G.R. No.

L-22948 March 17, 1925

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,

vs.
FAUSTO V. CARLOS, defendant-appellant.

M.H. de Joya, Jose Padilla, Vicente Sotto and Monico Mercado for appellant.
Attorney-General Villa-Real and City Fiscal Guevara for appellee.

OSTRAND, J.:

This is an appeal from a decision of the Court of First Instance of the City of Manila finding the defendant Fausto V. Carlos
guilty of the crime of murder and sentencing him to suffer life imprisonment, with the accessory penalties prescribed by
law and with the costs.

It appears from the evidence that the victim of the alleged murder, Dr. Pablo G. Sityar, on March 3, 1924, in Mary Chiles
Hospital, performed a surgical operation upon the defendant's wife for appendicitis and certain other ailments. She
remained in the hospital until the 18th of the same month, but after her release therefrom she was required to go several
times to the clinic of Doctor Sityar at No. 40 Escolta, for the purpose of dressing the wounds caused by the operation. On
these occasions she was accompanied by her husband, the defendant. The defendant states that on one of the visits, that
of March 20, 1924, Doctor Sityar sent him out on an errand to buy some medicine, and that while defendant was absent
on this errand Doctor Sityar outraged the wife. The defendant further states that his wife informed him of the outrage
shortly after leaving the clinic. Notwithstanding this it nevertheless appears that he again went there on March 28th to
consult the deceased about some lung trouble from which he, the defendant, was suffering.. He was given some medical
treatment and appears to have made at least one more visit to the clinic without revealing any special resentment.

On May 12, 1924, the defendant, suffering from some stomach trouble, entered the Philippine General Hospital where he
remained until May 18, 1924, and where he was under the care of two other physicians. While in the hospital her received
a letter (Exhibit 5) from Doctor Sityar asking the immediate settlement of the account for the professional services
rendered his wife. Shortly after his release from the hospital the defendant sought an interview with Doctor Sityar and
went to the latter's office several times without finding him in. On one of these occasions he was asked by an employee of
the office, the nurse Cabañera, if he had come to settle his account, to which the defendant answered that he did not
believe he owed the doctor anything.

In the afternoon of May 26th the defendant again went to the office of the deceased and found him there alone.
According to the evidence of the prosecution, the defendant then, without any preliminary quarrel between the two,
attacked the deceased with a fan-knife and stabbed him twice. The deceased made an effort to escape but the defendant
pursued him and overtaking him in the hall outside the office, inflicted another wound upon him and as a consequence if
the three wounds he died within a few minutes. The defendants made his escape but surrendered himself to the
Constabulary at Malolos, Bulacan, in the evening of the following day.

The defendant admits that he killed the deceased but maintains that he did so in self-defense. He explains that he went to
Doctor Sityar's office to protest against the amount of the fee charged by the doctor and, in any event, to ask for an
extension of the time of payment; that during the conversation upon that subject the deceased insulted him by telling him
that inasmuch as he could not pay the amount demanded he could send his wife to the office as she was the one treated,
and that she could then talk the matter over with the decease; that this statement was made in such an insolent and
contemptuous manner that the defendant became greatly incensed and remembering the outrage committed upon his
wife, he assumed a threatening attitude and challenged the deceased to go downstairs with him and there settle the
matter; that the deceased thereupon took a pocket-knife from the center drawer of his desk and attacked the defendant,
endeavoring to force him out of the office; that the defendant, making use of his knowledge of fencing, succeeded in
taking the knife away from the deceased and blinded by fury stabbed him first in the right side of the breast and then in
the epigastric region, and fearing that the deceased might secure some other weapon or receive assistance from the
people in the adjoining room, he again stabbed him, this time in the back.
The defendant's testimony as to the struggle described is in conflict with the evidence presented by the prosecution. But
assuming that it is true, it is very evident that it fails to establish a case of self-defense and that, in reality, the only
question here to be determined is whether the defendant is guilty of murder or of simple homicide.

The court below found that the crime was committed with premeditation and therefore constituted murder. This finding
can only be sustained by taking into consideration Exhibit L, a letter written to the defendant by his wife and siezed by the
police in searching his effects on the day of his arrest. It is dated May 25, 1924, two days before the commission of the
crime and shows that the writer feared that the defendant contemplated resorting to physical violence in dealing with the
deceased.

Counsel for the defendant argues vigorously that the letter was a privileged communication and therefore not admissible
in evidence. The numerical weight of authority is, however, to the effect that where a privileged communication from one
spouse to another comes into the hands of a third party, whether legally or not, without collusion and voluntary disclosure
on the part of either of the spouses, the privilege is thereby extinguished and the communication, if otherwise competent,
becomes admissible. (28 R.C.L., 530 and authorities there cited.) Such is the view of the majority of this court.

Professor Wigmore states the rule as follows:

For documents of communication coming into the possession of a third person, a distinction should obtain,
analogous to that already indicated for a client's communications (ante, par. 2325, 2326); i. e., if they were
obtained from the addressee by voluntary delivery, they should still be privileged (for otherwise the privilege
could by collusion be practically nullified for written communications); but if they were obtained surreptitiously or
otherwise without the addressee's consent, the privilege should cease. (5 Wigmore on Evidence, 2nd ed., par.
2339.)

The letter in question was obtained through a search for which no warrant appears to have been issued and counsel for
the defendant cites the causes of Boyd and Boyd vs. United States (116 U.S., 616) and Silverthorne Lumber Co. and
Silverthorne vs. United States (251 U.S., 385) as authority for the proposition that documents obtained by illegal searches
of the defendant's effects are not admissible in evidence in a criminal case. In discussing this point we can do not better
than to quote Professor Wigmore:

The foregoing doctrine (i. e., that the admissibility of evidence is not affected by the illegality of the means
through which the party has been enabled to obtain the evidence) was never doubted until the appearance of the
ill-starred majority opinion of Boyd vs. United States, in 1885, which has exercised unhealthy influence upon
subsequent judicial opinion in many States.

xxx xxx xxx

The progress of this doctrine of Boyd vs. United States was as follows: (a) The Boyd Case remained unquestioned
in its own Court for twenty years; meantime receiving frequent disfavor in the State Courts (ante, par. 2183). (b)
Then in Adams vs. New York, in 1904, it was virtually repudiated in the Federal Supreme Court, and the orthodox
precedents recorded in the State courts (ante, par. 2183) were expressly approved. (c) Next, after another twenty
years, in 1914 — moved this time, not by erroneous history, but by misplaced sentimentality — the Federal
Supreme Court, in Weeks vs. United States, reverted to the original doctrine of the Boyd Case, but with a condition,
viz., that the illegality of the search and seizure should first have been directly litigated and established by a
motion, made before trial, for the return of the things seized; so that, after such a motion, and then only, the
illegality would be noticed in the main trial and the evidence thus obtained would be excluded. ... (4 Wigmore on
Evidence, 2nd ed., par. 2184.)

In the Silverthorne Lumber Co. case the United States Supreme Court adhered to its decision in the Weeks Case. The
doctrine laid down in these cases has been followed by some of the State courts but has been severely criticized and does
not appear to have been generally accepted. But assuming, without deciding, that it prevails in this jurisdiction it is,
nevertheless, under the decisions in the Weeks and Silverthorne cases, inapplicable to the present case. Here the illegality
of the search and seizure was not "directly litigated and established by a motion, made before trial, for the return of the
things seized."

The letter Exhibit L must, however, be excluded for reasons not discussed in the briefs. The letter was written by the wife of
the defendant and if she had testified at the trial the letter might have been admissible to impeach her testimony, but she
was not put on the witness-stand and the letter was therefore not offered for that purpose. If the defendant either by
answer or otherwise had indicated his assent to the statements contained in the letter it might also have been admissible,
but such is not the case here; the fact that he had the letter in his possession is no indication of acquiescence or assent on
his part. The letter is therefore nothing but pure hearsay and its admission in evidence violates the constitutional right of
the defendant in a criminal case to be confronted with the witnesses for the prosecution and have the opportunity to
cross-examine them. In this respect there can be no difference between an ordinary communication and one originally
privileged.

The question is radically different from that of the admissibility of testimony of a third party as to a conversation between
a husband and wife overheard by the witness. Testimony of that character is admissible on the ground that it relates to a
conversation in which both spouses took part and on the further ground that where the defendant has the opportunity to
answer a statement made to him by his spouse and fails to do so, his silence implies assent. That cannot apply where the
statement is contained in an unanswered letter.

The Attorney-General in support of the contrary view quotes Wigmore, as follows:

. . . Express communication is always a proper mode of evidencing knowledge or belief. Communication to

a husband or wife is always receivable to show probable knowledge by the other (except where they are living
apart or are not in good terms), because, while it is not certain that the one will tell the other, and while the
probability is less upon some subjects than upon others, still there is always some probability, — which is all that
can be fairly asked for admissibility. ... (1 Wigmore, id., par. 261.)

This may possibly be good law, though Wigmore cites no authority in support of his assertion, but as far as we can see it
has little or nothing to do with the present case.

As we have already intimated, if Exhibit L is excluded, there is in our opinion not sufficient evidence in the record to show
that the crime was premeditated.

The prosecution maintains that the crime was committed with alevosia. This contention is based principally on the fact that
one of the wounds received by the deceased showed a downward direction indicating that the deceased was sitting down
when the wound was inflicted. We do not think this fact is sufficient proof. The direction of the wound would depend
largely upon the manner in which the knife was held.

For the reasons stated we find the defendant guilty of simple homicide, without aggravating or extenuating circumstances.

The sentence appealed from is therefore modified by reducing the penalty to fourteen years, eight months and one day
of reclusion temporal, with the corresponding accessory penalties and with the costs against the appellant. So ordered.

Johnson, Malcolm, Johns, and Romualdez, JJ., concur.

Separate Opinions

VILLAMOR, J., dissenting:

His Honor, the judge who tried this case, inserts in his decision the testimony of the witness Lucio Javillonar as follows:

The witness, Lucio Javillonar, testified that he went to the office of the deceased some minutes before six o'clock
in that evening in order to take him, as had previously been agreed upon between them, so that they might retire
 together to Pasig, Rizal, where they resided then; that having noticed that the deceased was busy in his office,
talking with a man about accounts, instead of entering, he stayed at the waiting room, walking from one end to
another, while waiting for that man to go out; that in view of the pitch of the voice in which the conversation was
held between the deceased and his visitor, and what he had heard, though little as it was, of said conversation, he
believes that there was not, nor could there have been, any change of hard words, dispute or discussion of any
kind; that shortly thereafter, he saw the screen of the door of the deceased's office suddenly open, and the
deceased rush out stained with blood, and followed closely by the accused who then brandished a steel arm in the
right hand; that upon seeing the deceased and overtaking him, leaning upon one of the screens of the door of a
tailor shop a few feet from his office, slightly inclined to the right, with the arms lowered and about to fall to the
floor, the accused stabbed him on the right side of the chest, thereby inflicting a wound on the right nipple; and
that then the accused descended the staircase to escape away, at the same time that the deceased was falling to
the ground and was being taken by him with the assistance of other persons from said place to a lancape (a sofa)
where he died a few minutes later, unable to say a word.

In deciding the question as to whether the act committed is murder, with the qualifying circumstance of treachery, as
claimed by the Attorney-General, the trial judge says that the principal ground of the prosecution for holding that the
commission of the crime was attended by the qualifying circumstance of treachery is a mere inference from the testimony
of Lucio Javillonar, and that the nature of the wounds found on the epigastric region of the deceased and his back do not
mean anything, because they could have been inflicted while the deceased was standing, seated or inclined.

A careful consideration of the testimony of Lucio Javillonar, as set out in the judgment appealed from, will show that,
according to said eyewitness, the deceased was with his arms lowered and about to fall to the floor when the accused
stabbed him on the right side of the chest with the weapon he was carrying, thereby inflicting a wound on the right nipple,
and that, according to the doctor who examined the wounds, anyone of them could have caused the death of the
deceased. These being the facts proven, I am of opinion that application must be made here of the doctrine laid down by
this court in the case of United States vs. Baluyot (40 Phil., 385), wherein it was held that "Even though a deadly attack may
be begun under conditions not exhibiting the feature of alevosia, yet if the assault is continued and the crime
consummated with alevosia, such circumstance may be taken into consideration as a qualifying factor in the offense of
murder." I admit that none of the witnesses who testified in this case has seen the beginning of the aggression; but it
positively appears from the testimony of the said witness Lucio Javillonar that, notwithstanding that the deceased was
already wounded and about to fall to the floor, he struck him with another mortal blow with the weapon he was carrying,
which shows that the accused consummated the crime with treachery.

For the foregoing, I am of opinion that the judgment appealed from must be affirmed, considering the act committed as
murder, with the qualifying circumstance of treachery, and in this sense I dissent from the majority opinion.
G.R. No. L-13109 March 6, 1918

THE UNITED STATES, plaintiff-appellee,

vs.
DALMACEO ANTIPOLO, defendant-appellant.

Irureta Goyena and Recto for appellant.

Acting Attorney-General Paredes for appellee.

FISHER, J.:

The appellant was prosecuted in the Court of First Instance of the Province of Batangas, charged with the murder of one
Fortunato Dinal. The trial court convicted him of homicide and from that decision he was appealed. One of the errors
assigned is based upon the refusal of the trial judge to permit Susana Ezpeleta, the widow of the man whom the appellant
is accused of having murdered, to testify as a witness on behalf of the defense concerning certain alleged dying
declarations. The witness was called to the stand and having stated that she is the widow of Fortunato Dinal was asked:
"On what occasion did your husband die?" To this question the fiscal objected upon the following ground:

I object to the testimony of this witness. She has just testified that she is the widow of the deceased, Fortunato
Dinal, and that being so I believe that she is not competent to testify under the rules and procedure in either civil
or criminal cases, unless it be with the consent of her husband, and as he is dead and cannot grant that
permission, it follows that this witness is disqualified from testifying in this case in which her husband is the
injured party.

Counsel for defendant insisted that the witness was competent, arguing that the disqualification which the fiscal evidently
had in mind relates only to cases in which a husband or wife of one of the parties to a proceeding is called to testify; that
the parties to the prosecution of a criminal case are the Government and the accused; that, furthermore the marriage of
Dinal to the witness having been dissolved by the death of her husband, she is no longer his wife, and therefore not
subject to any disqualification arising from the status of marriage.

These propositions were rejected by the trial judge, and the objection of the fiscal as to the testimony of the woman
Ezpeleta was sustained. To this objection counsel took exception and made an offer to prove by the excluded witness the
facts which he expected to establish by her testimony. Concerning these facts it is sufficient at this time to say that some
of them would be both material and relevant, to such a degree that if proven to the satisfaction of the court, they might
have lead to the acquittal of the accused, as they purported to relate to the dying declarations of the deceased,
concerning the cause of his death, the general purport being that his injuries were due to fall and not to the acts imputed
to the accused.

Section 58 of General Orders No. 58 (1900) reads as follows:

Except with the consent of both, or except in cases of crime committed by one against the other, neither husband
nor wife shall be a competent witness for or against the other in a criminal action or proceeding to which one or
both shall be parties.

The reasons for this rule are thus stated in Underhill's work on Criminal Evidence (second edition) on page 346:

At common law, neither a husband nor a wife was a competent witness for or against the other in any judicial
proceedings, civil or criminal, to which the other was a party. . . . If either were recognized as a competent witness
against the other who was accused of crime, . . . a very serious injury would be done to the harmony and
happiness of husband and wife and the confidence which should exist between them.

In Greenleaf's classical work on evidence, in section 337 [vol. I], the author says, in stating the reasons for the rule at
common law:
 The great object of the rule is to secure domestic happiness by placing the protecting seal of the law upon all
confidential communications between husband and wife; and whatever has come to the knowledge of either by
means of the hallowed confidence which that relation inspires, cannot be afterwards divulged in testimony even
though the other party be no longer living.

This case does not fall with the text of the statute or the reason upon which it is based. The purpose of section 58 is to
protect accused persons against statements made in the confidence engendered by the marital relation, and to relieve the
husband or wife to whom such confidential communications might have been made from the obligation of revealing them
to the prejudice of the other spouse. Obviously, when a person at the point of death as a result of injuries he has suffered
makes a statement regarding the manner in which he received those injuries, the communication so made is in no sense
confidential. On the contrary, such a communication is made for the express purpose that it may be communicated after
the death of the declarant to the authorities concerned in inquiring into the cause of his death.

The same theory as that upon which section 58 of General Orders No. 58 is based, underlies section 383, paragraph 3 of
Act No. 190, which reads as follows:

A husband cannot be examined for or against his wife without her consent; nor a wife for or against her husband
without his consent; nor can either, during the marriage or afterwards, be, without the consent of the other,
examined as to any communication made by one to the other during the marriage; but this exception does not
apply to a civil action or proceeding by one against the other, or to a criminal action or proceeding for a crime
committed by one against the other.

The only doubt which can arise from a reading of this provision relates to the meaning of the words "during the marriage
or afterwards," and this doubt can arise only by a consideration of this phrase separately from the rest of the paragraph.
Construed as a whole it is evident that it relates only to cases in which the testimony of a spouse is offered for or against
the other in a proceeding to which the other is a party. The use of the word "afterwards" in the phrase "during the
marriage or afterwards" was intended to cover cases in which a marriage has been dissolved otherwise than by death of
one of the spouses — as, for instance, by decree of annulment or divorce.

The declarations of a deceased person while in anticipation of certain impending death, concerning the circumstances
leading up to the death, are admissible in a prosecution of the person charged with killing the declarant. (U. S. vs. Gil, 13
Phil., Rep., 530.) Such dying declarations are admissible in favor of the defendant as well as against him. (Mattox vs. U. S.,
146 U. S., 140.) It has been expressly held in several jurisdictions in the United States that the widow of the deceased may
testify regarding his dying declarations. In the case of the State vs. Ryan (30 La. Ann., 1176), cited by appellant in his brief,
the court said:

The next bill is as to the competency of the widow of the deceased to prove his dying declarations. We see no
possible reason for excluding her . . . after the husband's death she is no longer his wife, and the rules of evidence,
as between husbands and wives, are no longer applicable.

In the case of Arnett vs. Commonwealth (114 Ky., 593, 596), the testimony of the widow of the deceased as to his dying
declarations made to her was objected to upon the express ground that under the terms of the Kentucky Code, "the wife
was incompetent to testify even after the cessation of the marriage relation, to any communication made by her by her
husband during the marriage."

This contention was rejected, the court saying:

On grounds of public policy the wife can not testify against her husband as to what came to her from him
confidentially or by reason of the marriage relation, but this rule does not apply to a dying communication made
by the husband to the wife on the trial of the one who killed him. The declaration of the deceased made in
extremes in such cases is a thing to be proven, and this proof may be made by any competent witness who heard
the statement. The wife may testify for the state in cases of this character as to any other fact known to her. . . . It
can not be contended that the dying declaration testified to by the witness was a confidential communication
 made to her; on the contrary, it was evidently made in the furtherance of justice for the express purpose that it
should be testified to in the prosecution of the defendant.

We are therefore of the opinion that the court below erred in excluding the testimony of the witness Susana Ezpeleta, and
that by reason of such exclusion, the accused was deprived of one of his essential rights. That being the case, a new trial
must be granted.

For the reason stated, the judgment of the court below is hereby set aside and a new trial is granted at which the
testimony of the witness Susana Ezpeleta will be admitted, together with any additional evidence which may be offered on
the part of the prosecution or the defense. At the new trial granted the accused, the testimony taken at the former hearing
shall be considered. The costs of this appeal shall be de officio. So ordered.

Arellano, C.J., Torres, Johnson, Carson, Araullo, Street, Malcolm, and Avanceña, JJ., concur.
G.R. No. L-9231 January 6, 1915

UY CHICO, plaintiff-appellant,
vs.
THE UNION LIFE ASSURANCE SOCIETY, LIMITED, ET AL., defendants-appellees.

Beaumont and Tenney for appellant.

Bruce, Lawrence, Ross and Block for appellees.

TRENT, J.:

An appeal from a judgment dismissing the complaint upon the merits, with costs.

The plaintiff seeks to recover the face value of two insurance policies upon a stock of dry goods destroyed by fire. It
appears that the father of the plaintiff died in 1897, at which time he was conducting a business under his own name, Uy
Layco. The plaintiff and his brother took over the business and continued it under the same name, "Uy Layco." Sometime
before the date of the fire, the plaintiff purchased his brother's interest in the business and continued to carry on the
business under the father's name. At the time of the fire "Uy Layco" was heavily indebted and subsequent thereto the
creditors of the estate of the plaintiff's father. During the course of these proceedings, the plaintiff's attorney surrendered
the policies of insurance to the administrator of the estate, who compromised with the insurance company for one-half
their face value, or P6,000. This money was paid into court and is now being held by the sheriff. The plaintiff now brings
this action, maintaining that the policies and goods insured belonged to him and not to the estate of his deceased father
and alleges that he is not bound by the compromise effected by the administrator of his father's estate.

The defendant insurance company sought to show that the plaintiff had agreed to compromise settlement of the policies,
and for that purpose introduced evidence showing that the plaintiff's attorney had surrendered the policies to the
administrator with the understanding that such a compromise was to be effected. The plaintiff was asked, while on the
witness stand, if he had any objection to his attorney's testifying concerning the surrender of the policies, to which he
replied in the negative. The attorney was then called for that purpose. Whereupon, counsel for the plaintiff formally
withdrew the waiver previously given by the plaintiff and objected to the testimony of the attorney on the ground that it
was privileged. Counsel, on this appeal, base their argument of the proposition that a waiver of the client's privilege may
be withdrawn at any time before acted upon, and cite in support thereof Ross vs. Great Northern Ry. Co., (101 Minn., 122;
111 N. W., 951). The case of Natlee Draft Horse Co. vs. Cripe and Co. (142 Ky., 810), also appears to sustain their
contention. But a preliminary question suggest itself, Was the testimony in question privileged?

Our practice Act provides: "A lawyer must strictly maintain inviolate the confidence and preserve the secrets of his client.
He shall not be permitted in any court, without the consent of his client, given in open court, to testify to any facts
imparted to him by his client in professional consultation, or for the purpose of obtaining advice upon legal matters." (Sec.
31, Act No. 190.)

A similar provision is inserted in section 383, No. 4, of the same Act. It will be noted that the evidence in question
concerned the dealings of the plaintiff's attorney with a third person. Of the very essence of the veil of secrecy which
surrounds communications made between attorney and client, is that such communications are not intended for the
information of third persons or to be acted upon by them, put of the purpose of advising the client as to his rights. It is
evident that a communication made by a client to his attorney for the express purpose of its being communicated to a
third person is essentially inconsistent with the confidential relation. When the attorney has faithfully carried out his
instructions be delivering the communication to the third person for whom it was intended and the latter acts upon it, it
cannot, by any reasoning whatever, be classified in a legal sense as a privileged communication between the attorney and
his client. It is plain that such a communication, after reaching the party for whom it was intended at least, is a
communication between the client and a third person, and that the attorney simply occupies the role of intermediary or
agent. We quote from but one case among the many which may be found upon the point:
 The proposition advanced by the respondent and adopted by the trial court, that one, after fully authorizing his
attorney, as his agent, to enter into contract with a third party, and after such authority has been executed and
relied on, may effectively nullify his own and his duly authorized agent's act by closing the attorney's mouth as to
the giving of such authority, is most startling. A perilous facility of fraud and wrong, both upon the attorney and
the third party, would result. The attorney who, on his client's authority, contracts in his behalf, pledges his
reputation and integrity that he binds his client. The third party may well rely on the assurance of a reputable
lawyer that he has authority in fact, though such assurance be given only by implication from the doing of the act
itself. It is with gratification, therefore, that we find overwhelming weight of authority, against the position
assumed by the court below, both in states where the privilege protecting communications with attorneys is still
regulated by the common law and in those where it is controlled by statute, as in Wisconsin. (Koeber vs. Sommers,
108 Wis., 497; 52 L. R. A., 512.)

Other cases wherein the objection to such evidence on the ground of privilege has been overruled are: Henderson vs.
Terry (62 Tex., 281); Shove vs. Martin (85 Minn., 29); In re Elliott (73 Kan., 151); Collins vs. Hoffman (62 Wash., 278);
Gerhardt vs. Tucker (187 Mo., 46). These cases cover a variety of communications made by an authority in behalf of his
client to third persons. And cases wherein evidence of the attorney as to compromises entered into by him on behalf of
his client were allowed to be proved by the attorney's testimony are not wanting. (Williams vs. Blumenthal, 27 Wash., 24;
Koeber vs. Sommers, supra.)

It is manifest that the objection to the testimony of the plaintiff's attorney as to his authority to compromise was properly
overruled. The testimony was to the effect that when the attorney delivered the policies to the administrator, he
understood that there was a compromise to be effected, and that when he informed the plaintiff of the surrender of the
policies for that purpose the plaintiff made no objection whatever. The evidence is sufficient to show that the plaintiff
acquiesced in the compromise settlement of the policies. Having agreed to the compromise, he cannot now disavow it
and maintain an action for the recovery of their face value.

For the foregoing reasons the judgment appealed from is affirmed, with costs. So ordered.

Arellano, C.J., Torres, Carson and Araullo, JJ., concur.

Moreland, J., concurs in the result.
G.R. No. 105938 September 20, 1996

TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V. CRUZ, JOSE C. CONCEPCION, ROGELIO A. VINLUAN,
VICTOR P. LAZATIN and EDUARDO U. ESCUETA, petitioners,
vs.
THE HONORABLE SANDIGANBAYAN, First Division, REPUBLIC OF THE PHILIPPINES, ACTING THROUGH THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, and RAUL S. ROCO, respondents.

G.R. No. 108113 September 20, 1996

PARAJA G. HAYUDINI, petitioner,

vs.
THE SANDIGANBAYAN and THE REPUBLIC OF THE PHILIPPINES, respondents.

KAPUNAN, J.:

These case touch the very cornerstone of every State's judicial system, upon which the workings of the contentious and
adversarial system in the Philippine legal process are based — the sanctity of fiduciary duty in the client-lawyer
relationship. The fiduciary duty of a counsel and advocate is also what makes the law profession a unique position of trust
and confidence, which distinguishes it from any other calling. In this instance, we have no recourse but to uphold and
strengthen the mantle of protection accorded to the confidentiality that proceeds from the performance of the lawyer's
duty to his client.

The facts of the case are undisputed.

The matters raised herein are an offshoot of the institution of the Complaint on July 31, 1987 before the Sandiganbayan
by the Republic of the Philippines, through the Presidential Commission on Good Government against Eduardo M.
Cojuangco, Jr., as one of the principal defendants, for the recovery of alleged ill-gotten wealth, which includes shares of
stocks in the named corporations in PCGG Case No. 33 (Civil Case No. 0033), entitled "Republic of the Philippines versus
Eduardo Cojuangco, et al."1

Among the dependants named in the case are herein petitioners Teodoro Regala, Edgardo J. Angara, Avelino V. Cruz, Jose
C. Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini, and herein private
respondent Raul S. Roco, who all were then partners of the law firm Angara, Abello, Concepcion, Regala and Cruz Law
Offices (hereinafter referred to as the ACCRA Law Firm). ACCRA Law Firm performed legal services for its clients, which
included, among others, the organization and acquisition of business associations and/or organizations, with the
correlative and incidental services where its members acted as incorporators, or simply, as stockholders. More specifically,
in the performance of these services, the members of the law firm delivered to its client documents which substantiate the
client's equity holdings, i.e., stock certificates endorsed in blank representing the shares registered in the client's name,
and a blank deed of trust or assignment covering said shares. In the course of their dealings with their clients, the
members of the law firm acquire information relative to the assets of clients as well as their personal and business
circumstances. As members of the ACCRA Law Firm, petitioners and private respondent Raul Roco admit that they assisted
in the organization and acquisition of the companies included in Civil Case No. 0033, and in keeping with the office
practice, ACCRA lawyers acted as nominees-stockholders of the said corporations involved in sequestration proceedings. 2

On August 20, 1991, respondent Presidential Commission on Good Government (hereinafter referred to as respondent
PCGG) filed a "Motion to Admit Third Amended Complaint" and "Third Amended Complaint" which excluded private
respondent Raul S. Roco from the complaint in PCGG Case No. 33 as party-defendant.3 Respondent PCGG based its
exclusion of private respondent Roco as party-defendant on his undertaking that he will reveal the identity of the
principal/s for whom he acted as nominee/stockholder in the companies involved in PCGG Case No. 33. 4

Petitioners were included in the Third Amended Complaint on the strength of the following allegations:
 14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro Regala, Avelino
V. Cruz, Rogelio A. Vinluan, Eduardo U. Escueta, Paraja G. Hayudini and Raul Roco of the Angara
Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed conspired and
confederated with each other in setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE,
COCOMARK, CIC, and more than twenty other coconut levy funded corporations, including the acquisition
of San Miguel Corporation shares and its institutionalization through presidential directives of the
coconut monopoly. Through insidious means and machinations, ACCRA, being the wholly-owned
investment arm, ACCRA Investments Corporation, became the holder of approximately fifteen million
shares representing roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987. This
ranks ACCRA Investments Corporation number 44 among the top 100 biggest stockholders of UCPB
which has approximately 1,400,000 shareholders. On the other hand, corporate books show the name
Edgardo J. Angara as holding approximately 3,744 shares as of February, 1984.5

In their answer to the Expanded Amended Complaint, petitioners ACCRA lawyers alleged that:

4.4 Defendants-ACCRA lawyers' participation in the acts with which their codefendants are charged, was in
furtherance of legitimate lawyering.

4.4.1 In the course of rendering professional and legal services to clients, defendants-
ACCRA lawyers, Jose C. Concepcion, Teodoro D. Regala, Rogelio A. Vinluan and Eduardo
U. Escueta, became holders of shares of stock in the corporations listed under their
respective names in Annex "A" of the expanded Amended Complaint as incorporating or
acquiring stockholders only and, as such, they do not claim any proprietary interest in the
said shares of stock.

4.5 Defendant ACCRA-lawyer Avelino V. Cruz was one of the incorporators in 1976 of Mermaid Marketing
Corporation, which was organized for legitimate business purposes not related to the allegations of the
expanded Amended Complaint. However, he has long ago transferred any material interest therein and
therefore denies that the "shares" appearing in his name in Annex "A" of the expanded Amended
Complaint are his assets.6

Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a separate answer denying the allegations in the
complaint implicating him in the alleged ill-gotten wealth.7

Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR OPPOSITION" dated October 8, 1991 with
Counter-Motion that respondent PCGG similarly grant the same treatment to them (exclusion as parties-defendants) as
accorded private respondent Roco.8 The Counter-Motion for dropping petitioners from the complaint was duly set for
hearing on October 18, 1991 in accordance with the requirements of Rule 15 of the Rules of Court.

In its "Comment," respondent PCGG set the following conditions precedent for the exclusion of petitioners, namely: (a) the
disclosure of the identity of its clients; (b) submission of documents substantiating the lawyer-client relationship; and (c)
the submission of the deeds of assignments petitioners executed in favor of its client covering their respective
shareholdings.9

Consequently, respondent PCGG presented supposed proof to substantiate compliance by private respondent Roco of the
conditions precedent to warrant the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a) Letter to
respondent PCGG of the counsel of respondent Roco dated May 24, 1989 reiterating a previous request for reinvestigation
by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8, 1989 executed by private respondent Roco as Attachment
to the letter aforestated in (a); and (c) Letter of the Roco, Bunag, and Kapunan Law Offices dated September 21, 1988 to
the respondent PCGG in behalf of private respondent Roco originally requesting the reinvestigation and/or re-examination
of the evidence of the PCGG against Roco in its Complaint in PCGG Case No. 33. 10
It is noteworthy that during said proceedings, private respondent Roco did not refute petitioners' contention that he did
actually not reveal the identity of the client involved in PCGG Case No. 33, nor had he undertaken to reveal the identity of
the client for whom he acted as nominee-stockholder. 11

On March 18, 1992, respondent Sandiganbayan promulgated the Resolution, herein questioned, denying the exclusion of
petitioners in PCGG Case No. 33, for their refusal to comply with the conditions required by respondent PCGG. It held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have
acted, i.e. their principal, and that will be their choice. But until they do identify their clients,
considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to
be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they
have begun to establish the basis for recognizing the privilege; the existence and identity of the client.

This is what appears to be the cause for which they have been impleaded by the PCGG as defendants
herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently
identified his principal, which revelation could show the lack of cause against him. This in turn has allowed
the PCGG to exercise its power both under the rules of Agency and under Section 5 of E.O. No. 14-A in
relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions availed of by Roco; full
disclosure in exchange for exclusion from these proceedings (par. 7, PCGG's COMMENT dated November
4, 1991). The ACCRA lawyers have preferred not to make the disclosures required by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as party defendants. In the
same vein, they cannot compel the PCGG to be accorded the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA lawyers and joined in by
Atty. Paraja G. Hayudini for the same treatment by the PCGG as accorded to Raul S. Roco is DENIED for
lack of merit. 12

ACCRA lawyers moved for a reconsideration of the above resolution but the same was denied by the respondent
Sandiganbayan. Hence, the ACCRA lawyers filed the petition for certiorari, docketed as G.R. No. 105938, invoking the
following grounds:

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners ACCRA lawyers who
undisputably acted as lawyers in serving as nominee-stockholders, to the strict application of the law of
agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not considering petitioners ACCRA
lawyers and Mr. Roco as similarly situated and, therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or had undertaken to
reveal, the identities of the client(s) for whom he acted as nominee-stockholder.
 2. Even assuming that Mr. Roco had revealed, or had undertaken to reveal, the identities
of the client(s), the disclosure does not constitute a substantial distinction as would make
the classification reasonable under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue preference in favor of Mr.

Roco in violation of the equal protection clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding that, under the facts
of this case, the attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity
of their client(s) and the other information requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege includes the identity
of the client(s).

2. The factual disclosures required by the PCGG are not limited to the identity of
petitioners ACCRA lawyers' alleged client(s) but extend to other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring that the dropping of
party-defendants by the PCGG must be based on reasonable and just grounds and with due consideration
to the constitutional right of petitioners ACCRA lawyers to the equal protection of the law.

Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration of the March 18, 1991 resolution which
was denied by respondent Sandiganbayan. Thus, he filed a separate petition for certiorari, docketed as G.R. No. 108113,
assailing respondent Sandiganbayan's resolution on essentially the same grounds averred by petitioners in G.R. No.
105938.

Petitioners contend that the exclusion of respondent Roco as party-defendant in PCGG Case No. 33 grants him a favorable
treatment, on the pretext of his alleged undertaking to divulge the identity of his client, giving him an advantage over
them who are in the same footing as partners in the ACCRA law firm. Petitioners further argue that even granting that
such an undertaking has been assumed by private respondent Roco, they are prohibited from revealing the identity of
their principal under their sworn mandate and fiduciary duty as lawyers to uphold at all times the confidentiality of
information obtained during such lawyer-client relationship.

Respondent PCGG, through its counsel, refutes petitioners' contention, alleging that the revelation of the identity of the
client is not within the ambit of the lawyer-client confidentiality privilege, nor are the documents it required (deeds of
assignment) protected, because they are evidence of nominee status. 13

In his comment, respondent Roco asseverates that respondent PCGG acted correctly in excluding him as party-defendant
because he "(Roco) has not filed an Answer. PCGG had therefore the right to dismiss Civil Case No. 0033 as to Roco 'without
an order of court by filing a notice of dismissal'," 14 and he has undertaken to identify his principal. 15

Petitioners' contentions are impressed with merit.

It is quite apparent that petitioners were impleaded by the PCGG as co-defendants to force them to disclose the identity
of their clients. Clearly, respondent PCGG is not after petitioners but the "bigger fish" as they say in street parlance. This
ploy is quite clear from the PCGG's willingness to cut a deal with petitioners — the names of their clients in exchange for
exclusion from the complaint. The statement of the Sandiganbayan in its questioned resolution dated March 18, 1992 is
explicit:

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have
acted, i.e, their principal, and that will be their choice. But until they do identify their clients,
considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to
be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they
have begun to establish the basis for recognizing the privilege; the existence and identity of the client.

This is what appears to be the cause for which they have been impleaded by the PCGG as defendants herein.
(Emphasis ours)

In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third Division, entitled "Primavera Farms, Inc., et al. vs.
Presidential Commission on Good Government" respondent PCGG, through counsel Mario Ongkiko, manifested at the
hearing on December 5, 1991 that the PCGG wanted to establish through the ACCRA that their "so called client is Mr.
Eduardo Cojuangco;" that "it was Mr. Eduardo Cojuangco who furnished all the monies to those subscription payments in
corporations included in Annex "A" of the Third Amended Complaint; that the ACCRA lawyers executed deeds of trust and
deeds of assignment, some in the name of particular persons; some in blank.

We quote Atty. Ongkiko:

ATTY. ONGKIKO:

With the permission of this Hon. Court. I propose to establish through these ACCRA lawyers that, one,
their so-called client is Mr. Eduardo Cojuangco. Second, it was Mr. Eduardo Cojuangco who furnished all
the monies to these subscription payments of these corporations who are now the petitioners in this case.
Third, that these lawyers executed deeds of trust, some in the name of a particular person, some in blank.
Now, these blank deeds are important to our claim that some of the shares are actually being held by the
nominees for the late President Marcos. Fourth, they also executed deeds of assignment and some of
these assignments have also blank assignees. Again, this is important to our claim that some of the shares
are for Mr. Conjuangco and some are for Mr. Marcos. Fifth, that most of thes e corporations are really just
paper corporations. Why do we say that? One: There are no really fixed sets of officers, no fixed sets of
directors at the time of incorporation and even up to 1986, which is the crucial year. And not only that,
they have no permits from the municipal authorities in Makati. Next, actually all their addresses now are
care of Villareal Law Office. They really have no address on records. These are some of the principal things
that we would ask of these nominees stockholders, as they called themselves. 16

It would seem that petitioners are merely standing in for their clients as defendants in the complaint. Petitioners are being
prosecuted solely on the basis of activities and services performed in the course of their duties as lawyers. Quite obviously,
petitioners' inclusion as co-defendants in the complaint is merely being used as leverage to compel them to name their
clients and consequently to enable the PCGG to nail these clients. Such being the case, respondent PCGG has no valid
cause of action as against petitioners and should exclude them from the Third Amended Complaint.

II

The nature of lawyer-client relationship is premised on the Roman Law concepts of locatio conductio operarum (contract of
lease of services) where one person lets his services and another hires them without reference to the object of which the
services are to be performed, wherein lawyers' services may be compensated by honorarium or for
hire, 17 and mandato (contract of agency) wherein a friend on whom reliance could be placed makes a contract in his
name, but gives up all that he gained by the contract to the person who requested him. 18 But the lawyer-client
relationship is more than that of the principal-agent and lessor-lessee.
In modern day perception of the lawyer-client relationship, an attorney is more than a mere agent or servant, because he
possesses special powers of trust and confidence reposed on him by his client. 19 A lawyer is also as independent as the
judge of the court, thus his powers are entirely different from and superior to those of an ordinary agent. 20 Moreover, an
attorney also occupies what may be considered as a "quasi-judicial office" since he is in fact an officer of the Court 21 and
exercises his judgment in the choice of courses of action to be taken favorable to his client.

Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct and duties that breathe life into it,
among those, the fiduciary duty to his client which is of a very delicate, exacting and confidential character, requiring a
very high degree of fidelity and good faith, 22 that is required by reason of necessity and public interest 23 based on the
hypothesis that abstinence from seeking legal advice in a good cause is an evil which is fatal to the administration of
justice. 24

It is also the strict sense of fidelity of a lawyer to his client that distinguishes him from any other
professional in society. This conception is entrenched and embodies centuries of established and stable
tradition. 25 In Stockton v. Ford,26 the U. S. Supreme Court held:

There are few of the business relations of life involving a higher trust and confidence than that of attorney
and client, or generally speaking, one more honorably and faithfully discharged; few more anxiously
guarded by the law, or governed by the sterner principles of morality and justice; and it is the duty of the
court to administer them in a corresponding spirit, and to be watchful and industrious, to see that
confidence thus reposed shall not be used to the detriment or prejudice of the rights of the party
bestowing it. 27

In our jurisdiction, this privilege takes off from the old Code of Civil Procedure enacted by the Philippine Commission on
August 7, 1901. Section 383 of the Code specifically "forbids counsel, without authority of his client to reveal any
communication made by the client to him or his advice given thereon in the course of professional
employment." 28 Passed on into various provisions of the Rules of Court, the attorney-client privilege, as currently worded
provides:

Sec. 24. Disqualification by reason of privileged communication. — The following persons cannot testify as
to matters learned in confidence in the following cases:

xxx xxx xxx

An attorney cannot, without the consent of his client, be examined as to any communication made by the
client to him, or his advice given thereon in the course of, or with a view to, professional employment, can
an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such capacity. 29

Further, Rule 138 of the Rules of Court states:

Sec. 20. It is the duty of an attorney: (e) to maintain inviolate the confidence, and at every peril to himself,
to preserve the secrets of his client, and to accept no compensation in connection with his client's
business except from him or with his knowledge and approval.

This duty is explicitly mandated in Canon 17 of the Code of Professional Responsibility which provides that:

Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and
confidence reposed in him.

Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to client:
 The lawyers owes "entire devotion to the interest of the client, warm zeal in the maintenance and defense
of his rights and the exertion of his utmost learning and ability," to the end that nothing be taken or be
withheld from him, save by the rules of law, legally applied. No fear of judicial disfavor or public popularity
should restrain him from the full discharge of his duty. In the judicial forum the client is entitled to the
benefit of any and every remedy and defense that is authorized by the law of the land, and he may expect
his lawyer to assert every such remedy or defense. But it is steadfastly to be borne in mind that the great
trust of the lawyer is to be performed within and not without the bounds of the law. The office of attorney
does not permit, much less does it demand of him for any client, violation of law or any manner of fraud
or chicanery. He must obey his own conscience and not that of his client.

Considerations favoring confidentially in lawyer-client relationships are many and serve several constitutional and policy
concerns. In the constitutional sphere, the privilege gives flesh to one of the most sacrosanct rights available to the
accused, the right to counsel. If a client were made to choose between legal representation without effective
communication and disclosure and legal representation with all his secrets revealed then he might be compelled, in some
instances, to either opt to stay away from the judicial system or to lose the right to counsel. If the price of disclosure is too
high, or if it amounts to self incrimination, then the flow of information would be curtailed thereby rendering the right
practically nugatory. The threat this represents against another sacrosanct individual right, the right to be presumed
innocent is at once self-evident.

Encouraging full disclosure to a lawyer by one seeking legal services opens the door to a whole spectrum of legal options
which would otherwise be circumscribed by limited information engendered by a fear of disclosure. An effective lawyer-
client relationship is largely dependent upon the degree of confidence which exists between lawyer and client which in
turn requires a situation which encourages a dynamic and fruitful exchange and flow of information. It necessarily follows
that in order to attain effective representation, the lawyer must invoke the privilege not as a matter of option but as a
matter of duty and professional responsibility.

The question now arises whether or not this duty may be asserted in refusing to disclose the name of petitioners' client(s)
in the case at bar. Under the facts and circumstances obtaining in the instant case, the answer must be in the affirmative.

As a matter of public policy, a client's identity should not be shrouded in mystery 30 Under this premise, the general rule in
our jurisdiction as well as in the United States is that a lawyer may not invoke the privilege and refuse to divulge the name
or identity of this client. 31

The reasons advanced for the general rule are well established.

First, the court has a right to know that the client whose privileged information is sought to be protected is flesh and
blood.

Second, the privilege begins to exist only after the attorney-client relationship has been established. The attorney-client
privilege does not attach until there is a client.

Third, the privilege generally pertains to the subject matter of the relationship.

Finally, due process considerations require that the opposing party should, as a general rule, know his adversary. "A party
suing or sued is entitled to know who his opponent is." 32 He cannot be obliged to grope in the dark against unknown
forces. 33

Notwithstanding these considerations, the general rule is however qualified by some important exceptions.

1) Client identity is privileged where a strong probability exists that revealing the client's name would implicate that client
in the very activity for which he sought the lawyer's advice.
In Ex-Parte Enzor, 34 a state supreme court reversed a lower court order requiring a lawyer to divulge the name of her
client on the ground that the subject matter of the relationship was so closely related to the issue of the client's identity
that the privilege actually attached to both. In Enzor, the unidentified client, an election official, informed his attorney in
confidence that he had been offered a bribe to violate election laws or that he had accepted a bribe to that end. In her
testimony, the attorney revealed that she had advised her client to count the votes correctly, but averred that she could
not remember whether her client had been, in fact, bribed. The lawyer was cited for contempt for her refusal to reveal his
client's identity before a grand jury. Reversing the lower court's contempt orders, the state supreme court held that under
the circumstances of the case, and under the exceptions described above, even the name of the client was privileged.

U .S. v. Hodge and Zweig,35 involved the same exception, i.e. that client identity is privileged in those instances where a
strong probability exists that the disclosure of the client's identity would implicate the client in the very criminal activity for
which the lawyer's legal advice was obtained.

The Hodge case involved federal grand jury proceedings inquiring into the activities of the "Sandino Gang," a gang
involved in the illegal importation of drugs in the United States. The respondents, law partners, represented key witnesses
and suspects including the leader of the gang, Joe Sandino.

In connection with a tax investigation in November of 1973, the IRS issued summons to Hodge and Zweig, requiring them
to produce documents and information regarding payment received by Sandino on behalf of any other person, and vice
versa. The lawyers refused to divulge the names. The Ninth Circuit of the United States Court of Appeals, upholding non-
disclosure under the facts and circumstances of the case, held:

A client's identity and the nature of that client's fee arrangements may be privileged where the person
invoking the privilege can show that a strong probability exists that disclosure of such information would
implicate that client in the very criminal activity for which legal advice was sought Baird v. Koerner, 279 F.
2d at 680. While in Baird Owe enunciated this rule as a matter of California law, the rule also reflects
federal law. Appellants contend that the Baird exception applies to this case.

The Baird exception is entirely consonant with the principal policy behind the attorney-client privilege. "In
order to promote freedom of consultation of legal advisors by clients, the apprehension of compelled
disclosure from the legal advisors must be removed; hence, the law must prohibit such disclosure except
on the client's consent." 8 J. Wigmore, supra sec. 2291, at 545. In furtherance of this policy, the client's
identity and the nature of his fee arrangements are, in exceptional cases, protected as confidential
communications. 36

2) Where disclosure would open the client to civil liability; his identity is privileged. For instance, the peculiar facts and
circumstances of Neugass v. Terminal Cab Corporation,37 prompted the New York Supreme Court to allow a lawyer's claim
to the effect that he could not reveal the name of his client because this would expose the latter to civil litigation.

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was riding, owned by respondent corporation,
collided with a second taxicab, whose owner was unknown. Plaintiff brought action both against defendant corporation
and the owner of the second cab, identified in the information only as John Doe. It turned out that when the attorney of
defendant corporation appeared on preliminary examination, the fact was somehow revealed that the lawyer came to
know the name of the owner of the second cab when a man, a client of the insurance company, prior to the institution of
legal action, came to him and reported that he was involved in a car accident. It was apparent under the circumstances
that the man was the owner of the second cab. The state supreme court held that the reports were clearly made to the
lawyer in his professional capacity. The court said:

That his employment came about through the fact that the insurance company had hired him to defend
its policyholders seems immaterial. The attorney is such cases is clearly the attorney for the policyholder
when the policyholder goes to him to report an occurrence contemplating that it would be used in an
action or claim against him. 38
 xxx xxx xxx

All communications made by a client to his counsel, for the purpose of professional advice or assistance,
are privileged, whether they relate to a suit pending or contemplated, or to any other matter proper for
such advice or aid; . . . And whenever the communication made, relates to a matter so connected with the
employment as attorney or counsel as to afford presumption that it was the ground of the address by the
client, then it is privileged from disclosure. . .

It appears . . . that the name and address of the owner of the second cab came to the attorney in this case
as a confidential communication. His client is not seeking to use the courts, and his address cannot be
disclosed on that theory, nor is the present action pending against him as service of the summons on him
has not been effected. The objections on which the court reserved decision are sustained. 39

In the case of Matter of Shawmut Mining Company,40 the lawyer involved was required by a lower court to disclose
whether he represented certain clients in a certain transaction. The purpose of the court's request was to determine
whether the unnamed persons as interested parties were connected with the purchase of properties involved in the action.
The lawyer refused and brought the question to the State Supreme Court. Upholding the lawyer's refusal to divulge the
names of his clients the court held:

If it can compel the witness to state, as directed by the order appealed from, that he represented certain
persons in the purchase or sale of these mines, it has made progress in establishing by such evidence
their version of the litigation. As already suggested, such testimony by the witness would compel him to
disclose not only that he was attorney for certain people, but that, as the result of communications made
to him in the course of such employment as such attorney, he knew that they were interested in certain
transactions. We feel sure that under such conditions no case has ever gone to the length of compelling
an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the nature of the
transactions to which it related, when such information could be made the basis of a suit against his
client. 41

3) Where the government's lawyers have no case against an attorney's client unless, by revealing the client's name, the
said name would furnish the only link that would form the chain of testimony necessary to convict an individual of a crime,
the client's name is privileged.

