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EN BANC

G. R. No. 133250 - November 11, 2003

FRANCISCO I. CHAVEZ, Petitioner, v. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.

R E S O L U T I O N

CARPIO, J.:

This Court is asked to legitimize a government contract that conveyed to a private entity 157.84 hectares of reclaimed public lands along Roxas Boulevard in Metro Manila at the negotiated price of P1,200 per square meter. However, published reports place the market price of land near that area at that time at a high of P90,000 per square meter.1 The difference in price is a staggering P140.16 billion, equivalent to the budget of the entire Judiciary for seventeen years and more than three times the Marcos Swiss deposits that this Court forfeited in favor of the government.

Many worry to death that the private investors will lose their investments, at most not more than one-half billion pesos in legitimate expenses,2 if this Court voids the contract. No one seems to worry about the more than tens of billion pesos that the hapless Filipino people will lose if the contract is allowed to stand. There are those who question these figures, but the questions arise only because the private entity somehow managed to inveigle the government to sell the reclaimed lands without public bidding in patent violation of the Government Auditing Code.

Fortunately for the Filipino people, two Senate Committees, the Senate Blue Ribbon Committee and the Committee on Accountability of Public Officers, conducted extensive public hearings to determine the actual market value of the public lands sold to the private entity. The Senate Committees established the clear, indisputable and unalterable fact that the sale of the public lands is grossly and unconscionably undervalued based on official documents submitted by the proper government agencies during the Senate investigation. We quote the joint report of these two Senate Committees, Senate Committee Report No. 560, as approved by the Senate in plenary session on 27 September 1997:3

The Consideration for the Property

PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of approximately One Million Five Hundred Seventy Eight Thousand Four Hundred Forty One (1,578,441) Square Meters for a total consideration of One Billion Eight Hundred Ninety Four Million One Hundred Twenty Nine Thousand Two Hundred (P1,894,129,200.00) Pesos, or a price of One Thousand Two Hundred (P1,200.00) Pesos per square meter.

According to the zonal valuation of the Bureau of Internal Revenue, the value of the Property is Seven Thousand Eight Hundred Pesos (P7,800.00) per square meter. The Municipal Assessor of Parañaque, Metro Manila, where the Property is located, pegs the market value of the Property at Six Thousand Pesos (P6,000.00) per square meter. Based on these alone, the price at which PEA agreed to convey the property is a pittance. And PEA cannot claim ignorance of these valuations, at least not those of the Municipal Assessors office, since it has been trying to convince the Office of the Municipal Assessor of Parañaque to reduce the valuation of various reclaimed properties thereat in order for PEA to save on accrued real property taxes.

PEAs justification for the purchase price are various appraisal reports, particularly the following:

(1) An appraisal by Vic T. Salinas Realty and Consultancy Services concluding that the Property is worth P500.00 per square meter for the smallest island and P750.00 per square meter for the two other islands, or a total of P1,170,000.00 as of 22 February 1995;

(2) An appraisal by Valencia Appraisal Corporation concluding that the Property is worth P850 per square meter for Island I, P800 per square meter for Island II and P600 per square meter for the smallest island, or a total of P1,289,732,000, also as of 22 February 1995; and

(3) An Appraisal by Asian Appraisal Company, Inc. (AACI), stating that the Property is worth approximately P1,000 per square meter for Island I, P950 per square meter for Island II and P600 per square meter for Island III, or a total of P1,518,805,000 as of 27 February 1995.

The credibility of the foregoing appraisals, however, are [sic] greatly impaired by a subsequent appraisal report of AACI stating that the property is worth P4,500.00 per square meter as of 26 March 1996. Such discrepancies in the appraised value as appearing in two different reports by the same appraisal company submitted within a span of one year render all such appraisal reports unworthy of even the slightest consideration. Furthermore, the appraisal report submitted by the Commission on Audit estimates the value of the Property to be approximately P33,673,000,000.00, or P21,333.07 per square meter.

There were also other offers made for the property from other parties which indicate that the Property has been undervalued by PEA. For instance, on 06 March 1995, Mr. Young D. See, President of Saeil Heavy Industries Co., Ltd., (South Korea), offered to buy the property at P1,400.00 and expressed its willingness to issue a stand-by letter of credit worth $10 million. PEA did not consider this offer and instead finalized the JVA with AMARI. Other offers were made on various dates by Aspac Management and Development Group Inc. (for P1,600 per square meter), Universal Dragon Corporation (for P1,600 per square meter), Cleene Far East Manila Incorporated and Hyosan Prime Construction Co. Ltd. which had prepared an Irrevocable Clean Letter of Credit for P100,000,000.

