced privacy expectations associated with airline travel.”240 Also, the act of a suspect
of checking-in his personal luggage as a passenger amounts to consent to inspection
in accordance with customs rules and regulations and waiver of any objection to a
warrantless search of such luggage.241 The search was held to be regular when a passenger
was frisked after passing through the metal detector booth that emitted a beeping sound
and the frisker noticed something bulging in the passenger’s body;242 or even when the
metal detector failed to detect anything suspicious, but a frisk was nonetheless conducted
which yielded a prohibited or illegal substance from the person of the passenger.243
In one case, the subsequent warrantless arrest of the passenger was justified as in
flagrante delicto upon the discovery and recovery of contraband in his bag.244 This should
not be confused with a case of search incidental to a lawful arrest where the arrest must
precede the search, but a case where the search was reasonable in the first place which
justifies the arrest. It is nonsensical for peace officers to be helpless in the face of the
glaring evidence of a crime committed in their presence.
52
236
Kentucky v. King, No. 09-1272, May 16, 2011, 563 U.S.___(2011).
237
Rieta v. People, G.R. No. 147817, August 12, 2004.
238
Salvador v. People. G.R. No. 146706, July 15, 2005; Papa v. Mago, G.R. No. 27360, February 28, 1968, 22
SCRA 857.
239
“SEC. 9. Every ticket issued to a passenger by the airline or air carrier concerned shall contain among others the
following condition printed thereon: ‘Holder hereof and his hand-carried luggage(s) are subject to search for,
and seizure of, prohibited materials or substances. Holder refusing to be searched shall not be allowed to board
the aircraft,’ which shall constitute a part of the contract between the passenger and the air carrier.” It may not
even be argued that under this provision, the action of the airport security personnel is limited to refusing the
passenger to “board the aircraft” as it would “sanction impotence and ineffectivity in law enforcement, to the
detriment of society.” (People v. Canton, G.R. No. 148825, December 27, 2002 citing People v. Malmstedt, 198
SCRA 401, 410 [1991]).
240
Sales v. People, G.R. No. 191023, February 6, 2013 citing People v. Johnson, 401 Phil. 734 [2000]
241
People v. Gatward, G.R. Nos. 119722-73, February 7, 1997.
242
People v. Canton, 442 Phil. 743 (2002).
243
Sales v. People, G.R. No. 191023, February 6, 2013.
244
People v. Gatward, G.R. Nos. 119722-73, February 7, 1997.
The IBP Journal
Revisiting the Law on Search and Seizure
G. Police and Military Checkpoints
The reasonableness of checkpoints by the military and the police was sustained in
Valmonte v. de Villa245 “as a security measure to enable the police to pursue its mission of
establishing effective territorial defense and maintaining peace and order for the benefit
of the public” and “as measures to thwart plots to destabilize the government, in the
interest of public security.” In Valmonte, the Supreme Court took judicial notice of “the
shift to urban centers and their suburbs of the insurgency movement, so clearly reflected
in the increased killings in cities of police and military men by NPA ‘sparrow units,’ not
to mention the abundance of unlicensed firearms and the alarming rise in lawlessness
and violence in such urban centers — which all sum up to what one can rightly consider,
at the very least, as abnormal times.” The Supreme Court further stated that “[b]etween
the inherent right of the state to protect its existence and promote public welfare and an
individual’s right against a warrantless search which is however reasonably conducted,
the former should prevail.” The reasonableness of checkpoints was also affirmed in People
v. Lisana,246 as dictated by “exceptional circumstances, as where the survival of organized
government is on the balance, or where the lives and safety of the people are in grave
peril.”
The qualification for the reasonableness of routine checkpoint searches consists of
the limitation imposed upon police officers that “the vehicle is neither searched nor its
occupants subjected to a body search, and the inspection of the vehicle is limited to
a visual search.”247 Routine inspection may, however, result in extensive search in the
event of consent of the motorist. In Aniag v. Commission on Elections,248 the Supreme Court
ruled that “consent” or “implied acquiescence” given under intimidating or coercive
circumstances is no consent and could not be more than a mere passive conformity within
the purview of the constitutional guaranty as the motorist was alone and a mere driver of
the car owner who could not have had the courage to protest against the extensive search
conducted in the vehicle. But in People v. Exala,249 the accused’s “submissive stance after
the discovery of the bag of marijuana, as well as the absence of any protest on their part
when arrested . . . . confirms their acquiescence to the search” which amounts to “waiver
of the right against unreasonable search and seizure.”
However, when there “is probable cause which justifies a reasonable belief of the men
at the checkpoints that either the motorist is a law offender or the contents of the vehicle
are or have been instruments of some offense” vehicles may be stopped and extensively
searched.”250 This becomes a probable-cause search and no longer a routine regulatory
search.
245
G.R. No. 83988, September 29, 1989. This majority decision in this case, however, draws strong dissents
from Justice Isagani Cruz who strongly stated that “[t]he bland declaration that individual rights must yield
to the demands of national security ignores the fact that the Bill of Rights was intended precisely to limit the
authority of the State even if asserted on the ground of national security” and Justice Abraham Sarmiento, who
reminded the majority that military checkpoints “are things of martial rule, and things of the past.”
246
323 SCRA 754, 768 (2000)
247
People v. Escaño, G.R. Nos. 129756-58. January 28, 2000.
248
Aniag v. Commission on Elections, G.R. No. 104961, October 7, 1994.
249
G.R. No. 76005, April 23, 1993.
250
People v. Exala, G.R. No. 76005, April 23, 1993; People v. Vinecario, G.R. No. 141137. January 20, 2004 citing
People v. Usana, supra; People v. Lapitaje, G.R. No. 132042. February 19, 2003
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H. Inspections For Compliance with Building,
Fire, Sanitary, and Environmental Laws and
Regulations
Searches and inspection for purposes of compliance with regulations are known as
administrative searches. The inspection and search here are not related to criminal law
enforcement in the sense that they are preceded by a probable cause determination that
a crime may have been committed in the premises. For example, for purposes of sanitary
compliance, the designated sanitary inspector is statutorily granted the power of entry
at all reasonable times to establishments and “premises engaged in the manufacture,
preparation or packing of any article of food for sale for the purpose of inspection.251
Refusal of entry and inspection is even criminally punishable here252 as it is in the
United States. 253 Later, in Camara v. Municipal Court,254 these regulatory inspections are later
found to be violative of the Fourth Amendment255 when not justified by “urgency” and
“reasonable governmental interest.” Camara, in bringing Fourth Amendment protection
to administrative searches, stated:
“It is surely anomalous to say that the individual and his private property
are fully protected by the Fourth Amendment only when the individual is
suspected of criminal behavior. For instance, even the most law-abiding
citizen has a very tangible interest in limiting the circumstances under
which the sanctity of his home may be broken by official authority, for
the possibility of criminal entry under the guise of official sanction is
a serious threat to personal and family security. And even accepting
Frank’s256 rather remarkable premise, inspections of the kind we are
here considering do in fact jeopardize “self-protection” interests of the
property owner. Like most regulatory laws, fire, health, and housing
codes are enforced by criminal processes. In some cities, discovery
251
Presidential Decree No. 856, December 23, 1975, Sec. 31, par. (f). “Code on Sanitation of the Philippines.”
252
Id., Chapter XXII, Sec. 103.
253
Frank v. Maryland, 359 U.S. 360 [1959] (This case had generally been interpreted to justify search not needing
a warrant because “the inspections are merely to determine whether physical conditions exist which do not
comply with minimum standards prescribed in local regulatory ordinances. Since the inspector does not ask
that the property owner open his doors to a search for ‘evidence of criminal action’ which may be used to secure
the owner’s criminal conviction, historic interests of ‘self-protection’ jointly protected by the Fourth and Fifth
Amendments are said not to be involved, but only the less intense ‘right to be secure from intrusion into personal
privacy.); Also Eaton v. Price, 364 U. S. 263.
254
387 U.S. 523 (1967).
255
Our counterpart provision on unreasonable search and seizure is contained in Sections 2 and 3, Article III of
the 1987 Constitution which provide:
“Section 2. The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search
warrant or warrant of arrest shall issue except upon probable cause to be determined personally by a judge after
examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly
describing the place to be searched and the persons or things to be seized.”
.......
Section 3 (1). The privacy of communication and correspondence shall be inviolable except upon lawful order
of the court, or when public safety and order requires otherwise as prescribed by law.
(2) Any evidence obtained in violation of this or the preceding section shall be inadmissible for any purpose in
any proceeding.”
54
256
Frank v. Maryland, 359 U.S. 360.
The IBP Journal
Revisiting the Law on Search and Seizure
of a violation by the inspector leads to a criminal complaint. Even in
cities where discovery of a violation produces only an administrative
compliance order, refusal to comply is a criminal offense, and the fact of
compliance is verified by a second inspection, again without a warrant.
Finally, as this case demonstrates, refusal to permit an inspection is itself
a crime, punishable by fine or even by jail sentence.
.......
“In summary, we hold that administrative searches of the kind at
issue here are significant intrusions upon the interests protected by the
Fourth Amendment, that such searches when authorized and conducted
without a warrant procedure lack the traditional safeguards which the
Fourth Amendment guarantees to the individual, and that the reasons
put forth in Frank v. Maryland and in other cases for upholding these
warrantless searches are insufficient to justify so substantial a weakening
of the Fourth Amendment’s protections. Because of the nature of the
municipal programs under consideration, however, these conclusions
must be the beginning, not the end, of our inquiry. The Frank majority
gave recognition to the unique character of these inspection programs
by refusing to require search warrants; to reject that disposition does
not justify ignoring the question whether some other accommodation
between public need and individual rights is essential.”
In People v. Compacion257 and in People v. Rodrigueza258 the Supreme Court made a
sweeping, if not nonchalant citation, of Camara as basis to justify the “exception” of
“inspection of buildings and other premises for the enforcement of fire, sanitary and
building regulations” when a “search may be validly made even without a warrant.”
This reference to Camara should be qualified in that warrantless administrative inspections
must first be tested by the standard set forth in Camara itself:
“Since our holding emphasizes the controlling standard of reasonableness,
nothing we say today is intended to foreclose inspections, even without
a warrant, that the law has traditionally upheld in emergency situations.259
On the other hand, in the case of most routine area inspections, there is no
compelling urgency to inspect at a particular time or on a particular day. Moreover,
most citizens allow inspections of their property without a warrant.
Thus, as a practical matter and in light of the Fourth Amendment’s
requirement that a warrant specify the property to be searched, it seems
likely that warrants should normally be sought only after entry is refused unless
there has been a citizen complaint or there is other satisfactory reason for securing
immediate entry. Similarly, the requirement of a warrant procedure does
not suggest any change in what seems to be the prevailing local policy, in
most situations, of authorizing entry, but not entry by force, to inspect.”
(Id. at pp. 540-541, Italics ours)
257
G.R. No. 124442, July 20, 2001.
258
G.R. No. 95902, February 4, 1992.
259
Citing seizure of unwholesome food in Cold storage Co. v. City of Chicago, 211 U.S. 306; compulsory smallpox
vaccination in Jacobson v. Massachussets, 187 U.S. 11; health quarantine in Compagnie Francaise v. Board of
Health, 186 U.S. 380; summary destruction of tubercular cattle in Kroplin v. Truax, 119 Ohio St. 610, 165 N.
E. 498.
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Thus, for administrative regulatory inspections to constitute reasonable search without
a warrant, the inspection must be demanded by urgent public interest. What is called for here
is, therefore, a balancing of public interest and individual rights. Thus in See v. City of
Seattle,260 the U.S. Supreme Court overturned the conviction of a building owner who was
convicted of violation of a municipal ordinance for his refusal to allow entry of inspectors
in his locked warehouse. The Supreme Court stated that that “the basic component of
a reasonable search under the Fourth Amendment — that it not be enforced without a
suitable warrant procedure — is applicable in this context, as in others, to business as well
as to residential premises.”
I. Consented or Waived Warrantless Search
The right against unreasonable searches and seizures even when constitutional is still
a personal right. It may be waived expressly or impliedly,261 but not by presumption.
Failure to object to a search cannot be construed as a waiver of this right262 nor “a
peaceful submission to a search or seizure, even when warrantless, may be considered
consent or invitation thereto.”263 Thus, no consented search may be concluded when the
accused asked for a search warrant but was searched anyway without the police showing
any warrant.264 Neither may mere silence be construed as passive consent nor implied
acquiescence to the search, the presumption of regularity in the performance of duty
on the part of the police officers notwithstanding.265 Acquiescence or consent in the loss
of fundamental rights cannot be presumed.266 Also, failure to object before the search or
passive submission to it will not amount to waiver or consent since “the constitutional
guaranty is not dependent upon any affirmative act of the citizen”:267
As the constitutional guaranty is not dependent upon any affirmative
act of the citizen, the courts do not place the citizens in the position
of either contesting an officer’s authority by force, or waiving his
constitutional rights; but instead they hold that a peaceful submission to
a search or seizure is not a consent or an invitation thereto, but is merely
a demonstration of regard for the supremacy of the law.268
56
260
387 U.S. 541 (1967), the companion case to Camara.
261
People v. Sotto, G.R. No. 106099, July 8, 1997.
262
People v. Cubcubin, G.R. No. 136267. July 10, 2001.
263
De Asis v. Romero, G.R. No. 33125, September 30, 1971.
264
People v. Figueroa, G.R. No. 134056, July 6, 2000 citing People v. Chua Ho San @ Tsay Ho San, 308 SCRA
432, 444 [1999], which in turn cited People v. Burgos, 144 SCRA 1 [1986].
265
People v. Aruta, G.R. No. 120915, April 13, 1998.
266
Pasion Vda. de Garcia v. Locsin, G.R. No. 45950. June 20, 1938, 65 Phil. 689 (1938) citing Johnson v. Zerbst,
304 U.S. 458.
267
Magoncia v. Palacio, 80 Phil. 770; People v. Barros, 231 SCRA 557 [1994].
268
Pasion Vda. de Garcia v. Locsin, G.R. No. 45950. June 20, 1938, 65 Phil. 689 (1938); De Asis v. Romero, G.R.
No. L-33125. September 30, 1971; People v. Burgos, G.R. No. L-68955. September 4, 1986, 144 SCRA 1;
People v. Compacion, G.R. No. 124442, July 20, 2001; Caballes v. Court of Appeals, G.R. No. 136292, January
15, 2002; People v. Mamaril, G.R. No. 147607, January 22, 2004; Lui v. Matillano, G.R. No. 141176, May
27, 2004; People v. Tudtud, G.R. No. 144037. September 26, 2003; People v. Lambujon, G.R. No. 89543.
November 13, 1992; People v. Asis, G.R. No. 142531, October 15, 2002; People v. Nuevas, G.R. No. 170233,
February 22, 2007
The IBP Journal
Revisiting the Law on Search and Seizure
“Waiver is defined as ‘a voluntary and intentional relinquishment or abandonment
of a known existing legal right, advantage, benefit, claim or privilege, which except for
such waiver the party would have enjoyed; the voluntary abandonment or surrender, by a
capable person, of a right known by him to exist, with the intent that such right shall be
surrendered and such person forever deprived of its benefit; or such conduct as warrants
an inference of the relinquishment of such right; or the intentional doing of an act
inconsistent with claiming it.’”269 Thus, for consented searches to amount to a waiver, the
elements of a valid waiver of a right must be shown: (1) the right exists; (2) that the person
involved had knowledge, either actual or constructive, of the existence of such right; and
(3) the said person had an actual intention to relinquish the right.270 A warrantless search
being “in derogation of a constitutional right, peace officers who conduct it cannot invoke
regularity in the performance of official functions and shift to the accused the burden of
proving that the search was unconsented.”271
Thus, the consent contemplated here to allow warrantless search must be “unequivocal,
specific, and intelligently given, uncontaminated by any duress or coercion”272 which
“cannot be lightly inferred, but must be shown by clear and convincing evidence.”273 In
determining the voluntariness of the consent given, the following circumstances may be
taken into account: “(1) the age of the defendant; (2) whether he was in a public or secluded
location; (3) whether he objected to the search or passively looked on;274 (4) the education
and intelligence of the defendant; (5) the presence of coercive police procedures; (6) the
defendant’s belief that no incriminating evidence will be found;275 (7) the nature of the
police questioning; (8) the environment in which the questioning took place; and (9) the
possibly vulnerable subjective state of the person consenting.”276 That said, a suspect who
voluntarily and without protest submitted some evidence of the crime and who allowed to
be searched, without protest or opposition, is deemed to have waived his right.277
269
People v. Donato, G.R. No. 79269, June 5, 1991 citing 67 C.J. 291.
270
People v. Nuevas, G.R. No. 170233. February 22, 2007; People v. Figueroa, G.R. No. 134056, July 6, 2000
citing People v. Chua Ho San @ Tsay Ho San, 308 SCRA 432, 444 [1999], which in turn cited People v. Burgos,
144 SCRA 1 [1986]; Pasion Vda. de Garcia v. Locsin, 65 Phil. 698.
271
People v. Cubcubin, G.R. No. 136267. July 10, 2001.
272
Caballes v. Court of Appeals, G.R. No. 136292, January 15, 2002 citing 68 Am Jur 2d Searches and Seizures,
§ 135.
273
Id.
274
Id. citing United States v. Barahona, 990 F. 2d 412.
275
Id. citing United States v. Lopez, 911 F. 2d 1006.
276
Id. citing United States v. Nafzger, 965 F. 2d 213.
277
People v. Malasugui, G.R. No. 44335, July 30, 1936; People v. Agbot, G.R. No. 37641, July 31, 1981; People v.
Omaweng, G.R. No. 99050, September 2, 1992 citing People v. Malasugui, 63 Phil. 221, 226 [1936]. See also
Vda. de Garcia v. Locsin, 65 Phil. 689 [1938]; People v. Donato, 198 SCRA 130 [1991]; People v. Rodriguez,
205 SCRA 791 [1992]; People v. Correa, G.R. No. 119246, January 30, 1998 citing People v. Fernandez,
G.R. No. 113474, 13 December 1994, 239 SCRA 174, 184; People v. Ramos, et al., G.R. Nos. 101804-07, 25
May 1993, 222 SCRA 557, 575; People v. Tabar, G.R. No. 101124, 17 May 1993, 222 SCRA 144; People v.
Malasugui, G.R. No. 44335, 30 July 1936, 63 Phil. 221; Vda de Garcia v. Locsin, 65 Phil. 689 [1938]; People v.
Donato, 198 SCRA 130 [1991]; People v. Rodrigueza, 205 SCRA 791 [1992]; People v. Omaweng, G. R. No.
99050, 02 September 1992, 213 SCRA 462-463.
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IV.
PRIVACY OF COMMUNICATION AND CORRESPONDENCE:
WIRETAPPING AND EAVESDROPPING
The evidence that may be used against the criminally-accused is not always tangible.
It may be as electronic or digital data or audio streaming or recording. In cases of audio
recording or wire tapping, the rule of inadmissibility is the same as in warrantless search
and seizure, in that “any communication or spoken word, or the existence, contents,
substance, purport, or meaning of the same or any part thereof, or any information
therein contained or secured by any person” by way of unauthorized wire tapping “shall
not be admissible in evidence in any judicial, quasi-judicial, legislative, or administrative
hearing of investigation.”278 The exception is when there is a written court order279
for any peace officer to wiretap. Such written court order, however, is limited to cases
“involving the crimes of treason, espionage, provoking war and disloyalty in case of war,
piracy, mutiny in the high seas, rebellion, conspiracy and proposal to commit rebellion,
inciting rebellion, sedition, conspiracy to commit sedition, inciting to sedition, kidnapping
as defined by the Revised Penal Code, and violations of Commonwealth Act No. 616,
punishing espionage, and other offenses against national security.”280
The prohibition on wiretapping concretized under the Anti-Wiretapping Act is
intended to fill the inadequacy of laws penalizing violation of the privacy of communication
and correspondence281 and to keep up with advances in technology.282 One may note,
however, that while violation of the constitutional provision on illegal search and seizure
may only give rise to a civil action for damages,283 violation of the Anti-Wiretapping Act
gives rise to criminal liability with a penalty of six (6) months nor more than six (6) years
with accessory penalty of perpetual absolute disqualification from public office.284 Illegal
search and seizure has graver consequences to the right of privacy since they involve
physical violence on one’s person and abode, one’s “castle,” if you may, not to mention
the trauma they create on the other members of the suspect’s family. The author could
not see why violation of one’s telephone will give rise to criminal liability but not to
violation of one’s home and person; rights which are equally inviolable by constitutional
command.
The Anti-Wiretapping law, however, does not cover accidental overhearing by a third
party of a telephone conversation through a “crossed-line,” and therefore, without any
intent or effort to tap the conversation.285 A third party line or extension line has been
ruled to be ”not a device commonly known as dictaphone or dictagraph or detectapohone
58
278
Republic Act No. 4200, Sec. 4. (Anti-Wiretapping Act).
279
For crimes defined as constituting Terrorism or Conspiring to Commit Terrorism under the Human Security
Act of 2007 (Republic Act No. 9372), the written court order must be secured from the Court of Appeals under
certain conditions.
280
Republic Act No. 4200, Sec. 3.
281
Const., Article IV, Sec.4 (2).
282
Explanatory Note by Senator Lorenzo Tañada for R.A. No. 4200 as quoted in Garcillano v. House of
Reprentatives Committees on Public Information, G.R. No. 170338 & 179275, December 23, 2008.
283
See §3.6.2.
284
Republic Act No. 4200, Sec. 2..
285
Gaanan v. Intermediate Appellate Court, G.R. No. 69809, October 16, 1986.
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or walkie-talkie or tape recorder or similar devices however described.”286 Neither does it
cover the recording of any speech or communication made by a speaker to the public, as
the prohibition covers communication between one person and another person.287
V.
SCOPE AND AREA OF SEARCH IN WARRANTLESS ARREST
A. Immediate Control Test
The search incidental to a valid arrest is not limited to the person of the suspect. It
extends to areas within his immediate control288 from where he can reach for a weapon or
for evidence that he can destroy.289
The “immediate control test” has been illustrated in the American case of Chimel v.
State of California290 where the accused’s entire three-bedroom house, including the attic,
the garage, a small workshop, and drawers were thoroughly searched and where evidence
of burglary were found. On the basis of such evidence the accused was convicted by the
trial court. The United States Supreme Court reversed the conviction on the ground
that “the search of the accused’s home went far beyond his person and the area from
within which he might have obtained either a weapon or something that could have been
used as evidence against him.”291 This same exacting principle of limitation obtains in
Philippine jurisdiction where “immediate control” has been construed as the “permissible
area within the suspect’s reach.”292
Thus, a warrantless search was held subversive to the basic constitutional right and
guarantee against unreasonable searches and seizures when conducted on accused’s
apartment which was located a few blocks away from his place of arrest,293 in a hotel room
other than the room of the accused,294 at the back of the house where the search was
initially conducted inside the house,295 in the house or room of the accused’s girlfriend
where he is merely a sojourner or visitor,296 or inside his house when the suspect was
arrested outside his house.297
286
Id., Sec. 1; Gaanan v. Intermediate Appellate Court, G.R. No. 69809, October 16, 1986.
287
Explanatory Note by Senator Lorenzo Tañada for R.A. No. 4200 as quoted in Garcillano v. House of
Reprentatives Committees on Public Information, G.R. No. 170338 & 179275, December 23, 2008.
288
People v. Cubcubin, G.R. No. 136267. July 10, 2001.
289
People v. Estela, G.R. No. 138539-40, January 21, 2003; People v. Malmstedt, G.R. No. 91107, June 19, 1992.
290
Chimel v. State of California, 395 U.S. 752 (1969).
291
People v. Leangsiri, G.R. No. 112659. January 24, 1996.
292
People v. Santos, G.R. No. 106213, September 23, 1994 citing People v. Catan, 205 SCRA 235; People v.
Liquen, 212 SCRA 288.
293
People v. Leangsiri, G.R. No. 112659. January 24, 1996; People v. Omogbalahan, G.R. No. 112659, January
24, 1996.
294
Id.
295
People v. Cubcubin, G.R. No. 136267. July 10, 2001.
296
People v. Che Chun Ting, G.R. No. 130568-69, March 21, 2000.
297
People v. Lua, 256 SCRA 539 (1996); Espano v. Court of Appeals, G.R. No. 120431, April 1, 1998.
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On the other hand, the warrantless search was held valid “in a confined place within
appellant’s (and his wife’s) immediate control, an area where he might gain possession of
a weapon or destroy evidence constituting proceeds or proof of his commission of related
offenses298 or of a bag carried by the suspect as it is within his custody and immediate
control.299
B. Reasonable Expectation of Privacy; Search and New Technologies
The right to privacy is not absolute.300 For example, intrusion to privacy may be
allowed to access information on matters of compelling public concern; to ensure
that banking regulatory agencies adequately protect the public who invest in foreign
securities when such information is required during congressional hearings301 or Senate
investigations;302 or to require public officers to make periodical submission of financial
statement as provided under an anti-graft law.303 All these exceptional cases, however,
involve the validity of a law and the extent of congressional power of inquiry in relation
to compelling state interest.
Beyond those compelled by public interest, the justification for a search must be
“narrowly focused” and “accompanied by proper safeguards and well-defined standards to
prevent unconstitutional invasions.”304
It may be advanced here as a proposition that in that pronounced need for a “narrow
focus” in ordinary searches in relation to a possible commission of a crime or transgression
of certain administrative rules, where compelling state interest is too pompous to invoke,
the test for the validity of a search should be on the individual’s reasonable expectation
of privacy.
The concept of reasonable expectation of privacy originated in the concurring
opinion of Justice Harlan in Katz v. United States.305 This case involved evidence of
accused’s telephone conversation tapped by the Federal Bureau of Investigation (FBI)
through an electronic surveillance device attached to the outside of a public telephone
booth. Justice Harlan opined that while the Fourth Amendment “protects people, not
places,” there should be some measure of limitation when the search extends to “people.”
He gathered that “the rule that has emerged from prior decisions is that there is a twofold
requirement for such limitation: first that a person has exhibited an actual (subjective)
expectation of privacy and, second, that the expectation be one that society is prepared to
60
298
People v. Li Wai Cheung, G.R. No. 90440-42, October 13, 1992.
299
People v. Milado, G.R. No. 147677, December 1, 2003.
300
Standard Chartered Bank (Philippine Branch) v. Senate Committee on Banks, G.R. No. 167173, December 27,
2007.
301
Sabio v. Gordon, G.R. Nos. 174340, 174318, 174177, October 16, 2006, 504 SCRA 704.
302
Standard Chartered Bank (Philippine Branch) v. Senate Committee on Banks, G.R. No. 167173, December 27,
2007.
303
Morfe v. Mutuc, No. L-20387, January 31, 1968, 22 SCRA 424, citing Whalen v. Roe, 429 U.S. 589 (1977).
304
Ople v. Torres, G.R. No. 127685, July 23, 1998
305
389 U.S. 347 [1967].
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recognize as ‘reasonable.’”306
The first requirement of actual or manifest expectation of privacy is largely
subjective to the individual, and will naturally depend on his actions, belief, expectations,
manifestations, and control over the items to be searched. Thus, State intrusion into a
numbered bank account which is absolutely confidential in nature affords the depositor a
reasonable expectation of privacy as he clearly intended the opening and maintenance of
such account as confidential.307 A motorist likewise has reasonable expectation of privacy
in his vehicle and that a routine flag-down would not justify an extensive search of his
vehicle absent probable cause that he is a law-offender or that he carries with him in the
car any instrumentality or evidence of a crime.308
The second requirement of reasonableness of the expectation is objective, which
depends on public interest, order, and security which, no doubt, the society recognizes
as reasonable impositions to the individual’s expectations of his right to privacy. Thus,
“persons may lose the protection of the search and seizure clause by exposure of their
persons or property to the public in a manner reflecting lack of subjective expectation
of privacy, which expectation society is prepared to recognize as reasonable” such as
in “airport security procedures” where “airplane hijacking and terrorism” have come
with increased public concern.309 Also, a pre-trial detainee has no reasonable expectation
of privacy with respect to his mails while in jail except when the letter is privileged as
one coming from his lawyer,310 as prison officials have the right to prevent smuggling of
contraband or prevent plan for coordinated escape, among others.311
a. Search of Computers
The test crafted in Katz has since been applied in warrantless search of computers
and its contents. For example, when computers are located in a common area accessible
to others, a person does not have an expectation of privacy in the physical components
of that computer.312 But a homeowner has a reasonable expectation of privacy in his
306
As we adopted in Ople v. Torres, G.R. No. 127685, July 23, 1998 citing Rakas v. Illinois, 439 U.S. 128, 143144 [1978]; see the decision and Justice Harlan’s concurring opinion in Katz v. United States, 389 U.S. 347,
353, 361, 19 L. ed. 2d 576, 583, 587-589 [1967]; see also Southard, “Individual Privacy and Governmental
Efficiency: Technology’s Effect on the Government’s Ability to Gather, Store, and Distribute Information”
(Computer/Law Journal, vol. IX, pp. 359, 367, note 63 [1989]; The test is reinstated per Justice Bersamin’s
concurring and dissenting opinion in Pollo v. Constantino-David as: “first, that a person have exhibited an
actual (subjective) expectation of privacy and, second, that the expectation be one that society is prepared to
recognize as ‘reasonable’” citing the concurring opinion of Justice Harlan in Katz v. United States, 389 U.S.
347, 350-351 [1967].
307
People v. Estrada, G.R. Nos. 164368-69, April 2, 2009.
308
Caballes v. Court of Appeals, G.R. No. 136292, January 15, 2002.
309
People v. Johnson, 401 Phil. 734 (2000).
310
Alejano v. Cabuay, G.R. No. 160792, August 25, 2005: “American cases recognize that the unmonitored use
of pre-trial detainees’ non-privileged mail poses a genuine threat to jail security (Corpus Juris Secundum, supra
note 44) Hence, when a detainee places his letter in an envelope for non-privileged mail, the detainee knowingly
exposes his letter to possible inspection by jail officials. A pre-trial detainee has no reasonable expectation of
privacy for his incoming mail. However, incoming mail from lawyers of inmates enjoys limited protection such
that prison officials can open and inspect the mail for contraband but could not read the contents without
violating the inmates’ right to correspond with his lawyer (In re Jordan, Cr. 15734, 15755 [1972]. The inspection
of privileged mail is limited to physical contraband and not to verbal contraband.
311
Alejano v. Cabuay, G.R. No. 160792, August 25, 2005, citing In re Jordan, Cr. 15734, 15755 [1972]
312
Clancy, Thomas K., The Fourth Amendment Aspecs of Computer Searchers and Seizures: A Perspective and a Primer, 75
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belongings, including computers, in his home313 or in his personal computer even if being
used in the workplace.314
A government-issued computer affords limited expectation of privacy. Thus, it can be
searched if it is being used for a work-related misconduct, in the same manner that it can
also be searched when being used for prohibited electronic messages with pornographic
content.315 A public employee has no reasonable expectation of privacy over a governmentissued computer when it was not shown that he had a “separate enclosed office which he
did not share with anyone, or that his office was always locked and not open to other
employees or visitors, nor did he use or adopt passwords to prevent other employees from
accessing his files.”316 This, on top of the fact that office regulation puts employees on
notice that they have no expectation of privacy in anything they create, store, send, or
receive on office computers” and that their use is a mere privilege, limited to legitimate
business purposes to assist them in the performance of their job.” 317
In Pollo v. Constantino-David,318 which involved a warrantless search of the contents
of a government-issued computer, the Supreme Court echoed Katz when it crafted the
following “relevant surrounding circumstances” to consider in determining the validity of
a warrantless search of computer and its files:
(1) the employee’s relationship to the item seized; (2) whether the item
was in the immediate control of the employee when it was seized; and (3)
whether the employee took actions to maintain his privacy in the item.”
These factors are relevant to both the subjective and objective prongs of
the reasonableness inquiry, and we consider the two questions together.319
Thus, where the employee used a password on his computer, did not
share his office with co-workers and kept the same locked, he had a
legitimate expectation of privacy and any search of that space and items
located therein must comply with the Fourth Amendment.320
In search and seizure of a computer, however, on the basis of a search warrant, the
printing from the diskettes of the computer seized was allowed when they were not shown
to have been tampered with.321
Mississipi Law Journal 227 [2005], citing United States v. Netties, 175 F. Supp. 2d 1089, 1093-94 (N.D. III,
2001).
62
313
Clancy, Thomas K., The Fourth Amendment Aspecs of Computer Searchers and Seizures: A Perspective and a Primer, 75
Mississipi Law Journal 227 [2005], citing Guest, 255 F. 3d at 333; See also People v. O’Brien, 769 N.Y.S. 2d 654,
656 (N.Y. App. Div. 2003) where defendant was held to have reasonable expectation of privacy in computer in
his bedroom).
314
Anonymous Letter-Complaint against Atty. Miguel Morales, Clerk of Court, Metropolitan Trial Court of
Manila, A.M. Nos. P-08-2519 and P-08-2520, November 19, 2008, 571 SCRA 361.
315
Pollo v. Constantino-David, G.R. No. 181881, October 18, 2011.
316
Id.
317
Id. .
318
G.R. No. 181881, October 18, 2011.
319
Citing U.S. v. Barrows, 481 F.3d 1246, C.A.10 (Okla.), April 3, 2007, citing United States v. Anderson, 154 F.3d
1225, 1229 (10th Cir. 1998).
320
Citing U.S. v. Ziegler, 474 F.3d 1184 C.A.9 (Mont.), January 30, 2007.
321
People v. Burgos, G.R. No. 92739, August 2, 1991.
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b. Search of Mobile Phones
With respect to mobile phones, most district courts in the United States justify search
and seizure of their contents under established exceptions to warrantless search, i.e. search
incidental to a valid arrest, search under exigent circumstances, and search of moving
vehicles, among others.322 This trend is merely a stopgap measure which disregards the
fact that a cell phone contains vast amount of information where those related to the
offense may not be immediately discernible from those that are not, unlike traditional
seizure under the known exceptions when the items seized are immediately discernible as
connected to, if not the direct object of, the search. This stopgap measures, however, have
been effectively overruled by the U.S. Supreme Court in Riley v. California (2014)323 which
held that search of a mobile phone may no longer be justified as reasonable without
a warrant even when made under the search incident to a lawful arrest doctrine. As
emphatically rule in Riley, “[o]ur answer to the question of what police must do before
searching a cell phone seized incident to an arrest is accordingly simple — get a warrant.”
Even the analogy often used to justify warrantless search of cell phone that it is
akin to a closed container like an address book or filing cabinets324 is too convenient for
comfort. It may be that there is no principled distinction under the doctrine of functional
equivalence325 that may be drawn for evidentiary purposes between digital documents and
their written or printed counterparts. But that non-discrimination to evidentiary weight
and probative value applies when the evidence, digital or otherwise, has already been
identified and segregated, not when the search for such evidence has yet to take place.
A cell phone today is not merely a repository of names and addresses but of, for
example, digital letters through e-mail, history and current records of bank accounts,
passwords, photographs, Internet browsing history, financial records, and other sensitive
information and privacy concerns. An all-encompassing approach to search this vast
amount of data is akin to a fishing expedition on top of the fact that it is subversive to the
settled principle that items to be searched, even in cases of warrant application, must be
particularized and only for a single-offense.326 As there is a void “scatter-shot” warrant327
prohibiting a search for multiple offenses, so must there be an equally void “shot-gun”
search, prohibiting the fishing for evidence.
322
Dee, Mireilee, Getting Back to the Fourth Amendment: Warrantless Cell Phone Searchers, 56 New York Law School Law
Review 1131 [211-2012] citing U.S. v. Murphy, 552 F. 3d 405 (upholding warrantless cell phone search as
lawful under the search incident to arrest); U.S. v. Salgado, 2010 U.S. Dis. LEXIS 77266 (under the exigent
circumstances exception); United States v. Suarez-Blanca, 2008 U.S. Dist. LEXIS 111623 (under the search
incident to a lawful arrest exception); U.S. v. Meador, 2008 US. Dis. LEXIS 92728 (under the automobile
exception); U.S. v. Zamora, 2005 U.S. Dist. LEXIS 40775 (under the exigent and incident to arrest exceptions);
U.S. v. Parada, 289 U.S. Dist. LEXIS 40775 (under the exigent circumstances exception).
323
No. 13-132 and its companion case of U.S. v. Wurie, No. 13-212, June 25, 2014, 573 U.S. ___ (2014).
324
Clancy, Thomas K., The Fourth Amendment Aspecs of Computer Searchers and Seizures: A Perspective and a Primer, 75
Mississipi Law Journal 200 [2005], citing People v. Gall, 30 P. 3d 145, 153 (Colo. 2001; See also United States
v. Al-Marri, 230 F. Supp. 2d 535, 541 (S.D.N.Y. 2003) (a computer is a form of container); People v. Loorie, 630
N.Y.S. 2d 483, 486 (County Ct. 1995); United States v. Barth, 26 F. Supp. 2d 929, 936 (W.D. Tex. 1998).
325
Republic Act No. 8792 (Electronic Commerce Act), Section 7: . . . . “For “evidentiary purposes, an electronic
document shall be the functional equivalent of a written document under existing laws.”
326See §4.2.5. Objects of the Warrant; §4.2.7. One-Specific-Offense Rule hereof.
327
See §4.2.7. One-Specific-Offense Rule hereof.
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It may be noted, however, that current technology closes the gap between computers
and mobile phones, especially those called “smart phones”328 which are actually computers
with calling capability. Note, that except for the size, a desktop, a laptop, or a tablet
computer connected to a “wi-fi” or to the Internet also have communication capability. It
is not remote that the standards imposed for warrantless search on computer may likewise
be observed for cell phones search. The caveat is that cell phones are, more often than not,
personally-owned with more stringent and heightened degree of reasonable expectation of
privacy against warrantless search than computers being used in offices.
c. Beeper or GPS Installation as Search
Beeper and Global Positioning System (GPS) are tracking devices that may be used to
monitor the movement and precise location of a vehicle, person, or other assets to which
they are attached. A beeper may only provide information on location, while a GPS, in
addition to providing location in real time, may store the location data in the unit itself or
they may be transmitted to a central data base.329
In 1983, in United States v. Knotts,330 the Supreme Court of the United States held
that the use of beeper in tracking a car on public highways does not amount to a search
because the vehicle may also be followed without the beeper. On the argument on
the possibility that the use of beepers without a warrant would permit 24-hour mass
surveillance of citizens, the Court refused to rule on the ground that the fear rests on
hypothetical grounds and deferred resolution until such time that the issue is presented
as actual controversy. Just a year after Knotts, or in 1984, in United States v. Karo,331 the
Court ruled that the use of a beeper to monitor the location of a property brought inside
a private home — where the government could tell the exact location of the property
inside the home — requires a warrant. The difference between Knotts and Karo is that the
beeper should not be allowed to do what a police officer could not do physically without
a warrant. The similarity in both cases is that the beeper was installed with the consent of
the initial party who was in possession of the container to where the beeper was installed
which thereafter was delivered to the suspects.
In 2012, it was held in United States v. Jones,332 that the government’s installation of
a GPS device to a vehicle without the consent of the suspect, and its use to monitor
the vehicle’s movement later, constitute a “search.” The search was ruled to be illegal
as the government “physically occupied private property (a Jeep Grand Cherokee) for the
purpose of obtaining information” and that by attaching the GPS device to the Jeep, the
government “encroached on a protected area.”
In Jones, the U.S. Supreme Court further stated that while Katz, indeed ruled that “the
Fourth Amendment protects people, not places,” later jurisprudence sustain the view that
“a violation occurs when government officers violate a person’s ‘reasonable expectation of
64
328
iPhone, Galaxy II, Blackberry brands and models, among others.
329
Wikipedia, GPS Tracking Unit at http://en.wikipedia.org/wiki/GPS_ tracking _ unit last visited 5 April 2012.
330
460 U.S. 276 [1983].
331
468 U.S. 705 [1984].
332
No. 10-1259, January 23, 2012; 565 U.S. __ (2012).
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privacy.’”333 The Court distinguished Jones from Knotts and Karo, by the fact that in Knotts
and Karo, the beeper had been placed in a container with the consent of its original holder
before it came into the accused’s possession and therefore no infringement of defendant’s
reasonable expectation of privacy is involved. In Jones, the accused is already in possession
of the vehicle when the government installed the GPS device without his consent.
d. Use of Thermal Imaging Devices as Search
Thermal imaging cameras, also known as infrared cameras detect the heat given off
by an object or person. If a person has gun tucked under his shirt, the camera can “see”
through the outlines of a gun as the person himself emits heat and the portion blocked
by the gun will appear cooler. Inside a car, it can be used in detecting hidden vehicle
compartments which may be used for transporting illegal drugs, contraband, or even
people due to the detected change in thermal characteristics of a surface caused by an
adjoining wall or bulkhead, where the thermal images highlight structural details unseen
by the naked eye. When focused inside a house, heat being exhausted through vents and
other outlets or exterior walls can “see” through this abnormal excess heat and provide
an additional element of probable cause such as growing marijuana inside a house which
requires high intensity lamps or illegal drugs manufacturing.334 Clearly, thermal imaging
cameras or devices effectively see through objects what the human eyes cannot see. If the
use of such devices is allowed, physical intrusion may no longer be necessary before the
police may establish probable cause to conduct a warrantless search.
In Kyllo v. United States,335 an agent of the U.S. Department of the Interior suspected
that marijuana was being grown inside a suspect’s home. Indoor growing of marijuana
requires high-intensity lamps to duplicate the heat of the sun. To determine such amount
of heat emanating from the suspect’s home consistent with the use of such lamps, the
agent used a thermal-imaging device to scan the suspect’s home while in his passenger
seat parked across the street. The scan revealed that relatively hot areas existed in some
portions of the house. Based on such thermal imaging result, utility bills, and tips from
informants, a federal magistrate issued a warrant to search the suspect’s home which
unveiled the fact that marijuana was indeed being grown inside the house. The issue on
the “intrusiveness of thermal imaging” reached the U.S. Supreme Court when the trial
court ruled that it is “non-intrusive.”
The U.S. Supreme Court, however, reversed in a 5-4 opinion and held that “[w]here,
as here, the Government uses a device that is not in general public use, to explore details
of the home that would previously have been unknowable without physical intrusion, the
surveillance is a ‘search’ and is presumptively unreasonable without a warrant.” In dissent, Justice
John Paul Stevens argued that the “observations were made with a fairly primitive thermal
imager that gathered data exposed on the outside of [Kyllo’s] home but did not invade
any constitutionally protected interest in privacy,” and were, thus, “information in the
public domain.”
333
Citing e.g. Bond v. United States, 529 U.S. 334 [2000]; California v. Ciraolo, 476 U.S. 207 [1986]; Smith v.
Maryland, 442 U.S. 735 [1979].
334
P&R Infrared site, Thermal Imaging: Facts v. Fiction at http://www.pr-infrared.com/about-thermal-imaging/
thermal -imaging-facts-vs-fiction/ last visited 18 May 2013.
335
533 U.S. 27 [2001].
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VI.
CONSEQUENCES AND REMEDIES OF ILLEGAL SEARCH
A. Inadmissibility of Evidence
There was a time when evidence secured even by illegal search and seizure are admissible
in evidence against the accused as held in Moncado v. People’s Court.336 Moncado, however,
was abandoned by the Supreme Court in Stonehill v. Diokno337 where evidence secured by
illegal search had been excluded, the volte-face dictated by the realization that exclusion “is
the only practical means of enforcing the constitutional injunction against unreasonable
searches and seizure.” The “fruit of the poisonous tree” doctrine, of American origin,338
which absolutely forbids use of evidence improperly obtained as adopted in Stonehill,
“extends to pieces of evidence derivatively flowing from illegal searches and seizures or
from admissions made by accused under conditions constitutionally proscribed.”339 More,
illegal searches and seizures are a menace against the constitutional guarantee of the
citizens to be inviolable in their homes.340 This has been known as the exclusionary rule.
In the event of illegal search and seizures, two alternative remedies are available to
the accused even before trial begins: 1) a motion to quash the search warrant341 before
the issuing court or when the information has already been filed, before the court where
the case is filed; or 2) a motion to suppress evidence before the court where the case is
pending.342
In both cases, one of the objectives is to exclude the evidence seized as “fruit of
the poisonous tree” as adopted in Stonehill. In a motion to quash a search warrant or to
suppress evidence, such motion shall be filed only in and acted upon by the court where
the action has been instituted.343 If no criminal action has been instituted, the motion
may be filed in and resolved by the court that issued the search warrant.344 If the motion
filed before the court which issued the search warrant was not resolved and the case
subsequently filed in another court, the latter court shall resolve the motion.345 “Since
two separate courts with different participations are involved in this situation, a motion to
quash a search warrant and a motion to suppress evidence are alternative and not cumulative
remedies. In order to prevent forum shopping, a motion to quash shall consequently be
governed by the omnibus motion rule, provided, however, that objections not available,
66
336
G.R. No. L-824. January 14, 1948, 80 Phil. 1 [1948].
337
G.R. No. 19550, June 19, 1967.
338
The principle as an extension of the exclusionary rule was established in Silverthorne Lumber Co. v. United States,
251 U.S. 385 [1920]. The phrase “fruit of the poisonous tree” was coined in Nardone v. United States, 308 U.S. 338,
[1939[. The doctrine was first applied in the context of a Fourth Amendment violation earlier in Weeks v. United
States, 232 U.S. 383 (1914) and was made to apply to state courts as well in Mapp v. Ohio, 367 U.S. 643 (1961).
