Public Interest Center, Inc. vs. Roxas

A taxpayer’s suit may satisfy legal standing where public funds are allegedly disbursed or wasted, but it is nonetheless dismissible for forum shopping when it shares identity of interest, causes of action, and reliefs with a prior taxpayers’ class action, and the pendency of a similar action is not reported under Section 5, Rule 7.

Respondent National Power Corporation (NPC), a government-owned and controlled corporation, entered into a contract with Westinghouse Electric S.A. for the construction of a 620-megawatt nuclear power plant at Morong, Bataan, later known as the Bataan Nuclear Power Plant (BNPP). Under Executive Order No. 55, as amended by Executive Order No. 98, ownership of the BNPP and related facilities was transferred to the National Government, which assumed the remaining foreign and local obligations incurred by NPC for the project. The project also generated legal proceedings in New Jersey, U.S.A. and an arbitration in Geneva, Switzerland.

On February 9, 1976, respondent National Power Corporation (NPC) entered into a contract with respondent Westinghouse Electric S.A. (WESA), an affiliate or subsidiary of respondent Westinghouse Electric Corporation (WESTINGHOUSE), whereby WESA undertook to construct in favor of NPC a 620-megawatt nuclear power plant at Morong, Bataan and to supply equipment, machineries, and services therefor. WESA subsequently executed a deed of assignment transferring all its rights and responsibilities in the Contract to its construction arm-agent, respondent Westinghouse International Projects Company (WIPCO).

In 1986, President Corazon Aquino issued Executive Order (E.O.) No. 55, later amended by E.O. No. 98, transferring ownership of the already constructed power plant, which had become known as the Bataan Nuclear Power Plant (BNPP), its equipment, materials and facilities, records and uranium fuel, to the National Government or its duly constituted agency. Pursuant to E.O. No. 55, as amended, the National Government assumed all remaining foreign and local obligations incurred by NPC in financing the construction of the BNPP.

In 1988, the Aquino administration instituted a complaint against WESTINGHOUSE in New Jersey, U.S.A. Westinghouse later filed an arbitration case in Geneva, Switzerland.

On September 27, 1995, President Fidel Ramos authorized government officials as members of a Government Panel to conduct exploratory discussions with WESTINGHOUSE for the possible settlement of pending legal proceedings. On October 4, 1995, President Ramos issued E.O. No. 265, which amended E.O. No. 315 dated January 1, 1988, creating the Presidential Committee on the Bataan Nuclear Power Plant (PC-BNPP Committee). E.O. No. 265 provided that the PC-BNPP Committee shall be the coordinating and policy-making body on the BNPP, including policies arising from negotiations for a fair commercial settlement of all pending legal claims that will provide a substantial net benefit to the country, and that it shall submit its recommendations on BNPP-related policies to the President for approval.

On October 11, 1995, the PC-BNPP Committee issued a Resolution adopting the essential terms and conditions arrived at by the Government Panel and Westinghouse representatives during exploratory discussions from September 29, 1995 to October 9, 1995 for a compromise settlement of the BNPP controversy and favorably recommending approval to the President. The Resolution noted that the government panel and Westinghouse representatives eventually agreed in principle on a settlement involving a package of more than $100 Million, consisting of (1) $40 Million in cash; (2) two newly manufactured 501-F Econopac combustion turbines, FOB Houston, at 160 MW each or a total of 320 MW valued at $30 Million each, or a total of $60 Million; and (3) relinquishment by Westinghouse of the right to recover more than $200,000 in attorney’s fees previously awarded by the New Jersey court. In exchange, the parties would secure a dismissal with prejudice of the pending lawsuits, appeals, and arbitration between the Republic and NPC, on one hand, and Westinghouse, its affiliates and Burns & Roe, on the other hand, involving the BNPP controversy, and the Republic would direct NPC and other government agencies to lift the ban against Westinghouse equipment and technology. The Resolution observed that the offer was the highest cash offer and the most advantageous in kind offer, and it considered the uncertainty of the arbitration, the possibility that some of Westinghouse’s counterclaims may partly offset any recovery, the prospect that even a favorable arbitration award could be limited to the $40 million cap under the original BNPP contract, and the substantial costs of pursuing a new trial even if the government eventually won the appeal of the New Jersey verdict. It adopted the essential terms of the settlement agreement and recommended to President Fidel V. Ramos the acceptance and approval thereof. On October 13, 1995, the Settlement Agreement reflected in the PC-BNPP Resolution was forged by the Republic and NPC on one hand, and respondent Westinghouse corporations on the other.

