Suplico v. National Economic and Development Authority

An official act of the President cancelling a proposed government project is subject to mandatory judicial notice and may render related petitions moot; the SC cannot, in an original petition, resolve issues requiring reception of evidence.

The ZTE National Broadband Network Project was a government telecommunications procurement involving the DOTC and ZTE Corporation, which public respondents characterized as an executive agreement with the People's Republic of China. The project was to be financed by a loan from the Export-Import Bank of China, and its effectiveness was subject to conditions precedent, including a loan agreement and budget authority.

Rolex Suplico, Amsterdam Holdings, Inc. and Nathaniel Sauz, and Galeleo P. Angeles et al., together with LATIGO, filed separate original petitions in the SC against NEDA, DOTC, CICT, ZTE Corporation, and related officials and entities over the ZTE National Broadband Network Project. Suplico's petition was docketed as G.R. No. 178830; Amsterdam Holdings, Inc. and Nathaniel Sauz filed G.R. No. 179317; and Galeleo P. Angeles, Vicente C. Angeles, Job Florante L. Castillo, Trini Anne G. Nieva, Roy Allan T. Arellano, Carlo Magno M. Reonal, Ethel B. Regadio, Raenan B. Malig, and Vinalyn M. Potot, together with LATIGO, filed G.R. No. 179613 against DOTC and Zhong Xing Equipment (ZTE) Company, Ltd. The petitions sought, among others, a TRO and/or preliminary injunction, production of the contract or agreement covering the NBN project with ZTE Corporation, annulment of the ZTE-DOTC Broadband Deal or the award to ZTE Corporation, and orders compelling public respondents to comply with procurement and public bidding laws.

On September 11, 2007, the SC issued a TRO in G.R. No. 178830 enjoining the NEDA, NEDA-Investment Coordination Committee, DOTC, CICT, Telecommunications Office, Bids and Awards for ICT, Technical Working Group for ICT, all other operating units of DOTC for ICT, ZTE Corporation, Amsterdam Holdings, Inc., ARESCOM, Inc., and any and all persons acting on their behalf from pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project.

During one of the Senate hearings on the NBN project, copies of the supply contract were readily made available to petitioners. On October 2, 2007, President Gloria Macapagal-Arroyo met Chinese President Hu Jintao at the Xi Jiao Guesthouse in Shanghai, China, and informed him that the Philippine Government had decided not to continue with the ZTE National Broadband Network Project due to several reasons and constraints; President Hu Jintao expressed understanding of the Philippine Government decision. The DOTC Legal Service transmitted the Highlights from the Notes of the Meeting to the OSG through a 1st Indorsement dated October 24, 2007.

On October 26, 2007, the OSG filed a Manifestation and Motion stating that the Philippine Government had decided not to continue with the ZTE National Broadband Network Project and that there was no more justiciable controversy, praying that the petitions be dismissed. The SC noted the motion on November 13, 2007 and required petitioners in G.R. Nos. 178830, 179317, and 179613 to comment. Suplico filed a Consolidated Reply and Opposition on December 6, 2007, arguing that the Notes of the Meeting were not attached to the OSG motion, that the 1st Indorsement was self-serving, and that the SC could still take cognizance of the case despite mootness. Amsterdam Holdings, Inc. and Nathaniel Sauz filed their comment on January 31, 2008, expressing doubt that the government would not backtrack, re-transact, or resurrect the NBN-ZTE transaction and invoking the transcendental importance of the issues. The SC required the OSG to reply on January 15, 2008, and the OSG filed its reply on April 18, 2008, reiterating that there was no actual case or controversy, that no perfected contract existed, that the NBN Project as an executive agreement remained in the negotiation stage, and that the right to information was not absolute and involved a political question. On July 2, 2008, the OSG filed a Supplemental Manifestation and Motion attaching the Highlights from the Notes of Meeting between President Arroyo and Chinese President Hu Jintao held on October 2, 2007.