339
People v. Alicando, G.R. No. 117487, December 12, 1995; People v. Rondero, G.R. No. 125687, December 9,
1999.
340
People v. Aruta, G.R. No. 120915, April 13, 1998; People v. Burgos, G.R. No. 68955, September 4, 1986.
341
Rules of Court, Rule 126, Sec. 14.
342
Rules of Court, Rule 126, Sec. 14; Malaloan v. Court of Appeals, 232 SCRA 249 at 268 (1994)
343
Id.
344
Id.
345
Id.
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existent or known during the proceedings for the quashal of the warrant may be raised
in the hearing of the motion to suppress. The resolution of the court on the motion to
suppress shall likewise be subject to any proper remedy in the appropriate higher court”346
Even one who is not a party to the case may file a motion to suppress the use of the
seized items against him, the proceeding for its issuance not being a criminal action in
itself, but merely a legal process likened to a writ of discovery.347
The failure to file a motion to quash the search warrant or to suppress evidence
before plea does not amount to waiver of the inadmissibility of the evidence seized during
the illegal search. The waiver occasioned by the plea “does not extend this far.”348 The
accused may still object to the admissibility of the illegally-seized evidence during the
offer of evidence by the prosecution or to file a demurrer to evidence, moored, among
others, to the inadmissibility of the illegally secured evidence.349 After all, “the well-known
practice” is that the time to object to the admissibility of the evidence is when it is being
formally offered “when the prosecution is at the stage of closing its case.”350 It is even
premature to object to documentary evidence when documents are just being marked for
identification, but have yet to be formally offered.351
B. Remedies Against Persons Who Conducted or Caused Illegal Search
The liability of a police officer who illegally conducted a search without warrant or
an illegal warrantless search is only civil.352 Thus, violation of one’s constitutional right
against illegal search and seizure can be the basis for the recovery of damages under
Article 32 in relation to Article 2219, pargraphs (6) and (10) of the New Civil Code.353 Per
se, illegal warrantless search by the police is not penalized under the Revised Penal Code
or any other special criminal law.354 What is criminally penalized is obtaining a search
warrant maliciously355 or conducting the search of domicile without warrant as violation
of domicile,356 or conducting a search otherwise proper, but done in the absence of the
suspect, of any member of his family, or when they are unavailable, of two witnesses
residing in the same locality.357
346
People v. Court of Appeals, G.R. No. 126379, 26 June 1998, 291 SCRA 400 as cited in Garaygay v. People,
G.R. No. 135503, July 6, 2000.
347
Securities and Exchange Commission v. Mendoza, G.R. No. 170425. April 23, 2012
348
People v. Aruta, G.R. No. 120915, April 13, 1998, 288 SCRA 626 [1998].
349
People v. Barros, 231 SCRA 557 [1994]
350
People v. Caguioa, G.R. No. 38975, January 17, 1980; Valencia v. Locquiao, G.R. No. 122134, October 3, 2003
citing Rules of Court, Rule 132, Section 36.
351
People v. Santito, 201 SCRA 87 (1991); People v. Sayat, G.R. Nos. 102773-77, 9 June 1993 as footnoted in
People v. Barros, G.R. No. 90640, March 29, 1994.
352
Illegal arrest, on the other hand, may be criminally pursued under Articles 269 or Article 124 on arbitrary
detention of the Revised Penal Code. (Morales v. Enrile, G.R. Nos. 61016 and 61107, April 26, 1983).
353
Silahis International Hotel, Inc. v. Soluta, G.R. No. 163087, February 20, 2006.
354
Galvante v. Casimiro, G.R. No. 162808, April 22, 2008.
355
Revised Penal Code, Art. 129: Search Warrants Maliciously Obtained and Abuse in the Service of Those
Legally Obtained.
356
Revised Penal Code, Article 128; Moncado v. El Tribunal Del Pueblo, G.R. No. 824, January 14, 1948.
357
Revised Penal Code, Art. 130: Searching Domicile Without Witnesses.
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Oscar G. Raro
Thus, when the victim is illegally searched in his vehicle which does not fall under the
“moving vehicle” exception or any other exception358 nor does he waive his right against
unreasonable search and seizure beyond mere failure to object,359 the remedy against the
police officer is a civil action for damages under Article 32, in relation to Article 2219 (6)
and (10) of the Civil Code.
An action for damages may be filed, not only against a public officer or employee, but
also against any private individual who “directly or indirectly obstructs, defeats, violates or
in any manner impedes or impairs” another person’s right to privacy of communication
and correspondence,360 which resulted in a “particular wrong or injury.”361
•••
68
•••
358
Silahis International Hotel, Inc. v. Soluta, G.R. No. 163087, February 20, 2006, 482 SCRA 660, 672.
359
Lui v. Matillano, G.R. No. 141176, May 27, 2004.
360
Civil Code, Article 32 (11).
361
Vinzons-Chato v. Fortune Tobacco Corporation, G.R. No. 141309, December 23, 2008; Vinzons-Chato v.
Fortune Tobacco Corporation, G.R. No. 141309, June 19, 2007, 525 SCRA 11.
The IBP Journal
Salient Features of the New Financial Rehabilitation Rules of Procedure
Salient Features of the New Financial
Rehabilitation Rules of Procedure
Reynaldo Bautista Daway*
I.
INTRODUCTION
The Financial Rehabilitation Rules of Procedure (2013) or FR Rules1
implements and procedurally supplements Republic Act No. 10142, otherwise known as
the Financial Rehabilitation and Insolvency Act (FRIA) of 2010. Under the FRIA, the Supreme
Court shall “promulgate the rules of pleading, practice, and procedure to govern the
proceedings brought under [the] Act.”2
The Supreme Court, through Memorandum No. 46-2010 (amended by Memorandum
Order No. 17-2013), tasked the Sub-Committee on Commercial Courts to revise and/
or amend the Rules of Procedure on Corporate Rehabilitation (A.M. No. 00-8-10-SC) to
incorporate the changes under the FRIA.
Prior to the FRIA, corporate rehabilitation was governed by the Presidential Decree
No. 902-A (SEC Reorganization Act) and was initially placed under the jurisdiction of the
Securities and Exchange Commission (SEC). When the SEC’s jurisdiction was transferred
to the Regional Trial Courts (under Republic Act No. 8799 or the Securities Regulation
Code), the Supreme Court promulgated the Interim Rules of Procedure on Corporate
Rehabilitation on 21 November 2000 (Interim Rules),3 and later, the Rules of Procedure on
Corporate Rehabilitation on 2 December 2008 (2008 Rules).4 The Interim Rules and the
2008 Rules shall be collectively referred to in this article as the old rehabilitation rules.
The FRIA provides for three kinds of rehabilitation: (1) court-supervised
rehabilitation; (2) pre-negotiated rehabilitation; and (3) out-of-court
rehabilitation.5 The first two were already recognized in the 2008 Rules.6
*
Presiding Judge, Regional Trial Court (RTC) of Quezon City, Branch 90. ’80 Advanced Management Course,
Yale University; ’77 LL.B., University of the Philippines (Order of the Purple Feather); ’72 B.S.C., major in accounting and auditing, San Beda College, magna cum laude, and certified public accountant. The article is primarily
based on the Executive Summary prepared by the Supreme Court Sub-Committee on Commercial Courts with
Supreme Court Associate Justice Arturo D. Brion as Chairperson, Supreme Court Associate Justice Estela M. Perlas-Bernabe as Vice-Chairperson, Court of Appeals Justices Japar B. Dimaampao and Apolinario D. Bruselas, Jr., the author Judge Reynaldo B. Daway, Intellectual Property Office
Director General Ricardo R. Blancaflor, Atty. Francis Ed. Lim and Atty. Rena M. Rico-Pamfilo as
Members.
1The FR Rules or the Financial Rehabilitation Rules of Procedure (2013) (A.M. No. 12-12-11-SC) was
approved by the Supreme Court on 27 August 2013.
2
FRIA, sec. 6.
3The Interim Rules became effective on 15 December 2000.
4
The 2008 Rules became effective on 16 January 2009.
5
See, FR Rules or Financial Rehabilitation Rules of Procedure (2013), rules 2, 3, and 4.
6
2008 Rules, rules 4, 5 and 6.
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The FRIA also expressly adopts the Model Law on Cross-Border Insolvency of the
United Nations Commission for International Trade Law and Development (UNCITRAL),
subject to the rules of procedure to be adopted by the Court.7 Although the 2008 Rules had already
incorporated some provisions of the UNCITRAL Model Law,8 the FR Rules further
modifies these provisions in light of relevant laws and rules.9
II.
COVERAGE AND GENERAL PROVISIONS
Proceedings and Entities Covered
The FR Rules applies to petitions for rehabilitation of corporations, partnerships,
and sole proprietorships filed pursuant to the FRIA.10 The old rehabilitation rules
limited the remedy only to corporations, partnerships or associations. The FRIA brought
under its coverage sole proprietorships that may file a petition for rehabilitation under
the Act. Expressly excluded from the FRIA’s coverage are petitions for rehabilitation
involving banks, insurance companies, pre-need companies and national and
local government agencies or units.11
Upon effectivity, the FR Rules shall also apply to suspensions of payments and
rehabilitation proceedings already pending, except where its application would not be just
or feasible in the opinion of the rehabilitation court.12 In the latter case, the procedures
originally applicable shall continue to govern the pending proceedings.13
As in the old rehabilitation rules, rehabilitation proceedings under the FRIA are
non-adversarial, summary, and in rem.14 Jurisdiction over persons affected by the
proceedings is acquired upon publication, in one (1) newspaper of general circulation
in the Philippines for two (2) consecutive weeks, of the Notice of Commencement of
Proceedings and Commencement Order to be issued by the rehabilitation court.15
The FR Rules shall be liberally construed to promote a timely, fair, transparent,
effective, and efficient rehabilitation of debtors.16
70
7
FRIA, sec. 139.
8
2008 Rules, rule 7.
9
See, FR Rules, supra note 5, rule 5.
10
See, FR Rules, supra note 5, rule 1, sec. 2.
11
FRIA, sec. 5.
12
FRIA, sec. 146..
13
See, FR Rules, supra note 10.
14
2008 Rules, rule 3, sec. 1.
15
See, FR Rules, supra note 5, rule 1, sec. 4.
16
See, FR Rules, supra note 5, rule 1, sec. 3.
The IBP Journal
Salient Features of the New Financial Rehabilitation Rules of Procedure
III.
COURT-SUPERVISED REHABILITATION
Initiation of Proceedings
Court-supervised rehabilitation proceedings17 may either be: (1) debtorinitiated,18 or (2) creditor-initiated.19
A debtor is deemed insolvent if it (1) is generally unable to pay its liabilities when
they fall due in the ordinary course of business, or (2) has liabilities that are greater than
its assets.20
As in the old rehabilitation rules,21 a group of debtors may initiate a petition for
rehabilitation when: (1) one or more of its members foresee the impossibility of meeting
debts when they respectively fall due; and (2) the financial distress would likely adversely
affect the financial condition and/or operations of the other members of the group or
the participation of the other members of the group is essential under the terms and
conditions of the proposed Rehabilitation Plan.22
Under the FR Rules, a creditor or group of creditors may commence rehabilitation
proceedings of a debtor if its claim (or its aggregate value) is at least One Million Pesos
(Php1,000,000.00) or its claim is equivalent to at least twenty-five (25%) of the
subscribed capital stock or partners’ contributions of the debtor, whichever
is higher.23 The 2008 Rules require the creditors to hold at least 20% of the total
liabilities of the debtor.24
The Commencement Order
The Commencement Order under the FR Rules incorporates a Stay Order that
specifically pertains to claims that are stayed during the pendency of the rehabilitation
proceedings.25 Other aspects of the Stay Order provided in the old rehabilitation rules26
are included as part of the Commencement Order in the FR Rules.
If the court finds the petition for rehabilitation sufficient in form and substance, it shall
issue a Commencement Order within five working (5) days from the filing of the petition.27
17
See, FR Rules, supra note 5, rule 2.
18
See, FR Rules, supra note 5, rule 2, sec. 1.
19
See, FR Rules, supra note 5, rule 2, sec. 4.
20
See, FR Rules, supra note 5, rule 1, sec. 5(k).
21
2008 Rules, rule 4, sec. 1.
22
See, FR Rules, supra note 5, rule 2, sec. 1.
23
See, FR Rules, supra note 5, rule 2, sec. 4.
24
2008 Rules, rule 5, sec. 1.
25
See, FR Rules, supra note 5, rule 2, sec. 8.
26
2008 Rules, rule 3, sec. 7.
27
See, FR Rules, supra note 5, rule 2, secs. 7 and 8.
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The Commencement Order, among others, shall:
1. direct the publication of the Notice of Commencement Order and
the Commencement Order in a newspaper of general circulation;
2. direct the personal service of the petition to each creditor holding
at least 10% of the total liabilities of the debtor (if debtor-initiated),
or to the debtor (if creditor-initiated), and to the Bureau of Internal
Revenue and other appropriate or relevant regulatory agency;
3. direct the petitioner to ensure the service of the Commencement
Order to foreign creditors with no known addresses in the Philippines
at their foreign addresses;
4. appoint a rehabilitation receiver;
5. direct creditors, the BIR and all interested parties to file their
respective comments on or opposition to the petition;
6. direct the creditors to file their verified notice of claims; and
7. set the case for initial hearing.28
These directives are also part of the Stay Order under the old rehabilitation rules.29
In addition to the above listed directives, the Commencement Order likewise carries
the following effects:
1. vest the rehabilitation receiver all the powers and functions under
the FRIA;
2. serve as legal basis to render null and void any extrajudicial
activity or process to enforce a claim against the debtor after the
commencement date;
3. serve as legal basis to render null and void any set-off after the
commencement date of any debt owed to the debtor by any of the
debtor’s creditors;
4. serve as legal basis to render null and void the perfection of any lien
against the debtor’s property after the commencement date;
5. consolidate all legal proceedings by and against the debtor to the
court; and
6. exempt the debtor for all liability for taxes, fees, and penalties,
interests, charges thereon due to the national or local government.30
Under the FR Rules, the effects of the Commencement Order shall retroact to the
date of the filing of the petition.31 The old rehabilitation rules only made the Stay Order
effective from the date of its issuance.32
72
28
Ibid.
29
See, 2008 Rules, supra note 26.
30
See, FR Rules, supra note 5, rule 2, sec. 9.
31
Ibid.
32
2008 Rules, rule 3, sec. 9.
The IBP Journal
Salient Features of the New Financial Rehabilitation Rules of Procedure
Under the FR Rules, the Commencement Order is effective for the duration of the
rehabilitation proceedings, unless:
1. earlier lifted by the court (as a result, for instance, of the dismissal of
the petition);
2. the Rehabilitation Plan is seasonably confirmed or approved by the
court; or
3. the rehabilitation proceedings are ordered terminated by the court33
(but the Commencement Order shall continue to be effective during
the interim period when the rehabilitation proceeding is converted to
liquidation. Since the old rehabilitation rules do not allow conversion
of rehabilitation proceedings to liquidation, the Stay Order was
effective only until the approval of the rehabilitation plan or the
dismissal of the petition.)34
The Stay Order
The Stay or Suspension Order, an essential component of the Commencement
Order, shall:
1. suspend all actions or proceedings in court or otherwise, for the
enforcement of all claims against the debtor;
2. suspend all actions to enforce any judgment, attachment or other
provisional remedies against the debtor;
3. prohibit the debtor from selling, encumbering, transferring or
disposing in any manner any of its properties except in the ordinary
course of business; and
4. prohibit the debtor from making any payment of its liabilities
outstanding as of the commencement date except as may be provided
herein.35
The Stay or Suspension Order does not apply
1. to cases already pending appeal in the Supreme Court as of
commencement date: provided, that any final and executory judgment
arising from such appeal shall be referred to the rehabilitation court
for appropriate action;
2. subject to the discretion of the court, to cases pending or filed with
a specialized court or quasi-judicial agency which is capable of
resolving the claim more quickly, fairly and efficiently than the court:
Provided, That any final and executory judgment of such court or
33
See, FR Rules, supra note 5, rule 2, sec. 11.
34
See, 2008 Rules, supra note 32.
35
See, FR Rules, supra note 5, rule 2, sec. 8(V).
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73
Reynaldo Bautista Daway
agency shall be referred to the court and shall be treated as a nondisputed claim;
3. to the enforcement of claims against sureties and other persons
solidarily liable with the debtor, and third party or accommodation
mortgagors as well as issuers of letters of credit;
4. to any criminal action against individual debtor or owner, partner,
director or officer of a debtor. The enforcement of the civil liability
arising from the offense charged, deemed instituted with the criminal
action, shall be covered by the Stay Order;
5. to any form of action of customers or clients of a securities market
participant to recover or otherwise claim moneys and securities
entrusted to the latter in the ordinary course of the latter’s business
as well as any action of such securities market participant or the
appropriate regulatory agency or self-regulatory organization to pay
or settle such claims or liabilities;
6. to the actions of a licensed broker or dealer to sell pledged securities
of a debtor pursuant to a securities pledge or margin agreement
for the settlement of securities transactions in accordance with the
provisions of the Securities Regulation Code and its implementing
rules and regulations; and
7. to the clearing and settlement of financial transactions through the
facilities of a clearing agency or similar entities duly authorized,
registered and/or recognized by the appropriate regulatory agency
like the BSP and the SEC as well as any form of actions of such
agencies or entities to reimburse themselves for any transactions
settled for the debtor.36
The court may also relieve a claim from the coverage of the Stay Order when: (a)
a creditor does not have adequate protection over property securing its claim; or (b) the
value of a claim secured by a lien on property which is not necessary for rehabilitation
of the debtor exceeds the fair market value of the property.37 A similar provision is also
found in the 2008 Rules, which allows relief from, modification, or termination of the
Stay Order.38
As in the old rehabilitation rules,39 the FR Rules declares that the issuance of the stay
order does not affect the right to commence actions or proceedings insofar as it is necessary
to preserve ad cautelam a claim against the debtor, with the additional requirement for
74
36
See, FR Rules, supra note 5, rule 2, sec. 10.
37
See, FR Rules, supra note 5, rule 2, sec. 60.
38
2008 Rules, rule 3, sec. 10.
39
2008 Rules, rule 3, sec. 7.
The IBP Journal
Salient Features of the New Financial Rehabilitation Rules of Procedure
the payment of the applicable filing fee. The FR Rules requires the ad cautelam filing of
the action or proceeding to preserve the claim, since the Stay Order does not toll the
running of the period of prescription. The plaintiff shall have to pay the amount of
Php100,000.00 or 1/10 of the prescribed filing fee, whichever is lower. The payment of
the balance of the filing fee shall be a jurisdictional requirement for the reinstatement or
revival of the case.40
Notice of Claim
The petition shall be accompanied by a Schedule of Debts and Liabilities, which
shall list all the creditors of the debtor, and the amounts due them including the principal,
interest or penalties, the nature of the claim, and any pledge, lien, or other security given.41
If the credit is not included in the Schedule of Debts and Liabilities, the creditor must
file his verified notice of claim not later than five (5) days before the first initial hearing
date fixed in the Commencement Order.42 Under the old rehabilitation rules, any omitted
credit should be included in the comment or opposition to be filed by the creditor.43
If a creditor fails to file his notice of claim on time, he shall not be entitled to
participate in the proceedings, but shall be entitled to receive distributions arising from
the proceedings if recommended and approved by the rehabilitation receiver, and
approved by the court.44 There was no similar barring effect under the old rehabilitation
rules in case the holder of an omitted claim fails to file a notice of claim. However, the old
rehabilitation rules required all creditors and interested parties to file a verified comment
on or opposition to the petition prior to the initial hearing;45 otherwise, they were barred
from participating in the proceedings.46
Pre-Trial Proceeding/Initial Hearing
The old rehabilitation rules required a proceeding akin to a pre-trial, where the parties
shall consider: amendments to the proposed rehabilitation plan; the simplification of the
issues; the possibility of obtaining stipulations and admissions of facts and documents;
the possibility of a new rehabilitation plan voluntarily agreed upon by the debtor and its
creditors; and any other matter that may aid in the speedy and summary disposition of
the case.47
This “pre-trial” proceeding had been removed in the FR Rules, since the FRIA itself
40
See, FR Rules, supra note 5, rule 2, sec. 8.
41
See, FR Rules, supra note 5, rule 2, sec. 2(B)(4).
42
See, FR Rules, supra note 5, rule 2, sec. 12.
43
2008 Rules, rule 4, sec. 4.
44
See, FR Rules, supra note 42.
45
2008 Rules, rule 4, sec. 4.
46
2008 Rules, rule 3, sec. 7.
47
2008 Rules, rule 4, sec. 5(b).
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does not require it. Instead, the court shall conduct an initial hearing where it shall:
(A) determine the creditors who have made timely and proper filing of
their notice of claims and issue an order that the creditors not named
therein shall not be entitled to participate in the proceedings but shall
be entitled to receive distributions arising from the proceedings;
(B) hear and determine any objection to the qualifications and
appointment of the rehabilitation receiver and, if necessary, appoint
a new one;
(C) direct the creditors to discuss their comments on the petition and the
Rehabilitation Plan that had been submitted;
(D) direct the rehabilitation receiver to evaluate the financial condition
of the debtor and to prepare and submit to the court a report; and
(E) determine the reasonableness of the rehabilitation receiver’s fees
stated in the Rehabilitation Plan, which shall be presumed reasonable
unless the creditors object to it.48
The court may hold additional hearings to discuss the above matters, but these
hearings must be concluded not later than ninety (90) days from the first hearing date.49
Due Course, Dismissal, or Conversion Order
After the conclusion of the initial hearing, the rehabilitation receiver is required to
submit a report to the court stating his preliminary findings and recommendations, among
others, on (1) whether the debtor is insolvent and the possible causes of such insolvency;
(2) the financial goals of the rehabilitation plan and the procedures to accomplish these
goals; and (3) the substantial likelihood that the debtor can be rehabilitated. In the
alternative, the rehabilitation receiver may recommend the dismissal of the petition, or
the dissolution and/or liquidation of the debtor.50
The court shall consider the rehabilitation receiver’s report and may:
(A) give due course to the petition upon a finding that:
(1) the debtor is insolvent; and
(2) there is a substantial likelihood that the debtor could be
successfully rehabilitated;
76
48
See, FR Rules, supra note 5, rule 2, sec. 14.
49
See, FR Rules, supra note 5, rule 2, sec. 15.
50
See, FR Rules, supra note 5, rule 2, sec. 16.
The IBP Journal
Salient Features of the New Financial Rehabilitation Rules of Procedure
(B) dismiss the petition upon a finding that:
(1) the debtor is not insolvent;
(2) the petition is a sham filing intended only to delay the
enforcement of the rights of the creditor/s or of any group
of creditors;
(3) the petition, the Rehabilitation Plan and the attachments
thereto contain any materially false or misleading statements;
or
(4) the debtor has committed acts of misrepresentation or fraud
to its creditor/s or a group of creditors;
(C) convert the proceedings into one for the liquidation of the debtor
upon a finding that:
(1) the debtor is insolvent and there is no substantial likelihood
for the debtor to be successfully rehabilitated as determined;
and
(2) there is failure of rehabilitation. 51
Alternative Dispute Resolution
If the petition is given due course, the court shall order the rehabilitation receiver
to meet with the debtor and its creditors to consider their views and proposals on the
Rehabilitation Plan. In case any dispute relating to the Rehabilitation Plan or the
proceedings remains unresolved, the court may refer the parties to arbitration or any
mode of dispute resolution under the ADR Law.52 However, a referral to arbitration or
other modes of dispute resolution shall not be made if it will prejudice the one-year
period for the confirmation of the Rehabilitation Plan.53
The old rehabilitation rules did not authorize any referral to arbitration.
The Rehabilitation Receiver Unlike in the old rehabilitation rules where only natural persons may serve as
rehabilitation receivers,54 the FRIA allows the appointment of juridical persons as
rehabilitation receivers. Thus, the FR Rules provides for the qualifications for juridical
persons who are to serve as rehabilitation receivers.55
The juridical receiver must, among others, be authorized to do business in the
Philippines for at least six (6) years prior to its appointment and must name a representative
51
See, FR Rules, supra note 5, rule 2, sec. 17.
52
Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004.
53
See, FR Rules, supra note 5, rule 2, sec. 18.
54
2008 Rules, rule 3, sec. 11.
55
See, FR Rules, supra note 5, rule 2, secs. 20 and 21.
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77
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who shall be authorized to act for it. The designated representative must be a director,
an officer, a stockholder, or a partner of the juridical receiver. The juridical receiver is
solidarily liable with its designated representative for any wrongful act committed in the
discharge of their functions and responsibilities.56
The FR Rules specifically requires the rehabilitation receiver (as well as the designated
representative, in case of juridical receivers) to disclose, upon appointment, if he has any
conflict of interest. He has the continuing obligation to make a disclosure of any fact
coming to his knowledge that may be deemed a conflict of interest.57 Under the old
rehabilitation rules, there was no requirement for the rehabilitation receiver to make a
disclosure of any conflict of interest he may have upon his appointment or at any time
thereafter.
In the event a rehabilitation receiver makes a disclosure of any conflict of interest he
may have, any party to the proceeding adversely affected may waive his right to object to
such appointment. The FR Rules provides that the court may disregard the conflict of
interest if it finds that it will not be detrimental to the general interest of the stakeholders.58
Though granted vast powers, the rehabilitation receiver may not interfere with or
take over the management of the debtor’s affairs, but may only oversee and monitor the
operations of these affairs during the pendency of the proceedings.59
As in the old rehabilitation rules,60 the rehabilitation receiver and persons he may
employ are entitled to compensation. The compensation shall be for the account of the
debtor and are considered administrative expense.61 The amount of compensation shall
be based on terms approved by the court after notice and hearing.62
The Management Committee
The old rehabilitation rules did not provide for the appointment of a management
committee with the authority to assume the powers of management of the debtor’s affairs.
The Interim Rules of Procedure Governing Intra-Corporate Controversies, however,
provided for the appointment of a management committee,63 and this was a provision
made applicable to corporate rehabilitation cases.
Under the FR Rules, the court - upon motion of any interested party - is now
empowered to appoint a management committee under the following circumstances:
78
56
Ibid.
57
See, FR Rules, supra note 5, rule 2, secs. 22, 23 and 24.
58
Ibid.
59
See, FR Rules, supra note 5, rule 2, secs. 26 and 28.
60
2008 Rules, rule 3, sec. 14.
61
FRIA, sec. 56.
62
See, FR Rules, supra note 5, rule 2, sec. 28.
63
Interim Rules of Procedure Governing Intra-Corporate Controversies under R.A. 8799 (A.M. No. 01-2-04SC), rule 9. This became effective on 01 April 2001.
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Salient Features of the New Financial Rehabilitation Rules of Procedure
(A) actual or imminent danger of dissipation, loss, wastage or destruction
of the debtor’s assets or other properties; or
(B) paralyzation of the business operations of the debtor; or
(C) gross mismanagement of the debtor, or fraud or other wrongful
conduct on the part of, or gross or willful violation of the Act by the existing management of the debtor or the owner, partner, director, officer or representative/s in management of the debtor.64
In the exercise of this power, the court may either direct the rehabilitation receiver
to assume the management of the debtor or appoint a management committee for such
purpose.65
The management committee shall take custody and control of all the assets of the
debtor and shall take the place of the management and governing body of the debtor and
assume its powers, rights and responsibilities. It has the power to overrule or revoke the
actions of the previous management or governing body of the debtor.66
The Creditors’ Committee
To facilitate dealing with the creditors, the FR Rules allows the creation and
organization of a creditors’ committee if the majority of the creditors vote for its creation.
The creditors belonging to a class may formally organize among themselves and each
class may elect a representative to the creditors’ committee.67
When created, the creditors’ committee shall be the primary liaison between the
rehabilitation receiver and the creditors. Notice shall be sent to the creditors’ committee
instead of the individual creditors. It may also perform such other tasks or functions
that the court may deem necessary to facilitate the rehabilitation process. However, the
creditors committee cannot exercise or waive any right or give any consent on behalf of
any creditor unless specifically authorized in writing by such creditor.68
Administrative Expenses
Administrative expenses, in general, are those reasonable and necessary expenses
incurred in connection with the rehabilitation proceedings. It likewise includes (1) expenses
incurred in the ordinary course of business of the debtor after the commencement date;
(2) payment of post-commencement loans and obligations; (3) fees of the rehabilitation
receiver and the management committee, and the professionals they may engage; and
64
See, FR Rules, supra note 5, rule 2, secs. 31 and 32.
65
Ibid.
66
See, FR Rules, supra note 5, rule 2, sec. 33.
67
See, FR Rules, supra note 5, rule 2, secs. 39, 42 and 43.
68
Ibid.
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(4) salaries and claims of employees for work performed after the commencement date.69
The payment of administrative expenses is not covered by the Stay Order.70
Use, Preservation, and Disposal of Assets
In general, the funds and properties of the debtor shall not be used or disposed
except in the ordinary course of business or unless necessary to finance the administrative expenses of
the rehabilitation proceedings.71
In certain cases, the court, upon motion, may authorize the sale, encumbrance or
disposition of the debtor’s property if there is showing that it is necessary for the continued
operation of the debtor’s business. If the property is encumbered, the secured creditor
must consent to the sale, encumbrance or disposition, and must be given a substitute
lien.72
Contracts and Pre-Commencement Transactions
Contracts and pre-commencement transactions are subject to close scrutiny
during rehabilitation proceedings. Within ninety (90) days from the issuance of the
Commencement Order, the debtor shall indicate whether it confirms its contracts with
the creditors and other third parties. If the contract is confirmed, all obligations arising
therefrom are considered administrative expenses.73 Contracts not confirmed within the
90-day period are automatically terminated. Any claim for actual damages arising from
the election to terminate the pre-commencement contract shall be considered a precommencement claim to be filed as a separate claim with the rehabilitation court, subject
to the Stay Order and the Rehabilitation Plan.74
Pre-commencement transactions which are executed with intent to defraud creditors
or which constitute undue preference of creditors may be also rescinded or declared null
and void.75 As a rule, the rehabilitation receiver initiates and prosecutes the action to
rescind, or declare null and void any pre-commencement transactions. If the rehabilitation
receiver refuses, the creditors may file the action, upon approval of the court and after
determination that their rights will be prejudiced if the action is not filed. Any benefit
derived (to the extent of their claims and the costs) belongs exclusively to the creditors
instituting the proceeding, and the surplus, if any, belongs to the estate.76
80
69
See, FR Rules, supra note 5, rule 1, sec. 5(a).
70
See, FR Rules, supra note 5, rule 2, sec. 8(V).
71
See, FR Rules, supra note 5, rule 2, sec. 47.
72
See, FR Rules, supra note 5, rule 2, secs. 48, 49 and 52.
73
See, FR Rules, supra note 5, rule 2, sec. 56.
74
Ibid.
75
See, FR Rules, supra note 5, secs. 57 and 58.
76
Ibid.
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Approval and Confirmation of the Rehabilitation Plan
The Rehabilitation Plan must be approved by all classes of creditors whose rights are
affected or modified by the Plan. The Rehabilitation Plan is deemed approved by a class
of creditors if members of the class holding more than 50% of the total claims in the
class vote in favor of the Plan.77 The 2008 Rules required a vote of at least 2/3 of the total
liabilities of the debtor, including secured creditors holding more than 50% of the total
secured claims of the debtor, and unsecured creditors holding more than 50% of the total
unsecured claims of the debtor.78
Notwithstanding the rejection of the Plan by the creditors, the court may still confirm
the Plan under the following circumstances:
(A) the Rehabilitation Plan complies with the requirements specified in
the FRIA and the FR Rules;
(B) the rehabilitation receiver recommends the confirmation of the
Rehabilitation Plan;
(C) the shareholders, owners or partners of the juridical debtor lose at
least their controlling interest as a result of the Rehabilitation Plan;
and
(D) the Rehabilitation Plan would likely provide the objecting class of
creditors with compensation, which has a net present value greater
than that which they would have received if the debtor were under
liquidation.79
Except for paragraph (C), these are the same circumstances required in the 2008
Rules for the court to confirm the rehabilitation plan notwithstanding the creditors’
rejection thereof.80
If the Rehabilitation Plan is approved by the creditors, any interested party may
still file an opposition to the Plan before it is confirmed by the court.81 The objections,
however, are limited to the following grounds:
(A) the creditors’ support was induced by fraud;
(B) the documents or data relied upon in the Rehabilitation Plan are
materially false or misleading; or
(C) the Rehabilitation Plan is in fact not supported by the voting creditors.
If the court finds the objections sufficient in form and substance, it shall conduct a
hearing on the objections.82
77
See, FR Rules, supra note 5, rule 2, sec. 62.
78
2008 Rules, rule 4, sec. 7.
79
See, FR Rules, supra note 77.
80
2008 Rules, rule 4, sec. 11.
81
See, FR Rules, supra note 5, rule 2, secs. 63, 64 and 65.
82
Ibid.
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The court shall issue an order confirming the Rehabilitation Plan in any of the
following instances:
(A) no objection is filed within the twenty (20)-day period from receipt of
notice from the Court that a rehabilitation plan has been submitted;
(B) the court finds the objections lacking in merit;
(C) the basis for the objection has been cured; or
(D) the debtor has complied with the order to cure the objection.83
The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes
over claims if the Rehabilitation Plan has made adequate provisions for paying such
claims.84
The court is given a maximum period of one (1) year from the filing of the petition
to confirm the Rehabilitation Plan.85 Unlike in the 2008 Rules where the one-year period
may be extended by the Supreme Court upon a showing of good cause,86 no extension is
authorized by the FRIA. Instead, if no confirmation is made within the one-year period,
the proceedings may be converted into one for liquidation of the debtor.87
Once the Rehabilitation Plan is confirmed, the debtors and all persons affected are
bound by its terms, regardless of whether or not they have participated in the proceedings.88
Termination of proceedings
The court may order the proceedings terminated either by declaring a successful
implementation of the Rehabilitation Plan or a failure of rehabilitation.89
There is a failure of rehabilitation in the following instances:
(A) Dismissal of the petition by the court;
(B) Failure to submit a Rehabilitation Plan;
(C) A Rehabilitation Plan is not confirmed by the court;
(D) Under the Rehabilitation Plan submitted by the debtor, there is no
substantial likelihood that the debtor can be rehabilitated within a
reasonable period;
(E) In the implementation of the Rehabilitation Plan, the debtor fails to
perform its obligations under the Plan, or there is a failure to realize
82
83
See, FR Rules, supra note 5, rule 2, sec. 66.
84
Ibid.
85
See, FR Rules, supra note 5, rule 2, sec. 70.
86
2008 Rules, rule 4, sec. 12.
87
See, FR Rules, supra note 85.
88
See, FR Rules, supra note 5, rule 2, sec. 67.
89
See, FR Rules, supra note 5, rule 2, sec. 73.
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the objectives, targets or goals of the Plan, including the timelines and
conditions for the settlement of the obligations due to the creditors
and other claimants;
(F) Determination that the Rehabilitation Plan may no longer be
implemented in accordance with its terms, conditions, restrictions,
or assumptions;
(G) There is a finding that fraud was committed in securing the approval
of the Rehabilitation Plan or its amendment;
(H) After the court finds merit in the objection/s raised against the
confirmation of the Rehabilitation Plan, the defect is not cured
within the time ordered by the court, or if the court determines that
the debtor acted in bad faith, or that it is no longer feasible to cure
the defect; and
(I) Failure of the debtor to comply with the FR Rules, the Rules of
Court, or any order of the court.90
If the termination of the proceeding is due to a failure of rehabilitation or the
petition is dismissed for reasons other than technical grounds, the proceedings shall be
immediately converted to liquidation.91
IV.
PRE-NEGOTIATED REHABILITATION
An insolvent debtor, by itself or jointly with any of its creditors, may file a verified
petition with the rehabilitation court for the approval of a Pre-Negotiated Rehabilitation
Plan. Similar to the 2008 Rules,92 the FR Rules requires that the Pre-Negotiated
Rehabilitation Plan be initially approved by creditors holding at least two-thirds (2/3) of
the debtor’s total liabilities, including secured creditors holding more than fifty percent
(50%) of the debtor’s total secured claims and unsecured creditors holding more than fifty
percent (50%) of the debtor’s total unsecured claims.93
The rehabilitation court shall have a maximum period of one hundred twenty (120)
days within which to act on the submitted Pre-Negotiated Rehabilitation Plan. The PreNegotiated Rehabilitation Plan shall be deemed approved upon the court’s failure to act
within the 120-day period. The approval of the Pre-Negotiated Rehabilitation Plan shall
have the same effects of a confirmation of a rehabilitation plan under Rule 2 of the FR
Rules.94
The implementation of the approved Pre-Negotiated Rehabilitation Plan, however,
must await the lapse of twenty (20) days from the second publication of the Order of
90
Ibid.
91
See, FR Rules, supra note 5, rule 2, sec. 74.
92
2008 Rules, rule 6, sec. 1.
93
See, FR Rules, supra note 5, rule 3, sec. 1.
94
See, FR Rules, supra note 5, rule 3, secs. 4, 8 and 9.
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Approval issued by the rehabilitation court. Within this period, any creditor or other
interested party is given the opportunity to file an objection to the Pre-Negotiated
Rehabilitation Plan based on limited grounds. The court may conduct a hearing on the
objection/s filed, which would then extend the suspension of the Plan’s implementation.95
If the rehabilitation court determines that the debtor or creditors supporting the PreNegotiated Rehabilitation Plan acted in bad faith, or that the objection filed to the Plan is
incurable, the court may convert the proceedings into liquidation.96
V.
OUT-OF-COURT OR INFORMAL RESTRUCTURING
AGREEMENT OR REHABILITATION PLAN
The FRIA recognizes an Out-of-Court or Informal Restructuring Agreement (OCRA)
or Rehabilitation Plan that is negotiated and finalized by the insolvent debtor and its
creditors.97 Unlike a Pre-Negotiated Rehabilitation Plan, the OCRA does not require
the approval of the court for its effectivity. As long as the required number of votes in its
favor is obtained, the OCRA can take effect and will bind the debtors and its creditors.
Court intervention will take place only if an interested party institutes an action for court
assistance or for the annulment of the OCRA, as provided below.98
To be effective, the OCRA requires a higher number of votes than the Pre-Negotiated
Rehabilitation Plan. An OCRA must be approved by the debtor, creditors representing
at least sixty-seven percent (67%) of the debtor’s secured obligations, creditors
representing seventy-five percent (75%) of the debtor’s unsecured obligations, and
creditors holding at least eighty-five percent (85%) of the debtor’s total liabilities.99
The Notice of the OCRA, which will contain the salient provisions of the agreement,
must be published once a week for at least three (3) consecutive weeks in a newspaper of
general circulation in the Philippines.100
The parties to an OCRA may agree to a Standstill Period101 wherein additional
creditors, notified of an existing OCRA, may participate in its negotiation. The Standstill
Period shall expire upon the lapse of one hundred twenty (120) days from the effectivity
of the Standstill Agreement, the effectivity of the OCRA, or the termination of the
negotiations for the OCRA as declared by creditors representing more than fifty per
84
95
Ibid.
96
See, FR Rules, supra note 5, rule 3, sec. 7
97
See, FR Rules, supra note 5, rule 4, secs. 1, 2, 4 and 5.
98
See, FR Rules, supra note 5, rule 4, secs. 7, 9 and 11.
99
See, FR Rules, supra note 5, rule 4, secs. 1, 2 and 4.
100
Ibid.
101
Standstill period shall refer to the period agreed upon by the debtor and its creditors to enable them to negotiate
and enter into an out-of-court or informal restructuring/workout agreement or rehabilitation plan pursuant to
rule 4 of the FR Rules. The standstill agreement may include provisions identical with or similar to the legal
effects of a commencement order under sec. 9, rule 2 of the FR Rules. (FR Rules, rule 1, sec. 5q).
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cent (50%) of the total liabilities of the debtor, whichever comes first.102 The parties,
however, are not precluded from extending the period or from executing a new Standstill
Agreement.
The OCRA shall take effect upon the lapse of fifteen (15) days from the date of
the last publication of its notice, and shall have the same effects of a confirmation of
rehabilitation plan under Rule 2 of the FR Rules. The parties may file a Petition for
Court Assistance with the Regional Trial Court (RTC) having jurisdiction over the
debtor’s residence or principal place of business for the execution or implementation of
the OCRA or even the Standstill Agreement.103
An OCRA or Standstill Agreement that does not comply with the requirements
under this Rule or obtained through fraud, intimidation, violence, or vitiated consent
may be cancelled by filing a Petition for Annulment with the RTC.104
Within five (5) days from receipt of the comment on or opposition to the Petition
for Court Assistance or Petition for Annulment filed under the FR Rules, the RTC shall
determine whether the petition be given due course and shall issue a Due Course Order, if
proper.105
The proceedings in the RTC shall be summary and conducted not later than twenty
(20) days from the filing of the petition.106 Judgment on the petition must be rendered,
not later than sixty (60) days from the filing of the petition, and shall be immediately
executory.107 A party aggrieved by the court’s judgment may file for an injunctive writ
with the Court of Appeals (CA) through a Petition for Certiorari under Rule 65 of the Rules
of Court. The implementation of the OCRA shall not be stayed by any court action
or proceeding arising from or relating to the OCRA, unless the CA issues an injunctive
writ.108
In the event of an unsuccessful rehabilitation, the parties to an OCRA are not
precluded from availing of other modes of rehabilitation under the FRIA.109
VI. RECOGNITION OF CROSS-BORDER INSOLVENCY PROCEEDINGS
The rule on cross-border insolvency shall apply where:
102
See, FR Rules, supra note 5, rule 4, secs. 2 and 3.
103
See, FR Rules, supra note 5, rule 4, secs. 4, 7 and 8.
104
See, FR Rules, supra note 5, rule 4, sec. 11.
105
This Order is required to address the jurisdictional issues found in Sections 88 and 89 of the FRIA.
106
See, FR Rules, supra note 5, rule 4, secs. 15 and 16.
107
Ibid.
108
See, FR Rules, supra note 5, rule 4, sec. 7.
109
See, FR Rules, supra note 5, rule 4, sec. 16.
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1. assistance is sought in a Philippine court by a foreign court or a
foreign representative in connection with a foreign proceeding;
2. assistance is sought in a foreign State in connection with a proceeding
governed by the FRIA and the FR Rules; or
3. a foreign proceeding and a proceeding governed by the FRIA and
the FR Rules are concurrently taking place; or
4. creditors in a foreign State have an interest in requesting the
commencement of, or participating in, a proceeding under Rules 2
(court-supervised rehabilitation), 3 (pre-negotiated rehabilitation),
and 4 (out-of-court rehabilitation) of the FR Rules.110
The right of creditors in a foreign State to commence or participate in a proceeding
under the FR Rules, however, depends on public policy and the rule of reciprocity.111
The rule on cross-border insolvency also covers petitions for recognition of a
foreign insolvency proceeding.112 The recognition, however, does not subject the foreign
representative (or the equivalent of a rehabilitation receiver) or the foreign assets and
affairs of the debtor to the jurisdiction of local courts.
The FR Rules shall continue with the requirement of reciprocity in proceedings
for recognition, which is consistent with the FRIA.113 If the court finds that the country of
which the petitioner is a national does not grant recognition to a Philippine rehabilitation
proceeding, the foreign proceeding in that country shall not also be recognized.
The FR Rules now specifically provides that upon recognition of a foreign proceeding,
the foreign representative, through counsel, acquires the standing to initiate actions to avoid
or otherwise render ineffective acts detrimental to creditors that are available under the
FR Rules. The intervention of foreign representative in any action or proceeding in the
Philippines in which the debtor is a party must also be through counsel.114
The local court shall cooperate to the extent feasible in all court-to-court
communications for purposes of information or assistance.115 Under the 2008 Rules, the
courts may communicate directly with foreign representatives.116
86
110
See, FR Rules, supra note 5, rule 5, secs. 1, 2, 3 and 4.
111
Ibid.
112
See, FR Rules, supra note 5, rule 5, sec. 5.
113
See, FR Rules, supra note 5, rule 5, sec. 4.
114
See, FR Rules, supra note 5, rule 5, sec. 17.
115
See, FR Rules, supra note 5, rule 5, secs. 18 and 20.
116
2008 Rules, rule 7, sec. 12.
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VII.
PROCEDURAL REMEDIES, AND MISCELLANEOUS
AND FINAL PROVISIONS
As in the 2008 Rules, a party may file a motion for reconsideration of any order
issued by the court before the approval of the rehabilitation plan.117 No relief may be
extended to the aggrieved party by the court’s order on the motion through a special civil
action for certiorari under Rule 65 of the Rules of Court.118
Unlike the 2008 Rules, no appeal may be taken from an order or resolution
of the court approving or dismissing the rehabilitation plan.119 The FR Rules
allows only a review of the order or resolution through a petition for certiorari under
Rule 65 of the Rules of Court filed with Court of Appeals, within fifteen (15) days from
notice of the decision or order.120
The FR Rules shall take effect fifteen (15) days after its complete publication in the
Official Gazette or in at least two (2) newspapers of national circulation in the Philippines.121
VIII.