In addition, AMARI agreed to pay huge commissions and bonuses to various persons, amounting to P1,596,863,050.00 (P1,754,707,150.00 if the bonus is included), as will be discussed fully below, which indicate that AMARI itself believed the market value to be much higher than the agreed purchase price. If such commissions are added to the purchase price, AMARIs acquisition cost for the Property will add-up to P3,490,992,250.00 (excluding the bonus). If AMARI was willing to pay such amount for the Property, why was PEA willing to sell for only P1,894,129,200.00, making the Government stand to lose approximately P1,596,863,050.00?

x       x       x

Even if we simply assume that the market value of the Property is half of the market value fixed by the Municipal Assessors Office of Parañaque for lands along Roxas Boulevard, or P3,000.00 per square meter, the Government now stands to lose approximately P2,841,193,800.00. But an even better assumption would be that the value of the Property is P4,500.00 per square meter, as per the AACI appraisal report dated 26 March 1996, since this is the valuation used to justify the issuance of P4 billion worth of shares of stock of Centennial City Inc. (CCI) in exchange for 4,800,000 AMARI shares with a total par value of only P480,000,000.00. With such valuation, the Governments loss will amount to P5,208,855,300.00.

Clearly, the purchase price agreed to by PEA is way below the actual value of the Property, thereby subjecting the Government to grave injury and enabling AMARI to enjoy tremendous benefit and advantage. (Emphasis supplied)

The Senate Committee Report No. 560 attached the following official documents from the Bureau of Internal Revenue, the Municipal Assessor of Parañaque, Metro Manila, and the Commission on Audit:

1. Annex "M," Certified True Copy of BIR Zonal Valuations as certified by Antonio F. Montemayor, Revenue District Officer. This official document fixed the market value of the 157.84 hectares at P7,800 per square meter.

2. Annex "N," Certification of Soledad S. Medina-Cue, Municipal Assessor, Parañaque, dated 10 December 1996. This official document fixed the market value at P6,000 per square meter.

3. Exhibit "1-Engr. Santiago," the Appraisal Report of the Commission on Audit. This official document fixed the market value at P21,333.07 per square meter.

Whether based on the official appraisal of the BIR, the Municipal Assessor or the Commission on Audit, the P1,200 per square meter purchase price, or a total of P1.894 billion for the 157.84 hectares of government lands, is grossly and unconscionably undervalued. The authoritative appraisal, of course, is that of the Commission on Audit which valued the 157.84 hectares at P21,333.07 per square meter or a total of P33.673 billion. Thus, based on the official appraisal of the Commission on Audit, the independent constitutional body that safeguards government assets, the actual loss to the Filipino people is a shocking P31.779 billion.

This gargantuan monetary anomaly, aptly earning the epithet "Grandmother of All Scams,"4 is not the major defect of this government contract. The major flaw is not even the P1.754 billion in commissions the Senate Committees discovered the private entity paid to various persons to secure the contract,5 described in Senate Report No. 560 as follows:

A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel Sy for and in behalf of AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San Cordova (a.k.a. Benito Co) and Mr. Chua Hun Siong (a.k.a. Frank Chua), on the other, sets forth various payments AMARI paid or agreed to pay the aforesaid stockholders by way of fees for "professional efforts and services in successfully negotiating and securing for AMARI the Joint Venture Agreement", as follows:

Form of Payment

Paid/Payable On

Amount

Managers Checks

28 April 1995

P 400,000,000.00

Managers Checks

Upon signing of letter

262,500,000.00

10 Post Dated Checks (PDCs)

60 days from date of letter

127,000,000.00

24 PDCs

31 Aug. 95 to 31 Jan. 98

150,000,000.00

48 PDCs

Monthly, over a 12-month pd. from date of letter

357,363,050.00

Cash bonus

When sale of land begins

not exceeding

   

157,844,100.00

Developed land from Project

Upon completion of each phase

Costing

   

   300,000,000.00

 

TOTAL

P1,754,707,150.00

   

==============

Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement was approved by the AMARI Board.6 (Emphasis supplied)

The private entity that purchased the reclaimed lands for P1.894 billion expressly admitted before the Senate Committees that it spent P1.754 billion in commissions to pay various individuals for "professional efforts and services in successfully negotiating and securing" the contract. By any legal or moral yardstick, the P1.754 billion in commissions obviously constitutes bribe money. Nonetheless, there are those who insist that the billions in investments of the private entity deserve protection by this Court. Should this Court establish a new doctrine by elevating grease money to the status of legitimate investments deserving of protection by the law? Should this Court reward the patently illegal and grossly unethical business practice of the private entity in securing the contract? Should we allow those with hands dripping with dirty money equitable relief from this Court?

Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is that it glaringly violates provisions of the Constitution expressly prohibiting the alienation of lands of the public domain.

Thus, we now come to the resolution of the second Motions for Reconsideration7 filed by public respondent Public Estates Authority ("PEA") and private respondent Amari Coastal Bay Development Corporation ("Amari"). As correctly pointed out by petitioner Francisco I. Chavez in his Consolidated Comment,8 the second Motions for Reconsideration raise no new issues.

However, the Supplement to "Separate Opinion, Concurring and Dissenting" of Justice Josue N. Bellosillo brings to the Courts attention the Resolutions of this Court on 3 February 1965 and 24 June 1966 in L- 21870 entitled "Manuel O. Ponce, et al. v. Hon. Amador Gomez, et al." and No. L-22669 entitled "Manuel O. Ponce, et al. v. The City of Cebu, et al." ("Ponce Cases"). In effect, the Supplement to the Dissenting Opinion claims that these two Resolutions serve as authority that a single private corporation like Amari may acquire hundreds of hectares of submerged lands, as well as reclaimed submerged lands, within Manila Bay under the Amended Joint Venture Agreement ("Amended JVA").

We find the cited Ponce Cases inapplicable to the instant case.

First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit that "submerged lands still belong to the National Government."9 The correct formulation, however, is that submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987 Constitution provides:

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. x x x. (Emphasis supplied)

Submerged lands, like the waters (sea or bay) above them, are part of the States inalienable natural resources. Submerged lands are property of public dominion, absolutely inalienable and outside the commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or foreshore lands is void being contrary to the Constitution.11

This is why the Cebu City ordinance merely granted Essel, Inc. an "irrevocable option" to purchase the foreshore lands after the reclamation and did not actually sell to Essel, Inc. the still to be reclaimed foreshore lands. Clearly, in the Ponce Cases the option to purchase referred to reclaimed lands, and not to foreshore lands which are inalienable. Reclaimed lands are no longer foreshore or submerged lands, and thus may qualify as alienable agricultural lands of the public domain provided the requirements of public land laws are met.

In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under the waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands even before their actual reclamation, although the documentation of the deed of transfer and issuance of the certificates of title would be made only after actual reclamation.

The Amended JVA states that the PEA "hereby contributes to the Joint Venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area."12 The Amended JVA further states that "the sharing of the Joint Venture Proceeds shall be based on the ratio of thirty percent (30%) for PEA and seventy percent (70%) for AMARI."13 The Amended JVA also provides that the PEA "hereby designates AMARI to perform PEAs rights and privileges to reclaim, own and develop the Reclamation Area."14 In short, under the Amended JVA the PEA contributed its rights, privileges and ownership over the Reclamation Area to the Joint Venture which is 70% owned by Amari. Moreover, the PEA delegated to Amari the right and privilege to reclaim the submerged lands.

The Amended JVA mandates that the PEA had "the duty to execute without delay the necessary deed of transfer or conveyance of the title pertaining to AMARIs Land share based on the Land Allocation Plan."15 The Amended JVA also provides that "PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARIs Land Share in the name of AMARI, x x x."16

In the Ponce Cases, the City of Cebu retained ownership of the reclaimed foreshore lands and Essel, Inc. only had an "irrevocable option" to purchase portions of the foreshore lands once actually reclaimed. In sharp contrast, in the instant case ownership of the reclamation area, including the submerged lands, was immediately transferred to the joint venture. Amari immediately acquired the absolute right to own 70% percent of the reclamation area, with the deeds of transfer to be documented and the certificates of title to be issued upon actual reclamation. Amaris right to own the submerged lands is immediately effective upon the approval of the Amended JVA and not merely an option to be exercised in the future if and when the reclamation is actually realized. The submerged lands, being inalienable and outside the commerce of man, could not be the subject of the commercial transactions specified in the Amended JVA.