On November 14, 1995, petitioners, as taxpayers, filed with the Regional Trial Court of Quezon City a Complaint against herein private respondents for declaration of nullity of the BNPP contract with application for the issuance of a temporary restraining order and preliminary injunction. On December 4, 1995, petitioners filed an Amended Complaint assailing the validity of and seeking to nullify (a) the BNPP Contract; (b) the loan contracts entered into by the Republic and NPC to finance the construction of the BNPP; and (c) the Settlement Agreement entered into by the Republic and NPC with Westinghouse on October 13, 1995 in settlement of the claims arising from the Contract. The Amended Complaint also prayed for a preliminary mandatory injunction to stop and/or not to perform further implementation or execution of obligations under the BNPP Nuclear Plant Contract and the Settlement Agreement; to stop further continuing payments for the contracted loans or interest based thereon unless otherwise securitized; to declare the BNPP Nuclear Plant Contract, all amendments thereto, the loan contracts based thereon, and the Settlement Agreement as inexistent and void ab initio; to order NPC and the Republic to reconvey or turn over the BNPP equipment and machineries to Westinghouse Electric Corporation and/or its corporate agents and to restitute or refund all payments paid for the BNPP Nuclear Plant to Westinghouse with legal interest; and to make the preliminary mandatory injunction permanent and award attorney’s fees and costs.

• Judicial Review: Petitioners contended that in dismissing their Amended Complaint, public respondent abdicated its constitutional duty to exercise judicial review over the validity of the BNPP Contract, the loan contracts, and the 1995 Settlement Agreement.
• Forum-Shopping: Petitioners maintained that they did not commit forum shopping because there is no identity of parties and causes of action in the instant case and in the complaint filed before the Manila RTC; they were not among the petitioners in the first set of cases; a taxpayer’s suit is not a class suit, hence judgment in one case does not amount to res judicata in the other; and there is no absolute identity of causes of action because their Amended Complaint includes the nullification of the Settlement Agreement, which was not raised in the first set of cases.
• Legal Standing: Petitioners argued that they sufficiently established that the injury caused to them by the contracts is actual, direct, and immediate, thus clothing them with standing.

• Grave Abuse of Discretion: The Solicitor General and WIPCO argued that no grave abuse of discretion attended the issuance by public respondent of the assailed resolutions.
• Forum-Shopping: The Solicitor General and WIPCO argued that petitioners are guilty of forum-shopping.
• Legal Standing: The Solicitor General and WIPCO argued that petitioners have no legal standing.
• Political Question: The Solicitor General and WIPCO argued that the propriety of entering into a settlement agreement involves a political question and is not subject to judicial review.
• Republic’s Grounds: The Republic moved to dismiss the Amended Complaint on grounds of lis pendens and/or forum-shopping, lack of legal capacity of petitioners to sue, and lack of cause of action.
• NPC’s Ground: NPC alleged that the Amended Complaint failed to state a cause of action against it.
• WIPCO’s Grounds: WIPCO moved to dismiss on grounds that petitioners have no legal capacity to sue, the Amended Complaint states no cause of action, and, assuming the existence of a cause of action, the same is barred by the statute of limitations.