CONCLUSION
The role and importance of financially rehabilitating financially distressed corporations,
partnerships and sole proprietorships in the country’s economic development have
become more pronounced and recognized in recent years. However, notwithstanding such
recognition, many issues remain unaddressed. To address these issues, Congress has taken
steps in enacting legislation and establishing the proper framework towards providing
effective financial rehabilitation of these business entities, if and when warranted. The
Judiciary has also done its part in addressing these concerns when it promulgated the
rules of procedure on corporate rehabilitation in 2008. The recent promulgation by the
Supreme Court of the new Financial Rehabilitation Rules of Procedure in 2013 can
only be viewed as a worthwhile development in this area of concern. What remains to
be seen is whether or not this new rules of procedure can be effectively implemented.
Needless to state, its successful implementation will depend not only on the judges, but
also on the cooperation to be extended by the various stakeholders. It is thus hoped that its
successful implementation will give additional incentive to foreign investors into providing
the country with direct investments that will bode well for continued economic prosperity.
•••
•••
117
See FR Rules, supra note 5, rule 6, sec. 1.
118
Ibid.
119
2008 Rules, rule 8, secs. 1 and 2.
120
See FR Rules, supra note 5, rule 6, sec. 2.
121
See FR Rules, supra note 5, rule 7, sec. 2. The FR Rules became effective on 22 October 2013, following its
publication in the Official Gazette on 07 October 2013.
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87
Francisco Ed. Lim
Toward a More Forward-Looking Insolvency System*
Francisco Ed. Lim**
I.
INTRODUCTION
The Philippines is facing a rosy economic outlook. Amidst slowdowns and financial
crises abroad, it has recently been dubbed as “an emerging Asian tiger,”1 a “star performer” in
Asia,2 and a “truly remarkable hot spot[] in Asia” that can “become one of the world’s top economies
by 2050.”3 Indeed, with the increasing investor confidence and the proliferation of small
and medium-scale local enterprises, the Philippines is a viable competitor in the race to
becoming a lead economy in South East Asia.
However, to win this race, it is crucial for the country to lay down its economic
fundamentals properly. One of the structural frameworks that need to be put in place
is a sound insolvency system. It is said that “the manner in which a country addresses
insolvency is tied to other decisions: about support for entrepreneurial behavior as an
engine of growth, about the promotion of education as a contributor to the well-educated
workforce needed for the future, and about the extent to which safety nets are provided by
governments to assist those who are less fortunate, among others.”4
As the continuity of economic activity is vital to our developing country, the country
must prepare itself by paving the road to ensure the continuity of economic stability.
All businesses, regardless of size, may encounter financial difficulties at some point. The
fairly recent experiences of General Motors Corporation and Lehman Brothers — two
pillars of the United States economy — attest to this fact. As such, there must be a good
set of insolvency laws, rules and systems in place which businesses may turn to in times
*���������������������������������������������������������������������������������������������������������
This paper was delivered on the occasion of the endowment on the author of the Professorial Chair in Commercial Law by the Philippine Supreme Court, Philippine Judicial Academy and the Metrobank Foundation,
Inc. The author profoundly thanks Attys. Jacqueline Ann C. Alegre, Catherine Anne L. Diño, Filemon Ray L.
Javier, Johanna Aleria P. Lorenzo and Lancaster L. Uy of ACCRA LAW Offices for their invaluable assistance
in preparing this paper.
**�������������������������������������������������������������������������������������������
Co-Managing Partner and Head, Corporate
�������������������������������������������������������������
and Special Projects Department, ANGARA ABELLO CONCEPCION REGALA & CRUZ (ACCRALAW)
88
1
Michael Lim Ubac, PH is rising Asian Tiger, Phil. Daily Inquirer, November 11, 2012, available at http://business.inquirer.net/92374/ph-is-rising-asian-tiger (last accessed January 16, 2013); JC Bello Ruiz, Emerging Asian
Tiger, Manila Bulletin, November 10, 2012, available at http://www.mb.com.ph/articles/380883/emergingasian-tiger (last accessed January 16, 2013).
2
See Karen Ward, The World in 2050 (HSBC Global Research: Global Economics, January 2012), available at
http://www.hsbc.com.mx/1/PA_esf-ca-app-content/content/home/empresas/archivos/world_2050.pdf
(last accessed January 16, 2013).
3
See The Philippines’ rising economy to Star in 2050, Rebuilding for the Better Philippines, January 16, 2012, available
at http://betterphils.blogspot.com/2012/01/philippines-rising-economy-to-star-in.html (last accessed January
16, 2013).
4
Report of the Standing Senate Committee on Banking, Trade and Commerce (Canada), Debtors and Creditors
Sharing the Burden: A Review of the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (November
2003), available at http://www.cfs-fcee.ca/html/english/campaigns/Senate_Cmte_Report_2003_11-a.pdf (last
accessed January 16, 2013).
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Toward a More Forward-Looking Insolvency System
of financial distress.
Indeed, as global integration increases, there is a tendency for risk-taking behavior
to rise, inasmuch as it contributes to success in a market-based economy.5 Therefore, the
government needs to create mechanisms that would encourage such profitable behavior
and at the same time protect businesses and the public from the possible negative
repercussions of certain ventures.
A.
KEEPING VIABLE BUSINESSES OPERATING
The primary objective of an insolvency system is to reallocate resources and distribute
liabilities. Its ultimate goals are to increase the competitiveness of industries, promote
investor confidence, and achieve economic growth.
It is imperative, therefore, that the law, rules and supporting systems put in place
by the government be able to keep viable businesses operating. This means avoiding
premature liquidation of sustainable businesses.6 As aptly described by author Paul L.C.
Torremans, the insolvency procedure must be a “measure of last resort.”7 Thus:
“The insolvency procedure aims at liquidation, i.e., the removal of a financially
unhealthy trader from the market to avoid damage to the system to other traders. As
such, it is a measure of last resort. It was thought to be desirable to create
a tool that could allow proactive intervention to complement the insolvency procedure.
Such a tool should make it possible to provide assistance to traders that experience
serious difficulties before they find themselves in a situation of insolvency, and before
liquidation is the only way out. The aim of the procedure, is, therefore, to give the trader
the opportunity and assistance that is needed to solve its problems, which should in turn
allow the trader to return to a situation where it can function normally and unassisted
in the economy once its financial health has been restored.”8
Let us examine some fairly recent experiences. First is the bankruptcy case faced
by United States automotive giant General Motors Corporation (now General Motors
Company) (“GM”). In 2009, the world watched as GM adamantly maintained its position
that “[r]estructuring the business out of court remains the best solution for
GM and its constituents.”9 GM had a firm view that in-court restructuring would
carry with it tremendous costs and risks. It insisted that a bankruptcy filing could force
liquidation — considering the financing that GM would require as well as consumer
reluctance to buy vehicles from a bankrupt automaker. The automaker, which lost
5
Ibid.
6
Simeon Djankov, Bankruptcy Regimes during Financial Distress (Financial and Private Sector Development, The
World Bank Group, May 2009), available at http://www.doingbusiness.org/~/media/FPDKM/Doing%20
Business/Documents/Miscellaneous/tbd/bankruptcy-regimes-during-financial-distress.pdf (last accessed January 16, 2013).
7
Collier International Business Insolvency Guide 2, Insolvency Laws of Selected Nations, 15.01[3] (2005 ed.).
8
Ibid. (emphasis supplied).
9
Poornima Gupta, GM says still prefers out-of-court restructuring, Reuters, March 6, 2009, available at http://www.
reuters.com/article/2009/03/06/us-gm-sb-idUSTRE5254XU20090306 (last accessed January 16, 2013).
Volume 38, Number 1 & 2 - ( January - June 2013 )
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Francisco Ed. Lim
nearly $31 billion in 2008, was given a deadline to complete concession talks with the
United Auto Workers and bondholders. This was part of a bid to convince the task force
assembled by United States President Barack Obama that it could be made viable with a
new round of government help.
Despite its optimistic outlook, GM had no recourse but to file for bankruptcy in the
middle of 2009. The bankruptcy filing was the largest in the United States manufacturing
history. The decision to push GM into a fast-track bankruptcy and provide $30 billion
of additional taxpayer funds to restructure the automaker was definitely a huge gamble
for the Obama administration.10 Now, the re-organized General Motors Company is
sixty percent (60%) government-owned, i.e., by the United States Treasury, “with a $50
billion equity investment and $10 billion in debt and perpetual preferred shares.”11 Such
equity was in exchange for more than $50 billion in federal assistance extended to the
old GM and its successor.12 This was a big issue for many American taxpayers. However,
the fact of the matter is that the successful rehabilitation of GM saved one of the pillars
of the United States economy. Moreover, the United States Government is now slowly
recovering its investments by selling some of its shareholdings in GM.
In Canada, the successful rehabilitation of its domestic airline carrier, Air Canada,
was attributed to the evolving role of the so-called court-appointed “Monitor” in
restructurings under the Companies’ Creditors Arrangement Act (CCAA).13 Throughout the
process of restructuring, the Monitor enjoyed a wide flexibility under the CCAA, such
that he was able to adapt his role to facilitate the needs of a particular restructuring (taking
into account the size and complexity of the case).14 In addition, the Superior Court Judge
played a crucial role in holding the parties to imposed deadlines and mitigating the tense
battle between labor and management officials.15
In Asia, Daewoo Motor Corporation (“Daewoo Motor”), which used to be part of
the conglomerate, Daewoo Group (dismantled by the Korean Government in 1999), was
declared bankrupt after its laborers rejected a restructuring plan that involved layoffs
and pay cuts, and after it defaulted on $78 million in commercial papers for two (2)
90
10
Kevin Krolicki and John Crawley, GM Files for Bankruptcy, Chrysler Sale Cleared, Reuters, June 1, 2009, available
at http://www.reuters.com/article/2009/06/01/us-gm-idUSN3044658620090601 (last accessed January 16,
2013).
11
Kevin Krolicki and David Bailey, GM exits bankruptcy, Reuters, July 10, 2009, available at http://www.reuters.
com/article/2009/07/10/us-gm-idUSTRE5690JO20090710 (last accessed January 16, 2013).
12
Ibid.
13
Michael A. Fitch and Sheryl E. Seigel, Recent Trends in Canadian Restructuring Cases (Fasken Martineau), available at http://www.fasken.com/files/Publication/1d527800-25c7-4057-a817-c4bcb4cedf46/Presentation/
PublicationAttachment/5f3014c0-17ed-4d9b-8d21-a28df13e04ba/RECENT_CASES_IN_CDN_RESTRUCTURING_CASES.PDF (last accessed January 16, 2013).
14
Ibid.
15
Keith McArthur and Brent Jang, How Air Canada got back on a new flight path, The Globe and Mail, August 28,
2004, available at http://www.avcanada.ca/forums2/viewtopic.php?f=31&t=3147 (last accessed January 16,
2013).
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Toward a More Forward-Looking Insolvency System
straight days.16 The restructuring plan was actually the offshoot of the Daewoo Group
bail-out that was earlier orchestrated by a number of South Korean banks, including
the government-run Korea Development Bank.17 About a month after the declaration
of bankruptcy, a civil court in South Korea granted Daewoo Motor’s application for
receivership. As a result, the company avoided immediate liquidation. Its creditors
agreed to offer 728 billion won ($1.16 billion) of new loans to help restore operations and
implement a reform plan that would foster talks of merger/acquisition with GM.18
Daewoo Motor’s operations had since been gradually returning to normal. In April
2002, GM signed a final agreement with its business partners and Daewoo Motor’s
creditors to form a joint venture to purchase the major passenger car manufacturing
operations of the company. Then in September 2002, a new restructuring plan was made
and tentatively/conditionally approved by the court, such that “Daewoo Motor [was
required to] repay 12% of debt owed to financial company creditors with cash over the
next nine years, and repay 80.1% of the debt owed to those creditors using securities in
trust, including preferred shares of GM-Daewoo. Daewoo Motor will also pay 16.3% of
debt owed to its affiliated suppliers, including Korea Delphi Automotive System Corp.,
with cash over the next nine years. It will convert 45% of the debt owed to these affiliated
suppliers into equity. GM-Daewoo will assume 21.4% of Daewoo Motor’s debt to the
affiliated suppliers.”19
The approval of the new plan became final after majority of the company’s creditors
agreed to swap seventy seven percent (77%) of Daewoo Motor’s debt amounting to 19
trillion won ($15.5 billion) for stock in the GM joint venture.20
About four (4) years after the restructuring, “Daewoo Motor [has become] a bright
spot for GM.” GM-Daewoo’s car sales steadily increased and the joint venture rehired
most of the 1,600 workers laid off by the old Daewoo Motor.21
It bears noting that the South Korean court played a key role in facilitating the
rehabilitation. It paved a way for the creditors to agree on a restructuring plan that made
16
See Daewoo Motor Declared Bankrupt, ABC News, November 8, 2000, available at http://abcnews.go.com/Business/story?id=89083&page=1 (last accessed January 16, 2013). See also Jonathan Watts and Nicholas Bannister,
Daewoo Motor plunges into bankruptcy, The Guardian, November 9, 2000, available at www.guardian.co.uk/business/2000/nov/09/2 (last accessed January 16, 2013).
17
Samuel Len, Daewoo Motor in Bankruptcy After Creditors Balk, The New York Times, November 9, 2000, available at
http://www.nytimes.com/2000/11/09/business/daewoo-motor-in-bankruptcy-after-creditors-balk.html (last
accessed January 16, 2013).
18
Bloomberg, Daewoo Motor goes into court receivership, December 1, 2000, available at http://news.drive.com.
au/drive/motor-news/daewoo-motor-goes-into-court-receivership-20100823-13h8e.html (last accessed January 16, 2013).
19
Jeongjin Lim, Daewoo Restructuring Plan Wins Backing From Court, The Wall Street Journal, September 15, 2002,
available at http://online.wsj.com/article/0,,SB1032113943767343075-search,00.html (last accessed January
16, 2013).
20
Daewoo restructuring plan cleared, CNN.com, September 30, 2002, available at http://archives.cnn.com/2002/
BUSINESS/asia/09/30/korea.daewoo/ (last accessed January 16, 2013).
21
Choe Sang-Hun, Daewoo Motor Becomes a Bright Spot for G.M., The New York Times, May 30, 2006, available at
http://www.nytimes.com/2006/05/30/business/30daewoo.html (last accessed January 16, 2013).
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the company attractive for GM to acquire.
The cases of GM, Air Canada and Daewoo Motor impress upon us the importance
of an insolvency system which gives distressed corporations flexibility and sufficient room
to select a rehabilitation proceeding that best addresses their financial problems.
In contrast, the Philippine experience has not been encouraging, at least in the
1980s, when there were no detailed rules governing rehabilitation of debtor companies.
For example, we have the case of the Philippine Blooming Mills (“PBM”), a large steel
company founded in 1952 that filed for suspension of payments in the 1980s with the
Securities and Exchange Commission (“SEC”) to save its business. Then, there is the
case of the Stanford Microsystems, Inc. (“Stanford”), once the largest and oldest contract
semiconductor manufacturer in the Philippines. Like PBM, Stanford filed a petition for
suspension of payments in 1985 with the SEC, in an effort to rehabilitate its business.22
Sadly, neither PBM nor Stanford successfully emerged from rehabilitation. Their
liquidation ultimately resulted in dire consequences to their creditors, employees and
owners that could have been prevented had there been a sound insolvency system in
place at the time.
B.
PROVIDING A PROMPT AND FAIR METHOD IN
LIQUIDATING CORPORATE ASSETS
An effective insolvency regime should not be in favor of the financially distressed
company only. There are numerous stakeholders whose interests must likewise be
accommodated. These include: the creditors who may be secured to varying degrees
(including tax agencies and other government creditors), employees, guarantors of debt,
suppliers of goods and services, and the owners of the insolvent debtor.
Balancing the interests of all stakeholders is highly important in liquidation
proceedings. It cannot be denied that while we may want to preserve all viable companies,
liquidation may be inevitable for some distressed entities. In fact, there are instances
where it is the stakeholders themselves who want to liquidate the assets of the corporation
to provide a orderly closure to their business, as what happened in the PBM case when it
became clear that PBM could no longer be rehabilitated.23
C.
SOUND INSOLVENCY SYSTEM AS A MEASURE
OF GLOBAL COMPETITIVENESS
In these modern times, a country’s insolvency system is one of the indicators used by
international institutions in benchmarking economies to determine the competitiveness
of its investment climate.
92
22
Chua v. NLRC, G.R. Nos. 89971-75, 17 October 1990, 190 SCRA 558.
23
See Chung Ka Bio v. Intermediate Appellate Court, G.R. No. 71837, 26 July 1988, 163 SCRA 534.
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For example, the World Economic Forum (“WEF”), an independent international
organization, comes out with a yearly report measuring the competitiveness of countries
around the world. It measures, among others, the degree to which collateral and
bankruptcy laws protect lenders’ and borrowers’ rights. The measurement is made under
the Legal Rights Index for Pillar 8 on Financial Market Development, one of the twelve
(12) pillars for measuring the competitiveness of economies worldwide.
While the Philippines improved by ten (10) notches overall in the 2012-2013 Global
Competitiveness Report of the WEF, relative to its rank for 2011-2012, it still fares quite
poorly with a score/value of 4 on a 0-10 (best) scale under the Legal Rights Index. The
Philippines’ score is the same as those of Lebanon, Iran and Sri Lanka. This score is
much lower than the scores of other Asian countries like Singapore, Hong Kong and
Malaysia, all of which obtained a perfect score of 10.
The International Finance Corporation (“IFC”), an international financial institution
that offers investment, advisory, and asset management services to encourage private
sector development in developing countries, also prepares an annual report called “Ease
of Doing Business Index.” This report ranks economies according to their capacity to
foster a suitable investment climate. Relevantly, an economy’s insolvency system is one of
the factors24 included in determining the ranking of an economy.
The latest report released in June 2012 ranks the Philippines 165 out of the 185
economies included in the index on the topic of insolvency. The Philippines then ranks
138 out of the 185 countries, as an economy recommended for ease in doing business
with.25
Another measurement worth noting is the so-called “Index of Economic Freedom,”
which is monitored by the Heritage Foundation in partnership with the Wall Street
Journal. This index considers ten (10) economic freedoms grouped into four (4) broad
categories, to wit:
1. Rule of Law (property rights, freedom from corruption);
2. Limited Government (fiscal freedom, government spending);
3. Regulatory Efficiency (business freedom, labor freedom, monetary
freedom); and,
4. Open Markets (trade freedom, investment freedom, financial
freedom).
The score for business freedom is based on factors such as starting a business, obtaining
a license, and closing a business. Efficient and effective insolvency systems and respect
for creditors’ rights are, therefore, important to business freedom, to the extent that “[r]igid
and onerous bankruptcy procedures [could be] distortionary, providing a disincentive for
24
Other factors include: (1) Starting a business; (2) Employing workers; (3) Registering property; (4) Getting credit;
(5) Protecting investors; (6) Paying taxes; (7) Trading across borders; and (8) Enforcing contracts.
25
International Financing Corporation, Doing Business, Economy Rankings as of June 2012 available at http://
doingbusiness.org/rankings (last accessed January 16, 2013).
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Francisco Ed. Lim
entrepreneurs to start businesses in the first place.”26
Under the 2013 Index of Economic Freedom Report, the Philippines suffered a decline
in business freedom, which is primarily attributed to the fact that business start-up process
remains time-consuming. The report does not state whether changes were noted as
regards the other factors of business freedom.
It must be stressed that the ten-notch increase in the country’s ranking and the
increase in the economic freedom score are due to the notable improvements in investment
freedom and freedom from corruption.27
Undeniably, an insolvency system plays a vital role in a modern market economy. A
strong insolvency system contributes to the efficient use of resources and hence, fosters
economic growth. The system also helps underpin investors’ confidence and financial
stability.
In fact, the Forum on Asian Insolvency Reform (“FAIR”)28 has been set up by the
Organization of Economic Co-operation and Development, the Asia-Pacific Economic
Co-operation Forum and the Asian Development Bank, with assistance from the
governments of Japan and Australia. FAIR regularly gathers key policy makers, members
of the judiciary, academics, insolvency practitioners and other private sector participants
to discuss insolvency-related matters, in recognition of the vital role that an insolvency
system plays in an economy.
Thus, an insolvency system is relevant, not only to cater to the needs of the stakeholders
of a company, but also to make an economy financially viable and globally competitive.
It is, thus, my humble submission that the time is ripe to pave the road to ensure that our
insolvency system is effective and responsive.
While there is no perfect model or framework that a country can simply adopt,
there are guidelines and principles that have emerged, primarily motivated by the recent
economic and financial crisis.
Among these guidelines are: (1) the United Nations Commission on International
Trade Law (“UNCITRAL”) Legislative Guide on Insolvency Law (“UNCITRAL
Guide”);29 (2) the Principles for Effective Creditor Rights and Insolvency Systems
94
26
Ambassador Terry Miller and Anthony B. Kim, Defining Economic Freedom, in Terry Miller, Kim R. Holmes,
and Edwin J. Feulner (eds.), Index of Economic Freedom: Promoting Economic Opportunity and Prosperity (2013), available at http://www.heritage.org/index/book/chapter-7 (last accessed January 16, 2013).
27
See Ronnel W. Domingo, PH up 10 notches in ‘economic freedom’ list, Philippine Daily Inquirer, January 14, 2013,
available at http://business.inquirer.net/102443/ph-up-10-notches-in-economic-freedom-list (last accessed January 16, 2013).
28
Organization of Economic Co-operation and Development (OECD) Website at http://www.oecd.org/corporate/corporateaffairs/corporategovernanceprinciples/insolvencyinasia-forumonasianinsolvencyreformfair.
htm (last accessed January 16, 2013).
29
United Nations Commission on International Trade Law, Legislative Guide on Insolvency Law (2005) [UNCITRAL
Guide], available at http://www.uncitral.org/pdf/english/texts/insolven/05-80722_Ebook.pdf (last accessed
January 16, 2013).
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formulated by the World Bank (“World Bank Principles”);30 and the principles and
guidelines submitted under a technical project of the Asian Development Bank under
RETA No. 5975: Promoting Regional Cooperation in the Development of Insolvency
(“ADB Insolvency Reform Guide” ).
These standards and/or practices are aimed at improving both the efficiency and
outcome of insolvency proceedings.
a. UNCITRAL Guide
The UNCITRAL Guide explains how designing an effective and efficient insolvency
law involves a consideration of a common set of issues relating to the substantive
and procedural legal framework and the institutional framework required for its
implementation. Thus, UNCITRAL recommends that an insolvency system must have
the following key objectives:
1. provide certainty in the market to promote economic stability and
growth;
2. maximize value of assets;
3. strike a balance between liquidation and reorganization;
4. ensure equitable treatment of similarly situated creditors;
5. provide for timely, efficient and impartial resolution of insolvency;
6. preserve the insolvency estate to allow equitable distribution to
creditors;
7. ensure a transparent and predictable insolvency law that contains
incentives for gathering and dispensing information; and,
8. recognize existing creditors rights and establish clear rules for ranking
of priority claims.31
b. World Bank Principles
The World Bank Principles, in turn, recommend the following objectives:
1. integrate with a country’s broader legal and commercial systems;
2. maximize the value of a firm’s assets and recoveries by creditors;
3. provide for both efficient liquidation of nonviable businesses and
those where liquidation is likely to produce a greater return to
creditors, and reorganization of viable businesses;
4. strike a careful balance between liquidation and reorganization,
allowing for easy conversion of proceedings from one to another;
5. provide for equitable treatment of similarly situated creditors,
including similarly situated foreign and domestic creditors;
30
The World Bank, Principles for Effective Creditor Rights and Insolvency Systems (Revised Draft –December 21, 2005)
[World Bank Principles], available at http://www.worldbank.org/ifa/FINAL-ICRPrinciples-March2009.pdf
(last accessed January 16, 2013).
31
UNCITRAL Guide, supra.
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Francisco Ed. Lim
6. provide for timely, efficient and impartial resolution of insolvencies;
7. prevent the improper use of the insolvency system;
8. prevent the premature dismemberment of a debtor’s assets by
individual creditors seeking quick judgments;
9. provide a transparent procedure that contains, and consistently
applies, clear risk allocation rules and incentives for gathering and
dispensing information;
10. recognize existing creditor rights and respect the priority of claims
with a predictable and established process; and
11. establish a framework for cross-border insolvencies, with recognition
of foreign proceedings.32
The foregoing guides, principles and assessments, however, do not provide concrete
rules or actions to be set in place. In order to determine other laws, rules or systems to
implement, we must look into, study and consider the experiences and trends implemented
by other countries, and determine if such laws, rules or systems, would work for our
country.
c. ADB Insolvency Reform Guide
Since the ASIAN financial crisis in 1997, the Asian Development Bank (“ADB”) was
extensively involved in helping ASEAN countries reform their insolvency systems.
In 2002, it undertook a regional technical project (RETA No. 5975: Promoting
Regional Cooperation in the Development of Insolvency), which involved four ASEAN
countries (i.e., Indonesia, Korea, Philippines and Thailand) with the following as its main
focus areas: (1) the development of sound insolvency frameworks for handling crossborder insolvencies; (2) regional cooperation, especially in formal and informal workouts
and restructurings; and, (3) the intersection of laws relating to secured transactions and
insolvency.33
In its Final Report (“ADB Insolvency Reform Guide”),34 the ADB suggests several
principles that should be taken into account in improving insolvency systems.
On cross-border insolvency, for example, the ADB Insolvency Reform Guide suggests
the following factors to be considered:
1. formalities for commencement in cases of recognition of foreign
insolvency proceedings;
2. procedures covering both inbound and outbound proceedings;
96
32
World Bank Principles, supra.
33
See Asian Development Bank Website (About RETA 5975) at http://www2.adb.org/Law/Insolvency/RETA5975.asp (last accessed January 16, 2013).
34
Asian Development Bank, Promoting Regional Cooperation in the Development of Insolvency Law Reforms (2008) [ADB
Final Report], available at http://www2.adb.org/Documents/Reports/Insolvency-Law-Final-Report/finalreport.pdf (last accessed January 16, 2013).
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3.
4.
5.
6.
7.
accommodation of different types of insolvency processes;
nomination of different courts;
access to relevant courts;
necessary evidence; and,
effect of recognition of a foreign insolvency proceeding.35
Insofar as informal workouts are concerned, the recommendations contained in the
ADB Insolvency Reform Guide include the following:
1. All finance creditors (other than those whose exposure is negligible)
should be eligible to participate in an informal workout process;
2. A restructure should be based on a business plan that addresses
operational as well as financial issues. A business plan should contain
forecasts, prepared on documented and reasonable assumptions
as to future events, which evince that the business of the debtor
corporation can generate sufficient cash flow and profit to meet its
obligations existing after the restructure;
3. Where a debtor is found to be in financial difficulties, all relevant
creditors should be prepared to cooperate with each other and to allow
a sufficient (though limited) time (“Standstill Period”) for information
about the debtor to be obtained and evaluated and for proposals
for resolving the debtor’s financial difficulties to be formulated
and assessed, unless such a course of action is inappropriate in a
particular case. The length of a Standstill Period should be limited
to the time that is reasonably required to fulfill the above objectives;
4. During the Standstill Period, all relevant creditors should agree to
refrain from taking any steps to enforce their claims or (otherwise than
by disposal of their debt to a third party) to reduce their exposure to
the debtor provided that during the Standstill Period their position
relative to other creditors and each other will not be prejudiced;
5. During the Standstill Period, the debtor should not take any action
that might adversely affect the prospective return to relevant creditors
(either collectively or individually) as compared with the position at
the commencement of the Standstill Period;
6. The interests of relevant creditors are best served by coordinating
their response to a debtor in financial difficulty. Such coordination
will be facilitated by the selection of one or more representative
coordination committees and by the appointment of professional
advisers to assist such committees, where appropriate, and the
relevant creditors participating in the process as a whole;
7. Creditors participating in an informal workout should ensure that
they take an active role by appointing an experienced and competent
representative. The representative should ensure that appropriate
levels of management within the creditor organization are informed
of the progress of the workout at all important stages, and that the
35
Ibid.
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Francisco Ed. Lim
prospective and likely outcome of the workout is expected to be
acceptable to the decision-makers within the creditor organization;
8. The debtor should meet all reasonable costs of creditors while it is
considering restructuring proposals. This would include the costs
of professional advisers, and any costs necessarily incurred by the
coordinating committee; and,
9. If additional funding is provided during the Standstill Period or
under any rescue or restructuring proposals, the repayment of such
additional funding should, as far as practicable, be accorded priority
status as compared to other indebtedness or claims of relevant
creditors.36
On the intersection of secured transactions and insolvency, the ADB Insolvency
Reform Guide includes the following proposals:
1. Clear rules regarding the creation of a secured property interest
would benefit an insolvency representative because it would assist
in determining whether a secured property interest had been validly
created;
2. An insolvency law should provide for the participation of a secured
creditor in an insolvency case, particularly in a case of reorganization,
enabling a secured creditor to participate in any decision-making
process and, for that purpose, establishing a class of secured creditors,
regulating their participation and the circumstances under which a
secured creditor may be bound to a reorganization plan;
3. If an insolvency law provides that a secured creditor may be bound
by a plan of reorganization, the law should provide conditions to
ensure that the economic value of the secured creditor’s rights are
not impaired and permit a secured creditor to object to being bound,
unless such conditions are met; and
4. An insolvency law should limit any claims of privilege or priority
as they may affect secured creditors. Any such claims to which
the proceeds of secured property are subject should be stated in a
transparent and predictable way.
II.
A.
PHILIPPINE INSOLVENCY LAW UNDER THE FRIA
HISTORICAL BACKGROUND
Our first insolvency law, Act No. 1956 (“Insolvency Law”), was enacted on 20 May
1909. As with most legislation of that time, the Insolvency Law traces origin to American
laws. Specifically, it was derived from the Insolvency Act of California (1895), with a few
36
98
ADB Final Report, supra.
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provisions taken from the American Bankruptcy Law of 1898.37 Under the Insolvency
Law, jurisdiction over suspension of payments and insolvency was vested in the Courts of
First Instance (now the Regional Trial Courts).
This changed in 1981, when Presidential Decree No. 1799 amended Section 6 of
Presidential Decree No. 902-A (“PD 902-A”), otherwise known as the SEC Reorganization
Act which was promulgated by then President Ferdinand Marcos on 11 March 1976. PD
902-A, as amended, gave the SEC jurisdiction over suspension of payments cases filed by
corporations, partnerships or associations.
For the first time in our legal history, P.D. 902-A, as amended, introduced the
remedy of rehabilitation. The SEC was vested with the power to create and appoint a
management committee or rehabilitation receiver “when there is imminent danger of
dissipation, loss, wastage or destruction of assets or other properties or
paralization of business operations of such corporations or entities which
may be prejudicial to the interest of minority stockholders, parties-litigants
or the general public.”38
On 8 August 2000, Republic Act No. 8799, otherwise known as the
Securities Regulation Code, came into effect. It reverted jurisdiction over
rehabilitation cases from the SEC to the courts of general jurisdiction or the
appropriate Regional Trial Courts.39 On December 15 of the same year, the
Supreme Court’s Interim Rules of Procedure on Corporate Rehabilitation
(“Interim Rules”)40 became effective.
The Interim Rules laid down the guidelines for filing a petition for
rehabilitation, either by the debtor or the creditor(s), and outlined the
powers and functions of the rehabilitation receiver, among others.
On 16 January 2009, or more than eight (8) years after its promulgation,
the Supreme Court amended the Interim Rules.41
The Insolvency Law, however, continued to remain in force and effect. It
was only on 18 July 2010 that this century-old law was replaced by Republic
Act No. 10142, otherwise known as the Financial Rehabilitation Act (“FRIA”).
The FRIA adopts best practices for an effective insolvency law culled from the
UNCITRAL Guidelines and World Bank Principles, and the ADB Insolvency Reform
Guide, among others. It has the following basic principle:
37
See Sun Life Assurance Co. of Canada v. Ingersoll, G.R. No. 16475, 8 November 1921, 42 Phil. 331 and Mitsui
Bussan Kaisha (Ltd.) v. Hongkong & Shanghai Banking Corporation, G.R. No. 11079, 12 January 1917, 36
Phil. 27.
38
Pres. Decree No. 902-A, as amended by Pres. Decree No. 1799, Sec. 6.
39
Rep. Act No. 8799 (2000), Sec. 5.2.
40
A.M. No. 00-8-10-SC, 21 November 2000.
41
A.M. No. 00-8-10-SC, 2 December 2008.
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Francisco Ed. Lim
“Section 2. Declaration of Policy. - It is the policy of the State to encourage
debtors, both juridical and natural persons, and their creditors to
collectively and realistically resolve and adjust competing claims and
property rights. In furtherance thereof, the State shall ensure a timely,
fair, transparent, effective and efficient rehabilitation or liquidation of
debtors. The rehabilitation or liquidation shall be made with a view to
ensure or maintain certainty and predictability in commercial affairs,
preserve and maximize the value of the assets of these debtors, recognize
creditor rights and respect priority of claims, and ensure equitable
treatment of creditors who are similarly situated. When rehabilitation
is not feasible, it is in the interest of the State to facilitate a speedy and
orderly liquidation of these debtor’s assets and the settlement of their
obligations.”42
Prior to the enactment of the FRIA, rules and procedures on suspension of payments,
corporate rehabilitation, insolvency and liquidation were scattered and embodied in
different laws and Supreme Court issuances.
The FRIA effectively repealed the provisions found in the Insolvency Law, PD 902-A,
as amended, the Interim Rules, and the Rules of Procedure on Corporate Rehabilitation.
In addition, the FRIA codified the procedures and requirements for court-supervised,
pre-negotiated and out-of-court rehabilitation and liquidation proceedings to enable
businesses to continue operating and creditors to recover their investments faster and
more efficiently.
B.
SALIENT FEATURES
The FRIA is not merely a collaboration and codification of existing laws and issuances
on insolvency. It introduced several innovations and has a forward-looking structure to
put our country’s insolvency law at par with international standards. The following are
some of its salient features:
1. Broadened Definition of Insolvency – Under the FRIA, insolvency does not
only refer to a situation where the debtor’s liabilities are greater than its assets (a concept
under the Insolvency Law). Consistent with modern day trend, insolvency now includes
a state of inability to pay liabilities as they fall due in the ordinary course of business.43
2. Broadened Definition of Debtor – Consistent with the pro-business stance
of the FRIA, individuals who conduct business under a single proprietorship, which
is duly registered with the Department of Trade and Industry, may now petition for
rehabilitation.44
100
42
Rep. Act No. 10142 (2010) [FRIA], Sec. 2.
43
FRIA, Sec. 4(p).
44
FRIA, Sec. 4(k).
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3. Global Filing – Recognizing the emergence of business conglomerates, the FRIA
allows the filing of a petition by a group of debtors45 which is defined as: “(1) corporations
that are financially related to one another as parent corporations, subsidiaries or affiliates;
(2) partnerships that are by the same person to the extent of owned more than fifty percent
(50%); and (3) single proprietorships that are owned by the same person.”46
4. Commencement Date – The FRIA introduces the concept of a Commencement
Date and specifies in detail its consequences. It occurs upon the issuance of a
Commencement Order by the court and retroacts to the filing of the petition.
The Commencement Order serves as legal basis for: (a) exception or waiver of all
taxes and fees including penalties, interests and charges;47 (b) rendering null and void
the results of any extrajudicial activity or process to seize property, sell encumbered
property, or otherwise attempt to collection or enforce a claim against the debtor
after the Commencement Date;48 (c) rendering null and void any set-off after the
Commencement Date of any debt owed to the debtor by any of the debtor’s creditors;49
(d) rendering null and void the perfection of any lien against the debtor’s property after
the Commencement Date;50 (e) rendering null and void any sale, payment, transfer or
conveyance of the debtor’s unencumbered property or any encumbering thereof by the
debtor or its agents or representatives which are not in the ordinary course of the business
of the debtor;51 (f) declaring claims of separation pay for months worked prior to the
Commencement Date as pre-commencement claim;52 (g) reckoning the 90-day period to
confirm existing contracts;53 and, (h) declaring null and void transactions, occurring prior
to Commencement Date, entered into by the debtor or involving its funds or assets, which
were executed with intent to defraud the creditor/s or which constitute undue preference
of creditors.54
5. Exchange Debt for Equity – The FRIA recognizes that banks are usually
the big creditors of businesses. To enable them to help rehabilitate their debtors, the
FRIA allows banks to acquire and hold an equity interest or investment in a debtor
or its subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a
rehabilitation or liquidation plan, notwithstanding any provision of law to the contrary.55
45
FRIA, Sec. 12.
46
FRIA, Sec. 4(n).
47
FRIA, Secs. 19, 71.
48
FRIA, Sec. 17(b).
49
FRIA, Sec. 17(c).
50
FRIA, Sec. 17(d).
51
FRIA, Sec. 52.
52
FRIA, Sec. 56.
53
FRIA, Sec. 57
54
FRIA, Sec. 58.
55
FRIA, Sec. 11.
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6. Pre-Negotiated Rehabilitation – Consistent with its objective to provide a
quick resolution of an insolvency situation, the FRIA expressly allows pre-negotiated
rehabilitation plan.
The plan must be endorsed or approved by creditors holding at least two-thirds (2/3)
of the total liabilities of the debtors, including secured creditors holding more than fifty
percent (50%) of the total secured claims and unsecured creditors holding more than fifty
percent (50%) of the total unsecured claims of the debtor.56
The approval of a pre-negotiated rehabilitation plan will have the same legal effect as
the confirmation of a court-supervised rehabilitation plan.57
7. Out-of-Court Rehabilitation – To accommodate preference for informal
workouts and protect the debtor and its creditors from the tyranny of the minority, the
FRIA introduces a key innovation by formally adopting out-of-court rehabilitation as part
of our legal system.
This remedy may be availed of where the debtor/s, and creditors representing at
least 85% of the debtor’s total liabilities (composed of at least 67% of the debtor’s secured
obligations and 75% of the debtor’s unsecured obligations), agree on a restructuring or
rehabilitation plan.58 This is essentially an out-of-court proceeding, but the FRIA expressly
allows the insolvent debtor and/or creditor to seek court assistance for the execution or
implementation of their rehabilitation plan.59
8. Exemption from Taxes – In furtherance of its policy objectives, the FRIA
grants certain relief from the imposition of all taxes and fees including penalties, interests
and charges due the national government or local government units upon issuance of the
Commencement Order.60
In addition, the FRIA provides that the amount of any indebtedness or obligation,
reduced or forgiven in connection with a rehabilitation plan’s approval, shall not be
subject to any tax.61
9. Additional Exceptions to Stay or Suspension Order – To help put an
end to never-ending disputes on the coverage of the stay or suspension order, the FRIA
enumerates the exceptions to its suspensive effect. For example, the order does not apply
to cases pending in the Supreme Court and specialized bodies62 and some financial
market-related transactions (i.e., clearing of checks, settlement of securities in the stock
102
56
FRIA, Sec. 76.
57
FRIA, Sec. 82.
58
FRIA, Secs. 83-84.
59
FRIA, Sec. 89.
60
FRIA, Sec. 19.
61
FRIA, Sec. 71.
62
FRIA, Sec. 18 (a) and (b).
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market, etc.).63
10. Post-commencement Loans and Obligations – To encourage third parties
to extend financial and other forms of assistance to the distressed debtor, the FRIA
allows the debtor, with the approval of the court and upon the recommendation of the
rehabilitation receiver, to enter into credit arrangements or incur other obligations as may
be essential for its rehabilitation.64
The payment of these post-commencement loans and obligations is considered an
administrative expense,65 which means that they can be paid by the debtor notwithstanding
the stay or suspension order.
11. Personal Liability of Directors and Officers – In line with trends on good
corporate governance, the FRIA imposes personal liability on directors and officers if
they are found to have willfully disposed or caused the disposal of any property in fraud
of creditors or in a manner grossly disadvantageous to the debtor, or have concealed or
approved the concealment from the creditors of, or embezzles or misappropriates, any
property of the debtor.66
12. Juridical Person as Rehabilitation Receiver – A juridical person may
now serve as a rehabilitation receiver. It must, however, designate a natural person who
possesses all the qualifications and none of the disqualifications of a rehabilitation receiver
as its representative.67
13. Creditors’ Committee – To facilitate the rehabilitation of the debtor, the FRIA
expressly authorizes the creditors belonging to a class to formally organize themselves into
a committee. The creditors may, as a group, form one committee composed of: (a) secured
creditors; (b) unsecured creditors; (c) trade creditors and suppliers; and, (d) employees of
the debtor.68
14. Confirmation of Contracts – The FRIA requires the debtor, with the
consent of the rehabilitation receiver, to notify each contractual counter-party whether
it is confirming a particular contract. Contractual obligations of the debtor arising or
performed during this period, and afterwards (for confirmed contracts), shall be considered
as administrative expenses. Contracts not confirmed within the required deadline shall be
considered terminated.69
63
FRIA, Sec. 18(f).
64
FRIA, Sec. 55.
65
See FRIA, Sec. 4(a)(4).
66
FRIA, Sec. 10.
67
FRIA, Sec. 28.
68
FRIA, Secs. 42-43.
69
FRIA, Sec. 57.
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15. Protection of Secured Creditors’ Interest – Consistent with international
best practices, the issuance of a commencement order or a suspension or stay order does
not diminish or impair the security or lien of a secured creditor, or the value of his/its lien
or security, except that his right to enforce it is suspended during the term of a stay order.
If the property secured is not necessary for the rehabilitation of the debtor, however,
the secured creditor is allowed to enforce his security or lien, or foreclose upon the property
of the debtor securing his/its claim under certain conditions.70
16. Conversion into Liquidation – In a court-supervised rehabilitation, a
rehabilitation plan must be approved by the court not later than one (1) year from the
filing of a petition. If no rehabilitation plan is approved within such period, the court
may, on its own or upon motion of a party, order the conversion of the rehabilitation
proceeding into liquidation.71
17. Faster Voluntary Liquidation – In cases of voluntary liquidation, the FRIA
mandates the issuance of a liquidation order within five (5) working days if the court finds
the petition sufficient in form and substance.72 In addition, the FRIA, in contrast to the
old Insolvency Law, no longer requires the posting of a bond with at least two (2) sureties.
C.
UNCITRAL CROSS-BORDER INSOLVENCY MODEL LAW
In order to better prepare for globalization of businesses, the FRIA formally
adopted the Model Law on Cross-Border Insolvency of the United Nations Commission
on International Trade Law (“Model Law”). The Model Law is aimed at improving
cooperation of courts and administrators in international insolvency proceedings, with
the “goal of maximizing the value of the debtor’s worldwide assets, protecting the rights
of the debtors and creditors and furthering the just administration of the proceedings.”73
Notably, in the Association of Southeast Asian Nations (ASEAN), the Philippines is
first to recognize and adopt the Model Law in its insolvency system.
The Model Law reflects cross-border insolvency practices which are characteristic
of modern and efficient insolvency systems. The Model Law, however, respects different
national procedural laws and does not impose a substantive unification of insolvency laws.
Instead, the Model Law offers solutions which help in modest, but significant, ways.74
These include:
104
70
FRIA, Sec. 60.
71
FRIA, Sec. 72.
72
FRIA, Sec. 104.
73
The World Bank, Principles and Guidelines for Effective Insolvency and Creditor Rights Systems (April 2001), available at
http://www.worldbank.org/ifa/ipg_eng.pdf (last accessed January 16, 2013).
74
United Nations Commission On International Trade Law (UNCITRAL), UNCITRAL Model Law on Cross-Border
Insolvency with Guide to Enactment, [UNCITRAL Model Law] available at http://www.uncitral.org/pdf/english/
texts/insolven/insolvency-e.pdf (last accessed January 16, 2013).
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1. Providing foreign representatives the right to access courts of the
enacting State. This, in turn, provides relief or a temporary “breathing
space” to foreign representatives and allows the court to determine
coordination among various jurisdictions or grant such other relief
warranted for optimal disposition of the insolvency proceeding;
2. Determining when a foreign insolvency proceeding should be
accorded recognition and the consequences of the same;
3. Providing a transparent regime in furtherance of the right of foreign
creditors to commence or participate in an insolvency proceeding in
the enacting State;
4. Permitting courts in the enacting State to cooperate effectively with
other courts and representatives, in a foreign insolvency proceeding;
5. Authorizing courts in the enacting State and other persons
administering insolvency proceedings therein to seek assistance
abroad;
6. Establishing rules for coordination in cases where an insolvency
proceeding in the enacting State proceeds concurrently with an
insolvency proceeding in another State; and,
7. Establishing rules for coordination of the relief granted in the
enacted State, in cases where two or more insolvency proceedings
involving the same debtor take place in multiple States.
The Model Law may be applied to a number of cross-border insolvency situations,
including the following: (a) inward-bound requests for recognition of a foreign proceeding;
(b) outward-bound requests from a court or administrator in the enacting State for
recognition of an insolvency proceeding commenced under the laws of the enacting State;
(c) coordination of concurrent proceedings in two or more States; and, (d) participation of
foreign creditors in insolvency proceedings taking place in the enacting State.75
The salient features of the Model Law are the following:
1. Cross-border Cooperation – There is a widespread limitation on cooperation
and coordination among judges from different jurisdictions in cases of cross-border
insolvency. This limitation is derived from uncertainty in, or lack of a legislative framework
regarding, the scope of legislative authority to pursue cooperation with foreign courts.