In Baird vs. Korner,42 a lawyer was consulted by the accountants and the lawyer of certain undisclosed taxpayers regarding
steps to be taken to place the undisclosed taxpayers in a favorable position in case criminal charges were brought against
them by the U.S. Internal Revenue Service (IRS).

It appeared that the taxpayers' returns of previous years were probably incorrect and the taxes understated. The clients
themselves were unsure about whether or not they violated tax laws and sought advice from Baird on the hypothetical
possibility that they had. No investigation was then being undertaken by the IRS of the taxpayers. Subsequently, the
attorney of the taxpayers delivered to Baird the sum of $12, 706.85, which had been previously assessed as the tax due,
and another amount of money representing his fee for the advice given. Baird then sent a check for $12,706.85 to the IRS
in Baltimore, Maryland, with a note explaining the payment, but without naming his clients. The IRS demanded that Baird
identify the lawyers, accountants, and other clients involved. Baird refused on the ground that he did not know their
names, and declined to name the attorney and accountants because this constituted privileged communication. A petition
was filed for the enforcement of the IRS summons. For Baird's repeated refusal to name his clients he was found guilty of
civil contempt. The Ninth Circuit Court of Appeals held that, a lawyer could not be forced to reveal the names of clients
who employed him to pay sums of money to the government voluntarily in settlement of undetermined income taxes,
unsued on, and with no government audit or investigation into that client's income tax liability pending. The court
emphasized the exception that a client's name is privileged when so much has been revealed concerning the legal services
rendered that the disclosure of the client's identity exposes him to possible investigation and sanction by government
agencies. The Court held:
 The facts of the instant case bring it squarely within that exception to the general rule. Here money was
received by the government, paid by persons who thereby admitted they had not paid a sufficient amount
in income taxes some one or more years in the past. The names of the clients are useful to the
government for but one purpose — to ascertain which taxpayers think they were delinquent, so that it
may check the records for that one year or several years. The voluntary nature of the payment indicates a
belief by the taxpayers that more taxes or interest or penalties are due than the sum previously paid, if
any. It indicates a feeling of guilt for nonpayment of taxes, though whether it is criminal guilt is
undisclosed. But it may well be the link that could form the chain of testimony necessary to convict an
individual of a federal crime. Certainly the payment and the feeling of guilt are the reasons the attorney
here involved was employed — to advise his clients what, under the circumstances, should be done. 43

Apart from these principal exceptions, there exist other situations which could qualify as exceptions to the general rule.

For example, the content of any client communication to a lawyer lies within the privilege if it is relevant to the subject
matter of the legal problem on which the client seeks legal assistance. 44 Moreover, where the nature of the attorney-client
relationship has been previously disclosed and it is the identity which is intended to be confidential, the identity of the client
has been held to be privileged, since such revelation would otherwise result in disclosure of the entire transaction. 45

Summarizing these exceptions, information relating to the identity of a client may fall within the ambit of the privilege
when the client's name itself has an independent significance, such that disclosure would then reveal client confidences. 46

The circumstances involving the engagement of lawyers in the case at bench, therefore, clearly reveal that the instant case
falls under at least two exceptions to the general rule. First, disclosure of the alleged client's name would lead to establish
said client's connection with the very fact in issue of the case, which is privileged information, because the privilege, as
stated earlier, protects the subject matter or the substance (without which there would be not attorney-client relationship).

The link between the alleged criminal offense and the legal advice or legal service sought was duly establishes in the case
at bar, by no less than the PCGG itself. The key lies in the three specific conditions laid down by the PCGG which
constitutes petitioners' ticket to non-prosecution should they accede thereto:

(a) the disclosure of the identity of its clients;

(b) submission of documents substantiating the lawyer-client relationship; and

(c) the submission of the deeds of assignment petitioners executed in favor of their clients covering their
respective shareholdings.

From these conditions, particularly the third, we can readily deduce that the clients indeed consulted the petitioners, in
their capacity as lawyers, regarding the financial and corporate structure, framework and set-up of the corporations in
question. In turn, petitioners gave their professional advice in the form of, among others, the aforementioned deeds of
assignment covering their client's shareholdings.

There is no question that the preparation of the aforestated documents was part and parcel of petitioners' legal service to
their clients. More important, it constituted an integral part of their duties as lawyers. Petitioners, therefore, have a
legitimate fear that identifying their clients would implicate them in the very activity for which legal advice had been
sought, i.e., the alleged accumulation of ill-gotten wealth in the aforementioned corporations.

Furthermore, under the third main exception, revelation of the client's name would obviously provide the necessary link
for the prosecution to build its case, where none otherwise exists. It is the link, in the words of Baird, "that would inevitably
form the chain of testimony necessary to convict the (client) of a . . . crime." 47

An important distinction must be made between a case where a client takes on the services of an attorney for illicit
purposes, seeking advice about how to go around the law for the purpose of committing illegal activities and a case where
a client thinks he might have previously committed something illegal and consults his attorney about it. The first case
clearly does not fall within the privilege because the same cannot be invoked for purposes illegal. The second case falls
within the exception because whether or not the act for which the client sought advice turns out to be illegal, his name
cannot be used or disclosed if the disclosure leads to evidence, not yet in the hands of the prosecution, which might lead
to possible action against him.

These cases may be readily distinguished, because the privilege cannot be invoked or used as a shield for an illegal act, as
in the first example; while the prosecution may not have a case against the client in the second example and cannot use
the attorney client relationship to build up a case against the latter. The reason for the first rule is that it is not within the
professional character of a lawyer to give advice on the commission of a crime. 48 The reason for the second has been
stated in the cases above discussed and are founded on the same policy grounds for which the attorney-client privilege, in
general, exists.

In Matter of Shawmut Mining Co., supra, the appellate court therein stated that "under such conditions no case has ever
yet gone to the length of compelling an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but
the nature of the transactions to which it related, when such information could be made the basis of a suit against his
client." 49 "Communications made to an attorney in the course of any personal employment, relating to the subject
thereof, and which may be supposed to be drawn out in consequence of the relation in which the parties stand to each
other, are under the seal of confidence and entitled to protection as privileged communications." 50 Where the
communicated information, which clearly falls within the privilege, would suggest possible criminal activity but there
would be not much in the information known to the prosecution which would sustain a charge except that revealing the
name of the client would open up other privileged information which would substantiate the prosecution's suspicions,
then the client's identity is so inextricably linked to the subject matter itself that it falls within the protection. The Baird
exception, applicable to the instant case, is consonant with the principal policy behind the privilege, i.e., that for the
purpose of promoting freedom of consultation of legal advisors by clients, apprehension of compelled disclosure from
attorneys must be eliminated. This exception has likewise been sustained in In re Grand Jury Proceedings51 and Tillotson
v. Boughner.52 What these cases unanimously seek to avoid is the exploitation of the general rule in what may amount to a
fishing expedition by the prosecution.

There are, after all, alternative source of information available to the prosecutor which do not depend on utilizing a
defendant's counsel as a convenient and readily available source of information in the building of a case against the latter.
Compelling disclosure of the client's name in circumstances such as the one which exists in the case at bench amounts to
sanctioning fishing expeditions by lazy prosecutors and litigants which we cannot and will not countenance. When the
nature of the transaction would be revealed by disclosure of an attorney's retainer, such retainer is obviously protected by
the privilege. 53 It follows that petitioner attorneys in the instant case owe their client(s) a duty and an obligation not to
disclose the latter's identity which in turn requires them to invoke the privilege.

In fine, the crux of petitioners' objections ultimately hinges on their expectation that if the prosecution has a case against
their clients, the latter's case should be built upon evidence painstakingly gathered by them from their own sources and
not from compelled testimony requiring them to reveal the name of their clients, information which unavoidably reveals
much about the nature of the transaction which may or may not be illegal. The logical nexus between name and nature of
transaction is so intimate in this case the it would be difficult to simply dissociate one from the other. In this sense, the
name is as much "communication" as information revealed directly about the transaction in question itself, a
communication which is clearly and distinctly privileged. A lawyer cannot reveal such communication without exposing
himself to charges of violating a principle which forms the bulwark of the entire attorney-client relationship.

The uberrimei fidei relationship between a lawyer and his client therefore imposes a strict liability for negligence on the
former. The ethical duties owing to the client, including confidentiality, loyalty, competence, diligence as well as the
responsibility to keep clients informed and protect their rights to make decisions have been zealously sustained.
In Milbank, Tweed, Hadley and McCloy v. Boon,54 the US Second District Court rejected the plea of the petitioner law firm
that it breached its fiduciary duty to its client by helping the latter's former agent in closing a deal for the agent's benefit
only after its client hesitated in proceeding with the transaction, thus causing no harm to its client. The Court instead ruled
that breaches of a fiduciary relationship in any context comprise a special breed of cases that often loosen normally
stringent requirements of causation and damages, and found in favor of the client.

To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and Shipley P.A. v. Scheller55 requiring strict obligation
of lawyers vis-a-vis clients. In this case, a contingent fee lawyer was fired shortly before the end of completion of his work,
and sought payment quantum meruit of work done. The court, however, found that the lawyer was fired for cause after he
sought to pressure his client into signing a new fee agreement while settlement negotiations were at a critical stage. While
the client found a new lawyer during the interregnum, events forced the client to settle for less than what was originally
offered. Reiterating the principle of fiduciary duty of lawyers to clients in Meinhard v. Salmon56 famously attributed to
Justice Benjamin Cardozo that "Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of
behavior," the US Court found that the lawyer involved was fired for cause, thus deserved no attorney's fees at all.

The utmost zeal given by Courts to the protection of the lawyer-client confidentiality privilege and lawyer's loyalty to his
client is evident in the duration of the protection, which exists not only during the relationship, but extends even after the
termination of the relationship. 57

Such are the unrelenting duties required by lawyers vis-a-vis their clients because the law, which the lawyers are sworn to
uphold, in the words of Oliver Wendell Holmes, 58 ". . . is an exacting goddess, demanding of her votaries in intellectual
and moral discipline." The Court, no less, is not prepared to accept respondents' position without denigrating the noble
profession that is lawyering, so extolled by Justice Holmes in this wise:

Every calling is great when greatly pursued. But what other gives such scope to realize the spontaneous
energy of one's soul? In what other does one plunge so deep in the stream of life — so share its passions
its battles, its despair, its triumphs, both as witness and actor? . . . But that is not all. What a subject is this
in which we are united — this abstraction called the Law, wherein as in a magic mirror, we see reflected,
not only in our lives, but the lives of all men that have been. When I think on this majestic theme my eyes
dazzle. If we are to speak of the law as our mistress, we who are here know that she is a mistress only to
be won with sustained and lonely passion — only to be won by straining all the faculties by which man is
likened to God.

We have no choice but to uphold petitioners' right not to reveal the identity of their clients under pain of the breach of
fiduciary duty owing to their clients, because the facts of the instant case clearly fall within recognized exceptions to the
rule that the client's name is not privileged information.

If we were to sustain respondent PCGG that the lawyer-client confidential privilege under the circumstances obtaining
here does not cover the identity of the client, then it would expose the lawyers themselves to possible litigation by their
clients in view of the strict fiduciary responsibility imposed on them in the exercise of their duties.

The complaint in Civil Case No. 0033 alleged that the defendants therein, including herein petitioners and Eduardo
Cojuangco, Jr. conspired with each other in setting up through the use of coconut levy funds the financial and
corporate framework and structures that led to the establishment of UCPB, UNICOM and others and that through
insidious means and machinations, ACCRA, using its wholly-owned investment arm, ACCRA Investment
Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total
capital stock of UCPB as of 31 March 1987. The PCGG wanted to establish through the ACCRA lawyers that Mr.
Cojuangco is their client and it was Cojuangco who furnished all the monies to the subscription payment; hence,
petitioners acted as dummies, nominees and/or agents by allowing themselves, among others, to be used as
instrument in accumulating ill-gotten wealth through government concessions, etc., which acts constitute gross
abuse of official position and authority, flagrant breach of public trust, unjust enrichment, violation of the
Constitution and laws of the Republic of the Philippines.

By compelling petitioners, not only to reveal the identity of their clients, but worse, to submit to the PCGG
documents substantiating the client-lawyer relationship, as well as deeds of assignment petitioners executed in
favor of its clients covering their respective shareholdings, the PCGG would exact from petitioners a link "that
would inevitably form the chain of testimony necessary to convict the (client) of a crime."

III

In response to petitioners' last assignment of error, respondents alleged that the private respondent was dropped
as party defendant not only because of his admission that he acted merely as a nominee but also because of his
undertaking to testify to such facts and circumstances "as the interest of truth may require, which includes . . . the
identity of the principal."59

First, as to the bare statement that private respondent merely acted as a lawyer and nominee, a statement made
in his out-of-court settlement with the PCGG, it is sufficient to state that petitioners have likewise made the same
claim not merely out-of-court but also in the Answer to plaintiff's Expanded Amended Complaint, signed by
counsel, claiming that their acts were made in furtherance of "legitimate lawyering."60 Being "similarly situated" in
this regard, public respondents must show that there exist other conditions and circumstances which would
warrant their treating the private respondent differently from petitioners in the case at bench in order to evade a
violation of the equal protection clause of the Constitution.

To this end, public respondents contend that the primary consideration behind their decision to sustain the
PCGG's dropping of private respondent as a defendant was his promise to disclose the identities of the clients in
question. However, respondents failed to show — and absolute nothing exists in the records of the case at bar —
that private respondent actually revealed the identity of his client(s) to the PCGG. Since the undertaking happens
to be the leitmotif of the entire arrangement between Mr. Roco and the PCGG, an undertaking which is so
material as to have justified PCGG's special treatment exempting the private respondent from prosecution,
respondent Sandiganbayan should have required proof of the undertaking more substantial than a "bare
assertion" that private respondent did indeed comply with the undertaking. Instead, as manifested by the PCGG,
only three documents were submitted for the purpose, two of which were mere requests for re-investigation and
one simply disclosed certain clients which petitioners (ACCRA lawyers) were themselves willing to reveal. These
were clients to whom both petitioners and private respondent rendered legal services while all of them were
partners at ACCRA, and were not the clients which the PCGG wanted disclosed for the alleged questioned
transactions.61

To justify the dropping of the private respondent from the case or the filing of the suit in the respondent court
without him, therefore, the PCGG should conclusively show that Mr. Roco was treated as species apart from the
rest of the ACCRA lawyers on the basis of a classification which made substantial distinctions based on real
differences. No such substantial distinctions exist from the records of the case at bench, in violation of the equal
protection clause.

The equal protection clause is a guarantee which provides a wall of protection against uneven application of
status and regulations. In the broader sense, the guarantee operates against uneven application of legal norms so
that all persons under similar circumstances would be accorded the same treatment. 62 Those who fall within a
particular class ought to be treated alike not only as to privileges granted but also as to the liabilities imposed.

. . . What is required under this constitutional guarantee is the uniform operation of legal norms so that all
persons under similar circumstances would be accorded the same treatment both in the privileges
conferred and the liabilities imposed. As was noted in a recent decision: "Favoritism and undue preference
cannot be allowed. For the principle is that equal protection and security shall be given to every person
under circumstances, which if not identical are analogous. If law be looked upon in terms of burden or
charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on
some in the group equally binding the rest.63

We find that the condition precedent required by the respondent PCGG of the petitioners for their exclusion as
parties-defendants in PCGG Case No. 33 violates the lawyer-client confidentiality privilege. The condition also
 constitutes a transgression by respondents Sandiganbayan and PCGG of the equal protection clause of the
Constitution.64 It is grossly unfair to exempt one similarly situated litigant from prosecution without allowing the
same exemption to the others. Moreover, the PCGG's demand not only touches upon the question of the identity
of their clients but also on documents related to the suspected transactions, not only in violation of the attorney-
client privilege but also of the constitutional right against self-incrimination. Whichever way one looks at it, this is
a fishing expedition, a free ride at the expense of such rights.

An argument is advanced that the invocation by petitioners of the privilege of attorney-client confidentiality at
this stage of the proceedings is premature and that they should wait until they are called to testify and examine as
witnesses as to matters learned in confidence before they can raise their objections. But petitioners are not mere
witnesses. They are co-principals in the case for recovery of alleged ill-gotten wealth. They have made their
position clear from the very beginning that they are not willing to testify and they cannot be compelled to testify
in view of their constitutional right against self-incrimination and of their fundamental legal right to maintain
inviolate the privilege of attorney-client confidentiality.

It is clear then that the case against petitioners should never be allowed to take its full course in the
Sandiganbayan. Petitioners should not be made to suffer the effects of further litigation when it is obvious that
their inclusion in the complaint arose from a privileged attorney-client relationship and as a means of coercing
them to disclose the identities of their clients. To allow the case to continue with respect to them when this Court
could nip the problem in the bud at this early opportunity would be to sanction an unjust situation which we
should not here countenance. The case hangs as a real and palpable threat, a proverbial Sword of Damocles over
petitioners' heads. It should not be allowed to continue a day longer.

While we are aware of respondent PCGG's legal mandate to recover ill-gotten wealth, we will not sanction acts
which violate the equal protection guarantee and the right against self-incrimination and subvert the lawyer-client
confidentiality privilege.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent Sandiganbayan (First Division)
promulgated on March 18, 1992 and May 21, 1992 are hereby ANNULLED and SET ASIDE. Respondent
Sandiganbayan is further ordered to exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V. Cruz,
Jose C. Concepcion, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayuduni as parties-defendants in SB Civil
Case No. 0033 entitled "Republic of the Philippines v. Eduardo Cojuangco, Jr., et al."

SO ORDERED.

Bellosillo, Melo and Francisco, JJ., concur.

Padilla, Panganiban and Torres, Jr., JJ., concur in the result.

Romero and Hermosisima, Jr., JJ., took no part.

Mendoza, J., is on leave.

Separate Opinions

VITUG, J., concurring:

The legal profession, despite all the unrestrained calumny hurled against it, is still the noblest of professions. It
exists upon the thesis that, in an orderly society that is opposed to all forms of anarchy, it so occupies, as it should,
an exalted position in the proper dispensation of justice. In time, principles have evolved that would help ensure
its effective ministration. The protection of confidentiality of the lawyer-client relationship is one, and it has since
been an accepted firmament in the profession. It allows the lawyer and the client to institutionalize a unique
relationship based on full trust and confidence essential in a justice system that works on the basis of substantive
 and procedural due process. To be sure, the rule is not without its pitfalls, and demands against it may be strong,
but these problems are, in the ultimate analysis, no more than mere tests of vigor that have made and will make
that rule endure.

I see in the case before us, given the attendant circumstances already detailed in the ponencia, a situation of the
Republic attempting to establish a case not on what it perceives to be the strength of its own evidence but on
what it could elicit from a counsel against his client. I find it unreasonable for the Sandiganbayan to compel
petitioners to breach the trust reposed on them and succumb to a thinly disguised threat of incrimination.

Accordingly, I join my other colleague who vote for the GRANT of the petition.

DAVIDE, JR., J.: dissenting

The impressive presentation of the case in the ponencia of Mr. Justice Kapunan makes difficult the espousal of a
dissenting view. Nevertheless, I do not hesitate to express that view because I strongly feel that this Court must
confine itself to the key issue in this special civil action for certiorari, viz., whether or not the Sandiganbayan acted
with grave abuse of discretion in not excluding the defendants, the petitioners herein, from the Third Amended
Complaint in Civil Case No. 0033. That issue, unfortunately, has been simply buried under the avalanche of
authorities upholding the sanctity of lawyer-client relationship which appears to me to be prematurely invoked.

From the undisputed facts disclosed by the pleadings and summarized in the ponencia, I cannot find my way clear
to a conclusion that the Sandiganbayan committed grave abuse of discretion in not acting favorably on the
petitioners' prayer in their Comment to the PCGG's Motion to Admit Third Amended Complaint.

The prerogative to determine who shall be made defendants in a civil case is initially vested in the plaintiff, or the
PCGG in this case. The control of the Court comes in only when the issue of "interest" (§ 2, Rule 3, Rules of Court)
as, e.g., whether an indispensable party has not been joined, or whether there is a misjoinder of parties (§ 7, 8, and
9, Id.), is raised.

In the case below, the PCGG decided to drop or exclude from the complaint original co-defendant Raul Roco
because he had allegedly complied with the condition prescribed by the PCGG, viz., undertake that he will reveal
the identity of the principals for whom he acted as nominee/stockholder in the companies involved in PCGG Case
No. 0033. In short, there was an agreement or compromise settlement between the PCGG and Roco. Accordingly,
the PCGG submitted a Third Amended Complaint without Roco as a defendant. No obstacle to such an agreement
has been insinuated. If Roco's revelation violated the confidentiality of a lawyer-client relationship, he would be
solely answerable therefor to his principals/clients and, probably, to this Court in an appropriate disciplinary action
if warranted. There is at all no showing that Civil Case No. 0033 cannot further be proceeded upon or that any
judgment therein cannot be binding without Roco remaining as a defendant. Accordingly, the admission of the
Third Amended Complaint cannot be validly withheld by the Sandiganbayan.

Are the petitioners, who did not file a formal motion to be excluded but only made the request to that effect as a
rider to their Comment to the Motion to Admit Third Amended Complaint, entitled to be excluded from the Third
Amended Complaint such that denial thereof would constitute grave abuse of discretion on the Sandiganbayan's
part? To me, the answer is clearly in the negative.

The petitioners seek to be accorded the same benefit granted to or to be similarly treated as Roco. Reason and
logic dictate that they cannot, unless they too would make themselves like Roco. Otherwise stated, they must first
voluntarily adopt for themselves the factual milieu created by Roco and must bind themselves to perform certain
obligations as Roco. It is precisely for this that in response to the petitioners' comment on the aforementioned
Motion to Admit Third Amended Complaint the PCGG manifested that it is willing to accord the petitioners the
treatment it gave Roco provided they would do what Roco had done, that is, disclose the identity of their
principals/clients and submit documents substantiating their claimed lawyer-client relationship with the said
principals/clients, as well as copies of deeds of assignments the petitioners executed in favor of their
principals/clients. The petitioners did not do so because they believed that compliance thereof would breach the
sanctity of their fiduciary duty in a lawyer-client relationship.

It, indeed, appears that Roco has complied with his obligation as a consideration for his exclusion from the Third
Amended Complaint. The Sandiganbayan found that

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently
identified his principal, which revelation could show the lack of action against him. This in turn has
allowed the PCGG to exercise its power both under the rules of agency and under Section 5 of E.O. No.
14-1 in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

As a matter of fact, the PCGG presented evidence to substantiate Roco's compliance. The ponencia itself so stated,
thus:

. . . respondent PCGG presented evidence to substantiate compliance by private respondent Roco of the
conditions precedent to warrant the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a)
Letter to respondent PCGG of the counsel of respondent Roco dated May 24, 1989 reiterating a previous
request for reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8, 1989 executed
by private respondent Roco as Attachment to the letter aforestated in (a); and (c) Letter of Roco, Bunag,
and Kapunan Law Offices dated September 21, 1988 to the respondent in behalf of private respondent
Roco originally requesting the reinvestigation and/or re-examination of evidence by the PCGG it
Complaint in PCGG Case No. 33. (Id., 5-6).

These are the pieces of evidence upon which the Sandiganbayan founded its conclusion that the PCGG was
satisfied with Roco's compliance. The petitioners have not assailed such finding as arbitrary.

The ponencia's observation then that Roco did not refute the petitioners' contention that he did not comply with
his obligation to disclose the identity of his principals is entirely irrelevant.

In view of their adamantine position, the petitioners did not, therefore, allow themselves to be like Roco. They
cannot claim the same treatment, much less compel the PCGG to drop them as defendants, for nothing
whatsoever. They have no right to make such a demand for until they shall have complied with the conditions
imposed for their exclusion, they cannot be excluded except by way of a motion to dismiss based on the grounds
allowed by law (e.g., those enumerated in § 1, Rule 16, Rules of Court). The rule of confidentiality under the lawyer-
client relationship is not a cause to exclude a party. It is merely aground for disqualification of a witness (§ 24, Rule
130, Rules of Court) and may only be invoked at the appropriate time, i.e., when a lawyer is under compulsion to
answer as witness, as when, having taken the witness stand, he is questioned as to such confidential
communicator or advice, or is being otherwise judicially coerced to produce, through subpoena duces tecum or
otherwise, letters or other documents containing the same privileged matter. But none of the lawyers in this case
is being required to testify about or otherwise reveal "any [confidential] communication made by the client to him,
or his advice given thereon in the course of, or with a view to, professional employment." What they are being
asked to do, in line with their claim that they had done the acts ascribed to them in pursuance of their
professional relation to their clients, is to identify the latter to the PCGG and the Court; but this, only if they so
choose in order to be dropped from the complaint, such identification being the condition under which the PCGG
has expressed willingness to exclude them from the action. The revelation is entirely optional, discretionary, on
their part. The attorney-client privilege is not therefor applicable.

Thus, the Sandiganbayan did not commit any abuse of discretion when it denied the petitioners' prayer for their
exclusion as party-defendants because they did not want to abide with any of the conditions set by the PCGG.
There would have been abuse if the Sandiganbayan granted the prayer because then it would have capriciously,
whimsically, arbitrarily, and oppressively imposed its will on the PCGG.
Again, what the petitioners want is their exclusion from the Third Amended Complaint or the dismissal of the case
insofar as they are concerned because either they are invested with immunity under the principle of confidentiality
in a lawyer-client relationship, or the claims against them in Civil Case No. 0033 are barred by such principle.

Even if we have to accommodate this issue, I still submit that the lawyer-client privilege provides the petitioners
no refuge. They are sued as principal defendants in Civil Case No. 0033, a case of the recovery of alleged ill-gotten
wealth. Conspiracy is imputed to the petitioners therein. In short, they are, allegedly, conspirators in the
commission of the acts complained of for being nominees of certain parties.

Their inclusion as defendants in justified under § 15, Article XI of the Constitution — which provides that the right
of the State to recover properties unlawfully acquired by public officials or employees, from them or from their
nominees or transferees, shall not be barred by prescription, laches or estoppel — and E.O. No. 1 of 28 February
1986, E.O. No. 2 of 12 March 1986, E.O. No. 14 of 7 May 1986, and the Rules and Regulations of the PCGG.
Furthermore, § 2, Rule 110 of the Rules of Court requires that the complaint or information should be "against all
persons who appear to be responsible for the offense involved."

Hypothetically admitting the allegations in the complaint in Civil Case No. 0033, I find myself unable to agree with
the majority opinion that the petitioners are immune from suit or that they have to be excluded as defendants, or
that they cannot be compelled to reveal or disclose the identity of their principals, all because of the sacred
lawyer-client privilege.

This privilege is well put in Rule 130 of the Rules of Court, to wit:

§ 24. Disqualification by reason of privileged communication. — The following persons cannot testify as to
matters learned in confidence in the following cases:

xxx xxx xxx

(b) An attorney cannot, without the consent of his client, be examined as to any communication made by
the client to him, or his advice given thereon in the course of, or with a view to, professional employment,
nor can an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and
his employer, concerning any fact the knowledge of which has been acquired in such capacity.

The majority seeks to expand the scope of the Philippine rule on the lawyer-client privilege by copious citations of
American jurisprudence which includes in the privilege the identity of the client under the exceptional situations
narrated therein. From the plethora of cases cited, two facts stand out in bold relief. Firstly, the issue of privilege
contested therein arose in grand jury proceedings on different States, which are preliminary proceedings before
the filing of the case in court, and we are not even told what evidentiary rules apply in the said hearings. In the
present case, the privilege is invoked in the court where it was already filed and presently pends, and we have the
foregoing specific rules above-quoted. Secondly, and more important, in the cases cited by the majority, the
lawyers concerned were merely advocating the cause of their clients but were not indicted for the charges against
their said clients. Here, the counsel themselves are co-defendants duly charged in court as co-conspirators in the
offenses charged. The cases cited by the majority evidently do not apply to them.

Hence, I wish to repeat and underscore the fact that the lawyer-client privilege is not a shield for the commission
of a crime or against the prosecution of the lawyer therefor. I quote, with emphases supplied, from 81 AM JUR 2d,
Witnesses, § 393 to 395, pages 356-357:

§ 393. Effect of unlawful purpose.

The existence of an unlawful purpose prevents the attorney-client privilege from attaching. The attorney-
client privilege does not generally exist where the representation is sought to further criminal or
 fraudulent conduct either past, present, or future. Thus, a confidence received by an attorney in order to
advance a criminal or fraudulent purpose is beyond the scope of the privilege.

Observation: The common-law rule that the privilege protecting confidential

communications between attorney and client is lost if the relation is abused by a client
who seeks legal assistance to perpetrate a crime or fraud has been codified.

§ 394. Attorney participation.

The attorney-client privilege cannot be used to protect a client in the perpetration of a crime in concert
with the attorney, even where the attorney is not aware of his client's purpose. The reason for the rule is
that it is not within the professional character of a lawyer to give advised on the commission of crime.
Professional responsibility does not countenance the use of the attorney-client privilege as a subterfuge,
and all conspiracies, either active or passive, which are calculated to hinder the administration of justice
will vitiate the privilege. In some jurisdictions, however, this exception to the rule of privilege in confined
to such intended acts in violation of the law as are mala in se, as distinguished from those which are
merely mala prohibita.

§ 395. Communication in contemplation of crime.

Communications between attorney and client having to do with the client's contemplated criminal acts, or
in aid or furtherance thereof, are not covered by the cloak of privilege ordinarily existing in reference to
communications between attorney and client. But, the mere charge of illegality, not supported by
evidence, will not defeat the privilege; there must be at least prima facie evidence that the illegality has
some foundation in fact.

Underhill also states:

There are many other cases to the same effect, for the rule is prostitution of the honorable relation of
attorney and client will not be permitted under the guise of privilege, and every communication made to an
attorney by a client for a criminal purpose is a conspiracy or attempt at a conspiracy which is not only lawful
to divulge, but which the attorney under certain circumstances may be bound to disclose at once in the
interest of justice. In accordance with this rule, where a forged will or other false instrument has come into
possession of an attorney through the instrumentality of the accused, with the hope and expectation that
the attorney would take some action in reference thereto, and the attorney does act, in ignorance of the
true character of the instrument, there is no privilege, inasmuch as full confidence has been withheld. The
attorney is then compelled to produce a forged writing against the client. The fact that the attorney is not
cognizant of the criminal or wrongful purpose, or, knowing it, attempts to dissuade his client, is
immaterial. The attorney's ignorance of his client's intentions deprives the information of a professional
character as full confidence has been withheld. (H.C. Underhill, A Treatise on the Law of Criminal Case
Evidence, vol. 2, Fifth ed. (1956), Sec. 332, pp. 836-837; emphasis mine).

125 AMERICAN LAW REPORTS ANNOTATED, 516-519, summarizes the rationale of the rule excepting
communications with respect to contemplated criminal or fraudulent acts, thus:

c. Rationale of rule excepting communications with respect to contemplated criminal or fraudulent act.

Various reasons have been announced as being the foundation for the holdings that communications
with respect to contemplated criminal or fraudulent acts are not privileged.

The reason perhaps most frequently advanced is that in such cases there is no professional employment,
properly speaking. Standard F. Ins. Co v. Smithhart (1919) 183 Ky 679, 211 SW. 441, 5 ALR 972; Cummings
v. Com. (1927) 221 Ky 301, 298 SW 943; Strong v. Abner (1937) 268 Ky 502, 105 SW(2d) 599; People v. Van
Alstine (1885) 57 Mich 69, 23 NW 594; Hamil & Co. v. England (1892) 50 Mo App 338; Carney v. United
R. Co. (1920) 205 Mo App 495, 226 SW 308; Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A
1054; Covency v. Tannahill (1841) 1 Hill (NY) 33, 37 AM Dec 287; People ex rel. Vogelstein v. Warden (1934)
150 Misc 714, 270 NYS 362 (affirmed without opinion in (1934) 242 App Div 611, 271 NYS 1059); Russell
v. Jackson (1851) 9 Hare 387, 68 Eng Reprint 558; Charlton v. Coombes (1863) 4 Giff 372, 66 Eng Reprint
751; Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR; Re Postlethwaite (1887) LR 35 Ch Div (Eng) 722.

In Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR, the court said: "In order that the rule may apply, there
must be both professional confidence and professional employment, but if the client has a criminal object in
view in his communications with his solicitor one of these elements must necessarily be absent. The client
must either conspire with his solicitor or deceive him. If his criminal object is avowed, the client does not
consult his adviser professionally, because it cannot be the solicitor's business to further any criminal
object. If the client does not avow his object, he reposes no confidence, for the state of facts which is the
foundation of the supposed confidence does not exist. The solicitor's advice is obtained by a fraud."

So, in Standard F. Ins. Co. v. Smithhart (1919) 183 Ky 679, 211 SW 441, 5 ALR 972, the court said: "The
reason of the principle which holds such communications not to be privileged is that it is not within the
professional character of a lawyer to give advice upon such subjects, and that it is no part of the
profession of an attorney or counselor at law to be advising persons as to how they may commit crimes
or frauds, or how they may escape the consequences of contemplated crimes and frauds. If the crime or
fraud has already been committed and finished, a client may advise with an attorney in regard to it, and
communicate with him freely, and the communications cannot be divulged as evidence without the
consent of the client, because it is a part of the business and duty of those engaged in the practice of the
profession of law, when employed and relied upon for that purpose, to give advice to those who have
made infractions of the laws; and, to enable the attorney to properly advise and to properly represent the
client in court or when prosecutions are threatened, it is conducive to the administration of justice that
the client shall be free to communicate to his attorney all the facts within his knowledge, and that he may
be assured that a communication made by him shall not be used to his prejudice."

The protection which the law affords to communications between attorney and client has reference to
those which are legitimately and properly within the scope of a lawful employment, and does not extend
to communications made in contemplation of a crime, or perpetration of a fraud. Strong v. Abner (1937)
368 Ky 502, 105 SW (2d) 599.

The court in People v. Van Alstine (1885) 57 Mich 69, 23 NW 594, in holding not privileged
communications to an attorney having for their object the communication of a crime, said: "They then
partake of the nature of a conspiracy, or attempted conspiracy, and it is not only lawful to divulge such
communications, but under certain circumstances it might become the duty of the attorney to do so. The
interests of public justice require that no such shield from merited exposure shall be interposed to protect a
person who takes counsel how he can safely commit a crime. The relation of attorney and client cannot exist
for the purpose of counsel in concocting crimes."

And in Coveney v. Tannahill (1841) 1 Hill (NY) 33, 37 Am Dec 287, the court was of the opinion that there
could be no such relation as that of attorney and client, either in the commission of a crime, or in the
doing of a wrong by force or fraud to an individual, the privileged relation of attorney and client existing
only for lawful and honest purposes.

If the client consults the attorney at law with reference to the perpetration of a crime, and they co-operate
in effecting it, there is no privilege, inasmuch as it is no part of the lawyer's duty to aid in crime — he
ceases to be counsel and becomes a criminal. Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A 1054.

The court cannot permit it to be said that the contriving of a fraud forms part of the professional business
of an attorney or solicitor. Charlton v. Coombes (1863) 4 Giff 372, 66 Eng Reprint 751.
If the client does not frankly and freely reveal his object and intention as well as facts, there is not
professional confidence, and therefore no privilege. Matthews v. Hoagland (NJ) supra. See to the same
effect Carney v. United R. Co. (1920) 205 Mo App 495, 226 SW 308.

There is no valid claim of privilege in regard to the production of documents passing between solicitor
and client, when the transaction impeached is charged to be based upon fraud, that is the matter to be
investigated, and it is thought better that the alleged privilege should suffer than that honestly and fair
dealing should appear to be violated with impunity. Smith v. Hunt (1901) 1 Ont L Rep 334.

In Tichborne v. Lushington, shorthand Notes (Eng) p. 5211 (cited in Reg. v. Cox (1884) LR 14 QB Div (Eng)
172 — CCR), the chief justice said "I believe the law is, and properly is, that if a party consults an attorney,
and obtains advice for what afterwards turns out to be the commission of a crime or a fraud, that party so
consulting the attorney has no privilege whatever to close the lips of the attorney from stating the truth.
Indeed, if any such privilege should be contended for, or existing, it would work most grievous hardship
on an attorney, who, after he had been consulted upon what subsequently appeared to be a manifest
crime and fraud, would have his lips closed, and might place him in a very serious position of being
suspected to be a party to the fraud, and without his having an opportunity of exculpating himself . . .
There is no privilege in the case which I have suggested of a party consulting another, a professional man,
as to what may afterwards turn out to be a crime or fraud, and the best mode of accomplishing it."

In Garside v. Outram (1856) 3 Jur NS (Eng) 39, although the question of privilege as to communications
between attorney and client was not involved, the question directly involved being the competency of a
clerk in a business establishment to testify as to certain information which he acquired while working in
the establishment, the court strongly approved of a view as stated arguendo for plaintiff, in Annesley
v. Anglesea (1743) 17 How St Tr (Eng) 1229, as follows: "I shall claim leave to consider whether an attorney
may be examined as to any matter which came to his knowledge as an attorney. If he is employed as an
attorney in any unlawful or wicked act, his duty to the public obliges him to disclose it; no private
obligations can dispense with that universal one which lies on every member of society to discover every
design which may be formed, contrary to the laws of society, to destroy the public welfare. For this
reason, I apprehend that if a secret which is contrary to the public good, such as a design to commit treason,
murder, or perjury, comes to the knowledge of an attorney, even in a cause where he is concerned, the
obligation to the public must dispense with the private obligation to the client."

The court in McMannus v. State (1858) 2 Head (Tenn) 213, said; "It would be monstrous to hold that if
counsel was asked and obtained in reference to a contemplated crime that the lips of the attorney would
be sealed, when the facts might become important to the ends of justice in the prosecution of crime. In
such a case the relation cannot be taken to exist. Public policy would forbid it."

And the court in Lanum v. Patterson (1909) 151 Ill App 36, observed that this rule was not in contravention
of sound public policy, but on the contrary, tended to the maintenance of a higher standard of
professional ethics by preventing the relation of attorney and client from operating as a cloak for fraud.

Communications of a client to an attorney are not privileged if they were a request for advice as to how to
commit a fraud, it being in such a case not only the attorney's privilege, but his duty, to disclose the facts
to the court. Will v. Tornabells & Co. (1907) 3 Porto Rico Fed Rep 125. The court said: "We say this
notwithstanding the comments of opposing counsel as to the indelicacy of his position because of his
being now on the opposite side of the issue that arose as a consequence of the communication he
testifies about, and is interested in the cause to the extent of a large contingent fee, as he confesses."

The object of prohibiting the disclosure of confidential communications is to protect the client, and not to
make the attorney an accomplice or permit him to aid in the commission of a crime. People
vs. Petersen (1901) 60 App Div 118, NYS 941.
 The seal of personal confidence can never be used to cover a transaction which is in itself a crime. People
v. Farmer (1909) 194 NY 251, 87 NE 457.

As to disclosing the identity of a client, 81 AM JUR 2d, Witnesses, § 410 and 411, pages 366-368, states:

§ 410. Name or identity of client.

Disclosure of a client's identity is necessary proof of the existence of the attorney-client relationship and is
not privileged information. Thus, the attorney-client privilege is inapplicable even though the information
was communicated confidentially to the attorney in his professional capacity and, in some cases, in spite
of the fact that the attorney may have been sworn to secrecy, where an inquiry is directed to an attorney
as to the name or identity of his client. This general rule applies in criminal cases, as well as in civil
actions. Where an undisclosed client is a party to an action, the opposing party has a right to know with
whom he is contending or who the real party in interest is, if not the nominal adversary.

§ 411. Disclosure of identity of client as breach of confidentiality.

The revelation of the identification of a client is not usually considered privileged, except where so much
has been divulged with regard to to legal services rendered or the advice sought, that to reveal the
client's name would be to disclose the whole relationship and confidential communications. However,
even where the subject matter of the attorney-client relationship has already been revealed, the client's
name has been deemed privileged.

Where disclosure of the identity of a client might harm the client by being used against him under
circumstances where there are no countervailing factors, then the identity is protected by the attorney-
client privilege.

In criminal proceedings, a client's name may be privileged if information already obtained by the tribunal,
combined with the client's identity, might expose him to criminal prosecution for acts subsequent to, and
because of, which he had sought the advice of his attorney.

Although as a general rule, the identity of a defendant in a criminal prosecution is a matter of public
record and, thus, not covered by the attorney-client privilege, where the attorney has surrendered to the
authorities physical evidence in his possession by way of the attorney-client relationship, the state must
prove the connection between the piece of physical evidence and the defendant without in any way
relying on the testimony of the client's attorney who initially received the evidence and, thus, the attorney
may not be called to the stand and asked to disclose the identity of the client. However, an attorney
cannot refuse to reveal the identity of a person who asked him to deliver stolen property to the police
department, whether a bona fide attorney-client relationship exists between them, inasmuch as the
transaction was not a legal service or done in the attorney's professional capacity.

Distinction: Where an attorney was informed by a male client that his female
acquaintance was possibly involved in [a] his-and-run accident, the identity of the female
did not come within scope of attorney-client privilege although the identity of the male
client was protected. (emphases supplied)

WIGMORE explains why the identity of a client is not within the lawyer-client privilege in this manner:

§ 2313. Identity of client or purpose of suit. — The identity of the attorney's client or the name of the real
party in interest will seldom be a matter communicated in confidence because the procedure of litigation
ordinarily presupposes a disclosure of these facts. Furthermore, so far as a client may in fact desire secrecy
and may be able to secure action without appearing as a party to the proceedings, it would be improper
to sanction such a wish. Every litigant is in justice entitled to know the identity of his opponents. He cannot
 be obliged to struggle in the dark against unknown forces. He has by anticipation the right, in later
proceedings, if desired, to enforce the legal responsibility of those who may have maliciously sued or
prosecuted him or fraudulently evaded his claim. He has as much right to ask the attorney "Who fees your
fee?" as to ask the witness (966 supra). "Who maintains you during this trial?" upon the analogy of the
principle already examined (2298 supra), the privilege cannot be used to evade a client's responsibility for
the use of legal process. And if it is necessary for the purpose to make a plain exception to the rule of
confidence, then it must be made. (Wigmore on Evidence, vol. 8, (1961), p. 609; emphases supplied).

In 114 ALR, 1322, we also find the following statement:

1. Name or identity.

As is indicated in 28 R.C.L. p. 563, it appears that the rule making communications between attorney and
client privileged from disclosure ordinarily does not apply where the inquiry is confined to the fact of the
attorney's employment and the name of the person employing him, since the privilege presupposes the
relationship of client and attorney, and therefore does not attach to its creation.

At the present stage of the proceedings below, the petitioners have not shown that they are so situated with
respect to their principals as to bring them within any of the exceptions established by American jurisprudence.
There will be full opportunity for them to establish that fact at the trial where the broader perspectives of the case
shall have been presented and can be better appreciated by the court. The insistence for their exclusion from the
case is understandable, but the reasons for the hasty resolution desired is naturally suspect.

We do not even have to go beyond our shores for an authority that the lawyer-client privilege cannot be invoked
to prevent the disclosure of a client's identity where the lawyer and the client are conspirators in the commission
of a crime or a fraud. Under our jurisdiction, lawyers are mandated not to counsel or abet activities aimed at
defiance of the law or at lessening confidence in the legal system (Rule 1.02, Canon 1, Code of Professional
Responsibility) and to employ only fair and honest means to attain the lawful objectives of his client (Rule 19.01,
Canon 19, Id.). And under the Canons of Professional Ethics, a lawyer must steadfastly bear in mind that his great
trust is to be performed within and not without the bounds of the law (Canon 15, Id.), that he advances the honor
of his profession and the best interest of his client when he renders service or gives advice tending to impress
upon the client and his undertaking exact compliance with the strictest principles of moral law (Canon 32, Id.).
These canons strip a lawyer of the lawyer-client privilege whenever he conspires with the client in the commission
of a crime or a fraud.

I then vote to DENY, for want of merit, the instant petition.

Narvasa, C.J. and Regalado, J., concur.

PUNO, J., dissenting:

This is an important petition for certiorari to annul the resolutions of the respondent Sandiganbayan denying
petitioners' motion to be excluded from the Complaint for recovery of alleged ill-gotten wealth on the principal
ground that as lawyers they cannot be ordered to reveal the identity of their client.

First, we fast forward the facts. The Presidential Commission on Good Government (PCGG) filed Civil Case No. 33
before the Sandiganbayan against Eduardo M. Cojuangco, Jr., for the recovery of alleged ill-gotten wealth. Sued as
co-defendants are the petitioners in the cases at bar — lawyers Teodoro Regala, Edgardo J. Angara, Avelino V.
Cruz, Jose Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo Escueta and Paraja Hayudini. Also included
as a co-defendant is lawyer Raul Roco, now a duly elected senator of the Republic. All co-defendants were then
partners of the law firm, Angara, Abello, Concepcion, Regala and Cruz Law Offices, better known as the ACCRA
Law Firm. The Complaint against Cojuangco, Jr., and the petitioners alleged, inter alia, viz:
 xxx xxx xxx

The wrongs committed by defendants acting singly or collectively and in unlawful concert with one
another, include the misappropriation and theft of public funds, plunder of the nation's wealth, extortion,
blackmail, bribery, embezzlement and other acts of corruption, betrayal of public trust and brazen abuse
of power as more fully described (in the subsequent paragraphs of the complaint), all at the expense and
to the grave and irreparable damage of Plaintiff and the Filipino people.

Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro D. Regala, Avelino V.
Cruz, Regalio A. Vinluan, Eduardo U. Escueta, Paraja G. Hayudini and Raul S. Roco of Angara, Concepcion,
Cruz, Regala, and Abello law offices (ACCRA) plotted, devised, schemed, conspired and confederated with
each other in setting up, through the use of the coconut levy funds, the financial and corporate
framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CIC
and more than twenty other coconut levy funded corporations, including the acquisition of the San
Miguel Corporation shares and the institutionalization through presidential directives of the coconut
monopoly. through insidious means and machinations, ACCRA, using its wholly-owned investment arm,
ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing
roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987. This ranks ACCRA
Investments Corporation number 44 among the top 100 biggest stockholders of UCPB which has
approximately 1,400,000 shareholders. On the other hand, corporate books show the name Edgardo J.
Angara as holding approximately 3,744 shares as of 7 June 1984.

In their Answer, petitioners alleged that the legal services offered and made available by their firm to its clients
include: (a) organizing and acquiring business organizations, (b) acting as incorporators or stockholders thereof,
and (c) delivering to clients the corresponding documents of their equity holdings (i.e., certificates of stock
endorsed in blank or blank deeds of trust or assignment). They claimed that their activities were "in furtherance of
legitimate lawyering."

In the course of the proceedings in the Sandiganbayan, the PCGG filed a Motion to Admit Third Amended
Complaint and the Third Amended Complaint excluding lawyer Roco as party defendant. Lawyer Roco was
excluded on the basis of his promise to reveal the identity of the principals for whom he acted as
nominee/stockholder in the companies involved in the case.

The Sandiganbayan ordered petitioners to comment on the motion. In their Comment, petitioners demanded that
they be extended the same privilege as their co-defendant Roco. They prayed for their exclusion from the
complaint. PCGG agreed but set the following conditions: (1) disclosure of the identity of their client; (2)
submission of documents substantiating their lawyer-client relationship; and (3) submission of the deeds of
assignment petitioners executed in favor of their client covering their respective shareholdings. The same
conditions were imposed on lawyer Roco.

Petitioners refused to comply with the PCGG conditions contending that the attorney-client privilege gives them
the right not to reveal the identity of their client. They also alleged that lawyer Roco was excluded though he did
not in fact reveal the identity of his clients. On March 18, 1992, the Sandiganbayan denied the exclusion of
petitioners in Case No. 33. It held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have
acted, i.e., their principal, and that will be their choice. But until they do identify their clients,
considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to
the debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they
have begun to establish the basis for recognizing the privilege; the existence and identity of the client.
 This is what appears to be the cause for which they have been impleaded by the PCGG as defendants
herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently
identified his principal, which revelation could show the lack of course against him. This in turn has
allowed the PCGG to exercise its power both under the rules of Agency and under Section 5 of E.O. No.
14-A in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions availed of by Roco; full
disclosure in exchange for exclusion from these proceedings (par. 7, PCGG's COMMENT dated November
4, 1991). The ACCRA lawyers have preferred not to make the disclosures required by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as a party defendants. In the
same vein, they cannot compel the PCGG to be accorded the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA lawyers and joined in by
Atty. Paraja G. Hayudini for the same treatment by the PCGG as accorded to Raul S. Roco is DENIED for
lack of merit.