Second, in the Ponce Cases the Cebu City ordinance granted Essel, Inc. an "irrevocable option" to purchase from Cebu City not more than 70% of the reclaimed lands. The ownership of the reclaimed lands remained with Cebu City until Essel, Inc. exercised its option to purchase. With the subsequent enactment of the Government Auditing Code (Presidential Decree No. 1445) on 11 June 1978, any sale of government land must be made only through public bidding. Thus, such an "irrevocable option" to purchase government land would now be void being contrary to the requirement of public bidding expressly required in Section 7917 of PD No. 1445. This requirement of public bidding is reiterated in Section 37918 of the 1991 Local Government Code.19 Obviously, the ingenious reclamation scheme adopted in the Cebu City ordinance can no longer be followed in view of the requirement of public bidding in the sale of government lands. In the instant case, the Amended JVA is a negotiated contract which clearly contravenes Section 79 of PD No. 1445.

Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands. The two Resolutions in the Ponce Cases upheld the Cebu City ordinance only with respect to foreshore areas, and nullified the same with respect to submerged areas. Thus, the 27 June 1965 Resolution made the injunction of the trial court against the City of Cebu "permanent insofar x x x as the area outside or beyond the foreshore land proper is concerned."

As we held in the 1998 case of Republic Real Estate Corporation v. Court of Appeals,20 citing the Ponce Cases, RA No. 1899 applies only to foreshore lands, not to submerged lands. In his concurring opinion in Republic Real Estate Corporation, Justice Reynato S. Puno stated that under Commonwealth Act No. 141, "foreshore and lands under water were not to be alienated and sold to private parties," and that such lands "remained property of the State." Justice Puno emphasized that "Commonwealth Act No. 141 has remained in effect at present." The instant case involves principally submerged lands within Manila Bay. On this score, the Ponce Cases, which were decided based on RA No. 1899, are not applicable to the instant case.

Fourth, the Ponce Cases involve the authority of the City of Cebu to reclaim foreshore areas pursuant to a general law, RA No. 1899. The City of Cebu is a public corporation and is qualified, under the 1935, 1973, and 1987 Constitutions, to hold alienable or even inalienable lands of the public domain. There is no dispute that a public corporation is not covered by the constitutional ban on acquisition of alienable public lands. Both the 9 July 2002 Decision and the 6 May 2003 Resolution of this Court in the instant case expressly recognize this.

Cebu City is an end user government agency, just like the Bases Conversion and Development Authority or the Department of Foreign Affairs.21 Thus, Congress may by law transfer public lands to the City of Cebu to be used for municipal purposes, which may be public or patrimonial. Lands thus acquired by the City of Cebu for a public purpose may not be sold to private parties. However, lands so acquired by the City of Cebu for a patrimonial purpose may be sold to private parties, including private corporations.

However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands under the Amended JVA. As we explained in the 6 May 2003 Resolution:

PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of the Department of Environment and Natural Resources ("DENR" for brevity) as the government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore (or submerged lands) lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. (Emphasis supplied)

Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR with respect to reclaimed foreshore or submerged lands in this wise:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. (Emphasis supplied)

Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations to acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private corporations from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated this prohibition. Obviously, the Ponce Cases cannot serve as authority for a private corporation to acquire alienable public lands, much less submerged lands, since under the present Constitution a private corporation like Amari is barred from acquiring alienable lands of the public domain.

Clearly, the facts in the Ponce Cases are different from the facts in the instant case. Moreover, the governing constitutional and statutory provisions have changed since the Ponce Cases were disposed of in 1965 and 1966 through minute Resolutions of a divided (6 to 5) Court.

This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by the Amended JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third parties. Title to the reclaimed lands remains with the PEA. As we stated in our 9 July 2002 Decision:

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.

As we held in our 9 July 2002 Decision, the Amended JVA "violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution." In our 6 May 2003 Resolution, we DENIED with FINALITY respondents Motions for Reconsideration. Litigations must end some time. It is now time to write finis to this "Grandmother of All Scams."

WHEREFORE, the second Motions for Reconsideration filed by Public Estates Authority and Amari Coastal Bay Development Corporation are DENIED for being prohibited pleadings. In any event, these Motions for Reconsideration have no merit. No further pleadings shall be allowed from any of the parties.

SO ORDERED.