The Model Law expressly empowers courts to extend cooperation in the areas
covered by the Model Law.76 This includes authorizing cooperation between a court in
the enacting State and a foreign representative, and between a person administering the
insolvency proceeding in the enacting State and a foreign court or representative.77
75
UNCITRAL Model Law, Art. 1.
76
See UNCITRAL Model Law, Arts. 25-27.
77
UNCITRAL Model Law, Art. 26.
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Francisco Ed. Lim
2. Coordination of Concurrent Proceedings – The Model Law deals with
coordination between a local proceeding and a foreign proceeding concerning the same
debtor78 and facilitates coordination between two or more foreign proceedings involving
the same debtor.79
The objective is to foster coordinated decisions that would best achieve the objectives
of both proceedings (e.g., maximizing the value of the debtor’s assets and determining
the most advantageous restructuring of the enterprise). In order to achieve satisfactory
coordination and adapt relief to changing circumstances, the Model Law directs the
court, in all situations covered by the Model Law (including those that limit the effects of
foreign proceedings in the face of local proceedings), to cooperate with foreign courts and
representatives to the maximum extent possible.80
3. Foreign Assistance for Insolvency Proceeding Taking Place in the
Enacting State – The Model Law authorizes courts of the enacting State to seek
assistance from other jurisdictions on behalf of an insolvency proceeding taking place
therein.81 Without such legislative authorization, courts are deterred from seeking such
assistance abroad. This, in turn, creates potential obstacles to a coordinated international
response in case of cross-border insolvency.
4. Foreign Representative’s Access to Courts of the Enacting State – An
important objective of the Model Law is to provide foreign representatives expeditious
and direct access to courts of the enacting State. The Model Law avoids the need to rely
on cumbersome and time-consuming letters rogatory or other diplomatic or consular
communications. Thus, it facilitates a coordinated approach to cross-border insolvency
and makes fast action possible.
5. Recognition of Foreign Proceedings – The Model Law establishes the criteria
in determining whether a foreign proceeding should be recognized.82 It provides that, in
appropriate cases, the court may grant interim relief pending a decision on recognition.83
D.
THE PROPOSED FRIA RULES
In accordance with its constitutionally-vested rule-making power, the Supreme Court
is in the process of formulating the implementing rules and regulations of procedure
(“IRR”) of the FRIA. The IRR for rehabilitation proceedings under the FRIA has
been drafted by the Sub-Committee on Commercial Courts. The draft rules have been
circulated to various stakeholders for their comments.
106
78
UNCITRAL Model Law, Art. 29.
79
UNCITRAL Model Law, Art. 30.
80
See UNCITRAL Model Law, Arts. 25-30.
81
UNCITRAL Model Law, Art. 25.
82
See UNCITRAL Model Law, Arts. 15-17.
83
UNCITRAL Model Law, Art. 19.
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Some of the key issues to be clarified under the IRR (for rehabilitation proceedings)
are the following:
1. The majority vote requirement for court-supervised rehabilitation
under Section 12 of the FRIA. The issue is whether the majority vote requirement
should be liberally construed and simply defined as more than 50% of the stockholders
representing the outstanding capital stock, notwithstanding any higher majority vote
requirement imposed in the debtor’s articles of incorporation and/or by-laws.
2. The consolidation of all legal proceedings upon the issuance of a
Commencement Order as provided under Section 17 (e) of the FRIA. The
question is whether a decision or order rendered by a judicial body, despite the issuance
of a Commencement Order, should at least be voidable in nature or may be a subject of
an annulment proceeding.
3. The time period for deciding a court-supervised rehabilitation case.
The FRIA gives a maximum period of one year. The issue is whether the Supreme Court
may be authorized under the IRR to give an extension for compelling reasons.
4. Treatment of Employee’ Claims. Under Section 56 of the FRIA, compensation
of employees required to carry on the business shall be considered administrative expense.
In cases where the employer does not want to reinstate the employee pending appeal and
opts for payroll reinstatement, the issue is whether such payroll reinstatement can be
considered as administrative expense.
5. Out-of-Court Rehabilitation Agreements. The issue is whether there can
be an authorized splitting of cause of action, i.e., a case in the Regional Trial Court to
annul the out-of-court rehabilitation agreement under its general jurisdiction and a case
for prohibitory injunction under Section 88 of the FRIA, to enjoin the implementation
of the agreement.
Once the IRR for rehabilitation proceedings are approved, the IRR for liquidation
proceedings will be drafted and thereafter, promulgated in due course.
III. ADDITIONAL KEY COMPONENTS FOR AN
EFFECTIVE INSOLVENCY SYSTEM FOUND
IN DEVELOPING COUNTRIES
The passage of the FRIA is considered a major reform to our economy’s financial
system. Nevertheless, we still need to provide a complementary set of rules and support
systems to ensure its effectivity and efficiency.
As previously mentioned, the Supreme Court is in the process of drafting the IRR
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Francisco Ed. Lim
of the FRIA. Aside from well-established rules, however, developed and/or developing
countries have put in place the following in their insolvency frameworks:
A.
CAPACITY BUILDING FOR INSOLVENCY COURTS
i. Special Commercial Courts
An efficient judicial system is founded on rules that confer jurisdiction upon courts and
vest them with authority to act on insolvency proceedings. Jurisdiction is the authority to
hear and determine a cause or the right to act in a case.84 Considering that rehabilitation
proceedings, insolvency issues and the task of implementing its governing law, such as the
FRIA, involve highly crucial and technical matters, most jurisdictions have assigned and
created “specialized” courts.
In Belgium, its legislature created a body called the “judicial composition” under
the Federal Act of 17 July 1997. The objective was to spot traders in difficulty at an
early stage and before their problems became so serious that the procedure would not
be able to save them from insolvency. Inside the commercial courts, there were special
chambers that were assigned to collect data on traders in difficulty. These chambers were
composed of three judges who determine whether a trader meets the criteria for a judicial
composition. The main source of information consisted of data that traders were obliged
to file with the registry of the commercial court on a regular basis. The special chambers
were also required to conduct its examinations in a discreet way so as not to disturb
normal commercial life. In fact, only the debtor and the public prosecutor were given the
right to consult the file.85
This “specialized” court in Belgium, however, was considered too evasive and created
a negative stigma in the names of the distressed traders. Thus, Belgium later (i.e., on 31
January 2009) passed the Law on the Continuity of Enterprises, which fundamentally
changed the rules on judicial composition. At present, the two main objectives which
govern Belgium’s new Restructuring Law are: (i) promoting out-of-court or confidential
restructurings, so that the debtor can avoid the negative stigma attached to any public
insolvency proceeding; and, (ii) providing flexible solutions to allow companies in distress
to reorganize their activities.86
In the United States, Congress passed the Bankruptcy Code which, among others:
(1) created a bankruptcy court, the constituent members of which are bankruptcy judges
appointed by the judges of various courts of appeals for a term of fourteen (14) years; (2)
granted jurisdiction over bankruptcy cases and litigation, which arises in those cases to
the district courts in the first instance; and, (3) reallocated the insolvency responsibility by
enabling a district court handling bankruptcy litigation to refer them to the bankruptcy
108
84
Feria & Noche, I Civil Procedure Annotated 130 (2001).
85
Collier International Business Insolvency Guide 2, Insolvency Laws of Selected Nations 15.05[1] (2005 ed.).
86
See Thierry Bosly and Muriel Alhadeff, The New Belgian Insolvency Law, White & Case, January 31, 2009, available
at http://www.whitecase.com/alert_new_belgian_insolvency_law_01312009 (last accessed January 16, 2013).
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court.87
However, in the Philippines, while Congress initially considered the creation of
specialized courts, budgetary constraints prevented this idea to materialize. Moreover,
considering that there are only few insolvency cases filed every year, Congress found it
best to leave the designation of specialized commercial courts from the ranks of our
Regional Trial Courts to the Supreme Court.
At present, there are special commercial courts which handle intra-corporate,
rehabilitation and intellectual property cases under A.M. No. 03-03-03-SC.
ii. Training Programs
Sufficient training programs and a medium must be in place to ensure the competency,
efficiency and independence of these specialized courts.
In the United States, bankruptcy judges as well as all federal judges and magistrates,
receive formal judicial training from the Federal Judicial Center in Washington D.C.
The Center provides research, training and continuing education programs necessary
to increase the skills of the judges. The Center runs orientation training for all new
federal judges, providing an in-depth introduction to the federal court system and to
substantive and procedural areas pertinent to the areas of law in which the judges deal.
The Center also provides continuing legal education programs, offering each judge an
update in relevant areas of statutory and case law, as well as case management. There is
also specialized training in specific subject areas, such as financial accounting, which is
very important to the development of bankruptcy judges skills.88
In the Philippines, the Philippine Judicial Academy (“PHILJA”), which was created
by the Supreme Court pursuant to Administrative Order No. 35-96 on 12 March 1996,
was institutionalized as the “training school for justices, judges, court personnel, lawyers
and aspirants to judicial posts.”89
PHILJA plays a vital role in ensuring judicial competence and efficiency through
continuing judicial education.
The training of our commercial law judges has been pursued earnestly by the Supreme
Court through PHILJA. PHILJA recently completed a training module on rehabilitation
and liquidation proceedings in insolvency. This module included the following: (1) recent
trends and developments in light of the enactment of the FRIA; (2) introduction of
significant changes and basic legal concepts and reasoning, including an introduction to
87
Collier International Business Insolvency Guide 2, Insolvency Laws of Selected Nations 2.02 [3], (Release No.
15, September 2012).
88
See Timothy B. De Sieno and Rupal Shah Palanki, The United States’ Specialized Bankruptcy Courts (Forum for Asian
Insolvency Reform, Insolvency Reform in Asia: An Assessment of the Recent Developments and the Role of
the Judiciary, Bali, Indonesia, February 7-8, 2001), available at http://siteresources.worldbank.org/GILD/Resources/DiSieno.pdf (last accessed January 16, 2013).
89
Rep. Act No. 8557 (1998), Sec. 3.
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Francisco Ed. Lim
primary and secondary source materials relating to the FRIA; (3) discussions on specific
roles and tasks; and, (4) accounting issues.
It is highly recommended that there be a continuing capacity building program for
our special commercial court judges on insolvency matters, which should include: (1) best
practices and techniques in handling rehabilitation and liquidation cases; (2) updates on
rules, procedures and jurisprudence; (3) studies on local and foreign insolvency cases; (4)
exposure trips to enable our judges to actually observe foreign insolvency proceedings and
interact with foreign bankruptcy judges; (5) introduction to procedures of international
insolvency proceedings in light of the cross-border insolvency provisions in the FRIA;
(6) dealing with rehabilitation receivers and liquidators; (7) financial and other technical
issues such as fixing the compensation of rehabilitation receivers and liquidators; and, (8)
guidelines in dealing with ethical disputes that may arise during the proceedings.
iii.Specialized Court Personnel
Capacity building for our insolvency courts may include tapping specialized personnel
to assist them.
In Germany, for example, there is a specialized court officer called a “Rechtspfleger”
who replaces the judge in a limited area of legal activity.90 The Rechtspfleger is a very
important officer in insolvency proceedings. After the proceedings have been opened
by the judge, they are from then on presided by the Rechtspfleger. This means that the
Rechtspfleger represents the court in the post-opening stage. The judge is no longer involved.
Theoretically, the judge may decide to retain control of the proceedings. The judges,
however, rarely do so because they have little or no experience with the post-opening
stage.
Unlike a judge, a Rechtspfleger does not have to attend law school and obtain a Juris
Doctor degree. Instead, he has to go through a legal education program especially designed
for the Rechtspfleger profession. The German states run internal colleges for that program.
Generally, the colleges will only admit students who have the revocable status of a civil
servant of the state running the college. The program takes three (3) years to complete.
It is made up of both on and off the job training. In some German states, the program
includes twelve (12) months of studies at the college, followed by thirteen (13) months
practical training at an Amtsgericht (County Court) and in the office of a civil law notary,
followed by another nine (9) months of studies at the college and concluded by two (2)
months of practical training with the office of the public prosecutor. At the end of the
program, the students have to take the Rechtspfleger exam. Each student who passes the
exam is awarded the degree of Diplomrechtspfleger. The Rechtspfleger decides independently,
just like a judge. The Rechtspfleger’s responsibilities include, among others, the following:
(a) supervision of legal guardians; (b) rulings on applications for entry in the commercial
register; (c) registration of mortgages and similar rights in the registry of deeds; (d) judicial
sales of realty; and, (e) execution of civil and criminal judgments.
90
110
See http://www.insolvencycourts.org/ICE/ICEGermanBasics.html (last accessed January 16, 2013).
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Toward a More Forward-Looking Insolvency System
In the United States, there is an officer known as a Certified Bankruptcy Assistant
(“CBA”). CBAs are required to attend a Certified Bankruptcy Assistant Program wherein
they are provided with a general background in bankruptcy law and enhanced writing
skills for professional bankruptcy assistants. Successful completion of the program allows
the CBA to have an enhanced knowledge-base and qualifications for private or public
employment in the bankruptcy field.
B.
CAPACITY BUILDING FOR INSOLVENCY PRACTITIONERS
Bankruptcy law has developed into a very unique, sophisticated and technical area
of expertise, and there is an increasing demand for legal ability and proficiency especially
from those who practice in this field. For example, rehabilitation receivers and liquidators
may be required to periodically attend primer courses on good insolvency practices. The
topics offered may include, among others, current developments and trends on insolvency
proceedings, compliance mechanisms and relevant periods, and ethical and professional
responsibility, including duty of confidentiality.
The organization of associations for insolvency practitioners has been done in other
countries to help professionalize the ranks of insolvency practitioners. In fact, there
is a worldwide federation, known as the International Association of Restructuring,
Insolvency & Bankruptcy Professionals (“INSOL”), composed of national associations of
accountants and lawyers who specialize in turnaround and insolvency. Currently, there
are over forty-three (43) Member Associations with over 9,000 professionals participating
as members.
INSOL also has ancillary groups that represent the judiciary, regulators, lenders and
academics. These groups play an invaluable role within INSOL and provide valuable fora
for discussions of mutual problems.
Members of INSOL have ready access to various conferences, seminars, publications
and activities that would facilitate the exchange of information and ideas, encourage
greater international cooperation and communication amongst insolvency professionals.
By becoming a member of, or partnering with, these international associations, we will
be equipped with vital knowledge and experience to guide our country in developing
internationally-accepted legislation and best practices.
In Australia, the Insolvency Practitioner Association of Australia (“IPAA”) has,
within the past twenty to thirty years, promulgated a scale of hourly rates for insolvency
practitioners. Liquidators are required to be registered.91 Administrators and liquidators in
Australia are required to make a statement of independence in the form of a declaration
of relevant relationships they have or have had with the company, its associates, any
former liquidators or administrators or any charge holder in the preceding twenty-four
(24) months.92 The Australian Securities and Investment Commission may investigate a
91
Collier International Business Insolvency Guide 2, Insolvency Laws of Selected Nations 14.04[4][v][A] (2005
ed.).
92
Ibid. at 14.04[5][d].
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Francisco Ed. Lim
liquidator’s conduct if he or she has not faithfully performed his or her duties.93
C.
“ELECTRONIC FILING” SYSTEM
Delay in the proceedings is commonly caused by the difficulty in determining the
reckoning date for the running of the period for compliance with the court’s orders and
processes. Our present Rules of Court provide that the period to file a responsive pleading
starts from receipt of the order/pleading. Thus, in order to delay the proceedings, most
parties serve and file their pleadings through registered mail.
To solve this problem, the court may require the parties to file and serve their pleadings/
motions electronically. In fact, the United States has created a system where parties and
courts may electronically file and serve their pleadings/motions/order. This system is
called the Electronic Bankruptcy Noticing (“EBN”).94 Under the EBN, lawyers, parties
and the courts can upload their pleadings and filings, and once uploaded, the same would
be accessible by interested persons online. The use of the EBN is free and voluntary, in
that the parties must consent to be subject to the electronic filing and notification system.
By having an electronic filing (“e-filing”) database, parties will no longer have an
avenue to prolong the proceedings of the case. Moreover, an e-filing system will be good
for our environment, as this would reduce the need to print out copies to be furnished all
parties of the case.
D.
ESTABLISHING AN EXPEDITIOUS AND SPECIALIZED
APPEAL SYSTEM
There is also a need to establish a fast track appeal system made up of an insolvency
law panel of appellate court judges. This would bring expertise to the appellate level.
While appeals cause delay in the disposition of a case, there must still be a mechanism
that would allow a timely and proficient review of the orders, resolutions and decisions of
the lower courts. This may only be attained if the composition of the reviewing body is
properly trained, experienced and knowledgeable in insolvency proceedings.
112
93
Ibid. at 14.04[5][f][iv]. See also Report 287: ASIC regulation of registered liquidators: January to December 2011 (Australian Securities & Investments Commission, May 2012), available at http://www.asic.gov.au/asic/pdflib.nsf/
LookupByFileName/rep287-published-22-May-2012.pdf/$file/rep287-published-22-May-2012.pdf (last accessed January 16, 2013).
94
See Electronic Bankruptcy Noticing at http://ebn.uscourts.gov/ (last accessed January 16, 2013).
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IV.
CONCLUSION
The legislative reform of the country’s insolvency system, through the enactment of
the FRIA, is a major step toward economic and financial reform. The FRIA has a forwardlooking structure by adopting international best practices on insolvency. Foremost is the
adoption of pre-negotiated rehabilitation, out-of-court rehabilitation or restructuring
agreements, and cross-border insolvency as component parts of the law.
With the enactment of the FRIA, we have paved the road to a more effective and
responsive insolvency system. Nevertheless, there are several support systems that still
need to be developed to realize this objective. As discussed above, these include capacity
building for our special commercial courts handling insolvency cases and insolvency
practitioners, providing for electronic filings and creating a fast track appeal system similar
to those existing in developed nations.
With the foregoing in mind, let us now move forward and take a step toward a
developed and stable financial economy.
•••
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•••
113
Ma. Araceli B. Habaradas
Ethical Regulation on Post-Mediation Professional
Relationships of the Philippine Mediator/Lawyer:
Is It Sufficient? *
Ma. Araceli B. Habaradas **
Among the critical concerns requiring a mediator/lawyer’s careful consideration ‘before,
during and after mediation’ are conflict of interest, neutrality, and confidentiality.1
These concerns are integral in protecting mediation participants and preserving the
integrity of the mediation process. This essay examines the ethical regulation on
cross-profession conflicts of the Filipino mediator/lawyer and its capability to protect
mediating parties, preserve neutrality and confidentiality, and uphold integrity of the
mediation process, and consequently, promote public confidence in mediation in the
Philippines.
The Philippines is encouraging the use of alternative dispute resolution (‘ADR’)
processes and enlisting ‘active private sector participation’ in disputes settlement through
ADR. Having skills and attributes desired of third-party neutral roles,2 lawyers are likely
to respond to this call for participation by engaging in the practice of mediation. With
an anticipated growth in number of lawyers practicing mediation in the Philippines,3
this essay focuses on the ethical regulation in the Philippines on cross-profession conflicts
of interest of a mediator who is also a lawyer (‘mediator/lawyer’) and assesses the
regulation’s sufficiency to protect mediating parties and uphold the integrity of mediation
as an ADR process. The essay will explain why much is to be desired in the subject
conflicts regulation’s ability to promote key concerns of confidentiality and neutrality, to
uphold mediation process integrity, and to stimulate public confidence in mediation as an
ADR process.
Part I discusses how key concerns of conflicts of interest, neutrality and confidentiality
are tied to the legitimacy and integrity of the mediation process. Part II dissects the ethical
114
*
This is an essay submitted to complete the requirements for the Dispute Resolution course of under the Master
of Dispute Resolution program of the University of New South Wales.
**
Accredited as Associate Mediator of the Singapore Mediation Centre and an Associate Member of LEADRAssociation of Dispute Resolvers; accredited under Australia’s National Accreditation System for mediators;
LL.M, Columbia University; Master of Dispute Resolution, University of New South Wales; Awardee for
Excellence on Mediation, Managing Workplace Conflict and Change and Facilitation.
1
Naomi Cukier, ‘Lawyers acting as mediators: Ethical dilemmas in the shift from advocacy to impartiality’ (2010)
21 Australasian Dispute Resolution Journal 59, 60.
2
See generally Mary Anne Noone, ‘Lawyers as mediators: More responsibility?’ (2006) 17 Australasian Dispute
Resolution Journal 96; Judith L Maute, ‘Public Values and Private Justice: A Case For Mediator Accountability’
(1990-1991) 4 Georgetown Journal of Legal Ethics 503, 508; Alison Smiley, ‘Professional Codes and Neutral
Lawyering: An Emerging Standard Governing Nonrepresentational Attorney Mediation’ (1993-1994) 7
Georgetown Journal of Legal Ethics 213. Maute maintains legal knowledge ‘facilitates mediation’ while Noone
contends that the ‘skills, training and experience’ of lawyers make them ‘ideally placed to be mediators’ (citing
Tapoohi v Lewenberg (No 2) [2003] VSC 410 at [76] per Habersberger J.). Smiley asserts that lawyers, compared to
other neutrals, ‘may be better’ in ‘identifying issues, pressing parties for decisions, incorporating these decisions
into a final settlement agreement, and drafting the final agreement.’
3
With the approval in 2012 of accreditation guidelines for ADR practitioners. See Adopting Accreditation Guidelines
for Alternative Dispute Resolution Provider Organizations and Training Standards for Alternative Dispute Resolution Practitioners
(Philippines) 17 August 2012, Department of Justice Circular No. 049.
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Ethical Regulation on Post-Mediation Professional Relationships of
Philippine Mediator/Lawyer: Is it Suffecient?
regulation as it applies to post-mediation professional relationships of Philippine mediator/
lawyers and reviews the regulation’s sufficiency to uphold neutrality and confidentiality in
mediation. References to ethical standards for mediator/lawyers (or mediators in general)
in other countries will be made to learn what lack may be plugged and if wisdom can
be drawn their experiences. Part III concludes the essay with a summary of proposed
modifications to improve the ethical regulation for mediator/lawyers.
I. NEUTRALITY, CONFIDENTIALITY, CONFLICTS AND CODES
Changing mediator and lawyer hats is a road laden with ethical dilemmas.4 Deemed
‘three of the most significant ethical dilemmas faced by practitioners of ADR’5, neutrality,
confidentiality and conflicts of interest are among the ‘fundamental considerations’
requiring attention from a lawyer shifting practice from advocate to neutral ‘before,
during and after mediation’.6 And when she7 switches hats back from mediator to advocate,
neutrality, confidentiality and conflicts of interest concerns merit equal attention as postmediation professional relationships may affect the interests of ADR parties, the integrity
of the mediation, and the public’s confidence in the process.
Neutrality and impartiality8 are ‘critical defining characteristics’ of mediation9
and their importance and centrality in mediation as an ADR process cannot be
overemphasized.10 Considered an ‘ethical requirement’ in mediation,11 neutrality is ‘often
4
See generally Maureen E Laflin, ‘Preserving the Integrity of Mediation Through the Adoption of Ethical Rules
for Lawyer-Mediators’ (2000) 14 Notre Dame Journal of Law Ethics & Public Policy 479; Carrie Menkel-Meadow,
‘The Lawyer as Consensus Builder: Ethics for a New Practice’ (2002-2003) 70 Tennessee Law Review 63.
5
Carrie Menkel-Meadow, ‘Ethics in Alternative Dispute Resolution: New Issues, No Answers from the Adversary
Conception of Lawyers’ Responsibilities’ (1997) 38 South Texas Law Review 407, 444. Menkel-Meadow
contends that ‘conflicts, confidentiality and neutrality, as three of the most significant ethical dilemmas faced
by practitioners of ADR, demonstrate how [to] consider the underlying values which inform the practice
differences [between neutral and lawyer roles]’ before ADR can be assimilated to lawyers’ ethics.
6
Cukier, above n 1. (emphasis added) Other fundamental considerations noted by Cukier are diligence,
competence, fairness and integrity, public interest, and fees.
7
Feminine and masculine pronouns are alternately used without suggesting gender-related assumptions.
8
In this essay, neutrality and impartiality are used interchangeably.
9
Christopher W Moore, The Mediation Process – Practical Strategies for Resolving Conflict (Jossey-Bass, 3rd revised ed,
2003) 53.
10
Hilary Astor, ‘Mediator Neutrality: Making Sense of Theory and Practice’ (2007) 16(2) Social & Legal Studies
221, 224 (noting that neutrality ‘plays a particularly important role in legitimizing mediation as a method of
resolving disputes.’). See generally Ellen E Deason, ‘The Quest for Uniformity in Mediation Confidentiality:
Foolish Consistency or Crucial Predictability?’ (2001-02), 85 Marquette Law Review 79, 82 (Deason tags neutrality
as “a bedrock principle of mediation”); Paula M. Young, ‘Rejoice! Rejoice! Rejoice, Give Thanks, and Sing:
ABA, ACR, and AAA Adopt Revised Model Standards Of Conduct For Mediators (2006) 5 Appalachian Journal
of Law 195, 209 (Young considers impartiality as a core value of mediation); Sara Cobb and Janet Rifkin,
‘Practice and Paradox: Deconstructing Neutrality in Mediation’ (1991) 16 Law and Social Inquiry 35 (Neutrality is
attributed as ‘a concept central to the theory and practice of mediation’); Uniform Mediation Act – 2001 (20022003) 3 Pepperdine Dispute Resolution Law Journal 449, 458 (drafters of the Uniform Mediation Act – 2001 of the
United States recognize that the ‘credibility and integrity of the mediation process is almost always dependent
upon the neutrality and the impartiality of the mediator.’).
11
Laurence Boulle, Mediation Principles, Process, Practice (LexisNexis Butterworths, 3rd ed, 2011) 75 [3.30]. See also
Suzanne McCorkle, ‘The Murky World of Mediation Ethics: Neutrality, Impartiality, and Conflict of Interest
in State Codes of Conduct (Winter 2005) 23 Conflict Resolution Quarterly 166 where McCorkle acknowledges
discourses on neutrality ‘as an immutable prerequisite of ethical mediation.’
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Ma. Araceli B. Habaradas
presented as an essential element of the superiority of mediation over legal representation
in the adversarial system.’12 Underscoring mediator ethical responsibility, Astor asserts
that the ‘legitimacy’ of mediation as a dispute resolution method ‘rests strongly’ on
‘mediator neutrality’.13
Boulle suggests that neutrality may be appreciated in the sense of disinterestedness
(i.e., mediator has ‘no personal or commercial interest in the mediation outcome, other
than in seeing a settlement reached’14), independence (i.e., mediator has ‘no prior
relationship’ with the ADR parties or ‘allegiance’ to other parties that may be interested
in the mediation outcome15) and impartiality (i.e., mediator conducts the process ‘fairly,
even-handedly and without bias towards either party16’).
Even if mediation has concluded, neutrality and impartiality remain ongoing
concerns. Moore contends that a mediator’s ability to be impartial or neutral ‘may be
undermined’ not only by past and present relations but also ‘potential future relations
with one or more of the parties’ in mediation.17 Since the ‘ultimate test of the impartiality
and neutrality of the mediator lies in the judgment of the parties’18, the perception of the
parties must be maintained even after the mediation making mediators ‘concerned about
not only prior but subsequent relationships’.19 Professional relationships subsequent to
mediation must therefore be governed by clear ethical guidelines as said relationships may
compromise impartiality, whether in fact or appearance.20
Like neutrality, confidentiality is considered a ‘defining feature of mediation.’21
Confidentiality is ‘regarded as fundamental to effective mediation’ as it ‘fosters
communication between the parties and the mediator.’22 Expectations of confidentiality
determine the amount of candor mediating parties will display during mediation.23
A conflict regulation is a form confidentiality protection that intends to minimize the
116
12
Michael King, Arie Freiberg, Becky Batagol, Ross Hyams, Non-Adversarial Justice (Federation Press, 2009) 105.
13
Astor, above n 10, 222. Astor adds that legitimacy of mediation also “rests strongly” on “consensual decisionmaking” which is related to mediator neutrality.
14
Boulle, above n 11, 73 [3.28].
15
Ibid.
16
Ibid.
17
Moore, above n 9, 449.
18
Ibid 54
19
Robert A Baruch-Bush, ‘The Dilemmas of Mediation Practice: A Study of Ethical Dilemmas and Policy
Implications’ (1994) 1994 Journal of Dispute Resolution 1, 12.
20
Ibid.
21
Rebecca Callahan, ‘Mediation Confidentiality: For California Litigants, Why Should Mediation Confidentiality
be a Function of the Court in Which the Litigation is Pending?’ (2012) 12 Pepperdine Dispute Resolution Law Journal
63, 64. Boulle considers impartiality an ‘intrinsic principle in’ and ‘defining feature of ’ mediation. (Boulle, above
n 11, 479).
22
Deason, above n 10, 80.
23
David Spencer and Michael Brogan, Mediation Law and Practice (Cambridge University Press, 2006) 85-86
(‘Confidentiality, in general terms, provides that parties may discuss the issues between them without fear of
disclosure to others in order to facilitate the resolution of the dispute.’)
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Ethical Regulation on Post-Mediation Professional Relationships of
Philippine Mediator/Lawyer: Is it Suffecient?
‘incentive for parties to withhold information from the mediator.’24 The ability of a third
party neutral to maintain confidentiality is a prerequisite to the integrity of the mediation
process25 and how confidentiality is handled in mediation can define the success of
mediation ‘as an alternative to litigation.’26
Izumi contends that ‘subsumed in the concept of neutrality’ is the avoidance of ‘any
actual or apparent conflict of interest’27 and that the value of confidentiality rests ‘upon
the parties’ perception of the mediator as an unaligned participant.’28 Menkel-Meadow
on the other hand sews conflicts of interest directly to confidentiality by underscoring
‘protection of confidentiality’ as an ‘underlying value’ of ‘conflicts protections’29 and
further ties conflicts rules to the ‘integrity and trust’ of the mediation process.30 She links
conflicts regulations to expectations of confidentiality by adding: ‘If a party thought that
a mediator could use shared information against him he would likely never participate in
the mediation.’31
Taking off from the importance neutrality and confidentiality play in casting
legitimacy and integrity in the mediation process and the intersection of both defining
features of mediation to conflicts of interest, this essay reviews the conflicts regulation for
a Philippine mediator/lawyer.
II. DISSECTING THE REGULATION
One significant conflicts issue that may be faced by a mediator/lawyer involves
representational work after mediations handled. The possible ‘conflicts of role’32 that
may be faced by a Filipino mediator/lawyer who traipses between ‘neutraling’ and
‘representation’ work33 is dealt with by the following rule on ethical conduct of a mediator34:
24
Michael Moffitt, ‘Loyalty, Confidentiality and Attorney-Mediators: Professional Responsibility in CrossProfession Practice’ (1996) 1 Harvard Negotiation Law Review 203, 209. Moffitt also notes from Poly Software
International Inc. v. Su, 880 F. Supp. 1487 (D. Utah 1995), a case on post-mediation conflicts of interest of a
mediator/lawyer, that it is ‘largely on the willingness of the parties to freely disclose their intentions, desires, and
the strengths and weaknesses of their case’ that the ‘success of mediation depends.’
25
Amber Bernauer, ‘Confidentiality’ (2005) 16 Australasian Dispute Resolution Journal 135, 141.
26
Mori Irvine, ‘Serving Two Masters: The Obligation under the Rules of Professional Conduct to Report
Attorney Misconduct to Report Attorney Misconduct in a Confidential Mediation’ (1994-1995) 26 Rutgers Law
Journal 155, 160-61.
27
Carol Izumi, ‘Implicit Bias and the Illusion of Mediator Neutrality’ (2010) 34 Washington University Journal of Law
and Policy 71, 80.
28
Ibid 76.
29
Menkel-Meadow, ‘Ethics in Alternative Dispute Resolution’, above n 5, 437-38.
30
Ibid 432.
31
Ibid 436.
32
Ibid 432.
33
Ibid.
34
Implementing Rules and Regulations of the Alternative Dispute Resolution Act of 2004 (Philippines) Department of Justice
Circular No. 98. 4 December 2009. Chapter 3, Rule 3-Ethical Conduct of a Mediator (‘Rule on Ethical Conduct
of a Mediator’).
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Ma. Araceli B. Habaradas
without the consent of all parties, and for a reasonable time under the
particular circumstance, a mediator who also practices another profession
shall not establish a professional relationship in that other profession with
one of the parties, or any person or entity, in a substantially and factually
related matter.35 [‘Regulation’]
As the Regulation may admit an interpretation involving lawyer-client relationships
entered simultaneous to the mediation, the essay will limit its discussion to post-mediation
relationships of the mediator/lawyer.
For clarity, the Regulation is dissected into the following guidelines on post-mediation
relationships of the mediator/lawyer:
A. The mediator/lawyer shall not establish a post-mediation
lawyer-client relationship with one of the mediated parties or
any person/entity on a matter substantially and factually related to
the mediation.
B. Guideline A disqualification does not apply if the mediator/
lawyer obtains the consent of all mediated parties; and the postmediation relationship is established for a reasonable time under the
particular circumstance.
C. A post-mediation relationship may be established with a
mediated party or any person/entity without consent and regardless
of time element if the intended lawyer-client relationship is on a
matter not substantially and factually related to the mediation.36
Guideline A establishes the relatedness threshold when a conflict may arise; that is,
when the subject of the anticipated post-mediation relationship is a matter ‘substantially
and factually related’ to the mediation handled by the mediator/lawyer. Guideline
B imposes the consent and time requirements to relieve the mediator/lawyer of the
disqualification in Guideline A. Absent substantial and factual relatedness in Guideline A,
the Regulation finds no conflict of interest and Guideline C allows the mediator/lawyer
to establish the post-mediation professional relationship.
If a mediator/lawyer (M/L) handled the mediation between P1 and P2 on the
dissolution of their professional partnership, which dissolution included decisions on
division of partnership properties and liquidation of assets, the following illustrate possible
post-mediation professional relationships based on the Regulation:
•
118
M/L cannot serve as legal counsel of P1 in handling properties she
got from the partnership after the mediation (Guideline A) unless
P2 gives her consent to the representation and for a reasonable time
after the mediation (Guideline B);
35
Ibid art 3.10.c.
36
Ibid.
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•
AlphaCo cannot hire M/L as its lawyer in a litigation against P2
where AlphaCo seeks to enforce an obligation against properties of
P2 (Guideline A) unless M/L gets the consent of P1 and P2 and the
subsequent representation occurs ‘for a reasonable time’37 after the
mediation (Guideline B);
• Two years after the mediation, M/L can serve as P2’s lawyer in
adopting a child (Guideline C).
But post-mediation professional relationship scenarios are not that cut-and-dried.
Possible limitations of the Regulation are highlighted in the example below and ensuing
scenarios drawn.
Illustration: Mediator/Lawyer (M/L) handled the mediation of X, Y and Z to
settle their conflict about their inheritance from their grandmother. X, Y and Z freely
disclosed information to M/L including information on their respective business interests
(unrelated to the estate) to determine a division of estate that best complements their
individual investments. Settlement of the estate was reached and properties were divided
among mediated parties.
A. Relatedness of matter
Scenario 1: Three months after mediation concluded, Q engages M/L as its
representative counsel in a negotiation on Q’s contract dispute with SuperCo, a business
of X that is not part of the grandmother’s estate. Does the professional relationship with
A involve a matter ‘substantially and factually related’38 to the subject of the mediation?
M/L can without difficulty maintain that since the mediation covered the grandmother’s
estate and SuperCo is not part of the estate, representation for Q covers an entirely
different matter; thus under Guideline C, M/L need not obtain the mediated parties’
consent.
X may reckon however that the negotiations with SuperCo may involve use of
information disclosed at the estate settlement mediation. Even if M/L continues to
abide by the ethical rule on confidentiality39 and has no intention of violating any nondisclosure clause, his mere knowledge of sensitive business information disclosed by X
during mediation (e.g., business plans) may serve useful to him (and incidentally to Q)
when moving forward with the negotiations. In reporting a Proposed New Model Rule
of Professional Conduct for the lawyer as third-party neutral40, Menkel-Meadow and
37
Ibid.
38
Ibid.
39
Rule on Ethical Conduct of a Mediator, art 3.8 (‘A mediator shall keep in utmost confidence all confidential
information obtained in the course of the mediation process.’)
40
CPR-Georgetown Commission on Ethics and Standards in ADR, Proposed New Model Rule of Professional Conduct
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Ma. Araceli B. Habaradas
Plapinger advocate that an ethical regulation on conflicts must aim to protect mediating
parties from ‘actual harm suffered by conflicts of interest.’41 In scenario 1, the potential
harm that may be suffered by X is far from illusory and the Regulation, without requiring
consent, may fall short in protecting X from such possible harm.
Also, in scenario 1, the post-mediation relationship casts doubt on the confidential
nature and the integrity of the mediation. Using the same argument of Menkel-Meadow,
if X believed that information shared during mediation may be used against him, he
would unlikely participate in the mediation.42 Further, M/L’s subsequent engagement
may be a disincentive43 for future consumers to exhibit candor in mediations or to even
consider mediation as a reliable ADR process.
Wisdom may be drawn from how the conflicts guideline under the Model Standards
of Conduct for Mediators of the American Arbitration Association, American Bar
Association, and Association for Conflict Resolution (‘AAA/ABA/ACR Model
Standards’)44 is drafted. Instead of banking on a single standard such as relatedness
of subject matter, the AAA/ABA/ACR Model Standards catalog important factors
a mediator/lawyer must consider (e.g., nature of relationships established; services
to be offered by the mediator/lawyer, time lapse after mediation45) when deciding if
conflicts may arise in post-mediation professional relationships. Using these factors in
addition to the relatedness-of-matter standard, uncertainties arising from the anticipated
representational work of M/L for Q may be better addressed.
B. Perceived conflict and endangered neutrality
Scenario 2: Two weeks after the mediation, Y engages the legal services of M/L
to handle the negotiations for a multi-million special project of MegaCo, a business
interest of Y not inherited from her grandmother. In this scenario, since the subject
of the subsequent professional relationship is not substantially and factually related to
the mediation, M/L need not grapple with consent or reasonable time requirements of
the Regulation. However the subsequent engagement by Y of M/L and the significant
business interest gained by M/L from Y may affect the other ADR parties’ perceptions of
M/L’s neutrality and of fairness of the mediation outcome.
- Rule 4.5: The Lawyer as Third-Party Neutral (Reported by Carrie Menkel-Meadow and Elizabeth Plapinger, 2000)
International Institute for Conflict Prevention & Resolution <www.cpradr.org/Resources/ ALLCPRArticles/
tabid/265/ID/622/Model-Rule-for-The-Lawyer-as-Third-Party-Neutral.aspx>.
41
Ibid. Comment [1] on Conflicts.
42
See above n 31 and accompanying text.
43
Moffitt, above n 24.
44
American Arbitration Association, American Bar Association and Association for Conflict Resolution, Model
Standards of Conduct for Mediators (at August 2005) STANDARD III. CONFLICTS OF INTEREST.
<http://www.americanbar.org/content/dam/aba/migrated/dispute/documents/model_standards_
conduct_april2007.authcheckdam.pdf> (‘AAA/ABA/ACR Model Standards’).
45
120
Ibid. Standard III.F.
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Neutrality ‘also means that the mediator does not expect to obtain benefits or special
payments from one of the parties as compensation for favors in conducting the mediation’46
and that the mediator has ‘no possibility of personal gain’ from the mediation.47 The
expectation (apparent or real) to receive benefits from one ADR party through potential
future work may have had an impact on M/L’s neutrality or on X and Z’s perceived
neutrality of M/L. Doubts on impartiality may be more nagging if M/L conducted an
evaluative mediation on the parties.
Apparently contemplating only actual conflict of interest by setting a relatedness-ofmatter standard and overlooking the need to maintain the perception of neutrality postmediation, the Regulation fails to cover scenarios where a subsequent relationship gives
rise to an appearance of conflict of interest and to doubts on mediator neutrality. If an
ethical standard is expected to protect the mediation from appearances of ‘self-interest’
of, or ‘improper influences’ on, the mediator/lawyer,48 the Regulation falls short of this
expectation and needs to be improved to explicitly prevent both actual and perceived
conflict of interest.
In synthesizing ‘best practice’ guidelines for lawyer-neutrals, Cukier proposes that
there should be ‘no actual conflict of interest, nor should there be a mere appearance of a
conflict of interest’ when the mediator/lawyer establishes a representational relationship
with any party involved in the mediation.49 The ABA/AAA/ACR Model Standards
hum the same tune by casting a wider conflicts regulation net requiring mediators to
‘avoid a conflict of interest or the appearance of a conflict of interest during and after
a mediation.’50 The standards impose the duty on the mediator/lawyer to not only steer
clear of post-mediation relationships that ‘raise questions about the integrity of the
mediation’51 but also flag factors (time, nature of relationship, services offered) to consider
in determining if ‘perceived’ conflict of interest might be created by the subsequent
relationship.52
C. Matter of time?
Scenario 3: Impressed with M/L at the mediation, Z (after informing X and Y) invited
M/L three days after the mediation to be her legal consultant in managing the properties
46
Moore, above n 9, 53.
47
Izumi, above n 27, 79-80.
48
CPR-Georgetown Commission on Ethics and Standards in ADR, above n 40, Comment on Rule 4.5.4.
49
Cukier, above n 1, 62.
50
AAA/ABA/ACR Model Standards, Standard III.A.
51
Ibid, Standard III.F.
52
Standard III.F of the AAA/ABA/ACR Model Standards states: ‘Subsequent to a mediation, a mediator shall not
establish another relationship with any of the participants in any matter that would raise questions about the integrity
of the mediation. When a mediator develops personal or professional relationships with parties, other individuals
or organizations following a mediation in which they were involved, the mediator should consider factors such
as time elapsed following the mediation, the nature of the relationships established, and services offered when
determining whether the relationships might create a perceived or actual conflict of interest.’ (emphasis added)
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Ma. Araceli B. Habaradas
she received from the estate settlement.
The Regulation uses both elements of time and consent to defuse the conflict resulting
from relatedness. In scenario 3, the ‘reasonable time’ requirement has to be met to excuse
the mediator/lawyer from disqualification to represent a mediated party. Assuming
proper consents from X and Y were obtained, are three days ‘reasonable time under the
particular circumstance’?53 Giving the Regulation a plain interpretation, ‘reasonable time’
appears to refer to a lapse of a certain period from the time the mediation concluded. To
say that the three-day period in scenario 3 is reasonable time requires a certain stretch
of imagination. Should M/L wait then for several months to pass? Is reasonableness
determined by the mediated parties required to give consent? If yes, does the ‘reasonable
time’ requirement remain relevant if consent of the other mediated parties has been
obtained?
Grey areas may be addressed by referring to the language of the Code of Professional
Conduct of the International Mediation Institute (‘IMI Code’),54 which uses time or consent
for a mediator to be excused on post-mediation conflict. The conflicts rule under the IMI
Code provides that a mediator cannot represent ‘any party to a mediation in the same or
a substantially related matter’ within ’12 months following the end of a mediation’ unless
‘all parties to the mediation expressly consent to that representation after full disclosure.’55
The IMI Code deals with the possible grey areas that ‘reasonable time’ and relatednessof-matter standards56 bring by specifying a definite period to measure when conflict is
deemed to disappear.
In contrast, the Model Rules of Professional Conduct of the American Bar
Association57 (‘ABA Model Rules’),58 does not prescribe a time lapse after mediation but
simply instructs a mediator/lawyer not to ‘represent anyone in connection with a matter
in which the lawyer participated personally and substantially’ as a mediator unless all the
parties to the mediation give an ‘informed consent.’59 Under the ABA Model Rules then,
only consent is the key requisite to be excused from the conflicts.
Lapse of time becomes more relevant when mitigating perceptions of mediator
partiality and appearances of conflicts in post-mediation relationships covering matters
53
Rule on Ethical Conduct of a Mediator, art 3.10.c.
54
International Mediation Institute, IMI Code of Professional Conduct <http://imimediation.org/imi-code-ofprofessional-conduct> (‘IMI Code’)
55
Ibid r 2.3.4.
56
See above Part II (A).
57
American Bar Association, Model Rules of Professional Conduct (2002)
<http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_profession_
conduct/rule_1_12_former_judge_arbitrator_mediator_or_other_third_party_neutral.html> (‘ABA Model
Rules’)
122
58
ABA Model Rules, r 1.12 (Former Judge, Arbitrator, Mediator or Other Third-Party Neutral) states that ‘a
lawyer shall not represent anyone in connection with a matter in which the lawyer participated personally and
substantially as a judge or other adjudicative officer or law clerk to such a person or as an arbitrator, mediator
or other third-party neutral, unless all parties to the proceeding give informed consent, confirmed in writing.’
59
Ibid.