Sandiganbayan later denied petitioners' motions for reconsideration in its resolutions dated May 21, 1988 and
September 3, 1992.

In this petition for certiorari, petitioners contend:

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners ACCRA lawyers who
indisputably acted as lawyers in serving as nominee-stockholders, to the strict application of the law
agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not considering petitioners ACCRA
lawyers and Mr. Roco as similarly situated and, therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or had undertaken to
reveal, the identities of the client(s) for whom he acted as nominee-stockholder.

2. Even assuming that Mr. Roco had revealed, or had undertaken to reveal, the identities
of the client(s), the disclosure does not constitute a substantial distinction as would make
the classification reasonable under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue preference in favor of Mr.

Roco and violation of the equal protection clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding that, under the facts
of this case, the attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity
of their client(s) and the other information requested by the PCGG.
 1. Under the peculiar facts of this case, the attorney-client privilege includes the identity
of the client(s).

2. The factual disclosures required by the PCGG are not limited to the identity of
petitioners ACCRA lawyers' alleged client(s) but extend to other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring that the dropping of
party-defendants by the PCGG must be based on reasonable and just grounds and with due consideration
to the constitutional right of petitioners ACCRA lawyers to the equal protection of the law.

The petition at bar is atypical of the usual case where the hinge issue involves the applicability of attorney-client
privilege. It ought to be noted that petitioners were included as defendants in Civil Case No. 33 as conspirators.
Together with Mr. Cojuangco, Jr., they are charged with having ". . . conspired and confederated with each other in
setting up, through the use of the coconut levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CICI and more than twenty other coconut
levy funded corporations, including the acquisition of San Miguel Corporation shares and the institutionalization
through presidential directives of the coconut monopoly." To stress, petitioners are charged with having conspired
in the commission of crimes. The issue of attorney-client privilege arose when PCGG agreed to exclude petitioners
from the complaint on condition they reveal the identity of their client. Petitioners refused to comply and assailed
the condition on the ground that to reveal the identity of their client will violate the attorney-client privilege.

It is thus necessary to resolve whether the Sandiganbayan committed grave abuse of discretion when it rejected
petitioners' thesis that to reveal the identity of their client would violate the attorney-client privilege. The
attorney-client privilege is the oldest of the privileges for confidential communications known to the common
law.1 For the first time in this jurisdiction, we are asked to rule whether the attorney-client privilege includes the
right not to disclose the identity of client. The issue poses a trilemma for its resolution requires the delicate
balancing of three opposing policy considerations. One overriding policy consideration is the need for courts to
discover the truth for truth alone is the true touchstone of justice. 2 Equally compelling is the need to protect the
adversary system of justice where truth is best extracted by giving a client broad privilege to confide facts to his
counsel.3 Similarly deserving of sedulous concern is the need to keep inviolate the constitutional right against self-
incrimination and the right to effective counsel in criminal litigations. To bridle at center the centrifugal forces of
these policy considerations, courts have followed to prudential principle that the attorney-client privilege must not
be expansively construed as it is in derogation of the search for truth.4 Accordingly, a narrow construction has
been given to the privilege and it has been consistently held that "these competing societal interests demand that
application of the privilege not exceed that which is necessary to effect the policy considerations underlying the
privilege, i.e., the privilege must be upheld only in those circumstances for which it was created.'" 5

Prescinding from these premises, our initial task is to define in clear strokes the substantive content of the
attorney-client privilege within the context of the distinct issues posed by the petition at bar. With due respect, I
like to start by stressing the irreducible principle that the attorney-client privilege can never be used as a shield to
commit a crime or a fraud. Communications to an attorney having for their object the commission of a crime ". . .
partake the nature of a conspiracy, and it is not only lawful to divulge such communications, but under certain
circumstances it might become the duty of the attorney to do so. The interests of public justice require that no
such shield from merited exposure shall be interposed to protect a person who takes counsel how he can safely
commit a crime. The relation of attorney and client cannot exist for the purpose of counsel in concocting
crimes."6 In the well chosen words of retired Justice Quiason, a lawyer is not a gun for hire. 7 I hasten to add,
however, that a mere allegation that a lawyer conspired with his client to commit a crime or a fraud will not defeat
the privilege.8 As early as 1933, no less than the Mr. Justice Cardozo held in Clark v. United States9 that: "there are
early cases apparently to the effect that a mere charge of illegality, not supported by any evidence, will set the
confidences free . . . But this conception of the privilege is without support . . . To drive the privilege away, there
must be 'something to give colour to the charge;' there must be prima facie evidence that it has foundation in
fact." In the petition at bar, however, the PCGG appears to have relented on its original stance as spelled out in its
Complaint that petitioners are co-conspirators in crimes and cannot invoke the attorney-client privilege. The
PCGG has agreed to exclude petitioners from the Complaint provided they reveal the identity of their client. In
fine, PCGG has conceded that petitioner are entitled to invoke the attorney-client privilege if they reveal their
client's identity.

Assuming then that petitioners can invoke the attorney-client privilege since the PCGG is no longer proceeding
against them as co-conspirators in crimes, we should focus on the more specific issue of whether the attorney-
client privilege includes the right not to divulge the identity of a client as contended by the petitioners. As a
general rule, the attorney-client privilege does not include the right of non-disclosure of client identity. The
general rule, however, admits of well-etched exceptions which the Sandiganbayan failed to recognize. The general
rule and its exceptions are accurately summarized in In re Grand Jury Investigation, 10 viz:

The federal forum is unanimously in accord with the general rule that the identity of a client is, with
limited exceptions, not within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Proceedings (Pavlick), 680 F.2d 1026, 1027 (5th Cir. 1982) (en banc); In re Grand Jury Proceedings (Jones),
517 F. 2d 666, 670-71 (5th Cir. 1975); In re Grand Jury Proceedings (Fine), 651 F. 2d 199, 204 (5th Cir.
1981); Frank v. Tomlinson, 351 F.2d 384 (5th Cir. 1965), cert. denied, 382 U.S. 1082, 86 S.Ct. 648, 15 L.Ed.2d
540 (1966); In re Grand Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982); In re Grand Jury Subpoenas
Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982); In re Grand Jury Proceedings
(Lawson), 600 F.2d 215, 218 (9th Cir. 1979).

The Circuits have embraced various "exceptions" to the general rule that the identity of a client is not
within the protective ambit of the attorney-client privilege. All such exceptions appear to be firmly
grounded in the Ninth Circuit's seminal decision in Baird v. Koerner, 279 F.2d 633 (9th Cir. 1960). In Baird
the IRS received a letter from an attorney stating that an enclosed check in the amount of $12,706 was
being tendered for additional amounts due from undisclosed taxpayers. When the IRS summoned the
attorney to ascertain the identity of the delinquent taxpayers the attorney refused identification assertion
the attorney-client privilege. The Ninth Circuit, applying California law, adjudged that the "exception" to
the general rule as pronounced in Ex parte McDonough, 170 Cal. 230, 149 P. 566 (1915) controlled:

The name of the client will be considered privileged matter where the circumstances of
the case are such that the name of the client is material only for the purpose of showing
an acknowledgment of guilt on the part of such client of the very offenses on account of
which the attorney was employed.

Baird, supra, 279 F.2d at 633. The identity of the Baird taxpayer was adjudged within this exception to the
general rule. The Ninth Circuit has continued to acknowledge this exception.

A significant exception to this principle of non-confidentiality holds that such information

may be privileged when the person invoking the privilege is able to show that a strong
possibility exists that disclosure of the information would implicate the client in the very
matter for which legal advice was sought in the first case.

In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982).
Accord: United States v. Hodge and Zweig, 548 F.2d 1347, 1353 (9th Cir. 1977); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Sherman, 627 F.2d 189, 190-91
(9th Cir. 1980); In re Grand Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982). This exception, which can
perhaps be most succinctly characterized as the "legal advice" exception, has also been recognized by
other circuits. See: In re Walsh, 623 F.2d 489, 495 (7th Cir.), cert. denied, 449 U.S. 994, 101 S. Ct. 531, 66
L.Ed.2d 291 (1980); In re Grand Jury Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980), cert. denied, 449
U.S.1083, 101 S.Ct. 869-70, 66 L.Ed.2d 808 (1981). Since the legal advice exception is firmly grounded in
 the policy of protecting confidential communications, this Court adopts and applies its principles herein.
See: In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), supra.

It should be observed, however that the legal advice exception may be defeated through a prima
facie showing that the legal representation was secured in furtherance of present or intended continuing
illegality, as where the legal representation itself is part of a larger conspiracy. See: In re Grand Jury
Subpoenas Decus Tecum (Marger/Merenbach), supra, 695 F.2d at 365 n. 1; In re Walsh, 623 F.2d 489, 495
(7th Cir.), cert. denied, 449, U.S. 994, 101 S.Ct. 531, 66 L.Ed. 2d 291 (1980); In re Grand Jury Investigation
(Tinari), 631 F.2d 17, 19 (3d Cir 1980); cert. denied, 449 U.S. 1083, 101 S.Ct. 869, 66 L.Ed. 2d 808 (1981); In
re Grand Jury Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Friedman, 445 F.2d
1076, 1086 (9th Cir. 1971). See also: Clark v. United States, 289 U.S. 1, 15, 53, S.Ct. 465, 469, 77, L.Ed. 993
(1933); In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026, 1028-29 (5th Cir. 1982 (en banc).

Another exception to the general rule that the identity of a client is not privileged arises where disclosure
of the identity would be tantamount to disclosing an otherwise protected confidential communication. In
Baird, supra, the Ninth Circuit observed:

If the identification of the client conveys information which ordinarily would be conceded
to be part of the usual privileged communication between attorney and client, then the
privilege should extend to such identification in the absence of another factors.

Id., 279 F.2d at 632. Citing Baird, the Fourth Circuit promulgated the following exception:

To the general rule is an exception, firmly embedded as the rule itself. The privilege may
be recognized where so much of the actual communication has already been disclosed
that identification of the client amounts to disclosure of a confidential communication.

NLRB v. Harvey, 349 F.2d 900, 905 (4th Cir. 1965). Accord: United States v. Tratner, 511 F.2d 248, 252 (7th
Cir. 1975); Colton v. United States, 306 F.2d 633, 637 (2d Cir. 1962), cert. denied, 371 U.S. 951, 83 S.Ct. 505,
9 L.Ed.2d 499 1963); Tillotson v. Boughner, 350 F.2d 663, 666 (7th Cir. 1965); United States v. Pape, 144 F.2d
778, 783 (2d Cir. 1944). See also: Chirac v. Reinecker, 24 U.S. (11 Wheat) 280, 6 L.Ed. 474 (1826). The
Seventh Circuit has added to the Harvey exception the following emphasized caveat:

The privilege may be recognized where so much of the actual communication has already
been disclosed [not necessarily by the attorney, but by independent sources as well] that
identification of the client [or of fees paid] amounts to disclosure of a confidential
communication.

United States vs. Jeffers, 532 F.2d 1101, 1115 (7th Cir. 1976 (emphasis added). The Third Circuit, applying
this exception, has emphasized that it is the link between the client and the communication, rather than
the link between the client and the possibility of potential criminal prosecution, which serves to bring the
client's identity within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Empanelled February 14, 1978 (Markowitz), 603 F.2d 469, 473 n. 4 (3d Cir. 1979). Like the "legal advice"
exception, this exception is also firmly rooted in principles of confidentiality.

Another exception, articulated in the Fifth Circuit's en banc decision of In re Grand Jury Proceedings
(Pavlick), 680 F.2d 1026 (5th Cir. 1982 (en banc), is recognized when disclosure of the identity of the client
would provide the "last link" of evidence:

We have long recognized the general rule that matters involving the payment of fees and
the identity of clients are not generally privileged. In re Grand Jury Proceedings, (United
States v. Jones), 517 F.2d 666 (5th Cir. 1975); see cases collected id. at 670 n. 2. There we
also recognized, however, a limited and narrow exception to the general rule, one that
 obtains when the disclosure of the client's identity by his attorney would have supplied
the last link in an existing chain of incriminating evidence likely to lead to the client's
indictment.

I join the majority in holding that the Sandiganbayan committed grave abuse of discretion when it misdelineated
the metes and bounds of the attorney-client privilege by failing to recognize the exceptions discussed above.

Be that as it may, I part ways with the majority when it ruled that petitioners need not prove they fall within the
exceptions to the general rule. I respectfully submit that the attorney-client privilege is not a magic mantra whose
invocation will ipso facto and ipso jure drape he who invokes it with its protection. Plainly put, it is not enough to
assert the privilege.11 The person claiming the privilege or its exceptions has the obligation to present the
underlying facts demonstrating the existence of the privilege.12 When these facts can be presented only by
revealing the very information sought to be protected by the privilege, the procedure is for the lawyer to move for
an inspection of the evidence in an in camera hearing.13 The hearing can even be in camera and ex-parte. Thus, it
has been held that "a well-recognized means for an attorney to demonstrate the existence of an exception to the
general rule, while simultaneously preserving confidentiality of the identity of his client, is to move the court for an
in camera ex-parte hearing.14 Without the proofs adduced in these in camera hearings, the Court has no factual
basis to determine whether petitioners fall within any of the exceptions to the general rule.

In the case at bar, it cannot be gainsaid that petitioners have not adduced evidence that they fall within any of the
above mentioned exceptions for as aforestated, the Sandiganbayan did not recognize the exceptions, hence, the
order compelling them to reveal the identity of their client. In ruling that petitioners need not further establish the
factual basis of their claim that they fall within the exceptions to the general rule, the majority held:

The circumstances involving the engagement of lawyers in the case at bench therefore clearly reveal that
the instant case falls under at least two exceptions to the general rule. First, disclosure of the alleged
client's name would lead to establish said client's connection with the very fact in issue of the case, which
is privileged information, because the privilege, as stated earlier, protects the subject matter or the
substance (without which there would be no attorney-client relationship). Furthermore, under the third
main exception, revelation of the client's name would obviously provide the necessary link for the
prosecution to build its case, where none otherwise exists. It is the link, in the word of Baird, "that would
inevitably form the chain of testimony necessary to convict the (client) of a . . . crime.

I respectfully submit that the first and third exceptions relied upon by the majority are not self-executory but need
factual basis for their successful invocation. The first exception as cited by the majority is ". . . where a strong
probability exists that revealing the clients' name would implicate that client in the very activity for which he
sought the lawyer's advice." It seems to me evident that "the very activity for which he sought the lawyer's advice"
is a question of fact which must first be established before there can be any ruling that the exception can be
invoked. The majority cites Ex Parte Enzor, 15 and
U S v. Hodge and Zweig,16 but these cases leave no doubt that the "very activity" for which the client sought the
advice of counsel was properly proved. In both cases, the "very activity" of the clients reveal they sought advice on
their criminal activities. Thus, in Enzor, the majority opinion states that the "unidentified client, an election official,
informed his attorney in confidence that he had been offered a bribe to violate election laws or that he had
accepted a bribe to that end."17 In Hodge, the "very activity" of the clients deals with illegal importation of drugs.
In the case at bar, there is no inkling whatsoever about the "very activity" for which the clients of petitioners
sought their professional advice as lawyers. There is nothing in the records that petitioners were consulted on the
"criminal activities" of their client. The complaint did allege that petitioners and their client conspired to commit
crimes but allegations are not evidence.

So it is with the third exception which as related by the majority is "where the government's lawyers have no case
against an attorney's client unless, by revealing the client's name, the said name would furnish the only link that
would form the chain of testimony necessary to convict an individual of a crime."18 Again, the rhetorical questions
that answer themselves are: (1) how can we determine that PCGG has "no case" against petitioners without
 presentation of evidence? and (2) how can we determine that the name of the client is the only link without
presentation of evidence as to the other links? The case of Baird vs. Koerner19 does not support the "no need for
evidence" ruling of the majority. In Baird, as related by the majority itself, "a lawyer was consulted by the
accountants and the lawyer of certain undisclosed taxpayers regarding steps to be taken to place the undisclosed
taxpayers in a favorable position in case criminal charges were brought against them by the US Internal Revenue
Service (IRS). It appeared that the taxpayers' returns of previous years were probably incorrect and the taxes
understated.20 Once more, it is clear that the Baird court was informed of the activity of the client for which the
lawyer was consulted and the activity involved probable violation of the tax laws. Thus, the Court held:

The facts of the instant case bring it squarely within that exception to the general rule. Here money was
received by the government, paid by persons who thereby admitted they had not paid a sufficient amount
in income taxes some one or more years in the past. The names of the clients are useful to the
government for but one purpose — to ascertain which taxpayers think they were delinquent, so that it
may check the records for that one year or several years. The voluntary nature of the payment indicates a
belief by the taxpayers that more tax or interest or penalties are due than the sum previously paid, if any.
It indicates a feeling of guilt for nonpayment of taxes, though whether it is criminal guilt is undisclosed.
But it may well be the link that could form the chain of testimony necessary to convict an individual of a
federal crime. Certainly the payment and the feeling of guilt are the reasons the attorney here involved
was employed — to advise his clients what, under the circumstances, should be done.

In fine, the factual basis for the ruling in Baird was properly established by the parties. In the case at bar, there is
no evidence about the subject matter of the consultation made by petitioners' client. Again, the records do not
show that the subject matter is criminal in character except for the raw allegations in the Complaint. Yet, this is the
unstated predicate of the majority ruling that revealing the identity of the client ". . . would furnish the only link
that would form the chain of testimony necessary to convict an individual of a crime." The silent implication is
unflattering and unfair to petitioners who are marquee names in the legal profession and unjust to their
undisclosed client.

Finally, it ought to be obvious that petitioners' right to claim the attorney-client privilege is resolutory of the
Complaint against them, and hence should be decided ahead and independently of their claim to equal protection
of the law. Pursuant to the rule in legal hermeneutics that courts should not decide constitutional issues unless
unavoidable, I also respectfully submit that there is no immediate necessity to resolve petitioners' claim to equal
protection of the law at this stage of the proceedings.

IN VIEW WHEREOF, I respectfully register a qualified dissent from the majority opinion.

Separate Opinions

VITUG, J., concurring:

The legal profession, despite all the unrestrained calumny hurled against it, is still the noblest of professions. It
exists upon the thesis that, in an orderly society that is opposed to all forms of anarchy, it so occupies, as it should,
an exalted position in the proper dispensation of justice. In time, principles have evolved that would help ensure
its effective ministration. The protection of confidentiality of the lawyer-client relationship is one, and it has since
been an accepted firmament in the profession. It allows the lawyer and the client to institutionalize a unique
relationship based on full trust and confidence essential in a justice system that works on the basis of substantive
and procedural due process. To be sure, the rule is not without its pitfalls, and demands against it may be strong,
but these problems are, in the ultimate analysis, no more than mere tests of vigor that have made and will make
that rule endure.

I see in the case before us, given the attendant circumstances already detailed in the ponencia, a situation of the
Republic attempting to establish a case not on what it perceives to be the strength of its own evidence but on
 what it could elicit from a counsel against his client. I find it unreasonable for the Sandiganbayan to compel
petitioners to breach the trust reposed on them and succumb to a thinly disguised threat of incrimination.

Accordingly, I join my other colleague who vote for the GRANT of the petition.

DAVIDE, JR., J.: dissenting

The impressive presentation of the case in the ponencia of Mr. Justice Kapunan makes difficult the espousal of a
dissenting view. Nevertheless, I do not hesitate to express that view because I strongly feel that this Court must
confine itself to the key issue in this special civil action for certiorari, viz., whether or not the Sandiganbayan acted
with grave abuse of discretion in not excluding the defendants, the petitioners herein, from the Third Amended
Complaint in Civil Case No. 0033. That issue, unfortunately, has been simply buried under the avalanche of
authorities upholding the sanctity of lawyer-client relationship which appears to me to be prematurely invoked.

From the undisputed facts disclosed by the pleadings and summarized in the ponencia, I cannot find my way clear
to a conclusion that the Sandiganbayan committed grave abuse of discretion in not acting favorably on the
petitioners' prayer in their Comment to the PCGG's Motion to Admit Third Amended Complaint.

The prerogative to determine who shall be made defendants in a civil case is initially vested in the plaintiff, or the
PCGG in this case. The control of the Court comes in only when the issue of "interest" (§ 2, Rule 3, Rules of Court)
as, e.g., whether an indispensable party has not been joined, or whether there is a misjoinder of parties (§ 7, 8, and
9, Id.), is raised.

In the case below, the PCGG decided to drop or exclude from the complaint original co-defendant Raul Roco
because he had allegedly complied with the condition prescribed by the PCGG, viz., undertake that he will reveal
the identity of the principals for whom he acted as nominee/stockholder in the companies involved in PCGG Case
No. 0033. In short, there was an agreement or compromise settlement between the PCGG and Roco. Accordingly,
the PCGG submitted a Third Amended Complaint without Roco as a defendant. No obstacle to such an agreement
has been insinuated. If Roco's revelation violated the confidentiality of a lawyer-client relationship, he would be
solely answerable therefor to his principals/clients and, probably, to this Court in an appropriate disciplinary action
if warranted. There is at all no showing that Civil Case No. 0033 cannot further be proceeded upon or that any
judgment therein cannot be binding without Roco remaining as a defendant. Accordingly, the admission of the
Third Amended Complaint cannot be validly withheld by the Sandiganbayan.

Are the petitioners, who did not file a formal motion to be excluded but only made the request to that effect as a
rider to their Comment to the Motion to Admit Third Amended Complaint, entitled to be excluded from the Third
Amended Complaint such that denial thereof would constitute grave abuse of discretion on the Sandiganbayan's
part? To me, the answer is clearly in the negative.

The petitioners seek to be accorded the same benefit granted to or to be similarly treated as Roco. Reason and
logic dictate that they cannot, unless they too would make themselves like Roco. Otherwise stated, they must first
voluntarily adopt for themselves the factual milieu created by Roco and must bind themselves to perform certain
obligations as Roco. It is precisely for this that in response to the petitioners' comment on the aforementioned
Motion to Admit Third Amended Complaint the PCGG manifested that it is willing to accord the petitioners the
treatment it gave Roco provided they would do what Roco had done, that is, disclose the identity of their
principals/clients and submit documents substantiating their claimed lawyer-client relationship with the said
principals/clients, as well as copies of deeds of assignments the petitioners executed in favor of their
principals/clients. The petitioners did not do so because they believed that compliance thereof would breach the
sanctity of their fiduciary duty in a lawyer-client relationship.

It, indeed, appears that Roco has complied with his obligation as a consideration for his exclusion from the Third
Amended Complaint. The Sandiganbayan found that
 5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently
identified his principal, which revelation could show the lack of action against him. This in turn has
allowed the PCGG to exercise its power both under the rules of agency and under Section 5 of E.O. No.
14-1 in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

As a matter of fact, the PCGG presented evidence to substantiate Roco's compliance. The ponencia itself so stated,
thus:

. . . respondent PCGG presented evidence to substantiate compliance by private respondent Roco of the
conditions precedent to warrant the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a)
Letter to respondent PCGG of the counsel of respondent Roco dated May 24, 1989 reiterating a previous
request for reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8, 1989 executed
by private respondent Roco as Attachment to the letter aforestated in (a); and (c) Letter of Roco, Bunag,
and Kapunan Law Offices dated September 21, 1988 to the respondent in behalf of private respondent
Roco originally requesting the reinvestigation and/or re-examination of evidence by the PCGG it
Complaint in PCGG Case No. 33. (Id., 5-6).

These are the pieces of evidence upon which the Sandiganbayan founded its conclusion that the PCGG was
satisfied with Roco's compliance. The petitioners have not assailed such finding as arbitrary.

The ponencia's observation then that Roco did not refute the petitioners' contention that he did not comply with
his obligation to disclose the identity of his principals is entirely irrelevant.

In view of their adamantine position, the petitioners did not, therefore, allow themselves to be like Roco. They
cannot claim the same treatment, much less compel the PCGG to drop them as defendants, for nothing
whatsoever. They have no right to make such a demand for until they shall have complied with the conditions
imposed for their exclusion, they cannot be excluded except by way of a motion to dismiss based on the grounds
allowed by law (e.g., those enumerated in § 1, Rule 16, Rules of Court). The rule of confidentiality under the lawyer-
client relationship is not a cause to exclude a party. It is merely aground for disqualification of a witness (§ 24, Rule
130, Rules of Court) and may only be invoked at the appropriate time, i.e., when a lawyer is under compulsion to
answer as witness, as when, having taken the witness stand, he is questioned as to such confidential
communicator or advice, or is being otherwise judicially coerced to produce, through subpoena duces tecum or
otherwise, letters or other documents containing the same privileged matter. But none of the lawyers in this case
is being required to testify about or otherwise reveal "any [confidential] communication made by the client to him,
or his advice given thereon in the course of, or with a view to, professional employment." What they are being
asked to do, in line with their claim that they had done the acts ascribed to them in pursuance of their
professional relation to their clients, is to identify the latter to the PCGG and the Court; but this, only if they so
choose in order to be dropped from the complaint, such identification being the condition under which the PCGG
has expressed willingness to exclude them from the action. The revelation is entirely optional, discretionary, on
their part. The attorney-client privilege is not therefor applicable.

Thus, the Sandiganbayan did not commit any abuse of discretion when it denied the petitioners' prayer for their
exclusion as party-defendants because they did not want to abide with any of the conditions set by the PCGG.
There would have been abuse if the Sandiganbayan granted the prayer because then it would have capriciously,
whimsically, arbitrarily, and oppressively imposed its will on the PCGG.

Again, what the petitioners want is their exclusion from the Third Amended Complaint or the dismissal of the case
insofar as they are concerned because either they are invested with immunity under the principle of confidentiality
in a lawyer-client relationship, or the claims against them in Civil Case No. 0033 are barred by such principle.

Even if we have to accommodate this issue, I still submit that the lawyer-client privilege provides the petitioners
no refuge. They are sued as principal defendants in Civil Case No. 0033, a case of the recovery of alleged ill-gotten
wealth. Conspiracy is imputed to the petitioners therein. In short, they are, allegedly, conspirators in the
commission of the acts complained of for being nominees of certain parties.

Their inclusion as defendants in justified under § 15, Article XI of the Constitution — which provides that the right
of the State to recover properties unlawfully acquired by public officials or employees, from them or from their
nominees or transferees, shall not be barred by prescription, laches or estoppel — and E.O. No. 1 of 28 February
1986, E.O. No. 2 of 12 March 1986, E.O. No. 14 of 7 May 1986, and the Rules and Regulations of the PCGG.
Furthermore, § 2, Rule 110 of the Rules of Court requires that the complaint or information should be "against all
persons who appear to be responsible for the offense involved."

Hypothetically admitting the allegations in the complaint in Civil Case No. 0033, I find myself unable to agree with
the majority opinion that the petitioners are immune from suit or that they have to be excluded as defendants, or
that they cannot be compelled to reveal or disclose the identity of their principals, all because of the sacred
lawyer-client privilege.

This privilege is well put in Rule 130 of the Rules of Court, to wit:

§ 24. Disqualification by reason of privileged communication. — The following persons cannot testify as to
matters learned in confidence in the following cases:

xxx xxx xxx

(b) An attorney cannot, without the consent of his client, be examined as to any communication made by
the client to him, or his advice given thereon in the course of, or with a view to, professional employment,
nor can an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and
his employer, concerning any fact the knowledge of which has been acquired in such capacity.

The majority seeks to expand the scope of the Philippine rule on the lawyer-client privilege by copious citations of
American jurisprudence which includes in the privilege the identity of the client under the exceptional situations
narrated therein. From the plethora of cases cited, two facts stand out in bold relief. Firstly, the issue of privilege
contested therein arose in grand jury proceedings on different States, which are preliminary proceedings before
the filing of the case in court, and we are not even told what evidentiary rules apply in the said hearings. In the
present case, the privilege is invoked in the court where it was already filed and presently pends, and we have the
foregoing specific rules above-quoted. Secondly, and more important, in the cases cited by the majority, the
lawyers concerned were merely advocating the cause of their clients but were not indicted for the charges against
their said clients. Here, the counsel themselves are co-defendants duly charged in court as co-conspirators in the
offenses charged. The cases cited by the majority evidently do not apply to them.

Hence, I wish to repeat and underscore the fact that the lawyer-client privilege is not a shield for the commission
of a crime or against the prosecution of the lawyer therefor. I quote, with emphases supplied, from 81 AM JUR 2d,
Witnesses, § 393 to 395, pages 356-357:

§ 393. Effect of unlawful purpose.

The existence of an unlawful purpose prevents the attorney-client privilege from attaching. The attorney-
client privilege does not generally exist where the representation is sought to further criminal or
fraudulent conduct either past, present, or future. Thus, a confidence received by an attorney in order to
advance a criminal or fraudulent purpose is beyond the scope of the privilege.

Observation: The common-law rule that the privilege protecting confidential

communications between attorney and client is lost if the relation is abused by a client
who seeks legal assistance to perpetrate a crime or fraud has been codified.
 § 394. Attorney participation.

The attorney-client privilege cannot be used to protect a client in the perpetration of a crime in concert
with the attorney, even where the attorney is not aware of his client's purpose. The reason for the rule is
that it is not within the professional character of a lawyer to give advised on the commission of crime.
Professional responsibility does not countenance the use of the attorney-client privilege as a subterfuge,
and all conspiracies, either active or passive, which are calculated to hinder the administration of justice
will vitiate the privilege. In some jurisdictions, however, this exception to the rule of privilege in confined
to such intended acts in violation of the law as are mala in se, as distinguished from those which are
merely mala prohibita.

§ 395. Communication in contemplation of crime.

Communications between attorney and client having to do with the client's contemplated criminal acts, or
in aid or furtherance thereof, are not covered by the cloak of privilege ordinarily existing in reference to
communications between attorney and client. But, the mere charge of illegality, not supported by
evidence, will not defeat the privilege; there must be at least prima facie evidence that the illegality has
some foundation in fact.

Underhill also states:

There are many other cases to the same effect, for the rule is prostitution of the honorable relation of
attorney and client will not be permitted under the guise of privilege, and every communication made to an
attorney by a client for a criminal purpose is a conspiracy or attempt at a conspiracy which is not only lawful
to divulge, but which the attorney under certain circumstances may be bound to disclose at once in the
interest of justice. In accordance with this rule, where a forged will or other false instrument has come into
possession of an attorney through the instrumentality of the accused, with the hope and expectation that
the attorney would take some action in reference thereto, and the attorney does act, in ignorance of the
true character of the instrument, there is no privilege, inasmuch as full confidence has been withheld. The
attorney is then compelled to produce a forged writing against the client. The fact that the attorney is not
cognizant of the criminal or wrongful purpose, or, knowing it, attempts to dissuade his client, is
immaterial. The attorney's ignorance of his client's intentions deprives the information of a professional
character as full confidence has been withheld. (H.C. Underhill, A Treatise on the Law of Criminal Case
Evidence, vol. 2, Fifth ed. (1956), Sec. 332, pp. 836-837; emphasis mine).

125 AMERICAN LAW REPORTS ANNOTATED, 516-519, summarizes the rationale of the rule excepting
communications with respect to contemplated criminal or fraudulent acts, thus:

c. Rationale of rule excepting communications with respect to contemplated criminal or fraudulent act.

Various reasons have been announced as being the foundation for the holdings that communications
with respect to contemplated criminal or fraudulent acts are not privileged.

The reason perhaps most frequently advanced is that in such cases there is no professional employment,
properly speaking. Standard F. Ins. Co v. Smithhart (1919) 183 Ky 679, 211 SW. 441, 5 ALR 972; Cummings
v. Com. (1927) 221 Ky 301, 298 SW 943; Strong v. Abner (1937) 268 Ky 502, 105 SW(2d) 599; People v. Van
Alstine (1885) 57 Mich 69, 23 NW 594; Hamil & Co. v. England (1892) 50 Mo App 338; Carney v. United
R. Co. (1920) 205 Mo App 495, 226 SW 308; Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A
1054; Covency v. Tannahill (1841) 1 Hill (NY) 33, 37 AM Dec 287; People ex rel. Vogelstein v. Warden (1934)
150 Misc 714, 270 NYS 362 (affirmed without opinion in (1934) 242 App Div 611, 271 NYS 1059); Russell
v. Jackson (1851) 9 Hare 387, 68 Eng Reprint 558; Charlton v. Coombes (1863) 4 Giff 372, 66 Eng Reprint
751; Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR; Re Postlethwaite (1887) LR 35 Ch Div (Eng) 722.
In Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR, the court said: "In order that the rule may apply, there
must be both professional confidence and professional employment, but if the client has a criminal object in
view in his communications with his solicitor one of these elements must necessarily be absent. The client
must either conspire with his solicitor or deceive him. If his criminal object is avowed, the client does not
consult his adviser professionally, because it cannot be the solicitor's business to further any criminal
object. If the client does not avow his object, he reposes no confidence, for the state of facts which is the
foundation of the supposed confidence does not exist. The solicitor's advice is obtained by a fraud."

So, in Standard F. Ins. Co. v. Smithhart (1919) 183 Ky 679, 211 SW 441, 5 ALR 972, the court said: "The
reason of the principle which holds such communications not to be privileged is that it is not within the
professional character of a lawyer to give advice upon such subjects, and that it is no part of the
profession of an attorney or counselor at law to be advising persons as to how they may commit crimes
or frauds, or how they may escape the consequences of contemplated crimes and frauds. If the crime or
fraud has already been committed and finished, a client may advise with an attorney in regard to it, and
communicate with him freely, and the communications cannot be divulged as evidence without the
consent of the client, because it is a part of the business and duty of those engaged in the practice of the
profession of law, when employed and relied upon for that purpose, to give advice to those who have
made infractions of the laws; and, to enable the attorney to properly advise and to properly represent the
client in court or when prosecutions are threatened, it is conducive to the administration of justice that
the client shall be free to communicate to his attorney all the facts within his knowledge, and that he may
be assured that a communication made by him shall not be used to his prejudice."

The protection which the law affords to communications between attorney and client has reference to
those which are legitimately and properly within the scope of a lawful employment, and does not extend
to communications made in contemplation of a crime, or perpetration of a fraud. Strong v. Abner (1937)
368 Ky 502, 105 SW (2d) 599.

The court in People v. Van Alstine (1885) 57 Mich 69, 23 NW 594, in holding not privileged
communications to an attorney having for their object the communication of a crime, said: "They then
partake of the nature of a conspiracy, or attempted conspiracy, and it is not only lawful to divulge such
communications, but under certain circumstances it might become the duty of the attorney to do so. The
interests of public justice require that no such shield from merited exposure shall be interposed to protect a
person who takes counsel how he can safely commit a crime. The relation of attorney and client cannot exist
for the purpose of counsel in concocting crimes."

And in Coveney v. Tannahill (1841) 1 Hill (NY) 33, 37 Am Dec 287, the court was of the opinion that there
could be no such relation as that of attorney and client, either in the commission of a crime, or in the
doing of a wrong by force or fraud to an individual, the privileged relation of attorney and client existing
only for lawful and honest purposes.

If the client consults the attorney at law with reference to the perpetration of a crime, and they co-operate
in effecting it, there is no privilege, inasmuch as it is no part of the lawyer's duty to aid in crime — he
ceases to be counsel and becomes a criminal. Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A 1054.

The court cannot permit it to be said that the contriving of a fraud forms part of the professional business
of an attorney or solicitor. Charlton v. Coombes (1863) 4 Giff 372, 66 Eng Reprint 751.

If the client does not frankly and freely reveal his object and intention as well as facts, there is not
professional confidence, and therefore no privilege. Matthews v. Hoagland (NJ) supra. See to the same
effect Carney v. United R. Co. (1920) 205 Mo App 495, 226 SW 308.

There is no valid claim of privilege in regard to the production of documents passing between solicitor
and client, when the transaction impeached is charged to be based upon fraud, that is the matter to be
 investigated, and it is thought better that the alleged privilege should suffer than that honestly and fair
dealing should appear to be violated with impunity. Smith v. Hunt (1901) 1 Ont L Rep 334.

In Tichborne v. Lushington, shorthand Notes (Eng) p. 5211 (cited in Reg. v. Cox (1884) LR 14 QB Div (Eng)
172 — CCR), the chief justice said "I believe the law is, and properly is, that if a party consults an attorney,
and obtains advice for what afterwards turns out to be the commission of a crime or a fraud, that party so
consulting the attorney has no privilege whatever to close the lips of the attorney from stating the truth.
Indeed, if any such privilege should be contended for, or existing, it would work most grievous hardship
on an attorney, who, after he had been consulted upon what subsequently appeared to be a manifest
crime and fraud, would have his lips closed, and might place him in a very serious position of being
suspected to be a party to the fraud, and without his having an opportunity of exculpating himself . . .
There is no privilege in the case which I have suggested of a party consulting another, a professional man,
as to what may afterwards turn out to be a crime or fraud, and the best mode of accomplishing it."

In Garside v. Outram (1856) 3 Jur NS (Eng) 39, although the question of privilege as to communications
between attorney and client was not involved, the question directly involved being the competency of a
clerk in a business establishment to testify as to certain information which he acquired while working in
the establishment, the court strongly approved of a view as stated arguendo for plaintiff, in Annesley
v. Anglesea (1743) 17 How St Tr (Eng) 1229, as follows: "I shall claim leave to consider whether an attorney
may be examined as to any matter which came to his knowledge as an attorney. If he is employed as an
attorney in any unlawful or wicked act, his duty to the public obliges him to disclose it; no private
obligations can dispense with that universal one which lies on every member of society to discover every
design which may be formed, contrary to the laws of society, to destroy the public welfare. For this
reason, I apprehend that if a secret which is contrary to the public good, such as a design to commit treason,
murder, or perjury, comes to the knowledge of an attorney, even in a cause where he is concerned, the
obligation to the public must dispense with the private obligation to the client."

The court in McMannus v. State (1858) 2 Head (Tenn) 213, said; "It would be monstrous to hold that if
counsel was asked and obtained in reference to a contemplated crime that the lips of the attorney would
be sealed, when the facts might become important to the ends of justice in the prosecution of crime. In
such a case the relation cannot be taken to exist. Public policy would forbid it."

And the court in Lanum v. Patterson (1909) 151 Ill App 36, observed that this rule was not in contravention
of sound public policy, but on the contrary, tended to the maintenance of a higher standard of
professional ethics by preventing the relation of attorney and client from operating as a cloak for fraud.

Communications of a client to an attorney are not privileged if they were a request for advice as to how to
commit a fraud, it being in such a case not only the attorney's privilege, but his duty, to disclose the facts
to the court. Will v. Tornabells & Co. (1907) 3 Porto Rico Fed Rep 125. The court said: "We say this
notwithstanding the comments of opposing counsel as to the indelicacy of his position because of his
being now on the opposite side of the issue that arose as a consequence of the communication he
testifies about, and is interested in the cause to the extent of a large contingent fee, as he confesses."

The object of prohibiting the disclosure of confidential communications is to protect the client, and not to
make the attorney an accomplice or permit him to aid in the commission of a crime. People
vs. Petersen (1901) 60 App Div 118, NYS 941.

The seal of personal confidence can never be used to cover a transaction which is in itself a crime. People
v. Farmer (1909) 194 NY 251, 87 NE 457.

As to disclosing the identity of a client, 81 AM JUR 2d, Witnesses, § 410 and 411, pages 366-368, states:

§ 410. Name or identity of client.

 Disclosure of a client's identity is necessary proof of the existence of the attorney-client relationship and is
not privileged information. Thus, the attorney-client privilege is inapplicable even though the information
was communicated confidentially to the attorney in his professional capacity and, in some cases, in spite
of the fact that the attorney may have been sworn to secrecy, where an inquiry is directed to an attorney
as to the name or identity of his client. This general rule applies in criminal cases, as well as in civil
actions. Where an undisclosed client is a party to an action, the opposing party has a right to know with
whom he is contending or who the real party in interest is, if not the nominal adversary.

§ 411. Disclosure of identity of client as breach of confidentiality.

The revelation of the identification of a client is not usually considered privileged, except where so much
has been divulged with regard to to legal services rendered or the advice sought, that to reveal the
client's name would be to disclose the whole relationship and confidential communications. However,
even where the subject matter of the attorney-client relationship has already been revealed, the client's
name has been deemed privileged.

Where disclosure of the identity of a client might harm the client by being used against him under
circumstances where there are no countervailing factors, then the identity is protected by the attorney-
client privilege.

In criminal proceedings, a client's name may be privileged if information already obtained by the tribunal,
combined with the client's identity, might expose him to criminal prosecution for acts subsequent to, and
because of, which he had sought the advice of his attorney.

Although as a general rule, the identity of a defendant in a criminal prosecution is a matter of public
record and, thus, not covered by the attorney-client privilege, where the attorney has surrendered to the
authorities physical evidence in his possession by way of the attorney-client relationship, the state must
prove the connection between the piece of physical evidence and the defendant without in any way
relying on the testimony of the client's attorney who initially received the evidence and, thus, the attorney
may not be called to the stand and asked to disclose the identity of the client. However, an attorney
cannot refuse to reveal the identity of a person who asked him to deliver stolen property to the police
department, whether a bona fide attorney-client relationship exists between them, inasmuch as the
transaction was not a legal service or done in the attorney's professional capacity.

Distinction: Where an attorney was informed by a male client that his female
acquaintance was possibly involved in [a] his-and-run accident, the identity of the female
did not come within scope of attorney-client privilege although the identity of the male
client was protected. (emphases supplied)

WIGMORE explains why the identity of a client is not within the lawyer-client privilege in this manner:

§ 2313. Identity of client or purpose of suit. — The identity of the attorney's client or the name of the real
party in interest will seldom be a matter communicated in confidence because the procedure of litigation
ordinarily presupposes a disclosure of these facts. Furthermore, so far as a client may in fact desire secrecy
and may be able to secure action without appearing as a party to the proceedings, it would be improper
to sanction such a wish. Every litigant is in justice entitled to know the identity of his opponents. He cannot
be obliged to struggle in the dark against unknown forces. He has by anticipation the right, in later
proceedings, if desired, to enforce the legal responsibility of those who may have maliciously sued or
prosecuted him or fraudulently evaded his claim. He has as much right to ask the attorney "Who fees your
fee?" as to ask the witness (966 supra). "Who maintains you during this trial?" upon the analogy of the
principle already examined (2298 supra), the privilege cannot be used to evade a client's responsibility for
the use of legal process. And if it is necessary for the purpose to make a plain exception to the rule of
confidence, then it must be made. (Wigmore on Evidence, vol. 8, (1961), p. 609; emphases supplied).
 In 114 ALR, 1322, we also find the following statement:

1. Name or identity.

As is indicated in 28 R.C.L. p. 563, it appears that the rule making communications between attorney and
client privileged from disclosure ordinarily does not apply where the inquiry is confined to the fact of the
attorney's employment and the name of the person employing him, since the privilege presupposes the
relationship of client and attorney, and therefore does not attach to its creation.

At the present stage of the proceedings below, the petitioners have not shown that they are so situated with
respect to their principals as to bring them within any of the exceptions established by American jurisprudence.
There will be full opportunity for them to establish that fact at the trial where the broader perspectives of the case
shall have been presented and can be better appreciated by the court. The insistence for their exclusion from the
case is understandable, but the reasons for the hasty resolution desired is naturally suspect.

We do not even have to go beyond our shores for an authority that the lawyer-client privilege cannot be invoked
to prevent the disclosure of a client's identity where the lawyer and the client are conspirators in the commission
of a crime or a fraud. Under our jurisdiction, lawyers are mandated not to counsel or abet activities aimed at
defiance of the law or at lessening confidence in the legal system (Rule 1.02, Canon 1, Code of Professional
Responsibility) and to employ only fair and honest means to attain the lawful objectives of his client (Rule 19.01,
Canon 19, Id.). And under the Canons of Professional Ethics, a lawyer must steadfastly bear in mind that his great
trust is to be performed within and not without the bounds of the law (Canon 15, Id.), that he advances the honor
of his profession and the best interest of his client when he renders service or gives advice tending to impress
upon the client and his undertaking exact compliance with the strictest principles of moral law (Canon 32, Id.).
These canons strip a lawyer of the lawyer-client privilege whenever he conspires with the client in the commission
of a crime or a fraud.

I then vote to DENY, for want of merit, the instant petition.

Narvasa, C.J. and Regalado, J., concur.

PUNO, J., dissenting:

This is an important petition for certiorari to annul the resolutions of the respondent Sandiganbayan denying
petitioners' motion to be excluded from the Complaint for recovery of alleged ill-gotten wealth on the principal
ground that as lawyers they cannot be ordered to reveal the identity of their client.

First, we fast forward the facts. The Presidential Commission on Good Government (PCGG) filed Civil Case No. 33
before the Sandiganbayan against Eduardo M. Cojuangco, Jr., for the recovery of alleged ill-gotten wealth. Sued as
co-defendants are the petitioners in the cases at bar — lawyers Teodoro Regala, Edgardo J. Angara, Avelino V.
Cruz, Jose Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo Escueta and Paraja Hayudini. Also included
as a co-defendant is lawyer Raul Roco, now a duly elected senator of the Republic. All co-defendants were then
partners of the law firm, Angara, Abello, Concepcion, Regala and Cruz Law Offices, better known as the ACCRA
Law Firm. The Complaint against Cojuangco, Jr., and the petitioners alleged, inter alia, viz:

xxx xxx xxx

The wrongs committed by defendants acting singly or collectively and in unlawful concert with one
another, include the misappropriation and theft of public funds, plunder of the nation's wealth, extortion,
blackmail, bribery, embezzlement and other acts of corruption, betrayal of public trust and brazen abuse
of power as more fully described (in the subsequent paragraphs of the complaint), all at the expense and
to the grave and irreparable damage of Plaintiff and the Filipino people.
 Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro D. Regala, Avelino V.
Cruz, Regalio A. Vinluan, Eduardo U. Escueta, Paraja G. Hayudini and Raul S. Roco of Angara, Concepcion,
Cruz, Regala, and Abello law offices (ACCRA) plotted, devised, schemed, conspired and confederated with
each other in setting up, through the use of the coconut levy funds, the financial and corporate
framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CIC
and more than twenty other coconut levy funded corporations, including the acquisition of the San
Miguel Corporation shares and the institutionalization through presidential directives of the coconut
monopoly. through insidious means and machinations, ACCRA, using its wholly-owned investment arm,
ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing
roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987. This ranks ACCRA
Investments Corporation number 44 among the top 100 biggest stockholders of UCPB which has
approximately 1,400,000 shareholders. On the other hand, corporate books show the name Edgardo J.
Angara as holding approximately 3,744 shares as of 7 June 1984.

In their Answer, petitioners alleged that the legal services offered and made available by their firm to its clients
include: (a) organizing and acquiring business organizations, (b) acting as incorporators or stockholders thereof,
and (c) delivering to clients the corresponding documents of their equity holdings (i.e., certificates of stock
endorsed in blank or blank deeds of trust or assignment). They claimed that their activities were "in furtherance of
legitimate lawyering."

In the course of the proceedings in the Sandiganbayan, the PCGG filed a Motion to Admit Third Amended
Complaint and the Third Amended Complaint excluding lawyer Roco as party defendant. Lawyer Roco was
excluded on the basis of his promise to reveal the identity of the principals for whom he acted as
nominee/stockholder in the companies involved in the case.

The Sandiganbayan ordered petitioners to comment on the motion. In their Comment, petitioners demanded that
they be extended the same privilege as their co-defendant Roco. They prayed for their exclusion from the
complaint. PCGG agreed but set the following conditions: (1) disclosure of the identity of their client; (2)
submission of documents substantiating their lawyer-client relationship; and (3) submission of the deeds of
assignment petitioners executed in favor of their client covering their respective shareholdings. The same
conditions were imposed on lawyer Roco.

Petitioners refused to comply with the PCGG conditions contending that the attorney-client privilege gives them
the right not to reveal the identity of their client. They also alleged that lawyer Roco was excluded though he did
not in fact reveal the identity of his clients. On March 18, 1992, the Sandiganbayan denied the exclusion of
petitioners in Case No. 33. It held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have
acted, i.e., their principal, and that will be their choice. But until they do identify their clients,
considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to
the debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they
have begun to establish the basis for recognizing the privilege; the existence and identity of the client.