• Legal Standing: Whether petitioners have legal standing.
• Forum-Shopping: Whether petitioners are engaged in forum-shopping.
• Judicial Review: Whether the validity of the Contract and the contracts of loan entered into by the Republic and NPC with foreign banks to finance the construction of the BNPP, and the propriety of entering into a Settlement Agreement, are subject to judicial review.
• Foreign Judgment: Whether courts may set aside a final judgment rendered by a foreign court.

• Legal Standing: Yes. Petitioners, as taxpayers, sufficiently alleged that the loan contracts entered into by the Republic and NPC are serviced or paid through a disbursement of public funds, a matter not disputed by respondents, thus investing them with personality to institute the action.
• Forum-Shopping: Yes. There exists identity of parties or interests represented, identity of rights or causes of action, and identity of reliefs sought between the first set of cases and the present case; petitioners also failed to report the pendency of the similar action as required by Section 5, Rule 7.
• Judicial Review: Not reached. Having found forum shopping, the Court deemed it unnecessary to pass on the remaining issues.
• Foreign Judgment: Not reached. Having found forum shopping, the Court deemed it unnecessary to pass on the remaining issues.

• Legal Standing: The Court defined legal standing or locus standi as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act being challenged. In public suits, the plaintiff asserts a public right, and a taxpayer must prove sufficient interest in preventing the illegal expenditure of money raised by taxation. Taxpayers have been allowed to sue where public funds are illegally disbursed, deflected to an improper purpose, or wasted through the enforcement of an invalid or unconstitutional law. Petitioners alleged in their Amended Complaint that the loan contracts entered into by the Republic and NPC are serviced or paid through a disbursement of public funds; respondents did not dispute this allegation. Hence, petitioners were invested with personality to institute the action.
• Forum-Shopping: The Court defined forum shopping as existing when, as a result of an adverse opinion in one forum, a party seeks a favorable opinion in another, or when he institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a favorable disposition. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will amount to res judicata in the other: identity of parties or at least parties representing the same interests, identity of rights asserted and relief prayed for founded on the same facts, and identity such that any judgment rendered in one action will amount to res judicata in the other. The first complaint before the Manila RTC, filed by the Anti-Graft League of the Philippines, Inc., et al. as a taxpayers’ suit, sought to declare null and void the Contract and the same loan contracts entered into by the Republic and NPC with foreign banks, and to restrain those respondents from making further payments under the loan contracts. That complaint was dismissed by the Manila RTC; instead of filing an appeal, the petitioners therein filed a petition for certiorari with the Supreme Court, which was dismissed by Resolution dated March 1, 1995; thereafter, they filed a petition for mandamus with the Court of Appeals, which was still pending when herein petitioners filed their complaint before the Quezon City RTC. Petitioners did not deny that the first set of cases and their complaint involved the same causes of action, were founded upon the same set of facts, and were taxpayers’ suits. Their claim of lack of identity of parties failed because a taxpayer’s action is essentially a class bill filed in the common interest of all taxpayers, and a judgment in favor of or against the parties representing the general class binds all represented under the doctrine of res judicata. Identity of interest, not literal identity of parties, is sufficient for lis pendens or res judicata. The incorporation of an additional cause of action in the Amended Complaint, occasioned merely by subsequent events, did not absolve petitioners from forum shopping. Additionally, Section 5, Rule 7 required petitioners to report to the court the fact that a similar action had been filed or was pending; when petitioners filed their Amended Complaint, they failed to report the pendency of the petition for mandamus before the appellate court bearing on the dismissal by the Manila RTC of the complaint filed by the Anti-Graft League of the Philippines, Inc. Thus, the dismissal of the Amended Complaint on the ground of forum shopping was in order.
• Judicial Review: Not reached. The Court stated that this leaves it unnecessary to pass on the rest of the issues.
• Foreign Judgment: Not reached. The Court stated that this leaves it unnecessary to pass on the rest of the issues.