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unrelated to the mediation such as scenarios 1 and 2. Working on the premise that conflicts
rules ought to ‘protect the process, the public, and the parties from the “appearance”
of improper influences’ or ‘appearance of self-interest’60 and viewing neutrality in the
sense of disinterestedness, Menkel-Meadow and Plapinger suggest a regulation that
disqualifies a mediator/lawyer from representing a mediated party ‘in a substantially
unrelated matter’ such as Scenarios 1 and 2 for a period of one year ‘or other reasonable
period of time under the circumstances, unless all parties consent to the subsequent
legal representation after full disclosure’ is done.61 This suggested cooling-off period62
addresses the so-called ‘downstream conflicts’ or future relationships between M/L and
an ADR party in unrelated cases63 that ‘might reasonably create the appearance that the
neutral had been influenced in the ADR process by the anticipation or expectation of a
subsequent relationship or interest’.64
It is therefore proposed that absent consent to proceed with post-mediation
relationships on an unrelated matter, a cooling-off period will erase appearances of
‘expectation of a beneficial future relationship or interest’ that may have ‘influenced the
neutral’s conduct in the preceding ADR process.’65 To address uncertainties posed by
scenarios 1 and 2 (where seeming unrelatedness of subject matter will not require consent
from the mediated parties), the suggestion of a cooling-off period or consent may be
worth considering when improving the Regulation.
D. Degrees of disclosure and consent
‘Beneficial mediation laws’ function to ‘set out rights and obligations of mediation
parties and outside parties, thereby protecting the integrity of mediation processes and
benefitting its participants.’66 As a beneficial mediation law, the Regulation articulates the
mediating parties’ continuing rights to preserved confidentiality and neutrality and informs
the public (future consumers) of such rights. It further sets rights of mediated parties to
be informed of and give consent to future professional relationships of the mediator/
lawyer that may result to conflicts and consequently affect these rights to confidentiality
and neutrality in the mediation. Consent under the Regulation is effectively a waiver of
conflicts of interest and consequently, of the mediated parties’ right to (or expectation of)
confidentiality and neutrality in the mediation.
Assuming post-mediation professional relationships in scenarios 1 and 2 govern
60
CPR-Georgetown Commission on Ethics and Standards in ADR, above n 40, 17, Comment [1].
61
Ibid r 4.5.4.(a)(4).
62
In the United States, the “absence or presence of a cooling-off period” before other professional post-mediation
relationships can occur varies by state. (McCorkle, above n 11, 166)
63
CPR-Georgetown Commission on Ethics and Standards in ADR, above n 40, 19, Comment [5].
64
Ibid, r 4.5.4.(a)(4).
65
Ibid 20, Comment [5].
66
Nadja Alexander, ‘Mediation and the Art of Regulation’ (2008) 8 Queensland University of Technology Law and Justice
Journal 1, 15. In her conceptual framework of Mediation Mix, Alexander suggests that one way to characterize
laws on mediation is the use of a functional approach where mediation laws may be characterized as triggering,
procedural, standard-setting or beneficial.
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Ma. Araceli B. Habaradas
matters substantially and factually related to the mediation handled by M/L, what quality
of consent must M/L obtain from the mediated parties to avoid conflicts? What type of
information must be communicated, or extent of disclosure made, to mediated parties
before consent is obtained? How should consent be given?67 Should the consent obtained
be same as that required for parties to proceed with mediation despite possible conflicts
existing pre-mediation?
If M/L were to avoid conflicts of interest in the practice of law, he is bound by the Code
of Professional Responsibility68 that prohibits the lawyer from representing ‘conflicting
interests except by written consent of all concerned after a full disclosure of the facts.’69 How
similar or different is this disclosure and consent requirement for lawyer conflicts from
that required of mediator/lawyers under the Regulation? The essay is not prepared to
apply this lawyer ethical rule to M/L’s post-mediation professional relationship as there
is no authority confirming if mediation is ‘practice of law’ in the Philippines70 and if a
lawyer-client relationship exists between M/L and the mediated parties.71 However, the
language of the Code of Professional Responsibility can give guidance when modifying
the Regulation.
Similarly, the Ethical Guidelines for Mediators developed by the Law Council of
Australia72 and the Revised Guidelines for Solicitors who act as Mediators of The Law
Society of New South Wales73 uniformly state that if a mediator is a partner or associate
of any representative of any party, ‘fully informed consent’ of all the parties has to be
obtained before he can act as the mediator in order to avoid conflict of interest.74 While
124
67
Questions patterned from those posed by Love and Cooley when inquiring into the consent required of parties
before a mediator switches to an evaluative role. They asked: “What should be said to the parties? When should
it be said? How can consent be given?” [Lela P Love and John W Cooley, ‘The Intersection of Evaluation by
Mediators and Informed Consent: Warning the Unwary” (2005) 21(1) Ohio State Journal on Dispute Resolution 45,
48].
68
Adopted by the Integrated Bar of the Philippines and approved by the Supreme Court of the Philippines on 21
June 1988. <www.ibp.ph>
69
Code of Professional Responsibility (Philippines) Canon 15, Rule 15.03. (emphasis added)
70
See generally Menkel-Meadow, ‘The Lawyer as Consensus Builder’, above n 4 (Discussing how ethics rules for
lawyers ‘fail to provide guidance and “best practices” for lawyers’ serving roles in ADR processes); Comment,
‘The Attorney as Mediator – Inherent Conflict of Interest?’ (1984-1985) 32 UCLA Law Review 987 where it is
argued that the ‘ethical guidelines for attorney conduct are designed primarily to regulate the adversarial system
of justice, but many of the adversarial system’s assumptions are inappropriate in other legal contexts.’ The
Comment explores if mediation conducted by a lawyer is considered practice of law and if the lawyer, when
acting as a mediator, should be governed by the ethical rules for lawyers.
71
Unlike the Code of Professional Responsibility, the ABA Model Rules clarifies that no lawyer-client relationship
exists between a mediator/lawyer and the mediated parties: ‘A lawyer serves as a third-party neutral when the
lawyer assists two or more persons who are not clients of the lawyer to reach a resolution of a dispute or other
matter that has arisen between them.’ ABA Model Rules, r 2.4(a).
72
Law Council of Australia, Ethical Guidelines for Mediators (at August 2011) <http://www.lawcouncil.asn.au/shadomx/
apps/fms/fmsdownload.cfm?file_uuid=239F39DD-1E4F-17FA-D241-5CF41A0BA6DC&siteName=lca>
(‘Law Council Ethical Guidelines’)
73
The Law Society of New South Wales, Revised Guidelines for Solicitors who act as Mediators (at 29 July 1993) < http://
www.lawsociety.com.au/cs/groups/public/documents/internetcontent/026506.pdf >. (‘NSW Guidelines for
Solicitors’)
74
Law Council Ethical Guidelines, Comment (d) to Guideline 3; NSW Guidelines for Solicitors, Guideline 5.4.
The IBP Journal
Ethical Regulation on Post-Mediation Professional Relationships of
Philippine Mediator/Lawyer: Is it Suffecient?
this rule refers to conflicts existing prior to the mediation, the kind of consent required
should not be any different from the quality of consent solicited of mediated parties to
seek excuse from post-mediation conflicts.
What then must a mediator disclose, discuss and ascertain to ensure fully informed
consent is obtained? The ABA Model Rules, which require ‘informed consent, confirmed
in writing’75 before a mediator/lawyer can represent any party in connection with a matter
in which he ‘participated personally and substantially’ as a mediator,76 define ‘informed
consent’ as one that
denotes the agreement by a person to a proposed course of conduct after
the lawyer has communicated adequate information and explanation
about the material risks of and reasonably available alternatives to the
proposed course of conduct.77
While the definition appears to refer to informed consent on choice of ADR process
and apply tangentially to the conflicts rule, the language remains instructive. Provided
the mediator/lawyer communicates ‘adequate information’ to the mediated parties and
explains ‘material risks’ to them, consent can be deemed ‘informed’.
III. CONCLUSION
Ethical standards and practice are critical to the legitimacy of mediation as
an appropriate, additional dispute resolution process. If ethical standards
are not effectively maintained, public confidence in the independence
and trustworthiness of mediators will erode and the administration
of informal justice will be undermined. Therefore, the existence and
efficacy of appropriate ethics in mediation is critical.78
‘No code of ethical standards can cover all circumstances’79 without doubt and no
‘rules will be totally clear when applied to real-life disputes.’80 Nonetheless, it remains that
the ‘efficacy of appropriate ethics in mediation is critical’81 and any attempt to improve
ethical guidelines ought to be welcomed in order to better guide mediator/lawyers, inform
mediating parties, and promote public confidence in the process.82 Besides, clear ethical
rules will ‘facilitate lawyers’ involvement in mediation’ and ‘protect the public purpose
75
ABA Model Rules, r 1.12.
76
Ibid.
77
Ibid r 1.0(e).
78
Rachel Field, ‘A mediation profession in Australia: An improved framework for mediation ethics’ (2007) 18
Australasian Dispute Resolution Journal 178.
79
Moore, above n 9, 449.
80
Ibid.
81
Field, above n 78.
82
Adopted from the purposes of ethical standards commonly found in the Law Council Ethical Guidelines,
Introductory Note and AAA/ABA/ACR Model Standards, Preamble.
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Ma. Araceli B. Habaradas
served by mediation.’83
Conversation among policymakers is accordingly invited to revisit the Regulation and
reflect on:
a. Qualifying the relatedness standard to cover possible grey areas
affecting perception of neutrality. In the alternative, a catalog of
factors can be added to guide mediator/lawyers when determining
the presence or absence of post-mediation conflicts.
b. Including provisions to address perceptions of conflicts in postmediation professional relationships.
c. Adding safeguards to cover post-mediation professional relationships
on unrelated matters such as consent or cooling-off periods.
d. Clarifying the quality of consent and the disclosure requirements
that should precede it.
The Integrated Bar of the Philippines (IBP)84 is likewise encouraged to explore the
possibility of expanding the Code of Professional Responsibility for Philippine lawyers85
to cover possible conflicts of lawyers who are also third-party neutrals. Other areas of
possible ethical dilemma (e.g., whether a lawyer-client relationship is present between a
mediator/lawyer and a mediated party) may be considered.86 The IBP may take a step
further by considering a separate ethical code or guidelines for mediators akin to those
issued by the Law Council of Australia,87 the Law Society of New South Wales,88 and the
American Bar Association (with the American Arbitration Association and Association
for Conflict Resolution).89
Boulle shares early Australian codes of ethics ‘were generated in the absence of
widespread practical experience in mediation’ giving the earlier ethical standards ‘an
abstract and tentative quality.’90 The ‘extensive practical experience of mediation’ rendered
these codes of conduct ‘more sophisticated instruments.’91 Absent a rich experience in
mediation, the Philippines can meanwhile learn from other countries in this regard as it
endeavors to enhance its ethical standards for mediator/lawyers.
•••
126
•••
83
Smiley, above n 2, 221.
84
The Integrated Bar of the Philippines is the ‘official organization of all Philippine lawyers whose names appear
in the Roll of Attorneys of the Supreme Court.’ <www.ibp.ph/history.html>.
85
Code of Professional Responsibility (Philippines).
86
See n 70.
87
Law Council Ethical Guidelines.
88
NSW Guidelines for Solicitors.
89
AAA/ABA/ACR Model Standards.
90
Boulle, above n 11, 467[12.15].
91
Ibid.
The IBP Journal
Between Public Interest and Private Good: Protection of Third Parties in
etween ublic
ood
Environmental
Mediationnterest
and Consentand
Decreesrivate
in the Philippines
B
P
I
P
G
:
Protection of Third Parties in Environmental Mediation
and Consent Decrees in the Philippines
Teresita Asuncion M. Lacandula-Rodriguez*
Abstract
This work explores Philippine environmental mediation as a conflict
resolution process wherein the parties themselves, with the assistance
of a disinterested mediator, work out a mutually acceptable solution to
their dispute. Specifically, it studies the arguably anomalous situation of
private mediated agreements being made on matters affecting public
interest. Since environmental disputes involve public rights and interest
and long term consequences not just for the parties but also for nonparties and future generations, this study poses the question: does judicial
oversight of such settlement agreements in the form of environmental
consent decrees serve as sufficient protection of rights of the parties and
broader public interest?
The author scrutinizes the nature, benefits and dangers of environmental
consent decrees based on American experience and the duty of the court
with such decrees in relation to the protection of public interest including
affected third parties.
I. INTRODUCTION
A. Background of the Study
The Philippines, as a developing nation prone to natural disasters, has a host
of environmental problems because of the damage brought about by population
growth and the exploitation of natural resources for economic development, among
others. Deforestation, agricultural land degradation, destruction of coral reefs, loss of
biodiversity, large-scale mining and pollution are continuing environmental concerns.1
It is evident that marginalized or vulnerable sectors (which include indigenous peoples,
farmers, fisher folk, informal settlers, poor communities, women and children)2 are the
most negatively affected by the backlash of environmental violations, e.g. flash floods,
*
Presiding Judge of Metropolitan Trial Court, Branch 81, Valenzuela City.
1
See Ibon Databank and Research Center, The State of the Philippine Environment (3rd ed. 2006).
2
See Joan Michelle M. Legaspi, et al., Access
Pillars of the Justice System (2011).
to
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Environmental Justice: A Capacity Assessment
of the
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Teresita Asuncion M. Lacandula-Rodriguez
landslides and pollution.3 Usually, these sectors rely on the environment and natural
resources for their subsistence and livelihood. Because of poverty and lack of access to
formal structures and decision-makers, they are at the losing end of any difference in
perspective or competition on the use of the environment. Hence, to enforce the people’s
right to environment in the Philippine context when conflict arises, particularly their
environmental procedural rights, there is a need for legal remedies which are effective but
are simple and inexpensive. To address such need, the Philippine Supreme Court recently
formulated in Rule 3, Section 3 of the Rules of Procedure of Environmental Cases4 the
procedural policy of environmental mediation. Under these rules, environmental civil
cases shall undergo mediation as an alternative to costly and protracted litigation. The
outcome of such environmental mediation can be approved by the court in a judicial
order known as a consent decree.
B. Introduction
Internationally, there is an emerging trend of using mediation to resolve environmental
disputes because of its perceived advantages and benefits compared to litigation.5 In the
Philippines, environmental disputes may involve the determination of the constitutional
right to a balanced and healthful ecology under Article II, Section 16 of the Constitution.
This right is a fundamental right of each person.6 On the other hand, mediation seeks to
harmonize the interests of the parties and not necessarily to protect rights. In addition,
environmental disputes involve public rights and interests because all are stakeholders
in the protection and preservation of the environment. Considering that mediation is a
process wherein parties’ private interests prevail, are public environmental rights protected
or undermined in the course of settling the dispute? Stated differently, taking into account
that environmental disputes involve public rights and interest and long term consequences
not just for the parties but also for non-parties and future generations, how can such
mediated agreements wherein the parties’ interests prevail be in the public interest? It
is important to note that while parties to a case may agree to a mutually satisfactory
settlement, non-parties and even future generations will be affected by the consequences
of their agreement. Furthermore, does judicial oversight of such settlement agreements
in the form of environmental consent decrees serve as sufficient protection of rights of
the parties and broader public interest?
C. Definition of Terms
For purposes of this study, these key terms shall be defined this way:
1. Environmental meditation is the use by parties in environmental
disputes of a neutral third party to resolve their disputes and to arrive
128
3
Id. at 1-2.
4
Rules of Procedure for Environmental Cases, A.M. No. 09-6-8-SC, Apr. 13, 2010.
5
See George Pring & Catherine Pring, Greening Justice: Creating and Improving Environmental Courts
and Tribunals 61 (2009).
6
Oposa v. Factoran, Jr., 224 SCRA 792, 804 (1993).
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Between Public Interest and Private Good: Protection of Third Parties in
Environmental Mediation and Consent Decrees in the Philippines
at a negotiated settlement.
2. Environmental disputes are conflicts involving the environment and
natural resources wherein there are opposing rights or interests in the
management, control or use of such resources.
3. Consent decrees are judicially approved settlement agreements of
the parties who have brought a civil case involving an environmental
dispute.
D. Objectives
Given the legal framework of environmental justice wherein the right to environment
is a fundamental right of each human being, this study seeks to study the possibilities and
limitations of environmental meditation which is a novel concept in the Philippines and
has not been extensively discussed. Thus, this research delves into the concept and practice
of environmental mediation in the Philippines. In exploring environmental mediation as
a dispute resolution process vis-à-vis the nature of environmental rights and disputes, this
study will look at whether public interest is or can be safeguarded when self-interested
parties reach an agreement. Thereafter, this paper will make recommendations to ensure
that the product of environmental mediation, i.e. consent decrees, does not undermine
the rights of both the parties and affected third parties.
E. Organization of the Paper
Chapter 2 will talk about the concept of environmental mediation as an alternative
dispute resolution mechanism, particularly court-annexed mediation of environmental
disputes. Chapter 3 will discuss the benefits and limitations of environmental mediation as
a legal remedy. It will also examine how environmental mediation principles are different
from those of environmental litigation. Chapter 4 will scrutinize the nature, benefits and
dangers of environmental consent decrees based on American experience and the duty
of the court in relation to the protection of public interest including affected third parties.
Lastly, Chapter 5 will explain the author’s conclusions and recommendations on the legal
issue presented.
II. ENVIRONMENTAL MEDIATION
A. Alternative Dispute Resolution in the Philippines
Because people are different from each other, conflict is inevitably part of life. The
challenge is to find conflict resolution processes to get past the disagreement, enable life to
move forward and create conditions for human beings to thrive. While it is very difficult
to agree on common values, we can agree on processes which will make it possible for us
to discuss those things we disagree about.
Presently, the dominant dispute resolution process in the Philippine justice system is
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Teresita Asuncion M. Lacandula-Rodriguez
adversarial. In this system, party-litigants bring their legal controversies to court. They
present their evidence and arguments to a judge. This judge is expected to be impartial
in applying the law to the facts established. However, this system of justice has been
imposed on the people by colonizers even if most of the country’s indigenous systems were
discursive7 instead of adversarial. Thus, people’s needs for dispute resolution and justice
are not fulfilled. People feel that the justice system only works for those immersed in or are
comfortable with Western adversarial rationality. Majority are marginalized because they
do not understand their own system which should serve them. The language used by the
system and its style alienate them such that they cannot freely and fairly participate in it.
Policy makers have responded by enacting The Alternative Dispute Resolution
(ADR) Act8 in 2004. ADR consists of ways of settling disputes by means other than
litigation, e.g., by arbitration or mediation. This law’s aim is to institutionalize ADR and
to actively promote and encourage its use “as an important means to achieve speedy and
impartial justice and to declog court dockets.”9 The declared state policy under this law is
“to actively promote party autonomy in the resolution of disputes or the freedom of the
parties to make their own arrangement to resolve disputes.”10
But even before the ADR Act was formulated, Philippine laws already provided for
alternative modes of settling disputes. In fact, such modes, like mediation, have been seen
to be rooted in Filipinos’ historical experience before the entry of colonizers and can be
found in indigenous dispute resolution systems.11 Even before the Spaniards came, the
local rulers (datus) or respected village elders settled disputes in their communities.12
Thus when Philippine laws were formalized, ADR was incorporated. For example,
the Civil Code encourages parties to come to a compromise even if litigation has already
started.13 For suits between members of the same family, it mandates that earnest efforts
toward a compromise should have been made and failed before such can be filed.14 Since
the 1950s, the Arbitration Law15 had already been in place. International arbitration is
130
7
See Tanggol Kalikasan, A Sourcebook on Appropriate Dispute Resolution Processes 20-26 (n.d.).
8
An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to
Establish the Office for Alternative Dispute Resolution, and for Other Purposes [Alternative Dispute Resolution
Act of 2004] R.A. No. 9285 (2004). Practitioners prefer to use the term “Appropriate Dispute Resolution” to
communicate the idea that these ADR mechanisms are mainstream and not alternative.
9
Id., § 2.
10
Id.
11
Philippine Mediation Center, JURIS Primer, available at http://pmc.judiciary.gov.ph/downloads/JURIS_
Primer.pdf (last accessed Sep. 30, 2012).
12
Marthe Lois V. Cordia, Alternative Dispute Resolution in the Philippines: Wave of the Future or the Road Less Traveled? 51
UST L. Rev. 185, 187 (2006-2007).
13
An Act to Ordain and Institute the Civil Code of the Philippines [Civil Code] R.A. No. 386 (1949), art. 2029.
14
Id. art. 222.
15
An Act to Authorize the Making of Arbitration and Submission Agreements, to Provide for the Appointment of
Arbitrators and the Procedure for Arbitration in Civil Controversies, and for Other Purposes [The Arbitration
Law] R.A. No. 876 (1953).
The IBP Journal
Between Public Interest and Private Good: Protection of Third Parties in
Environmental Mediation and Consent Decrees in the Philippines
also recognized as a system of settling commercial disputes of an international character.16
The Local Government Code of 1991 has provisions on Katarungang Pambarangay
(Barangay Justice) where residents of the same city or municipality who have disputes are
required to confront each other before the barangay officials and look into the possibility
of amicable settlement before going to court.17 Under the procedural Rules of Court,
judges are required to take advantage of the pre-trial conference to arrive at settlements
and compromises between the parties and to ask the latter to explore the possibility of
submitting their cases to any of the alternative modes of dispute resolution.18 In labor
or industrial disputes, the 1987 Constitution itself encourages the preferential use
of “voluntary modes” in settling disputes in order to foster industrial peace.19 Even in
administrative bodies in the executive department, the use of ADR processes is being
promoted.20
1. Court-Annexed Mediation
The judiciary, realizing the potential of ADR in improving its systems and in carrying
out its constitutional mandate to promulgate rules that shall provide a “simple and
inexpensive procedure for the speedy disposition of cases,”21 has come up with its own
initiatives, specifically in the promotion of mediation as a way of settling cases already
filed in court. As early as 1999, the judiciary tested the efficacy of mandatory mediation.
Since this is mandatory, it being part of pre-trial, the trial court is empowered to impose
sanctions in case of abusive conduct during the proceedings or absence of a party.22 This
is referred to as court-annexed mediation (CAM).
In CAM, the court refers the mediatable cases to an accredited mediator. The mediator,
who is ideally a neutral third party chosen by the disputants from a list provided to them,
facilitates the discussion of the parties and assists them in negotiating and reaching a
voluntary agreement regarding their dispute. In 2001, the Supreme Court designated its
educational arm, the Philippine Judicial Academy (PHILJA) as the component unit of the
Court for CAM and other ADR mechanisms, likewise creating the Philippine Mediation
16
The Philippines Adhered to the United Nations Convention on the Recognition and the Enforcement of
Foreign Arbitral Awards of 1958 (adopted Jun. 7, 1959, 330 U.N.T.S. 3.) under the 10 May 1965 Resolution
No. 71 of the Philippine Senate, which gave reciprocal recognition and allowed enforcement of international
arbitration agreements between parties of different nationalities within a contracting state [Gonzales v. Climax
Mining Ltd., 512 SCRA 148, 166-167 (2007), citing National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen
Philippines, Inc., 184 SCRA 682, 688-689 (1990)].
17
An Act Providing for a Local Government Code of 1991 [Local Government Code of 1991], R.A. No. 7160,
§ 408 (1991).
18
1997 Rules of Civil Procedure, rule 18, § 2 (a).
19
Phil. Const. art. XIII, § 3; see also A Decree Instituting a Labor Code Thereby Revising and Consolidating Labor
and Social Laws to Afford Protection to Labor, Promote Employment and Human Resources Development and
Insure Industrial Peace Based on Social Justice [Labor Code], P.D. No. 442, art. 211 (a) (1975).
20
Office of the President, Revoking Executive Order No. 523 (s. 2006) and Conferring upon the Office for
Alternative Dispute Resolution the Management, Development, Coordination, and Oversight Of Alternative
Dispute Resolution Programs in the Executive Department, and for Other Purposes, Executive Order No. 97,
Series of 2012 [E.O. No. 97, s. 2012] (Oct. 18, 2012).
21
Phil. Const. art. VIII, § 5, ¶ 5.
22
Custodio O. Parlade, Alternative Dispute Resolution of 2004 (Annotated) 15 (2004).
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Teresita Asuncion M. Lacandula-Rodriguez
Center (PMC) to be the center of mediation initiatives.23 PMC units were then established
in the different courts nationwide. Mediation proceedings were expanded to the appellate
court in 2002.24
Amicable settlements and arbitral awards are favored by the courts because it unclogs
judicial dockets. Thus, the latter will only interfere with great reluctance to invalidate or
set aside such compromise agreements or action of the arbitrator.25
B. Court-Annexed Environmental Mediation in the Philippines
1. Rules of Procedure for Environmental Cases
Very recently, the Supreme Court formulated the Rules of Procedure for Environmental
Cases (Rules). Under Rule 3, Section 3, the court is required to refer environmental civil
cases to CAM before trial starts:
Section 3. Referral to mediation – At the start of the pre-trial conference,
the court shall inquire from the parties if they have settled the dispute;
otherwise, the court shall immediately refer the parties or the counsel, if
authorized by their clients, to the [PMC] unit for purposes of mediation.
If not available, the court shall refer the case to the clerk of court or legal
researcher for mediation.
The mediation should be terminated after 30 days from the referral.26 The mediation
report from the PMC must be submitted to the court within 10 days from the expiration
of the 30-day period. Even after mediation in the PMC unit fails, the court may refer the
case to the branch clerk of court to further assist the parties in reaching a settlement.27
Thereafter, the judge is likewise tasked to mediate and assist the parties in reaching
an amicable settlement.28 The parties are also allowed to “compromise or settle in
accordance with law at any stage of the proceedings before rendition of judgment.”29
The Rules, however, provide parameters as to what the court can approve by way of
compromise agreement, i.e. it must be “in accordance with law, morals, public order and
public policy to protect the right of the people to a balanced and healthful ecology”30
and shall be judicially approved in a consent decree.31 It is clear therefore that under the
132
23
Supreme Court, Re: Various Resolutions of the Board of Trustees of the PHILJA Approved During its
Meetings on 18 September 2001 and 1 October 2001, SC Administrative Matter No. 01-10-5-SC-PHILJA
(Oct. 16, 2001).
24
Supreme Court, Re: Pilot Testing of Mediation in the Court of Appeals, SC Administrative Matter No. 02-217-SC [A.M. No. 02-2-17-SC] (Apr. 16, 2002).
25
Home Bankers Savings and Trust Company v. Court of Appeals, 318 SCRA 558, 568 (1999).
26
Rules of Procedure for Environmental Cases, part II, rule 3, § 3.
27
Id. §4 (a).
28
Id. § 5.
29
Id. § 10.
30
Id. § 5.
31
Id. § 4.
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Between Public Interest and Private Good: Protection of Third Parties in
Environmental Mediation and Consent Decrees in the Philippines
Rules, environmental mediation is now a policy in the courts. The Rules are applicable
to environmental courts also known as “green courts” which were designated to handle
environmental cases.32
Under the Rules, even after CAM fails, “the judge shall exert best efforts to persuade
the parties to arrive at a settlement of the dispute.”33 This is referred to as Judicial Dispute
Resolution (JDR) wherein after CAM, the JDR judge will continue to assist the parties
in reaching an agreement regarding the dispute. This is done by another judge through
raffle and not the environmental court judge unless the parties agree that this court
shall conduct the JDR.34 The judge acts like a mediator and not adjudicator. Even after
termination of pre-trial and already in the trial stage, the case may be referred back to
JDR while trial is suspended should at least one of the parties desire to do so.35
III. ENVIRONMENTAL MEDIATION VIS-À-VIS
ENVIRONMENTAL LITIGATION
A. Advantages of Environmental Mediation over Litigation
In the Philippine context, litigation is an involuntary, formal and public process for
dispute resolution where a government-appointed judge determines facts and decrees an
outcome to legal causes of action based on adversarial presentations of arguments and
evidence by each party and after applying laws and rules.36 Litigation is seen as a rightsbased approach wherein a verdict is made in accordance with the rights protected under
laws and rules whereas mediation is an interests-based approach of dispute resolution
which seeks to unearth and deal with the interests of the parties.
Culling from experience of other countries and the Philippines’ own familiarity
with mediation in general, the following are the potential benefits of mediation in
environmental disputes over litigation in the country if it is practiced well and the parties
engage the process with good intentions:
Appropriate to Filipino Culture. Mediation resonates with the Filipino values of
neighborliness and solidarity. It relies on the goodwill of the parties involved in a dispute
32
Supreme Court, Re: Environmental Courts and Forestry Courts, SC A.M. No. 07-11-12-SC (amended on Jan.
22, 2008), as implemented by SC Administrative Order No. 23-08, Designation of Special Courts to Hear, Try
and Decide Environmental Cases (Jan. 28, 2008).
33
Rules of Procedure for Environmental Cases, part 2, rule 3, § 5.
34
Re: Consolidated and Revised Guidelines to Implement the Expanded Coverage of Court-Annexed
Mediation [CAM] and Judicial Dispute Resolution [JDR]), A.M. No. 11-1-6-SC-PHILJA, Part Three, III,
4.
35
Supreme Court, Consolidated and Revised Guidelines to Implement the Expanded Coverage of CourtAnnexed Mediation [CAM] and Judicial Dispute Resolution (JDR), SC A.M. No. 11-1-6-SC-PHILJA, part
Three (IV) (Jan. 11, 2011).
36
Menkel-Meadow, et al., Mediation: Practice, Policy, and Ethics 14 (2006) [hereinafter Menkel-Meadow,
Mediation].
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Teresita Asuncion M. Lacandula-Rodriguez
to arrive at a mutually acceptable solution. Each party strives to consider what is good for
both parties and resolve the other’s problem. Such resonance necessarily can contribute
to the success of the process.
Decongesting Court Dockets. One of the policy objectives of court-mandated
mediation in environmental cases is to divert court cases from proceeding to a full-blown
trial. Hence, it helps relieve court dockets. Resultantly, the reduction of caseload can have
the effect of improving the quality of work of judges.
Comprehensive Process and Outcome. The parties explain the reasons behind
their positions. These strongly felt interests are presented to the other party. Thus, in
discussing what their real issues are, the parties are not limited by the legal definition of
their dispute, i.e. the cause of action or elements of the crime and legal defenses.37 The
process allows them to thresh out what truly matters to them, even related non-legal
concerns. Thus the resulting agreement is more comprehensive. Possibly, it addresses even
the underlying or root causes of the conflict. Furthermore, the mediated solution may
integrate not only the needs of the disputants but of the ecosystem as a whole.
Efficient and Economical. It is speedier and more efficient because it does away
with a protracted trial. Consequently, it is less costly and more convenient because the
parties need not spend much on paying lawyers and going to the court to attend trial.
Counsels’ participation is not indispensable in mediation because the parties themselves
can speak on their own behalf. This is significant because “the filing of environmental
cases has ‘increased tenfold from 1996 to 2008.’”38
Informal and Understandable. Since it is an informal process without the rigidity
of procedural rules and esoteric or legalese language of court practitioners, proceedings
are more casual and understandable where parties can participate meaningfully in the
process.
Flexibility of Process. The process of mediation is flexible so as to respond to the
peculiar difficulties in reaching an agreement. Thus, meetings between parties can be
arranged on a time and in a place most convenient for them unlike trials which the court
sets. The meetings would still most likely be during the office hours of the mediation
officers but there is more leeway in fixing the time as compared to court hearings.
Creative and Contextual Resolutions. The parties can explore creative options
and a greater variability of solutions that are not available or cannot be produced through
court remedy. The settlement reached by the parties can be tailored to their particular
situation. More inventive solutions that are responsive to specific interests of the parties
can emerge. This is because the group discussion “enables participants to broaden the
range of possible alternatives. Freed from the narrowness and restrictions of a purely legal
134
37
Antonio M. Martinez, Mediation in the Courts and the Barangay Justice System, 4 The PHILJA Judicial J., 67, 71
(Jan. - Mar. 2002).
38
Francis N. Tolentino, An Environmental Writ: The Philippines’ Avatar, 35 (1) IBP J. 117, 131 (Aug. 2010).
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challenge, solutions can be very creative.”39
Mutually Satisfactory and Stable Outcome. Since the objective is to voluntarily
reach a consensus, the successful outcome is acceptable to both sides. Unlike in litigation,
no one loses and assignment of blame is not necessary. The parties make concessions
because of the uncertainty of the result if litigation proceeds. Also, the outcome is
implementable, realistic and practical since it came from the parties themselves and they
voluntarily bound themselves to abide by it. The parties have a sense of ownership of
the agreement and feel more responsible over it. Furthermore, if their needs or interests
are met, they are more likely to be committed to abide by the terms that they themselves
worked out. Thus the solution is more enduring than one that is imposed by a third party/
judicial decree.40 It also makes it possible for dialogue to continue even after the particular
dispute has been settled such that long-term solutions can be further worked out.
Empowerment and Control of Outcome. The central values of mediation are
self-determination and empowerment which means that the parties retain control over
the process and outcome.41 The parties’ views are affirmed and they gain the capacity,
resources, knowledge and skills to solve their own problems.42 When the outcome is vital
to their lives, people generally desire to directly participate and have a say in the decisionmaking process. Empowerment also means that the weaker party is assisted during the
process while being fair to the stronger group.
Improved Communication. Communication is without animosity because it is
non-confrontational and non-adversarial, discouraging the demonization of the other
party. Hence, rapport, trust and understanding are increased and tension defused. Stress
is lessened and cordial relations are made possible. This results in the parties becoming
more willing to share relevant information and collaborate with each other. Such direct or
face-to-face interaction of parties who may have been alienated from each other paves the
way for real problems to be uncovered and solutions reached.43 The parties may bring in
any information they wish, not limited by cumbersome rules of evidence and procedure.44
Relationships are Preserved. The dialogue between the parties mends rifts,
preserves or even improves their relationship, or at the very least does not damage it
because trust and respect are developed. Eventually, it fosters harmony and cultivates
a culture of peace in the community. Some say that mediation sooner or later leads to
social transformation by peaceful relations. Maintenance of relationships of stakeholders
is valuable for the present and future protection of the environment.
39
James E. Crowfoot & Julia M. Wondolleck, Environmental Disputes: Community Involvement In
Conflict Resolution 257 (1990).
40
Martinez, supra note 37.
41
Menkel-Meadow, Mediation, supra note 36, at 94.
42
Edward W. Schwerin, Mediation, Citizen Empowerment, and Transformational Politics 62-70 (1995).
43
Gail Bingham & Lee M. Langstaff, Alternative Dispute Resolution in the NEPA Process, available at http://www.
resolv.org/wp-content/uploads/2011/02/nepa.pdf (last accessed June 24, 2012).
44
Menkel-Meadow, Mediation, supra note 36, at 27.
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Discovery of Common Ground. Frequently, parties in an environmental dispute
have different values and views when it comes to environmental protection. This is why
mediation would be preferred over the adversarial process: in mediation, the parties are
assisted in finding and establishing common ground from which they can move forward.
Expertise of a Mediator. To help steer them towards an agreement, parties can
choose a third party who has an expertise on environmental dispute resolution whereas
a judge, who they did not choose, may not be as knowledgeable or skillful. Such expert
neutral party can help them understand the scientific and technical issues. In contrast,
judges of green courts who must adjudge environmental cases may not be as familiar
considering that they are duty-bound to be knowledgeable about all fields of law and
need not be experts in environmental law. Also often, there is scientific uncertainty when
scientists disagree or have different findings with respect to the environmental effects of
an activity. The mediator can help parties to agree upon an expert whose opinions will
be trusted in the course of reaching an agreement. This helps in lowering expenses and
prevents a “battle of the experts” which is usual in environmental litigation.45 It also
avoids the selective use of facts to support partisan positions.
Capacity to Resolve Future Disputes. Because the parties learn a new process of
dispute resolution, this skill is instilled and can be put to use in resolving future disputes.
In addition, since the parties have already talked and worked together to solve mutual
problems, they can avoid a repeat of past pitfalls and establish new ways of amicably
dealing with each other.
Multi-party Disputes. Environmental mediation is appropriate in multi-party
disputes where diverse interests need to be addressed whereas this can be too cumbersome
in a court trial.
Confidentiality. Mediation provides for a more private atmosphere where the
parties are assured of the confidentiality of the proceedings. To encourage an open and
honest disclosure of relevant information to aid in the resolution of the conflict, matters
discussed during the CAM and JDR are considered confidential information which shall
be inadmissible as evidence for any purpose in any other proceedings.46 The proceedings
are conducted in private and the persons shall not divulge information communicated
therein.47 This is unlike court trials which are open to the public and court decisions which
are mandated to be published for the public to be informed. Furthermore, a party is
allowed to communicate privately to the mediator without the presence of the other party
as long as this other party knows. Considering the interest involved in environmental
disputes, confidentiality minimizes the publicity generated which in turn facilitates a
successful and peaceful resolution of the conflict.
136
45
Stephen Higgs, The Potential for Mediation to Resolve Environmental and Natural Resources Disputes,
available at http://www.acctm.org/docs/The%20Potential%20For%20Mediation%20to%20Resolve%20
Environmental%20_CONNOR-Higgs_.pdf (last accessed Oct. 13, 2012).
46
Re: Consolidated and Revised Guidelines to Implement the Expanded Coverage of Court-Annexed
Mediation [CAM] and Judicial Dispute Resolution [JDR]), A.M. No. 11-1-6-SC-PHILJA, part Four.
47
Id.
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Procedural Democracy. Even where specific solutions to problems are not
found or commitments not reached, dialogue and discourse during mediation enhances
democracy.48
Moving Forward. Although mediation may fail, the parties would not have
sacrificed their claims and can still pursue rights-based dispute resolution mechanisms.
B. Limitations of Environmental Mediation
But even proponents admit that environmental mediation has its difficulties:
Agreement is Voluntary. Obviously, the parties cannot be forced into a settlement
and may end up with a stalemate. In a formal rights-based approach, the decision is
imposed on the party.
Investment of Time. Because environmental disputes are complex, the parties
have to commit a substantial amount of time, effort and resources to the process. Thus,
there is the challenge of keeping the parties, their constituencies, other stakeholders and
the general public interested and involved.49
Lack of Skills. The parties and their representatives may not have the necessary
skills in negotiating a fair and acceptable agreement.
Timing is Relevant. In the Philippines, there is a question as to its effectivity when
hostilities already exist as in instances where environmental clashes result in a long history
of bad relations or even violence and bloodshed.
No Precedent. The process does not create precedents. There is no consistency in
the treatment of environmental problems, thus outcomes cannot be predicted. This may
negatively impact on environmental governance.
Social Norms Not Protected. It can be said that such approach to conflict
resolution does not create, refine or enforce agreed upon societal norms for behavior50 in
relation to the environment. In contrast, the judge decides based on formal rules which
bind people and communities together in generally accepted understanding of what they
value.51
Rights Undervalued. A public trial may be necessary to establish important legal
principles or to ensure that parties or communities do not negotiate below their legal
entitlement. Because of the focus on interests, legitimate rights which should be enforced
are undermined. When rights are not fully enforced, the status quo of the parties, which
48
Menkel-Meadow, Dispute Processing and Conflict Resolution: Theory, Practice
[hereinafter, Menkel-Meadow, Dispute Processing].
49
Id. at 259
50
Menkel-Meadow, Mediation, supra note 36, at 16 & 92.
51
Menkel-Meadow, Dispute Processing, supra note 48, at 22.
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may be unjust, is maintained. A party or community which is a victim of injustice who
had been seriously wronged may need to have his, her or its rights vindicated through a
public process and not a confidential settlement just for the sake of harmony, which may
set back legitimate environmental advocacies or movements.
Lack of Transparency. Because of the broader public interest involved, critics
want the proceedings and outcome to be more transparent and open to public scrutiny.
Power Imbalances Exacerbated. There is also a concern as to whether parties
can really negotiate as equals when there is a power imbalance (like a multinational
corporation versus a poor community). For a settlement to be successful, it is assumed that
the parties have relatively equal status or bargaining powers which may not be the case in
reality. Although the resulting agreement is not illegal,52 the poorer, informal or weaker
party may have been forced to just acquiesce to a disadvantageous settlement by the
dominant party or by the process itself because of such party’s desperation, limitations
or inadequacies. Even if the parties and the third party assisting them attempt to ensure
a leveled playing field, it may not overcome structural inequalities or historical injustices
which have disempowered the underrepresented, marginalized and vulnerable sectors.
Factors that can affect the balance of power in the process are class, gender, education,
social status, age, religion, sexual orientation, values and mental or psychological condition
of the participants.53
Third Party is Never Neutral. When parties are assisted by a mediator, the
process may be unwittingly skewed towards an outcome even if such third party is wellintentioned. This is because no one, not even the mediator, is exempt from prejudices and
subconscious preconceived ideas of fairness or of how things should be.
Needs of the Public Overlooked. The disputing parties may be satisfied with the
solution but the broader community or general public’s welfare may be disadvantaged if
the violator of environmental laws is also allowed to be a winner in a mediated settlement.54
Ensuring Representation of All Affected Parties. Some affected stakeholders
may not be represented because they are marginalized. Some may be represented but
the representative may not be adequately representing their interest. In order to have
sustainable agreements, there is also the question of who represents those who cannot
be present at the negotiating table, i.e. future generations – who will be their advocate?55
138
52
In Philippine alternative dispute resolution processes, the compromise agreement is required to be one that is
not contrary to law, morals, good customs, public policy and public order (Civil Code, art. 1306) so that the
court approves the same and orders all parties to comply with the terms and conditions under pain of writ of
execution [Gasaino v. Akol, 652 SCRA 378, 381 (2011)].
53
Eleanor Conda, Traversing Boundaries and the No-Man’s Land: On Mediation, Gender, Rights and Justice, in A Sourcebook
on Alternatives to Formal Dispute Resolution Mechanisms 133 (2008).
54
See Peter H. Kahn, Jr., Resolving Environmental Disputes: Litigation, Mediation, and the Courting of Ethical
Community available at http://faculty.washington.edu/pkahn/articles/Resolving_ Environmental_ Disputes.
pdf (last accessed Oct. 13, 2012).
55
See Alexis Gensberg, Mediating Inequality: Mediators’ Perspectives on Power Imbalances in Public Disputes,
available at http://dspace.mit.edu/bitstream/handle/1721.1/66400/52971312.pdf ?sequence=1(last accessed
Oct. 13, 2012).
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IV. CONSENT DECREE
When an agreement is reached, whether through CAM or JDR, the judge where the
case was filed is tasked to approve the compromise agreement if it is not contrary to law,
morals, good customs, public order and public policy.56 This takes the form of a consent
decree. The Rules define a consent decree as “a judicially-approved settlement between
concerned parties based on public interest and public policy to protect and preserve the
environment.”57
The Philippines has not had much experience with consent decrees.58 But in the
United States, the very first consent decree appeared in the 1859 case of United States v.
Peralta.59 Consent decrees were first heavily utilized in anti-trust litigation.60 Thereafter, it
had been used for public interest disputes involving civil rights and environmental issues.61
Thus, the American doctrines on consent decrees will be used as a guide for this study.
Likewise, this study shall draw on existing Philippine jurisprudence on general principles
applicable to consent decrees, in particular case law on compromise agreements under
civil and labor laws.
A. Nature of Consent Decree
A consent decree is both contract and judgment or court order.62 According to the
framers of the Rules:
The designation of a consent decree as a mode of settlement gives
emphasis to the public interest aspect in environmental cases and
encourages the parties to expedite the resolution of litigation. A consent
decree derives its contractual nature from the fact of their being entered
into by the parties themselves through which they arrive at a certain
compromise with respect to the issues involved in the case, whereas their
judicial feature is acquired through the approval of the court.63
56
Civil Code, art. 1306.
57
Rules of Procedure for Environmental Cases, part 1, rule 1, § 4 (b).
58
Rommel J. Casis, Green Rules: Gray Areas and Red Flags, 86 Phil. L.J. 765, 772-773 (2012).
59
27 F. Cas. 502 (N.D. Cal. 1859). Frank J. Macchiarola, The Courts in the Political Process: Judicial Activism or Timid
Local Government?, 9 St. John’s J.L. Comm. 703, 707 (1994).
60
Timothy K. Webster, Protecting Environmental Consent Decrees from Third Party Challenges, 10 Va. Envtl. L.J. 137, 140
(1990).
61
Id. at 140.
62
Jeremy A. Rabkin & Neal E. Devins, Averting Government by Consent Decree: Constitutional Limits on the Enforcement
of Settlements with the Federal Government, 40 (1) Stan. L. Rev. 203, 207 (Nov. 1987), citing United States v. ITT
Continental Baking Co., 420 U.S. 223, 236 n.10 (1975); Webster, supra note 60, at 139.
63
Secretariat of the Sub-committee on the Rules of Procedure for Environmental Cases, Annotation to the Rules of
Procedure for Environmental Cases 102-103 (2010).
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The contract aspect pertains to the compromise agreement between the two parties
“whereby the parties, by making reciprocal concessions, avoid a litigation or put an end
to one already commenced.”64 Such reciprocal concessions where all parties benefit mean
that parties give up claims or defenses that they could have advanced if trial ensued. They
are bound by what they have agreed upon and not what they may be entitled to under the
law. The agreement is prepared by the parties and signed by them. Just like any contract,
to be valid, the following elements must concur pursuant to Article 1318 of the Civil
Code: (a) consent of the contracting parties; (b) object certain that is the subject matter of
the contract; and (c) cause of the obligation. Consent means that the parties voluntarily,
freely and intelligently executed the agreement with full knowledge. It is “manifested
by the meeting of the offer and cause which are to constitute the agreement.”65 The
object is what is specifically stated in the agreement, including other objects by necessary
implication.66 The cause or consideration consists of the reciprocal concessions.
The court which approves the compromise agreement renders a judgment based
on such agreement and orders the parties to faithfully comply with their agreement in
good faith. Once approved, it becomes more than a mere contract between the parties
and thereafter has the force and effect of a judgment.67 As in other decisions based on
compromise agreement, the judgment operates as disposing of the merits of the case.