This is what appears to be the cause for which they have been impleaded by the PCGG as defendants
herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently
identified his principal, which revelation could show the lack of course against him. This in turn has
allowed the PCGG to exercise its power both under the rules of Agency and under Section 5 of E.O. No.
14-A in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).
 The PCGG has apparently offered to the ACCRA lawyers the same conditions availed of by Roco; full
disclosure in exchange for exclusion from these proceedings (par. 7, PCGG's COMMENT dated November
4, 1991). The ACCRA lawyers have preferred not to make the disclosures required by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as a party defendants. In the
same vein, they cannot compel the PCGG to be accorded the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA lawyers and joined in by
Atty. Paraja G. Hayudini for the same treatment by the PCGG as accorded to Raul S. Roco is DENIED for
lack of merit.

Sandiganbayan later denied petitioners' motions for reconsideration in its resolutions dated May 21, 1988 and
September 3, 1992.

In this petition for certiorari, petitioners contend:

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners ACCRA lawyers who
indisputably acted as lawyers in serving as nominee-stockholders, to the strict application of the law
agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not considering petitioners ACCRA
lawyers and Mr. Roco as similarly situated and, therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or had undertaken to
reveal, the identities of the client(s) for whom he acted as nominee-stockholder.

2. Even assuming that Mr. Roco had revealed, or had undertaken to reveal, the identities
of the client(s), the disclosure does not constitute a substantial distinction as would make
the classification reasonable under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue preference in favor of Mr.

Roco and violation of the equal protection clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding that, under the facts
of this case, the attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity
of their client(s) and the other information requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege includes the identity
of the client(s).

2. The factual disclosures required by the PCGG are not limited to the identity of
petitioners ACCRA lawyers' alleged client(s) but extend to other privileged matters.

IV
 The Honorable Sandiganbayan committed grave abuse of discretion in not requiring that the dropping of
party-defendants by the PCGG must be based on reasonable and just grounds and with due consideration
to the constitutional right of petitioners ACCRA lawyers to the equal protection of the law.

The petition at bar is atypical of the usual case where the hinge issue involves the applicability of attorney-client
privilege. It ought to be noted that petitioners were included as defendants in Civil Case No. 33 as conspirators.
Together with Mr. Cojuangco, Jr., they are charged with having ". . . conspired and confederated with each other in
setting up, through the use of the coconut levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CICI and more than twenty other coconut
levy funded corporations, including the acquisition of San Miguel Corporation shares and the institutionalization
through presidential directives of the coconut monopoly." To stress, petitioners are charged with having conspired
in the commission of crimes. The issue of attorney-client privilege arose when PCGG agreed to exclude petitioners
from the complaint on condition they reveal the identity of their client. Petitioners refused to comply and assailed
the condition on the ground that to reveal the identity of their client will violate the attorney-client privilege.

It is thus necessary to resolve whether the Sandiganbayan committed grave abuse of discretion when it rejected
petitioners' thesis that to reveal the identity of their client would violate the attorney-client privilege. The
attorney-client privilege is the oldest of the privileges for confidential communications known to the common
law.1 For the first time in this jurisdiction, we are asked to rule whether the attorney-client privilege includes the
right not to disclose the identity of client. The issue poses a trilemma for its resolution requires the delicate
balancing of three opposing policy considerations. One overriding policy consideration is the need for courts to
discover the truth for truth alone is the true touchstone of justice. 2 Equally compelling is the need to protect the
adversary system of justice where truth is best extracted by giving a client broad privilege to confide facts to his
counsel.3 Similarly deserving of sedulous concern is the need to keep inviolate the constitutional right against self-
incrimination and the right to effective counsel in criminal litigations. To bridle at center the centrifugal forces of
these policy considerations, courts have followed to prudential principle that the attorney-client privilege must not
be expansively construed as it is in derogation of the search for truth.4 Accordingly, a narrow construction has
been given to the privilege and it has been consistently held that "these competing societal interests demand that
application of the privilege not exceed that which is necessary to effect the policy considerations underlying the
privilege, i.e., the privilege must be upheld only in those circumstances for which it was created.'" 5

Prescinding from these premises, our initial task is to define in clear strokes the substantive content of the
attorney-client privilege within the context of the distinct issues posed by the petition at bar. With due respect, I
like to start by stressing the irreducible principle that the attorney-client privilege can never be used as a shield to
commit a crime or a fraud. Communications to an attorney having for their object the commission of a crime ". . .
partake the nature of a conspiracy, and it is not only lawful to divulge such communications, but under certain
circumstances it might become the duty of the attorney to do so. The interests of public justice require that no
such shield from merited exposure shall be interposed to protect a person who takes counsel how he can safely
commit a crime. The relation of attorney and client cannot exist for the purpose of counsel in concocting
crimes."6 In the well chosen words of retired Justice Quiason, a lawyer is not a gun for hire. 7 I hasten to add,
however, that a mere allegation that a lawyer conspired with his client to commit a crime or a fraud will not defeat
the privilege.8 As early as 1933, no less than the Mr. Justice Cardozo held in Clark v. United States9 that: "there are
early cases apparently to the effect that a mere charge of illegality, not supported by any evidence, will set the
confidences free . . . But this conception of the privilege is without support . . . To drive the privilege away, there
must be 'something to give colour to the charge;' there must be prima facie evidence that it has foundation in
fact." In the petition at bar, however, the PCGG appears to have relented on its original stance as spelled out in its
Complaint that petitioners are co-conspirators in crimes and cannot invoke the attorney-client privilege. The
PCGG has agreed to exclude petitioners from the Complaint provided they reveal the identity of their client. In
fine, PCGG has conceded that petitioner are entitled to invoke the attorney-client privilege if they reveal their
client's identity.

Assuming then that petitioners can invoke the attorney-client privilege since the PCGG is no longer proceeding
against them as co-conspirators in crimes, we should focus on the more specific issue of whether the attorney-
client privilege includes the right not to divulge the identity of a client as contended by the petitioners. As a
general rule, the attorney-client privilege does not include the right of non-disclosure of client identity. The
general rule, however, admits of well-etched exceptions which the Sandiganbayan failed to recognize. The general
rule and its exceptions are accurately summarized in In re Grand Jury Investigation, 10 viz:

The federal forum is unanimously in accord with the general rule that the identity of a client is, with
limited exceptions, not within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Proceedings (Pavlick), 680 F.2d 1026, 1027 (5th Cir. 1982) (en banc); In re Grand Jury Proceedings (Jones),
517 F. 2d 666, 670-71 (5th Cir. 1975); In re Grand Jury Proceedings (Fine), 651 F. 2d 199, 204 (5th Cir.
1981); Frank v. Tomlinson, 351 F.2d 384 (5th Cir. 1965), cert. denied, 382 U.S. 1082, 86 S.Ct. 648, 15 L.Ed.2d
540 (1966); In re Grand Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982); In re Grand Jury Subpoenas
Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982); In re Grand Jury Proceedings
(Lawson), 600 F.2d 215, 218 (9th Cir. 1979).

The Circuits have embraced various "exceptions" to the general rule that the identity of a client is not
within the protective ambit of the attorney-client privilege. All such exceptions appear to be firmly
grounded in the Ninth Circuit's seminal decision in Baird v. Koerner, 279 F.2d 633 (9th Cir. 1960). In Baird
the IRS received a letter from an attorney stating that an enclosed check in the amount of $12,706 was
being tendered for additional amounts due from undisclosed taxpayers. When the IRS summoned the
attorney to ascertain the identity of the delinquent taxpayers the attorney refused identification assertion
the attorney-client privilege. The Ninth Circuit, applying California law, adjudged that the "exception" to
the general rule as pronounced in Ex parte McDonough, 170 Cal. 230, 149 P. 566 (1915) controlled:

The name of the client will be considered privileged matter where the circumstances of
the case are such that the name of the client is material only for the purpose of showing
an acknowledgment of guilt on the part of such client of the very offenses on account of
which the attorney was employed.

Baird, supra, 279 F.2d at 633. The identity of the Baird taxpayer was adjudged within this exception to the
general rule. The Ninth Circuit has continued to acknowledge this exception.

A significant exception to this principle of non-confidentiality holds that such information

may be privileged when the person invoking the privilege is able to show that a strong
possibility exists that disclosure of the information would implicate the client in the very
matter for which legal advice was sought in the first case.

In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982).
Accord: United States v. Hodge and Zweig, 548 F.2d 1347, 1353 (9th Cir. 1977); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Sherman, 627 F.2d 189, 190-91
(9th Cir. 1980); In re Grand Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982). This exception, which can
perhaps be most succinctly characterized as the "legal advice" exception, has also been recognized by
other circuits. See: In re Walsh, 623 F.2d 489, 495 (7th Cir.), cert. denied, 449 U.S. 994, 101 S. Ct. 531, 66
L.Ed.2d 291 (1980); In re Grand Jury Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980), cert. denied, 449
U.S.1083, 101 S.Ct. 869-70, 66 L.Ed.2d 808 (1981). Since the legal advice exception is firmly grounded in
the policy of protecting confidential communications, this Court adopts and applies its principles herein.
See: In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), supra.

It should be observed, however that the legal advice exception may be defeated through a prima
facie showing that the legal representation was secured in furtherance of present or intended continuing
illegality, as where the legal representation itself is part of a larger conspiracy. See: In re Grand Jury
Subpoenas Decus Tecum (Marger/Merenbach), supra, 695 F.2d at 365 n. 1; In re Walsh, 623 F.2d 489, 495
(7th Cir.), cert. denied, 449, U.S. 994, 101 S.Ct. 531, 66 L.Ed. 2d 291 (1980); In re Grand Jury Investigation
(Tinari), 631 F.2d 17, 19 (3d Cir 1980); cert. denied, 449 U.S. 1083, 101 S.Ct. 869, 66 L.Ed. 2d 808 (1981); In
 re Grand Jury Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Friedman, 445 F.2d
1076, 1086 (9th Cir. 1971). See also: Clark v. United States, 289 U.S. 1, 15, 53, S.Ct. 465, 469, 77, L.Ed. 993
(1933); In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026, 1028-29 (5th Cir. 1982 (en banc).

Another exception to the general rule that the identity of a client is not privileged arises where disclosure
of the identity would be tantamount to disclosing an otherwise protected confidential communication. In
Baird, supra, the Ninth Circuit observed:

If the identification of the client conveys information which ordinarily would be conceded
to be part of the usual privileged communication between attorney and client, then the
privilege should extend to such identification in the absence of another factors.

Id., 279 F.2d at 632. Citing Baird, the Fourth Circuit promulgated the following exception:

To the general rule is an exception, firmly embedded as the rule itself. The privilege may
be recognized where so much of the actual communication has already been disclosed
that identification of the client amounts to disclosure of a confidential communication.

NLRB v. Harvey, 349 F.2d 900, 905 (4th Cir. 1965). Accord: United States v. Tratner, 511 F.2d 248, 252 (7th
Cir. 1975); Colton v. United States, 306 F.2d 633, 637 (2d Cir. 1962), cert. denied, 371 U.S. 951, 83 S.Ct. 505,
9 L.Ed.2d 499 1963); Tillotson v. Boughner, 350 F.2d 663, 666 (7th Cir. 1965); United States v. Pape, 144 F.2d
778, 783 (2d Cir. 1944). See also: Chirac v. Reinecker, 24 U.S. (11 Wheat) 280, 6 L.Ed. 474 (1826). The
Seventh Circuit has added to the Harvey exception the following emphasized caveat:

The privilege may be recognized where so much of the actual communication has already
been disclosed [not necessarily by the attorney, but by independent sources as well] that
identification of the client [or of fees paid] amounts to disclosure of a confidential
communication.

United States vs. Jeffers, 532 F.2d 1101, 1115 (7th Cir. 1976 (emphasis added). The Third Circuit, applying
this exception, has emphasized that it is the link between the client and the communication, rather than
the link between the client and the possibility of potential criminal prosecution, which serves to bring the
client's identity within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Empanelled February 14, 1978 (Markowitz), 603 F.2d 469, 473 n. 4 (3d Cir. 1979). Like the "legal advice"
exception, this exception is also firmly rooted in principles of confidentiality.

Another exception, articulated in the Fifth Circuit's en banc decision of In re Grand Jury Proceedings
(Pavlick), 680 F.2d 1026 (5th Cir. 1982 (en banc), is recognized when disclosure of the identity of the client
would provide the "last link" of evidence:

We have long recognized the general rule that matters involving the payment of fees and
the identity of clients are not generally privileged. In re Grand Jury Proceedings, (United
States v. Jones), 517 F.2d 666 (5th Cir. 1975); see cases collected id. at 670 n. 2. There we
also recognized, however, a limited and narrow exception to the general rule, one that
obtains when the disclosure of the client's identity by his attorney would have supplied
the last link in an existing chain of incriminating evidence likely to lead to the client's
indictment.

I join the majority in holding that the Sandiganbayan committed grave abuse of discretion when it misdelineated
the metes and bounds of the attorney-client privilege by failing to recognize the exceptions discussed above.

Be that as it may, I part ways with the majority when it ruled that petitioners need not prove they fall within the
exceptions to the general rule. I respectfully submit that the attorney-client privilege is not a magic mantra whose
invocation will ipso facto and ipso jure drape he who invokes it with its protection. Plainly put, it is not enough to
assert the privilege.11 The person claiming the privilege or its exceptions has the obligation to present the
underlying facts demonstrating the existence of the privilege.12 When these facts can be presented only by
revealing the very information sought to be protected by the privilege, the procedure is for the lawyer to move for
an inspection of the evidence in an in camera hearing.13 The hearing can even be in camera and ex-parte. Thus, it
has been held that "a well-recognized means for an attorney to demonstrate the existence of an exception to the
general rule, while simultaneously preserving confidentiality of the identity of his client, is to move the court for an
in camera ex-parte hearing.14 Without the proofs adduced in these in camera hearings, the Court has no factual
basis to determine whether petitioners fall within any of the exceptions to the general rule.

In the case at bar, it cannot be gainsaid that petitioners have not adduced evidence that they fall within any of the
above mentioned exceptions for as aforestated, the Sandiganbayan did not recognize the exceptions, hence, the
order compelling them to reveal the identity of their client. In ruling that petitioners need not further establish the
factual basis of their claim that they fall within the exceptions to the general rule, the majority held:

The circumstances involving the engagement of lawyers in the case at bench therefore clearly reveal that
the instant case falls under at least two exceptions to the general rule. First, disclosure of the alleged
client's name would lead to establish said client's connection with the very fact in issue of the case, which
is privileged information, because the privilege, as stated earlier, protects the subject matter or the
substance (without which there would be no attorney-client relationship). Furthermore, under the third
main exception, revelation of the client's name would obviously provide the necessary link for the
prosecution to build its case, where none otherwise exists. It is the link, in the word of Baird, "that would
inevitably form the chain of testimony necessary to convict the (client) of a . . . crime.

I respectfully submit that the first and third exceptions relied upon by the majority are not self-executory but need
factual basis for their successful invocation. The first exception as cited by the majority is ". . . where a strong
probability exists that revealing the clients' name would implicate that client in the very activity for which he
sought the lawyer's advice." It seems to me evident that "the very activity for which he sought the lawyer's advice"
is a question of fact which must first be established before there can be any ruling that the exception can be
invoked. The majority cites Ex Parte Enzor, 15 and
U S v. Hodge and Zweig,16 but these cases leave no doubt that the "very activity" for which the client sought the
advice of counsel was properly proved. In both cases, the "very activity" of the clients reveal they sought advice on
their criminal activities. Thus, in Enzor, the majority opinion states that the "unidentified client, an election official,
informed his attorney in confidence that he had been offered a bribe to violate election laws or that he had
accepted a bribe to that end."17 In Hodge, the "very activity" of the clients deals with illegal importation of drugs.
In the case at bar, there is no inkling whatsoever about the "very activity" for which the clients of petitioners
sought their professional advice as lawyers. There is nothing in the records that petitioners were consulted on the
"criminal activities" of their client. The complaint did allege that petitioners and their client conspired to commit
crimes but allegations are not evidence.

So it is with the third exception which as related by the majority is "where the government's lawyers have no case
against an attorney's client unless, by revealing the client's name, the said name would furnish the only link that
would form the chain of testimony necessary to convict an individual of a crime."18 Again, the rhetorical questions
that answer themselves are: (1) how can we determine that PCGG has "no case" against petitioners without
presentation of evidence? and (2) how can we determine that the name of the client is the only link without
presentation of evidence as to the other links? The case of Baird vs. Koerner19 does not support the "no need for
evidence" ruling of the majority. In Baird, as related by the majority itself, "a lawyer was consulted by the
accountants and the lawyer of certain undisclosed taxpayers regarding steps to be taken to place the undisclosed
taxpayers in a favorable position in case criminal charges were brought against them by the US Internal Revenue
Service (IRS). It appeared that the taxpayers' returns of previous years were probably incorrect and the taxes
understated.20 Once more, it is clear that the Baird court was informed of the activity of the client for which the
lawyer was consulted and the activity involved probable violation of the tax laws. Thus, the Court held:
 The facts of the instant case bring it squarely within that exception to the general rule. Here money was
received by the government, paid by persons who thereby admitted they had not paid a sufficient amount
in income taxes some one or more years in the past. The names of the clients are useful to the
government for but one purpose — to ascertain which taxpayers think they were delinquent, so that it
may check the records for that one year or several years. The voluntary nature of the payment indicates a
belief by the taxpayers that more tax or interest or penalties are due than the sum previously paid, if any.
It indicates a feeling of guilt for nonpayment of taxes, though whether it is criminal guilt is undisclosed.
But it may well be the link that could form the chain of testimony necessary to convict an individual of a
federal crime. Certainly the payment and the feeling of guilt are the reasons the attorney here involved
was employed — to advise his clients what, under the circumstances, should be done.

In fine, the factual basis for the ruling in Baird was properly established by the parties. In the case at bar, there is
no evidence about the subject matter of the consultation made by petitioners' client. Again, the records do not
show that the subject matter is criminal in character except for the raw allegations in the Complaint. Yet, this is the
unstated predicate of the majority ruling that revealing the identity of the client ". . . would furnish the only link
that would form the chain of testimony necessary to convict an individual of a crime." The silent implication is
unflattering and unfair to petitioners who are marquee names in the legal profession and unjust to their
undisclosed client.

Finally, it ought to be obvious that petitioners' right to claim the attorney-client privilege is resolutory of the
Complaint against them, and hence should be decided ahead and independently of their claim to equal protection
of the law. Pursuant to the rule in legal hermeneutics that courts should not decide constitutional issues unless
unavoidable, I also respectfully submit that there is no immediate necessity to resolve petitioners' claim to equal
protection of the law at this stage of the proceedings.

IN VIEW WHEREOF, I respectfully register a qualified dissent from the majority opinion.
In Re Grand Jury Proceedings United States of America, Appellant, 309 F.2d 440 (3d Cir. 1962)

U.S. Court of Appeals for the Third Circuit - 309 F.2d 440 (3d Cir. 1962)Argued June 21, 1962
Decided November 1, 1962

Lionel Kestenbaum, Asst. Chief, Appellate Section, Antitrust Division, Department of Justice, Washington, D. C. (Lee
Loevinger, Asst. Atty. Gen., George R. Kucik, Attorney, Department of Justice, Washington, D. C., Donald G. Balthis, Chief,
John E. Sarbaugh, Attorney, Department of Justice, Middle Atlantic Office, Antitrust Division, Philadelphia, Pa., on the brief),
for appellant.

W. Bradley Ward, Philadelphia, Pa. (Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Edward W. Mullinix, Philadelphia,
Pa., on the brief), for Allis-Chalmers Mfg. Co.

Roberts B. Owen, Washington, D. C., Henry T. Reath, Philadelphia, Pa. (Henry W. Sawyer, III, Drinker, Biddle & Reath,
Philadelphia, Pa., Covington & Burling, Alvin Friedman, Washington, D. C., on the brief), for General Electric Co.

Philip H. Strubing, Philadelphia, Pa., Ralph L. McAfee, New York City (Pepper, Hamilton & Scheetz, Philadelphia, Pa.,
Cravath, Swaine & Moore, Victor M. Earle, III, New York City, of counsel), for Westinghouse Electric Corp.

Austin, Burns, Appell & Smith, New York City, Cyrus Austin, Joseph W. Burns, New York City, for Ingersoll-Rand Co.

Busser, Smith & Harding, Philadelphia, Pa., George A. Smith, Philadelphia, Pa., James E. Austin, New York City, for DeLaval
Steam Turbine Co.

Morgan, Lewis & Bockius, Philadelphia, Pa., Miles W. Kirkpatrick, Philadelphia, Pa., for C. H. Wheeler Mfg. Co.

Before BIGGS, Chief Judge, and HASTIE and SMITH, Circuit Judges.

WILLIAM F. SMITH, Circuit Judge.

During 1960, five separate grand juries, impanelled in the Eastern District of Pennsylvania, returned twenty indictments
which charged twenty-nine manufacturers of heavy electrical equipment, and forty-seven corporate officials, with
violations of Section 1 of the Sherman Act, 15 U.S.C.A. § 1. Of the series of indictments, United States v. General Electric
Company et al.1 (Cr. No. 20401), charged a conspiracy " [t]o fix and maintain prices, terms and conditions for the sale of
turbine-generator units" and " [t]o submit noncompetitive, collusive and rigged bids and price quotations * * *" to utility
companies and other purchasers. United States v. Foster Wheeler Corporation et al. 2 (Cr. No. 20402), charged a similar
conspiracy in connection with the sale of steam condensers. The defendants were convicted on the respective indictments
on pleas of guilty or nolo contendere.
The three corporations convicted in Criminal No. 20401 have been subject to the provisions of a Cease and Desist
Order3 issued by the Federal Trade Commission. This order directs the corporations to "cease and desist" from " [f]ixing
and maintaining uniform delivered prices" and from " [s]ubmitting uniform or identical delivered prices in competitive
bidding * * *" in connection with the sale of turbine generators. The six corporations convicted in Criminal No. 20402,
except Carrier Corporation, have been subject to the provisions of a Cease and Desist Order 4 which prohibits similar unfair
methods of competition in connection with the sale of steam condensers. These orders were issued by the Commission on
April 2, 1937, pursuant to the authority vested in it by Section 5(b) of the Act, 15 U.S. C.A. § 45(b), and became final on May
21, 1938.
The convictions of the corporate defendants in the criminal actions prompted an investigation by the Commission of
possible violations of the cease and desist orders and the liability of the respective corporations for the penalties
prescribed by Section 5(l) of the Act, 15 U.S.C.A. § 45(l).5 The penalty provisions are enforceable in an appropriate
proceeding brought by the United States whenever the "Commission has reason to believe that any * * * corporation is
liable" under subdivision (l) and upon certification of the "facts" to the Attorney General. 6
This matter came before the court below on a verified petition, and an amendment thereto, requesting that the
Commission or its designated attorneys be granted leave to inspect and copy the following:
"(1) Documents * * * submitted by corporations named as defendants or co-conspirators, and,
"(2) Transcripts of grand jury testimony * * * of witnesses employed or formerly employed by corporations named as
defendants or co-conspirators."
The request was limited to documents and testimony relating to turbine generators and steam condensers. The
Commission sought access to this evidence in connection with its investigation. The petition was resisted by the
corporations on their own behalf and on behalf of their respective employees. The petition was denied and the present
appeal followed.
The proceedings before a grand jury are protected against disclosure by the common law policy of secrecy. This policy is
continued in rule 6(e) of the Federal Rules of Criminal Procedure, 18 U.S.C.A., which is the measure of the Commission's
privilege of access to the documents and transcripts requested. The first sentence of this rule permits disclosure, without
leave of the district court, "of matters occurring before the grand jury * * * to the attorneys for the government for use in
the performance of their duties." The term "attorneys for the government" is limited in its application to "the Attorney
General, an authorized assistant of the Attorney General, a United States Attorney, an authorized assistant of the United
States Attorney * * *." Fed.Rules Cr.Proc. rule 54(c), 18 U.S.C.A.
It is here contended that "* * * the Commission is entitled to the use of the grand jury material * * * because of its special
relation to" the Attorney General, under whose direction the grand jury proceeding was conducted. The basis of this
contention is the dual responsibility of the Attorney General and the Commission for the enforcement of the Clayton Act, a
responsibility which the Attorney General shares with other administrative agencies. 7 15 U.S.C.A. §§ 21 and 25; United
States v. W. T. Grant Co., 345 U.S. 629, 73 S. Ct. 894, 97 L. Ed. 1303 (1953); Federal Trade Commission v. Cement
Institute, 333 U.S. 683, 68 S. Ct. 793, 92 L. Ed. 1010 (1948). The attorneys for the Commission argue that since the Attorney
General may have free access to the grand jury evidence in the performance of his duties the same privilege should be
accorded to them.
We have heretofore noted that the right of access enjoyed by the Attorney General is derived from the express language
of the first sentence of rule 6(e), supra. The term "attorneys for the government" is restrictive in its application and does
not include the attorneys for the administrative agencies. See rule 54(c), supra. If it had been intended that the attorneys
for the administrative agencies were to have free access to matters occurring before a grand jury, the rule would have so
provided. The rule is not ambiguous and we see no reason to extend its application by judicial interpretation.
The Commission urges in further support of its petition the pertinent provision of the second sentence of the rule, supra,
which authorizes the disclosure of matters occurring before the grand jury when "directed by the court preliminarily to or
in connection with a judicial proceeding." It is argued that the requirements of the rule are satisfied in the instant case. We
cannot agree. The Commission does not seek the grand jury evidence for use in any judicial proceeding; it seeks a private
disclosure in aid of an administrative investigation into possible violations of the cease and desist orders.
There is no judicial proceeding now pending and it is possible that none may result from the investigation. The function of
the Commission is to ascertain whether there is reason to believe that one or more of the corporations is liable to a
penalty and, if it is so ascertained, to certify the facts to the Attorney General. The exclusive authority to enforce the
statutory provision is vested in the Attorney General. 15 U.S.C.A., supra, at footnote 6. The investigation undertaken by the
Commission is preliminary to and in connection with the ex parte administrative proceeding contemplated by the statute;
it is not preliminary to or in connection with a judicial proceeding within the intendment of the rule.
The Commission argues that its "petition * * * comes within the settled rule authorizing disclosure of grand jury evidence
for the use of government law-enforcement agencies other than those involved in the grand jury proceeding." (Emphasis
by the Court.) It is further argued that under this rule the petition should have been granted upon a showing that "the
grand jury evidence [would] be material and useful to a lawful function of the * * * agency." The cases cited 8 in support of
the argument establish no such "settled rule." The decision of the court in each of those cases, consistent with established
principles, rested on a determination that under the facts presented the interests of justice outweighed the countervailing
policy of secrecy. The disclosure of evidence "material and useful to a lawful function" may facilitate investigation and
serve the convenience of the agency, but in our opinion more is required to outweigh the traditional policy of secrecy.
The courts have uniformly held that a petition or motion for leave to inspect grand jury evidence is addressed to the
sound discretion of the trial judge, to be dealt with by him in light of the facts and circumstances of the particular case.
Pittsburgh Plate Glass Co. v. United States, 360 U.S. 395, 399, 79 S. Ct. 1237, 3 L. Ed. 2d 1323 (1959), and the cases therein
cited; Franano v. United States, 277 F.2d 511, 513 (8th Cir. 1960); Herzog v. United States, 226 F.2d 561, 566 (9th Cir. 1955).
This discretion should be exercised favorably to disclosure only when it is persuasively shown that the ends of justice
require it. The action of the trial judge on such a petition or motion may not be disturbed absent a clear abuse of
discretion.
The Commission has plenary authority to investigate possible violations of its cease and desist orders and, under Section 9
of the Act, the "power to require by subpoena the attendance and testimony of witnesses and the production of all * * *
documentary evidence relating to any matter under investigation." 15 U.S.C.A. § 49. See United States v. Morton Salt
Company, 338 U.S. 632, 643, 70 S. Ct. 357, 94 L. Ed. 401 (1960). The witnesses who appeared before the grand jury, and the
documents there produced, are readily available to the Commission and subject to administrative subpoena. It seems
reasonably clear that under these circumstances it was not an abuse of discretion to hold the secrecy of the grand jury
inviolate.
The decision of the court below will be affirmed.
1
General Electric Company, Allis-Chalmers Manufacturing Company, Westinghouse Electric Corporation, and certain
individuals. Carrier Corporation, DeLaval Steam Turbine Company and Worthington Corporation, were named as co-
conspirators but not as defendants
2
Foster Wheeler Corporation, Allis-Chalmers Manufacturing Company, Carrier Corporation, Ingersoll-Rand Company,
Westinghouse Electric Corporation, C. H. Wheeler Manufacturing Company, Worthington Corporation, and certain
individuals
3
In the matter of General Electric Company, et al., Docket No. 2941, 24 F.T.C. 881. Elliott Company, named as a respondent,
has been a division of Carrier Corporation since 1957
4
In the matter of Westinghouse Electric and Manufacturing Co., et al., Docket No. 2941, 24 F.T.C. 892
5
15 U.S.C.A. § 45(l). "Any person, partnership, or corporation who violates an order of the Commission to cease and desist
after it has become final, and while such order is in effect, shall forfeit and pay to the United States a civil penalty of not
more than $5,000 for each violation, which shall accrue to the United States and may be recovered in a civil action brought
by the United States. * * *"
6
15 U.S.C.A. § 56. "Whenever the Federal Trade Commission has reason to believe that any person, partnership, or
corporation is liable to a penalty * * * under subsection (l) of section 45 of this title, it shall certify the facts to the Attorney
General, whose duty it shall be to cause appropriate proceedings to be brought for the enforcement of the provisions of
such * * * subsection."
7
Interstate Commerce Commission, Federal Communications Commission, Civil Aeronautics Board, and Federal Reserve
Board. 15 U.S.C.A. § 21
8
Doe v. Rosenberry, 255 F.2d 118 (2d Cir. 1958); In re Petition for Disclosure of Evidence, 184 F. Supp. 38 (E.D. Va. 1960); In
re Bullock, 103 F. Supp. 639 (D.C.1952); In re Grand Jury Proceedings, 4 F. Supp. 283 (E.D. Pa. 1933). If our interpretation of
these cases agreed with that of the Commission we would be constrained to disregard them
G.R. No. L-21237 March 22, 1924

JAMES D. BARTON, plaintiff-appellee,

vs.
LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant.

Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant.
Frank B. Ingersoll for appellee.

STREET, J.:

This action was instituted in the Court of First Instance of the City of Manila by James D. Barton, to recover of the Leyte
Asphalt & Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30, United States currency, and
further to secure a judicial pronouncement to the effect that the plaintiff is entitled to an extension of the terms of the
sales agencies specified in the contract Exhibit A. The defendant answered with a general denial, and the cause was heard
upon the proof, both documentary and oral, after which the trial judge entered a judgment absolving the defendant
corporation from four of the six causes of action set forth in the complaint and giving judgment for the plaintiff to recover
of said defendant, upon the first and fourth causes of action, the sum of $202,500, United States currency, equivalent to
$405,000, Philippine currency, with legal interest from June 2, 1921, and with costs. From this judgment the defendant
company appealed.

The plaintiff is a citizen of the United States, resident in the City of Manila, while the defendant is a corporation organized
under the law of the Philippine Islands with its principal office in the City of Cebu, Province of Cebu, Philippine Islands.
Said company appears to be the owner by a valuable deposit of bituminous limestone and other asphalt products, located
on the Island of Leyte and known as the Lucio mine. On April 21, 1920, one William Anderson, as president and general
manager of the defendant company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing the latter to sell the
products of the Lucio mine in the Commonwealth of Australia and New Zealand upon a scale of prices indicated in said
letter.

In the third cause of action stated in the complaint the plaintiff alleges that during the life of the agency indicated in
Exhibit B, he rendered services to the defendant company in the way of advertising and demonstrating the products of the
defendant and expended large sums of money in visiting various parts of the world for the purpose of carrying on said
advertising and demonstrations, in shipping to various parts of the world samples of the products of the defendant, and in
otherwise carrying on advertising work. For these services and expenditures the plaintiff sought, in said third cause of
action, to recover the sum of $16,563.80, United States currency. The court, however, absolved the defendant from all
liability on this cause of action and the plaintiff did not appeal, with the result that we are not now concerned with this
phase of the case. Besides, the authority contained in said Exhibit B was admittedly superseded by the authority expressed
in a later letter, Exhibit A, dated October 1, 1920. This document bears the approval of the board of directors of the
defendant company and was formally accepted by the plaintiff. As it supplies the principal basis of the action, it will be
quoted in its entirety.

(Exhibit A)
CEBU, CEBU, P. I.
October 1, 1920.

JAMES D. BARTON, Esq.,

Cebu Hotel City.

DEAR SIR: — You are hereby given the sole and exclusive sales agency for our bituminous limestone and other asphalt
products of the Leyte Asphalt and Mineral Oil Company, Ltd., May first, 1922, in the following territory:

Australia Saigon Java

 New Zealand India China

Tasmania Sumatra Hongkong

Siam and the Straits Settlements, also in the United States of America until May 1, 1921.

As regard bituminous limestone mined from the Lucio property. No orders for less than one thousand (1,000) tons will be
accepted except under special agreement with us. All orders for said products are to be billed to you as follows:

Per ton
In 1,000 ton lots ........................................... P15
In 2,000 ton lots ........................................... 14
In 5,000 ton lots ........................................... 12
In 10,000 ton lots .......................................... 10

with the understanding, however that, should the sales in the above territory equal or exceed ten thousand (10,000) tons
in the year ending October 1, 1921, then in that event the price of all shipments made during the above period shall be
ten pesos (P10) per ton, and any sum charged to any of your customers or buyers in the aforesaid territory in excess of ten
pesos (P10) per ton, shall be rebated to you. Said rebate to be due and payable when the gross sales have equalled or
exceeded ten thousand (10,000) tons in the twelve months period as hereinbefore described. Rebates on lesser sales to
apply as per above price list.

You are to have full authority to sell said product of the Lucio mine for any sum see fit in excess of the prices quoted
above and such excess in price shall be your extra and additional profit and commission. Should we make any collection in
excess of the prices quoted, we agree to remit same to your within ten (10) days of the date of such collections or
payments.

All contracts taken with municipal governments will be subject to inspector before shipping, by any authorized
representative of such governments at whatever price may be contracted for by you and we agree to accept such
contracts subject to draft attached to bill of lading in full payment of such shipment.

It is understood that the purchasers of the products of the Lucio mine are to pay freight from the mine carriers to
destination and are to be responsible for all freight, insurance and other charges, providing said shipment has been
accepted by their inspectors.

All contracts taken with responsible firms are to be under the same conditions as with municipal governments.

All contracts will be subject to delays caused by the acts of God, over which the parties hereto have no control.

It is understood and agreed that we agree to load all ships, steamers, boats or other carriers prompty and without delay
and load not less than 1,000 tons each twenty-four hours after March 1, 1921, unless we so notify you specifically prior to
that date we are prepared to load at that rate, and it is also stipulated that we shall not be required to ship orders of 5,000
tons except on 30 days notice and 10,000 tons except on 60 days notice.

If your sales in the United States reach five thousand tons on or before May 1, 1921, you are to have sole rights for this
territory also for one year additional and should your sales in the second year reach or exceed ten thousand tons you are
to have the option to renew the agreement for this territory on the same terms for an additional two years.

Should your sales equal exceed ten thousand (10,000) tons in the year ending October 1, 1921, or twenty thousand
(20,000) tons by May 1, 1922, then this contract is to be continued automatically for an additional three years ending April
30, 1925, under the same terms and conditions as above stipulated.
The products of the other mines can be sold by you in the aforesaid territories under the same terms and conditions as
the products of the Lucio mine; scale of prices to be mutually agreed upon between us.

LEYTE ASPHALT & MINERAL OIL CO., LTD.

By (Sgd.) WM. ANDERSON
President

(Sgd.) W. C. A. PALMER
Secretary

Approved by Board of Directors,

October 1, 1920.
(Sgd.) WM. ANDERSON
President

Accepted.
(Sgd.) JAMES D. BARTON
Witness D. G. MCVEAN

Upon careful perusal of the fourth paragraph from the end of this letter it is apparent that some negative word has been
inadvertently omitted before "prepared," so that the full expression should be "unless we should notify you specifically
prior to that date that we are unprepared to load at that rate," or "not prepared to load at that rate."

Very soon after the aforesaid contract became effective, the plaintiff requested the defendant company to give him a
similar selling agency for Japan. To this request the defendant company, through its president, Wm. Anderson, replied,
under date of November 27, 1920, as follows:

In re your request for Japanese agency, will say, that we are willing to give you, the same commission on all sales
made by you in Japan, on the same basis as your Australian sales, but we do not feel like giving you a regular
agency for Japan until you can make some large sized sales there, because some other people have given us
assurances that they can handle our Japanese sales, therefore we have decided to leave this agency open for a
time.

Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that port he entered into an agreement with
Ludvigsen & McCurdy, of that city, whereby said firm was constituted a subagent and given the sole selling rights for the
bituminous limestone products of the defendant company for the period of one year from November 11, 1920, on terms
stated in the letter Exhibit K. The territory assigned to Ludvigsen & McCurdy included San Francisco and all territory in
California north of said city. Upon an earlier voyage during the same year to Australia, the plaintiff had already made an
agreement with Frank B. Smith, of Sydney, whereby the latter was to act as the plaintiff's sales agent for bituminous
limestone mined at the defendant's quarry in Leyte, until February 12, 1921. Later the same agreement was extended for
the period of one year from January 1, 1921. (Exhibit Q.)

On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to the plaintiff, then in San Francisco,
advising hi that he might enter an order for six thousand tons of bituminous limestone to be loaded at Leyte not later than
May 5, 1921, upon terms stated in the letter Exhibit G. Upon this letter the plaintiff immediately indorsed his acceptance.

The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote to him from Cebu, to the effect that the
company was behind with construction and was not then able to handle big contracts. (Exhibit FF.) On March 12, Anderson
was in Manila and the two had an interview in the Manila Hotel, in the course of which the plaintiff informed Anderson of
the San Francisco order. Anderson thereupon said that, owing to lack of capital, adequate facilities had not been provided
by the company for filling large orders and suggested that the plaintiff had better hold up in the matter of taking orders.
The plaintiff expressed surprise at this and told Anderson that he had not only the San Francisco order (which he says he
exhibited to Anderson) but other orders for large quantities of bituminous limestone to be shipped to Australia and
Shanghai. In another interview on the same Anderson definitely informed the plaintiff that the contracts which be claimed
to have procured would not be filled.

Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant company in Cebu, in which he notified the
company to be prepared to ship five thousand tons of bituminous limestone to John Chapman Co., San Francisco, loading
to commence on May 1, and to proceed at the rate of one thousand tons per day of each twenty-four hours, weather
permitting.

On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for five thousand tons of bituminous
limestone; and in his letter of March 15 to the defendant, the plaintiff advised the defendant company to be prepared to
ship another five thousand tons of bituminous limestone, on or about May 6, 1921, in addition to the intended
consignment for San Francisco. The name Henry E. White was indicated as the name of the person through whom this
contract had been made, and it was stated that the consignee would be named later, no destination for the shipment
being given. The plaintiff explains that the name White, as used in this letter, was based on an inference which he had
erroneously drawn from the cable sent by Frank B. Smith, and his intention was to have the second shipment consigned to
Australia in response to Smith's order.

It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that no mention was made of the names of
the person, or firm, for whom the shipments were really intended. The obvious explanation that occurs in connection with
this is that the plaintiff did not then care to reveal the fact that the two orders had originated from his own subagents in
San Francisco and Sydney.

To the plaintiff's letter of March 15, the assistant manager of the defendant company replied on March, 25, 1921,
acknowledging the receipt of an order for five thousand tons of bituminous limestone to be consigned to John Chapman
Co., of San Francisco, and the further amount of five thousand tons of the same material to be consigned to Henry E.
White, and it was stated that "no orders can be entertained unless cash has been actually deposited with either the
International Banking Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Z.)

To this letter the plaintiff in turn replied from Manila, under date of March, 1921, questioning the right of the defendant to
insist upon a cash deposit in Cebu prior to the filling of the orders. In conclusion the plaintiff gave orders for shipment to
Australia of five thousand tons, or more, about May 22, 1921, and ten thousand tons, or more, about June 1, 1921. In
conclusion the plaintiff said "I have arranged for deposits to be made on these additional shipments if you will signify your
ability to fulfill these orders on the dates mentioned." No name was mentioned as the purchaser, or purchases, of these
intended Australian consignments.

Soon after writing the letter last above-mentioned, the plaintiff embarked for China and Japan. With his activities in China
we are not here concerned, but we note that in Tokio, Japan, he came in contact with one H. Hiwatari, who appears to
have been a suitable person for handling bituminous limestone for construction work in Japan. In the letter Exhibit X,
Hiwatari speaks of himself as if he had been appointed exclusive sales agent for the plaintiff in Japan, but no document
expressly appointing him such is in evidence.

While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to himself, to be signed by Hiwatari. This letter,
endited by the plaintiff himself, contains an order for one thousand tons of bituminous limestone from the quarries of the
defendant company, to be delivered as soon after July 1, 1921, as possible. In this letter Hiwatari states, "on receipt of the
cable from you, notifying me of date you will be ready to ship, and also tonnage rate, I will agree to transfer through the
Bank of Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the entire payment of $16,000 gold, to be
subject to our order on delivery of documents covering bill of lading of shipments, the customs report of weight, and
prepaid export tax receipt. I will arrange in advance a confirmed or irrevocable letter of credit for the above amounts so
that payment can be ordered by cable, in reply to your cable advising shipping date."

In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he had shown the contract, signed by himself, to
the submanager of the Taiwan Bank who had given it as his opinion that he would be able to issue, upon request of
Hiwatari, a credit note for the contracted amount, but he added that the submanager was not personally able to place his
approval on the contract as that was a matter beyond his authority. Accordingly Hiwatari advised that he was intending to
make further arrangements when the manager of the bank should return from Formosa.

In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of bituminous limestone, it was stated that
if the material should prove satisfactory after being thoroughly tested by the Paving Department of the City of Tokio, he
would contract with the plaintiff for a minimum quantity of ten thousand additional tons, to be used within a year from
September 1, 1921, and that in this event the contract was to be automatically extended for an additional four years. The
contents of the letter of May 5 seems to have been conveyed, though imperfectly, by the plaintiff to his attorney, Mr.
Frank B. Ingersoll, of Manila; and on May 17, 1921, Ingersoll addressed a note to the defendant company in Cebu in which
he stated that he had been requested by the plaintiff to notify the defendant that the plaintiff had accepted an order from
Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum order of ten thousand tons of the stone annually for a
period of five years, the first shipment of one thousand tons to be made as early after July 1 as possible. It will be noted
that this communication did not truly reflect the contents of Hiwatari's letter, which called unconditionally for only one
thousand tons, the taking of the remainder being contingent upon future eventualities.

It will be noted that the only written communications between the plaintiff and the defendant company in which the
former gave notice of having any orders for the sale of bituminous limestone are the four letters Exhibit Y, AA, BB, and II.
In the first of these letters, dated March 15, 1921, the plaintiff advises the defendant company to be prepared to ship five
thousand tons of bituminous limestone, to be consigned to John Chapman, Co., of San Francisco, to be loaded by March
5, and a further consignment of five thousand tons, through a contract with Henry E. White, consignees to be named later.
In the letter Exhibit BB dated May 17, 1921, the plaintiff's attorney gives notice of the acceptance by plaintiff of an order
from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum of ten thousand annually for a period of five
years, first shipment of a thousand tons to be as early after July 1 as possible. In the letter Exhibit H the plaintiff gives
notice of an "additional" (?) order from H. E. White, Sydney, for two lots of bituminous limestone of five thousand tons
each, one for shipment not later than June 30, 1921, and the other by July 20, 1921. In the same letter thousand tons from
F. B. Smith, to be shipped to Brisbane, Australia, by June 30, and a similar amount within thirty days later.

After the suit was brought, the plaintiff filed an amendment to his complaint in which he set out, in tabulated form, the
orders which he claims to have received and upon which his letters of notification to the defendant company were based.
In this amended answer the name of Ludvigsen & McCurdy appears for the first time; and the name of Frank B. Smith, of
Sydney, is used for the first time as the source of the intended consignments of the letters, Exhibits G, L, M, and W,
containing the orders from Ludvigen & McCurdy, Frank B. Smith and H. Hiwatari were at no time submitted for inspection
to any officer of the defendant company, except possibly the Exhibit G, which the plaintiff claims to have shown to
Anderson in Manila on March, 12, 1921.

The different items conspiring the award which the trial judge gave in favor of the plaintiff are all based upon the orders
given by Ludvigsen & McCurdy (Exhibit G), by Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit W; and the
appealed does not involve an order which came from Shanghai, China. We therefore now address ourselves to the
question whether or not the orders contained in Exhibit G, L, M, and W, in connection with the subsequent notification
thereof given by the plaintiff to the defendant, are sufficient to support the judgment rendered by the trial court.

The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank B. Smith must, in our opinion, be at
once excluded from consideration as emanating from persons who had been constituted mere agents of the plaintiff. The
San Francisco order and the Australian orders are the same in legal effect as if they were orders signed by the plaintiff and
drawn upon himself; and it cannot be pretended that those orders represent sales to bona fide purchasers found by the
plaintiff. The original contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and
the United States contemplated that he should find reliable and solvent buyers who should be prepared to obligate
themselves to take the quantity of bituminous limestone contracted for upon terms consistent with the contract. These
conditions were not met by the taking of these orders from the plaintiff's own subagents, which was as if the plaintiff had
bought for himself the commodity which he was authorized to sell to others. Article 267 of the Code of Commerce
declares that no agent shall purchase for himself or for another that which he has been ordered to sell. The law has placed
its ban upon a broker's purchasing from his principal unless the latter with full knowledge of all the facts and
circumstances acquiesces in such course; and even then the broker's action must be characterized by the utmost good
faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the broker has been
guilty of fraudulent conduct or not. (4 R. C. L., 276-277.) We think, therefore, that the position of the defendant company is
indubitably sound in so far as it rest upon the contention that the plaintiff has not in fact found any bona fide purchasers
ready and able to take the commodity contracted for upon terms compatible with the contract which is the basis of the
action.

It will be observed that the contract set out at the beginning of this opinion contains provisions under which the period of
the contract might be extended. That privilege was probably considered a highly important incident of the contract and it
will be seen that the sale of five thousand tons which the plaintiff reported for shipment to San Francisco was precisely
adjusted to the purpose of the extension of the contract for the United States for the period of an additional year; and the
sales reported for shipment to Australia were likewise adjusted to the requirements for the extention of the contract in
that territory. Given the circumstances surrounding these contracts as they were reported to the defendant company and
the concealment by the plaintiff of the names of the authors of the orders, -- who after all were merely the plaintiff's
subagents, — the officers of the defendant company might justly have entertained the suspicion that the real and only
person behind those contracts was the plaintiff himself. Such at least turns out to have been the case.

Much energy has been expended in the briefs upon his appeal over the contention whether the defendant was justified in
laying down the condition mentioned in the letter of March 26, 1921, to the effect that no order would be entertained
unless cash should be deposited with either the International Banking Corporation of the Chartered Bank of India,
Australia and China, in Cebu. In this connection the plaintiff points to the stipulation of the contract which provides that
contracts with responsible parties are to be accepted "subject to draft attached to bill of lading in full payment of such
shipment." What passed between the parties upon this point appears to have the character of mere diplomatic parrying,
as the plaintiff had no contract from any responsible purchaser other than his own subagents and the defendant company
could no probably have filled the contracts even if they had been backed by the Bank of England.

Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found ample assurance that deposits for the
amount of each shipment would be made with a bank in Manila provided the defendant would indicated its ability to fill
the orders; but these assurance rested upon no other basis than the financial responsibility of the plaintiff himself, and this
circumstance doubtless did not escape the discernment of the defendant's officers.

With respect to the order from H. Hiwatari, we observe that while he intimates that he had been promised the exclusive
agency under the plaintiff for Japan, nevertheless it does not affirmatively appear that he had been in fact appointed to be
such at the time he signed to order Exhibit W at the request of the plaintiff. It may be assumed, therefore, that he was at
that time a stranger to the contract of agency. It clearly appears, however, that he did not expect to purchase the
thousand tons of bituminous limestone referred to in his order without banking assistance; and although the submanager
of the Bank of Taiwan had said something encouraging in respect to the matter, nevertheless that official had refrained
from giving his approval to the order Exhibit W. It is therefore not shown affirmatively that this order proceeds from a
responsible source.