• Proof of Cancellation: Petitioner Suplico argued that the Notes of the Meeting Between President Gloria Macapagal-Arroyo and Chinese President Hu Jintao held on October 2, 2007 were not attached to the October 26, 2007 Manifestation and Motion, depriving petitioners of the opportunity to comment, and that a mere verbally requested 1st Indorsement was not sufficient basis to conclude that the ZTE-DOTC NBN deal had been permanently scrapped; he called the 1st Indorsement self-serving absent the Notes or other proof.
• Mootness Exception: Petitioner Suplico argued that even assuming some aspects of the petition were rendered moot, the SC may still take cognizance, citing Gonzales vs. Chavez, Rufino vs. Endriga, and Alunan III vs. Mirasol, because of the SC's symbolic function of educating the bench and bar by formulating guiding and controlling principles, precepts, doctrines, and rules.

• No Actual Case or Controversy: Public respondents argued that for a court to exercise adjudication there must be an actual case or controversy involving a conflict of legal rights and opposite legal claims susceptible of judicial resolution, not moot or academic; the government's decision not to continue the project removed any justiciable controversy.
• No Perfected Contract / Executive Agreement: Public respondents argued that no perfected contract existed that would prejudice the government or public interest; the NBN Project was an executive agreement that remained in the negotiation stage, and the conditions precedent for the agreement to become effective had not been complied with.
• Right to Information / Political Question: Public respondents argued that petitioners' right to information is not absolute; the matters raised concerned executive policy, a political question that the judicial branch would generally hesitate to pass upon.
• Factual Issues Require Evidence: ZTE Corporation, respondent in G.R. No. 178830, argued that because Suplico filed his petition directly in the SC without prior factual findings by any lower court, the SC needed to determine factual issues, including whether an executive agreement was reached, whether the ZTE Supply Contract was entered pursuant to and as an integral part of that agreement, whether a loan agreement was executed, whether the project required a Build-Operate-and-Transfer scheme, whether the AHI proposal complied with the BOT Law, whether public funds were earmarked, and whether the ZTE Supply Contract's coverage was more extensive than the AHI proposal or other proposals.
• Government May Backtrack / Transcendental Importance: Amsterdam Holdings, Inc. and Nathaniel Sauz, respondents in the first-captioned case, countered that the government had a habit of not keeping its word and might backtrack, re-transact, or resurrect the NBN-ZTE transaction if the cases were dismissed; they argued that because of the transcendental importance of the issues, including the President's use of the power to borrow and enter into foreign loan agreements, the SC should take cognizance despite apparent mootness.

• Mootness: Whether the consolidated petitions became moot and academic after President Gloria Macapagal-Arroyo officially informed Chinese President Hu Jintao on October 2, 2007 that the Philippine Government had decided not to continue with the ZTE National Broadband Network Project.
• Judicial Notice: Whether the SC may take judicial notice of the President's official act of cancelling the ZTE-NBN Project without requiring evidence.
• Prayer for Copies of the Supply Contract: Whether the prayer for certified true copies of the contract or agreement covering the NBN project with ZTE Corporation was mooted by the availability of copies of the supply contract during a Senate hearing.
• Factual Issues / SC Not a Trier of Facts: Whether the SC may resolve the petitions on the merits in an original action when their resolution requires reception of evidence and prior factual findings.

• Mootness: Yes. The principal prayers to annul, set aside, and enjoin implementation of the ZTE-NBN Project became moot when the President officially announced the government's decision not to continue the project; there was no longer a live controversy.
• Judicial Notice: Yes. The SC was required to take judicial notice of the President's official act under Rule 129, Section 1, and to presume that executive officials regularly performed their official duty under Rule 131, Section 2(m).
• Prayer for Copies of the Supply Contract: Yes. The prayer was mooted because copies of the supply contract were readily made available to petitioners during a Senate hearing.
• Factual Issues / SC Not a Trier of Facts: No. Even if mootness were disregarded, the SC could not resolve the petitions because they required reception of evidence and prior factual findings, and the SC is not a trier of facts in an original petition.