It is already a determination of the controversy and has the effect of res judicata on the
parties.68 It should not be disturbed and is not appealable except for vices of consent
(e.g. mistake, fraud, misrepresentation, coercion or duress), forgery69 or if the terms of
settlement are so palpably unconscionable.70
64
Civil Code, art. 2028.
65
Regal Films, Inc. v. Concepcion, 362 SCRA 504, 508 (2001).
66
Civil Code, art. 2036; Chu v. Cunanan, 657 SCRA 379, 387 (2011).
67
Martir v. Verano, 497 SCRA 120, 126-127 (2006).
68
Rabkin & Devins, supra note 62, at 207, citation omitted.
69 Civil Code, art. 2038; Republic v. Florendo, 549 SCRA 527, 536 (2008). Art. 2038 states:
Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue
influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code.
However, one of parties cannot set up a mistake of fact as against the other if the latter, by
virtue of the compromise, has withdrawn from a litigation already commenced.
70
Clark Development Corporation v. Mondragon Leisure and Resorts Corporation, 517 SCRA 203, 219 (2007),
citing Genova v. De Castro, 407 SCRA 165, 172-173 (2003). Prudence Realty and Development Corp. v. Court
of Appeals, 231 SCRA 379, 389 (1994) discusses the remedies of aggrieved parties:
“Where the aggrieved party alleges mistake, fraud, violence, intimidation, undue influence,
or falsity in the execution of the compromise embodied in a judgment, an action to annul it
should be brought before the Court of Appeals, in accordance with Sec. 9 (2) of BP 129, which
gives that court exclusive original jurisdiction over inter alia actions for annulment of judgments
of regional trial courts.
The other available remedy is a motion for relief from judgment, which may be sought under
Rule 38, Secs. 2 to 3, of the Rules of Court, on the ground that the judgment was obtained
through fraud, mistake or excusable negligence. This must be filed with the court that rendered
the judgment, within 60 days after the petitioner is notified of the judgment and not more than
six months after its entry.”
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It follows that concessions made by the parties not contrary to law, morals, good
customs, public order and public policy are binding even though the agreement may
have gone beyond the issues of the case. As to the parties, it is still res judicata because the
compromise is not of the claim alone but even its incidents and ramifications.71
A judicial compromise has the force of law and is conclusive between the parties.72 A
party cannot discard it unilaterally because of a change of mind thus under Article 2041
of the Civil Code, if one of the parties fails or refuses to abide by the compromise, the
other party may either enforce the compromise or regard it as rescinded without necessity
for a prior judicial declaration of rescission73 and insist upon his, her or its original
demand. The court has no power to relieve the parties of obligations they voluntarily
assumed “simply because the compromise agreement turned out to be unwise, disastrous
or foolish. It [has] no authority to impose upon the parties a judgment different from or
against the terms and conditions of their compromise agreement.”74
Because it is generally not appealable, it is immediately final and executory such that
execution is the ministerial duty of the court. Under Article 2037 of the Civil Code, a
compromise has the effect and authority of res judicata upon the parties even if not judicially
approved; but when judicially approved, it is already a judgment subject to execution. A
mere contract can be judicially executed through an action for specific performance but
a consent decree just like any judgment can be enforced in the same proceeding through
a writ of execution.75 In case of default, refusal or failure to abide with its terms, the
aggrieved party is entitled to a writ of execution.76 The obligations undertaken under
the decree for which a writ of execution has been issued must be obeyed under penalty
of contempt.77 Still, it has been held that “the court may stay immediate execution of
a judgment where supervening events bring about a material change in the situation
of the parties which makes the execution inequitable, or where there is no compelling
urgency for the execution because it is not justified by the prevailing circumstances.”78 As
a judgment, the court retains jurisdiction over the execution of the same.
Under the non-impairment of obligations of contracts clause of the Bill of Rights,79
the terms and conditions confirmed in a final and executory consent decree cannot be
71
Salazar, et al. v. Jarabe, 91 Phil. 596, 601 (1952), citing McCarthy v. Barber Steamship Lines, 45 Phil. 488.
72
Martir, 497 SCRA at 127.
73
Iloilo Traders Finance Inc. v. Heirs of Oscar Soriano Jr., 404 SCRA 67, 73 (2003), citing Diongzon v. Court of
Appeals, 321 SCRA 477 (1999).
74
Martir, 497 SCRA at 129, citing Choithram Jethmal Ramnani v. Court of Appeals, 413 Phil. 194, 209 (2001)
& Manila International Airport Authority (MIAA) v. ALA Industries Corporation 422 SCRA 603, 610-611
(2004).
75
Martir, 497 SCRA at 128, citing Dela Rama v. Mendiola, 401 SCRA 704, 713 (2003).
76
Id.
77
Under 1997 Rules of Civil Procedure, rule 71; Prudence Realty, 231 SCRA at 390.
78
Dalida v. Naguit, 526 SCRA 172, 175-176 (2007), citing Laurel v. Abalos, 140 Phil. 532 (1969) & Hualam
Construction and Dev’t Corp. v. Court of Appeals, 214 SCRA 612 (1992).
79
Phil. Const. art. III, § 10.
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Teresita Asuncion M. Lacandula-Rodriguez
impaired by subsequent legislation80 in line with the principle that laws generally have
prospective application. There is impairment if a subsequent law changes the terms of a
contract between the parties.81 Existing laws are deemed to be read into the compromise
agreement as a contract but the reinterpretation of laws in judicial decisions likewise
should be applied prospectively.82 However, the non-impairment clause must yield to the
police power of the state.83 Such police power may consist in the passage of subsequent
legislation for the purpose of advancing the right of the people to a balanced and healthful
ecology.
The consent decree is res judicata and binding only on the parties to the suit who are
signatories to it and their successors in interest.84 Accordingly, it is not binding on colitigants who did not sign the same (e.g. a defendant not mentioned in the agreement),85
more so third parties to the case. It follows that a non-party cannot be allowed to enforce,
modify or amend the agreement.86 Those harmed by it or who feel that the terms are
insufficient or inadequate are not prevented from filing their own suit later on, especially
those who are not organized, have no resources or have no access to information regarding
the proceedings.
Non-parties who want to contest an approved consent decree can do so in the higher
court on the ground of abuse of discretion.87
Because of its nature and being an outcome of mediation, a consent decree in an
environmental case does not adjudicate causes of action which happened in the past. By
focusing on the interests of the parties and the objective of reaching a mutually workable
solution, the decree affects the present and future not just of the parties but of other
third parties which may include future generations, transboundary communities and even
other species.
B. Benefits of Consent Decree
A consent decree has the advantages of mediation because it is a product of the
negotiations of the parties. The most obvious advantage for plaintiff is the assurance that
compensation will be received and for the defendant that liability may be reduced than if
the court decides the case.88 Considering its hybrid nature as both contract and judgment,
142
80
National Waterworks and Sewerage Authority v. NLRC, 258 SCRA 48, 53 (1996).
81
Hacienda Luisita, Incorporated v. Presidential Agrarian Reform Council, 653 SCRA 154, 241-242 (2011).
82
Cemco Holdings, Inc. v. National Life Insurance Company of the Philippines, Inc., 529 SCRA 355, 375 (2007),
citing Serrano v. National Labor Relations Commission, 346 Phil. 1003, 1010 (1997).
83
Oposa, 224 SCRA at 813, citations omitted.
84
Aromin v. Floresca, 496 SCRA 785, 807 (2006).
85
Limpo v. Court of Appeals, 482 SCRA 333, 338 (2006).
86
Periquet v. Intermediate Appellate Court, 238 SCRA 697, 713 (1994), citing J.M. Tuason & Co., Inc. v.
Cadampog, 7 SCRA 808 (1963).
87
Maimon Schwarzschild, Public Law by Private Bargain: Title VII Consent Decrees and the Fairness of Negotiated Institutional
Reform, 1984 (5) Duke L. J. 887, 931 (Nov. 1984).
88
Magbanua v. Uy, G.R. 458 SCRA 184, 196 (2005).
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the following are its additional benefits:
Open to Public Scrutiny. Because it is a judgment, it is published and accessible
to the public.
Judge Protects Public Interest. Even if public interest is not properly represented
and defended during mediation, the judge is responsible for ensuring that the consent
decree does not contravene public interest.
Compliance. Aside from the advantage of voluntary compliance made possible by
mediated settlements, the court which approved the consent decree retains jurisdiction
over the decree’s execution. In the event of non-compliance by the parties, such can be
remedied through the same court and action without necessitating resort to a separate
action thus saving time. Under the Rules, the court can monitor the execution of all
judgments,89 not just consent decrees. The supervision of the court and its contempt
powers can assist in the enforcement of the consent decree. The continued supervision
of the court is also valuable in guiding the parties in interpreting and carrying out
complicated agreements.90 It has been held that because a judgment by compromise is
final and executory, it cannot be amended or modified unless such would “consist only of
supplying an omission, or striking out a superfluity or interpreting an ambiguous phrase
therein in relation to the body of the decision which gives it life.”91
But there is American jurisprudence stating that the court can modify its terms, even
over the objection of a party when crucial to give effect to the decree.92 This is particularly
helpful when the implementation of the settlement will take some time to complete.93
Non-admission of Wrongdoing. The defendant can be allowed to take on
89
Rules of Procedure for Environmental Cases, part II, rule 5, § § 3 & 4.
Section 3. Permanent EPO; writ of continuing mandamus. - In the judgment, the court may convert the TEPO to
a permanent EPO or issue a writ of continuing mandamus directing the performance of acts which shall be
effective until the judgment is fully satisfied.
The court may, by itself or through the appropriate government agency, monitor the execution of the judgment
and require the party concerned to submit written reports on a quarterly basis or sooner as may be necessary,
detailing the progress of the execution and satisfaction of the judgment. The other party may, at its option,
submit its comments or observations on the execution of the judgment.
Section 4. Monitoring of compliance with judgment and orders of the court by a commissioner. - The court may motu proprio,
or upon motion of the prevailing party, order that the enforcement of the judgment or order be referred to a
commissioner to be appointed by the court. The commissioner shall file with the court written progress reports
on a quarterly basis or more frequently when necessary.
90
David L. Callies, The Use of Consent Decrees in Settling Land Use and Environmental Disputes, 21 Stetson L.Rev. 871,
872 (1992).
91
Heirs of Felicidad Vda. De Dela Cruz v. Heirs of Pedro T. Fajardo, 649 SCRA 463, 472 (2011), citing Inaldo v.
Balagot, 203 SCRA 650, 654 (1991).
92
Schwarzschild, supra note 87, at 895; Rabkin & Devins, supra note 62, at 207-208, citing United States v. Swift
& Co., 286 U.S. 106, 114 (1932).
93
Macchiarola, supra note 59.
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obligations to the plaintiff without admitting to any wrongdoing94 hence avoiding the
concomitant negative perception arising from such admission or adverse decision. A
compromise likewise cannot be construed to be an admission of liability of the parties to
a third party.95
Partial Consent Decrees. In multi-party disputes, some of the parties can choose
to settle the case without affecting the non-consenting parties.96
Future Behavior Affected. Although a consent decree is not precedent, it may
influence future actions of stakeholders including industry players, even if they were not
involved in the case.
Some of the benefits of consent decrees address the limitations of environmental
mediation: a consent decree is published as a judgment thus it cannot be criticized for
not being transparent and it is enforceable in court unlike other privately mediated
agreements.
C. Dangers of Consent Decree
There are likewise some misgivings about consent decrees:
Encroachment on Policy-making. Judges are criticized for encroaching on
environmental policy and engaging in judicial rule-making when approving a consent
decree. The idea is that policy formulation is best done by the political branches of
government because they are elected to represent the people and are accountable to
them. These branches have an established system of providing notice and hearings to
the public in the passage of policies not only to inform them but to come up with wellthought out rules that would comprehensively address needs. Courts, on the other hand,
adjudicate based on facts which happened in the past through adversarial presentations in
a trial. It is all the more unacceptable that policies are the outcome of negotiations of the
parties which the judge approves without trial. Aside from it being an encroachment, the
effect is often a piece-meal police-making because it is in the context of a dispute between
the litigating parties which may disregard other stakeholders, both present and future.97
Besides, such additional functions tend to overburden the courts.
It is also argued that the judge assumes an “unfamiliar role” in relation to the
consent decree98 because he or she becomes involved in the execution, implementation
or monitoring of his or her judicial decisions. This may already be in the sphere of
responsibility of the executive branch of government and going beyond the judge’s usual
judicial functions.
144
94
Chavez v. Court of Appeals, 453 SCRA 843, 852 (2005), citing Servicewide Specialists, Inc. v. Court of Appeals,
257 SCRA 643 (1996).
95
Servicewide, 257 SCRA at 656.
96
Webster, supra note 60, at 141.
97
Macchiarola, supra note 59, at 721.
98
Id. at 709.
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No Precedent. Even if a consent decree is a judgment, it is just like any mediated
settlement that does not create precedent for future cases.
Non-parties Affected. The case affects others and not just the parties who are
negotiating and proposing a consent decree to be approved. It cannot be expected that
the parties will draft an agreement that will be beneficial to third parties thus it may not
be possible that everyone will be satisfied with the solution. Parties may externalize the
costs and burdens of their settlement such that these costs do not affect them leaving it to
others (present or future) to bear them.99
D. Duty of the Court
Mindful of their benefits, compromises are allowed and accepted, even favored
and encouraged by the courts.100 The court can even approve compromise agreements
submitted to it for approval that were executed outside the court and without its
assistance.101 Just like ordinary contracts, in interpreting the agreement, “the intention of
the parties is to be ascertained from the agreement itself, and effect should be given to that
intention. Thus, the compromise agreement must be read as a whole.”102
However, the duty of the court is to ensure that the agreement is not contrary to law,
morals, good customs, public order and public policy to protect the right of the people
to a balanced and healthful ecology.103 It is not there merely to rubberstamp or to give
pro forma approval. The judge should actively and independently assess and thereafter
approve, deny or modify the agreement in accordance with these criteria. The parties
may not be expected to go beyond their narrow concerns thus it is the judge, with his
or her knowledge of the law, who can look out for this broader interest and scrutinize
the agreement’s conformity with the law. This duty inevitably falls on the judge because
the mediator is not required to be an expert of the law. This does not require the judge
to look into the merits of the case. The court decides independently of the adversarial
proceedings. Nonetheless, the agreement should be aligned with the objectives of the laws
invoked in the dispute.
However, the judge can impose additional terms104 without supplanting the will of the
99
Robert Zeinemann, The Characterization of Public Sector Mediation, 24 Environs Envtl. L. & Pol’y J. 49, 57 (2001).
100 Rañola v. Rañola, 594 SCRA 788, 794 (2009), citing DMG Industries, Inc. v. Philippine American Investments
Corporations, 526 SCRA 682, 687 (2007); Civil Code, art. 2029 states:
Art. 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise.
Rule 18, § 2(a) of the 1997 Rules of Civil Procedure:
Sec. 2. Nature and purpose. – xxx.
(a) The possibility of an amicable settlement or of a submission to alternative modes of dispute resolutions.
101
Algabre v. Court of Appeals, 28 SCRA 1130, 1138-1139 (1969).
102
Chu, 657 SCRA at 387-388, citing Adriatico Consortium, Inc. v. Land Bank, 609 SCRA 403 (2009).
103
Rules of Procedure for Environmental Cases, part II, rule 3, § 5.
104
Webster, supra note 60, at 142.
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parties. When needed, particularly in complicated environmental cases, the unspecialized
judge can always seek assistance in obtaining information independent of the parties and
evaluating the proposal by engaging experts, commissioners105 or amicus curae.106 When
appointed by the court, they are considered officers of the court who are expected to
assist it in good faith. The primordial duty is to ensure that the consent decree will not go
against popular will expressed in legislation.
To repeat, the approved compromise agreement should not be contrary to law,
morals, good customs, public order and public policy to protect the right of the people to
a balanced and healthful ecology. Otherwise, it is null and void ab initio; it vests no rights
in and creates no obligation for any party and “produces no legal effect at all.”107 “The
void agreement cannot be rendered operative even by the parties’ alleged performance
(partial or full) of their respective prestations”108 because “all acts performed pursuant to
it and all claims emanating from it have no legal effect”.109 The consent of the parties does
not make it valid and neither does the approval of the court make an otherwise illegal
contract legal because it has no authority to do so for the court cannot go against the
law.110 A void consent decree “can never become final, and any writ of execution based
on it is void.”111
Traditionally, the judge’s work in the Philippines is characterized as passive: he or
she receives evidence presented by the parties and then decides in accordance with the
applicable laws and rules which he or she merely applies or interprets as they are and
without modification. In approving a consent decree, he or she must evaluate the proposal
which necessitates sufficient understanding of the factual context of the conflict. Even
after the decree is issued, the judge is active in that he or she supervises its implementation.
Throughout the process, he or she is expected to be impartial and insulated from political
pressures. In Metropolitan Manila Development Authority v. Concerned Residents of Manila Bay,112
the Philippine Supreme Court said that in enforcing its decision, the continued jurisdiction
of the court over executive agencies is not an encroachment by the Court over executive
functions.
V. CONCLUSION AND RECOMMENDATIONS
In the Philippines, court-annexed mediation is mandatory in environmental civil
cases. While environmental mediation is a new requirement, court-annexed mediation in
146
105
Rules of Procedure for Environmental Cases, part II, rule 3, § 6 (k).
106
Legal Ethics, rule 138, § 16.
107
Rivero v. Court of Appeals, 458 SCRA 714, 735 (2005), citing Chavez v. PCGG, 307 SCRA 394 (1999).
108
Uy v. Chua, 600 SCRA 806, 819 (2009).
109
Id. at 820.
110
Id.
111
Id.
112
643 SCRA 90, 105 (2011) [hereinafter MMDA Resolution].
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general is already widely used in Philippine courts as an alternative to litigation. This came
about because of the problems encountered with traditional litigation which leave parties
feeling that justice was not achieved. Although environmental mediation has a longer
history in other countries, there is still skepticism as to how such confidential proceedings
where self-interested parties negotiate with each other and the resultant decree can take
into consideration the public interest.113
Any settlement should be “in accordance with law, morals, public order and public
policy to protect the right of the people to a balanced and healthful ecology” for the court
to approve it in a consent decree. It is expected that counsels for the parties, along with
the mediator, know how to steer the parties to an agreement that will be consistent with
this standard. But even if there is an error or lack of expertise on their part, in due course,
it is the judge who makes certain that the standard is followed. This can be a nebulous
standard when faced with the particular context of an environmental dispute before the
court. Given that there is no extensive experience yet with consent decrees, the court
can only be aided by the general guideline it uses when making a judgment approving a
compromise agreement: the agreement should comport with the objectives of the laws
giving framework to the dispute. Once it negates these objectives, the agreement must
be rejected. It is the author’s submission that if this standard is ensured, public interest is
advanced in that the agreement does not contradict the policy formulated by the political
branches of government, the goal of which is the preservation of the environment.
Environmental mediation has limitations which can result in its failure such that the
parties will have to resort to litigation. Should it succeed and a consent decree is approved,
the same likewise has limits and poses dangers to non-parties. Another way to guarantee
that the agreement does not work against broader public interest is to address the needs
of affected non-parties. Even if procedural fairness and substantive justice are attained
between or among the parties, how can the judge ensure that public interest is served such
that the rights of third parties are not disregarded? It is proposed that as much as possible,
all affected groups should be represented and participate in the discussion of a particular
dispute, not just the impleaded parties of the case, so that the negotiated outcome will be
good for everyone and not just some.
Therefore, there is a need for a consistent procedure that will address the needs
of interested key stakeholders who are not parties to the case. At the same time, the
litigants will want assurance that their negotiated settlement will not be challenged by
non-parties in the future. Such threat gives a cloud of uncertainty that does not encourage
good faith settlement efforts. It is essential that parties are accorded due process: The
procedure should be fair in that all the affected stakeholders who may not be parties to
the litigation are given the opportunity to be heard and participate. Existing rules provide
remedies to involve all known stakeholders such as Joinder of Parties and Intervention.
However, the author likewise will recommend supplemental rules specifically applicable
to environmental cases.
113
Higgs, Mediating Sustainability: The Public Interest Mediator in the New Zealand Environment Court, 37 Envtl. L. 61, 81
(Winter 2007).
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A. Remedies under the 1997 Rules of Civil Procedure
1. Joinder
When the third party is an indispensable party to the case, compulsory joinder of
parties is the proper remedy.114 Indispensable parties, i.e. parties without whom no final
determination can be had of an action, should be impleaded and the court can dismiss
the action if the party refuses to do so despite its order.115 If judgment is rendered despite
the non-joinder, the indispensable party who is not impleaded is not bound by the consent
decree116 and such party’s remedy is to have the judgment annulled under Rule 47 of
the 1997 Rules of Civil Procedure. There is jurisprudence that states that joinder can be
allowed even after final judgment if such is necessary to afford full relief and the delay in
filing the joinder motion is excusable.117
Permissive joinder of parties is also allowed when there is a question of law or fact
common to all such plaintiffs or defendants in the action involving the same transaction
or series of transactions such that the same evidence will be presented to prove a cause of
action.118 In joining parties, the provisions on jurisdiction and venue should be respected.119
114
1997 Rules of Civil Procedure, rule 3, § 7 states:
Section 7. Compulsory joinder of indispensable parties. — Parties in interest without whom no final determination can
be had of an action shall be joined either as plaintiffs or defendants.
115
PepsiCo, Inc. v. Emerald Pizza, Inc., 530 SCRA 58, 67 (2007); 1997 Rules of Civil Procedure, rule 3, § 11
provides:
Section 11. Misjoinder and non-joinder of parties. — Neither misjoinder nor non-joinder of parties is ground for
dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its
own initiative at any stage the action and on such terms as are just. Any claim against a misjoined party may be
severed and proceeded with separately.
116
See Garcia v. Garcia, 660 SCRA 1, 13 (2011).
117
Republic v. Sandiganbayan, 406 SCRA 190, 272-273 (2003).
118
1997 Rules of Civil Procedure, rule 3, § 6:
119
Pantranco North Express, Inc. v. Standard Insurance Company, Inc., 453 SCRA 482, 488 (2005); 1997 Rules
of Civil Procedure, rule 2, § 5 states:
Section 5. Joinder of causes of action. — A party may in one pleading assert, in the alternative or otherwise, as
many causes of action as he may have against an opposing party, subject to the following conditions:
Section 6. Permissive joinder of parties. — All persons in whom or against whom any right to relief in respect to or
arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided in these Rules, join as plaintiffs or be joined as defendants in one
complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in
the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no interest.
(a) The party joining the causes of action shall comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions or actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different venues
or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of
the causes of action falls within the jurisdiction of said court and the venue lies therein;
and
(d) Where the claims in all the causes action are principally for recovery of money, the
aggregate amount claimed shall be the test of jurisdiction.
148
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The rationale is orderly administration of justice, practicality and convenience120 in order
to avoid multiplicity of suits and for unnecessary time, effort, resources and expense to
be spent.
However, this determination of indispensable parties and process of mandatory
joinder can cause delay and costs to the original parties. Also, this is feasible only if the
affected stakeholders are identifiable which in environmental cases may be problematic.121
Establishing who might be affected parties is already a demanding task in itself in
view of the latitude with which courts allow standing to sue in cases of transcendental
importance.122
Joinder is not necessary in class suits. In a class suit, the subject matter of the controversy
is one of common or general interest to many and the parties are so numerous that it is
impracticable to bring them all before the court.123
2. Intervention
The rule in the Philippines is that intervention is not mandatory, but only optional
and permissive under Section 1, Rule 19 of the 1997 Rules of Civil Procedure:
Section 1. Who may intervene. — A person who has a legal interest in the
matter in litigation, or in the success of either of the parties, or an interest
against both, or is so situated as to be adversely affected by a distribution
or other disposition of property in the custody of the court or of an
officer thereof may, with leave of court, be allowed to intervene in the
action. The court shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the original
parties, and whether or not the intervenor’s rights may be fully protected
in a separate proceeding.
Such intervenors may be affected private third parties, national, regional or
local government regulatory agencies, local government units, concerned citizens or
environmental interest groups.
As for the appropriate timing of the intervention, the 1997 Rules of Civil Procedure
state:
Section 2. Time to intervene.– The motion to intervene may be filed at
any time before rendition of judgment by the trial court. A copy of the
pleading-in-intervention shall be attached to the motion and served on
the original parties.
120
La Farge Cement Philippines, Inc. v. Continental Cement Corporation, 443 SCRA 522, 543 (2004).
121
Webster, supra note 60, at 921
122
Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 101 (2005).
123
1997 Rules of Civil Procedure, rule 3, § 12.
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It has been held that intervention after the judgment of compromise was final and
executory and already substantially executed is improper.124 The remedy of the affected
third party is to institute a separate action. However, the Philippine Supreme Court has
also ruled that intervention may still be allowed even after the prescribed period in the
interest of substantial justice.125
A third party who is an indispensable party126 or who has a direct and material interest
in the approval or disapproval of the compromise agreement can be allowed to intervene
to challenge such agreement.127 Such third party is not bound and its rights should not be
infringed on by the compromise agreement of the parties.128
The Rules expressly allow for a motion for intervention.129 Moreover, it contains a
particular provision on intervention in a citizen suit:
Section 5. Citizen suit. — Any Filipino citizen in representation of others,
including minors or generations yet unborn, may file an action to enforce
rights or obligations under environmental laws. Upon the filing of a
citizen suit, the court shall issue an order which shall contain a brief
description of the cause of action and the reliefs prayed for, requiring all
interested parties to manifest their interest to intervene in the case within
fifteen (15) days from notice thereof. The plaintiff may publish the order
once in a newspaper of a general circulation in the Philippines or furnish
all affected barangays copies of said order.
Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be
governed by their respective provisions.130
Joinder or Intervention will be denied to those whose interest is deemed to already
be adequately represented by existing parties, e.g. transferees of interest131 or those
150
124
Magat v. Delizo, 360 SCRA 508, 513 (2001).
125
Office of the Ombudsman v. Masing, 542 SCRA 253, 265 (2008).
126
Uy v. Court of Appeals, 232 SCRA 579, 585 (1994).
127
Strategic Alliance Development Corporation v. Radstock Securities Limited, 607 SCRA 413, 457 (2009). In this
case, the Court declared that a stockholder of the party-corporation, in a derivative suit, can sue on behalf of
such party-corporation to annul the compromise agreement.
128
Gubat v. National Power Corporation, 613 SCRA 742, 758 (2010), citing University of the East v. Secretary of
Labor and Employment, 204 SCRA 254, 262 (1991).
129
Rules of Procedure for Environmental Cases, part II, rule 2, § 1.
130
Id. § 5.
131
1997 Rules of Civil Procedure, rule 3, §19:
Section 19. Transfer of interest. — In case of any transfer of interest, the action may be continued by or against
the original party, unless the court upon motion directs the person to whom the interest is transferred to be
substituted in the action or joined with the original party.
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representing the same right based on common facts.132
Likewise, under the principle of laches, third parties, although entitled to be involved
in the case, may be barred from later on questioning a judgment or the rules on joinder
and intervention when because of negligence, they failed to join or intervene in the action
and remained silent despite being given the opportunity to do so.133
B. Recommended Supplemental Rules Governing Approval of Consent
Decrees
Considering the infancy stage of environmental mediation practice in the Philippines,
these recommendations draw from the more mature jurisprudence in the United
States where consent decrees have been used for decades. Culling from the American
experience, it is recommended that special rules be put in place to supplement existing
remedies and to address the peculiar needs of parties and stakeholders in environmental
cases affected by consent decrees. Like the Rules, these can be done by the Philippine
Supreme Court under its power under the Constitution to “promulgate rules concerning
the protection and enforcement of constitutional rights, pleading, practice, and procedure
in all courts.”134
132
See David v. Commission on Elections, 271 SCRA 90, 93 (1997) where it stated:
“The Petition for Leave to Intervene filed on March 17, 1997 by Punong Barangay Rodson F. Mayor was denied
as it would just unduly delay the resolution of the case, his interest like those of all other barangay officials being
already adequately represented by Petitioner David who filed this petition as “president of the Liga ng mga
Barangay sa Pilipinas.”
133
Avisado v. Rumbaua, 354 SCRA 245, 258 (2001), citing Lim Tay v. Court of Appeals, 293 SCRA 634, 659
(1998), defines laches, to wit:
There is “laches” when there is failure or neglect, for an unreasonable length of time to do that which by
exercising due diligence could or should have been done earlier. When there is laches, the presumption arises
that the party entitled to assert aright has either abandoned it or has declined to assert it. Even a registered
owner may be barred from recovering possession of land by virtue of laches. Its elements are:
(1) conduct on the part of defendant, or one under whom he claims, giving rise to the
situation that led to the complaint and for which the complaint seeks a remedy;
(2) delay in asserting the complainant’s rights, having had knowledge or notice of the
defendant’s conduct and having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of defendant that the complainant would assert
the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or
the suit is not held barred.
134
Phil. Const. art VIII, § 5 (5). Section 5. The Supreme Court shall have the following powers:
xxxxxxxxx
(5) Promulgate rules concerning the protection and enforcement of constitutional rights,
pleading, practice, and procedure in all courts, the admission to the practice of law, the
integrated bar, and legal assistance to the under-privileged. Such rules shall provide a
simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform
for all courts of the same grade, and shall not diminish, increase, or modify substantive
rights. Rules of procedure of special courts and quasi-judicial bodies shall remain
effective unless disapproved by the Supreme Court.
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1. Notice and Third Party Comment
To make the public aware of the case and settlement proceedings, before approving
the compromise agreement reached by the parties, the court should cause a notice to
be posted for affected non-parties to have ample time and opportunity to intervene in
the case, i.e. time when they could have reasonably seen the effects of the settlement
on their interests,135 and file a third party comment. In the United States, this has been
called “limited intervention” wherein the intervenors are permitted to comment on
the reasonableness of the terms of the settlement and suggest alternatives or revisions
thereto.136 Patterning the proposed provision to that required for intervention in citizen
suits under the aforementioned Part II, Rule 2, Section 5 of the Rules, the same should
state:
Notice and third party comment. — Before approval of the compromise
agreement reached by the parties, the court shall issue an order which
shall contain the text of such compromise agreement, requiring all
interested parties to manifest their interest to intervene in the case and to
file their third party comment on the proposed compromise agreement
within fifteen (15) days from notice thereof. The court shall post the order
in at least one (1) conspicuous place in the court premises for at least ten
(10) consecutive working days. The parties may be ordered to publish the
order once in a newspaper of a general circulation in the Philippines or
furnish all affected barangays copies of said order.
This recommended rule should not apply in said citizen suits where interested parties
were already required to intervene upon filing of the suit. They have already been given
the opportunity to do so and are precluded at this stage to belatedly intervene. However,
according to the framers of the Rules, a suit by an individual who can show personal
and direct injury can be filed alongside a citizen suit.137 The framers likewise noted that
publication of the notice to the public is merely “permissive and non-jurisdictional and is
meant only to encourage public participation.”138
The notice should contain the proposed settlement giving the public an opportunity
to inspect it. This will not violate the requirement of confidentiality for CAM since only
the proceedings are expressly stated as confidential, not the outcome which is subject to
court approval. The requirement of giving notice will not entail added substantial costs.
Moreover, interested parties can look up these notices in their own environmental courts.
Consequently, taking into account the reach of possible effects of environmental cases
to other parties and to prevent approved decrees from being prone to attack, those third
parties who were identified as stakeholders and notified actually or constructively of their
entitlement to limited intervention but failed to intervene in the original suit should be
152
135
Schwarzschild, supra note 87, at 921.
136
Id. at 923.
137
Secretariat of the Sub-committee on the Rules of Procedure for Environmental Cases, supra note 63, at 110.
138
Id. at 112.
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barred from later on challenging the decree.139 As a result, a non-party should prove that
it was denied due process by being prevented from intervening (as when such stakeholder
was not identified as an interested party and could not be reasonably deemed to have been
constructively notified as well as when there are difficulties of communication) before it
can be allowed to attack the decree after establishing its legal standing to do so.140
The intervention should not result in opening the case to litigation or a “veto power”
against an otherwise legitimate settlement141 thereby delaying the proceedings and
prolonging the uncertainty arising from litigation142 which ultimately defeats the purpose
of CAM and compromise agreements.
2. Fairness Hearings
In the United States, some courts hold “fairness hearings” wherein they give notice
to affected parties not involved in the case and allow them a limited amount of time to
comment on or object to the proposed agreement prior to approval and entry of a decree,
particularly its effects on them, without however arguing the merits of the case, i.e. the
alleged violation or liability.143 A similar rule can be adopted here:
Fairness Hearings. – Upon receipt of the third party comment, the court
shall require the original parties to reply thereto within ten (10) days
from receipt of a copy thereof. After the replies are filed or the time
for the filing thereof has expired, the court may hear the commentsin-intervention and replies thereto which shall be summary in nature
or require the parties to submit memoranda. The court shall consider
such pleadings and those taken up during the hearings in acting on the
compromise agreement.
This timeline does not unduly prolong the disposition of environmental cases
considering that at this point, trial had been dispensed with and what only needs to be
completed is action on the proposed agreement.
This enables the court to take into account the views of the public when approving
the agreement.144 In this way, the government’s interest through its regulatory agency can
be presented and explained when necessary. This is important because by the nature of a
settlement agreement, the parties choose a solution that works for them which can just be
among several possible legal ways of resolving the conflict. In other words, there is no such
thing as one correct solution. The hearings give an opportunity for stakeholders to state
their views on the agreement and for them to be apprised of the benefits of the decree.
139
Webster, supra note 60, at 147 citing Martin v. Wilks, 109 S.Ct. at 2180.
140
Id. at 148.
141
Schwarzschild, supra note 87, at 921.
142
Clark, 517 SCRA at 219, citing Ramnani v. Court of Appeals, 360 SCRA 645, 654 (2001).
143
Schwarzschild, supra note 87, at 911.
144
Id.
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These will also elicit relevant information from the expanded pool of stakeholders which
can help in the evaluation of the proposal. This can facilitate in sorting out conflicting
information.
During this time, the action is considered suspended since this stage is still part of
CAM.145
These additional provisions are proposed as Supplemental Rules attached as Annex
“A”.
3. Non-mandatory Protective Measures
The following are proposed ways to make the process fair for both parties and nonparties which are just additional safeguards and need not be mandatory:
While fairness hearings serve a purpose so that exclusion of interested parties
is mitigated as much as possible, with it comes the risk that the conciliatory nature of
proceedings leading to the consent decree will be negated by the criticisms directed at the
proposed decree.146 A remedy can be to require the intervening parties to likewise undergo
mediation along with the original parties so that the cooperative atmosphere is preserved.
This may discourage litigants from settling because they are opening themselves up to
negotiating even with intervenors but it may be argued that this scenario is still less costly
to them than litigation with various parties.147
Another measure is for the court, in its discretion, to appoint a guardian ad litem to protect
the interests of known but absent or unrepresented third parties148 and of the environment
which duty may be performed by the DENR as the regulator for environmental concerns.
The guardian can present information and arguments on behalf of the absent party.
145
1997 Rules of Civil Procedure, rule 30, § 8:
Sec. 8. Suspension of Actions. – The suspension of actions shall be governed by the provisions of the Civil Code.
CIVIL CODE, art. 2030:
Art. 2030. Every civil action or proceeding shall be suspended:
1. If willingness to discuss a possible compromise is expressed by one or both parties;
or
2. If it appears that one of the parties, before the commencement of the action or
proceeding, offered to discuss a possible compromise but the other party refused the
offer.
154
The duration and terms of the suspension of the civil action or proceeding and similar matters shall be governed
by such provisions of the rules of court as the Supreme Court shall promulgate. Said rules of court shall likewise
provide for the appointment and duties of amicable compounders.
146
Schwarzschild, supra note 87, at 932.
147
Id.
148
Abram Chayes, The Role of the Judge in Public Law Litigation, 89 (7) Harv. L. Rev. 1281, 1312 (May 1976).
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With this recommended process, the consent decree can withstand attacks from nonparties. While it may not be possible for the decree to be acceptable to everyone who
could be affected, this procedure enables non-parties to be informed and be included
in the dialogue so that the decision can be justified to a broader public. However, it is
important not to make the procedure so burdensome that it becomes more like litigation
than an alternative to it. It should maintain the advantage of cooperative atmosphere
that should pervade the proceedings leading to a consent decree. This is best done if the
process is responsive to all the parties who make themselves known although in the end,
the judge will make an independent review, assessment and analysis of everything he
or she has heard, in keeping with his or her judicial training. The court will rule on the
comments-in-intervention in the consent decree and set forth its reasons for its holdings.
Ultimately, it will be the task of the court to balance the rights and interests of parties
along with those of the public including future generations.
In view of the young environmental mediation practice in the Philippines and the
limitations facing it, the consequences of consent decrees have not been seen. Thus, there
are still a lot to be learned as to how to protect public interest in the process of approving
consent decrees. It is expected to evolve and improve as the country strives to resolve
environmental disputes peacefully.
Annex “A”
Republic of the Philippines
SUPREME COURT
Manila
PROPOSED SUPPLEMENTAL RULES TO A.M. NO. 09-6-8-SC
ALSO KNOWN AS THE RULES OF PROCEDURE FOR
ENVIRONMENTAL CASES
Section 1. There shall be inserted as Sections 5-A and 5-B of Part II, Rule 3 of A.M.
No. 09-6-8-SC the following subsections:
SEC. 5-A. Notice and third party comment. — Before approval of the
compromise agreement reached by the parties, the court shall issue
an order which shall contain the text of such compromise agreement,
requiring all interested parties to manifest their interest to intervene in the
case and to file their third party comment on the proposed compromise
agreement within fifteen (15) days from notice thereof. The court shall
post the order in at least one (1) conspicuous place in the court premises
for at least ten (10) consecutive working days. The parties may be ordered
to publish the order once in a newspaper of a general circulation in the
Philippines or furnish all affected barangays copies of said order.
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SEC. 5-B. Fairness Hearings. – Upon receipt of the third party comment,
the court shall require the original parties to reply thereto within ten (10)
days from receipt of a copy thereof. After the replies are filed or the time
for the filing thereof has expired, the court may hear the commentsin-intervention and replies thereto which shall be summary in nature
or require the parties to submit memoranda. The court shall consider
such pleadings and those taken up during the hearings in acting on the
compromise agreement.
SEC. 2. Effectivity. - These Supplemental Rules shall take effect within fifteen (15)
days following publication once in a newspaper of general circulation.
•••
156
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Elementary Dilemmas in Philippine Tort Law
Elementary Dilemmas in Philippine Tort Law*
Rommel J. Casis**
I.
INTRODUCTION
Before proceeding with the substantial discussion, it is important that we understand
the topic at hand. As the title of this lecture indicates, we will be discussing the “elementary
dilemmas in Philippine Tort Law.” There are, therefore, two terms or phrases we must first
define. The first phrase is “elementary dilemmas” and the second phrase is “Philippine
Tort Law.” The meaning of the first phrase depends on the meaning of the second phrase,
so let us begin with the latter.
What is Philippine Tort Law?
The answer to that question can be the subject of an entire lecture itself, considering
the fact that the status of tort under Philippine Civil Law is unclear. The word “tort” itself
does not appear in the entire Civil Code because it was rejected by the Code Commission1
and yet jurisprudence treats tort as if it were a natural part of Civil Law. There is also the
question of whether a quasi-delict is a tort and vice versa. I have discussed this relationship
between torts and quasi-delicts elsewhere2 and there is no reason to repeat the discussion
in detail now.
But for the purpose of moving this discussion forward, let us sidestep the issue of the
definition of what Philippine tort law is and adopt Carpio’s model3 wherein Philippine
tort law consists of three parts: intentional torts, negligent torts or quasi-delicts, and strict
liability torts. These three types of torts are all found in the Civil Code.
But why is Philippine tort law difficult (if not impossible) to define?
That question brings us to the second term. What do we mean by “elementary
dilemmas?”
The word “elementary” refers to something basic and a “dilemma” is a problem.
When we speak of “elementary dilemmas,” we are referring to basic problems. The fact
that a problem is a basic problem does not mean that it is easy to solve. In fact, it may be
argued that when it comes to Philippine tort law, the most basic problems can be the most
difficult to solve. Basic problems are foundational problems.
*
This was delivered as the Edgardo J. Angara Professorial Chair Lecture. Thus, it is written from the first person
point of view.
**
Assistant Professor, College of Law, University of the Philippines Diliman; LL.M., Columbia Law School,
Columbia University; LL.B College of Law, University of the Philippines; B.A. Political Science, College of
Social Sciences and Philosophy, University of the Philippines.
1
Napoleon Malolos and Teodorico Martin, Report of the Code Commission: With Annotations 161-162
(1951).
2
Rommel Casis, Analysis of Law and Jurisprudence on Torts and Quasi-Delicts 42 (2012).
3
Antonio Carpio, Intentional Torts in Philippine Law, 47 Phil. L.J. 649 (1973).
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Rommel J. Casis
Now what are the basic problems in Philippine Tort Law?
The basic problem is that jurisprudence has been chronically inconsistent in dealing
with what it calls “tort.” If common law has a problem in defining tort,4 it is no surprise
that the Philippines will also have the same problem because jurisprudence has chosen to
adopt the common law concept despite the rejection of the term in the Civil Code.
The dilemma is further aggravated by the other reason for the use of the term
“elementary” in this lecture. Often, in determining whether a valid cause of action exists,
jurisprudence would identify elements that the claimant must comply with. The problem
is, in establishing these elements, issues have arisen which would not have arisen had the
Court stuck to the language of the Civil Code. This is particularly true in the case of
quasi-delicts and torts.
The purpose of this lecture is to bring to light these elementary dilemmas in the
hope that solutions can be identified. If these are the foundational issues in tort law,
then they have to be addressed and not sidestepped. However, it can be a daunting task
because it requires reconciling seemingly antagonistic rulings. But through what I like to
call “jurisprudential apologetics,” there may be a way to reconcile divergent decisions.
II.
QUASI-DELICT
A. Defining a Quasi-Delict
What is the definition of a quasi-delict?
This question should be easy to answer considering that the Civil Code appears to
provide for a definition. Article 2176 provides:
Article 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter. (1902a)
Based on the text of this article, what is a quasi-delict? Is it the “act or omission” or
“the fault or negligence?”
In the first sentence, the act or omission causes damage. It is this act or omission
causing damage which gives rise to the obligation to pay damages.5 It is reasonable to
suppose that this is the quasi-delict. However, in the second sentence, it is the “fault
or negligence” which is called a quasi-delict when there is no pre-existing contractual
relation.
158
4
Casis, supra note 4, at 1-3.
5
The text itself does not say “damages,” but considering other provisions of the Civil Code, payment is in the
form of damages.
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Elementary Dilemmas in Philippine Tort Law
Article 1902 of the old Civil Code, the precursor of Article 2176, is clearer. It says:
ARTICLE 1902. Any person who by an act or omission causes damage
to another by his fault or negligence shall be liable for the damage so
done.
Assuming that the subtle change in language in the new code was not intended to
change the substance of the text, Article 2176 can be interpreted to mean that “fault or
negligence” is the manner by which the act or omission causing damage to another was
committed. It may be said that the quasi-delict is the negligent act or omission.
But what about the term “fault?” Is the concept of fault different from negligence?
This brings us to the problem of scope.
B. Scope of Quasi-Delict
It is clear that acts committed with negligence can be a quasi-delict. But can an
intentional act be considered a quasi-delict? Does “fault or negligence” in Article 2176
justify the inclusion of intentional acts?
1.
Fault or Negligence under Article 1902
In Daywalt v. La Corporacion6 the Court said:
Article 1902 of the Civil Code declares that any person who by an act or
omission, characterized by fault or negligence, causes damage to another
shall be liable for the damage so done. Ignoring so much of this article
as relates to liability for negligence, we take the rule to be that a person is
liable for damage done to another by any culpable act and by “culpable
act” we mean any act which is blameworthy when judged by
accepted legal standards. The idea thus expressed is undoubtedly
broad enough to include any rational conception of liability for
the tortious acts likely to be developed in any society. (Emphasis
supplied.)
This early case suggests that any “culpable act” was covered by Article 1902 of the
old Civil Code. But what is a culpable act?
Tolentino, in explaining Article 1902, said:
The obligation spoken of in this article are those which arise from an
injury caused by an act or omission without malicious intention.
The obligation so dealt with differ from those arising from crimes in
that the latter are the offspring of illicit acts which are purely voluntary,
while the former proceed from acts or omissions not punishable
and sometimes involuntary or even not personal to the person who
6
G.R. No. L-13505, February 4, 1919.
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Rommel J. Casis
becomes responsible therefor (12 Manresa 611-612).7 (Emphasis supplied.)
Therefore in Tolentino’s view, Article 1902 covered acts “without malicious intention.”
In his view, it covered voluntary and involuntary acts provided that these acts were not
punishable or were not crimes. Thus, under this interpretation, the act or omission which
constitutes culpa aquiliana under the Article 1902 cannot be a crime. While this opinion
was supported by the text of the old Civil Code, after the ruling of the Court in Barredo v.
Garcia8 which “re-interpreted” the rule in Article 1902, the act or omission constituting a
culpa aquiliana could be a crime.