The first assignment of error in the appellant's brief is directed to the action of the trial judge in refusing to admit Exhibit
2, 7, 8, 9 and 10, offered by the defendant, and in admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated
June 25, 1921, or more than three weeks after the action was instituted, in which the defendant's assistant general
manager undertakes to reply to the plaintiff's letter of March 29 proceeding. It was evidently intended as an
argumentative presentation of the plaintiff's point of view in the litigation then pending, and its probative value is so
slight, even if admissible at all, that there was no error on the part of the trial court in excluding it.

Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties by mail or telegraph during the first
part of the year 1921. The subject-matter of this correspondence relates to efforts that were being made by Anderson to
dispose of the controlling in the defendant corporation, and Exhibit 9 in particular contains an offer from the plaintiff,
representing certain associates, to but out Anderson's interest for a fixed sum. While these exhibits perhaps shed some
light upon the relations of the parties during the time this controversy was brewing, the bearing of the matter upon the
litigation before us is too remote to exert any definitive influence on the case. The trial court was not in error in our
opinion in excluding these documents.
Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which information is given concerning the
property of the defendant company. It is stated in this letter that the output of the Lucio (quarry) during the coming year
would probably be at the rate of about five tons for twenty-four hours, with the equipment then on hand, but that with
the installation of a model cableway which was under contemplation, the company would be able to handle two thousand
tons in twenty-four hours. We see no legitimate reason for rejecting this document, although of slight probative value;
and her error imputed to the court in admitting the same was not committed.

Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy of a letter dated June 13, 1921,
written by the plaintiff to his attorney, Frank B. Ingersoll, Esq., of Manila, and in which plaintiff states, among other things,
that his profit from the San Francisco contract would have been at the rate of eigthy-five cents (gold) per ton. The
authenticity of this city document is admitted, and when it was offered in evidence by the attorney for the defendant the
counsel for the plaintiff announced that he had no objection to the introduction of this carbon copy in evidence if counsel
for the defendant would explain where this copy was secured. Upon this the attorney for the defendant informed the court
that he received the letter from the former attorneys of the defendant without explanation of the manner in which the
document had come into their possession. Upon this the attorney for the plaintiff made this announcement: "We hereby
give notice at this time that unless such an explanation is made, explaining fully how this carbon copy came into the
possession of the defendant company, or any one representing it, we propose to object to its admission on the ground
that it is a confidential communication between client and lawyer." No further information was then given by the attorney
for the defendant as to the manner in which the letter had come to his hands and the trial judge thereupon excluded the
document, on the ground that it was a privileged communication between client and attorney.

We are of the opinion that this ruling was erroneous; for even supposing that the letter was within the privilege which
protects communications between attorney and client, this privilege was lost when the letter came to the hands of the
adverse party. And it makes no difference how the adversary acquired possession. The law protects the client from the
effect of disclosures made by him to his attorney in the confidence of the legal relation, but when such a document,
containing admissions of the client, comes to the hand of a third party, and reaches the adversary, it is admissible in
evidence. In this connection Mr. Wigmore says:

The law provides subjective freedom for the client by assuring him of exemption from its processes of disclosure
against himself or the attorney or their agents of communication. This much, but not a whit more, is necessary for
the maintenance of the privilege. Since the means of preserving secrecy of communication are entirely in the
client's hands, and since the privilege is a derogation from the general testimonial duty and should be strictly
construed, it would be improper to extend its prohibition to third persons who obtain knowledge of the
communications. One who overhears the communication, whether with or without the client's knowledge, is not
within the protection of the privilege. The same rule ought to apply to one who surreptitiously reads or obtains
possession of a document in original or copy. (5 Wigmore on Evidence, 2d ed., sec. 2326.)

Although the precedents are somewhat confusing, the better doctrine is to the effect that when papers are offered in
evidence a court will take no notice of how they were obtained, whether legally or illegally, properly or improperly; nor will
it form a collateral issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268;
Gross vs. State, 33 L. R. A., [N. S.], 477, note.)

Our conclusion upon the entire record is that the judgment appealed from must be reversed; and the defendant will be
absolved from the complaint. It is so ordered, without special pronouncement as to costs of either instance.

Araullo, C.J., Johnson, Avanceña, Ostrand, Johns and Romualdez, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

An intensive scrutiny of every phase of this case leads me to the conclusion that the trial judge was correct in his findings
of fact and in his decision. Without encumbering the case with a long and tedious dissent, I shall endeavor to explain my
point of view as briefly and clearly as possible.

A decision must be reached on the record as it is and not on a record as we would like to have it. The plaintiff and the
defendant deliberately entered into a contract, the basis of this action. The plaintiff, proceeding pursuant to this contract,
spent considerable effort and used considerable money to advance the interests of the defendant and to secure orders for
its products. These orders were submitted to the president of the defendant company personally and later formally by
writing. Prior to the institution of the suit, the only objection of the defendant was that the money should be deposited
with either the International Banking Corporation or the Chartered Bank of India, Australia and China at Cebu, a stipulation
not found in the contract.

A reasonable deduction, therefore, is that the plaintiff presented orders under circumstances which were a substantial
compliance with the terms of the contract with the defendant, and which insured to the defendant payment for its
deliveries according to the price agreed upon, and that as the defendant has breached its contract, it must respond in
damages.

The current running through the majority opinion is that the order emanated from subagents of the plaintiff, and that
no bona fide purchasers were ready and able to take the commodity contracted for upon terms compatible with the
contract. The answer is, in the first place, that the contract nowhere prohibits the plaintiff to secure subagents. The answer
is, in the second place, that the orders were so phrased as to make the persons making them personally responsible. The
Ludvigsen & McCurdy order from San Francisco begins: "You can enter our order for 6,000 tons of bituminous limestone
as per sample submitted, at $10 gold per ton, f. o. b., island of Leyte, subject to the following terms and conditions:

* * * "(Exhibit G). The Smith order from Australia contains the following: "It is therefore with great pleasure I confirm the
booking of the following orders, to be shipped at least within a week of respective dates: . . ." (Exhibit L). The Japan order
starts with the following sentence: "You can enter my order for 1,000 tons of 1,000 kilos each of bituminous limestone
from the quarries of the Leyte Asphalt and Mineral Oil Co. . . ." (Exhibit W.)

But the main point of the plaintiff which the majority decision misses entirely centers on the proposition that the orders
were communicated by the plaintiff to the defendant, and that the only objection the defendant had related to the
manner of payment. To emphasize this thought again, let me quote the reply of the defendant to the plaintiff when the
defendant acknowledge receipts of the orders placed by the plaintiff. The letter reads: "In reply to same we have to advice
you that no orders can be entertained unless cash has been actually deposited with either the International Banking
Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Y.) Prior to the filing of suit, the defendant
company never at any time raised any questioned as to whether the customers secured by plaintiff were "responsible
firms" within the meaning of the contract, and never secured any information whatsoever as to their financial standing.
Consequently, defendant is now estopped by its conduct from raising new objections for rejection of the orders. (Mechem
on Agency, section 2441.)

The majority decision incidentally takes up for consideration assignments of error 1 and 2 having to do with either the
admission or the rejection by the trial court of certain exhibits. Having in mind that the Court reverses the court a quo on
the facts, what is said relative to these two assignments is absolutely unnecessary for a judgment, and even as obiter dicta,
contains unfortunate expressions. Exhibit 14, for example, is a letter addressed by the plaintiff to his lawyer and probably
merely shown to the counsel of the defendant during negotiations to seek a compromise. Whether that exhibit be
considered improperly rejected or not would not change the result one iota.

The rule now announced by the Court that it makes no difference how the adversary acquired possession of the
document, and that a court will take no notice of how it was obtained, is destructive of the attorney's privilege and
constitutes and obstacle to attempts at friendly compromise. In the case of Uy Chico vs. Union Life Assurance
Society ([1915], 29 Phil., 163), it was held that communications made by a client to his attorney for the purpose of being
communicated to others are not privileged if they have been so communicated. But here, there is no intimation that Exhibit
14 was sent by the client to the lawyer for the purpose of being communicated to others. The Supreme Court of Georgia
in the case of Southern Railway Co. vs. White ([1899], 108 Ga., 201), held that statements in a letter to a party's attorney
handed by the latter to the opponent's attorney, are confidential communications and must be excluded.

Briefly, the decision of the majority appears to me to be defective in the following particulars: (1) It sets aside without
good reason the fair findings of fact as made by the trial court and substitutes therefor other findings not warranted by
the proof; (2) it fails to stress plaintiff's main argument, and (3) it lay downs uncalled for rules which undermine the
inviolability of a client's communications to his attorney.

Accordingly, I dissent and vote for an affirmance of the judgment.

G.R. No. 34098 September 17, 1930

ORIENT INSURANCE COMPANY, petitioner,

vs.
E. P. REVILLA, Judge of First Instance of Manila, and TEAL MOTOR CO., INC., respondents.

Gibbs and McDonough for petitioner.

Guevara, Francisco and Recto for respondents.

STREET, J.:

This is an original petition for writs of certiorari and mandamus filed in this court by the Orient Insurance Company against
the respondent judge of the Court of First Instance of Manila and the Teal Motor Co., Inc. The object of the petition is to
obtain an order requiring the respondent judge to permit the attorney for the petitioner to examine a letter (Exhibits 49
and 49-Act) part of which has been read into the record in the course of the examination of one of the witnesses testifying
for the plaintiff in the case of Teal Motor Co., Inc. vs. Orient Insurance Company, now pending in the Court of First Instance
of the City of Manila, civil case No. 35825, with which, for purposes of trial, have been consolidated several other cases of
similar character. The cause is now before us for resolution upon the complaint and answer interposed by the two
respondents.

The respondent Teal Motor Co., Inc. is plaintiff in a civil action instituted in the Court of First Instance of Manila (civil case
No. 35825) for the purpose of recovering upon two fire insurance policies issued by the Orient Insurance Company,
aggregating P60,000, upon a stock of merchandise alleged to be of the value of P414,513.56, which, with the exception of
salvage valued at about P50,000, was destroyed by a fire on or about January 6, 1929. In one of the clauses of the policies
sued upon is a stipulation to the effect that all benefit under the policy would be forfeited if, in case of loss, the claim
should be rejected by the insurer and action or suit should not be commenced within three months after such rejection. In
the answer of the Orient Insurance Company, interposed in the civil case mentioned, it is alleged, by way of defense, that
the company rejected the claim on April 15, 1929, that notice of such rejection was given to the plaintiff by letter on the
same day, and that suit was not instituted on the policy until August 3, 1929, which was more than three months after the
rejection of the claim.

In a replication to the answer of the defendant, containing the foregoing and other defenses, the plaintiff admitted that
the adjusters of the defendant company had, on April 15, 1929, notified the plaintiff that the Orient Insurance Company
would not pay the claim, basing refusal upon alleged incendiarism and fraud on the part of the plaintiff; and by way of
avoidance, it was alleged in the replication that, after notification of denial of liability by the insurance company, one E. E.
Elser, as representative of the company, expressly requested the plaintiff to defer judicial action until after the following
July 31, stating that three were great possibilities that an extrajudicial compromise might be arranged in the matter; and it
was further asserted, in the replication, that the plaintiff had deferred action, relying upon this request.

It will thus be seen that the reason for the admitted delay in the institution of the action is an important issue in the case,
or case, now in course of trial.

It further appears that while case No. 35825 was in course of trial, as it still is, before the respondent judge, in the Court of
First Instance of Manila, the witness E. M. Bachrach, president of the Teal Motor Co., Inc., while being examined in chief by
the attorneys for the plaintiff, and speaking of the circumstances surrounding the institution of the action, said that he had
reported certain conversations to plaintiff's attorneys, and he added: "I waited for about a week longer and not having
heard anything about it, in the meantime, on the 13th of July, I received a letter from our attorneys, Guevara, Francisco &
Recto, urging me to file these cases." The attorney for the defendant, Orient Insurance Company, thereupon interposed,
saying: "I ask that the witness be required to produce the letter referred to from Mr. Guevara, or else his answer be
stricken out. (To the witness) Have you got the letter there?" The witness replied that he had the letter with him and that
he had no objection to show that part of the letter in which Guevara urged him to proceed with the cases. Upon being
asked about the other part of the letter, the witness said that the other part contained private matter, "between the
attorney and ourselves," meaning between the Teal Motor Co., Inc., and its attorneys. Thereupon the attorney for the
defendant, Orient Insurance Company, said he would like to see the letter, inquiring as to its date. The witness replied that
it bore date of July 13, 1929; and upon the court inquiring whether the witness had any objection to the reading of the
letter by the attorney for the defendant, the witness replied that he wished to consult with his attorney. Upon this the
attorney for the adversary party, the Orient Insurance Company, suggested that he would like to have the letter marked
without his reading it, and it was accordingly marked as Exhibit 49. The attorney then said: "In view of the production of
the letter, I withdraw the objection to the statement of the witness as to its contents," and he added: "I now ask the
permission of the court to read the letter for my information." The court thereupon inquired of the attorney for the Teal
Motor Co., Inc., whether he had any objection, and the attorney observed that he would have no objection to the
disclosing of that part of the letter which referred exactly to the point of the urging of the filing of the complaints, and he
added: "Unfortunately, the other part of the letter being a communication between a client and attorney, I don't think, if
your Honor please, it can be disclosed without the consent of both."

In the course of the colloquy which thereupon unsued between the attorney for the plaintiff and the attorney for the
defendant, it was stated by the attorney for the plaintiff that only a part of the letter had anything to do with the urging of
the presentation of the complaints in the cases to which the witness had testified, and that the other part of the letter
referred to the contract of fees, or retaining of the services of plaintiff's attorneys in connection with said cases, a matter,
so the attorney suggested, entirely distinct from the urging of the presentation of the cases. The attorney for the
defendant thereupon insisted before the court that, inasmuch as all the letter refers to the case then in court, the entire
document should be exhibited, in conformity with the rule that when part of a document is offered in evidence, the entire
document must be presented.

Upon this the respondent judge ruled as follows: "Objection of the counsel for the plaintiff and the witness, Mr. Barchrach,
to the showing or reading of the whole letter in the record is sustained, and it is ordered that only that part of the letter
which has been referred to by Mr. Bachrach in his testimony be read and transcribed into the record." To this ruling the
attorney for the defendant excepted and the respondent judge then said: "Let that part of the letter pointed out by Mr.
Bachrach be transcribed in the record;" whereupon the following part of the letter was read out in court and incorporated
in the transcript.

July 13, 1929

DEAR SIR: As you know, your attorney Mr. Basilio Francisco has turned over to us, prior to his departure, all the
papers in connection with the insurance claim of the Teal Motor Co., Inc., on destroyed or burned merchandise,
and everything is now ready for filing of the corresponding complaints in the Court of First Instance.

When the matter above quoted had been thus read into the record, the attorney for the defendant made the following
observation: "In view of the fact that counsel for the plaintiff has just now read into the record and presented as evidence
a part of the letter of July 13, I now request that the entire letter be produced." This request was overruled by the court,
and the attorney for the defendant excepted. After further discussion, upon the suggestion of the attorney for the
defendant and by agreement of the counsel for both parties, the second page of the letter was marked 49-A by the clerk
court.

The incident was renewed when it came at turn of the attorney for the defendant to cross-examine the same witness E. M.
Bachrach, when the attorney for the defendant, having ascertained from the witness that he still had the letter in his
possession, and that he had not answered it in writing, formally offered the letter in evidence. The attorney for the plaintiff
again objected, on the ground that the letter was of a privileged nature and that it was the personal property of the
witness. Thereupon the court, receiving the letter in hand from the witness, observed that he had already ruled upon it,
and after further discussion, the court sustained the objection of the attorney for the plaintiff and refused to admit in
evidence so much of the letter as had not already been read into the record. The attorney for the defendant again
excepted.

At a later stage of the trial the attorney interposed a formal motion for reconsideration of the ruling of the court in
refusing to admit the letter in evidence, or the part of it not already incorporated in the record. The court, however,
adhered to its original ruling, and the attorney for the defendant excepted. Another incident that might be noted, though
not alleged as a ground of relief in the petition before us, but set forth in the answer of the respondents, is that the
attorney for the defendant procured a subpoena duces tecum to be issued by the clerk of court requiring the attorneys for
the plaintiff to produce in court certain papers including the letter which gave rise to the present controversy. The court,
on motion of the attorneys for the plaintiff, quashed said subpoena.

The essential character of this incident, which we have perhaps narrated with unnecessary prolixity, is readily discernible. A
witness for the plaintiff made an oral statement as to the substance of part of a letter which had been received by the
plaintiff from its attorney, and when the fact was revealed that the communication had been made by letter, the attorney
for the defendant requested that the witness be required to produce the letter in court, and if not, that his answer should
be stricken out. This in legal effect was a demand for the production of "the best evidence," it being a well-known rule of
law that a witness cannot be permitted to give oral testimony as to the contents of a paper writing which can be produced
in court. In response to this request that portion of the letter to which the witness had supposedly referred was read into
the record.

The respondent judge appears to have considered that the excerpt from the letter thus incorporated in the record was
either proof of the defendant, its production having been demanded by defendant's counsel, or that at least the legal
responsibility for the incorporation of said excerpt into the record was attributable to the defendant. We are unable to
accept this view. The incorporation of this excerpt from the letter was a necessary support of the oral statement which the
witness had made, and if this basis for such statement had not been laid by the incorporation of the excerpt into the
record, the oral statement of the witness concerning the tenor of the letter should properly have been stricken out. But
instead of withdrawing the oral statement of the witness concerning the nature of the written communication, the witness
produced the letter and the part of it already quoted was read into the record. The excerpt in question must therefore be
considered as proof submitted by the plaintiff; and there can be no question that, part of the letter having been
introduced in behalf of the plaintiff, the whole of the letter could properly be examined by the other party, in accordance
with the express provision of section 283 of the Code of Civil Procedure.

It was stated in the court by the attorney for the plaintiff, in opposing the introduction of other portions of the letter in
proof, that the other parts were privileged, because they related to the terms of employment between attorney and client,
or to the fee to be paid to the attorney. With respect to this point it is difficult to see how a contract for fees could be
considered privileged. Irrelevant it might, under certain circumstances, certainly be, but not privileged. Of course contracts
between attorneys and clients are inherently personal and private matters, but they are a constant subject of litigation,
and contracts relating to fees are essentially not of privileged nature. Privilege primarily refers to communications from
client to attorney, an idea which of course includes communications from attorney to client relative to privileged matters.

But, even supposing that the matter contained in the letter and withheld from the inspection of the adversary was
originally of a privileged nature, the privilege was waived by the introduction in evidence of part of the letter. The
provision in section 283 of the Code of Civil Procedure making the whole of a declaration, conversation, or writing
admissible when part has been given in evidence by one party, makes no exception as to privileged matter; and the
jurisprudence on the subject does not recognize any exception. Practically every feature of the question now under
consideration was involved in the case of Western Union Tel. Co. vs. Baltimore & Ohio Tel. Co. (26 Fed., 55), which in 1885
came before Wallace, J., a distinguished jurist presiding in the Federal Circuit Court of the Southern District of New York.
The substance of the case is well stated in the note to Kelly vs. Cummens (20 Am. & Eng. Ann. Cases, 1283, 1287), from
which we quote as follows:

In Western Union Tel. Co. vs. Baltimore, etc., Tel. Co. (26 Fed., 55), it appeared that upon a motion in the cause,
which was in equity for a preliminary injunction, one of the questions involved was whether a reissued patent
upon which the suit was founded was obtained for the legitimate purpose of correcting mistake or inadvertence in
the specification and claims of the original, or whether it was obtained merely for the purpose of expanding the
claims of the original in order to subordinate to the reissue certain improvements or inventions made by others
after the grant of the original patent and before the application for the reissue. To fortify its theory of the true
reasons for obtaining the reissue, the complainant upon that motion embodied in affidavits extracts from
communications made by a patent expert and attorney in the office of the solicitor general of the complainant, to
the president and the vice-president of the complainant, when the subject of applying for a reissue was under
 consideration by the officers of the complainant, and while the proceedings for a reissue were pending. After the
cause had proceeded to the taking of proofs for final hearing the defendant sought to introduce in evidence the
original communications, extracts from which were used by the complainant upon the motion for an injunction,
on the ground that the parts of the communication which were not disclosed had an important bearing upon the
history of the application for a reissue, and indicated that it was not made for any legitimate purpose. The
complainant resisted the efforts of the defendant to have the original communications admitted, on the ground
that they were privileged as made to its officers by its attorney, but it was held that the defendant was entitled to
introduce them in evidence, the court saying: "The question, then, is whether the complainant can shelter itself
behind its privilege to insist upon the privacy of the communications between its attorney and its other officers as
confidential communications, when it has itself produced fragmentary part of them, and sought to use them as a
weapon against the defendant to obtain the stringent remedy of a preliminary injunction. Assuming that the
communications addressed to the president and vice-president of the complainant by Mr. Buckingham were
communications made to the complainant by its attorney, and as such privileged at the option of the complainant,
it was competent for the complainant to waive its privilege. It would hardly be contended that the complainant
could introduce extracts from these communications as evidence in its own behalf for the purpose of a final
hearing, and yet withhold the other parts if their production were required by the defendant. A party cannot waive
such a privilege partially. He cannot remove the seal of secrecy from so much of the privileged communications as
makes for his advantage, and insist that it shall not be removed as to so much as makes to the advantage of his
adversary, or may neutralize the effect of such as has been introduced. Upon the principle it would seem that it
cannot be material at what stage of the proceedings in a suit a party waives his right to maintain the secrecy of
privileged communication. All the proceedings in the cause are constituent parts of the controversy, and it is not
obvious how any distinction can obtain as to the effect of waiver when made by a party for the purpose of
obtaining temporary relief and when made by him to obtain final relief."

From the foregoing decision and other cases contained in the note referred to, we are led to the conclusion that the
attorney for the defendant in the court below was entitled to examine the whole of the letter (Exhibit 49 and 49-A), with a
view to the introduction in evidence of such parts thereof as may be relevant to the case on trial, and the respondent
judge was in error in refusing to permit the inspection of the letter by said attorney.

It is suggested in the argument for the respondents that the question of the admissibility in evidence of the parts of the
letter not already read into the record was prematurely raised, and that the attorney for the defendant should have waited
until it became his turn to present evidence in chief, when, as is supposed, the question could have been properly raised.
We are of the opinion, however, that if the attorney for the defendant had a right to examine the letter, it should have
been produced when he asked for it on the cross-examination of the witness who had the letter in his possession. Besides,
in the lengthy discussions between court and attorneys, occuring at different times, there was not the slightest suggestion
from the court that the parts of the letter which were held inadmissible would be admitted at any time. Furthermore, the
action of the court in quashing the subpoena duces tecum for the production of the letter shows that the court meant to
rule that the letter could not be inspected at all by the attorney for the defendant.

Objection is also here made by the attorney for the respondents to the use of the writ of mandamus for the purpose of
correcting the error which is supposed to have been committed. The situation presented is, however, one where the herein
petitioner has no other remedy. The letter which the petitioner seeks to examine has been ruled inadmissible, as to the
parts not introduced in evidence by the defendant in the court below, and the respondent judge had not permitted the
document to become a part of the record in such a way that the petitioner could take advantage of the error upon appeal
to this court. It is idle to discuss whether other remedy would be speedy or adequate when there is no remedy at all. This
court is loath, of course, to interfere in course of the trial of a case in a Court of First Instance, as such interference might
frequently prolong unduly the litigation in that court. But this case has been pending before the respondent judge for a
considerable period of time, and undoubtedly the probatory period will be necessarily extended much longer. Under these
circumstances, the action of this court in entertaining the present application will either be conductive to the speedy
determination of case, or at least will not appreciably extend the proceedings.
It goes without saying that the subject matter of the contention is of a nature which makes the use of the writ
of mandamus appropriate, since the right from the exercise of which the petitioner is excluded is one to which it is entitled
under the law and the duty to be performed is one pertaining to the respondent judge in his official capacity.

From what has been said it follows that the writ of mandamus prayed for will be granted, and the respondent judge is
directed to permit the attorney for the defendant (petitioner here) to inspect the letter (Exhibit 49 and 49-A) with a view to
the introduction in evidence of such parts thereof as may be relevant to the issues made by the pleadings in civil case No.
35825 and other cases which have been consolidated with it for trial. So ordered, with costs against the respondent Teal
Motor Co., Inc.

Avanceña, C.J., Villamor, Ostrand, Johns and Romualdez, JJ., concur.

Separate Opinions

VILLA-REAL, J., concurring:

I concur solely on the ground that the portion of the letter alleged to be privileged is not so.
Justia Opinion Summary and Annotations

Annotation
Primary Holding

Under the work product doctrine, a party usually will not have access to materials prepared by an opposing party's lawyers
in anticipation of litigation. However, this is only a presumption rather than an absolute rule and can be overcome in
exigent circumstances.

Facts

When a tug boat with nine crew members sank, five of them were drowned. The four remaining crew members were
questioned at a public hearing, after which their testimony was recorded and made available to interested parties. The
owner of the tug boat, Taylor, enlisted an attorney in anticipation of litigation. The attorney conducted another interview
of the survivors, as well as talking to other people who were believed to have information about the accident.
Representatives of the dead crew members brought wrongful death claims. Hickman was the only claimant who did not
settle his claim.

During interrogatories in the discovery process, Hickman asked for any statements taken from crew members as well as
oral or written statements, records, reports, or other memorandums that related to any matters connected to the towing
company's operation, the sinking of the vessel, the salvaging and repair process, and the death of the crew member who
was the subject of the claim. Taylor argued that there was no need to provide this information because it was protected by
the attorney-client privilege.

Opinions

Majority

 Frank Murphy (Author)

 Frederick Moore Vinson
 Stanley Forman Reed
 Felix Frankfurter
 William Orville Douglas
 Wiley Blount Rutledge
 Harold Hitz Burton
 Hugo Lafayette Black

There are some boundaries to discovery, even though the value of the process means that its rules should be interpreted
broadly. Material that is irrelevant, privileged, or sought in bad faith may not be subject to discovery. The attorney-client
privilege is not relevant here because the material is not a communication between the attorney and the client. However,
it implicates the work product doctrine because it concerns the work that the attorney performed on the client's behalf, in
which the attorney has a privacy interest. It may be overcome if the party seeking to introduce it into discovery can show
why gaining access to that information is essential to the preparation of the case. On the other hand, such as in this case,
the material may not be introduced into discovery if the opposing party to the attorney's client would be able to access it.
The witnesses in this case were known and able to speak with the plaintiff, and there was no reason to invade the
attorney's privacy.

Concurrence

 Robert Houghwout Jackson (Author)

Some of the adverse effects of limiting the work product doctrine might include requiring lawyers to testify regarding the
contents of their notes and impressions, which would set up an adversarial relationship between the lawyer and the
witness or the lawyer and the client, if the lawyer's credibility is attacked. It also would be unfair to require lawyers to
provide interview testimony from hostile or untrustworthy witnesses. In almost all cases, the burden is on the litigant to
interview a witness directly rather than profiting from an opponent's interview.

Case Commentary

Attorneys should not face the concern of whether they should write down something that would interfere with providing
zealous representation in an adversary system. This is more important than relieving an opposing party of the
inconvenience of extra efforts to obtain paperwork.

Opinions

 Syllabus
U.S. Supreme Court
Hickman v. Taylor, 329 U.S. 495 (1947)

Hickman v. Taylor

No. 47

Argued November 13, 1946

Decided January 13, 1947

329 U.S. 495

Syllabus

Under the Federal Rules of Civil Procedure, plaintiff in a suit in a federal district court against certain tug owners to recover
for the death of a seaman in the sinking of the tug filed numerous interrogatories directed to the defendants, including
one inquiring whether any statements of members of the crew were taken in connection with the accident and requesting
that exact copies of all such written statements be attached and that the defendant "set forth in detail the exact provisions
of any such oral statements or reports." There was no showing of necessity or other justification for these requests. A
public hearing had been held before the United States Steamboat Inspectors at which the survivors of the accident had
been examined and their testimony recorded and made available to all interested parties. Defendants answered all other
interrogatories, stating objective facts and giving the names and addresses of witnesses, but declined to summarize or set
forth the statements taken from witnesses, on the ground that they were "privileged matter obtained in preparation for
litigation." After a hearing on objections to the interrogatories, the District Court held that the requested matters were not
privileged and decreed that they be produced and that memoranda of defendants' counsel containing statements of fact
by witnesses either be produced or submitted to the court for determination of those portions which should be revealed
to plaintiff. Defendants and their counsel refused, and were adjudged guilty of contempt.

Held:

1. In these circumstances, Rules 26, 33 and 34 of the Federal Rules of Civil Procedure do not require the production as of
right of oral and written statements of witnesses secured by an adverse party's counsel in the course of preparation for
possible litigation after a claim has arisen. Pp. 329 U. S. 509-514.

2. Since plaintiff addressed simple interrogatories to adverse parties, did not direct them to such parties or their counsel
by way of deposition under Rule 26, and it does not appear that he filed a

Page 329 U. S. 496

motion under Rule 34 for a court order directing the production of the documents in question, he was proceeding
primarily under Rule 33, relating to interrogatories to parties. P. 329 U. S. 504.

3. Rules 33 and 34 are limited to parties, thereby excluding their counsel or agents. P. 329 U. S. 504.

4. Rule 33 did not permit the plaintiff to obtain, as adjuncts to interrogatories addressed to defendants, memoranda and
statements prepared by their counsel after a claim had arisen. P. 329 U. S. 504.

5. The District Court erred in holding defendants in contempt for failure to produce that which was in the possession of
their counsel, and in holding their counsel in contempt for failure to produce that which he could not be compelled to
produce under either Rule 33 or Rule 34. P. 329 U. S. 505.
6. Memoranda, statements, and mental impressions prepared or obtained from interviews with witnesses by counsel in
preparing for litigation after a claim has arisen are not within the attorney-client privilege, and are not protected from
discovery on that basis. P. 329 U. S. 508.

7. The general policy against invading the privacy of an attorney's course of preparation is so essential to an orderly
working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish
adequate reasons to justify production through a subpoena or court order. P. 329 U. S. 512.

8. Rule 30(b) gives the trial judge the requisite discretion to make a judgment as to whether discovery should be allowed
as to written statements secured from witnesses; but, in this case, there was no ground for the exercise of that discretion
in favor of plaintiff. P. 329 U. S. 512.

9. Under the circumstances of this case, no showing of necessity could be made which would justify requiring the
production of oral statements made by witnesses to defendants' counsel, whether presently in the form of his mental
impressions or in the form of memoranda. P. 329 U. S. 512.

153 F.2d 212 affirmed.

A District Court adjudged respondents guilty of contempt for failure to produce, in response to interrogatories, copies of
certain written statements and memoranda prepared by counsel in connection with pending litigation. 4 F.R.D. 479. The
Circuit Court of Appeals reversed. 153 F.2d 212. This Court granted certiorari. 328 U.S. 876. Affirmed, p. 329 U. S. 514.

Page 329 U. S. 497

Disclaimer: Official Supreme Court case law is only found in the print version of the United States Reports. Justia case law
is provided for general informational purposes only, and may not reflect current legal developments, verdicts or
settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information
contained on this site or information linked to from this site. Please check official sources.

Justia Annotations is a forum for attorneys to summarize, comment on, and analyze case law published on our site. Justia
makes no guarantees or warranties that the annotations are accurate or reflect the current state of law, and no annotation
is intended to be, nor should it be construed as, legal advice. Contacting Justia or any attorney through this site, via web
form, email, or otherwise, does not create an attorney-client relationship.
Upjohn Co. v. United States, 449 U.S. 383 (1981)
Justia Opinion Summary and Annotations

Annotation
Primary Holding

Communications between all corporate employees and the company's counsel may be protected by the attorney-client
privilege. Also, the work product doctrine may cover materials sought in an IRS summons.

Facts

When they were conducting an independent audit of a foreign subsidiary of Upjohn, accountants determined that it had
made payments to government officials in foreign nations to solicit business from those governments. They told Upjohn's
general counsel, Gerard Thomas, and he followed up with an internal investigation. Attorneys working with Thomas sent a
questionnaire about the alleged payments to foreign general and area managers. They also interviewed many employees
at various levels of the corporation. The company then voluntarily submitted a preliminary report about the payments to
the SEC, which sent a copy to the IRS. In turn, the IRS began a tax audit and sent a summons to Upjohn that demanded all
of the files that were relevant to the investigation. The IRS also sought the memoranda of interviews between the
attorneys and the employees.

Upjohn cited the attorney-client privilege in refusing to produce the documents that were listed in the summons. It also
argued that they were protected as the work product of their attorneys, who had prepared them in anticipation of
litigation. The federal government filed a petition to enforce the summons, and the appellate court ruled that the
attorney-client privilege did not apply to company employees below the level of senior management. It also ruled that the
work product doctrine did not protect the interview memoranda and required them to be disclosed.

Opinions

Majority

 William Hubbs Rehnquist (Author)

 William Joseph Brennan, Jr.
 Potter Stewart
 Byron Raymond White
 Thurgood Marshall
 Harry Andrew Blackmun
 Lewis Franklin Powell, Jr.
 John Paul Stevens

The attorney-client privilege extends two-way protections that cover not only the lawyer's guidance but also information
provided by the client to the lawyer that assist the lawyer in offering that guidance. It is plausible that employees below
the most senior levels of the organization can take actions that create significant liability for the corporation, and they
might have access to information that the company's lawyers would need to provide appropriate advice. Limiting the
privilege to a certain control group of senior management inhibits low-level and mid-level employees from disclosing
information to attorneys working for the corporation as a whole. Moreover, the privilege does not extend to the
disclosures of underlying facts by the employees to the attorneys, so the government could gain access to the same
information that was provided to the attorneys simply by interviewing the employees.

On the other hand, an IRS summons remains subject to the work product doctrine, which is a traditional limitation on
discovery. Congress did not show any intent to preclude the use of the doctrine in its laws and legislative history regarding
the IRS summons. These materials fall within the definition of work product based on oral statements and reflect the
mental processes used by the attorneys in evaluating the communications. Applying a standard of substantial need or
undue hardship is insufficient to support releasing these materials under Federal Rule of Civil Procedure 26 and Hickman v.
Taylor (1947). There must be a much higher standard of necessity to overcome the work product doctrine, essentially
requiring that the party seeking discovery show that it had no other means to obtain the materials.

Concurrence

 Warren Earl Burger (Author)

Case Commentary
The decision's discussion of this long-standing evidentiary privilege stresses the importance of candid communication
between parties and lawyers, which facilitates the judicial system, encourages compliance with the law, and helps produce
more accurate results. The case did not fully address what must be shown to compel disclosure of an attorney's opinions,
despite their status as work product, but it appears likely to be allowed when the attorney's own thoughts and actions are
at issue.
U.S. Supreme Court
Upjohn Co. v. United States, 449 U.S. 383 (1981)

Upjohn Co. v. United States

No. 79-886

Argued November 5, 1980

Decided January 13, 1981

449 U.S. 383

Syllabus

When the General Counsel for petitioner pharmaceutical manufacturing corporation (hereafter petitioner) was informed
that one of its foreign subsidiaries had made questionable payments to foreign government officials in order to secure
government business, an internal investigation of such payments was initiated. As part of this investigation, petitioner's
attorneys sent a questionnaire to all foreign managers seeking detailed information concerning such payments, and the
responses were returned to the General Counsel. The General Counsel and outside counsel also interviewed the recipients
of the questionnaire and other company officers and employees. Subsequently, based on a report voluntarily submitted by
petitioner disclosing the questionable payments, the Internal Revenue Service (IRS) began an investigation to determine
the tax consequences of such payments and issued a summons pursuant to 26 U.S.C. § 762 demanding production
of, inter alia, the questionnaires and the memoranda and notes of the interviews. Petitioner refused to produce the
documents on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the
work product of attorneys prepared in anticipation of litigation. The United States then filed a petition in Federal District
Court seeking enforcement of the summons. That court adopted the Magistrate's recommendation that the summons
should be enforced, the Magistrate having concluded, inter alia, that the attorney-client privilege had been waived, and
that the Government had made a sufficient showing of necessity to overcome the protection of the work product doctrine.
The Court of Appeals rejected the Magistrate's finding of a waiver of the attorney-client privilege, but held that, under the
so-called "control group test," the privilege did not apply

"[t]o the extent that the communications were made by officers and agents not responsible for directing [petitioner's]
actions in response to legal advice . . . for the simple reason that the communications were not the 'client's'.'"

The court also held that the work product doctrine did not apply to IRS summonses.

Held:

1. The communications by petitioner's employees to counsel are covered by the attorney-client privilege insofar as the
responses to the

Page 449 U. S. 384

questionnaires and any notes reflecting responses to interview questions are concerned. Pp. 449 U. S. 389-397.

(a) The control group test overlooks the fact that such privilege exists to protect not only the giving of professional advice
to those who can act on it, but also the giving of information to the lawyer to enable him to give sound and informed
advice. While in the case of the individual client the provider of information and the person who acts on the lawyer's
advice are one and the same, in the corporate context, it will frequently be employees beyond the control group (as
defined by the Court of Appeals) who will possess the information needed by the corporation's lawyers. Middle-level --
and indeed lower-level -- employees can, by actions within the scope of their employment, embroil the corporation in
serious legal difficulties, and it is only natural that these employees would have the relevant information needed by
corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. Pp. 449 U. S.
390-392.

(b) The control group test thus frustrates the very purpose of the attorney-client privilege by discouraging the
communication of relevant information by employees of the client corporation to attorneys seeking to render legal advice
to the client. The attorney's advice will also frequently be more significant to noncontrol employees than to those who
officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the
employees who will put into effect the client corporation's policy. P. 449 U. S. 392.

(c) The narrow scope given the attorney-client privilege by the Court of Appeals not only makes it difficult for corporate
attorneys to formulate sound advice when their client is faced with a specific legal problem, but also threatens to limit the
valuable efforts of corporate counsel to ensure their client's compliance with the law. Pp. 449 U. S. 392-393.

(d) Here, the communications at issue were made by petitioner's employees to counsel for petitioner, acting as such, at
the direction of corporate superiors in order to secure legal advice from counsel. Information not available from upper-
echelon management was needed to supply a basis for legal advice concerning compliance with securities and tax laws,
foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. The
communications concerned matters within the scope of the employees' corporate duties, and the employees themselves
were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. Pp. 449 U.
S. 394-395

2. The work product doctrine applies to IRS summonses. Pp. 449 U. S. 397-402.

(a) The obligation imposed by a tax summons remains subject to the traditional privileges and limitations, and nothing in
the language

Page 449 U. S. 385

or legislative.history of the IRS summons provisions suggests an intent on the part of Congress to preclude application of
the work product doctrine. P. 449 U. S. 398.

(b) The Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of
necessity to overcome the protections of the work product doctrine. The notes and memoranda sought by the
Government constitute work product based on oral statements. If they reveal communications, they are protected by the
attorney-client privilege. To the extent they do not reveal communications, they reveal attorneys' mental processes in
evaluating the communications. As Federal Rule of Civil Procedure 6, which accords special protection from disclosure to
work product revealing an attorney's mental processes, and Hickman v. Taylor, 329 U. S. 495, make clear, such work
product cannot be disclosed simply on a showing of substantial need or inability to obtain the equivalent without undue
hardship. P. 449 U. S. 401.

600 F.2d 1223, reversed and remanded.

REHNQUIST, J., delivered the opinion of the Court, in which BRENNAN, STEWART, WHITE, MARSHALL, BLACKMUN,
POWELL, and STEVENS, JJ., joined, and in Parts I and III of which BURGER, C.J., joined. BURGER, C.J., filed an opinion
concurring in part and concurring in the judgment, post, p. 449 U. S. 402.

Page 449 U. S. 386

Disclaimer: Official Supreme Court case law is only found in the print version of the United States Reports. Justia case law
is provided for general informational purposes only, and may not reflect current legal developments, verdicts or
settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information
contained on this site or information linked to from this site. Please check official sources.

Justia Annotations is a forum for attorneys to summarize, comment on, and analyze case law published on our site. Justia
makes no guarantees or warranties that the annotations are accurate or reflect the current state of law, and no annotation
is intended to be, nor should it be construed as, legal advice. Contacting Justia or any attorney through this site, via web
form, email, or otherwise, does not create an attorney-client relationship.
 595 F.2d 1321
4 Fed. R. Evid. Serv. 416
UNITED STATES of America, Plaintiff-Appellee,
v.
Robert McPARTLIN et al., Defendant-Appellants.
Nos. 77-2258, 77-2259, 77-2274, 77-2275 and 77-2280.
United States Court of Appeals,
Seventh Circuit.

Argued Sept. 29, 1978.

Decided March 26, 1979.
As Amended on Denial of Rehearing and Rehearing En Banc
April 23, 1979.
Edward J. Calihan, Jr., William J. Harte, Chicago, Ill., Herbert J. Miller, Jr., Washington, D. C., Joseph A. Lamendella, Harvey
M. Silets, John J. Jiganti, Chicago, Ill., for defendants-appellants.

Gordon B. Nash, Joan B. Safford, Candace J. Fabri, Asst. U. S. Attys., Chicago, Ill., for plaintiff-appellee.

Before PELL, SPRECHER and TONE, Circuit Judges.

TONE, Circuit Judge.

The appellants were convicted, in a nine-week jury trial, of conspiring to violate the wire and travel fraud statutes and of
substantive violations of those statutes.

2
The indictment charged that defendant Frederick B. Ingram,1 chairman of the board of the Louisiana-based Ingram
Corporation, had paid defendant Robert F. McPartlin, an Illinois legislator, defendant Valentine Janicki, a trustee for the
Metropolitan Sanitary District, and others more than $900,000 to secure for the Ingram Corporation a multi-million dollar
sludge-hauling contract with the District. Defendants Franklin H. Weber, a businessman, and Edwin T. Bull, president of a
towing company, were alleged to be intermediaries through whom many of the payments were made. William J. Benton,
vice president of Ingram Corporation, was an unindicted co-conspirator who played a major role in the conspiracy and
testified as a witness for the prosecution. The defendants were convicted of numerous violations of the Travel Act, 18
U.S.C. § 1952, and the Wire, Radio, Television Fraud Act, 18 U.S.C. § 1343, and of conspiring to violate those acts in
violation of 18 U.S.C. § 371. The jury acquitted three other defendants, E. Bronson Ingram, brother of Frederick B. Ingram
and an officer of Ingram Corporation, Chester Majewski, a Metropolitan Sanitary District trustee, and Bart T. Lynam,
General Supervisor of the Sanitary District.2
3

The defendants urge as grounds for reversal the district court's denial of motions for severance, a ruling on the alleged
withholding by the prosecution of evidence favorable to the defendants until the beginning of the trial, rulings admitting
and excluding evidence, certain instructions to the jury, and other alleged trial errors. In this portion of the opinion the
facts are stated and the issues arising from the denial of severance are decided. Judge Pell and Judge Sprecher have
written, and I concur in, the portions of the opinion dealing with the other issues.

The Facts

4
The Sanitary District is a municipal corporation with primary responsibility for disposing of sewage from Chicago and
surrounding areas. The District's business is governed by an elected Board of Trustees3 and managed by a professional
staff, which from time to time makes recommendations to the Board concerning major undertakings of the District.
5
 The Sanitary District operates a sewage treatment plant in Stickney, Illinois. Until 1971 the sludge produced as a by-
product was disposed of by pumping it into nearby lagoons. Early that year, because the lagoons were rapidly being filled
and efforts to clean them had failed, the District announced plans to have the sludge transported to Fulton County, Illinois,
about 160 miles southwest of Stickney, and solicited bids on the project, which were due on March 19, 1971.

Viewed in the light most favorable to the prosecution, the evidence showed that Benton, acting with the knowledge
and complicity of Frederick Ingram and through intermediaries Bull and Weber, bribed McPartlin and Janicki to cause the
sludge-hauling contract to be awarded to Ingram Corporation and one of its subsidiaries, and later bribed the same
officials to secure favorable treatment under the contract and modifications of the contract. The details were as follows:

When the District solicited bids on the sludge-hauling project, defendant Bull assisted Frank Oberle, an employee of
Ingram Contractors, Inc., a wholly owned subsidiary of Ingram Corporation, in investigating the new proposal. During the
week before the bids were to be submitted, Bull visited Robert Howson, a vice president of Ingram Contractors, Inc., in
New Orleans, Louisiana, and told Howson that if Ingram Corporation expected to secure the contract, it would have to
make a "political contribution." Howson responded that he was not in that sort of business, but then took Bull to meet
William J. Benton, vice president of Ingram Corporation and president of Ingram Contractors, Inc.

Ingram Corporation, Burlington Northern, Inc., and the Atchison, Topeka and Santa Fe Railway Company were the
leading contenders among those submitting bids on March 19, 1971. To negotiate with these three bidders, the Sanitary
District established a committee, which met with representatives of the bidders for the first time on March 23, 1971.

That evening Bull, Oberle, and Benton met in Benton's hotel room, where they were later joined by defendant Weber.
After Bull had introduced Weber to Benton, Bull and Oberle left the room. Weber then told Benton that if Ingram
Corporation wanted the sludge-hauling contract, it would have to make a $250,000 "political contribution." Benton replied
that he would have to get approval from his superiors. After agreeing to meet Benton the next day, Weber left.

10

Benton then telephoned defendant Frederick Ingram to inform him of Weber's "political contribution" proposal. Ingram
agreed, provided that the contribution could be added to the cost of the contract.

11

On March 24, 1971, Benton again met with Bull, who expressed his belief that if the Ingram Corporation accepted
Weber's proposal, it would get the contract. Bull also told Benton that if the corporation did get the contract, he wanted
$100,000 in addition to anything it paid Weber. At another meeting later in the day, Weber asked Benton to open an
account at a Chicago bank to demonstrate Ingram Corporation's "good faith." That same day, Benton opened an account
at the First National Bank of Chicago.

12

The following week, Weber called Benton and told him that Burlington Northern, Inc. had offered to make a $295,000
political contribution. According to Weber, it was therefore necessary for Ingram Corporation to raise its contribution to
$450,000, including a $150,000 cash payment before the contract was awarded. Again Benton consulted Frederick Ingram,
who again agreed on condition that the contribution could be added to the contract price. Benton communicated Ingram
Corporation's approval to Weber, but said that the corporation could not raise $150,000 in cash on such short notice.
Weber replied that some of the $150,000 had to be paid by April 3, 1971.
13

On April 3, 1971, Weber and McPartlin went to Benton's Chicago hotel room, where Weber introduced McPartlin to
Benton as the man who handled all political contributions for the Democratic Party in Illinois. McPartlin assured Benton
that Ingram Corporation would receive at least $21,500,000 in total revenue from the sludge-hauling contract. Benton
gave McPartlin $75,000 in cash, including several one thousand dollar bills. On April 6, 1971, Weber deposited nine one
thousand dollar bills in the account of one of his defunct corporations, Illinois Southern Materials.

14

On April 6, 1971, Weber telephoned Benton, asking for $25,000 in cash immediately to secure the cooperation of three
Sanitary District staff members. When Benton protested that he could not deliver $25,000 cash on such short notice,
Weber suggested that Ingram Corporation issue a check in that amount to Bull Towing Company, which Benton caused to
be done the next day. On April 8, 1971, Edwin Bull deposited the Ingram check in the account of Bull Towing Company
and, at the same time, withdrew $25,000 in cash from the account.

15
The Sanitary District requested the three bidders on the sludge-hauling contract to submit new bids by April 15, 1971.
Santa Fe declined. Burlington Northern submitted a revised bid of $18,300,000. Oberle submitted Ingram Corporation's
revised bid of $16,990,000, after which he returned to his hotel room, where he received a telephone call from either
Benton or Weber. The caller instructed him to go to the bar at the Continental Plaza Hotel to meet defendant Janicki,
which Oberle did.4 At the meeting in the bar Janicki told Oberle to raise Ingram's revised bid to $17,990,000. Oberle then
returned to his hotel room and telephoned Benton for advise. Benton instructed Oberle to attend the Sanitary District
negotiating committee meeting scheduled for that afternoon. While attending the meeting, Oberle received telephone
instructions from Benton to raise the Ingram bid by $1,000,000 to $17,990,000. Oberle did so.
16

On April 22, 1971, the Sanitary District Board of Trustees voted to award the contract to Ingram Corporation. Between
that date and May 12, 1971, a contract was drafted by members of the Sanitary District staff and Ingram Corporation
representatives, including John Donnelly, president of Ingram Barge Company, the Ingram Corporation subsidiary that
would transport the sludge under the contract. The staff insisted on a liquidated damages clause authorizing the District
to prescribe the amount of sludge to be transported in any 24-hour period and providing that Ingram Corporation would
be assessed a penalty for each ton of sludge not transported, as prescribed, in any 24-hour period. Donnelly, after initially
refusing to agree to the provision, discussed it with Benton, who told him to agree to it. Only after talking with Frederick
Ingram, however, did Donnelly accede to inclusion of the liquidated damages clause.