Davide, Jr., C.J., Panganiban, Austria-Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur.
Bellosillo, J., voted to grant reconsideration, pls. see dissenting opinion.
Puno, J., maintains previous qualified opinion.
Vitug, J., pls. see separate(concurring) opinion.
Quisumbing, J., voted to allow reconsideration, see separate opinion.
Ynares-Santiago, Sandoval-Gutierrez, and Corona, JJ., maintains their dissent.
Azcuna, J., no part.
Tinga, J., see dissenting opinion.



Endnotes:

1 See "The Grandmother of All Scams" by Sheila S. Coronel and Ellen Tordesillas, 18-20 March 1998, Philippine Center for Investigative Journalism. This report won the 1st Prize in the 1998 JVO Investigative Journalism Awards.

2 6 May 2003 Resolution, p. 13.

3 PEAs Memorandum dated 4 August 1999 quoted extensively, in its Statement of Facts and the Case, the Statement of Facts in Senate Committee Report No. 560 dated 16 September 1997. Moreover, the existence of this report is a matter of judicial notice pursuant to Section 1, Rule 129 of the Rules of Court which provides, "A court shall take judicial notice, without the introduction of evidence, of x x x the official acts of the legislature."

4 9 July 2002 Decision, p. 4.

5 Senate Committee Report No. 560, p. 48.

6 A more detailed discussion on this matter in Senate Report No. 560 reads as follows:

The Commissions

A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel Sy for and in behalf of AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San Cordova (a.k.a. Benito Co) and Mr. Chua Hun Siong (a.k.a. Frank Chua), on the other, sets forth various payments AMARI paid or agreed to pay the aforesaid stockholders by way of fees for "professional efforts and services in successfully negotiating and securing for AMARI the Joint Venture Agreement", as follows:

Form of Payment

Paid/Payable On

Amount

Managers Checks

28 April 1995

P 400,000,000.00

Managers Checks

Upon signing of letter

262,500,000.00

10 Post Dated Checks (PDCs)

60 days from date of letter

127,000,000.00

24 PDCs

31 Aug. 95 to 31 Jan. 98

150,000,000.00

48 PDCs

Monthly, over a 12-month pd. from date of letter

357,363,050.00

Cash bonus

When sale of land begins

not exceeding

   

157,844,100.00

Developed land from Project

Upon completion of each

Costing

 

Phase

300,000,000.00

 

TOTAL

P1,754,707,150.00

   

==============

Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement was approved by the AMARI Board.

On the first payment of P400 million, records show that P300 million was paid in managers checks of Citibank-Makati, while the balance of P100 million was deposited to the account of the two Chinese in a Hongkong bank. On the basis of a Memorandum Order dated April 28, 1995 issued by Messrs. Karnasuta and Emmanuel Sy, and upon the instruction of Messrs. Chin San Cordova and Chua Hun Siong, 31 managers checks in the total amount of P300 million were issued by Citibank-Makati in favor of a Mr. George Triviño, a Dominican Republic national, broken down as follows:

1) Twenty-nine (29) managers checks at P10 million each;

2) One (1) managers check at P7 million; and,

One (1) managers check at P3 million.

All these checks were indorsed by Mr. Triviño. Mr. Sy could not satisfactorily answer why Mr. Triviño was made payee of the Managers Checks when he had nothing to do with the transactions. Neither could he provide information regarding the said Mr. Triviño.

Mr. Emmanuel Sy admitted signing several blank checks as special request from Messrs. Co and Chua and issuing said checks as follows:

1) Ten (10) Managers checks dated 60 days from the June 9 letter amounting to P127 million;

2) Twenty-four (24) blank checks amounting to P150 million dated from 31 August 1995 up to 31 January 1998; and,

3) Forty (40) blank checks amounting to P357 million.

In this regard, the pertinent portion of the 9 June 1995 letter-agreement provides as follows:

"3. Upon signing of this letter-agreement AMARI shall (a) pay to you (in cash in the form of Bank Managers Checks) the sum of Two Hundred Sixty Two Million Five Hundred Thousand Pesos (Pesos 262,500,000) and (b) pay and deliver to you the following checks:

"3.1 Ten (10) checks dated sixty (60) days from date of this letter agreement in the total amount of One Hundred Twenty Seven Million Pesos (Pesos 127,000,000);

"3.2 Twenty-Four (24) checks in the total amount of One Hundred Fifty Million Pesos (Pesos 150,000,000) as follows:

DUE DATE OF CHECK

AMOUNT

August 31, 1995

P 6,250,000

March 31, 1996

6,250,000

April 30, 1996

6,250,000

May 31, 1996

6,250,000

June 30, 1996

6,250,000

July 31, 1996

6,250,000

August 31, 1996

6,250,000

September 30, 1996

6,250,000

October 31, 1996

6,250,000

November 30, 1996

6,250,000

December 31, 1996

6,250,000

January 31, 1997

6,250,000

February 28, 1997

6,250,000

March 31,1997

6,250,000

April 30, 1997

6,250,000

May 31, 1997

6,250,000

June 30, 1997

6,250,000

July 31, 1997

6,250,000

August 31, 1997

6,250,000

September 30, 1997

6,250,000

October 31, 1997

6,250,000

November 30, 1997

6,250,000

December 31, 1997

6,250,000

January 31, 1998

6,250,000

Total

P150,000,000

 

==========

"3.3 Forty Eight (48) checks in the total amount of Three Hundred Fifty Seven Million Three Hundred Sixty Three Thousand Fifty Pesos (Pesos 357,363,050) payable over a period of twelve (12) months as follows:

"Each monthly payment to consist of Four (4) checks, three (3) checks of which shall each bear the amount of P7,250,000 and one (1) check of which shall bear the amount of P8,000,000 for a total monthly amount of P29,750,000. These monthly payment of four (4) checks each shall be dated the last date of the thirteen, fourteen, fifteen, sixteen, seventeen, eighteen, nineteen, twenty, twenty-one, twenty-two, twenty-three, and twenty-four months from the date of this letter agreement. The last issued check hereunder shall bear the sum of P8,363,050."

The Provisional Receipt shows that Mr. Chin San Cordova and Mr. Chua Hun Siong received the amount of P896,863,050.00 as of 09 June 1995. Based on the submitted photocopies of the returned checks issued by AMARI vis-a-vis item 3(b) of the quoted Letter-Agreement, the following persons were made payees: Emmanuel Sy, Manuel Sy, Sy Pio Lato, International Merchandising and Development Corporation, Golden Star Industrial Corporation, Chin San Cordova, EY, and Wee Te Lato. Other payments were made payable to Cash (bearer instruments). Each person was thus named payee to the following amounts:

1. Emmanuel Sy:

 

Citibank Check No. 000019 dated 10/31/96

P 6,250,000

2. Manuel Sy:

 

Citibank Check No. 000007 dated 8/8/95

12,700,000

3. Sy Pio Lato:

 

Citibank Check No. 000008 dated 8/8/95

12,700,000

000009 dated 8/8/95

12,700,000

000010 dated 8/8/95

12,700,000

4. International Merchandising and Development Corporation:

 

Citibank Check No. 000013 dated 4/30/96

6,250,000

000014 dated 5/31/96

6,250,000

000015 dated 6/30/96

6,250,000

000016 dated 7/31/96

6,250,000

000045 dated 9/30/96

7,250,000

5. Golden Star Industrial Corporation:

 

Citibank Check No. 000018 dated 9/30/96

6,250,000

6. Chin San Cordova:

 

Citibank Check No. 000041 dated 8/31/96

7,250,000

000043 dated 9/30/96

7,250,000

7. EY:

 

Citibank Check No. 000047 dated 10/31/96

7,250,000

000049 dated 10/31/96

7,250,000

8. Wee Te Lato:

 

Citibank Check No. 000048 dated 10/31/96

7,250,000

9. Bearer Instruments: CASH:

 

Citibank Check No. 000001 dated 8/8/95

12,700,000

000002 dated 8/8/95

12,700,000

000003 dated 8/8/95

12,700,000

000004 dated 8/8/95

12,700,000

000005 dated 8/8/95

12,700,000

000006 dated 8/8/95

12,700,000

000012 dated 3/31/96

6,250,000

000017 dated 8/31/96

6,250,000

000039 dated 8/31/96

7,250,000

000040 dated 8/31/96

7,250,000

000042 dated 8/31/95

8,000,000

000044 dated 9/30/96

7,250,000

000046 dated 9/30/96

7,250,000

000050 dated 10/31/96

8,000,000

10. Payees Name Not Legible:

 

Citibank Check No. 000011 dated 8/31/96

6,250,000

On the other hand, Ms. Aurora Montano, a cousin of Mr. Justiniano Montano IV, was asked by a Mr. Ben Cuevo if she knew anybody from PEA, and she answered: "Yes, I know Mr. Justiniano Montano IV." For this answer, and for introducing the AMARI representative to Mr. Montano, she received P10 million in cash and P20 million in postdated managers checks in the office of Mr. Benito Co and in the presence of, aside from Mr. Benito Co, Mr. Ben Cuevo and Mr. Frank Chua. Ms. Montano, however, insisted that she actually received only P10 million.