But the Barredo ruling does not necessarily answer the question of whether a culpa
aquiliana can be an intentional criminal act. The Court in that case, after a thorough
discussion of the authorities, said:
Specifically they show that there is a distinction between civil liability
arising from criminal negligence (governed by the Penal Code) and
responsibility for fault or negligence under articles 1902 to 1910 of the
Civil Code, and that the same negligent act may produce either a
civil liability arising from a crime under the Penal Code, or a separate
responsibility for fault or negligence under articles 1902 to 1910 of the
Civil Code. (Emphasis supplied.)
Thus, the rule stated in Barredo was: “the same negligent act may produce either a civil
liability arising from a crime under the Penal Code, or a separate responsibility for fault
or negligence under articles 1902 to 1910 of the Civil Code.” Under this case, the kind of
act that can be both a crime and a culpa aquiliana was a negligent act. Therefore, Barredo
cannot be the basis for a rule stating that the same intentional9 act can both be a crime
and a culpa aquiliana.
2.
Fault or Negligence under Article 2176
a. Voluntary does not mean intentional
Caguioa, in explaining what a quasi-delict is, says:
It is different from Anglo-American tort because it does not include
intentional offenses. Although the concept under the new Civil Code
includes acts or omissions punished by criminal law…It differs from
dolo or fraud in that there is no deliberate intent to break the
obligation or cause damage to another but merely carelessness
or want of due care required by the circumstances.10 (Emphasis
supplied.)
160
7
Arturo Tolentino, Commentaries
(1947).
and Jurisprudence on the
Civil Code
8
Barredo v. Garcia, G.R. No. L-48006, July 8, 1942.
9
“Intentional” here does not mean voluntary. It means “with intent to harm.”
10
Eduardo Caguioa, Comments and Cases on Civil Law Vol. VI 392 (1970).
with
Special
laws
Vol. II 1070
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Elementary Dilemmas in Philippine Tort Law
Jarencio, in discussing Article 2176, explains:
Fault, in general, signifies a voluntary act or omission which causes
damage to the right of another giving rise to an obligation on
the part of the actor to repair such damage. But fault in civil law must
be distinguished from dolo. If the act or omission causing the damage is
committed with intent to cause such damage, it is dolo, the act becomes a
crime, and is governed by the Revised Penal Code. When intent is absent,
it is fault or culpa. The distinction between the two concepts depends on
the will of the actor rather than on his intelligence.11 (Emphasis supplied.)
The statements of Caguioa and Jarencio underscore the clarification made earlier
regarding the ruling in Barredo. The fact that a quasi-delict may be a criminal act does
not necessarily mean that all criminal acts may be a quasi-delict. An act cannot be a
quasi-delict if there is a deliberate intent to harm. Therefore, only crimes committed with
criminal negligence can be a quasi-delict but not crimes committed with deliberate intent
to harm.
The problem, however, is that there are cases which seem to say otherwise.
In Elcano v. Hill,12 the Court held that “Article 2176, [when] it refers to ‘fault or
negligence,’ covers not only acts ‘not punishable by law’ but also acts criminal in character,
whether intentional and voluntary or negligent.” However, as it has been explained in
detail elsewhere,13 Elcano cannot be used as basis for saying that a quasi-delict can be a
criminal act with intent to harm.
Neither is the statement in Andamo v. IAC,14 which copies the same statement Elcano
without quoting it as a source, a proper legal basis because it is obiter dictum.15
Unfortunately, both Elcano and Andamo were relied upon by the Court in Dulay v. CA,16
where it said:
there is no justification for limiting the scope of Article 2176 of the Civil
Code to acts or omissions resulting from negligence. Well-entrenched
is the doctrine that Article 2176 covers not only acts committed with
negligence, but also acts which are voluntary and intentional.
The respondent in this case argued that the word “intentional” in the
Andamo case was an inaccurate obiter, and should be read as “voluntary”
because intent cannot be coupled with negligence as defined by Article
365 of the Revised Penal Code. The Court dismissed this argument,
stating that:
11
Hilarion Jarencio, Torts and Damages in Philippine Law 17 (1977).
12
Elcano v. Hill, G.R. No. L-24803, May 26, 1977.
13
Casis, supra note 4, at 31-38.
14
Andamo v. IAC, G.R. No. 74761, November 6, 1990.
15
Casis supra note 4, at 37.
16
Dulay v. CA, G.R. No. 108017, April 3, 1995.
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Rommel J. Casis
In the absence of more substantial reasons, this Court will not disturb the
above doctrine on the coverage of Article 2176.
With all due respect to the Court, a jurisprudential misreading of a clear
provision in the Civil Code is a substantial error that must be corrected.
If the rule stated in both Elcano and Andamo is not authoritative, then the
reliance of these two cases on Dulay makes the rule stated therein also
not authoritative. Otherwise, obiter dicta cited in earlier cases will become
doctrine by quoting it in later cases.
Nevertheless, a compelling argument for the said rule can be made in cases involving
vicarious liability. Under Article 2180, a person may be held liable for a quasi-delict for
acts committed by a person for whom he is responsible for. The argument is that it should
not matter if the injury causing act or omission was committed with intent to harm. The
logic of the argument is that if under Article 2180 a person can be held liable by the
mere negligence of a person he is responsible for, should he not also be responsible for
the intentional17 acts of the same person? For instance, under Article 2180, an employer
is liable for the damage caused by an employee for acts or omission within the scope of
his assigned tasks. Jurisprudence explains that under this article, if an employee is found
negligent, the employer is presumed negligent in the selection and supervision of his
employee. The argument is that if an employer is liable for mere acts of negligence of an
employee, shouldn’t he also be held responsible for acts with intent to harm?18
The answer would require a closer scrutiny of Article 2180.
The first paragraph of Article 2180 states:
The obligation imposed by article 2176 is demandable not only for one’s
own acts or omissions, but also for those of persons for whom one is
responsible.
The obligation referred to is the obligation to pay damages. Therefore,
the article is saying that a person is responsible to pay for damages, not
only for his own fault or negligence but also for the fault or negligence
of those he is responsible for. The article goes on to list the persons
vicariously liable and the persons for whom they are responsible for (the
“actors”). The article ends:
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good
father of a family to prevent damage.
The “persons herein mentioned” refers to the persons vicariously responsible and not
the actors. Therefore, the text of the article suggests that the quasi-delict is the negligent
act or omission of the person vicariously responsible. In other words, the person who is
guilty of the negligent act is the person vicariously responsible and not the actor.
162
17
With intent to harm, not just voluntary.
18
Of course, it could also be argued that even the most diligent employer cannot possibly prevent an act of his
employee done with intent to harm.
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Elementary Dilemmas in Philippine Tort Law
This interpretation of Article 2180 would be supported by the cases wherein a person
was held vicariously liable for the intentional19 acts or omissions of a person for whom he
is responsible for.20
This interpretation, while supportive of the “compelling argument,” however raises
some questions.
First, if the person vicariously responsible is liable for all acts or omissions of the
actor, whether negligent or with intent to harm, why does the Court require a finding of
negligence on the part of the actor in many cases?21
Second, under Article 2180, there may be two negligent acts, that of the actor and
that of the person vicariously responsible. If the negligence of the latter is the quasi-delict,
shouldn’t it be required that such negligence be the proximate cause of the injury before
there can be a quasi-delict? Why is it that in many cases involving the vicarious liability
of employers, an employer can be held liable under Article 2180 upon his failure to rebut
the presumption of negligence on his part? If it is his negligence which is considered a
quasi-delict, then mere proof of his negligence should not be enough. The claimant must
prove that his negligence, presumed or otherwise, is the proximate cause of the injury. But
we do not see this in jurisprudence. The same complaint can be made against the view
that the act or omission of the actor is the quasi-delict. In many cases, after his negligence
is proven, there is at times no discussion as to why his negligence is the proximate cause.22
Despite these questions, the current status of jurisprudence seems to be that cases
based on Article 2180 can prosper even if the actor acted with intent to harm provided
the person vicariously responsible was negligent. This is a strange set-up, considering that
the actor is not necessarily committing a quasi-delict if he is not negligent and neither
is the person vicariously responsible because his negligence is not required to be the
proximate cause. But, the status quo may be acceptable to many because it allows for
recovery despite conceptual inconsistency.
a. The distinction between “fault” and negligence
Jarencio differentiates “fault” from “negligence” in this way:
Liability under Art. 2176 may arise either from “fault” or “negligence.”
In other words, liability may be incurred by an “act” or through an
“omission.” Fault requires the execution of a positive act
which causes damage to another, while negligence consists in the
omission to do acts which result also in damage to another. The act
or omission must be without intent to cause damage, because if there is
intent to cause damage, the act or omission becomes a crime and civil
liability for such act or omission will be governed by the Revised Penal
19
With intent to harm, not merely voluntary.
20
Salvosa v. IAC, G.R. No. 70458, October 5, 1988; Amadora v. CA, G.R. No. L-47745, April 15, 1988; Libi v.
IAC, G.R. No. 70890, September 18, 1992; Palisoc v. Brillantes, G.R. No. L-29025, October 4, 1971.
21
Lampesa v. De Vera, G.R. No. 155111, February 14, 2008; Mercury Drug v. Huang, G.R. No. 172122, June 22,
2007; Valenzuela v. CA, G.R. No. 115024, February 7, 1996.
22
There are also cases under Article 2176 where this complaint can also be made.
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Rommel J. Casis
Code in accordance with the provisions of Art. 1161 of the Civil Code.23
Thus, in Jarencio’s view, fault corresponds to acts, while negligence corresponds to
omissions. This view seems to have been accepted by the Court in Child Learning Center v.
Tagario:24
Fault, in general, signifies a voluntary act or omission which causes damage to
the right of another giving rise to an obligation on the part of the actor to repair
such damage. Negligence is the failure to observe for the protection of the interest of
another person that degree of care, precaution and vigilance which the circumstances
justly demand. Fault requires the execution of a positive act which causes damage to
another while negligence consists of the omission to do acts which result in damage
to another.25
Jarencio further explains that there are two kinds of fault:
(a) “Fault substantive and independent” which, on account of its origin,
gives rise to an obligation between two persons not similarly bound
by any other obligation;
(b) As “an incident in the performance of an obligation” which already
existed, which cannot be presumed to exist without the other,
and which increases the liability arising from the already existing
obligation.26
As to which type is what is referred to in Article 2176, he says:
The fault referred to in Art. 2176 of the New Civil Code is “fault
substantive and independent” which in itself is a source of obligations.
This kind of fault is also known as “culpa extracontractual” or “culpa
aquiliana.”
Fault as an incident in the performance of a pre-exiting contract is know
as “contractual fault” or “culpa contractual.”27
Caguioa adds:
Only juridical fault but not moral fault gives rise to liability for damages.
Lack of charity or altruism, constituting moral fault, does not constitute
a quasi-delict. Thus, a person who folds his arms while another is in
danger of death, is guilty only of moral negligence but not of juridical
negligence and cannot be held liable for damages.28
164
23
Jarencio, supra note 13, at 18.
24
Child Learning Center v. Tagario, G.R. No. 150920, November 25, 2005.
25
Id., citing Alicia Gonzales-Decano, Notes on Torts and Damages 18-19 (Central Law Book Publishing Co.
Inc., 2004).
26
Jarencio, supra note 13, at 17.
27
Id., at 17-18.
28
Caguioa, supra note 12, at 393, citing “5 Tolentino 506.”
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Elementary Dilemmas in Philippine Tort Law
The term “fault or negligence” also appears in Article 1173, which states in part:
ARTICLE 1173. The fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the
time and of the place.
xxxxxxxxx
Explaining the meaning of “fault” in this provision, Nicolas writes:
The word fault is synonymously used with negligence or culpa, a Latin
word which in civil law means fault, neglect, or negligence.29
Therefore, it may be said that apart from the difference identified by Jarencio and
apparently adopted in the Child Learning Center case, there is no substantial distinction
between fault or negligence and the two terms can be subsumed under the concept of
negligence.
C. Elements of a Quasi-Delict
1. Under Article 1902
Tolentino writes:
In order to give rise to an action under this article, the following requisites
must concur: (1) That there exists a damage or injury, which must be
proved by the person claiming recovery; (2) That there exists a wrongful
act or omission imputable to the defendant by reason of his fault or
negligence; and (3) That there be a direct relation of cause and effect
between the damage or injury and the fault or negligence (12 Manresa
613-614).30
In Donaldson v. Smith,31 the Court explained that Article 1902 of the Civil Code
“established the general principle of liability for damage caused by fault or negligence”
and “there can be no fault or negligence where... there was no obligation resting upon the
person causing the damage to exercise diligence as respects the injured person.”
In Francisco v. Onrubia,32 the Court explained that “it is necessary that the negligence
or fault in question be not punished by law.” It explained:
And this is so because if the fault or negligence is punished by the law, it
ceases to be the quasi crime of negligence having purely civil effects, and
29
Macario Nicolas, The Philippine Law on Torts and Damages 20 (1958).
30
Tolentino supra note 9, at 1071.
31
Donaldson v. Smith, G.R. No. 411, April 23, 1902.
32
Francisco v. Onrubia, G.R. No. 22063, September 30, 1924.
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Rommel J. Casis
becomes a crime or misdemeanor, according to the gravity of the penalty
imposed by the law.
In Dioquino v. Araneta,33 the Court discussed that Article 1902 was not applicable
against the defendant because the negligence was not the proximate cause of the injury.
In Receiver v. Ybanez,34 the Court explained that the word “damage” in Article
1902 “includes any and all damages that a human being may suffer in any and all the
manifestations of his life: physical or material, moral or psychological, mental or spiritual,
financial, economic, social, political, and religious.”
2. Under Article 2176
The Court has ruled in a number of cases35 that based on Article 2176, there are
three elements36 necessary to establish a quasi-delict case:
• damages to or suffered by the plaintiff;
• fault or negligence, by act or omission, of the defendant;37 and
• the connection of cause and effect between such negligence of the
defendant and the damages inflicted on the plaintiff.
“Damages” as the first element is obviously inaccurate because the term refers to
the “recompense or compensation awarded for the damage suffered.”38 In Bulao v. CA39
and Dy Teban v. Jose Ching,40 the Court used “damage” but this is also not applicable in
all situations because there could be damage without injury (damnum absque injuria). Thus,
the fact that there is damage along with the two other elements may not be sufficient to
establish a quasi-delict if the case involves damnum absque injuria. As the Court explained
in Custodio v. CA:41
In order that a plaintiff may maintain an action for the injuries of which
he complains, he must establish that such injuries resulted from a breach
166
33
Dioquino v. Araneta, G.R. No. L-48176, July 21, 1944.
34
Receiver v. Ybanez, G.R. No. L-22183, August 30, 1968.
35
Dela Llana v. Biong, G.R. No. 182356, December 4, 2013; Huang v. Philippine Hoteliers, G.R. No. 180440,
December 5, 2012; Gregorio v. CA G.R. No. 179799, September 11, 2009; Corinthian Gardens v. Tanjangco,
G.R. No. 160795, June 27, 2008; BPI v. Lifetime, G.R. No. 176434, June 25, 2008; Dy Teban v. Jose Ching,
G.R. No. 161803, February 4, 2008; PNR v. Brunty, G.R. No. 169891, November 2, 2006; Child Learning
Center v. Tagario, G.R. No. 150920, November 25, 2005; PNCC v. CA, G.R. No. 159270, August 22, 2005;
Smith Bell v. Borja, G.R. No. 143008, June 10, 2002; PBC v. CA, G.R. No. 97626, March 14, 1997; MMTC v.
CA, G.R. No. 104408, June 21, 1993; Bulao v. CA, G.R. No. 101983, February 1, 1993; Andamo v. IAC, G.R.
No. 74761, November 6, 1990; Vergara v. CA, G.R. No. 77679, September 30, 1987.
36
Vergara v. CA, G.R. No. 77679, September 30, 1987; PNR v. Brunty, G.R. No. 169891, November 2, 2006. This
was referred to as “requisites.”
37
Some cases would add “or by some person for whose acts the defendant must respond.” This would be based,
however, on Article 2180 in connection with Article 2176. So, if this would be added, it would be more accurate
to say that these are the elements to establish a quasi-delict under Articles 2176 and 2180. This is what the Court
did in MMTC v. CA (G.R. No. 104408, June 21, 1993) and it even included Article 2177 for good measure.
38
Custodio v. CA, G.R. No. 116100, February 9, 1996.
39
Bulao v. CA, G.R. No. 101983, February 1, 1993.
40
Dy Teban v. Jose Ching, G.R. No. 161803, February 4, 2008.
41
Custodio v. CA, G.R. No. 116100, February 9, 1996
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Elementary Dilemmas in Philippine Tort Law
of duty which the defendant owed to the plaintiff — a concurrence of
injury to the plaintiff and legal responsibility by the person causing it.
The underlying basis for the award of tort damages is the premise that
an individual was injured in contemplation of law. Thus, there must
first be the breach of some duty and the imposition of liability for that
breach before damages may be awarded; it is not sufficient to state
that there should be tort liability merely because the plaintiff
suffered some pain and suffering.
Many accidents occur and many injuries are inflicted by acts or omissions
which cause damage or loss to another but which violate no legal duty
to such other person, and consequently create no cause of action in
his favor. In such cases, the consequences must be borne by the injured
person alone. The law affords no remedy for damages resulting
from an act which does not amount to a legal injury or wrong.
(Emphasis supplied, citations omitted.)
Therefore, instead of “damages” or “damage,” the first element should be injury.
In some cases, the Court would add an additional element to the three. In Gregorio v.
CA,42 the Court added a fourth element: “that there must be no preexisting contractual
relation between the parties.” As basis, the Court cited the case of Corinthian Gardens
v. Tanjangco43 which was written by the same ponente. Curiously, however, the Court in
Corinthian Gardens only indicated the three usual elements.
In a few cases,44 the Court listed the “requisites of quasi-delict” in this manner:
(a)
(b)
(c)
(d)
there must be an act or omission;
such act or omission causes damage to another;
such act or commission is caused by fault or negligence; and
there is no pre-existing contractual relation between the parties.
D. Effect of a Pre-existing Contractual Relationship
Can a quasi-delict exist if there is a pre-existing contract between the parties?
1. Dissecting the Text
Article 2176 provides:
ARTICLE 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter. (Emphasis supplied.)
42
Gregorio v. CA, G.R. No. 179799, September 11, 2009.
43
Corinthian Gardens v. Tanjangco, G.R. No. 160795, June 27, 2008.
44
Ngo Sin Sing v. Li Seng Giap, G.R. No. 170596, November 28, 2008; Chan v. Iglesia ni Kristo, G.R. No.
160283, October 14, 2005.
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The text of the article suggests that a quasi-delict can only exist if there is no preexisting contract between the parties. But the use of the phrase “is called” creates
ambiguity.
The first sentence of Article 2176 creates an obligation on the part of a person who
by negligent act or omission causes damage to another. The second sentence says that
such negligent act or omission “is called” a quasi-delict if there is no pre-existing contract
between the parties.
How does the requirement in the second sentence, that there is no contract between
the parties, affect the obligation to pay for the damage caused by negligent acts or
omissions found in the first sentence?
Does the existence of a contract between the parties negate the existence of the
obligation created under the first sentence or does the obligation subsist but it simply
cannot be called a quasi-delict? What is the purpose of the second sentence in Article
2176?
a. Nomenclature
It may be argued that if the purpose of the “no contractual relation” requirement
was to negate the existence of a quasi-delict, then the article should have read:
Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done, provided there
is no pre-existing contractual relation between the parties.
Such fault or negligence is called a quasi-delict and is governed by the
provisions of this Chapter.
The fact that the “no contractual relation” requirement was separated from the
statement establishing the obligation, in addition to the use of the phrase “is called”
(as opposed to simply using “is”), suggests that such requirement does not affect the
obligation. If this were the case, the second sentence may be interpreted as simply a rule
on nomenclature. It gives a name to the negligent act or omission when there is no preexisting contract between the parties. This view also seems to be supported by the intent
of the Code Commission. In its Report, the Code Commission stated:
A question of nomenclature confronted the Commission. After careful
deliberation, it was agreed to use the term “quasi-delict” for those
obligations which do not arise from law, contracts, quasi-contracts, or
criminal offenses. They are known in Spanish legal treatises as “culpa
aquiliana,” “culpa-extracontractual” or “cuasi-delitos”. The phrase
“culpa-extra-contractual” or its translation “extra-contractual fault”
was eliminated because it did not exclude quasi-contractual or penal
obligations. Aquilian fault” might have been selected, but it was thought
inadvisable to refer to so ancient a law as the “Lex Aquilia.” So “quasidelicts” was chosen which more nearly corresponds to the Roman Law
classification of obligations, and is in harmony with the nature of this
kind of liability.
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The Commission also thought of the possibility of adopting the word
“tort” from Anglo-American law. But “tort” under that system is much
broader than the Spanish-Philippine concept of obligations arising from
non-contractual negligence.
Thus, the second sentence may simply be a result of the “question of nomenclature”
which the Commission grappled with. Their intention may have been simply to establish
the name as to what was being described under Article 2176 and it was just unfortunate
that the text lent itself to an interpretation that the mere existence of a contract prevents
a quasi-delict from coming into existence.
Thus, under this interpretation, the obligation created under the first paragraph
of Article 2176 subsists even though a contract between the parties exists. The second
sentence only gives a name to that obligation where no contract at all exists. However, this
interpretation, while supported by textual considerations, creates a problem.
What is the name of the negligent act or omission causing damage to another when
there is a pre-existing contract? The obligation subsists but it cannot be called a quasidelict because that name only applies if there is no pre-existing contract. Thus, the
interpretation may be creating a nameless tort.
On the other hand, it may be argued that it is not a nameless tort because the first
sentence of Article 2176 is substantially the same as Article 1902 of the old Civil Code. If
the latter is referred to as culpa aquiliana then the first sentence of Article 2176 is also culpa
aquiliana. Thus, it is not a nameless tort. The effect of this, however, is that Article 2176
defines two concepts. The first sentence defines culpa aquiliana while the second sentence
defines a quasi-delict. This implies that quasi-delict and culpa aquiliana are two different
concepts.
b. Negation
On the other hand, it may be argued that the text suggests that the second sentence
adds a further requirement to establish a quasi-delict. The second sentence is referring to
the “fault or negligence” mentioned in the first, so it cannot possibly describe something
different from it. In other words, the second sentence is describing what is being referred
to in the first sentence. Thus, both sentences are defining the same thing and should be
considered one whole idea. Therefore, under this interpretation, a quasi-delict cannot
exist if there is a pre-existing contract between the parties. A pre-existing contract between
the parties negates the existence of a quasi-delict.
This interpretation may also be supported by the intent of the Code Commission.
As quoted earlier, the term “culpa-extra-contractual” or its translation “extra-contractual
fault” was considered but eliminated because it did not exclude quasi-contractual or
penal obligations. But it is important to note that it was considered because these terms
conformed to the idea that Article 2176 is supposed to cover non-contractual fault. The
Code Commission report also stated that the word “tort” was rejected because it was
much broader than the Spanish-Philippine concept of obligations arising from “noncontractual negligence.” Hence, the intent of the framers was to limit Article 2176 to
non-contractual negligence.
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3. Untangling Jurisprudence
Considering that the text of the article and intent of the framers can support two
contrasting interpretations, resort to jurisprudence becomes a necessity. Unfortunately,
instead of providing clarity, jurisprudence further clouds the issue.
In Fores v. Miranda,45 the Court ruled that an action for breach of contract cannot
simultaneously embody an action on tort.46 This statement is not the same as stating that
a quasi-delict cannot exist if there is a contract. However, it can be implied. Nevertheless,
the authoritativeness of this implied rule is doubtful, considering the reasoning behind
it.47
In PSBA v. CA,48 the Court made three statements on the issue:
Because the circumstances of the present case evince a contractual
relation between the PSBA and Carlitos Bautista, the rules on quasidelict do not really govern. A perusal of Article 2176 shows
that obligations arising from quasi-delicts or tort, also known
as extra-contractual obligations, arise only between parties not
otherwise bound by contract, whether express or implied.
However, this impression has not prevented this Court from
determining the existence of a tort even when there obtains a contract.
(Citation omitted, emphasis supplied.)
The first statement says that because there is a contract between the parties, “the rules
on quasi-delict do not really govern.” The “rules on quasi-delict” can refer to a number
of provisions.49 Is the Court saying that if there is a contractual relation, there can be no
quasi-delict or only that the rules of quasi-delict, whatever these may be, do not apply?
It is also not clear what the Court means by these rules “not really governing.” Do these
rules absolutely not apply or only generally not apply? If it were only stating general rule,
the Court did not specify any exceptions to this general rule.
In its second statement, the Court points out that based on Article 2176, obligations
arising from quasi-delict50 “arise only between parties not otherwise bound by contract.”
This statement is a categorical rejection of the possibility of a quasi-delict if there is
a contract between the parties. This may be taken as a clarification of what the first
statement meant. But unfortunately, the Court did not stop there.
In its third statement, the Court characterized the rule in the second statement as a
mere “impression” which has not prevented the Court “from determining the existence
170
45
Fores v. Miranda, G.R. No. L-12163, March 4, 1959.
46
In this case, “tort” referred to Article 2176.
47
See Casis, supra note 4, at 78-80.
48
PSBA v. CA, G.R. No. 84698, February 4, 1992.
49
It may refer to Articles 2176 and 2180 which define types of quasi-delicts. It may also refer to the rules on
damages applicable to quasi-delicts as well as provisions referring to possible defenses to quasi-delictual actions
such as fortuitous event under Article 1174.
50
Here, the Court equates the concept of quasi-delict with tort.
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of a tort even when there obtains a contract.” It is not clear as to whether this observation
negates the rule mentioned in the second statement. On its face, the third statement casts
doubt on the authoritativeness of that rule by citing contrary rulings of the Court as basis.
But the problem is, can the Court’s rulings overturn a rule stated in the Civil Code?51
Furthermore, this third statement refers to tort and not to quasi-delict. Then again, the
Court in the second statement equated tort with quasi-delict or at least used the terms
interchangeably.
Finally, after this statement, the Court explained the ruling in Air France v. Carrascoso52
and implied that this was the basis of the third statement. It said:
In Air France vs. Carroscoso, the private respondent was awarded damages
for his unwarranted expulsion from a first-class seat aboard the petitioner
airline. It is noted, however, that the Court referred to the petitionerairline’s liability as one arising from tort, not one arising from a contract
of carriage. In effect, Air France is authority for the view that liability
from tort may exist even if there is a contract, for the act
that breaks the contract may be also a tort. (Citations omitted,
emphasis supplied.)
Unfortunately, despite its popularity, Air France does not solve the problem at all. As
we have explained in detail elsewhere,53 the factual and legal considerations in that case
disqualify it from serving as basis for a rule which states that a quasi-delict cannot exist if
there is a pre-existing contractual relationship.
The Court in Consolidated Bank v. CA54 said:
The law on quasi-delict or culpa aquiliana is generally applicable when
there is no pre-existing contractual relationship between the parties.
(Emphasis supplied.)
Thus, based on this statement, the law on quasi-delict would apply as a general rule
in cases where there is no pre-existing contractual relationship between the parties. By
stating this rule as a general rule, the Court is implying that there are exceptions. However
the Court did not expound on this.
In this case, the Court appeared to have used this general rule as justification for its
application of the rules on culpa contractual and not culpa aquiliana. The Court agreed with
the trial court that what was involved in this case was a contract between a depositor and
its bank, thereby rejecting the application of the rules on culpa aquiliana relied upon by the
appellate court. Curiously however, the Court went on to discuss at length the proximate
cause of the injury. If this were a case for culpa contractual and not culpa aquliana, there was
no reason to determine the proximate cause, which is part of the “law on quasi-delicts.”
51
The answer to this question is “no.” But the Court has admitted making rulings which seem to conflict with
Civil Code provisions. See Republic v. Tuvera, G.R. No. 148246, February 16, 2007.
52
Air France v. Carrascoso, G.R. No. L-21438, September 28, 1966.
53
Casis, supra note 4, at 81-86.
54
Consolidated Bank v. CA, G.R. No. 138569, September 11, 2003.
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In this sense, the Court may not have applied its own rule.55
In American Express v. Cordero,56 the Court said that:
In order that an obligation based on quasi-delict may arise, there must
be no pre-existing contractual relation between the parties.
But there are exceptions. There may be an action for quasi-delict
notwithstanding that there is a subsisting contract between the parties.
A liability for tort may arise even under a contract, where tort is that
which breaches the contract. Stated differently, when an act which
constitutes a breach of contract would have itself constituted
the source of a quasi-delictual liability, the contract can be said
to have been breached by tort, thereby allowing the rules on tort to apply.
(Emphasis supplied.)
So in this case, the Court considers the non-existence of a contract between the
parties to a case for a quasi-delict as the general rule. The exception, according to the
Court, is when it is “where tort is that which breaches the contract.” The rule can be
traced ultimately to Air France which does not provide adequate basis.
On the other hand, there are cases wherein the Court appears to rule that a preexisting contract and a quasi-delict are not mutually exclusive.
In Syquia v. CA,57 the Court mentioned that “a pre-existing contractual relation
between the parties does not preclude the existence of a culpa aquiliana.” But the Court
did not explain or provide a basis for this statement. This case involved a complaint “for
recovery of damages arising from breach of contract and/or quasi-delict” filed by heirs
of a deceased buried in the memorial park of the respondent. The suit was commenced
when the heirs discovered that the coffin and remains of the deceased were damaged
by water. The Court held that because there was a contract between the parties, such
agreement governed the relations of the parties and defined their respective rights and
obligations. It added:
Hence, had there been actual negligence on the part of the Manila
Memorial Park Cemetery, Inc., it would be held liable not for a quasidelict or culpa aquiliana, but for culpa contractual as provided by Article 1170
of the Civil Code.
This statement seems to say that because there was a contract between the parties,
negligence, if proven, would be considered culpa contractual and not culpa aquiliana. The
Court did not state this in the context of explaining the second sentence of Article 2176.
But if it were, the Court would be explaining that such sentence is not stating that a preexisting contract precludes the existence of a quasi-delict but only creates a rule on priority.
Therefore, if there is a breach of contract committed via negligence, then Article 2176
would require that it be governed by the rules on culpa contractual and not culpa aquiliana.
172
55
This raises the question of whether the authoritativeness of a rule stated by the Court loses strength when the
Court itself decides in a manner contrary to it.
56
American Express v. Cordero, G.R. No. 138550, October 14, 2005.
57
Syquia v. CA, G.R. No. 98695. January 27, 1993.
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In this case, the Court did not find any breach of contract. So it went on to determine
if there was negligence that could become the basis for an action on quasi-delict.
The said statement in Syquia is similar to what the Court also said in PSBA. It said:
In the circumstances obtaining in the case at bar, however, there is, as
yet, no finding that the contract between the school and Bautista had
been breached thru the former’s negligence in providing proper security
measures. This would be for the trial court to determine. And, even
if there be a finding of negligence, the same could give rise
generally to a breach of contractual obligation only. Using the
test of Cangco, supra, the negligence of the school would not be relevant
absent a contract. In fact, that negligence becomes material only because
of the contractual relation between PSBA and Bautista. In other words,
a contractual relation is a condition sine qua non to the school’s liability.
The negligence of the school cannot exist independently on
the contract, unless the negligence occurs under the circumstances set
out in Article 21 of the Civil Code. (Emphasis supplied.)
The Court’s statement that “[t]he negligence of the school cannot exist independently
on the contract” seems to imply that the negligence is only relevant if it exists independent
of a contract.
This is similar with what the Court said in Far East Bank v. CA:58
The Court has not in the process overlooked another rule that a quasidelict can be the cause for breaching a contract that might
thereby permit the application of applicable principles on
tort even where there is a pre-existing contract between the
plaintiff and the defendant. This doctrine, unfortunately, cannot
improve private respondents’ case for it can aptly govern only
where the act or omission complained of would constitute an
actionable tort independently of the contract. The test (whether
a quasi-delict can be deemed to underlie the breach of a contract) can
be stated thusly: Where, without a pre-existing contract between
two parties, an act or omission can nonetheless amount to an
actionable tort by itself, the fact that the parties are contractually
bound is no bar to the application of quasi-delict provisions to the case.
Here, private respondents’ damage claim is predicated solely on their
contractual relationship; without such agreement, the act or omission
complained of cannot by itself be held to stand as a separate cause of
action or as an independent actionable tort. (Citations omitted, emphasis
supplied.)
In this case, the Court says that a quasi-delict can be the fault or negligence that
breaches the contract. This means that a quasi-delict can exist despite the existence of a
pre-existing contractual relationship. Unfortunately, the cases cited by the Court to justify
58
Far East Bank v. CA, G.R. No. 108164, February 23, 1995
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Rommel J. Casis
this rule are not appropriate for this purpose.59
Assuming that the stated rule is correct, the Court nevertheless provides for a
requirement for this to happen. Essentially, what the Court is saying is this:
A fault or negligence that breaches a contract can be considered a quasidelict if even without the contract the defendant would be liable for such
fault or negligence. This means that a quasi-delict can exist despite the
existence of a contract provided that the defendant has a duty to the
plaintiff even without a contract.
There have also been several other cases wherein the Court ruled that there was a
quasi-delict despite the existence of a contract between the parties.
In BLTB v. IAC,60 which involved a collision between two buses, the passengers of one
bus sued the owners of both buses they were riding on for damages they sustained. BLTB,
the owner of the bus the injured passengers were riding on, argued that the action should
have been based on culpa contractual. The Court responded by saying that a reading of the
appellate court’s decision showed that it anchored the bus company’s liability both in culpa
contractual and culpa aquiliana, implying that there is no problem for these two sources of
obligations to co-exist.
In BPI v. Lifetime,61 the depositor sued the bank for quasi-delict. Despite the existence
of a contract between the bank and its depositor, the Court found nothing wrong with the
action for damages based on quasi-delict.
In Makati Shangri-la v. Harper62 the hotel owner was held liable for damages under
Article 2176 when a “stranger” killed a guest inside a hotel room. The Court adopted
the ruling of the appellate court finding that the hotel owner was negligent in providing
security measures, implying the acceptance of a quasi-delict despite the existence of a
contract between the hotel and its guest.
4. Reconciling the text, intent and jurisprudence
Perhaps there is a way to reconcile the text of Article 2176 that preserves the vision of
the framers and is consistent with the intended interpretation of jurisprudence.
As discussed, the Code Commission deliberately chose to use the word “quasi-delict”
to convey the exact coverage of the source of obligation defined under Article 2176.
The second sentence may be seen as the Commission’s attempt to explicitly express this
intention to limit the coverage of the action based on Article 2176 to exclude actions
similar to Anglo-American tort and/or intentional criminal acts.
But what of the phrase “if there is no pre-existing contractual relation between the
parties?” To preserve the vision of the framers, the word “if ” should be understood as
174
59
See Casis, supra note 4, at 89-90.
60
BLTB v. IAC, G.R. Nos. 74387-90, November 14, 1988.
61
BPI v. Lifetime, G.R. No. 176434, June 25, 2008.
62
Makati Shangri-la v. Harper, G.R. No. 189998, August 29, 2012.
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“where” such that the phrase is not interpreted as a condition but a description. In essence,
the second sentence merely reiterates that the action based on quasi-delict is not based on
contractual negligence. This view is similar to Carpio’s view when he says:
The second sentence of Article 2176 did not appear in Article 1902 of
the old Code, the provision governed quasi-delicts under the old law.
Under the old Code, it was repeatedly held that the existence of a
contract between the parties did not bar the commission of a tort by the
one against the other and the consequent recovery of damages therefor.
And notwithstanding the addition of the second sentence in
Article 2176 of the present Code, the Supreme Court has not
changed its view. It has been said that the second sentence
was added in the present Code for better “clarity” without
changing the essence of the precept contained in Article 1902
of the old law. If that was the purpose, then not only did the
second sentence fail miserably in its purpose, it also confused
the concept of quasi-delict.63 (Emphasis supplied.)
Thus, it may be said that the second sentence of Article 2176 may be taken as a case
where the literal meaning of the text does not reflect the intent of the framers and must
therefore be interpreted correctly by the courts. Carpio adds:
We are disposed to think that the second sentence did not add any
requirement to those already recognized under the old law for the
existence of a quasi-delict. The second sentence can best be explained
as an attempt to distinguish an action based on quasi-delict
from one founded on breach of contract, particularly in cases
where a quasi-delict is coincident with a breach of contract.
An action under Article 2176 may lie although the relation between the
parties which gives rise to the quasi-delict emanates from a contract, as
when the defendant through negligence violates a legal duty which arises
when the contract is made but which legal duty is not identical with the
contract obligation.64
Therefore, the mere existence of a contract does not preclude the existence of a quasidelict. If there was negligence in breaching the contract, it would be considered culpa
contractual. But such negligence may also be considered culpa aquiliana if the defendant’s
duty to be diligent subsists even without a contract.
III.
TORT UNDER ARTICLE 2176
Despite the clear intent of the Code Commission to reject “tort” at least as far as
Article 2176 is concerned, it has not stopped the Court from citing Article 2176 as basis
for actions which appear to be based on “tort.”
63
Carpio, supra note 5, at 693.
64
Carpio, supra note 5, at 693-694.
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Rommel J. Casis
A. Medical Negligence
In Cayao-Lasam v. Sps. Ramolete65 the Court characterized the case as a medical
malpractice case and said:
Medical malpractice, in our jurisdiction, is often brought as a civil action
for damages under Article 2176 of the Civil Code.
Earlier, the Court also said:
Medical malpractice is a particular form of negligence which consists in
the failure of a physician or surgeon to apply to his practice of medicine
that degree of care and skill which is ordinarily employed by the
profession generally, under similar conditions, and in like surrounding
circumstances. In order to successfully pursue such a claim, a patient
must prove that the physician or surgeon either failed to do something
which a reasonably prudent physician or surgeon would not have done,
and that the failure or action caused injury to the patient.
As to the elements of medical negligence, the Court said:
There are four elements involved in medical negligence cases: duty,
breach, injury and proximate causation.
Putting all of these statements together, the implication is that the basis of the four
elements of medical negligence cases is Article 2176.
In Lucas v. Tuaño,66 which was also characterized by the Court as a medical negligence
case, the Court was more explicit:
For lack of a specific law geared towards the type of negligence committed
by members of the medical profession, such claim for damages is almost
always anchored on the alleged violation of Article 2176 of the Civil
Code.
It further added that:
In medical negligence cases, also called medical malpractice suits, there
exist a physician-patient relationship between the doctor and the victim.
But just like any other proceeding for damages, four essential (4) elements
i.e., (1) duty; (2) breach; (3) injury; and (4) proximate causation, must be
established by the plaintiff/s. All the four (4) elements must co-exist in
order to find the physician negligent and, thus, liable for damages.
The Cayao-Lasam case cites as its basis Reyes v. Sisters of Mercy67 which in turn cites
176
65
Cayao-Lasam v. Sps. Ramolete, G.R. No. 159132, December 18, 2008.
66
Lucas v. Tuaño, G.R. No. 178763. April 21, 2009.
67
Reyes v. Sisters of Mercy, G.R. No. 130547, October 3, 2000.
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Garcia-Rueda v. Pascasio68 as basis for the four elements. The Lucas case cites Garcia-Rueda
directly. Therefore, the root of both cases that identify Article 2176 as the basis of the four
elements, is Garcia-Rueda.
The relevant portion of Garcia-Rueda says this:
A word on medical malpractice or negligence cases.
“In its simplest terms, the type of lawsuit which has been called medical malpractice
or, more appropriately, medical negligence, is that type of claim which a victim has
available to him or her to redress a wrong committed by a medical professional which
has caused bodily harm.
In order to successfully pursue such a claim, a patient must prove that a health care
provider, in most cases a physician, either failed to do something which a reasonably
prudent health care provider would have done, or that he or she did something that a
reasonably prudent provider would not have done; and that failure or action caused
injury to the patient.”
Hence, there are four elements involved in medical negligence cases:
duty, breach, injury and proximate causation.
It must be noted that the Court did not provide basis when it listed the four elements.
It can only be surmised that it used the two quoted paragraphs as basis. It must be noted,
however, that the quoted paragraphs do not justify the four elements. It must also be
noted that the case itself was not decided on the basis of these elements. The case was a
civil action under Rule 65 of the Rules of Court against the Ombudsman for its failure
to uphold the public respondents for violation of Republic Act No. 3019. The original
complaint was one for Homicide for Reckless Imprudence. These facts, coupled with the
nature of the source of these two paragraphs,69 do not make the case a proper foundation
for what seems to be a new cause of a civil action for medical negligence cases.
But since Garcia-Rueda was decided in 1997, there have been a number of medical
negligence cases,70 apart from Cayao-Lasam and Lucas, which list these same four elements.
In most of these cases, the Court does not even identify any statutory basis for the action on
damages as if the mere listing of these four elements were enough. However, considering
that the law of damages applicable to quasi-delicts71 or the doctrine of proximate cause72
is applied in some of these cases, it can be seen that the Court considers these actions at
least analogous to quasi-delicts.
68
Garcia-Rueda v. Pascasio, G.R. No. 118141, September 5, 1997.
69
The case indicates “Internet - http://www.medicalmal.com/neglig.html.” as the source of these two paragraphs.
70
Solidum v. People, G.R. No. 192123, March 10, 2014; Garrido v. Dela Paz, G.R. No. 183967, December 11,
2003; Aquino v. Heirs of Calayag, G.R. No. 158461, August 22, 2012; Sps. Flores v. Sps. Pineda, G.R. No.
158996, November 14, 2008; Professional Services v. Agana, G.R. No. 126297, January 31, 2007; Reyes v.
Sisters of Mercy, G.R. No. 130547, October 3, 2000.
71
Sps. Flores v. Sps. Pineda, G.R. No. 158996, November 14, 2008.
72
Garrido v. Dela Paz, G.R. No. 183967, December 11, 2003.
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It seems that despite its weak73 foundation, these elements of medical negligence have
not just been accepted as part of Philippine tort law but have even entered the realm of
administrative and criminal law. In Solidum v. People,74 the Court said:
An action upon medical negligence — whether criminal, civil or
administrative — calls for the plaintiff to prove by competent evidence
each of the following four elements, namely: (a) the duty owed by the
physician to the patient, as created by the physician-patient relationship,
to act in accordance with the specific norms or standards established by
his profession; (b) the breach of the duty by the physician’s failing to act
in accordance with the applicable standard of care; (3) the causation,
i.e., there must be a reasonably close and causal connection between the
negligent act or omission and the resulting injury; and (4) the damages
suffered by the patient. (Citation omitted.)
Noticeably, the elements have changed somewhat but are still the same in essence.
Instead of “proximate causation,” what is required is “reasonably close and causal
connection.” Instead of “injury,” the ponente used “damages.”75
What was the basis of the Court for this paragraph? Footnote 36 of the decision
states:
Flamm, Martin B., Medical Malpractice and the Physician Defendant,
Chapter 11, Legal Medicine, Fourth Edition (1998), pp. 123-124,
American College of Legal Medicine, Mosby, Inc., St. Louis, Missouri.
It is intriguing how the Court can consider this secondary source from a foreign
jurisdiction as basis for such an important rule which can affect litigation in civil, criminal
and administrative cases.
The Solidum case involved a criminal action for reckless imprudence resulting in serious
physical injuries. The physician was acquitted due to the absence of expert testimony but
the Court said:
We have to clarify that the acquittal of Dr. Solidum would not immediately
exempt him from civil liability. But we cannot now find and declare
him civilly liable because the circumstances that have been established
here do not present the factual and legal bases for validly doing so. His
acquittal did not derive only from reasonable doubt. There was really
no firm and competent showing how the injury to Gerard had been
caused. That meant that the manner of administration of the anesthesia
by Dr. Solidum was not necessarily the cause of the hypoxia that caused
the bradycardia experienced by Gerard. Consequently, to adjudge Dr.
Solidum civilly liable would be to speculate on the cause of the hypoxia.
We are not allowed to do so, for civil liability must not rest on speculation
178
73
Some may say that there is a non-existent foundation because there is no statutory basis at all.
74
Solidum v. People, G.R. No. 192123, March 10, 2014.
75
For reasons explained earlier, the former term is more accurate.
The IBP Journal
Elementary Dilemmas in Philippine Tort Law
but on competent evidence.
If the reason for the acquittal in this criminal case is the absence of expert testimony,
then does it not also result in absolution from civil liability? If the elements are the same as
the Court claims, the only difference is the quantum of proof required in criminal actions
versus civil actions. In this case, is a preponderance of evidence possible considering that
no expert testimony was given? Considering that what was involved in this case was a
complete absence of expert testimony then negligence could not be proven regardless of
the quantum of proof required.
B.
Illegal Act
The four elements used in medical negligence cases have also been used in cases
which can be loosely characterized as “torts for violation of law” or “torts for illegal acts.”
In Garcia v. Salvador,76 the Court said:
Negligence is the failure to observe for the protection of the interest of
another person that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers injury.
For health care providers, the test of the existence of negligence is: did
the health care provider either fail to do something which a reasonably
prudent health care provider would have done, or that he or she did
something that a reasonably prudent health care provider would not
have done; and that failure or action caused injury to the patient; if yes,
then he is guilty of negligence.
Thus, the elements of an actionable conduct are: 1) duty, 2) breach, 3)
injury, and 4) proximate causation. (Citations omitted.)