• Mootness: The OSG's Manifestation and Motion dated October 26, 2007 stated that the Philippine Government had decided not to continue with the ZTE NBN Project and that no justiciable controversy remained. The OSG later attached the Highlights from the Notes of Meeting between President Arroyo and Chinese President Hu Jintao held in Shanghai on October 2, 2007, where the Philippine Government conveyed its decision not to continue the project due to several constraints and President Hu expressed understanding. The SC held that when the President, acting in her official capacity, informed the Chinese President of the cancellation, all principal prayers in the three petitions — to annul, set aside, and enjoin implementation — became moot. It relied on Republic Telecommunications Holdings, Inc. vs. Santiago: judicial power requires an actual case or controversy; where the issue is moot, there is no justiciable controversy, and adjudication would be a theoretical exercise with no practical use. Although the SC has passed upon moot issues to formulate guiding principles, this case did not fall under the exception because resolving the petitions required appraisal of factual considerations peculiar to the transactions and parties, and the issues did not call for clarification of a constitutional principle or statutory provision.
• Judicial Notice: Rule 129, Section 1 mandates judicial notice without introduction of evidence of official acts of the legislative, executive, and judicial departments. The President heads the executive branch, so the act of cancelling the proposed ZTE-NBN Project during the October 2, 2007 meeting with the Chinese President was an official act of the executive department; the SC had no alternative but to take judicial notice of it. David vs. Macapagal-Arroyo and Estrada vs. Desierto were cited as instances where the SC resorted to judicial notice. Under Rule 131, Section 2(m), the official duty of executive officials to inform the SC of the government's decision was presumed regularly performed absent proof to the contrary; AHI's insinuation provided no factual or legal basis to disregard the presumption.
• Prayer for Copies of the Supply Contract: In G.R. Nos. 178830 and 179613, petitioners prayed to be furnished certified true copies of the contract or agreement covering the NBN project with ZTE Corporation. During a Senate hearing on the NBN project, copies of the supply contract were readily made available to petitioners. The prayer was therefore complied with and mooted.
• Factual Issues / SC Not a Trier of Facts: Even assuming mootness were disregarded, the SC could not completely rule on the merits because the three petitions involved settling factual issues requiring reception of evidence, and the SC is not a trier of facts. ZTE correctly pointed out that Suplico filed directly in the SC without prior factual findings and enumerated factual issues: whether an executive agreement was reached; whether the ZTE Supply Contract was entered pursuant to and as an integral part of the executive agreement; whether a loan agreement was executed; whether the project required a BOT scheme; whether the AHI proposal complied with the BOT Law; whether public funds were earmarked; and whether the ZTE Supply Contract's coverage was more extensive than the AHI proposal or other proposals. The reliefs in G.R. Nos. 178830 and 179613 — annulling the award and compelling compliance with procurement and public bidding laws — required prior determination of facts and evidence of specific violations. The SC could not annul the award without evidence supporting a factual finding of violation, and it could not summarily compel compliance without factual basis or prior determination of particular violations by specific officials; doing so would breach comity among co-equal branches. The Senate investigation in aid of legislation could not be the basis of a decision requiring a judicial finding of facts.

• Moot and Academic Principle — Judicial power requires an actual case or controversy; where the issue has become moot, there is no justiciable controversy and adjudication would have no practical use or value. The SC applied it because the President's official cancellation of the ZTE-NBN Project removed the live controversy over the principal prayers to annul, set aside, and enjoin implementation. The exception for formulating guiding principles did not apply because the resolution required factual appraisal and did not call for clarification of a constitutional principle or statutory provision.
• Mandatory Judicial Notice of Official Acts — Courts shall take judicial notice, without introduction of evidence, of the official acts of the legislative, executive, and judicial departments. The SC applied it to the President's official act of informing the Chinese President that the Philippine Government would not continue the ZTE-NBN Project.
• Presumption of Regular Performance of Official Duty — Official duty is presumed to have been regularly performed absent proof to the contrary. The SC applied it to the executive officials' act of informing the SC of the government's decision not to continue the project.
• SC Is Not a Trier of Facts — The SC cannot resolve factual issues requiring reception of evidence in an original petition; factual determinations must be made by lower courts. The SC applied it because the petitions sought annulment and procurement-compliance orders that depended on disputed factual issues.
• Comity Among Co-equal Branches — The SC cannot summarily compel the executive to comply with procurement laws without a factual basis or prior determination of specific violations, as that would breach the norms of comity among co-equal branches. The SC applied it to the prayer to compel public respondents to comply with procurement and public bidding laws.