• Legal Standing (Locus Standi) — A personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act being challenged. In public suits, the plaintiff asserts a public right, and a taxpayer must show sufficient interest in preventing the illegal expenditure of money raised by taxation. Taxpayers may sue where public funds are illegally disbursed, deflected to an improper purpose, or wasted through the enforcement of an invalid or unconstitutional law. The Court applied this doctrine by finding that petitioners had standing because they alleged that the loan contracts were serviced or paid through public funds, which respondents did not dispute.
• Taxpayers’ Suits as Class Actions — A taxpayer’s bill is essentially a class bill and can be filed only in the common interest of all taxpayers to prevent the wrongful expenditure of public money or the wasting of public assets. A judgment for or against the parties representing the general class binds all represented under the doctrine of res judicata. The Court applied this doctrine by holding that the lack of literal identity of parties did not defeat forum shopping because petitioners and the prior plaintiffs sued as taxpayers in a representative capacity; identity of interest sufficed.
• Forum Shopping — Forum shopping exists when, as a result of an adverse opinion in one forum, a party seeks a favorable opinion in another, or when he institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a favorable disposition. It exists where the elements of litis pendentia are present and where a final judgment in one case will amount to res judicata in the other: identity of parties or interests, identity of rights asserted and relief prayed for founded on the same facts, and identity such that judgment in one would be res judicata in the other. The Court applied this doctrine by finding that the first Manila complaint and the pending Court of Appeals mandamus petition involved the same causes of action and reliefs, and that the additional Settlement Agreement cause did not negate forum shopping.
• Certification Against Forum Shopping — Under Section 5, Rule 7, the plaintiff or principal party must certify under oath that he has not commenced any action or filed any claim involving the same issues, or if there is such pending action or claim, a complete statement of its present status, and must report within five days if he learns that the same or similar action has been filed or is pending. Failure to comply is cause for dismissal without prejudice; a false certification or non-compliance constitutes indirect contempt; willful and deliberate forum shopping is ground for summary dismissal with prejudice and direct contempt. The Court applied this doctrine by holding that petitioners failed to report the pending mandamus petition when they filed their Amended Complaint, making dismissal proper.

• "Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged. The term "interest" means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions." — This passage states the Court’s canonical formulation of legal standing and supplies the standard applied to petitioners’ taxpayer suit.
• "Forum shopping exists when, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another, or when he institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a favorable disposition." — This passage defines forum shopping and is the ratio for the dismissal of the petition.
• "A taxpayer's bill is essentially a class bill and can be filed only in the common interest of all the taxpayers of the municipality, to prevent the wrongful expenditure of the money of the municipality or the wasting of its assets." — This passage supports the Court’s holding that a taxpayer’s suit is a class action and that identity of interest, not literal identity of parties, suffices for forum shopping and res judicata.
• "Public respondent’s dismissal of the Amended Complaint on the ground of forum shopping is thus in order." — This passage states the Court’s conclusion that the RTC correctly dismissed the amended complaint for forum shopping.