17

The contract provided that Ingram Corporation would construct additions to the treatment facilities at Stickney and an
unloading dock and pump station in Fulton County, for which work the Sanitary District was to pay $733,000. Ingram
Corporation was also to construct a pipeline over property not owned by the District, for which construction the District
agreed to pay $68,000 per month for 36 months, a total of $2,448,000. The contract also provided that Ingram
Corporation would receive $1.802 per ton of sludge hauled from Stickney to Fulton County. The parties estimated that
over the life of the contract 8,000,000 tons of sludge would be transported.

18

On May 19, 1971, Weber and Benton met in New Orleans to discuss ways of increasing Ingram Corporation's total
revenue under the contract to the $21,500,000 that McPartlin had assured Benton would be forthcoming. Weber told
Benton that Janicki and he thought that the corporation could receive an additional $2,100,000 by billing the Sanitary
District a second time for the construction of the pipeline and the construction in Fulton County.

19

On June 26, 1971, Weber told Benton that Janicki needed $21,250 to pay off three District staff members. Ingram issued
a check for that amount to Southwest Expressway, another of Weber's defunct corporations.
20

On July 27, 1971, Weber issued a $20,000 check to Bull Towing Company. Edwin Bull deposited the check and, at the
same time, withdrew $20,000. The next day, the Illinois Commerce Commission granted Ingram Corporation's request for a
certificate of convenience and necessity.

21
On August 14, 1971, Edwin Bull negotiated two contracts with Ingram Corporation. In one of them Ingram Corporation
agreed to rent barges from Bull Towing Company to transport sludge from the Lemont Bridge over the Illinois River to
Fulton County. Donnelly signed this contract but refused to sign the other contract, under which Ingram Corporation
would agree to pay Bull $.17 per ton for transporting sludge from Stickney to the Lemont Bridge. Ten cents per ton were
intended as payment for actual towing services; the other seven cents per ton were intended as payment for consulting
services and engineering and feasibility studies that Bull had allegedly performed for Ingram Corporation. The second
contract also provided for payment to Bull of a $76,000 "finder's fee."5 Donnelly objected to the "finder's fee," questioned
whether any consulting services or studies that Bull provided to Ingram Corporation were worth $560,000, and questioned
Bull's competence as a barge operator. Out of Bull's presence, Benton told Donnelly that if Bull did not participate in the
sludge-hauling contract, there would be no contract. Donnelly still refused to sign the second Ingram-Bull contract, but
permitted Benton to sign it on behalf of Ingram Barge Corporation as well as Ingram Corporation.
22

On August 15, 1971, Benton, Weber, and McPartlin met in Chicago to discuss further payments. Benton agreed to
provide.$146,000 in two installments. On August 18, 1971, Oscar Hardison, comptroller of Ingram Corporation, delivered
$30,000 in cash to Weber at O'Hare Airport in Chicago. On August 28, 1971, another Ingram executive, G. Glen Martin,
gave Weber $116,000, which consisted of $46,000 in cash and $70,000 in checks payable to Weber's defunct corporations.

23

Ingram Barge Corporation began transporting sludge six days later than the date it was required to do so under the
sludge-hauling contract; whereupon the Sanitary District assessed liquidated damages of $30,000 under the liquidated
damages clause. In early October, 1971, Benton, Weber, and Janicki held a meeting in Chicago to discuss this matter,
following which the Sanitary District withdrew the assessment. After the meeting, Weber told Benton that Janicki wanted
$100,000 by the end of 1971. When informed by Benton of this request, however, Frederick Ingram refused, saying that no
more payments would be made until the Sanitary District began making payments on the pipeline, as Weber had
promised it would.

24

On December 15, 1971, Weber telephoned Benton to tell him that the Sanitary District would issue a check to Ingram
Corporation for $1,000,000, as partial payment on the pipeline. When Benton arrived at Janicki's office the following day,
however, Janicki disclaimed any knowledge of the $1,000,000 check. Benton threatened to "jerk the rug" from under
everyone in Chicago.

25

Upon learning of Benton's threat, Weber informed Oberle of it and asked Oberle to do whatever he could about
Benton. Oberle telephoned defendant Frederick Ingram to tell him of Benton's threat. Ingram expressed no surprise,
simply thanked Oberle for the information and hung up, and later in the day met with Benton to discuss the matter. At the
meeting they agreed that Benton would continue to represent Ingram's interest in dealing with the Chicago officials.

26

On December 21, 1971, Weber, Janicki, and Benton met in Benton's hotel room in Chicago. Benton apologized for his
threat. He then gave Weber two checks payable to Weber's defunct corporations in the amount of $50,070. This payment
brought Ingram's total contribution to.$317,320, leaving a balance of $132,680 on the $450,000 commitment.

27
 In February, 1972, Weber told Benton that because of the difficulties in getting the Sanitary District to pay the
additional $2,100,000 for the pipeline, Ingram Corporation would have to increase its contribution to $620,000. On
February 17, 1972, Weber asked Benton for $100,000 in cash immediately. When Benton told defendant Ingram of the
request, Ingram responded that he would investigate ways of raising the money. On February 28, 1972, Benton delivered
$100,000 to Mrs. Valentine Janicki.

28
At trial, defendant Frederick Ingram contended that he did not learn until this February, 1972 meeting with Benton that
his company had secured a multi-million dollar contract by paying more than $300,000 to Chicago officials.6 Ingram
testified that he protested against paying the bribes, but reluctantly agreed when Benton informed him that if he refused
to pay, the Sanitary District would not pay the additional $2,100,000 for the pipeline and would use the liquidated
damages clause to penalize Ingram Corporation.
29

On March 10, 1972, Weber told Benton that if Ingram Corporation could deliver $100,000 before the end of the month,
the Sanitary District Board of Trustees would approve the purchase of the pipeline. One-fourth of this amount was
delivered, but the balance was not, and the trustees failed to approve the purchase. At a July 6, 1972 meeting between
Benton, Janicki, and Weber, however, Janicki promised that the trustees would take some action on the pipeline in the
month of July. As promised, the board of trustees authorized the staff to negotiate with Ingram for the purchase of the
pipeline on July 20, 1972.

30

On August 23, 1972, Benton gave McPartlin $80,000 in cash. McPartlin told Benton that the trustees would approve the
purchase of the pipeline in September, but Ingram would have to pay the balance of its contribution, about $95,000, in
September also.

31

Between August and November, 1972, Ingram Corporation and the Chicago officials negotiated a new agreement.
Ingram would pay $750,000 over a three year period, and the Sanitary District would purchase the pipeline, modify the
liquidated damages clause, and extend the sludge-hauling contract for three years at a higher price per ton.

32

On December 28, 1972, representatives of the Ingram companies and the District signed an agreement covering the
pipeline purchase that was to be effective only if the parties also signed two other agreements: a retroactive modification
of the liquidated damages clause and a three year extension of the sludge-hauling contract. On January 26, 1973, the
additional agreements were signed.

33
After the signing, Benton returned to his hotel room and telephoned Janicki to tell him that his money was ready.
Janicki sent his secretary to pick up a package containing $50,000 in cash. Benton then telephoned Weber to tell him to
come and pick up the balance of the money due. When Weber arrived, Benton gave him $95,000 in cash and nine letters
of credit drawn on a Swiss bank in the amount of $70,000 each.7
34

One of the letters of credit matured in June, 1973, and each of the others matured sequentially at six-month intervals.
Weber admitted negotiating the first four letters at the Swiss bank in July, 1973, December, 1973, June, 1974, and
December, 1974. On each occasion, he purchased his plane ticket to Europe with cash, arranged for his trip to Switzerland
only after he arrived in Europe, and stopped in Toronto, Canada, on the way back to the United States. On his last two
trips, Weber telephoned Janicki from Europe.

35
 Sometime before the fall of 1974 a federal grand jury commenced an investigation of the events surrounding the
sludge-hauling contract. In May, 1975, the government granted immunity to Benton.

36
In November, 1975, Weber sent his brother, Henry Weber, to Europe to negotiate the fifth and sixth letters of credit,
which matured in June, 1975, and December, 1975.8 Following his brother's instructions, Henry Weber did not proceed
directly to the drawee Swiss bank but went to a bank in Vaduz, Liechtenstein, to have that bank present the letters to the
Swiss bank.
37

On November 26, 1975, two weeks after his return from Liechtenstein, Henry Weber appeared before the grand jury
and testified that he had only visited Frankfurt and Munich. On December 3, 1975, the government called Henry Weber to
appear a second time before the grand jury, this time asking Weber to bring his travel records. During his second
appearance, Henry Weber testified that he had been mistaken when he said that he had only visited Frankfurt and Munich
and that he had also visited Vaduz.

38

On December 9, 1975, Franklin Weber's attorney telephoned one of the government's attorneys in this case and
informed him of what the government attorney already had reason to suspect, namely, that Franklin Weber had
possession of the remaining letters of credit.

39

Additional details and procedural matters necessary to an understanding of the various issues to be decided will be
stated at appropriate places in the opinion.

I.

Severance

40

Before discussing the specific attacks on the district court's denial of severance, some general principles should be
noted. The question of whether charges that have been properly joined ought to be severed for trial is for the discretion of
the trial judge, whose decision will be reversed only upon a showing of clear abuse. United States v. Tanner, 471 F.2d 128,
137 (7th Cir.), Cert. denied, 409 U.S. 949, 93 S.Ct. 269, 34 L.Ed.2d 220 (1972). The defendant has the burden of showing
prejudice, which is a difficult one. Id. A denial of severance will rarely be reversed on review, Tillman v. United States, 406
F.2d 930, 935 (5th Cir.), Cert. denied, 395 U.S. 830, 89 S.Ct. 2143, 23 L.Ed.2d 742 (1969), and then only for the most "cogent
reasons," United States v. Kahn, 381 F.2d 824, 838 (7th Cir.), Cert. denied, 389 U.S. 1015, 88 S.Ct. 591, 19 L.Ed.2d 661 (1967).
There is, moreover, a strong policy in favor of joint trial "where the charge against all the defendants may be proved by
the same evidence and results from the same series of acts." United States v. Cohen, 124 F.2d 164, 165 (2d Cir.), Cert.
denied sub nom. Bernstein v. United States, 315 U.S. 811, 62 S.Ct. 796, 86 L.Ed. 1210 (1942). See also United States v.
Echeles, 352 F.2d 892, 896 (7th Cir. 1965) recently quoted in United States v. Harris, 542 F.2d 1283, 1312 (7th Cir.), Cert.
denied, 430 U.S. 934, 97 S.Ct. 1558, 51 L.Ed.2d 779 (1976).

41

In the case at bar all appellants assert error in the denial of their motions for severance. Frederick Ingram argues that
the denial deprived him of evidence that would otherwise have been available. The other appellants, whom we shall call
the Illinois defendants, argue that they were prejudiced by the denial because Ingram and his brother (whom the jury
acquitted) defended on a ground antagonistic to the defenses of their co-defendants and because of curtailment of cross-
examination and the spillover effect of evidence admitted only against Frederick Ingram. We turn first to the argument of
the Illinois defendants.

A. The Illinois Defendants

 1. Antagonistic Defenses

42
The Ingrams contended that the payments were made only because the Sanitary District threatened to take action that
would have resulted in financial disaster to Ingram Corporation, and therefore neither of them had the "intent (to
influence the performance of an official act) required by the Illinois bribery statute." United States v. Peskin, 527 F.2d 71, 84
(7th Cir. 1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976). It was not necessary to this defense that the
Illinois defendants were guilty of extortion or received bribes, because it was possible that Benton, through whom the
corporation's communications with, and payments to, the Illinois defendants were carried out, did not pass any of the
money on but kept it all himself.9 Thus the Ingram defense was not necessarily antagonistic to the defenses of others,
although it was possible, on the Ingrams' theory, that they were innocent even if the others were guilty.
43
Even if the defenses were to a degree antagonistic, however, it does not follow that there should have been two or
more trials. One has no right to any tactical advantage that would result if evidence that is admissible against him in either
a joint or separate trial might be unavailable in a separate trial. Cf. Brady v. Maryland, 373 U.S. 89, 90-91, 83 S.Ct. 1194, 10
L.Ed.2d 215 (1963).10 It is therefore the settled rule that a defendant is not entitled to a severance merely because it would
give him a better chance of acquittal. See United States v. Tanner, supra, 471 F.2d at 137. Thus antagonistic defenses do
not require the granting of severance, United States v. Hutul, 416 F.2d 607, 620 (7th Cir.), Cert. denied, 396 U.S. 1007, 90
S.Ct. 573, 24 L.Ed.2d 504 (1970), even when one defendant takes the stand and blames his co-defendant for the crime,
United States v. Joyce, 499 F.2d 9, 21 (7th Cir.), Cert. denied, 419 U.S. 1031, 95 S.Ct. 512, 42 L.Ed.2d 306 (1974). Even when
the defendant who testified he was the victim of extortion had dealt directly with the defendant alleged to have extorted
the bribe, we sustained the denial of severance. United States v. George, 477 F.2d 508 (7th Cir.), Cert. denied, 414 U.S. 827,
94 S.Ct. 49, 38 L.Ed.2d 61 (1973).
44
There may be cases, as we recognized in George, in which the conflict among defendants is of such a nature that the
"jury will unjustifiably infer that this conflict alone demonstrates that both are guilty." 477 F.2d at 515. This is not such a
case. The joinder did not result in the exclusion or admission of any evidence of consequence that would not have been
excludable or admissible in separate trials. Nor was any argument made that could not properly have been made in such a
separate trial. There was no cognizable prejudice arising from antagonistic defenses.11

2. Curtailment of Cross-Examination

45

Janicki complains that cross-examination was curtailed because of the joinder when, during cross-examination of
Benton, the trial judge delivered a general admonition against repetitious cross-examination. Neither Janicki nor the other
Illinois defendants, who adopt by reference his arguments on severance, show any prejudice resulting from the
admonition or point to any specific ruling curtailing their cross-examination. It was, moreover, entirely proper for the
judge to attempt to forestall repetition.

46

3. Spillover Effect of Evidence Offered Against Frederick Ingram

47

Janicki also asserts that he was prejudiced by evidence offered against Frederick Ingram showing that Ingram
Corporation had bribed a Brazilian corporate official between 1969 and 1971, because the conduct of the Brazilian was
similar to that with which Janicki was charged. The trial court instructed the jury to consider the evidence of the earlier
bribe only as to Frederick Ingram's state of mind, but Janicki asserts that this instruction was ineffective. We see no
substantial risk that the jury would believe that because a Brazilian corporate officer took a bribe from Ingram
Corporation, Janicki did also, and therefore we conclude that Janicki was not prejudiced by the admission of this evidence.
Its admissibility as to Frederick Ingram and the effectiveness of the limiting instruction are discussed below.

48
 The Illinois defendants were not deprived of a fair trial by the joinder.

B. Frederick Ingram

49

Frederick Ingram's attack on the joinder is based on the district court's exclusion of three items of evidence offered to
support his extortion defense, which Ingram argues occurred because he was tried with the men he allegedly bribed.

50

1. The McPartlin Statements and the Attorney-Client Privilege Among Co-defendants and Their Counsel

51

Throughout the period covered by the indictment, Benton kept diaries, or appointment calendars, in which he made
notes concerning meetings and telephone conversations, naming the persons involved and often recording the substance
of the conversations. The Benton diaries figured prominently in the government's case, for they corroborated much of his
testimony.

52

Destroying Benton's credibility was important to Ingram, as it was to the other defendants, even though Ingram's
defense was based, in part, on the argument that he had made the payments in response to the threats Benton had
reported to him, because Ingram's account of events in issue differed materially from Benton's, and because the
government's case hinged largely on Benton's testimony. Since Benton's diaries corroborated so much of his testimony, it
was imperative from the standpoint of all defendants that an effort be made to discredit them.

53

Such an effort was made, and Frederick Ingram and McPartlin cooperated in that effort. In a brief supporting a pretrial
"Motion for Additional Time to Conduct Document Analysis," Ingram's counsel stated, with reference to contemplated
tests on the Benton diaries,

54

(T)he defendant Frederic B. Ingram is not the only defendant who may be affected by the results of these tests. Besides
the general effect of the doubts that may be raised as to Benton's veracity and the credibility of the diary entries, the case
against at least one other defendant Robert F. McPartlin may be substantially affected by the results of the tests. From the
results of the tests conducted so far, it appears that at least two of the suspicious diary entries relate to alleged payments
of money to Mr. McPartlin.

55
An investigator acting for Frederick Ingram's counsel twice interviewed McPartlin with the consent of the latter's
counsel12 for the purpose of determining whether there was a basis for challenging the truth of some of the diary entries.
In the second of these interviews McPartlin made certain statements, which Ingram argues tend to support his defense. At
trial, when Ingram offered evidence of these statements, McPartlin's counsel objected on the ground, Inter alia, of the
attorney-client privilege, and the court, after an In camera hearing, sustained the objection on this and another ground.13
56
The exclusion of the McPartlin statements would not be reversible error even if he had not been entitled to claim the
privilege. We are satisfied from our examination of the transcript of the In camera hearing, which was sealed and made a
part of the record on appeal, that the statements merely corroborated facts which were admitted in evidence and which
the jury obviously found to be true.14 We do not disclose the contents of the statements because they remain protected
by the attorney-client privilege, on which we alternatively base our ruling on this point.
57
 McPartlin was entitled to the protection of the attorney-client privilege, because his statements were made in
confidence to an attorney for a co-defendant for a common purpose related to both defenses. They were made in
connection with the project of attempting to discredit Benton, a project in which Ingram and McPartlin and their attorneys
were jointly engaged for the benefit of both defendants. Ingram acknowledges that communications by a client to his own
lawyer remain privileged when the lawyer subsequently shares them with co-defendants for purposes of a common
defense. The common-defense rule, which is not as narrow as Ingram contends, has been recognized in cases spanning
more than a century. Chahoon v. Commonwealth, 62 Va. (21 Gratt.) 822 (1871); Schmitt v. Emery, 211 Minn. 547, 2 N.W.2d
413 (1942); Continental Oil Co. v. United States, 330 F.2d 347 (1964); Hunydee v. United States, 355 F.2d 183 (9th Cir.
1965); Matter of Grand Jury Subpoena, 406 F.Supp. 381, 387-389 (S.D.N.Y.1975); See State v. Emmanuel, 42 Wash.2d 799,
259 P.2d 845, 854-855 (1953); Note, "Waiver of Attorney-Client Privilege on Inter-Attorney Exchange of Information," 63
Yale L.J. 1030 (1954); Note, "The Attorney-Client Privilege in Multiple Party Situations," 8 Colum.J.L. & Soc.Prob. 179 (1972).
Uninhibited communication among joint parties and their counsel about matters of common concern is often important
to the protection of their interests. Note, Supra, 8 Colum.J.L. & Soc.Prob. at 179-180. In criminal cases it can be necessary
to a fair opportunity to defend. Therefore, waiver is not to be inferred from the disclosure in confidence to a co-party's
attorney for a common purpose.

58

In the case at bar, the judge found, as a preliminary question of fact, from the evidence adduced at the hearing held
pursuant to Rule 404(a), Fed.R.Evid., that McPartlin had made the statements to the investigator in confidence. That
finding is not clearly erroneous.

59
Ingram argues that the co-defendants' defenses must be in all respects compatible if the joint-defense privilege is to be
applicable. The cases do not establish such a limitation,15 and there is no reason to impose it. Rule 503(b)(3) of the
proposed Federal Rules of Evidence, as approved by the Supreme Court, stated that the privilege applies to
communications by a client "to a lawyer representing another in a matter of common interest." See 2 J. Weinstein,
Evidence 503-52 (1977). The Advisory Committee's Note to proposed Rule 503(b) makes it clear that the joint-interest
privilege is not limited to situations in which the positions of the parties are compatible in all respects:
60

The third type of communication occurs in the "joint defense" or "pooled information" situation, where different lawyers
represent clients who have Some interests in common. . . . The rule does not apply to situations where there is No
common interest to be promoted by a joint consultation, and the parties meet on a purely adversary basis.

61
Quoted in 2 J. Weinstein, Supra, at 503-6 to 503-7. (Emphasis supplied and citations omitted.) Although the Congress,
in its revision of the Federal Rules of Evidence, deleted the detailed privilege rules and left the subject of privilege in
federal question cases to "be governed by the principles of common law as they may be interpreted by the courts of the
United States," R. 501 Fed.R.Evid., the recommendations of the Advisory Committee, approved by the Supreme Court, are
a useful guide to the federal courts in their development of a common law of evidence. 2 J. Weinstein, Supra, at 501-20.4
to 501-20.5. In this instance we follow the recommendation. The privilege protects pooling of information for any defense
purpose common to the participating defendants. Cooperation between defendants in such circumstances is often not
only in their own best interests but serves to expedite the trial or, as in the case at bar, the trial preparation.16
62

Ingram also seems to argue that the communication was not privileged because it was made to an investigator rather
than an attorney. The investigator was an agent for Ingram's attorney, however, so it is as if the communication was to the
attorney himself. "It has never been questioned that the privilege protects communications to the attorney's . . . agents . . .
for rendering his services." 8 Wigmore, Evidence § 2301 at 583 (McNaughton rev. 1961); Cf. United States v. Kovel, 296 F.2d
918, 921-922 (2d Cir. 1961) (client's communications to an accountant employed by his attorney).

63
 Nor was it, as Ingram contends, fatal to the privilege that McPartlin made the statement, in effect, to Ingram's attorney
rather than his own. When the Ingram and McPartlin camps decided to join in an attempt to discredit Benton, the attorney
for each represented both for purposes of that joint effort. The relationship was no different than it would have been if
during the trial the Ingram and McPartlin attorneys had decided that Ingram's attorney would cross-examine Benton on
behalf of both, and during cross-examination McPartlin passed Ingram's attorney a note containing information for use in
the cross-examination. The attorney who thus undertakes to serve his client's co-defendant for a limited purpose becomes
the co-defendant's attorney for that purpose. A claim of privilege was upheld in circumstances such as these where
communications were made directly to the attorney for another party in In the Matter of Grand Jury Subpoena Duces
Tecum, supra, 406 F.Supp. at 391. United States v. Friedman, 445 F.2d 1076, 1085 n.4 (9th Cir.), Cert. denied, 404 U.S. 958,
92 S.Ct. 326, 30 L.Ed.2d 275 (1971), relied on by Ingram, is not to the contrary. In Friedman the court held its decision in
Hunydee v. United States, supra, inapplicable, because no joint defense or common interest was alleged. The court went
on to state, in the footnote relied upon, that even if Hunydee was applicable, there was no privilege since "the facts of the
conversation negate confidentiality." 445 F.2d at 1085 n.4.

64

Inasmuch as McPartlin was entitled to assert the privilege whether Ingram was tried jointly or separately, no prejudice
would have resulted from the joint trial by reason of the exclusion of the McPartlin statements even if those statements
had not been merely cumulative.

2. Relevance of Threats Against Benton

65
Frederick Ingram also argues that joinder caused specific prejudice through the trial court's exclusion, as prejudicial to
other defendants, of evidence of threats of physical harm directed against Benton. The short answer is that prejudice to
other defendants was not the only ground for the exclusion. The excluded evidence consisted of testimony by Ingram that
in the fall of 1972 Benton expressed fear for his own physical well-being if Ingram refused to make the promised
payments to the Chicago officials, and testimony by two other witnesses that Benton told them in October 1974 that
someone had threatened him with physical harm. To begin with, both statements by Benton were said to have been made
long after February 1972, when Ingram, by his own admission, authorized Benton to make payments to secure the
contract. There is no indication in the record that the second, made long after all payments were made was ever
communicated to Ingram. The alleged threats were directed at Benton, not Frederick Ingram, who had no dealings in the
matter with anyone outside Ingram Corporation. Finally, Ingram's theory throughout the trial was economic, not physical,
coercion.17 The evidence was properly excluded as irrelevant, and it would have been equally irrelevant if Ingram had
been tried separately.
66

3. Relevance of an Unrelated Payment by a Third-Party

67

Frederick Ingram also contends that the joinder caused the exclusion of evidence that an attorney who represented
Ingram Corporation before the Illinois Commerce Commission made a $5,000 contribution to McPartlin's reelection
campaign fund, and that the payment was motivated in part by McPartlin's having recommended the attorney's firm to
Ingram Corporation. There was no showing that the attorney was coerced. This evidence, offered first by the prosecution
and then by the Ingrams, was rightly excluded on both occasions as irrelevant. In rejecting the Ingram offer the court said
that it "could be prejudicial to McPartlin without being probative of any issue as far as the Ingrams are concerned."
Prejudice to McPartlin aside, the trial court was correct as to the probative value of the evidence.

68

We therefore conclude that the denial of the motions for severance was not error.

SPRECHER, Circuit Judge:

69
 I concur in the portions of this opinion prepared by Judges Pell and Tone.

II.

Extortion Defense Instruction

70
As noted earlier, defendant Ingram never denied making certain of the illicit personal payments to officials of the
Sanitary District. Instead Ingram premised his defense to the counts relating to these payments on the theory that these
payments were not intended as bribes but were extorted from him by threats that, unless these payments were made, the
Sanitary District would, contrary to an alleged understanding, refuse to purchase the pipeline which Ingram had already
constructed and would invoke the liquidated damages clause to further penalize Ingram Corporation.18 In relation to
these arguments, the trial court gave the jury the following instructions on the defense of extortion:
71

Now, I have just told you that willful conduct, which is required in each of the crimes charged in this indictment, must
be voluntary.

72

One of the defenses raised by the Defendants Frederick B. Ingram and E. Bronson Ingram is that they authorized certain
payments to be made only because they were told unless the payments were made, the pipeline would not be paid for
and the liquidated damage provision would be used against Ingram Barge Company in an unreasonable and punitive
manner. These defendants claim, therefore, that they did not commit bribery or conspire to commit bribery and lacked the
intent to bribe.

73

In analyzing this defense, there are several things for you to consider. First, you should determine whether a defendant
did in fact authorize payments because of a fear of economic loss. If you find that a defendant did authorize any of the
payments in question, but that he did so solely to procure an economic advantage rather than out of fear of an economic
loss, then this defense that the act was involuntary must fail.

74

On the other hand, if you do find that a defendant authorized payments because of his fear of economic loss, then you
should proceed to a consideration of whether that fear of economic loss was such as to render his action involuntary
within the meaning of the law.

75

There are several things to consider in this connection. First, did the defendant fear loss as a result of a withholding of
something to which he believed Ingram Barge Company was already legally entitled? Specifically, did the defendant
believe that the Metropolitan Sanitary District was already under a legal obligation to pay Ingram Barge for the pipeline?
Did he believe that the threatened assessment of liquidated damages was legally unjustified?

76

The answers to these questions are important because there is a difference between paying a public official for
something one is entitled to receive and paying a public official for something one is not entitled to receive.

77

If one does not believe he is legally entitled to receive the thing in question, then, no matter how much he needs it and
no matter how great the economic loss one might suffer by not receiving it, there can be no legal justification for paying a
public official to get it. Such a payment is bribery, pure and simple.
78

However, if one is legally entitled to the thing in question or in good faith believes he is legally entitled to it, then the
fear of economic harm from not receiving it may be sufficient to render the act of payment involuntary, depending upon
three additional considerations: The seriousness of the economic harm perceived by the defendant, the effect that
perception had on his ability to exercise free choice, and the defendant's awareness of reasonable alternatives to the
making of the demanded payments.

79

If a defendant did not in fact fear serious economic harm or if his fear did not substantially impair his ability to exercise
free choice or if he was aware of actions he might take to forestall the harm without making the payments and chose not
to take those actions, then his conduct in authorizing the payment cannot be considered involuntary within the meaning
of the law.

80

In order to prove, therefore, that a defendant acted willfully as opposed to involuntarily in authorizing a payment, the
government must prove one of the following things: (a) that the defendant was not motivated by a fear of economic harm
in authorizing the particular payment, or (b) the thing which the defendant sought to obtain by making the payment was
not something he believed Ingram Barge Company was legally entitled to have without making the payment, or (c) the
defendant did not perceive the threatened economic harm to be of serious magnitude, or (d) the defendant's fear was not
such as to substantially impair his ability to exercise free choice, or (e) and finally, the defendant was aware of reasonable
alternatives to making the payments and chose not to pursue those alternatives.

81

Defendant Ingram urges that this instruction was prejudicial error in three respects. In considering these contentions we
shall assume without deciding, that as the instruction states, under Illinois law, if one who pays a bribe is or believes
himself to be "legally entitled" to have the official take the action induced by the bribe, "then the fear of economic harm
from not receiving it may be sufficient to render the act of payment involuntary." This court's decision in United States v.
Peskin, 527 F.2d 71, 84 (7th Cir. 1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976), in the following words,
left open the question whether this is so but did establish the rule applicable in the case of a discretionary official decision:

82

(A)t least in a case where a discretionary or legislative decision . . . has been requested, the withholding of such action
until a money demand is met could not negate the intent (to influence the performance of an official act) required by the
Illinois bribery statute.

83

Id. at 84.

84
First, Ingram argues that the distinction between economic loss and gain was erroneous. The prejudice from this
distinction allegedly arose from the fact that the jury was likely to define economic loss as the payment of money and
economic gain as the receipt of money and therefore might have rejected the extortion defense out of hand on the
ground that the admitted object of the payment was to complete the sludge-hauling project and thereby gain a profit. In
response we note initially that Ingram here has too narrowly characterized his own defense. Ingram asserted throughout
the trial and continues to assert before us that the payments were at least in part motivated by a desire to avoid
assessment of liquidated damages. Even under the simplistic construction of the loss-gain distinction which Ingram alleges
was most likely, this would constitute an economic "loss" thereby preventing the jury from rejecting the defense on the
basis of the loss-gain distinction.19 Moreover it is not clear that Ingram preserved this objection for appeal; the written
objection to the instruction tendered at trial makes no mention of any error in this distinction.20 Finally, we are not
convinced that the jury would put such a simplistic construction on the loss-gain distinction. Certainly it requires no
extraordinary economic acumen to realize that the receipt of money may not represent an economic gain if the amount
received is less than an amount to which one was previously entitled. Conversely, an ordinary juror would certainly realize
that a real economic gain accrues only when a person becomes entitled to something to which he had no prior
entitlement, that is, when a discretionary official act is performed for his benefit. The district court followed this gain-loss
instruction with a discussion of the concept of entitlement, explicitly denoting a "loss" as a failure to receive a benefit to
which one was entitled, thereby further clarifying the interdependent relation between these two concepts.21
85
Ingram advances a second attack on this instruction. He argues that the district court erred in instructing the jury that
the extortion defense is unavailable if the defendant did not believe that he had a legal entitlement to the official action.
Once again we must note that this objection appears not to have been properly preserved for appeal, since Ingram's
objection to the trial court did not criticize the entitlement aspects of the instruction.22 Even if this objection were
properly preserved, it lacks merit. The district court's instruction is consistent with Peskin.23
86
Ingram's final objection to the trial court instruction is that the instruction, by its emphasis on the voluntariness of the
payments, implicitly disallowed the extortion defense and permitted only the narrower defense of duress. Assuming that
the distinction drawn in United States v. Barash, 365 F.2d 395 (2d Cir. 1966), between the defenses of duress and extortion
is correct,24 the instruction could not have prejudiced Ingram since Ingram, before this court and the trial court,
characterized his own conduct in such a way as to absolutely preclude the availability of the extortion defense, even
assuming that the voluntariness of his conduct alone would not negate the extortion defense. Ingram, during the course
of the trial, admitted that he had no legal entitlement to the benefits which his payments were designed to
obtain.25 Accordingly he is absolutely precluded from prevailing on an extortion defense under Peskin, which makes that
defense unavailable where the defendant is seeking to obtain a benefit not owed and thus the emphasis of the
instructions on involuntariness could not have harmed the defendant.26

III.

87

Evidence of Ingram's Bribes of Foreign Officials

88
At trial the government, seeking to rebut Ingram's testimony that he made the payments only as a victim of extortion,
sought to demonstrate that in other instances Ingram had been willing to make such payments without the alleged
incentive of extortion. The trial court carefully screened this proffer with an ex parte review of the evidence, an in camera
meeting with all counsel, and a voir dire of the government witnesses. After this careful consideration, the court, although
rejecting a substantial portion of the government's offer of proof,27 permitted the government to introduce testimony
that Ingram had made surreptitious payments to an employee of a semi-official Brazilian corporation in order to receive
preferential treatment.
89

The government introduced at trial the testimony of Chris Daley, an official of the Ingram Corporation, to establish the
government's account of Ingram's alleged prior bribe. Daley testified that in 1967 the Ingram Corporation became
interested in engaging in an off-shore drilling project conducted by Petrobas, a Brazilian oil company owned jointly by the
Brazilian government and private investors. Daley and Benton then met with Levindo Caniero, the Petrobas official with
responsibility for procuring the contractor for the off-shore drilling. As a result of this meeting, Caniero agreed to provide
inside information to Ingram Corporation to assure that it was low-bidder in exchange for a "payoff or commission."
Benton, Daley and Caniero agreed that these payments should be made into a Swiss bank account. The contract was then
awarded to Ingram Corporation through a letter of intent. However, Caniero threatened to withdraw the letter of intent
because of a delay in Ingram Corporation's establishment of a Swiss account for him. At this point Daley informed Ingram
that the letter of intent was about to be lost because of the delay in making the payoffs. Ingram then put Daley in touch
with an international banker at Lehmann Brothers to expedite the establishment of the account. Subsequently, between
1969 and 1973, $172,000 was paid into the account.

90
 We hold that this evidence was properly admissible against Ingram in that it tended to refute Ingram's defense that he
lacked the intent to bribe the Chicago defendants and made the payments only to satisfy extortionate demands. Rule
404(b) of the Federal Rules of Evidence permits proof of prior crimes or acts where it is used for such purposes "as proof
of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." This provision
has been interpreted as permitting admission of evidence of prior acts as long as it has a substantial relevance to an issue
other than showing that the defendant has a criminal character and therefore possesses a propensity to commit criminal
acts. See, e. g., United States v. Sigal, 572 F.2d 1320, 1323 (9th Cir. 1978). Or, as this court has held, such evidence is
admissible "if, entirely apart from the matter of 'propensity,' it has a tendency to make the existence of An element of the
crime charged more probable than it would be without such evidence." United States v. Fairchild, 526 F.2d 185, 189 (7th
Cir. 1975), Cert. denied,425 U.S. 942, 96 S.Ct. 1682, 48 L.Ed.2d 186 (1976) (emphasis added).

91
Ingram forwards three attacks on the admission of this evidence. First, he claims, the prior payments to Caniero were
not sufficiently similar to the payments for which he was indicted to establish their relevance to his intent. Before
examining the particular dissimilarities urged, we note that there is no requirement that the prior acts be virtually identical
to the charged acts and that it is sufficient that the acts be similar enough and close enough in time to be relevant. The
major thrust of Ingram's argument is that there is no showing that the Brazilian payments were either illegal or immoral
since such payments are simply a way of doing business in Brazil. Initially we must note that we would be loathe to
assume that surreptitious payments to governmental or private officials is a common and accepted practice in Brazil
absent proof to that effect. Ingram admits that neither he nor the government offered proof on that matter, and thus this
argument rests solely on Ingram's facile and unsupported characterizations of Brazilian practice. However, even were we
to accept that such payments are a legal and accepted practice in Brazil,28 we do not find that fact sufficient to
differentiate the two transactions. In United States v. Boggett, 481 F.2d 114 (4th Cir.), Cert. denied, 414 U.S. 1116, 94 S.Ct.
850, 38 L.Ed.2d 744 (1973), the government was permitted to introduce in a Travel Act bribery prosecution against a
zoning official evidence showing a series of transactions wherein gifts were made to the official and favorable actions by
him on behalf of the donor followed shortly thereafter. The defendant urged that since no showing of a Quid pro quo had
been made by the government there was nothing to establish anything improper in these transactions. The court,
however, admitted the evidence holding that regardless of the propriety of the individual's acts, the evidence
demonstrated a course of conduct which indicated the defendant's "preference for favors and gifts over his public duty."
Id. at 115. Likewise here, whatever the moral and legal status of the Brazilian payoffs, they indicate that the defendant had
knowingly circumvented ordinary business channels with "facilitating payments." Admittedly the illegality of such
payments to government officials in the United States would make such payments less likely than those not involving
illegality; that, however, does not deny that one making such payments, legal or not, is more likely to have the intent to
influence official action by similar payments in other instances than one who has never made such payments.29 The other
differences urged by Ingram are even less substantial. The fact that the Brazilian official was an employee of a semi-public
entity and that the indictment alleged payments to employees of a wholly public governmental entity is a completely
negligible difference, unless of course one makes the irrational assumption that one who would knowingly cheat both the
public and private investors would not knowingly cheat the public alone. Nor is it relevant that the Brazilian payoff was not
initiated by Ingram: we can see no difference in active participation in making payments suggested by another and
initiation of the suggestion itself, since one who is willing to perform the essential act of bribery that is, to dispense the
bribe moneys themselves must be presumed to have also been willing to suggest the bribe. Finally, we reject Ingram's
characterization of the Brazilian transaction as involving less harm that the Sanitary District bribes since the latter added
the amount of the bribes onto the contract price. Nothing in this record suggests that the amounts charged to Brazil
would not have decreased once the cost of the project was reduced by the amount of the bribes. Further, it is axiomatic
that for a competitively-bid project, where no inside information was available, Ingram would have bid less and therefore
charged less than where the project is guaranteed by virtue of a bribe and Ingram could set its own price. It is therefore
completely disingenuous to suggest that the level of harm differed.
92
Ingram's second objection is that there was no clear and convincing proof that Ingram knew the purpose of the
payments made to Caniero. We have held that there must be clear and convincing evidence of the prior act to justify its
admissibility,30 and we find that there is evidence in the record to meet that standard. Daley testified in camera as to
Ingram's reaction when he learned of the payments and that Benton's delay in setting up the account might lead to a
revocation of the letter of intent. Daley stated:
93
 Benton was to open it, which we wouldn't do. So that's when I called Fritz, and Fritz says, "Jesus Christ. How did you get
into that," or whatever. And he says, "Okay, okay. We will go ahead and call him back and see what we can put
together."(Tr. 5638). At trial, Daley testified as to Ingram's response to knowledge of the payments in the following terms:
"Mr. Ingram, in disgust, says 'Well, okay. I will see what I can do about it. . . .' " (Tr. 5674). It is difficult to understand why
Ingram would have responded "in disgust" or with queries as to how Daley became involved "in that" unless he knew that
the payments were illicit payments made to procure unauthorized benefits or at least were improper in some respect.
Furthermore, the government introduced a memorandum sent out by Daley to Ingram in which Daley stated that he knew
after speaking with Petrobas personnel that Ingram would be the low bidder and that Caniero had assured Daley that "we
could count on him for any assistance we need." Considering all the evidence, particularly Ingram's reaction to Daley's
statement and his knowledge that Ingram was assured to be the low bidder, there is a convincing portrait of Ingram's
knowledge of the purpose of the Caniero payments.

94

Finally, Ingram urges, relying on Rule 403 of the Federal Rules of Evidence, that the prejudicial impact of the evidence
outweighed its relevance and therefore should have been excluded. Ingram must sustain a heavy burden to succeed on
this argument since the careful balancing of the probative value of prior acts versus their possible unduly prejudicial effect
is uniquely appropriate to the informed discretion of the trial judge. See United States v. Peskin, 527 F.2d 71, 84 (7th Cir.
1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976); United States v. Sigal, 572 F.2d 1320, 1323 (9th Cir.
1978). More precisely, this balancing entails considering whether the probative value this evidence had in indicating that
Ingram's intent was to bribe, not to satisfy extortionate demands, outweighs its possible prejudicial effect, that is, the
possibility that the jury will take the evidence to be indicative of a criminal disposition.

95
The highly judgmental character of this test mandates that we not restrike the balance ourselves but instead examine
only the manner in which the district court exercised its discretion. The record here shows that the trial court was
meticulous and deliberate in its decision to admit the evidence. The trial court heard in camera evidence of a number of
prior acts which the government had sought to introduce.31 After extensive discussion the court permitted proof only of
the Petrobas transaction. Further, the court required the government to present its witness to the Petrobas transaction in
camera to confirm the substance of the testimony. Finally, to minimize any prejudice the court preceded the presentation
of this witness's testimony before the jury with an extensive limiting instruction emphasizing that Ingram was not "on trial"
for this previous transaction, that the evidence was to be considered only as it concerned Ingram's intent in the Sanitary
District transaction and that the court passed no judgment on the value of this evidence. Courts have often looked to
these factors indicating due consideration to uphold the trial court's judgment. See, e. g., United States v. Carleo, 576 F.2d
846 (10th Cir. 1978). In particular the use of limiting instructions has been accorded great significance. See United States v.
Sigal, 572 F.2d 1320, 1323 (9th Cir. 1978). We therefore decline to hold that the trial court abused its discretion.

IV.

96

Government's Compliance with Brady v. Maryland

97

During his opening statement, counsel for the government revealed that the principal government witness, Benton, had
embezzled and applied to his own benefit $375,000 of the money he obtained from Ingram in order to pay off the
Chicago defendants. Although the government had turned over to the defendants both Benton's and Ingram
Corporation's financial records, from which the government asserts the defalcations could have been discerned by the
defendants, the government did not turn over to the defendants Benton's grand jury testimony in which he referred to the
$375,000 as "the amount of money I am responsible for keeping," nor did the government disclose that Benton had
expressly admitted the embezzlements in interviews with government counsel. Defendants McPartlin and Janicki, relying
on Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), urge that this failure to disclose this information
earlier violated their Due Process rights and mandates reversal of the convictions.
98

We note initially that Brady and its successor, United States v. Agurs, 427 U.S. 97, 96 S.Ct. 2392, 49 L.Ed.2d 342 (1976),
address a thoroughly different problem than the one before us. The concern of Agurs and Brady is whether the
suppression of exculpatory material until after trial requires that a new trial be given so that this evidence may be
considered. The Court in Agurs characterized the situations to which the Brady principles apply as those involving "the
discovery, After trial, of information which had been known to the prosecution but unknown to the defense." 427 U.S. at
103, 96 S.Ct. at 2397 (emphasis supplied). Indeed the standard developed in Agurs can only sensibly be applied to the
suppression of evidence throughout the trial: "if the Omitted evidence creates a reasonable doubt that did not otherwise
exist, constitutional error has been committed. Id. at 112, 96 S.Ct. at 2402 (emphasis supplied).

99
The defendants here, however, do not complain of a total suppression of favorable evidence but merely attack the
timing of the disclosure of such evidence. Here the prosecutor did not conceal or withhold evidence of Benton's
defalcations but waited until early in the trial to reveal them.32 There is nothing in Brady or Agurs to require that such
disclosures be made before trial, and we have explicitly held this in the past. United States v. Stone, 471 F.2d 170, 173-74
(7th Cir. 1972), Cert. denied, 411 U.S. 931, 93 S.Ct. 1898, 36 L.Ed.2d 391 (1973). See also United States v. Lomprez, 472 F.2d
860 (7th Cir. 1972), Cert. denied, 411 U.S. 965, 93 S.Ct. 2144, 36 L.Ed.2d 685 (1973). Thus, even though evidence might be
material or might create a reasonable doubt as to guilt, Due Process, albeit requiring eventual disclosure, does not require
that in all instances this disclosure must occur before trial.
100

The appropriate standard to be applied in a case such as this is whether the disclosure came so late as to prevent the
defendant from receiving a fair trial. See United States v. Stone, 471 F.2d at 174. After considering the record and the
claims of prejudice forwarded by the defendants, we cannot say that this disclosure came so late as to violate Due Process.

101
The defendants, apparently relying on their misinterpretation of Brady as a constitutional mandate for pretrial
discovery, concentrated on the exculpatory nature of the evidence and barely developed before this court any specific
ways in which they were prejudiced by this delay.33 McPartlin merely argues that, had the Benton embezzlements been
revealed before trial, "specific requests could have been directed toward more detailed information concerning these
(embezzled) funds. . . . A thorough investigation into the disposition of those funds which he admittedly retained might
have revealed that additional funds were similarly expended, deposited or hidden." Brief for Defendant McPartlin at 34-36.
It is difficult for us to discern any undue prejudice on this basis. To begin with, there was nothing to preclude the
defendants from having made additional investigations between the time of the disclosure and the close of the evidence
almost two months later, and yet nothing in the record reveals that defendants directed any further inquiries to Benton.
This omission is even more important given the statement of the trial court that it would reconsider the defendant's
motion for a recess if it later became apparent that "anyone has in fact been prejudiced by a late disclosure." Tr. at 250.
Nor did the defendants subsequently renew their request for a continuance. Thus, given the failure of the defendants to
pursue adequately any subsequent investigation and their subsequent failure to request additional time for any
investigation thoroughly discredits their assertion that they were prejudiced by the timing of the disclosure.

V.

Admission of Benton's Desk Calendars

102

At trial the government introduced as exhibits over the objections of the defendant, the desk calendar-appointment
diaries of William J. Benton described above, Part I, B, 1. These diaries documented in some detail the dealings of Benton
with the Chicago defendants. As a foundation for admission of the diaries, Benton testified that he had kept such business
diaries since 1952 or 1953 and that he maintained these diaries during the period of his dealings with Metropolitan
Sanitary District officials. Benton further testified that he kept these diaries and made entries in them as a regular part of
his business activity as a vice-president of Ingram Corp., noting in them anticipated meetings, telephone calls, personnel
matters and bids. These entries were characterized by Benton as "things which I would need to look back on," to recall a
bid or to prepare letters and memoranda, for example.

103

In admitting the diaries the trial court made the following findings:

104

It was the regular course of business for Mr. Benton to make entries in diaries about the things he did during the course
of a business day, where he went, what people said to him, what commitments he made and what commitments were
made to him in connection with that business. The entries that are contained in the diary, in the series of diaries, do
pertain to Ingram's business.

105

The contents of the diaries further indicated their reliability to the district court:

106

I find no indication of a motive to falsify. At the time these entries were made back in 1971 and 1972, there is not the
slightest bit of evidence to suggest that Mr. Benton thought this scheme was going to be disclosed; that he thought that
he would be caught. There is nothing self-serving about these entries. They implicate Mr. Benton in serious criminal
misconduct. Indeed, if he were unavailable, I think these diaries might well be admissible as statements against penal
interest, so incriminatory are they of Mr. Benton.

107

So I think they have the earmarks of reliability in that sense.

108

We agree with the district court that these diaries were admissible. These diaries clearly fulfilled all the requirements
which justify the admission of business records under Federal Rule of Evidence 803(6). These records were kept as part of a
business activity and the entries were made with regularity at or near the time of the described event. Most importantly
these diaries satisfied the central rationale of the business records exception: since Benton had to rely on the entries
made, there would be little reason for him to distort or falsify the entries.

109

The application of the business record exception to documents differing greatly from the classic "shopbook" or
business ledger is well established. See, e. g., United States v. Reese, 568 F.2d 1246 (6th Cir. 1977) (scrapbook of press
clippings compiled by public relations department); United States v. Yates, 553 F.2d 518 (6th Cir. 1977) (letter from bank to
employees describing recent robbery); Magnus Petroleum Co. v. Skelly Oil Co., 446 F.Supp. 874 (E.D.Wis.1978) (corporate
officer's personal notes of business negotiations); Aluminum Co. v. Sperry Products, Inc., 285 F.2d 911, 916 (6th Cir. 1960),
Cert. denied, 368 U.S. 890, 82 S.Ct. 139, 7 L.Ed.2d 87 (1961) (inventor's diary of progress on invention). Moreover, the
business record exception has been applied to admit documents indistinguishable in kind from Benton's desk calendars. In
United States v. Evans, 572 F.2d 455 (5th Cir. 1978), the court permitted the introduction of "pocket-size appointment
calendars known as 'daytimers.' " Id. at 487. The court noted in support of its holding that these calendars were business
records that "(t)he entries purport on their face to list . . . business entertainment expenses . . . (and) such documents were
used as a matter of company policy." Id. at 488. Likewise, the calendars here on their face describe business matters and,
even if not mandated by Ingram policy, were kept in accord with the widespread practice of business executives to
maintain such records.