• "When President Gloria Macapagal-Arroyo, acting in her official capacity during the meeting held on October 2, 2007 in China, informed China's President Hu Jintao that the Philippine Government had decided not to continue with the ZTE-National Broadband Network (ZTE-NBN) Project due to several reasons and constraints, there is no doubt that all the other principal prayers in the three petitions (to annul, set aside, and enjoin the implementation of the ZTE-NBN Project) had also become moot." — This is the majority's core mootness holding after the President's official cancellation.
• "Under the rules, it is mandatory and the Court has no alternative but to take judicial notice of the official acts of the President of the Philippines, who heads the executive branch of our government." — This states the judicial-notice rule applied to the President's cancellation.
• "In the absence of actual justiciable controversies or disputes, the Court generally opts to refrain from deciding moot issues. Where there is no more live subject of controversy, the Court ceases to have a reason to render any ruling or make any pronouncement." — This articulates the mootness principle.
• "It is simply impossible for this Court \"to annul and set aside the award of the ZTE-DOTC Broadband Deal\" without any evidence to support a prior factual finding pointing to any violation of law that could lead to such annulment order. For sure, the Supreme Court is not the proper venue for this factual matter to be threshed out." — This explains why the SC cannot grant annulment without evidence.

• Republic Telecommunications Holdings, Inc. vs. Santiago, G.R. No. 140338, August 7, 2007, 529 SCRA 232 — Controlling precedent on mootness; the SC relied on it to hold that a supervening event rendering the issue moot leaves no justiciable controversy and that adjudication would be a theoretical exercise.
• David vs. Macapagal-Arroyo, G.R. No. 171396, May 3, 2006, 489 SCRA 160 — Cited as precedent for taking judicial notice of an official act of the Office of the President.
• Estrada vs. Desierto, G.R. No. 146710, March 2, 2001, 353 SCRA 452 — Cited as precedent for resorting to judicial notice in resolving a factual ingredient of a petition.

• Rule 129, Section 1, Rules of Court — Mandatory judicial notice of official acts of the legislative, executive, and judicial departments without introduction of evidence; applied to the President's official act of cancelling the ZTE-NBN Project.
• Rule 131, Section 2(m), Rules of Court — Presumption that official duty has been regularly performed; applied to the executive officials' communication to the SC of the government's decision not to continue the project.

• Justice Azcuna (Concurring) — He found Justice Carpio's points arguably sound as an abstract treatise in law, but under the facts and Article VIII, Section 1 of the Constitution, the desistance from the agreement rendered the matter academic and moot, leaving no actual controversy; resolving the issue would be an advisory opinion. He also viewed the supply or procurement contract as clearly incomplete and unable to stand alone without the companion yet-to-be-agreed loan agreement, so desistance prevented the contract from materializing. He voted to dismiss for being moot and academic, without prejudice to a proper case to settle an actual controversy arising from the incomplete agreement.

• Justice Carpio (Dissenting) — He dissented on the ground that the ZTE Supply Contract is void from the beginning for being contrary to the Constitution, the Administrative Code of 1987, the Government Auditing Code of the Philippines, and the Government Procurement Reform Act. He argued that the contract had no appropriation from Congress, no certificate of appropriation and fund availability, and no public bidding; that an executive agreement cannot amend or repeal a prior law or exempt the contract from mandatory public bidding; and that the contract is a commercial contract governed by Philippine law, not an executive agreement. He concluded that the contract is legally non-existent, that the government's unilateral cancellation had no legal effect and did not moot the petition, and voted to grant the petition and declare the ZTE Supply Contract void from the beginning.
• Justice Carpio-Morales (Dissenting) — She dissented from the majority's dismissal, believing the petitions warranted a decision on the merits despite the President's declaration. She shared Justice Carpio's view that the petitions should not be dismissed on mootness, citing David vs. Arroyo for the exceptions to the moot and academic principle: grave violation of the Constitution, paramount public interest, formulation of controlling principles, and capability of repetition yet evading review. She also believed the admissions, explicit and implicit, of respondents in their Consolidated Comment sufficed to establish the substantial factual issues without need of further evidence.
• Justice Austria-Martinez (Dissenting) — Joined Justice Carpio in his dissenting opinion.