Ms. Montano furthermore admitted that, through Mr. Ben Cuevo, she met Messrs. Chin San Cordova and Chua Hun Siong in 1994 for this transaction.

In Executive Session, Mr. Ben Cuevo admitted to having encashed two checks at Pilipinas Bank, worth P12.5 million. According to him, the two checks form part of the P150 million worth of post-dated checks (PDCs), with a face value of P6.25 million per check, described in the Letter-Agreement. Of this P150 million, Mr. Cuevo actually received five (5) PDCs worth P31 million, but he was only able to encash 2 checks at P12.5 million.

Still in Executive Session, Mr. Ben Cuevo also admitted receiving a check worth P6.25 million payable to his company, International Merchandising and Development Corporation. This was deposited in his Current Account No. 604010562-A, and the amount was transferred by credit memo to Mr. Montano IVs account at Pilipinas Bank.

Mr. Montano IV admitted that he has an account with Pilipinas Bank, but invoked his constitutional right against self-incrimination when asked if he received the amount of P6.25 million transferred to his account. The Pilipinas Bank Credit Advice dated May 6, 1996, marked as Exhibit 1-Montano IV, indicating the transfer of the amount of P6.25 million was presented by Senator Drilon. Once or twice, a certain Ms. Polly Tragico accompanied Mr. Montano IV to withdraw funds from Pilipinas Bank-Pavilion.

7 Both filed on 26 May 2003. On 6 June 2003 Amari filed a Supplement to its second Motion for Reconsideration.

8 Filed on 19 August 2003.

9 Decision dated 17 January 1964 of Judge Amador E. Gomez. Also quoted in Justice Josue N. Bellosillos Supplement to Separate Opinion, Concurring and Dissenting.

10 Sections 2 and 3, Article XII of the 1987 Constitution.

11 Article 112 , Civil Code of the Philippines.

12 Section 3.2 (a), Amended JVA.

13 Section 3.3 (a), Amended JVA.

14 Section 2.2, Amended JVA.

15 Section 5.2 (c), Amended JVA.

16 Ibid.

17 SECTION 79. Destruction or sale of unserviceable property. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsalable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on awards or similar body in the presence of the auditor concerned or other duly authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission.

18 SECTION 379. Property Disposal. When property of any local government unit has become unserviceable for any cause or is no longer needed, it shall upon application of the officer accountable therefor, be inspected and appraised by the provincial, city or municipal auditor, as the case may be, or his duly authorized representative or that of the Commission on Audit and, if found valueless or unusable, shall be destroyed in the presence of the inspecting officer.

If found valuable, the same shall be sold at public auction to the highest bidder under the supervision of the committee on awards and in the presence of the provincial, city or municipal auditor or his duly authorized representative. Notice of the public auction shall be posted in at least three (3) publicly accessible and conspicuous places, and if the acquisition cost exceeds One hundred thousand pesos (P100,000.00) in the case of provinces and cities, and Fifty thousand pesos (P50,000.00) in the case of municipalities, notice of auction shall be published at least two (2) times within a reasonable period in a newspaper of general circulation in the locality.

19 Under Section 380 of the 1991 Local Government Code, local governments can sell real property through negotiated sale only with the approval of the Commission on Audit. Under paragraph 2 (a) of COA Circular No. 89-296, on "Sale Thru Negotiation," a negotiated sale may be resorted to only if "[T]here was a failure of public auction." The Commission on Audit enforces the express requirement in Section 79 of the Government Auditing Code that a negotiated sale is possible only after there is a failure of public auction.

20 359 Phil. 530 (1998).

21 Laurel v. Garcia, G.R. No. 92013, 25 July 1990, 187 SCRA 797.




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o only if "[T]here was a failure of public auction." The Commission on Audit enforces the express requirement in Section 79 of the Government Auditing Code that a negotiated sale is possible only after there is a failure of public auction.

20 359 Phil. 530 (1998).

21 Laurel v. Garcia, G.R. No. 92013, 25 July 1990, 187 SCRA 797.




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