110
 Defendants McPartlin and Weber have argued that several facts differentiate the records here from admissible business
records. First, the defendants stress that some of the entries in the calendars were made out of sequence. The defendants'
document expert testified that fifteen entries out of all those made over a two-year period were made out of sequence.
We do not however agree with the defendants that nonsequential entries preclude admissibility as business records.
Although there is no dispute that Benton's entries in a few cases did not proceed page by page in the book, the
defendants' document examiner could not disprove Benton's statements that entries were made at or about the time of
the described event.34 Indeed, it seems to us that insisting that entries proceed methodically from the first to last page is
as pointless as insisting that ledger and account entries proceed in alphabetical order or from top to bottom. As long as
the entries satisfy the contemporaneity and regularity requirements, their sequence is irrelevant. This point was made clear
by the Tenth Circuit in United States v. Carranco, 551 F.2d 1197 (10th Cir. 1977). There the defendants attempted to block
the admission of freight bills on the ground that some of the notations on the bills occurred after the document had been
completed by the freight originator. The court rejected this argument noting:
111

The notations on the freight bill were explained by the witnesses, and this is probably more than is required by the
business records exception to the hearsay rule. As pointed out by the appellee, a freight bill is not meant to be a static
document nor is it used as such. As testified to by those familiar with the shipping business, a freight bill is used by many
different people and it is their job to make notations on the freight bill so it will continue to be an accurate description of
the shipment. It was adopted by ICX as its record, in the regular course of its business, when the ICX driver signed it as he
picked up the interline shipment. He used it as an ICX record, verified the shipment, and made the notations on it. The
notations as testified to by the witnesses were thus also made in the regular course of business of ICX. One of the freight
bill copies went into the ICX terminal records, and one or more copies continued with the shipment. The requirements of
Rule 803(6) of the Federal Rules of Evidence were met.

112

Id. at 1200. Similarly here there is no reason to require that an appointment calendar remain a "static document";
indeed as appointments and other matters change the calendar to be useful must be nonsequentially revised. The only
requirement is that these revisions be contemporaneous and regular, and the defendant's proof of simple
nonsequentiality does not rebut Benton's testimony that the entries were made regularly and contemporaneously.
However, even if several of the entries were made non-contemporaneously, it remains within the district court's discretion
to determine whether the few non-contemporaneous entries so undermine the reliability of the record as to preclude
admissibility. Given that there were only fifteen non-sequential entries over a two year period, even if many of these were
shown to be non-contemporaneous, we could not say that this discretion was abused.

113

The defendants also urge that these diaries could not be business records because they were relied on by no one other
than Benton and in any event contained many entries of a purely private nature, Viz., the alleged extortion scheme
engaged in by Benton which supposedly was not related to Ingram Corporation's official business. However, nothing in
the text or comments to the Rule provides any indication that a necessary prerequisite to the reliability of a business
record is verification by persons other than the one making the entry. Indeed, the Advisory Committee Notes appear to
suggest otherwise:

114

The element of unusual reliability of business records is said variously to be supplied by systematic checking, by
regularity and continuity which produce habits of precision, by actual experience of business in relying upon them, or by a
duty to make an accurate record as part of a continuing job or occupation.

115

Certainly the second and fourth, and possibly the first, indicia of reliability contemplate only the accuracy imposed by
the record keeper on himself. Accordingly, admissibility has been upheld even in instances in which the records were
made only for the benefit of the record keeper himself and not for the benefit of the entire business entity. See United
States v. Prevatt, 526 F.2d 400, 403 (5th Cir. 1976); Aluminum Co. of America v. Sperry Products, Inc., 285 F.2d 911, 916 (6th
Cir. 1960), Cert. denied, 368 U.S. 890, 82 S.Ct. 139, 7 L.Ed.2d 87 (1961).

116

Nor do we consider it significant that the illegality of Benton's activities may have removed these actions in some
technical sense from a narrow construction of his duties at Ingram. This argument proceeds on the false premise that
because Benton's activities were not a part of Ingram Corporation's business, they could not be a business at all. United
States v. Re, 336 F.2d 306 (2d Cir.), Cert. denied, 379 U.S. 904, 85 S.Ct. 188, 13 L.Ed.2d 177 (1964), addressed, and rejected,
such a contention. There the defendant after having gained control of a company, engaged in a fraudulent scheme for the
distribution of that company's securities for his own personal benefit. The court was unpersuaded that records relating to
that scheme, since they were not part of the company's business, could not constitute business records. The court pointed
out that the defendant, "while distributing a huge block of control stock to the investing public through a complex system
of brokerage accounts and over-the-counter sales, was engaged in a 'business,' " albeit a business of his own and not the
company's. Id. at 313. The court further rejected the notion that business records would lose admissibility as such because
of the illegality of the underlying business. We think that the same rationale applies here. Benton was engaged in
systematically negotiating under-the-counter payments either for himself or the Chicago defendants in order to facilitate
the award of business contracts. Although this is not a business of "the usual orthodox nature" (Id.), there is no question
that this bribery scheme was as much a business as a fraudulent securities-marketing scheme.

117

However, even if there were to be some question as to whether Benton's activities constituted an independent business,
we believe that his activities can also be characterized as part of Ingram's business. As long as the recorded activities had
become, properly or not, an integral part of Benton's business activities for Ingram, the records are not too personal to
preclude admissibility under this exception. In this matter we are persuaded by United States v. Schiller, 187 F.2d 572 (2d
Cir. 1951). There the defendant, a government employee in the Rent Control Program, maintained a diary which evidenced
a bribe paid to him. The court, in refusing to consider a Fourth Amendment challenge to the admission of the diary
premised on the personal, non-official nature of the papers, noted:

118

We think . . . there was a sufficient showing that the entries introduced in evidence dealt with official duties. Such
matters as rent adjustments and recommendations regarding the same were within his general duties, Whether he
performed them rightly or wrongly, at lunch or elsewhere. . . .

119

187 F.2d at 575 (emphasis supplied). Certainly if such papers have sufficient business character to remove them from
the personal paper protections of the Fourth Amendment, they have sufficient reliability to permit admissibility.

120

Defendants finally rely heavily on Buckley v. Altheimer, 152 F.2d 502 (7th Cir. 1945) in support of their position. In
Buckley, this circuit declined to permit, under the business record exception, the admission of a diary which contained
entries documenting the amount of indebtedness between two parties, Frost and Altheimer. The court, in denying
admission, noted that "(t)he book did not contain any regular set of entries relating to any accounts between Frost and
Altheimer." Id. at 507. It was argued that, although no claim was made that the entries in the diary occurred in the regular
course of business and was "informally kept," the diary should have been admitted because the entries were made
"precisely and meticulously." Id. The court rejected this argument, stating that "private diaries as distinguished from
account books or individual memoranda of particular transactions" are inadmissible. Id. at 508. It is this latter statement
upon which the defendants rely.

121
 We believe however that the defendants' emphasis on the court's language concerning "private diaries" is misplaced.
We do not believe that the court there intended to make any Per se rule precluding the admissibility of private diaries;
instead it is clear that the decisive factor in that case was that no regular entries had been made documenting the
relationship. The desk calendar before us is clearly a record of a different order: regular and frequent entries documenting
the relation between Benton and Sanitary District officials were made systematically for the purpose of allowing Benton to
rely on its accounts of the status of the relationship.

122
We note as a final matter that even if any of the defendant's arguments were sufficient grounds to prevent admission of
these diaries under the business record exception, they would be admissible under two other exceptions. First, they would
be admissible under the "residual" exception, Federal Rule of Evidence 803(24).35 A number of factors combine to
demonstrate the reliability of the entries: the highly self-incriminatory nature of the entries themselves, the regularity with
which they were made, Benton's need to rely on the entries. Where evidence complies with the spirit, if not the latter, of
several exceptions, admissibility is appropriate under the residual exception. See generally, United States v. Ianconetti, 406
F.Supp. 554 (E.D.N.Y.), Aff'd, 540 F.2d 574 (2d Cir. 1976), Cert. denied,429 U.S. 1041, 97 S.Ct. 739, 50 L.Ed.2d 752 (1977)
(especially Judge Weinstein's opinion for the district court). Furthermore the degree of reliability necessary for admission is
greatly reduced where, as here, the declarant is testifying and is available for cross-examination, thereby satisfying the
central concern of the hearsay rule. Second, these calendars would also be admissible under Rule 801(d)(2)(E) as
statements "by a coconspirator of a party during the course and in furtherance of the conspiracy." Since these entries were
made so that Benton could rely on them in carrying out his scheme, they aided and were "in furtherance of" the
conspiracy. See United States v. Evans, 572 F.2d 455 (5th Cir. 1978).

VI.

Weber's Prior Consistent Statements

123
The government's evidence revealed that the first installment of the bribe money consisted of $75,000 given to
McPartlin in Weber's presence. Some part of that amount consisted of thousand-dollar bills. The government further
presented evidence to establish that three days after this cash payment, Weber deposited nine thousand-dollar bills in the
bank account of one of the companies controlled by Weber. Weber, in an attempt to rebut the damaging inferences that
could properly be drawn from such a cash deposit, testified that he obtained this money from a safe-deposit box
maintained by himself and his mother. His mother testified that they indeed had such a joint safe-deposit box and that it
did contain several thousand-dollar bills. As further corroboration, Weber sought to introduce the testimony of his
accountant, as well as the accountant's copy of the bank statement recording the deposit. In an offer of proof Weber
indicated that the accountant would testify that in 1973, two years after the deposit, Weber told him, in connection with
his preparation of an IRS audit, that the funds were obtained from Weber's mother. The proffered bank statement
contained the accountant's notation next to the sum: "Overdraft covered and paid in cash from Mother (per FNW)." The
trial court refused the admission of the accountant's testimony and his copy of the bank statement. Defendants
McPartlin36 and Weber urge that this was error.
124
Two theories of admissibility are advanced. First, it is argued that the evidence was admissible under Federal Rule of
Evidence 801(d)(1)(B) as a prior consistent statement.37 We do not believe, however, that these statements were
admissible under this theory. Evidence offered under this theory must have some probative value in rebutting the implied
charge of recent fabrication or improper motive. However, where a motive to falsify also existed at the time of the earlier
statement, it possesses no such probative value. As Judge Weinstein correctly pointed out in his treatise on the Federal
Rules:
125

Substantive use under Rule 801(d)(1)(B) is limited to situations where high probative value is most likely . . . . Evidence
which merely shows that the witness said the same thing on other occasions when his motive was the same does not have
much probative force "for the simple reason that mere repetition does not imply veracity."

126
 4 J. Weinstein & M. Berger, Evidence P 801(d)(1)(B)(01) at 801-100 (1977). Obviously Weber would have had no more
reason to tell the IRS that the proceeds were illegal bribes than he has a motive now to tell that to a jury in a criminal
prosecution. Indeed, Weber would have even had a further reason not to tell the IRS that the $9,000 was part of a
kickback: a bribe would be includable in Weber's gross income whereas an appropriation of jointly-held funds might not
have been. Thus, we do not feel that these prior statements were admissible under 801(d)(1)(B).

127

As a second ground of admissibility, Weber and McPartlin urge that the bank statement was admissible as a business
record under Federal Rule of Evidence 803(6). This argument creates a paradoxical tension with their arguments that
Benton's desk calendars were not business records. The defendants assailed the diaries on the grounds that the entries
were not made at or near the time of the event related (but recorded in advance as reminders of appointments) and that
many of the entries were derived from "second or third-hand information." Brief for Defendant Weber at 7. Yet the
defendants urge that a single notation of a cash transaction made more than two years after the transaction and based
solely on information supplied by someone other than the person making the entry constitutes a business record. We do
not rely on these two grounds, however, to uphold the exclusion of the notation on the bank statement. Instead we find a
more fundamental flaw in this evidence: this notation, unlike those in Benton's diaries, was not made for future reference
and reliance but was made in anticipation of IRS litigation. The defendants appear to admit this fact, and the trial judge
was informed of this. (Tr. 1363-69). As such prelitigation records, we hold that they lacked sufficient trustworthiness to
permit admissibility. Indeed, this case is not significantly distinguishable from Hartzog v. United States, 217 F.2d 706 (4th
Cir. 1954), which was cited by the Advisory Committee Notes to Rule 803(6) as an example of insufficient trustworthiness.
In Hartzog the court held it was error to admit the worksheets of an IRS agent, deceased at the time of trial, that had been
prepared from his examination of the defendant's records in preparation for a tax-evasion prosecution. The court
explained the reasons for finding insufficient trustworthiness as follows:

128

These worksheets were made in preparation for this prosecution; they were Baynard's (the agent's) personal working
papers, were the product of his judgment and discretion and not a product of any efficient clerical system. There was no
opportunity for anyone . . . to tell when an error or misstatement had been made. These worksheets were not more than
Baynard's unsworn, unchecked version of what he thought (the defendant) Hartzog's records contained.

129
Id. at 710. The records made by Weber's accountant are no more trustworthy than those prepared by the agent in
Hartzog: they were prepared as a matter of his judgment and discretion; they were not produced as part of any regular
system; there was no reliance on these notations by the accountant or others to guard against error or misstatement. If
anything, the records in this case are less trustworthy since, unlike Hartzog where the agent examined records that the
defendant had prepared for his own use, these notations were the product of Weber's own representations for the
purposes of the audit, thereby furthering the possibility of misstatement. Accordingly, we hold that the trial court properly
exercised its discretion to exclude these records.38

PELL, Circuit Judge:

130

I concur in the portions of this opinion prepared by Judges Tone and Sprecher.VII.

Weber's Political Acquaintances

131

Henry Weber, brother of Franklin Weber, called as a Government witness, was permitted to testify on direct
examination without objection that his brother Franklin was an acquaintance of Clyde Choate. He was then asked whether
his brother was an acquaintance of Paul Powell to which he also responded in the affirmative. An objection was made,
without any specificity, following the answer as to Powell. There was no motion to strike the answer and the "objection" as
such was overruled. No effort was made at the time to demonstrate to the trial judge any particular basis for the objection.
132

Subsequently during redirect examination Weber moved for a mistrial on the basis of the Powell matter because "(i)t
was highly prejudicial and has no relation whatsoever to this case." The court in denying the motion, properly from our
examination of the record, observed that:

133

the reason I let that in is that you cross examined several witnesses about whether or not there was any reason to
believe Mr. Weber had any political connections, whether it was credible to believe that he knew anybody, and there
again, that is something you opened up.

134

Without specific reference to Powell, Weber again moved for a mistrial following final argument. He now says that
which he didn't say to the court specifically that on the basis of Fed.R.Evid. 404(b) the testimony as to Powell was improper
and prejudicial in the light of widely-circulated publicity of wrongdoing on the part of Powell when he was Secretary of
State of Illinois. Certainly in any trial and particularly in a complex trial involving numerous defendants such as the present
case, a lawyer should make clear to the trial judge the exact nature of the claimed prejudice, which was not done here.
Even, however, if we assume what probably was a fact that the notoriety given to the Powell case some seven years earlier
was such as to make it clear why Weber's attorney did not want his client linked with Powell, we agree here with the
district court that the door had been opened. Weber, not the Government, portrayed political associations, which he
sufficiently indicated he did not have, as a unique requirement for accomplishing that with which Weber is charged.

135

For the court to admit relevant evidence in rebuttal on the subject was well within its discretion. See United States v.
Eliano, 522 F.2d 201 (2d Cir. 1975); United States v. Jones, 438 F.2d 461 (7th Cir. 1971). C. Wright and K. Graham, Federal
Practice & Procedure § 5241. The purpose of Rule 404(b) is to prevent "the use of alleged particular acts ranging over the
entire period of the defendant's life (making) it impossible for him to be prepared to refute the charges, any or all of which
may be mere fabrications." 2 J. Weinstein, Evidence P 405(04), at 405-39, Quoting Wigmore, Evidence § 194. The defendant
focused the proof on this issue and cannot complain of surprise if evidence of his political associations was introduced.

VIII.

Henry Weber's Grand Jury Testimony

136

Franklin Weber also objects to the admission of his brother Henry's grand jury testimony at trial. Henry Weber testified
on direct examination that he went to Vaduz, Liechtenstein, to negotiate two letters of credit given to him by the
defendant. During the course of the direct examination, the Government attempted to introduce Henry Weber's
inconsistent grand jury testimony that he had never gone to Liechtenstein, testimony given two weeks after his return
from that country at the first of his two appearances before the grand jury. The court would not admit the testimony on
direct examination, however, on the basis that the trial jury might unfairly infer that the defendant had somehow been
responsible for his brother's falsehoods. When cross-examined by the defendant, Henry explained that because he was by
coincidence going to Europe, he negotiated the letters of credit as a favor to his brother. Henry also testified that the
defendant had told him the letters "covered sale commissions for oil or Arabian interest or something." The trial court
then permitted the Government to introduce the grand jury testimony on redirect examination, and the defendant argues
that the evidence still created the prejudical impression that Franklin Weber forced his brother to testify falsely.

137

Weber's argument that the admission of this evidence was a prejudicial linking of the brothers Weber, however, shifts
the focus from the basis on which the evidence was properly admitted. As the district court pointed out there need be no
connection between Franklin Weber and the giving of the false testimony to the grand jury for that testimony to be
admissible.

138
The trial court properly admitted the statement as nonhearsay, Fed.R.Evid. 801(c); See Anderson v. United States, 417
U.S. 211, 219-21, 94 S.Ct. 2253, 41 L.Ed.2d 20 (1974), to rebut the theory of the defense raised by the defendant during
cross-examination. During cross-examination, the defendant did not attempt to rebut the Government's showing on direct
examination that Henry Weber negotiated the letters of credit. The defendant instead attempted to impose upon the
transactions the appearance of innocence. Once the defendant, again opening a door, attempted to create this
impression, the testimony became significant as rebuttal merely because it was given, and not for its truth.39 The grand
jury testimony, viewed with other admissible evidence showing that it was false, tended to establish that Henry Weber was
aware that he was involved in improper transactions. See id. at 220.
139
In his reply brief, Weber argues that the Government has resorted to mere rules of impeachment to justify the
introduction of the grand jury testimony. It is true that as a secondary justification the Government, citing Fed.R.Evid. 607,
argues that it could properly impeach its own witness, although Weber does not argue otherwise.40 Although the
impeachment aspect is one which enters the present picture, this aspect appears neither to be the prime thrust of the
Government's position nor the basis on which the trial court admitted the evidence. As the trial judge pointed out when
the impeaching testimony was being discussed, the cross-examination by Franklin Weber was designed expressly to bring
out that this was a routine transaction that the witness was conducting for his brother, nothing was wrong with it and
there was no reason to suspect it. The judge then pointed out:
140

You didn't have to do that. I had earlier ruled that this (impeaching testimony) would not be admissible. Having opened
it up, I think the Government is now entitled to show that two weeks after he returned from Liechtenstein and I hadn't
realized that it was that soon that he appeared before the Grand Jury this witness said he had never been to Liechtenstein.

141

We agree with the district judge that the evidence was properly admissible through the open door.

IX.

Denial of Effective Assistance of Counsel

142

A second aspect of the Swiss letters and Henry Weber's various connections therewith is the basis for a claim that
Franklin Weber was denied effective assistance of counsel. The gist of the claim is that evidence pertaining to the Swiss
letters in addition to that discussed in Part VIII of this opinion not only further linked Franklin Weber with his brother's first
grand jury testimony but also constituted such a challenge to the integrity of Franklin Weber's trial lawyer as to deny the
defendant effective assistance of counsel.

143

Specifically, the proof to which the objection is directed is the testimony, presented during the Government's rebuttal,
of Assistant United States Attorney Michael O'Brien, who had conducted the preliminary grand jury investigation. The
testimony described the following sequence of events: About a week after Henry Weber testified truthfully before the
grand jury on December 3, 1975, his second appearance, that he carried the letters of credit to Liechtenstein, Franklin
Weber's attorney had called Government counsel to report his client's possession of other letters of credit. During closing
argument, the prosecutor suggested, "Isn't it interesting that after Henry Weber has all this recollection, then everybody is
calling up and telling the Government about it, after the cat is out of the bag." The defendant argues that this statement
implied that defense counsel engaged in wrongdoing and therefore denied the defendant assistance of counsel. This
argument is completely without merit. The cases cited by the defendant, United States v. Candelaria-Gonzalez, 547 F.2d
291 (5th Cir. 1977), and Zebouni v. United States, 226 F.2d 826 (5th Cir. 1955), concerned continuous derision of the
defense attorney by the trial judge and are not in point. Furthermore, we have difficulty seeing how this testimony and
final argument disparaged defense counsel. The Government's questioning and argument were obviously for the purpose
of rebutting the defendant's exculpatory evidence that Franklin Weber had not learned of the grand jury investigation
until "very recently," and that he had been suspicious of the purpose behind the letters of credit, and that he therefore
directed his attorney to notify the United States Attorney that he possessed more letters of credit.

144

We find no error in the admission of the rebuttal evidence. It was for the jury to draw such inferences as the evidence
properly supported on the issues to be determined by the jury. The admission of this evidence properly bearing on what
amounted to an assertion of a defense does not by any stretch of the imagination so impugn the defendant's attorney as
to make his assistance ineffective to the prejudice of his client. We find no suggestion in the record that the attorney had
the information with respect to the letters any sooner than he provided the information to the Government.

X.

Judge's Comment during Weber's Testimony

145

Franklin Weber finally argues that a comment by the trial judge during his testimony constitutes reversible error. The
defendant testified, "I can swear that I did not see Mr. Benton give him anything . . . ." The trial judge then said in the
presence of the jury, "that is what you are doing in everything you say. You understand that." Thereafter the matter was
brought to the attention of the judge by way of a motion for a mistrial in which it was claimed that Weber's credibility was
seriously depreciated in the eyes of the jury. The court immediately stated that the remark was not intended in any such
way and offered to make that clear to the jury.

146

The judge did fully explain to the jury that in reflecting upon the matter he thought he should not have made the
statement and that he in no way intended to reflect or comment on Weber's testimony or indicate any attitude
whatsoever about the testimony. The judge also in final instructions made it clear that any comment by the court was not
intended to invade the jury's province to decide the facts.

147

Weber, while not challenging the completeness of the court's curative instruction, argues that it did nothing to heal an
incurable situation, stating that "A placebo cannot cure a terminal condition." In candor, we regard this hyperbolic
characterization as a desperate bit of straw grabbing. In the first place we would have had difficulty even absent the
curative instruction in reading this remark as any indication that the judge was expressing disbelief in the defendant's
testimony. The judge, however, made it abundantly clear, if there had been any doubt, by his curative instruction that
there was no reflection on the witness's credibility. In any event, this was an isolated incident in a long and complex trial.
Weber testified for two full days during which the jury had ample opportunity to formulate its opinion of his credibility
without regard to what was at most an oblique passing remark by the judge. Courts generally, and properly, decline to
reverse in comparable situations. See, e. g., United States v. Cardall, 550 F.2d 604, 606 (10th Cir. 1976), Cert. denied, 434
U.S. 841, 98 S.Ct. 137, 54 L.Ed.2d 105 (1978); Gordon v. United States, 438 F.2d 858, 862-63 (5th Cir.), Cert. denied, 404 U.S.
828, 92 S.Ct. 63, 30 L.Ed.2d 56 (1971); United States v. Allen, 431 F.2d 712, 712-13 (9th Cir. 1970); United States v. Wilkins,
422 F.Supp. 1371 (E.D.Pa.1976), Aff'd sub nom. Appeal of Smith, 547 F.2d 1164 (3d Cir. 1976), 547 F.2d 1166 (3d Cir. 1976),
559 F.2d 1210 (3d Cir. 1977).

148

As the Supreme Court stated in United States v. Glasser, 315 U.S. 60, 83, 62 S.Ct. 457, 471, 86 L.Ed. 680 (1942):

149
 (An) examination of the record as a whole leads to the conclusion that the substantial rights of the petitioners were not
affected. The trial was long and the incidents relied on by petitioners few. We must guard against the magnification on
appeal of instances which were of little importance in their setting.

XI.

Sufficiency of Evidence as to Edwin Bull

150

The defendant Edwin Bull argues that the evidence against him was insufficient to sustain a conviction for conspiracy
because of an absence of evidence showing that he had knowledge of the illegal purposes of the conspiracy. He argues
that the statements of co-conspirators connecting him to the conspiracy were improperly admitted against him, and that if
these inadmissible statements had been excluded, his conviction could not stand.

151

Bull's theory of defense was that he was merely a "friendly and accommodating" businessman who earned a finder's fee
and a subcontract by introducing the Ingrams to the contract opportunities available at the Sanitary District. Especially
damaging to this defense, however, was testimony admitted at trial of conversations between Bull's alleged co-
conspirators concerning Bull's role in the conspiracy. Benton testified, for example, that prior to receiving the contract,
Ingram was having trouble generating sufficient cash to meet the demands of Sanitary District officials. When Weber
learned of this problem, he instructed Benton to write a check for $25,000 (the amount then demanded) payable to "Mr.
Bull's company, Bull Towing Company, and that he and Mr. Bull would handle this check and convert it into cash and take
care of the staff of the Sanitary District." Bull argues that without this statement the evidence merely shows that he
deposited a check from Ingram for $25,000 in the No. 3 Bull Towing account and drew a countercheck for the same
amount and received cash. Bull also declared this sum on his corporate and personal income tax returns and paid the
necessary taxes. According to Bull's brief, "(t)here is not a scintilla of evidence that any of these monies reached anyone
else." We hold that the co-conspirators' statements connecting Bull to the conspiracy were admissible under Fed.R.Evid.
801(d)(2)(E) and that the evidence against Bull was adequate to sustain the conviction.

152

Rule 801(d)(2)(E) provides that statements of a co-conspirator made during the course of and in furtherance of a
conspiracy are not hearsay. In United States v. Santiago, 582 F.2d 1128 (7th Cir. 1978), we held that the trial court alone
should decide, as a question of competence under Rule 104(a), the preliminary question of whether the proponent has
submitted sufficient proof that there was a conspiracy before admitting a co-conspirator's statement under Rule 801(d)(2)
(E). For the statement to be admissible, we held that this preliminary showing must satisfy the preponderance of the
evidence standard, and that the trial court's determination of admissibility is final as to admissibility.

153

The proceedings below, however, took place prior to our decision in Santiago, at a time when there were ambiguities in
the law about who was to decide co-conspirator preliminary questions and by what standards. See generally, 1 J.
Weinstein, Evidence P 104(05). In Santiago we noted that in this circuit the former standard for determining the
admissibility of co-conspirators' statements committed the question to both judge and jury. The trial court would admit
the statement if the proponent made a prima facie showing, on the basis of evidence other than the statement, that there
had been a conspiracy. The jury, however, was instructed not to consider the statement against another defendant unless
they found, beyond a reasonable doubt, that the evidence other than the statement showed that a conspiracy existed and
that the other defendant was a member of the conspiracy. See also United States v. Rizzo, 418 F.2d 71 (7th Cir. 1969), Cert.
denied, 397 U.S. 967, 90 S.Ct. 1006, 25 L.Ed.2d 260 (1970); United States v. Santos, 385 F.2d 43 (7th Cir. 1967), Cert. denied,
390 U.S. 954, 88 S.Ct. 1048, 19 L.Ed.2d 1148 (1968).

154
The trial court in this case proceeded substantially according to the prior standard, described in Santiago.41 Bull,
however, relying on Santiago language, which, of course, was not available to the trial judge here, seizes upon a part of
the court's instructions given during the course of the trial in connection with the admission of testimony of statements of
alleged co-conspirators. It is true that the judge did say that the jury could consider such statements on the question of
whether a conspiracy existed. Bull cites us to criticism in Santiago of "the view that the existence of a conspiracy could be
proved by the very hearsay statement for which admission is sought." 582 F.2d at 1133 n. 11. That was done here, he
argues, and constituted "bootstrapping" proof which had been condemned by earlier cases.
155

This argument however, taking language of the instructions out of context, ignores the clear and explicit admonitions of
the court during the course of the trial that as to any particular charged co-conspirator it was essential that he be proved a
participant in the conspiracy by independent evidence before statements of others could be considered on the question
of his liability.

156

Thus, on the first occasion during the trial that the subject was addressed, which was early in the trial, the judge
instructed as follows:

157

There are two fundamental questions that you have to decide in regard to the conspiracy count of the indictment. The
first of those questions is what is the conspiracy that is alleged by the indictment to have existed? Was there such a
conspiracy? On that question you consider all of the evidence that I allow in and you make up your minds at the
conclusion of the case as to whether a conspiracy, as alleged in the indictment, has been shown to exist as between
somebody.

158

The second question is and it is eight separate questions here was this particular defendant shown to have been a
member of that conspiracy. On that second question which you must answer in regard to each defendant, only those acts
of that particular defendant should be considered to answer that question. You can't decide that Defendant B was a
member of the conspiracy, if you find there has been a conspiracy, on the basis of something Defendant A said. It has to
be on the basis of what you find Defendant B said and did.

159

Those are the two questions, and let's just assume, generally speaking, that a jury in a hypothetical case finds Defendant
B to have been a member of the conspiracy. All right, then and only then are the statements and actions of his alleged co-
conspirators admissible against him. Provided they are acts and statements which the jury finds were committed in
furtherance of the objectives of the conspiracy.

160

So, to recapitulate, question one, was there a conspiracy? Question two, was Defendant B a member of that conspiracy?
Question three, as to any acts or statements of an alleged co-conspirator in considering whether you are going to
consider that against Defendant B, was that act or statement committed in furtherance of the common conspiracy?

161

Only if you answer all three of those questions in the affirmative can you consider this act or statement of, say,
Defendant A against Defendant B.

162

On analysis, all that the district court was really saying as to the establishment of a conspiracy was as follows: If there
was testimony as to a conversation between B and C which reflected an agreement to violate the law, this testimony
would be admissible as to B and C and would, if believed by the jury, tend to establish a conspiracy as to B and C. If during
the course of the conversation either B or C had spoken of A's participation this would not have been proof of A's
participation unless and until it had already been established by independent evidence, other than the statements of co-
conspirators, that A was a participant.

163

While the quoted portion of the instructions above was perhaps repetitive, and we note its substance as to the
necessity for independent evidence as to any particular defendant becoming a conspiracy member was repeated
thereafter, it is evident that the trial judge was attempting to make absolutely clear to the jury by repetitive emphasis that
the statements of others could not be considered against a defendant for finding him to be a participant in a conspiracy
unless his membership had been otherwise independently established. From the record we regard this attempt by the
judge to have been successful.

164

In sum, we fail to see any prejudice to Bull. The instructions on conspiracy as in the case of all instructions must be
considered in the whole complex of instructions, and it was made perfectly clear to the jury by those instructions that even
though a conspiracy had been established by all of the evidence which the court had admitted, the jury could not find Bull
guilty as a conspirator unless his membership in the conspiracy had been established by independent evidence other than
the statements of co-conspirators.

165

Further, and in any event on the record in this case, we are firmly convinced that apart from any statements there was
overwhelming independent evidence sufficient to show the existence of a conspiracy. If there had been any error in the
instruction it would have been harmless. Fed.R.Evid. 103(a); Williams v. United States, 119 U.S.App.D.C. 190, 338 F.2d 530
(1964).

166

Bull disagrees that there was independent evidence linking him to the conspiracy and asserts that the co-conspirators'
statements were therefore not admissible against him. As we have said the trial court instructed the jury that it must find
beyond a reasonable doubt and on the basis of independent evidence that Bull was a member of the conspiracy before it
could consider co-conspirator statements against Bull.

167

In reviewing the jury's determination of the sufficiency of the independent evidence linking Bull to the conspiracy, we
do not weigh the evidence or determine the credibility of witnesses. We will affirm the jury's finding if there is substantial
evidence, viewed in the light most favorable to the government, to support it, Glasser v. United States, 315 U.S. 60, 80, 62
S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Buschman, 527 F.2d 1082, 1085 (7th Cir. 1976), and we therefore turn to an
examination of that evidence.

168

Robert Howson, an Ingram Contractors, Inc. Vice President, testified that Bull came to New Orleans in March 1971 and
told him that for a southern contractor like Ingram to get the Sanitary District contract, a political contribution would be
necessary. Benton testified that Bull brought Benton and Weber together for a meeting later that month, and that the day
after this meeting, Bull told Benton that "if (Benton) agreed with the discussion with Mr. Weber, he felt Ingram would get
this contract, there would be no problem, and that he expected to receive $100,000 and Mr. Weber's group $200,000."
There was evidence that Bull deposited a $25,000 check from Ingram, and withdrew the same amount in cash. Although
Bull declared the amount on his taxes, there was also testimony that Bull insisted to Benton that his finder's fee from
Ingram include reimbursement for the taxes he paid on the check drawn to his company. From this testimony, the jury
certainly could infer that Bull did not keep the $25,000, and from Bull's insistence that Ingram be responsible for the taxes,
the jury could infer that Bull's laundering of the check was a favor for Ingram, to whom Bull had earlier suggested the
need for political contributions in exchange for a contract. The testimony also showed that Bull's involvement in the
bribery scheme continued. When insisting on an increase in his subcontract rates, Bull was reminded by Benton in January
1975 "that this contract extension was a similar situation with the original contract and that Ingram did not retain all of the
increase that would be reflected between the various unit prices in the two agreements."

169
We have already found that the evidence that a conspiracy existed was overwhelming. In United States v. Robinson, 470
F.2d 121 (7th Cir. 1972), we noted that once the existence of a common scheme is established, very little may be required
to show beyond a reasonable doubt that a particular defendant became a party. See also United States v. Harris, 542 F.2d
1283 (7th Cir. 1976), Cert. denied, 430 U.S. 934, 97 S.Ct. 1558, 51 L.Ed.2d 779 (1977). From the evidence of Bull's
independent acts and statements, the jury was entitled to find beyond a reasonable doubt that Bull was a member of this
conspiracy, and the jury therefore was entitled to use the statements of other conspirators against him.42 The
discriminating conclusions of guilt and innocence returned by the jury in this complex case demonstrate that the jury
studied the evidence with great care. See United States v. Kaufman, 429 F.2d 240, 244 (2d Cir.), Cert. denied, 400 U.S. 925,
91 S.Ct. 185, 27 L.Ed.2d 184 (1970). We decline to disturb their verdict, holding that the independent evidence of Bull's
knowing participation in the conspiracy was sufficient to support the jury's use of the co-conspirators' statements against
him, and that with such evidence there is no merit in his claim of insufficiency.

XII.

Bull's Claim of Prosecutorial Misconduct

170

Edwin Bull also argues that during its closing argument, the Government raised for the first time an unfounded
inference that he bribed someone in the Illinois Commerce Commission to procure a Certificate of Public Necessity and
Convenience for Ingram. Specifically, during closing arguments the Government attorney made the following statement:

171

On July 27, 1971, Frank Weber and Ed Bull went through another series of transactions to generate cash very similar to
what they did in April, to generate the $25,000. This time the amount involved was $20,000.

172

Frank Weber made out a Southwest Expressways' check for $20,000, payable to Bull Towing. Bull took it to the bank,
deposited it into the Bull Towing Company account, and wrote a check in that amount made payable to himself and
received $20,000 in cash.

173

This occurred on July 27, ladies and gentlemen, the day before Ingram received his Commerce Commission Certificate
of Registration.

174

During rebuttal argument, the Government added:

175

Would you put up Government Exhibit 1-12(A).

176

That is a check from Southwest Expressways to No. 3 Bull Towing dated July 27, 1971, the same day as Government
Exhibit 1-12(D) was issued. It is again a check to Ed Bull, and as the evidence indicates, Mr. Bull left the bank with $20,000.
Benton had nothing to do with this transaction, but as you have seen from the notes that Mr. Weber wrote, there was
apparently some sort of problem at the ICC, Illinois Commerce Commission.
177

It just so happens that the following day, Ingram is granted their Certificate of Convenience and Necessity by the Illinois
Commerce Commission. Well, the bankers and those documents are not ghosts, and they begin to add up.

178

Bull argues that this suggestion constituted an unconstitutional amendment of the indictment and that it prejudiced
unfairly the preparation of his defense. The defendant concedes that the evidence shows he converted a $20,000 check
from Franklin Weber to cash on July 27, 1971, but argues that absolutely no evidence supports the implication in the
Government argument that he bribed the Commerce Commission.

179

Although the prosecution, of course, must never refer to matters with no basis in the evidence, United States v. Morris,
568 F.2d 396 (5th Cir. 1978); United States v. Meeker, 558 F.2d 387 (7th Cir. 1977), the prosecutor may in argument
suggest reasonable inferences from the evidence already admitted. United States v. Jones, 157 U.S.App.D.C. 158, 482 F.2d
747 (1973). Because of the secret nature of the crime, conspiracy is especially subject to proof by circumstantial evidence.
We decline to require the prosecutor to suggest to the jury only conclusions supported by direct evidence.

180

During the trial there was evidence that the Certificate of Public Necessity and Convenience was granted to Ingram the
day after Bull converted the check to cash. Government Exhibit 11-1, a memo made by Weber, also admitted in evidence,
indicated that Weber had made payments to the Commerce Commission on behalf of Ingram. On direct examination,
Weber testified that he gave Bull the $20,000 check as a payment for a dredge, and during cross-examination the
Government confronted Weber with the connection between the memo, the laundered check, and the issuance of the
Certificate. Bull did not object to this line of questioning.

181

These matters admitted in evidence were available to Bull in time to prepare his rebuttal. The conversion of the $20,000
check to cash was one of the overt acts charged in the conspiracy indictment. The documents connected with this line of
proof were turned over to Bull's attorney ten months prior to the trial. Bull's argument that this closing statement unfairly
prejudiced his defense must therefore fail.

182

Our examination of the Government's argument and the evidence supporting it also leads us to conclude that the
inference created was that Weber, not Bull, bribed the Commerce Commission. The Government therefore did not stray
beyond the confines of the scheme alleged in the indictment, which describes Bull in paragraphs 21 and 27 as having
been a knowing conduit for the bribery funds. Furthermore, paragraphs 21 and 27 of the indictment describe in broad
language the objects of the bribery scheme as "public officers and employees," so that proof of bribes to Illinois
Commerce Commission officials was entirely within the scope of the scheme alleged. Bull's argument that any proof
involving officials from agencies other than the Sanitary District amended the indictment is therefore without merit. See
Stirone v. United States, 361 U.S. 212, 218-19, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960).

XIII.

183

Claimed Error of Instructions on Travel Act

184

The defendant Frederick Ingram challenges the portion of the court's instructions pertaining to the counts charging
violations of 18 U.S.C. § 1952 (the "Travel Act") insofar as the jury was told that under the Travel Act a defendant need not
know or reasonably foresee that the facilities of interstate commerce will be used or that someone will travel in interstate
commerce in order to be guilty under the Travel Act. The authority in this circuit is that neither the language nor the
purpose of the Travel Act compels this showing of knowledge on the part of each co-conspirator. United States v. Peskin,
527 F.2d 71 (7th Cir. 1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976). See United States v. Feola, 420 U.S.
671, 95 S.Ct. 1255, 43 L.Ed.2d 541 (1975). The defendant has offered no persuasive reason for a different rule. The use of
interstate facilities merely provides the basis for federal jurisdiction. United States v. Peskin, 527 F.2d at 78; United States v.
Bursten, 560 F.2d 779, 783-84 (7th Cir. 1977).

185

What we have said herein no way indicates that there is not a necessity for interstate travel or the use of an interstate
facility. The court did properly instruct the jury that the Government had to prove:

186

(1) that someone traveled in interstate commerce, or used an interstate facility in furtherance of the bribery scheme; (2)
that a person who caused the travel or use did so with intent to facilitate the bribery scheme; (3) that a member of the
scheme thereafter performed or caused to be performed acts to promote the carrying on of the bribery scheme; and (4)
that the particular defendant under consideration "was a knowing and willful participant in the bribery scheme at the time
of the interstate travel or use of the interstate facility and at the time the subsequent act or acts took place."

187

The fact that Frederick Ingram did not travel interstate or use interstate facilities or that he may not have known that
others in the bribery scheme would do so is immaterial.

188

The judgments accordingly are affirmed.

189

AFFIRMED.

We use the spelling of Ingram's first name that appears in the indictment (Frederick) rather than the spelling that appears
in his brief (Frederic)

The indictment also charged appellants McPartlin, Weber, and Janicki with filing false income tax returns in violation of 26
U.S.C. § 7206(1). The tax counts against McPartlin and Weber were dismissed before trial. Janicki was convicted of tax
violations, but raises no issue on appeal with respect thereto

In 1975 the name was changed to "Board of Commissioners."

Since Benton did not meet Janicki until a month later, the caller was probably Weber

Benton testified that Bull had informed him that he needed money to pay income taxes on the money that he had
laundered through Bull Towing Company. Part of the $76,000 was for this purpose, but the government concedes that
part of the $76,000 finder's fee was legitimate
6

Benton testified that he informed Frederick Ingram of Weber's first proposal that Ingram Corporation make a political
contribution immediately after Weber made it in March, 1971, and that Ingram authorized the payments then

It is not clear whether the $95,000 due in September on the first agreement was ever paid. Nor is it clear why Benton paid
Janicki and Weber $775,000 on January 26, 1973, rather than the $750,000 agreed to

It is not clear how Weber expected his brother to cash the sixth letter of credit in November, 1975; it did not mature until
December, 1975. Nevertheless, it is undisputed that Henry Weber did go to Vaduz, Liechtenstein carrying the two letters of
credit with the intent to negotiate them

Benton admitted siphoning off for his own use some of the funds that the Ingrams intended be paid to the Illinois
defendants. See Part IV, Infra

10

In Brady, which is famous for a holding irrelevant here (Viz., that the prosecution's suppression of evidence requested by
the defense and material to punishment violated the due process clause of the Fourteenth Amendment), the Court also
held that no federal right was violated by limiting a new trial to the issue of punishment where the suppressed evidence
was inadmissible as to guilt, even though there might have been some spillover favorable to the defendant on the issue of
guilt. At the first trial, in which a jury had convicted Brady of first degree murder and fixed penalty as death, the
prosecution had failed to disclose a confession in which petitioner's accomplice admitted having actually strangled the
victim. Concerning the petitioner's right to a new trial on both guilt and punishment, the Court said:

A sporting theory of justice might assume that if the suppressed confession had been used at the first trial, the judge's
ruling that it was not admissible on the issue of innocence or guilt might have been flouted by the jury . . . . But we cannot
raise that trial strategy to the dignity of a constitutional right and say that the deprival of this defendant of that sporting
chance through the use of a bifurcated trial . . . denies him due process or violates the Equal Protection Clause of the
Fourteenth Amendment.

373 U.S. at 90-91, 83 S.Ct. at 1198 (footnote omitted).

11

Although the Commentary to § 2.3(b) of the ABA Minimum Standards for Criminal Justice: Standards Relating to Joinder
and Severance (Approved Draft 1968), contains a sentence which, standing alone, indicates that "defenses . . . antagonistic
to each other" constitute a sufficient basis for granting a severance, the Commentary elsewhere states that this is only one
of several factors to be considered and makes it clear that the appropriateness of severance depends upon the degree and
kind of antagonism. See also the federal cases cited in the ALR Annotation referred to in the Commentary, 70 A.L.R. at
1184-1185; and see Annot., 82 A.L.R.3d 245, 250-251, 257-259 (1978). As the cases cited in the text of this opinion
illustrate, the federal courts have held that an attempt by one defendant to place the guilt upon another does not require
severance. See also 82 A.L.R.3d at 260-261

12

McPartlin's attorney advised McPartlin to meet with the investigator because it was in the interest of all the defendants to
"poke holes" in the Benton diaries

13

In the alternative, the court ruled that McPartlin's statements were inadmissible hearsay not within the exception provided
by Rule 804(b)(3), Fed.R.Evid. (declarations against penal interest). Since we agree that McPartlin's statements are
protected by his attorney-client privilege, and in any event their exclusion was not prejudicial, we do not reach the
alternative ground for exclusion

14

The trial judge remarked at one point that the evidence "would be of great assistance to Ingram" if admissible. With
respect, we see no basis for that conclusion and believe that, if the judge had been given the opportunity we have had to
lay the facts proved in other ways beside the proffered evidence and carefully compare the two, he would have reached
the same conclusion we do

15

In Hunydee v. United States, supra, the attorney for Hunydee's co-defendant believed that the government would not
prosecute the co-defendant if Hunydee pleaded guilty, and therefore their interests conflicted. Nevertheless, the Ninth
Circuit held that statements made by Hunydee during a joint conference held for the purpose of discussing his willingness
to plead guilty, a matter of common interest, which affected both attorneys' subsequent representation of their respective
clients, were privileged. Similarly, in Schmitt, supra, the common interest of the co-defendants related to the exclusion of a
specific item of evidence. See, Note, Supra, 63 Yale L.J. at 1035-1036

16

Smale v. United States, 3 F.2d 101, 102 (7th Cir. 1924), relied on by Ingram, in which one defendant volunteered
statements to another defendant and the latter's attorney and the requisite joint interest and confidentiality were both
lacking, does not establish the compatible defense requirement for which Ingram argues

17

In United States v. McClure, 546 F.2d 670 (5th Cir. 1977), relied upon by Ingram, the court held it to have been reversible
error to exclude as irrelevant "evidence of a systematic campaign of threats and intimidation" by an informer against
persons other than the defendant, offered to corroborate the defendant's testimony that he had been threatened and
coerced by the informer to commit the crime charged. The case is not authority for the proposition that evidence of
threats of physical violence, made by some unnamed person, directed at a person other than the defendant, is relevant in
a case in which the defendant does not contend that his criminal activity was motivated by threats of physical violence or
that he even had knowledge of such threats at the time of his criminal activity

18

It is to be noted that this defense is inapplicable to the counts under which Ingram was found guilty of participation in
payments made prior to February, 1972. (Counts 3, 4, and 6.) As to these counts Ingram contended he did not know of the
payments. The conspiracy count (Count 1) involved payments made before and after that date, but the verdicts on the
three substantive counts tell us that the jury disbelieved Ingram's denial of knowledge of the earlier payments, so the
extortion defense would not suffice under the conspiracy count

19

Indeed Ingram seems to have admitted as much. In his brief defendant Ingram states: "Alternatively, the jury might
confusingly (Sic ) have reasoned that threatened liability under the liquidated damages clause was an 'economic loss'. . . ."
Brief for Defendant Ingram at 37

20

Ingram made the following written objection to the instruction:

Court's Instruction No. 2: The Ingram defendants have tendered several alternative charges dealing with the subject matter
as Court's Instruction No. 2, each of which we submit correctly states the law with respect to the effect of economic
coercion on the defendant's alleged intent to bribe. In support of the tendered charges, we referred to our memorandum
on the "extortion defense" submitted to the Court in July 1977, which we incorporate by reference here. The instruction
given by the Court treats the issue not as one of economic coercion bearing on intent, but as one of duress, contrary to
the analysis in United States v. Barash, 365 F.2d 395 (2d Cir. 1966), and contrary to the pattern instruction in Devitt &
Blackmar § 34.10. Accordingly, we object to the Court's charge in this respect and we object to the omission of any of the
proposed instructions on this issue tendered by the Ingram defendants, or some modified version of those proposed
instructions.

21

Ingram attempts to bolster this argument by urging that decisions under the Hobbs Act have rejected any distinction
between threats of economic loss and gain in extortion prosecutions. See, e. g., United States v. Hathaway, 534 F.2d 386
(1st Cir.), Cert. denied, 429 U.S. 819, 97 S.Ct. 64, 50 L.Ed.2d 79 (1976). We do not see the relevance of such authority,
however, since there is no reason that conduct giving rise to criminal liability for extortion should necessarily provide a
criminal defense for the reciprocal party. Indeed it does not seem illogical to suggest that it may be reasonable to
prosecute both the official who conditions discretionary benefits on bribes and the person who seeks to obtain such
benefits. See United States v. Hall, 536 F.2d 313, 321 (10th Cir. 1976), Cert. denied, 429 U.S. 919, 97 S.Ct. 313, 50 L.Ed.2d
285 (1977) ("bribery and extortion are not to be considered mutually exclusive nor does the fact that the alleged victims of
the extortion were also bribers nullify anything."); United States v. Gill, 490 F.2d 233 (7th Cir. 1973), Cert. denied, 417 U.S.
968, 94 S.Ct. 3171, 41 L.Ed.2d 1139 (1974)

22

See note 20 Supra

23

United States v. Peskin, 527 F.2d 71, 84 (7th Cir. 1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976). See p.
25 Supra

24

As the court in Barash noted:

Although the instruction that only a threat of death or serious bodily injury would make out the defense of duress appears
correct enough . . . that was only part of the story since Barash had also requested instructions as to the bearing of threats
of economic harm on the intent required for conviction. . . . We think that if a government officer threatens serious
economic loss unless paid for giving a citizen his due, the latter is entitled to have the jury consider this, not as a complete
defense like duress but as bearing on the specific intent required for the commission of bribery.