This case involved a civil action for damages against the owner and employee of a
clinic for issuing an incorrect test result showing that she tested positive for Hepatitis.
The test results caused the plaintiff to lose her job and her father to have a heart attack.
Thus, this case is not a medical negligence case because the negligence claimed was in
the conduct of the business of the clinic. In fact, in ruling against the owner of the
clinic, the Court relied upon rules and regulations that governed the operations of clinical
laboratories. It said:
Owners and operators of clinical laboratories have the duty to comply
with statutes, as well as rules and regulations, purposely promulgated to
protect and promote the health of the people by preventing the operation
of substandard, improperly managed and inadequately supported
clinical laboratories and by improving the quality of performance of
clinical laboratory examinations. Their business is impressed with
public interest, as such, high standards of performance are expected
from them. (Citation omitted, emphasis supplied.)
After quoting the relevant laws and regulations, the Court held that the owner did
not comply with the standards set and proceeded to explain how the four elements listed
76
Garcia v. Salvador, G.R. No. 168512, March 20, 2007.
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Rommel J. Casis
earlier were established. The Court then quoted Article 20 of the Civil Code, which
states:
Article 20 Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same.
This article provides for an award of damages for illegal acts causing injury to a
person. Article 2176 is noticeably absent in the entire case. Thus, the only statutory basis
to which the four elements can be founded on would be Article 20.
In Ocean Builders v. Sps. Cubacub,77 the Court said:
At the onset, the Court notes that the present case is one for damages based
on torts, the employer-employee relationship being merely incidental. To
successfully prosecute an action anchored on torts, three elements must
be present, viz.: (1) duty (2) breach (3) injury and proximate causation.
The assailed decision of the appellate court held that it was the duty
of petitioners to provide adequate medical assistance to the employees
under Art. 161 of the Labor Code, failing which a breach is committed.
The Court identifies the four elements78 in connection with the violation of a statute.
This case therefore appears to be similar to Garcia except that Article 20 is not mentioned
at all. Article 161 itself does not provide for an award of damages for its violation so there
had to be another legal basis for an award of damages. Nevertheless, the Court in this
case ruled that the elements were not established.
In Garrido v. Dela Paz,79 the Court said:
Four essential elements must concur in a suit for damages, namely: (1)
duty; (2) breach; (3) injury; and (4) proximate causation. Even in medical
negligence cases, all elements must co-exist in order to find the physician
negligent and thus, liable for damages.
The language of the Court suggests that the four elements apply to any and all suits
for damages, citing Lucas v. Tuaño as basis. The Garrido case was described by the Court
as one for “torts and damages.” It involved a case filed by the wife of man who allegedly
suffered “failing health, comatose and eventual death” as a result of the negligence of a
hospital and its doctor. However, the complaint was eventually dismissed on procedural
grounds. Hence, the subsequent discussion on the elements would be obiter dictum.
180
77
Ocean Builders v. Sps. Cubacub, G.R. No. 150898, April 13, 2011.
78
Which for some reason the Court counts as three.
79
G.R. No. 183967. December 11, 2013.
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Elementary Dilemmas in Philippine Tort Law
IV.
CONCLUSION
Ironically, the simplest things baffle us the most. Definitions and elements of legal
concepts are the building blocks of the more complex legal doctrines. But sometimes
these building blocks are not clearly defined. Sometimes the courts assume too much, not
realizing that these assumptions have serious legal implications.
Perhaps in the haste to move on to complexity, little thought is given to the basic
issues. But when the foundation of a legal regime is uncertain or unsound, the whole
regime is at risk.
The uncertainty can be blamed on the language employed in the text of the Civil
Code and in the discussion of the Court. The solution therefore is greater care in the
words and phrases employed to define our legal rules whether in the form of a code or
jurisprudence. Those who construct our legal rules can ill afford to be negligent.
In this lecture, we tried to figure out a way to reconcile the conflicts in the law and
jurisprudence in torts. But there is a difference between conflicting decisions and simply
erroneous decisions. The discerning student of law should learn to tell the difference.
•••
Volume 38, Number 1 & 2 - ( January - June 2013 )
•••
181
Antonio P. Jamon, Jr.
The Affordable Medicines Bill Advocacy:
A Case for State Regulation in Light of MNC
Dominance in the Pharmaceutical Industry in the Philippines
Antonio P. Jamon, Jr.*
INTRODUCTION
The 1987 Constitution of the Philippines mandates the State to protect the health of
the people1 and to adopt a comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the
people at affordable cost.2 Furthermore, the Universal Declaration of Human Rights3
states, to wit:
Article 25.
(1) Everyone has the right to a standard of living adequate
for the health and well-being of himself and of his family,
including food, clothing, housing and medical care and
necessary social services, and the right to security in the
event of unemployment, sickness, disability, widowhood,
old age or other lack of livelihood in circumstances beyond
his control.
(2) Motherhood and childhood are entitled to special care
and assistance. All children, whether born in or out of
wedlock, shall enjoy the same social protection.
182
*
Managing Partner, JAMON TORREJA & ASSOC. LAW OFFICES; Assistant Dean, De La Salle University
(DLSU) College of Law; Coach for the Debating Team of the De La Salle College of Law, in the recent Moot
Court Competition on International Humanitarian Law held at the University of the Philippines, College of
Law, Diliman, Quezon City; Member, National Committee on Bio-Safety of the Philippines (NCBP), Department of Science and Technology (DOST) representing the Consumer Sector; Assistant Vice-President, Office
of the Chairman of the Board, United Laboratories, Inc. (UNILAB) (April 1996 – June 2001); Assistant VicePresident, Legal and Corporate Affairs, Chemphil Group of Companies (October 1989 – April 15, 1996); Director, Legal and Intelligence Services, Bureau of Customs (March to August 1987); Officer-in-Charge (OIC),
Office of the Executive Director (March 1987) and Chief Legal Officer, Legal and Policy Research Division
(LPRD) (January 1984), Environment Management Bureau, DENR; Corporate Secretary, Institute of Strategic
and Development Studies (ISDS), a private research and “think-tank” Institute, based in UP; He also served
as Corporate Legal Counsel, Office of the President and Chief Executive Officer (Pres/CEO) of the Philippine Health Insurance Corp. (PhilHealth); Corporate Secretary, Board of Trustees of the Specialty Hospitals
(Philippine Heart Center, National Kidney & Transplant Institute, Lung Center of the Philippines, Philippine
Children’s and Medical Center and East Avenue Medical Center); Legal Consultant, Veterans Medical and
Memorial Center, and Legal Counsel of the Nutritionists – Dietitians Association of the Philippines (NDAP),
and the Office of the Secretary of Health, Department of Health, for almost a decade.
1
Sec. 15, Art. I1 Declaration of Principles and State Policies, 1987 Constitution: The State shall protect and
promote the right to health of the people and instill health consciousness among them.
2
Sec. 1 Art. XI11 Social Justice and Human Rights, ibid: The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential goods, health and other
social services available to all the people at affordable cost. There shall be priority for the needs of
the underprivileged sick, elderly, disabled, women and children. The state shall endeavor to provide free medical
care to paupers.
3
Adopted and proclaimed by General Assembly resolution 217 A (III) of 10 December 1948
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
The International Covenant on Economic, Social and Cultural Rights
(ICESCR), which entered into force in 1976, likewise enshrines ‘the right of everyone
to the enjoyment of the highest attainable standard of physical and mental health’.4 The
World Health Organization has specified that the right to health is closely related
to, and dependent upon, the realization of other human rights, contained both in the
ICESCR and other human rights instruments, such as the rights to food, housing, work,
education, human dignity, life, non-discrimination, equality, the prohibition against
torture, privacy, access to information and the freedoms of association, assembly and
movement. 5
Based on the above legal infrastructure, it is crystal clear that right to health is a
paramount right of a human being, of every Filipino, comparable if not more important
than the other human rights. The State is given the duty of assuring its people their right
to health. Our very own Constitution recognizes this duty and imposes upon the State
the duty of providing affordable essential goods for health and development. Hence, the
State cannot just abdicate on this right by leaving the market forces to prevail in the
MNC dominated pharmaceutical industry in the country. Pharmaceutical companies
are, by their very nature profit driven. The same is especially true for multi national
pharmaceutical companies. Said industry, is by nature already tilted in favor of the “big
bad pharmaceutical MNCs” that the poor Filipino masses need the intervention of the
State to protect their interest – their basic right to health !
This Paper discusses and supports the Affordable Medicine Bill (AMB) as a timely
and urgent remedy to the high costs of medicines in the Philippines. If successful, this
Bill also has the added advantage of boosting local pharmaceutical industries, as well
as developing traditional Filipino alternative medicines. Ultimately, it is the common
Filipino who will benefit from the reduced prices of essential but quality medicines.
Grinding poverty has been one of the most serious problems confronting our society
today. A host of other problems flow from this. According to the World Bank, the country’s
poor, or those living with less than $2 a day, stands at 35.1 million in 2006 or 41.9%
of the total population. This percentage may have been lower than the previous year’s
percentage of 43.5%,6 but there is one inescapable truth in these numbers. Almost 50%
of Filipinos are poor. At the threshold level of P100 per day, a family of 4 would barely
have enough money for food, much less medicine during times of sickness. Coupled with
this situation is the fact that the country’s medicine costs are one of the highest in the
region, if not in the world. This stark reality makes the present study relevant, significant
and urgent.
Despite the rhetoric and grandstanding of giant pharmaceutical multinational
companies (MNCs) in their commitment to corporate social responsibility (CSR), the
ultimate desire for more profits almost always win the day.
4
Article 12
5
http://www.who.int/hhr/Right_to_health.pdf
6
http://www.manilastandardtoday.com/?page=felMaragay_april10_2006
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Antonio P. Jamon, Jr.
Prices of basic drugs sold by these companies put a heavy burden on populations in the
developing world thus undermining their basic right to health. The enormous resources
of MNCs have influence not only doctors who continue to prescribe their products, but
also the host State itself which miserably fails to effectively regulate operation in the free
market system of the said MNCs. In the end, it is the ordinary people who almost always
bear the brunt of the astronomical cost of essential medicines.
It is argued in this Paper that the Affordable Medicines Bill (AMB) can substantially
provide a good alternative regulatory mechanism that can effectively check on the
excessive MNC predominance in the pharmaceutical industry in the Philippines. The Bill
if signed into law has the potential of delivering quality and cheap medicines to a greater
majority of the Filipino people.
I. THE PHILIPPINE PHARMACEUTICAL INDUSTRY
A)
Current State of the Industry
In the Philippines, around fifty percent (50%) of the population lives below the
poverty line. As such they cannot afford basic necessities such as housing, food and health
care. Coupled with minimal government intervention, the problem is also exacerbated
by opportunistic companies which put profit at a pedestal. The cost of medicines in the
Philippines has become so prohibitive that every time a family member gets sick, the
whole family sinks in a quagmire of debts.
The Explanatory Note of House Bill 5718, one of the various bills addressing the
issue of affordability of medicines, states that in 2000, the Philippines ranked 126th out
of 191 countries in terms of health level. In fact, around forty percent (40%) of Filipinos
never get to be treated or been ever seen by a doctor in their entire lives. Indeed, with
the prohibitive cost of drugs in the country only thirty percent (30%) of the population
has the capacity to purchase essential medicines, essential medicines that could spell the
difference between life and death to Filipinos.
It is no wonder then that we Filipinos tend to be very resourceful and creative in
finding ways to treat illnesses. Some resort to under medication, which hardly cures their
illnesses while some, especially those in remote areas, consult “quack doctors” with little
or no formal training in medicine. Just the other day, a man who calls himself “King
Cobra” was featured in the television. He claims ability to diagnose the illness of patients
by having them touch a cobra and then he skins the cobra to determine the disease
plaguing the patient. He then mixes the blood and liver of the cobra and have the patient
drink the concoction. I thought, only in the Philippines will we find such quack doctors
and the worse thing is, people fall for such antics. But then again, its “better” for a person
to believe in such quack doctors and just pay a minimal fee than go to a legitimate doctor
and discover that he has hypertension which requires a patented medicine priced at a
ridiculously high price of P74.75 per 10 mg7 which he has to take twice or thrice a day.
7
184
Norvasc, an Anti-Hypertensive maintenance drug gained global sales of USD 4.87 Billion for Pfizer last year.
Norvasc is priced at Php 44.75 per 5 mg tablet and Php 74.75 per 10 mg tablet.
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
The Philippines is one of the few countries in the world where the cost of medicines
are really high. And this is true for all kinds of medicines, even those medicines for
common ailments. For example, the antibiotic Bactrim, generically named Cotrimoxazole
and produced by Roche, is priced locally at P 14.80 per 400/80 mg capsule. The same
drug, manufactured by the same manufacturer, is sold in India at only P 0.75. In Pakistan,
Roche sells the same medicine at P 1.09. This means that Bactrim is being sold in the
Philippines at 1,300% to 1,900% higher than the ones sold in India or Pakistan.8 What
could possibly be the cause of these astronomical prices? Surely taxes and other costs of
operation in the Philippines are not so high as to justify such differences in costs.
Perhaps the following statistics sum up the current state of the Philippine
pharmaceutical industry. Prices of medicines in the country are higher by forty to seventy
per cent (40 to 70 %) than in the neighboring countries. The Philippines ranks second to
Japan as the country with the highest prices of medicines in Asia. Our country’s medicines
are 18 times more expensive than India’s or Canada’s.9 As of August 2006, the country’s
top 10 players in the local pharmaceutical industry posted a 12-month sales of P93
billion. This amounts to a 9.4% increase in value, despite the fact that the volume of sales
increased only by three per cent. This happens despite the fact that the patents of 80-90
percent of essential drugs in the Philippines have already expired.10 The latter statistic,
perhaps more than anything else, shows that the country’s pharmaceutical industry is
price driven, rather than volume driven.
The following factors are also cited for having contributed to the high costs of
medicines in the country:
1.) “Brand loyalty” of consumers (and physicians) resulting in a sort of a
“monopolistic competition” that enables drug firms to set prices above purely
competitive price levels, partly due to ”asymmetry of information” where the
consumers, on the one hand, know very little information, or nothing at all,
about the nature of the product and the variety of choices and options, while the
drug manufacturers and intermediaries or agents or distributors, particularly the
physicians and pharmacists, on the other hand, exclusively keep unto themselves
the essential information about the pharmaceutical products.
2.) Prescribing patterns of physicians who tend to indicate their preferred
brands while patients simply follow the brand name prescribed without trying
to find out the range of differently-priced options available in the market by
considering the generic names of the drugs;
3.) Intensive marketing strategies on the part of pharmaceutical
companies resulting in high expenditures on promotions and advertising,
targeted mainly towards physicians and pharmacists; competent, fair, honest,
effective regulation through a strengthened Bureau of Food and Drugs; stronger
8
Co-Sponsorship Speech on Senate Bill No. 2263 by Senator Pia Cayetano, September 2, 2006
9
Are Filipinos Dying because of Expensive Medicines? By Wigberto E. Tanada in Newsbreak, December 4, 2006, p. 28
10
Big Big Pharma, by Lala Rimando in Newsbrreak, December 4, 2006, p. 24.
Volume 38, Number 1 & 2 - ( January - June 2013 )
185
Antonio P. Jamon, Jr.
government role in procurement, production and distribution of drugs and
pharmaceuticals; wider dissemination of adequate and accurate information
on drugs and medicines to both physicians and the public; and coordination
of investment and trade policies to achieve self-sufficiency in good quality and
affordable pharmaceuticals.11
B.)
Existing policy framework that has allowed for MNC
dominance of the Philippine pharmaceutical industry and the
alternative advocacy on affordable medicines
The pharmaceutical industry in the Philippines is pegged at around P100 billion
pesos/revenues per year. However, 97% of market preference goes to “branded” products
introduced by big foreign pharmaceutical companies. Furthermore, 80% of the wholesale
distribution of medicines is controlled by one big foreign pharmaceutical company, while
retail distribution is dominated by one local company, the ubiquitous Mercury Drug.12
Indeed, one of reasons, if not the most important reason, pointed out for the high
costs of medicines in the country is the “institutionalized protection” given to giant
foreign pharmaceutical companies by the present Republic Act 8293, otherwise known
as Intellectual Property Code (IPC).
Under the present IPC, the protection given to patent holders is twenty (20) years.
This period is often extended by patent holders (usually foreign owned multinational
corporations), by filing new patents on the individual ingredients of the drug which might
not have therapeutic effects at all – “ever greening principle”. An example of this is the
case of Pfizer’s Norvasc. The patent of Norvasc or Amlodipine Besylate, for its active
ingredient Amlodipine, has long been expired. Currently, Norvasc’s patent is based on
the besylate salt, an ingredient which has no therapeutic effect or curative capacities. 13
In addition to this scenario is the fact that the patent of the patented drug denies
any other manufacturer from testing and developing a new drug based on the patented
drug as long as the patent is in effect. It is only after the patent expires that another
manufacturer can study the patented drug and market any possible product he may have
developed. This period often takes 2 to 3 years after the patent expires. 14
Another built-in protection in our present IP Code in favor of big multinational
companies is the adoption of the “domestic exhaustion principle”. Section 71.1 of the
IPC states thus:
SECTION 71. Rights Conferred by Patent. - 71.1. A patent shall confer on its owner
the following exclusive rights:
186
11
Sponsorship Speech of Sen. Loren Legarda for SB 1530, citing Lim 1997
12
Explanatory Note for House Bill No. 5718
13
3CPNet, Pfizer Denying Filipinos of Affordable Hypertensive Drug, dated August 17, 2007
14
Co-sponsorship speech of Sen. Cayetano on SB 2263
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
(a) Where the subject matter of a patent is a product, to restrain, prohibit
and prevent any unauthorized person or entity from
making, using, offering for sale, selling or importing
that product;
Under the above provision, parallel importation is prohibited because the patent
confers upon the holder the exclusive right to offer for sale, sell or import the product.
Under this provision, a patent holder can offer the same patented drug for sale at P100
in one country and sell the same drug at P1 in another country. The country where the
drug is being sold at 100% mark up has no remedy because the right to sell and import
the product is exclusively lodged in the patent holder. This is happening in our country.
The protection given under the law has prevented newcomers from penetrating the
pharmaceutical industry. The multi-national drug companies have firmly entrenched its
grip on the industry through patents of the essential drugs and the legal framework that
leans heavily on protecting the rights of the patent holder.
C.)Substantive content of the Affordable Medicines Bill (AMB)
and its implications on the accessibility of cheap but quality
medicines
Perhaps realizing that the demand for affordable medicines has reached a critical
point, several bills in both houses of Congress were filed to address this need. Some of
these bills, the more important and significant ones, were HB 400 which promotes the
institution of a system that allows for parallel importation of medicines in the country;15
HB 5718 which sought to amend the Intellectual Property Code to allow importation
and early development of patented medicines and to lower prices and increase access
to and supply of quality drugs;16 HB 305 which sought to lower the prices of medicine
by establishing a drug regulatory system;17 and HB 498 which sought to lower the
prices of medicines by amending the IP Code, specifically by lowering the term of drug
and pharmaceutical products from 20 to 10 years and by providing for a more liberal
compulsory licensing system.18 These House Bills were consolidated into House Bill No.
6035 by the Committee on Trade and Industry.19
Similarly, in the Senate, several Senate Bills were passed addressing the issue of
astronomical drug prices in the country. Specifically, the following bills were filed: SB 1530
which sought to put a cap on the maximum retail price on certain medicines;20 SB 755
which sought to lower the prices of medicines by amending the existing laws pertaining
15
Introduced by Rep. Roseller Barinaga of Zamboanga del Norte
16
Introduced by Akbayan Reps. Anna Theresia Hontiveros-Baraquel, Loretta Ann Rosales and Mario Joyo Aguja
17
Introduced by Hon. Jesli Lapus
18
Introduced by Hon. Arthur Pingoy, JR., MD
19
Committee Report No. 2153, December 19, 2006
20
Introduced by Sen. Loren Legarda
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187
Antonio P. Jamon, Jr.
to medicines such as the Pharmacy law, Generics Act, among other things;21 SB 90,22
SB 10123 and SB 141424 all of which sought to bring down the prices of medicines by
amending the IP Code. These Senate Bills were consolidated to become SB 2139 and
finally SB 2263.25
D.)Potential of the Affordable Medicines Bill (AMB) as an
alternative regulatory mechanism that can allow for genuine
competition (parallel importation…) in the pharmaceutical
industry
The Affordable Medicine Bill is significant in that it aims to level the playing field
among all pharmaceutical companies either established players or newcomers. Ultimately,
it is hoped that the public will benefit in this new playing field. Specifically the AMB
addresses the following:
1) New use of existing substances (“ever greening” principle)
The AMB seeks to curtail the practice of unscrupulous drug patent holders of filing
new patents for each demonstrable “new use” of a previously patented product. It has
been observed that through this practice, patent holders get to prolong the protection of
their product, way beyond the 20 years allowed in the law. And while their patent subsists,
they get to monopolize the market and dictate the prices of their drugs.
The AMB is also a significant piece of legislation in that it seeks to balance the needs
of the Filipinos with the international duties of the country. Under the TRIPS Agreement,
to which the Philippines is a signatory, countries have an obligation to grant patents on
pharmaceutical products and processes. However, these same countries are not obliged
to grant patents on new uses of existing substances. In fact, no provision in the TRIPS
Agreement or in the Intellectual Property Code of the Philippines requires the grant of
patents for such. 26 Hence, there is no legal impediment for the country to take a firm step
in refusing to grant successive patents to what is essentially the same invention.
2) Parallel Importation
Also, under the AMB, the country will benefit enormously from the “law of supply
and demand.” Under the present IP Code, the patent holder has the exclusive right of
importing and introducing the patented product into the Philippine market. On the
proposed amendment to the IP Code under the AMB, manufacturers or even the common
Filipinos, will be able to shop at any international drug markets in the world, and secure
188
21
Introduced by Sen. Antonio Trillanes
22
Introduced by Sen. Manny Villar
23
Introduced by Sen. Mar Roxas
24
Introduced by Sen. Pia Cayetano
25
Committee Report No. 79 dated June 7, 2006
26
Ibid.,
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
best prices for the same product and introduce it in the country, without violating the
rights of the patent holders, and even without the drug companies’ consent. Thus, it is
hoped that competition will bring down the market price of the medicines.
Furthermore, this right of a country to adopt an international exhaustion regime is
one of the “flexibilities” recognized under the “TRIPS Agreement” and subsequently
reiterated in the Declaration on TRIPS and Public Health, otherwise known as the
Doha Declaration.27
3) “Early working” principle or the Bolar Amendment/Exception
“Early working” refers to the process by which generic companies are allowed to
experiment and test for regulatory approval of generic versions of a drug or medicine
before its patent expires. This will allow generic producers to get ready, so that they can
start the production and sale of a generic drug as soon as its patent expires.28
Without this exception, drug manufacturers can only test and later on register the
product after the expiry of the patent. This registration process alone often takes three (3)
years, thus effectively extending, in effect, the patent 3 years after its expiration. With the
Bolar amendment/exception generic drugs are introduced into the market the following
day the patent expires. Notably, this amendment is similarly provided in many other
jurisdictions like Canada, Argentina, Thailand, Malaysia and Indonesia.29
Let me just mention the case filed by Pfizer against the Bureau of Food and Drugs
(BFAD) and the Philippine International Trading Corporation (PITC) which operates the
“Botica ng Bayan”. PITC got samples of Norvasc, the most popular hypertension drug in
the country and which is manufactured by Pfizer, from India, and applied for registration
with BFAD in anticipation of the expiration of the patent sometime in July of this year.
Pfizer immediately filed a case for TRO and Injunction/Damages against BFAD and
PITC to stop them from processing the registration of Norvasc on the ground that it is an
infringement of its patent. Our Office filed an Intervention on behalf of the Fair Trade
Alliance, a multi-sectoral group composed of, among others, heart patients who are using
Norvasc as maintenance drug. The case has become “moot and academic” as the patent
has expired during the pendency of the case.
4) Government Use
Under this proposed amendment, the government can determine the circumstances
under which it can exercise its right to make use of the invention. Significantly, the TRIPS
Agreement does not limit the right of member states to make the determination of the
reasons, including public health, which may justify the government use of a patented
27
Ibid.,
28
Ibid.,
29
Ibid.,
Volume 38, Number 1 & 2 - ( January - June 2013 )
189
Antonio P. Jamon, Jr.
invention. This amendment is also an answer to the defects of the government compulsory
licensing, specifically the long delay before the government can make use of its compulsory
licensing power, mainly because of the numerous petitions filed by the patent owner.
The proposed amendment also grants to the President of the Republic of the
Philippines the power to make a determination on the “immediate use” or other
exploitation by the government or its authorized representatives of drugs or medicines,
still under patent, to protect public health. It also retained the proposals to provide legal
cover for the implementing agencies and its officers, which shall implement the said
action. This legal cover is the grant of an exemption from temporary restraining orders
and preliminary injunctions of such government actions, except if issued by the Supreme
Court. This amendment sought to create a situation where the government will be able to
act promptly and decisively on matters that involve public interest.30
E) Domination of the Pharma Patents by MNCs
The Philippine pharmaceutical industry is characterized by a monopoly by foreign
multi-national companies of pharmaceutical patents. This monopoly enables them to
virtually dictate the prices of the medicines they produce. The data from the Intellectual
Property Office tells us that of the 191 pharmaceutical patents filed from 2001 to
2004, at least 89% were foreign patents while only 11% are local. Also, of the number
of pharmaceutical patents issued from 2002 to 2005, only one local patent was issued
compared to 448 foreign patents issued in 2001, 363 in 2002, 351 in 2003, 531 in 2004
and 404 in 2005. At present, the country has 3, 113 foreign patents on medicines but only
5 local patents due to expire from 2006 to 2015.31
F) The “Botica ng Bayan” as a government initiative to provide
affordable medicines
The Philippines International Trading Corporation (PITC) is a government
corporation engaged in trading and marketing activities aimed at uplifting the quality
of life of the Filipino people and promoting equitable national progress. 32 One of its
missions is to make quality essential medicines available, accessible and affordable to the
greater number of Filipino.
Sometime in 2004, PITC launched the Botika ng Bayan, a project aimed at providing
quality but affordable medicines to the Filipinos. The Botika ng Bayan sells imported
medicines from India and Pakistan and also local generic drugs. Most of the medicines
imported are for common illnesses that usually requires maintenance drugs like asthma,
hypertension and diabetes.33
190
30
Ibid.,
31
Co-sponsorship speech of Sen. Cayetano on SB 2263
32
PITC Vision Statement
33
www.pitc.com
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
A Botika ng Bayan outlet is a privately owned and operated drugstore, which carries
over-the-counter (OTC) and prescription drugs, as well as imported branded medicines.
A “Botika ng Barangay”, on the other hand, is owned either by a local government unit,
people’s organization or community-based organization. It sells only OTC and selected
prescription drugs. The drug stores in the Botika ng Bayan are privately owned but are
under the supervision of Department of Health and the Bureau of Food and Drugs. The
prices in these stores are usually 40-50% cheaper than their counterpart in the market.
For example, Nifedipine, an hypertensive drug, retails for P44 a tablet but is being sold in
the Botika for only P25-26.34
The Botika ng Bayan Program aims to take a chunk out of the billion dollar
pharmaceutical industry in the Philippines dominated by the MNCs. It had a 2-3 percent
share in 2005, and a 4 percent share in 2006.35 The numbers themselves might seem
insignificant, but considering that we are talking about a billion-dollar industry, even a
single point increase in the market share of the Botika ng Bayan is a significant increase
already. PITC hopes that by the end of the present year, the share of generics would
increase to as much as 20 to 25 percent. The ultimate goal is to achieve a 50-percent
market share for generics by 2010.
G) United Laboratories, Inc. (UNILAB) and Pascual Laboratories,
Inc. as Filipino owned companies which had try to compete
with MNC’s to provide more affordable medicines to poor
Filipinos
UNILAB is a local pharmaceutical company that aims to deliver quality healthcare
to Filipinos at affordable prices. Its company logo is the “bayanihan”, which perhaps
symbolizes the commitment of the company to the society and at the same time
recognizes its role in the society as a provider of quality health care products. UNILAB
is also engaged in export of its products from the generic drugs to the branded drugs
it had manufactured. The first ever export it had made was in 1959, when it exported
the first batch of drugs to Hongkong. Apart from its commitment to “corporate social
responsibility”, the company also aims to promote traditional Filipino herbal medicines.36
Pascual Laboratories, Inc. is also another Filipino pharmaceutical company which
“aims” to wrest control of the pharmaceutical industry from the foreign multi national
companies. It is also engaged in its export of medicine using traditional herbs and plants
that it had developed here in the Philippines. It is the 2nd biggest Filipino pharmaceutical
conglomerate and ranked 12th largest among all pharmaceutical companies operating in
the Philippines.37
34
Amy Remo, Botika ng Bayan sells cheaper drugs, Inquirer March 19, 2007
35
Ibid.,
36
http://www.unilab.com.ph/about/ul_organization.asp
37
http://www.pascuallab.com/aboutus/aboutus_profile.html
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Antonio P. Jamon, Jr.
II. THE “AYOS NA GAMOT SA ABOT KAYANG PRESYO”
(AGAP) ADVOCACY
A. The Coalition members and its Advocacy: A case of stakeholder
regulation
AGAP was created and formally launched on May 23, 2006 with the aim of making
quality medicines in the Philippines more affordable and to ensure that public health
comes first. It is composed of labor organizations, government agencies, civil society
groups, health professionals and consumer groups. It had made the Affordable Medicine
Bill the heart of its campaign.
B. The AGAP Lobby Campaign and Its Strategies
AGAP had only been convened the previous year, but it had already made its presence
felt in the non government organization (NGO) community. It pushed for the passage of
SB 2263 and HB 6035, by lobbying in the two houses of Congress and giving the issue
the necessary media mileage. Through concerted efforts of its members, it had been able
to secure a certification from the Office of the President making the bills on affordable
medicines “urgent and a priority”. AGAP was also involved in the deliberations of the
bills in their respective committees. One of the convenors of AGAP was also given the
privilege of expressing their support through a privilege speech during the hearings of the
bills. AGAP also wrote letters to the House of Representatives’ Committee on Trade and
Commerce where the bill is pending and to different legislators to express their support
and stress the urgency of the measure. AGAP was also given the chance to take part in
the technical working groups which consolidated the various bills filed in the senate into
the cohesive affordable medicine bill. More importantly, AGAP also raised the awareness of the public on the campaign
and advocacy for affordable but quality medicines, taking it to separate houses of
Congress through pickets, newspaper ads and collaboration with other with other NGO
groups. AGAP likewise heightened public awareness on the advantages of using generic
medicines as opposed to their high priced branded counterpart.
AGAP similarly supported the government, as aforementioned, in the suit brought
by Pfizer against BFAD and PITC. AGAP’s stand on the matter is that this suit is nothing
more than harassment suits filed by the big pharmaceutical company, Pfizer, to prevent the
bold and innovative step being taken by PITC and BFAD to provide affordable medicines
to the Filipino people. While the case was pending, AGAP again brought the issue to
the public, by organizing rallies and press conferences regarding the matter. AGAP also
closely monitored the progress of the case and even supported a Motion for Intervention
filed on behalf of FTA, and its coalition members.38
38
192
Ayos na Gamot sa Abot Kayang Presyo: A Year in Advocacy, May 2, 2007
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
III. THE AFFORDABLE MEDICINES BILL (AMB) IN CONGRESS
A. Basic Features of the Affordable Medicines Bill
Senate Bill 2263 (The Manuel Roxas Bill), in substitution of Senate Bill 2139 seeks to
amend Sections 26, 72 and 147 of the IP Code. (Note: The House Version has yet to be
passed.) The amended version (i.e. highlighted) states thus:
SEC. 26. Inventive Step. - 26.1. An invention involves an inventive step if, having
regard to prior art, it is not obvious to a person skilled in the art at the time of the filing
date or priority date of the application claiming the invention.
“26.2. IN THE CASE OF DRUGS OR MEDICINES, THERE IS NO
INVENTIVE STEP IF THE INVENTION RESULTS FROM THE
MERE DISCOVERY OF A NEW FORM OR NEW PROPERTY
OF A KNOWN SUBSTANCE WHICH DOES NOT RESULT IN
THE ENHANCEMENT OF THE KNOWN EFFICACY OF THAT
SUBSTANCE, OR, THE MERE DISCOVERY OF ANY NEW USE
FOR A KNOWN SUBSTANCE OR A KNOWN PROCESS UNLESS
SUCH KNOWN PROCESS RESULTS IN A NEW PRODUCT
THAT EMPLOYS AT LEAST ONE NEW REACTANT.”
Section 72 is likewise sought to be amended to read as follows:
SEC. 72. Limitations of Patent Rights. - The owner of a patent has no right to
prevent third parties from performing, without his authorization, the acts referred to in
Section 71 hereof in the following circumstances:
72.1. Using a patented product which has been put on the market in the Philippines by
the owner of the product, or with his express consent, insofar as such use is performed
after that product has been so put on the said market: PROVIDED THAT, WITH
REGARD TO DRUGS OR MEDICINES, THE LIMITATION
ON PATENT RIGHTS TO THE USE, SALE, OFFERING FOR
SALE OR IMPORTATION OF THE PRODUCT SHALL APPLY
AFTER A DRUG OR MEDICINE HAS BEEN INTRODUCED
ANYWHERE IN THE WORLD BY THE PATENT OWNER, OR
BY ANY PARTY AUTHORIZED TO USE THE INVENTION.
72.2. Where the act is done privately and on a non-commercial scale or for a noncommercial purpose: Provided, That it does not significantly prejudice the economic
interests of the owner of the patent;
72.3. Where the act consists of making or using exclusively for [the purpose
of experiments that relate to the subject matter of the patented invention;]
EXPERIMENTAL USE OF THE INVENTION FOR SCIENTIFIC
PURPOSES OR EDUCATIONAL PURPOSES AND SUCH OTHER
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Antonio P. Jamon, Jr.
ACTIVITIES DIRECTLY RELATED TO SUCH SCIENTIFIC OR
EDUCATIONAL EXPERIMENTAL USE.
72.4. WHERE THE ACT INCLUDES TESTING, USING, MAKING
OR SELLING THE INVENTION INCLUDING ANY DATA
RELATED THERETO, SOLELY FOR PURPOSES REASONABLY
RELATED TO THE DEVELOPMENT AND SUBMISSION
OF INFORMATION AND ISSUANCE OF APPROVALS BY
GOVERNMENT REGULATORY AGENCIES REQUIRED
UNDER ANY LAW OF THE PHILIPPINES THAT REGULATES
THE MANUFACTURE, CONSTRUCTION, USE OR SALE OF
ANY PRODUCT: PROVIDED, THAT IN ORDER TO PROTECT
THE DATA SUBMITTED BY THE ORIGINAL PATENT HOLDER
FROM UNFAIR COMMERCIAL USE PROVIDED IN ARTICLE
39.3 OF THE TRIPS AGREEMENT, THE INTELLECTUAL
PROPERTY OFFICE (IPO), IN CONSULTATION WITH THE
APPROPRIATE GOVERNMENT AGENCIES, SHALL ISSUE
THE APPROPRIATE RULES AND REGULATIONS NECESSARY
THEREIN NOT LATER THAN ONE HUNDRED TWENTY (120)
DAYS AFTER ENACTMENT OF THIS LAW.
72.5. Where the act consists of the preparation for individual cases, in a pharmacy or
by a medical professional, of a medicine in accordance with a medical prescription or
acts concerning the medicine so prepared;
72.6. Where the invention is used in any ship, vessel, aircraft, or land vehicle of
any other country entering the territory of the Philippines temporarily or accidentally:
provided, That such invention is used exclusively for the needs of the ship, vessel,
aircraft, or land vehicle and not used for the manufacturing of anything to be sold
within the Philippines. (Secs. 38 and 39, R.A. No. 165a)”
SEC. 74. Use of Invention by Government. - 74.1. A Government agency or third
person authorized by the Government may exploit the invention even without agreement
of the patent owner where:
(a) The public interest, in particular, national security, nutrition, health or
the development of other sectors, as determined by the appropriate agency
of the government, so requires; or
(b) A judicial or administrative body has determined that the manner of
exploitation, by the owner of the patent or his license, is anti-competitive;
OR
(c) THERE IS PUBLIC NON-COMMERCIAL USE OF
THE PATENT BY THE PATENTEE, WITHOUT
SATISFACTORY REASON.
194
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The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
74.2. UNLESS OTHERWISE PROVIDED HEREIN, [The use by the
government, or third person authorized by the Government shall be subject, mutatis
mutandis, to the conditions set forth in Sections 95 to 97 and 100 to 102. (Sec. 41,
R.A. No. 165a) TO THE FOLLOWING PROVISIONS:
(a) IN SITUATIONS OF NATIONAL EMERGENCY
OR OTHER CIRCUMSTANCES OF EXTREME
URGENCY, THE RIGHT HOLDER SHALL
BE NOTIFIED AS SOON AS REASONABLY
PRACTICABLE;
(b) IN THE CASE OF PUBLIC NON-COMMERCIAL USE,
WHERE THE GOVERNMENT OR CONTRACTOR,
WITHOUT MAKING A PATENT SEARCH, KNOWS
OR HAS DEMONSTRABLE GROUNDS TO KNOW
THAT A VALID PATENT IS OR WILL BE USED BY OR
FOR THE GOVERNMENT, THE RIGHT HOLDER
SHALL BE INFORMED PROMPTLY;
(c) THE SCOPE AND DURATION OF SUCH USE SHALL
BE LIMITED TO THE PURPOSE FOR WHICH ”IT
WAS AUTHORIZED, AND IN THE CASE OF SEMICONDUCTOR TECHNOLOGY, SHALL ONLY BE
FOR PUBLIC NONCOMMERCIAL USE OR TO
REMEDY A PRACTICE DETERMINED AFTER
JUDICIAL OR ADMINISTRATIVE PROCESS TO BE
ANTI-COMPETITIVE;
(d) SUCH USE SHALL BE NON-EXCLUSIVE;
(e) THE RIGHT HOLDER SHALL BE PAID ADEQUATE
REMUNERATION IN THE CIRCUMSTANCES
OF EACH CASE, TAKING INTO ACCOUNT THE
ECONOMIC VALUE OF THE AUTHORIZATION;
(f)THE LEGAL VALIDITY OF ANY DECISION
RELATING TO THE AUTHORIZATION OF SUCH
USE SHALL BE SUBJECT TO JUDICIAL REVIEW;
AND
(g)THE USE OR OTHER EXPLOITATION BY
THE GOVERNMENT OR THIRD PERSON
AUTHORIZED BY THE GOVERNMENT OF
DRUGS OR MEDICINES UNDER THIS SECTION
SHALL BE SUBJECT TO THE EXCLUSIVE
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Antonio P. Jamon, Jr.
DETERMINATION OF THE PRESIDENT OF THE
REPUBLIC OF THE PHILIPPINES AND SHALL
BE IMMEDIATELY EXECUTORY PROVIDED,
THAT NO COURT. EXCEPT THE SUPREME
COURT OF THE HILIPPINES, SHALL ISSUE
ANY TEMPORARY RESTRAINING ORDER OR
PRELIMINARY INJUNCTION OR PRELIMINARY
MANDATORY INJUNCTION THAT WILL PREVENT
ITS IMMEDIATE EXECUTION. THE OFFICE OF
THE PRESIDENT, IN CONSULTATION WITH THE
APPROPRIATE GOVERNMENT AGENCIES, SHALL
ISSUE THE APPROPRIATE IMPLEMENTING RULES
AND REGULATIONS FOR THE EXERCISE OF THIS
AUTHORITY WITHIN ONE HUNDRED TWENTY
(120) DAYS AFTER ENACTMENT OF THIS LAW. ALL
CASES ARISING FROM THE IMPLEMENTATION
OF THIS PROVISION SHALL BE COGNIZABLE BY
COURTS WITH APPROPRIATE JURISDICTION
PROVIDED BY LAW.”
Section 159 of the IP Code is also amended to read as follows:
159.4 THERE SHALL BE NO INFRINGEMENT OF
TRADEMARKS OR TRADENAMES OF IMPORTED OR SOLD
DRUGS OR MEDICINES ALLOWED UNDER SECTION 72.1 OF
THIS ACT, AS WELL AS, .. IMPORTED OR SOLD OFF-PATENT
DRUGS OR MEDICINES: PROVIDED, THAT SAID DRUGS
OR MEDICINES BEAR THE REGISTERED MARKS THAT
HAVE NOT BEEN TAMPERED, UNLAWFULLY MODIFIED, OR
INFRINGED UPON AS DEFINED UNDER SECTION 155 OF
THIS CODE.39
The above provisions highlight the four (4) major changes that the Bill seeks to
make on the present IP Code. These are with regard to (1) parallel importation, (2)
government use, (3) early working or Bolar Amendment/exception, and (4)
the prohibition against the so called “ever greening” principle.
B. Status of the AMB Bills in Congress
The present Affordable Medicine Bill is a consolidation of several bills filed by
different senators all aimed at providing quality but affordable medicine to the public.
Early this year, on January 31, 2007 Senate passed SB 2139 on the third reading while the
House of Representatives continued interpellations. The sessions closed with HB 6035
still pending. While the Senate version has already been passed, the House version has yet
to be passed, as of the writing of this Paper.
39
196
Those in capital letters were the amendments sought to be made
The IBP Journal
The Affordable Medicines Bill Advocacy: A Case for State Regulation in Light of
MNC Dominance in the Pharmaceutical Industry in the Philippines
AGAP recognized the fact that there is still a long way to go before these bills can
be enacted into law. The big pharmaceutical companies are trying their best to “derail”
the passage of this bill. News accounts tell of a One Billion Lobby Fund that the big
pharmaceutical companies have put up for the single purpose of preventing the passage
of these bills into law.
The Bills from the Senate and the House would also have to be harmonized in the 3rd
Chamber, the so-called “Bicam Conference”, for reconciliation of otherwise conflicting
provisions of the Senate and House Versions of the Bill. When the Bill is finally passed into
law, the long and tedious process of formulating the implementing rules and regulations
commences, which is equally important and must also be closely monitored, lest they fail
to give tooth and nail to the law.
SUMMARY AND CONCLUSIONS
The Affordable Medicine Bill is an answer, among others, to the dilemma faced by
millions of Filipinos today. It is timely and urgent, if the government is to fulfill its role
as protector of the health of the people. The writer of this Paper is of the position that
this Bill is a necessary step to correct the wrong perpetrated by the present IP code. In
the House deliberations of the bill that will later become the IP Code, then Congressman
Joker Arroyo is one of the very few congressmen who did not vote for the passing of
the IP Code. In his opinion then, the IP Code will hamper the development of home
grown products by Filipinos. It seems that his fears have proven true. The present IP Code
operates for the benefit of the multinational pharmaceutical companies which have an
entrenched hold on the pharmaceutical market. Thus, struggling Filipino inventors find
it difficult to break into the pharmaceutical industry.
The passage of the AMB will surely put in place in our country the objectives of
making affordable but quality medicine accessible to the Filipino masses. The Pharma
MNCs could then be effectively regulated to serve first and foremost the constitutional
right of the people to good health and enjoy a better quality of life.
Giant pharma companies should not look solely into their profits but should give
similar, if not more, importance to corporate social responsibility (CSR). The right to
health must prevail over the MNCs’ right to profits. Economics and property must always
yield to the paramount right to life!
•••
Volume 38, Number 1 & 2 - ( January - June 2013 )
•••
197
Integrated Bar of the Philippines
BOARD OF GOVERNORS
(2011-2013)
ROAN I. LIBARIOS
National President &
Chairman of the Board
(from March 29, 2013 until expiration of Atty. Libarios’ term)
DENIS B. HABAWEL
Governor for Northern Luzon
(Replacement of Atty. Habawel for his unexpired term)
OLIVIA VELASCO-JACOBA
Governor for Central Luzon
DOMINIC C.M. SOLIS
Governor for Greater Manila
LEONOR L. GERONA-ROMEO
Governor for Bicolandia
MANUEL L. ENAGE, JR.
Governor for Eastern Visayas
MARLOU B. UBANO
Governor for Western Visayas
ISRAELITO P. TORREON
Governor for Eastern Mindanao
VICENTE M. JOYAS*
Chairman, Executive Committee
Governor for Southern Luzon
LYNDA B. CHAGUILE
FLORENDO B. OPAY
Governor for Western Mindanao
NATIONAL OFFICERS
NASSER A. MAROHOMSALIC
National Secretary
MARIA TERESITA C. SISON GO
National Treasurer
JOSE V. CABRERA
National Executive Director for Operations
ROLAND B. INTING
National Executive Director for Administration
ROSARIO T. SETIAS-REYES
National Director for Legal Aid
DENNIS B. FUNA
National Director for Bar Discipline
ALICIA A. RISOS-VIDAL
National Director for Peer Assistance Program
PACIFICO A. AGABIN
General Counsel
TRIXIE CRUZ-ANGELES
Public Information Officer
MERLIN M. MAGALLONA
Editor-in-Chief, IBP Journal
PATRICIA ANN T. PRODIGALIDAD
Assistant National Secretary
VICTORIA V. LOANZON
Assistant National Treasurer
RODOLFO G. URBIZTONDO
Deputy General Counsel
*
IBP Board of Governors Resolution No. XX-2013
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Telephone: (632) 631-3014/18 Fax: (632) 634-4697
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