• Integrated Bar of the Philippines vs. Zamora, G.R. No. 141284, August 15, 2000, 338 SCRA 81 — Cited for the definition of legal standing or locus standi as a personal and substantial interest and direct injury.
• Francisco, Jr. vs. Nagmamalasakit na mga Manananggol ng mga Manggagawang Pilipino, Inc., G.R. No. 160261, November 10, 2003, 415 SCRA 44 — Cited in relation to the legal standing discussion.
• David vs. Macapagal-Arroyo, G.R. No. 171396, May 3, 2006, 489 SCRA 160 — Cited for the rule on public suits and standing.
• Del Mar vs. Philippine Amusement and Gaming Corporation, 400 Phil. 307 (2000) — Cited for taxpayer suits, which are allowed where public funds are illegally disbursed or wasted.
• Kilosbayan, Inc., et al. vs. Morato, et al., 320 Phil. 171 (1995) — Cited in the taxpayer standing discussion.
• Dumlao vs. Comelec, G.R. No. L-52245, January 22, 1980 — Cited in the taxpayer standing discussion.
• Sanidad vs. Commission on Elections, G.R. No. 44640, October 12, 1976, 23 SCRA 333 — Cited in the taxpayer standing discussion.
• Philconsa vs. Mathay, 124 Phil. 890 (1966) — Cited in the taxpayer standing discussion.
• Pascual vs. Sec. of Public Works, 110 Phil. 331 (1960) — Cited in the taxpayer standing discussion.
• Gonzales vs. Narvasa, 392 Phil. 518 (2000) — Cited for the requirement of personal and substantial interest.
• People vs. Vera, 65 Phil. 50 (1937) — Cited in Gonzales vs. Narvasa for personal and substantial interest.
• Municipality of Taguig vs. Hon. Court of Appeals, G.R. No. 142619, September 13, 2005, 469 SCRA 588 — Cited for the definition and consequences of forum shopping.
• Rudecon vs. Singson, G.R. No. 150798, March 31, 2005 — Cited in the forum shopping discussion.
• Chemphil Export and Import Corp. vs. Court of Appeals, 321 Phil. 619 (1995) — Cited in the forum shopping discussion.
• First Philippine International Bank vs. Court of Appeals, 322 Phil. 280 (1996) — Cited for the elements of forum shopping and litis pendentia.
• Prubankers Association vs. Prudential Bank & Trust Company, 361 Phil. 744 (1999) — Cited for the requisites of litis pendentia.
• Luzon Development Bank vs. Benedicto C. Conquilla, G.R. No. 163338, September 21, 2005, 470 SCRA 533 — Cited for the rule that identity of interest, not literal identity of parties, is required.
• Gericke vs. City of Philadelphia, 353 Pa. 60, 44 A.2d 233 (1945) — Cited for the proposition that a taxpayer’s bill is essentially a class bill.
• Housing Authority of the City of Atlanta vs. Heart of Atlanta Motel, Inc., 220 Ga 192, 137 S.E. 2d 647 (1964) — Cited for the binding effect of class action judgments on taxpayers.
• Petition of Gardiner, 67 N.J. Super 435, 170 A 2d 820 (1961) — Cited for the rule that a taxpayer attacking governmental action sues as a representative of all taxpayers as a class.

• Section 5, Rule 7, Rules of Court — Requires the plaintiff or principal party to certify under oath that he has not commenced any action or filed any claim involving the same issues, or if there is such pending action or claim, to provide a complete statement of its present status, and to report within five days if he learns that the same or similar action has been filed or is pending. Failure to comply is cause for dismissal without prejudice; false certification or non-compliance constitutes indirect contempt; willful and deliberate forum shopping is ground for summary dismissal with prejudice and direct contempt. The Court applied this provision by holding that petitioners failed to report the pending mandamus petition when they filed their Amended Complaint, making dismissal proper.
• Executive Order No. 55, as amended by Executive Order No. 98 — Transferred ownership of the BNPP, its equipment, materials and facilities, records and uranium fuel to the National Government or its duly constituted agency, and caused the National Government to assume all remaining foreign and local obligations incurred by NPC in financing the construction of the BNPP. This provided the background for the public-funds allegation supporting petitioners’ taxpayer standing.
• Executive Order No. 265 — Amended Executive Order No. 315 dated January 1, 1988, creating the Presidential Committee on the Bataan Nuclear Power Plant (PC-BNPP Committee) as the coordinating and policy-making body on the BNPP, including policies arising from negotiations for a fair commercial settlement of all pending legal claims that will provide a substantial net benefit to the country, and requiring it to submit recommendations to the President for approval. This formed part of the factual backdrop of the Settlement Agreement challenged by petitioners.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Dante O. Tinga, and Presbitero J. Velasco, Jr.