365 F.2d at 401-02.

25

The defendant clearly makes these admissions in his brief when he argues that the entitlement distinction was erroneous:

This second element (of the instructions, that the extortion defense was not available if the defendant was seeking a
benefit to which he was not entitled,) was tantamount to a judicial instruction to reject the extortion defense in light of the
record that had already been made. Bronson Ingram had testified (as quoted at pp. 16-17, Supra ) that on February 21,
1972, during the meeting between the Ingram brothers and Benton, Benton had said, "(W)e don't really have a legal
position to get the rest of our money" (Tr. 4075). Indeed, it was precisely because there was no legal recourse that,
according to both Ingrams, they saw no option other than to capitulate to the demands.

. . . .f o

On any fair reading of the record, Mr. Ingram was in the position of ordinary applicants for zoning variances or for
discretionary governmental action. He honestly and with substantial basis believed that it was right and proper for the
MSD to exercise its discretion to purchase the pipeline and to refrain from punitive use of the liquidated damages clause.
Whether he also believed that Ingram Corporation had a legal right under the existing contracts to obtain this result was
completely irrelevant to the question of his intent to commit bribery.

Brief for Defendant Ingram at 39-41 (emphasis supplied). Ingram's admission that he was in the same position as "ordinary
applicants for zoning variances" is particularly damaging in that it was in precisely that context in Peskin that we explicitly
held the extortion defense to be unavailable as a matter of law. 527 F.2d at 84. See also the cited quotation on p. 25 Supra.
26

Ingram also objects to the trial court's refusal to give a "theory of defense" instruction describing Ingram's view of the
extortion. This is a somewhat surprising argument since the trial court's instruction gave more factual information as to the
defendant's theory, albeit more concisely, than the defendant's proposed instructions. Ingram's factual theory of his
defense is detailed in the following excerpts from the defendant's proposed instructions:

If, on the other hand, the Ingram defendants had formed no purpose of offering any money or thing of value to any
personnel of the Metropolitan Sanitary District, and acted only because of demands or threats communicated by Benton,
and believed that the Metropolitan Sanitary District intended to carry out the threats not to pay for the pipeline and
destroy the company on the barging operations unless their demands were satisfied, or if you have a reasonable doubt on
this issue, then the essential element of intent is not present and you will find the defendants Frederic B. Ingram and E.
Bronson Ingram not guilty of all charges.

It is the position of the defendants Frederic B. Ingram and E. Bronson Ingram that they had no purpose of improperly
offering or promising any money or thing of value to any official of the Metropolitan Sanitary District in connection with
the sludge contract, and that they did not devise or intend to devise a scheme or artifice to defraud either the
Metropolitan Sanitary District, its citizens, its officers and employees, or the Burlington Northern Railroad and other
competitors. Indeed, it is the position of the defendants Frederic B. Ingram and E. Bronson Ingram that they acted only
because of demands or threats communicated to them by William J. Benton and because they believed that those threats
would be carried out unless the demands were satisfied.

If you find that the defendants Frederic B. Ingram and E. Bronson Ingram did not act voluntarily, or had formed no
purpose of offering any money or thing of value to the employees or officers of the Metropolitan Sanitary District, and
acted only because of demands or threats communicated by William J. Benton, and that they believed that those threats
would be carried out unless the demands for payment were satisfied, then the essential element of intent is not present
and you must find the defendants Frederic B. Ingram and E. Bronson Ingram not guilty of the charges against them.

In contrast to these generalized and repetitive instructions, the trial court instructions, set out on pages 23-25 Supra,
concisely explained the defendant's theory that the alleged extortion scheme revolved around threats not to purchase the
pipeline, as well as setting out defendant's additional factual theory that the scheme involved threats to assess liquidated
damages in an unreasonable manner. Thus, the defendant Ingram's claim that the trial court erred in rejecting a "theory of
defense" instruction is without merit.

27

The government offered to prove that Ingram had personal control of a cash box containing unreported funds from scrap
sales which were distributed to Louisiana politicians. Additionally the government offered to prove that a joint-venture in
which Ingram Corp. was a participant had paid a real-estate commission to a Louisiana state representative who gave part
of that payment to another state representative and kicked back another part of it to Frederick Ingram personally. The
government also offered to prove that Ingram Corp. made kickback payments to an Amoco employee who was potentially
able to provide inside information and influence the level of payments by Amoco to Ingram. Finally, the government said
it could prove that Ingram Corp. had made an interest-free, uncollateralized loan to an Indonesian military officer who was
able to influence contracts for Ingram in Indonesia

28

Ingram's assertion that such a practice is "moral" in Brazil tempts us to examine the philosophical underpinnings of an
ethical system that varies with geographical or cultural boundaries. Even if morality varies with one's own culture, can it be
said that an individual from a cultural and moral tradition that condemns a practice can morally engage in that practice
once he simply steps "across the river" into a culture with different norms? See B. Pascal, Pensees 151 (Editions Garnier
Freres 1964) ("Plaisante justice qu'une riviere borne! Verite au de ca des Pyrenees; erreur au dela." "Curious justice that a
river bounds! Truth on one side of the Pyrenees; error on the other.")

29

See also United States v. Peskin, 527 F.2d 71, 84 (7th Cir. 1975), Cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1978)
(upholding admission of evidence of subsequent bribes to public officials)
30

United States v. Feinberg, 535 F.2d 1004, 1009 (7th Cir.), Cert. denied, 429 U.S. 929, 97 S.Ct. 337, 50 L.Ed.2d 300 (1976).
Compare the majority opinion in United States v. Beechum, 582 F.2d 898, 910, 912-913, (5th Cir. 1978) (en banc) with the
dissent in that case, Id. 918, 922-923 (Goldberg, Godbold, Simpson, Morgan, and Roney, JJ., dissenting)

31

See note 27 Supra

32

Defendant Janicki also apparently claims that the government did not ultimately turn over all exculpatory material relating
to specific instances of embezzlement: "the Government may have secured information about particular instances of
embezzlement about which the defendant was unaware. . . ." Brief of Defendant Janicki at 32. However, a denial of Due
Process cannot be premised on the defendant's mere conjecture that there might have been favorable evidence which was
undisclosed. The existence of the evidence must be established, and here the defendants offered nothing to rebut the
government's assertion that it had turned over to the defendants all its information on the embezzlement

33

At trial the defendants made only generalized claims of prejudice without advancing any specific theories upon which a
finding of prejudice might be based. Tr. at 230-31 (Janicki), 249-50 (McPartlin). Such specific theories were advanced for
the first time in the briefs submitted to this court

34

The defendants have also attacked the contemporaneity of the entries, arguing that the records were inadmissible
because entries were made relating to appointments before the appointment took place. This is an overly narrow
construction of "at or near the time." Even though such entries were not made "at or near the time" of the meeting they
were "at or near the time" the appointment was made. This seems to be sufficient contemporaneity to constitute a
business record documenting the making of appointments

35

Rule 803(24) provides:

(24) Other exceptions. A statement not specifically covered by any of the foregoing exceptions but having equivalent
circumstantial guarantees of trustworthiness, if the court determines that (A) the statement is offered as evidence of a
material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the
proponent can procure through reasonable efforts; and (C) the general purpose of these rules and the interests of justice
will best be served by admission of the statement into evidence.

36

McPartlin argues that evidence denying Weber's participation in the first bribe installment would have inured to his
benefit since the original installment was alleged to have been delivered to McPartlin in Weber's presence. Thus,
presumably, any cash deposited by Weber, if not from innocuous sources, would have been obtained from McPartlin. We
do not think, however, that any benefit from such evidence would have been sufficient to have made its exclusion a denial
of a fair trial to McPartlin. The fact that Weber may not have received a cash rake-off from this first installment in no way
detracts from the credibility of testimony that McPartlin received the money; at most such evidence would have only
contributed to a demonstration of McPartlin's penuriousness

37

Rule 801(d)(1)(B) provides that

(d) A statement is not hearsay if . . . (B) consistent with his testimony and is offered to rebut an express or implied charge
against him of recent fabrication or improper influence or motive . . ..
38

Further support can also be found in this circuit's decision in United States v. Ware, 247 F.2d 698 (7th Cir. 1957), also cited
by the Advisory Committee as a proper application of the untrustworthiness principle. In Ware this circuit held that records
of drug purchases made by a drug agent were inadmissible in subsequent prosecutions, noting that "such utility as . . .
(these records) possess relates Primarily to prosecution of suspected law breakers and only Incidentally to the systematic
conduct of the police business." Id. at 700 (emphasis supplied). Likewise, the notations here must be seen as relating
primarily to the avoidance of additional tax liability or prosecution as a result of an audit and only incidentally to the
conduct of Weber's business

39

The Government's theory of the case was that Henry Weber did go to Liechtenstein to negotiate the letters of credit.
Henry's negotiation of the letters of credit in Liechtenstein formed the basis of Count 32 of the indictment. Because the
Government was not trying to prove the truth of the out-of-court statement, the defendant was not prejudiced by lack of
cross-examination at the time of the grand jury testimony. Anderson v. United States, 417 U.S. at 220-21, 94 S.Ct. 2253

40

The Government also points out that pursuant to Rule 613(b), the witness was permitted on recross-examination to
explain the impeaching grand jury testimony by stating that he had been unfamiliar with the geography of Liechtenstein
and because of that he had not understood the question at the time of his first grand jury appearance

41

Although the record is not clear, we assume arguendo that the trial court, in letting in the statements, applied the lesser
prima facie standard then used for determining the existence of a conspiracy for purposes of admission, rather than the
stricter preponderance test prescribed in Santiago

42

Although our decision in Santiago commits this admissibility question to the court in the future, we nevertheless apply the
then current standards to evaluate the procedures at trial. The defendant has not challenged the submission of the
admissibility issue to the jury. Furthermore, we fail to see how this "added layer of fact-finding," although unnecessary,
could prejudice the defendant. United States v. Santiago, 582 F.2d 1128, 1136 (7th Cir. 1978); United States v. Petrozziello,
548 F.2d 20, 23 (1st Cir. 1977)

As we observed in Santiago, there is some danger of confusing the jury with the instruction because the judge essentially
is telling the jury not to consider the evidence unless it has already found the defendant guilty. See Carbo v. United States,
314 F.2d 718, 736, 84 S.Ct. 1625, 12 L.Ed.2d 498 (9th Cir. 1963), Cert. denied, 377 U.S. 953, 84 S.Ct. 1626, 12 L.Ed.2d 498
(1964). We do not regard the instruction as prejudicial, however, because it at least cautioned the jury against the dangers
of using this evidence for improper purposes. 1 J. Weinstein, Evidence P 104(05), at 104-45.
 THIRD DIVISION

A.C. No. 4078 - July 14, 2003

WILLIAM ONG GENATO, Complainant, vs. ATTY. ESSEX L. SILAPAN, respondent.

PUNO, J.:

In this complaint for disbarment filed by William Ong Genato against respondent Atty. Essex L. Silapan, complainant
alleged that in July 1992, respondent asked if he could rent a small office space in complainant's building in Quezon City
for his law practice. Complainant acceded and introduced respondent to Atty. Benjamin Dacanay, complainant's retained
lawyer, who accommodated respondent in the building and made him handle some of complainant's cases. Hence, the
start of the legal relationship between complainant and respondent.

The conflict between the parties started when respondent borrowed two hundred thousand pesos (P200,000.00) from
complainant which he intended to use as downpayment for the purchase of a new car. In return, respondent issued to
complainant a postdated check in the amount of P176,528.00 to answer for the six (6) months interest on the loan. He
likewise mortgaged to complainant his house and lot in Quezon City but did not surrender its title claiming that it was the
subject of reconstitution proceedings before the Quezon City Register of Deeds.

With the money borrowed from complainant, respondent purchased a new car. However, the document of sale of the car
was issued in complainant's name and financed through City Trust Company.

In January 1993, respondent introduced to complainant a certain Emmanuel Romero. Romero likewise wanted to borrow
money from complainant. Complainant lent Romero the money and, from this transaction, respondent earned commission
in the amount of P52,289.90. Complainant used the commission to pay respondent's arrears with the car financing firm.

Subsequently, respondent failed to pay the amortization on the car and the financing firm sent demand letters to
complainant. Complainant tried to encash respondent's postdated check with the drawee bank but it was dishonored as
respondent's account therein was already closed.

Respondent failed to heed complainant's repeated demands for payment. Complainant then filed a criminal case against
respondent for violation of Batas Pambansa Blg. 22 and a civil case for judicial foreclosure of real estate mortgage.

In the foreclosure case, respondent made the following allegation in his Answer:

xxx-xxx-xxx

4. That complainant is a businessman who is engaged in the real estate business, trading and buy and sell of deficiency
taxed imported cars, shark loans and other shady deals and has many cases pending in court;

xxx-xxx-xxx

Complainant denied respondent's charges and claimed that respondent's allegation is libelous and not privilege as it was
irrelevant to the foreclosure case. Complainant further pointed to paragraph 12 of respondent's Answer, thus:

12. That on January 29, 1993, before paying for the next installment on his car on January 30, 1993, defendant Essex L.
Silapan asked the complainant to execute a Deed of Sale transferring ownership of the car to him but the latter said that
he will only do so after the termination of his criminal case at Branch 138 of the Regional Trial Court of Makati, Metro
Manila, x x x where he (complainant) wanted Essex L. Silapan, his former counsel in that case, to offer bribe money to the
members of the review committee of the Department of Justice where a petition for review of the resolution of the
Investigating Prosecutor was pending at the time, x x x or, in the event that the said petition for review is denied, he
wanted Essex L. Silapan to offer bribe money to the prosecutor assigned at the above-mentioned Court, and even to the
presiding Judge, for his eventual acquittal, which defendant Essex L. Silapan all refused to do not only because such acts
are immoral and illegal, but also because the complainant confided to him that he was really involved in the commission
of the crime that was charged of in the above-mentioned case. (emphasis supplied)

Complainant gripes that the foregoing allegations are false, immaterial to the foreclosure case and maliciously designed to
defame him. He charged that in making such allegations, respondent is guilty of breaking their confidential lawyer-client
relationship and should be held administratively liable therefor. Consequently, he filed this complaint for disbarment,
praying also that an administrative sanction be meted against respondent for his issuance of a bouncing check.

When required by the Court to comment, respondent explained 1 that it was complainant who offered him an office space
in his building and retained him as counsel as the latter was impressed with the way he handled a B.P. 22 case 2 filed
against complainant. Respondent insisted that there was nothing libelous in his imputations of dishonest business
practices to complainant and his revelation of complainant's desire to bribe government officials in relation to his pending
criminal case. He claimed to have made these statements in the course of judicial proceedings to defend his case and
discredit complainant's credibility by establishing his criminal propensity to commit fraud, tell lies and violate laws. He
argued that he is not guilty of breaking his confidential lawyer-client relationship with complainant as he made the
disclosure in defense of his honor and reputation.

Secondly, respondent asserted that he executed the real estate mortgage in favor of complainant without consideration
and only as a "formal requirement" so he could obtain the P200,000.00 loan and for this reason, he did not surrender his
title over the mortgaged property to complainant.

Thirdly, respondent claimed that he issued the postdated check, not for account or for value, but only: (a) to serve as
"some kind of acknowledgment" that he already received in advance a portion of his attorney's fees from the complainant
for the legal services he rendered, and (b) as a form of assurance that he will not abandon the cases he was handling for
complainant.

Lastly, respondent denied that he received a P52,289.90 commission from Romero's loan which he allegedly helped
facilitate. He alleged that the amount was paid to him by Romero as attorney's fees, the latter being his client. He used
this amount to pay his arrears with the car financing firm. On January 29, 1993, before paying the next amortization on the
car, he asked complainant to execute a deed of sale transferring ownership of the car to him. Complainant refused and
insisted that he would transfer ownership of the car only after the termination of his criminal case which respondent was
handling as his defense lawyer. Consequently, respondent stopped paying the amortization on the car. Respondent also
alleged that he filed a perjury case against complainant who, in turn, filed a complaint for libel against him.

In a Resolution, dated October 27, 1993, the Court referred the administrative case to the Integrated Bar of the Philippines
(IBP) for investigation, report and recommendation.

On August 3, 2002, the Board of Governors of the IBP approved the report of the investigating commissioner finding the
respondent guilty as charged and recommending his suspension from the practice of law for one (1) year.

We affirm the findings and recommendation of the IBP.

Prefatorily, we stress that we shall not delve into the merits of the various criminal and civil cases pending between the
parties. It is for the trial courts handling these cases to ascertain the truth or falsity of the allegations made therein. For this
reason, it is not for us to sanction respondent for his issuance of a bouncing check. His liability has yet to be determined
by the trial court where his case is pending.

The only issue in this administrative case is whether respondent committed a breach of trust and confidence by imputing
to complainant illegal practices and disclosing complainant's alleged intention to bribe government officials in connection
with a pending case.
Canon 17 of the Code of Professional Responsibility provides that a lawyer owes fidelity to the cause of his client and shall
be mindful of the trust and confidence reposed on him. The long-established rule is that an attorney is not permitted to
disclose communications made to him in his professional character by a client, unless the latter consents. This obligation
to preserve the confidences and secrets of a client arises at the inception of their relationship. 3 The protection given to the
client is perpetual and does not cease with the termination of the litigation, nor is it affected by the party's ceasing to
employ the attorney and retaining another, or by any other change of relation between them. It even survives the death of
the client.4

It must be stressed, however, that the privilege against disclosure of confidential communications or information is limited
only to communications which are legitimately and properly within the scope of a lawful employment of a lawyer. It does
not extend to those made in contemplation of a crime or perpetration of a fraud. 5 If the unlawful purpose is avowed, as in
this case, the complainant's alleged intention to bribe government officials in relation to his case, the communication is
not covered by the privilege as the client does not consult the lawyer professionally. It is not within the profession of a
lawyer to advise a client as to how he may commit a crime as a lawyer is not a gun for hire. Thus, the attorney-client
privilege does not attach, there being no professional employment in the strict sense.

Be that as it may, respondent's explanation that it was necessary for him to make the disclosures in his pleadings fails to
satisfy us. The disclosures were not indispensable to protect his rights as they were not pertinent to the foreclosure case. It
was improper for the respondent to use it against the complainant in the foreclosure case as it was not the subject matter
of litigation therein and respondent's professional competence and legal advice were not being attacked in said case. A
lawyer must conduct himself, especially in his dealings with his clients, with integrity in a manner that is beyond reproach.
His relationship with his clients should be characterized by the highest degree of good faith and fairness.

Thus, the Court agrees with the evaluation of the IBP and finds that respondent's allegations and disclosures in the
foreclosure case amount to a breach of fidelity sufficient to warrant the imposition of disciplinary sanction against him.
However, the recommended penalty of one (1) year suspension of respondent from the practice of law seems to be
disproportionate to his breach of duty considering that a review of the records of this Court reveals that this is the first
administrative complaint against him.

IN VIEW WHEREOF, respondent Atty. Essex L. Silapan is ordered suspended from the practice of law for a period of six (6)
months effective upon receipt of this Decision. Let a copy of this Decision be furnished the Office of the Bar Confidant and
the Integrated Bar of the Philippines. The Court Administrator is directed to circulate this order of suspension to all courts
in the country.

SO ORDERED.
Panganiban, Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.

G.R. Nos. 115439-41 July 16, 1997

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HONORABLE SANDIGANBAYAN, MANSUETO V. HONRADA, CEFERINO S. PAREDES, JR. and GENEROSO S.
SANSAET, respondents.

REGALADO, J.:

Through the special civil action for certiorari at bar, petitioner seeks the annulment of the resolution of respondent
Sandiganbayan, promulgated on December 22, 1993, which denied petitioner's motion for the discharge of respondent
Generoso S. Sansaet to be utilized as a state witness, and its resolution of March 7, 1994 denying the motion for
reconsideration of its preceding disposition.1

The records show that during the dates material to this case, respondent Honrada was the Clerk of Court and Acting
Stenographer of the First Municipal Circuit Trial Court, San Francisco-Bunawan-Rosario in Agusan del Sur. Respondent
Paredes was successively the Provincial Attorney of Agusan del Sur, then Governor of the same province, and is at present
a Congressman. Respondent Sansaet was a practicing attorney who served as counsel for Paredes in several instances
pertinent to the criminal charges involved in the present recourse.

The same records also represent that sometime in 1976, respondent Paredes applied for a free patent over Lot No. 3097-
A, Pls-67 of the Rosario Public Land Subdivision Survey. His application was approved and, pursuant to a free patent
granted to him, an original certificate of title was issued in his favor for that lot which is situated in the poblacion of San
Francisco, Agusan del Sur.

However, in 1985, the Director of Lands filed an action 2 for the cancellation of respondent Paredes' patent and certificate
of title since the land had been designated and reserved as a school site in the aforementioned subdivision survey. The
trial court rendered judgment3 nullifying said patent and title after finding that respondent Paredes had obtained the
same through fraudulent misrepresentations in his application. Pertinently, respondent Sansaet served as counsel of
Paredes in that civil case.4

Consequent to the foregoing judgment of the trial court, upon the subsequent complaint of the Sangguniang Bayan and
the preliminary investigation conducted thereon, an information for perjury5 was filed against respondent Paredes in the
Municipal Circuit Trial Court.6 On November 27, 1985, the Provincial Fiscal was, however, directed by the Deputy Minister
of Justice to move for the dismissal of the case on the ground inter alia of prescription, hence the proceedings were
terminated.7 In this criminal case, respondent Paredes was likewise represented by respondent Sansaet as counsel.

Nonetheless, respondent Sansaet was thereafter haled before the Tanodbayan for preliminary investigation on the charge
that, by using his former position as Provincial Attorney to influence and induce the Bureau of Lands officials to favorably
act on his application for free patent, he had violated Section 3(a) of Republic Act No. 3019, as amended. For the third
time, respondent Sansaet was Paredes' counsel of record therein.

On August 29, 1988, the Tanodbayan, issued a resolution8 recommending the criminal prosecution of respondent Paredes.
Atty. Sansaet, as counsel for his aforenamed co-respondent, moved for reconsideration and, because of its legal
significance in this case, we quote some of his allegations in that motion:

. . . respondent had been charged already by the complainants before the Municipal Circuit Court of San
Francisco, Agusan del Sur, went to jail on detention in 1984 under the same set of facts and the same
evidence . . . but said case after arraignment, was ordered dismissed by the court upon recommendation of
the Department of Justice. Copy of the dismissal order, certificate of arraignment and the recommendation
 of the Department of Justice are hereto attached for ready reference; thus the filing of this case will be a
case of double jeopardy for respondent herein . . . 9 (Emphasis supplied.)

A criminal case was subsequently filed with the Sandiganbayan 10 charging respondent Paredes with a violation of Section
3 (a) of Republic Act No. 3019, as amended. However, a motion to quash filed by the defense was later granted in
respondent court's resolution of August 1, 1991 11 and the case was dismissed on the ground of prescription.

On January 23, 1990, one Teofilo Gelacio, a taxpayer who had initiated the perjury and graft charges against respondent
Paredes, sent a letter to the Ombudsman seeking the investigation of the three respondents herein for falsification of
public documents. 12 He claimed that respondent Honrada, in conspiracy with his herein co-respondents, simulated and
certified as true copies certain documents purporting to be a notice of arraignment, dated July 1, 1985, and transcripts of
stenographic notes supposedly taken during the arraignment of Paredes on the perjury charge. 13 These falsified
documents were annexed to respondent Paredes' motion for reconsideration of the Tanodbayan resolution for the filing
of a graft charge against him, in order to support his contention that the same would constitute double jeopardy.

In support of his claim, Gelacio attached to his letter a certification that no notice of arraignment was ever received by the
Office of the Provincial Fiscal of Agusan del Sur in connection with that perjury case; and a certification of Presiding Judge
Ciriaco Ariño that said perjury case in his court did not reach the arraignment stage since action thereon was suspended
pending the review of the case by the Department of Justice. 14

Respondents filed their respective counter-affidavits, but Sansaet subsequently discarded and repudiated the submissions
he had made in his counter-affidavit. In a so-called Affidavit of Explanations and Rectifications, 15 respondent Sansaet
revealed that Paredes contrived to have the graft case under preliminary investigation dismissed on the ground of double
jeopardy by making it appear that the perjury case had been dismissed by the trial court after he had been arraigned
therein.

For that purpose, the documents which were later filed by respondent Sansaet in the preliminary investigation were
prepared and falsified by his co-respondents in this case in the house of respondent Paredes. To evade responsibility for
his own participation in the scheme, he claimed that he did so upon the instigation and inducement of respondent
Paredes. This was intended to pave the way for his discharge as a government witness in the consolidated cases, as in fact
a motion therefor was filed by the prosecution pursuant to their agreement.

Withal, in a resolution 16 dated February 24, 1992, the Ombudsman approved the filing of falsification charges against all
the herein private respondents. The proposal for the discharge of respondent Sansaet as a state witness was rejected by
the Ombudsman on this evaluative legal position:

. . . Taking his explanation, it is difficult to believe that a lawyer of his stature, in the absence of deliberate
intent to conspire, would be unwittingly induced by another to commit a crime. As counsel for the
accused in those criminal cases, Atty. Sansaet had control over the case theory and the evidence which the
defense was going to present. Moreover, the testimony or confession of Atty. Sansaet falls under the
mantle of privileged communication between the lawyer and his client which may be objected to, if
presented in the trial.

The Ombudsman refused to reconsider that resolution 17 and, ostensibly to forestall any further controversy, he decided to
file separate informations for falsification of public documents against each of the herein respondents. Thus, three criminal
cases, 18 each of which named one of the three private respondents here as the accused therein, were filed in the graft
court. However, the same were consolidated for joint trial in the Second Division of the Sandiganbayan.

As stated at the outset, a motion was filed by the People on July 27, 1993 for the discharge of respondent Sansaet as a
state witness. It was submitted that all the requisites therefor, as provided in Section 9, Rule 119 of the Rules of Court, were
satisfied insofar as respondent Sansaet was concerned. The basic postulate was that, except for the eyewitness testimony
of respondent Sansaet, there was no other direct evidence to prove the confabulated falsification of documents by
respondents Honrada and Paredes.
Unfortunately for the prosecution, respondent Sandiganbayan, hewing to the theory of the attorney-client privilege
adverted to by the Ombudsman and invoked by the two other private respondents in their opposition to the prosecution's
motion, resolved to deny the desired discharge on this ratiocination:

From the evidence adduced, the opposition was able to establish that client and lawyer relationship
existed between Atty. Sansaet and Ceferino Paredes, Jr., before, during and after the period alleged in the
information. In view of such relationship, the facts surrounding the case, and other confidential matter
must have been disclosed by accused Paredes, as client, to accused Sansaet, as his lawyer in his
professional capacity. Therefore, the testimony of Atty. Sansaet on the facts surrounding the offense
charged in the information is privileged. 19

Reconsideration of said resolution having been likewise denied, 20 the controversy was elevated to this Court by the
prosecution in an original action for the issuance of the extraordinary writ of certiorari against respondent Sandiganbayan.

The principal issues on which the resolution of the petition at bar actually turns are therefore (1) whether or not the
projected testimony of respondent Sansaet, as proposed state witness, is barred by the attorney-client privilege; and (2)
whether or not, as a consequence thereof, he is eligible for discharge to testify as a particeps criminis.

As already stated, respondent Sandiganbayan ruled that due to the lawyer-client relationship which existed between
herein respondents Paredes and Sansaet during the relevant periods, the facts surrounding the case and other confidential
matters must have been disclosed by respondent Paredes, as client, to respondent Sansaet, as his lawyer. Accordingly, it
found "no reason to discuss it further since Atty. Sansaet cannot be presented as a witness against accused Ceferino S.
Paredes, Jr. without the latter's consent." 21

The Court is of a contrary persuasion. The attorney-client privilege cannot apply in these cases, as the facts thereof and
actuations of both respondents therein constitute an exception to the rule. For a clearer understanding of that evidential
rule, we will first sweep aside some distracting mental cobwebs in these cases.

1. It may correctly be assumed that there was a confidential communication made by Paredes to Sansaet in connection
with Criminal Cases Nos. 17791-93 for falsification before respondent court, and this may reasonably be expected since
Paredes was the accused and Sansaet his counsel therein. Indeed, the fact that Sansaet was called to witness the
preparation of the falsified documents by Paredes and Honrada was as eloquent a communication, if not more, than
verbal statements being made to him by Paredes as to the fact and purpose of such falsification. It is significant that the
evidentiary rule on this point has always referred to "any communication," without distinction or qualification. 22

In the American jurisdiction from which our present evidential rule was taken, there is no particular mode by which a
confidential communication shall be made by a client to his attorney. The privilege is not confined to verbal or written
communications made by the client to his attorney but extends as well to information communicated by the client to the
attorney by other means. 23

Nor can it be pretended that during the entire process, considering their past and existing relations as counsel and client
and, further, in view of the purpose for which such falsified documents were prepared, no word at all passed between
Paredes and Sansaet on the subject matter of that criminal act. The clincher for this conclusion is the undisputed fact that
said documents were thereafter filed by Sansaet in behalf of Paredes as annexes to the motion for reconsideration in the
preliminary investigation of the graft case before the Tanodbayan. 24 Also, the acts and words of the parties during the
period when the documents were being falsified were necessarily confidential since Paredes would not have invited
Sansaet to his house and allowed him to witness the same except under conditions of secrecy and confidence.

2. It is postulated that despite such complicity of Sansaet at the instance of Paredes in the criminal act for which the latter
stands charged, a distinction must be made between confidential communications relating to past crimes already
committed, and future crimes intended to be committed, by the client. Corollarily, it is admitted that the announced
intention of a client to commit a crime is not included within the confidences which his attorney is bound to respect.
Respondent court appears, however, to believe that in the instant case it is dealing with a past crime, and that respondent
Sansaet is set to testify on alleged criminal acts of respondents Paredes and Honrada that have already been committed
and consummated.

The Court reprobates the last assumption which is flawed by a somewhat inaccurate basis. It is true that by now, insofar as
the falsifications to be testified to in respondent court are concerned, those crimes were necessarily committed in the past.
But for the application of the attorney-client privilege, however, the period to be considered is the date when the
privileged communication was made by the client to the attorney in relation to either a crime committed in the past or with
respect to a crime intended to be committed in the future. In other words, if the client seeks his lawyer's advice with respect
to a crime that the former has theretofore committed, he is given the protection of a virtual confessional seal which the
attorney-client privilege declares cannot be broken by the attorney without the client's consent. The same privileged
confidentiality, however, does not attach with regard to a crime which a client intends to commit thereafter or in the
future and for purposes of which he seeks the lawyer's advice.

Statements and communications regarding the commission of a crime already committed, made by a party who
committed it, to an attorney, consulted as such, are privileged communications. Contrarily, the unbroken stream of judicial
dicta is to the effect that communications between attorney and client having to do with the client's contemplated criminal
acts, or in aid or furtherance thereof, are not covered by the cloak of privileges ordinarily existing in reference to
communications between attorney and client. 25 (Emphases supplied.)

3. In the present cases, the testimony sought to be elicited from Sansate as state witness are the communications made to
him by physical acts and/or accompanying words of Parades at the time he and Honrada, either with the active or passive
participation of Sansaet, were about to falsify, or in the process of falsifying, the documents which were later filed in the
Tanodbayan by Sansaet and culminated in the criminal charges now pending in respondent Sandiganbayan. Clearly,
therefore, the confidential communications thus made by Paredes to Sansaet were for purposes of and in reference to the
crime of falsification which had not yet been committed in the past by Paredes but which he, in confederacy with his
present co-respondents, later committed. Having been made for purposes of a future offense, those communications are
outside the pale of the attorney-client privilege.

4. Furthermore, Sansaet was himself a conspirator in the commission of that crime of falsification which he, Paredes and
Honrada concocted and foisted upon the authorities. It is well settled that in order that a communication between a
lawyer and his client may be privileged, it must be for a lawful purpose or in furtherance of a lawful end. The existence of
an unlawful purpose prevents the privilege from attaching. 26 In fact, it has also been pointed out to the Court that the
"prosecution of the honorable relation of attorney and client will not be permitted under the guise of privilege, and every
communication made to an attorney by a client for a criminal purpose is a conspiracy or attempt at a conspiracy which is
not only lawful to divulge, but which the attorney under certain circumstances may be bound to disclose at once in the
interest of justice." 27

It is evident, therefore, that it was error for respondent Sandiganbayan to insist that such unlawful communications
intended for an illegal purpose contrived by conspirators are nonetheless covered by the so-called mantle of privilege. To
prevent a conniving counsel from revealing the genesis of a crime which was later committed pursuant to a conspiracy,
because of the objection thereto of his conspiring client, would be one of the worst travesties in the rules of evidence and
practice in the noble profession of law.

II

On the foregoing premises, we now proceed to the consequential inquiry as to whether respondent Sansaet qualifies, as
a particeps criminis, for discharge from the criminal prosecution in order to testify for the State. Parenthetically,
respondent court, having arrived at a contrary conclusion on the preceding issue, did not pass upon this second aspect
and the relief sought by the prosecution which are now submitted for our resolution in the petition at bar. We shall,
however, first dispose likewise of some ancillary questions requiring preludial clarification.

1. The fact that respondent Sandiganbayan did not fully pass upon the query as to whether or not respondent Sansaet was
qualified to be a state witness need not prevent this Court from resolving that issue as prayed for by petitioner. Where the
determinative facts and evidence have been submitted to this Court such that it is in a position to finally resolve the
dispute, it will be in the pursuance of the ends of justice and the expeditious administration thereof to resolve the case on
the merits, instead of remanding it to the trial court. 28

2. A reservation is raised over the fact that the three private respondents here stand charged in three separate
informations. It will be recalled that in its resolution of February 24, 1992, the Ombudsman recommended the filing of
criminal charges for falsification of public documents against all the respondents herein. That resolution was affirmed but,
reportedly in order to obviate further controversy, one information was filed against each of the three respondents here,
resulting in three informations for the same acts of falsification.

This technicality was, however, sufficiently explained away during the deliberations in this case by the following discussion
thereof by Mr. Justice Davide, to wit:

Assuming no substantive impediment exists to block Sansaet's discharge as state witness, he can,
nevertheless, be discharged even if indicted under a separate information. I suppose the three cases were
consolidated for joint trial since they were all raffled to the Second Division of the Sandiganbayan. Section
2, Rule XV of the Revised Rules of the Sandiganbayan allows consolidation in only one Division of cases
arising from the same incident or series of incidents, or involving common questions of law and fact.
Accordingly, for all legal intents and purposes, Sansaet stood as co-accused and he could be discharged
as state witness. It is of no moment that he was charged separately from his co-accused. While Section 9
of Rule 119 of the 1985 Rules of Criminal Procedure uses the word jointly, which was absent in the old
provision, the consolidated and joint trial has the effect of making the three accused co-accused or joint
defendants, especially considering that they are charged for the same offense. In criminal law, persons
indicted for the same offense and tried together are called joint defendants.

As likewise submitted therefor by Mr. Justice Francisco along the same vein, there having been a consolidation of the
three cases, the several actions lost their separate identities and became a single action in which a single judgment is
rendered, the same as if the different causes of action involved had originally been joined in a single action. 29

Indeed, the former provision of the Rules referring to the situation "(w)hen two or more persons are charged with the
commission of a certain offense" was too broad and indefinite; hence the word "joint" was added to indicate the identity
of the charge and the fact that the accused are all together charged therewith substantially in the same manner in point of
commission and time. The word "joint" means "common to two or more," as "involving the united activity of two or more,"
or "done or produced by two or more working together," or "shared by or affecting two or more. 30 Had it been intended
that all the accused should always be indicted in one and the same information, the Rules could have said so with facility,
but it did not so require in consideration of the circumstances obtaining in the present case and the problems that may
arise from amending the information. After all, the purpose of the Rule can be achieved by consolidation of the cases as
an alternative mode.

2. We have earlier held that Sansaet was a conspirator in the crime of falsification, and the rule is that since in a conspiracy
the act of one is the act of all, the same penalty shall be imposed on all members of the conspiracy. Now, one of the
requirements for a state witness is that he "does not appear to be the most guilty." 31 not that he must be the least
guilty 32 as is so often erroneously framed or submitted. The query would then be whether an accused who was held guilty
by reason of membership in a conspiracy is eligible to be a state witness.

To be sure, in People vs. Ramirez, et al. 33 we find this obiter:

It appears that Apolonio Bagispas was the real mastermind. It is believable that he persuaded the others
to rob Paterno, not to kill him for a promised fee. Although he did not actually commit any of the
stabbings, it was a mistake to discharge Bagispas as a state witness. All the perpetrators of the offense,
including him, were bound in a conspiracy that made them equally guilty.
However, prior thereto, in People vs. Roxas, et al., 34 two conspirators charged with five others in three separate
informations for multiple murder were discharged and used as state witnesses against their confederates. Subsequent
thereto, in Lugtu, et al. vs. Court of Appeals, et al., 35 one of the co-conspirators was discharged from the information
charging him and two others with the crime of estafa. The trial court found that he was not the most guilty as, being a
poor and ignorant man, he was easily convinced by his two co-accused to open the account with the bank and which led
to the commission of the crime.

On appeal, this Court held that the finding of respondent appellate court that Lugtu was just as guilty as his co-accused,
and should not be discharged as he did not appear to be not the most guilty, is untenable. In other words, the Court took
into account the gravity or nature of the acts committed by the accused to be discharged compared to those of his co-
accused, and not merely the fact that in law the same or equal penalty is imposable on all of them.

Eventually, what was just somehow assumed but not explicity articulated found expression in People vs. Ocimar, et
al., 36 which we quote in extenso:

Ocimar contends that in the case at bar Bermudez does not satisfy the conditions for the discharge of a co-accused to
become a state witness. He argues that no accused in a conspiracy can lawfully be discharged and utilized as a state
witness, for not one of them could satisfy the requisite of appearing not to be the most guilty. Appellant asserts that since
accused Bermudez was part of the conspiracy, he is equally guilty as the others.

We do not agree. First, there is absolute necessity for the testimony of Bermudez. For, despite the presentation of four (4)
other witnesses, none of them could positively identify the accused except Bermudez who was one of those who pulled
the highway heist which resulted not only in the loss of cash, jewelry and other valuables, but even the life of Capt.
Cañeba, Jr. It was in fact the testimony of Bermudez that clinched the case for the prosecution. Second, without his
testimony, no other direct evidence was available for the prosecution to prove the elements of the crime. Third, his
testimony could be, as indeed it was, substantially corroborated in its material points as indicated by the trial court in its
well-reasoned decision. Fourth, he does not appear to be the most guilty. As the evidence reveals, he was only invited to a
drinking party without having any prior knowledge of the plot to stage a highway robbery. But even assuming that he
later became part of the conspiracy, he does not appear to be the most guilty. What the law prohibits is that the most
guilty will be set free while his co-accused who are less guilty will be sent to jail. And by "most guilty" we mean the highest
degree of culpability in terms of participation in the commission of the offense and not necessarily the severity of the penalty
imposed. While all the accused may be given the same penalty by reason of conspiracy, yet one may be considered least
guilty if We take into account his degree of participation in the perpetration of the offense. Fifth, there is no evidence that he
has at any time been convicted of any offense involving moral turpitude.

xxx xxx xxx

Thus, We agree with the observations of the Solicitor General that the rule on the discharge of an accused
to be utilized as state witness clearly looks at his actual and individual participation in the commission of
the crime, which may or may not have been perpetrated in conspiracy with the other accused. Since
Bermudez was not individually responsible for the killing committed on the occasion of the robbery
except by reason of conspiracy, it cannot be said then that Bermudez appears to be the most guilty.
Hence, his discharge to be a witness for the government is clearly warranted. (Emphasis ours.)

The rule of equality in the penalty to be imposed upon conspirators found guilty of a criminal offense is based on
the concurrence of criminal intent in their minds and translated into concerted physical action although of varying
acts or degrees of depravity. Since the Revised Penal Code is based on the classical school of thought, it is the
identity of the mens rea which is considered the predominant consideration and, therefore, warrants the
imposition of the same penalty on the consequential theory that the act of one is thereby the act of all.

Also, this is an affair of substantive law which should not be equated with the procedural rule on the discharge of
particeps criminis. This adjective device is based on other considerations, such as the need for giving immunity to
one of them in order that not all shall escape, and the judicial experience that the candid admission of an accused
 regarding his participation is a guaranty that he will testify truthfully. For those reasons, the Rules provide for
certain qualifying criteria which, again, are based on judicial experience distilled into a judgmental policy.

III

The Court is reasonably convinced, and so holds, that the other requisites for the discharge of respondent Sansaet as a
state witness are present and should have been favorably appreciated by the Sandiganbayan.

Respondent Sansaet is the only cooperative eyewitness to the actual commission of the falsification charged in the
criminal cases pending before respondent court, and the prosecution is faced with the formidable task of establishing the
guilt of the two other co-respondents who steadfastly deny the charge and stoutly protest their innocence. There is thus
no other direct evidence available for the prosecution of the case, hence there is absolute necessity for the testimony of
Sansaet whose discharge is sought precisely for that purpose. Said respondent has indicated his conformity thereto and
has, for the purposes required by the Rules, detailed the substance of his projected testimony in his Affidavit of
Explanation and Rectifications.

His testimony can be substantially corroborated on its material points by reputable witnesses, identified in the basic
petition with a digest of their prospective testimonies, as follows: Judge Ciriaco C. Ariño, Municipal Circuit Trial Court in
San Francisco, Agusan del Sur; Provincial Prosecutor and Deputized Ombudsman Prosecutor Claudio A. Nistal; Teofilo
Gelacio, private complainant who initiated the criminal cases through his letter-complaint; Alberto Juvilan of the
Sangguniang Bayan of San Fernando, Agusan del Sur, who participated in the resolution asking their Provincial Governor
to file the appropriate case against respondent Paredes, and Francisco Macalit, who obtained the certification of non-
arraignment from Judge Ariño.

On the final requirement of the Rules, it does not appear that respondent Sansaet has at any time been convicted of any
offense involving moral turpitude. Thus, with the confluence of all the requirements for the discharge of this respondent,
both the Special Prosecutor and the Solicitor General strongly urge and propose that he be allowed to testify as a state
witness.

This Court is not unaware of the doctrinal rule that, on this procedural aspect, the prosecution may propose but it is for
the trial court, in the exercise of its sound discretion, to determine the merits of the proposal and make the corresponding
disposition. It must be emphasized, however, that such discretion should have been exercised, and the disposition taken
on a holistic view of all the facts and issues herein discussed, and not merely on the sole issue of the applicability of the
attorney-client privilege.

This change of heart and direction respondent Sandiganbayan eventually assumed, after the retirement of two members
of its Second Division 37 and
the reconstitution thereof. In an inversely anticlimactic Manifestation and Comment 38 dated June 14, 1995, as required by
this Court in its resolution on December 5, 1994, the chairman and new members thereof 39 declared:

4) That the questioned Resolutions of December 22, 1993 and March 7, 1994 upon which the Petition
for Certiorari filed by the prosecution are based, was penned by Associate Justice Narciso T. Atienza and
concurred in by the undersigned and Associate Justice Augusto M. Amores;

5) That while the legal issues involved had been already discussed and passed upon by the Second
Division in the aforesaid Resolution, however, after going over the arguments submitted by the Solicitor-
General and re-assessing Our position on the matter, We respectfully beg leave of the Honorable
Supreme Court to manifest that We are amenable to setting aside the questioned Resolutions and to
grant the prosecution's motion to discharge accused Generoso Sansaet as state witness, upon authority of
the Honorable Supreme Court for the issuance of the proper Resolution to that effect within fifteen (15)
days from notice thereof.
WHEREFORE, the writ of certiorari prayed for is hereby granted SETTING ASIDE the impunged resolutions and ORDERING
that the present reliefs sought in these cases by petitioner be allowed and given due course by respondent
Sandiganbayan.

SO ORDERED.

Narvasa, C.J., Padilla, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco and Panganiban, JJ.,
concur.

Hermosisima, Jr. and Torres, Jr., JJ., are on leave.

 [A.C. NO. 5108 : May 26, 2005]

ROSA F. MERCADO, Complainant, v. ATTY. JULITO D. VITRIOLO, Respondent.

DECISION

PUNO, J.:

Rosa F. Mercado filed the instant administrative complaint against Atty. Julito D. Vitriolo, seeking his disbarment from the
practice of law. The complainant alleged that respondent maliciously instituted a criminal case for falsification of public
document against her, a former client, based on confidential information gained from their attorney-client relationship.

Let us first hearken to the facts.

Complainant is a Senior Education Program Specialist of the Standards Development Division, Office of Programs and
Standards while respondent is a Deputy Executive Director IV of the Commission on Higher Education (CHED). 1

Complainant's husband filed Civil Case No. 40537 entitled "Ruben G. Mercado v. Rosa C. Francisco," for annulment of their
marriage with the Regional Trial Court (RTC) of Pasig City. This annulment case had been dismissed by the trial court, and
the dismissal became final and executory on July 15, 1992. 2

In August 1992, Atty. Anastacio P. de Leon, counsel of complainant, died. On February 7, 1994, respondent entered his
appearance before the trial court as collaborating counsel for complainant.3

On March 16, 1994, respondent filed his Notice of Substitution of Counsel,4 informing the RTC of Pasig City that he has
been appointed as counsel for the complainant, in substitution of Atty. de Leon.

It also appears that on April 13, 1999, respondent filed a criminal action against complainant before the Office of the City
Prosecutor, Pasig City, entitled "Atty. Julito Vitriolo, et al. v. Rose Dela Cruz F. Mercado," and docketed as I.S. No. PSG 99-
9823, for violation of Articles 171 and 172 (falsification of public document) of the Revised Penal Code. 5 Respondent
alleged that complainant made false entries in the Certificates of Live Birth of her children, Angelica and Katelyn Anne.
More specifically, complainant allegedly indicated in said Certificates of Live Birth that she is married to a certain
Ferdinand Fernandez, and that their marriage was solemnized on April 11, 1979, when in truth, she is legally married to
Ruben G. Mercado and their marriage took place on April 11, 1978.

Complainant denied the accusations of respondent against her. She denied using any other name than "Rosa F. Mercado."
She also insisted that she has gotten married only once, on April 11, 1978, to Ruben G. Mercado.

In addition, complainant Mercado cited other charges against respondent that are pending before or decided upon by
other tribunals - (1) libel suit before the Office of the City Prosecutor, Pasig City;6 (2) administrative case for dishonesty,
grave misconduct, conduct prejudicial to the best interest of the service, pursuit of private business, vocation or profession
without the permission required by Civil Service rules and regulations, and violations of the "Anti-Graft and Corrupt
Practices Act," before the then Presidential Commission Against Graft and Corruption; 7 (3) complaint for dishonesty, grave
misconduct, and conduct prejudicial to the best interest of the service before the Office of the Ombudsman, where he was
found guilty of misconduct and meted out the penalty of one month suspension without pay;8 and, (4) the Information for
violation of Section 7(b)(2) of Republic Act No. 6713, as amended, otherwise known as the Code of Conduct and Ethical
Standards for Public Officials and Employees before the Sandiganbayan.9

Complainant Mercado alleged that said criminal complaint for falsification of public document (I.S. No. PSG 99-9823)
disclosed confidential facts and information relating to the civil case for annulment, then handled by respondent Vitriolo
as her counsel. This prompted complainant Mercado to bring this action against respondent. She claims that, in filing the
criminal case for falsification, respondent is guilty of breaching their privileged and confidential lawyer-client relationship,
and should be disbarred.
Respondent filed his Comment/Motion to Dismiss on November 3, 1999 where he alleged that the complaint for
disbarment was all hearsay, misleading and irrelevant because all the allegations leveled against him are subject of
separate fact-finding bodies. Respondent claimed that the pending cases against him are not grounds for disbarment, and
that he is presumed to be innocent until proven otherwise. 10 He also states that the decision of the Ombudsman finding
him guilty of misconduct and imposing upon him the penalty of suspension for one month without pay is on appeal with
the Court of Appeals. He adds that he was found guilty, only of simple misconduct, which he committed in good faith. 11

In addition, respondent maintains that his filing of the criminal complaint for falsification of public documents against
complainant does not violate the rule on privileged communication between attorney and client because the bases of the
falsification case are two certificates of live birth which are public documents and in no way connected with the confidence
taken during the engagement of respondent as counsel. According to respondent, the complainant confided to him as
then counsel only matters of facts relating to the annulment case. Nothing was said about the alleged falsification of the
entries in the birth certificates of her two daughters. The birth certificates are filed in the Records Division of CHED and are
accessible to anyone.12

In a Resolution dated February 9, 2000, this Court referred the administrative case to the Integrated Bar of the Philippines
(IBP) for investigation, report and recommendation.13

The IBP Commission on Bar Discipline set two dates for hearing but complainant failed to appear in both. Investigating
Commissioner Rosalina R. Datiles thus granted respondent's motion to file his memorandum, and the case was submitted
for resolution based on the pleadings submitted by the parties.14

On June 21, 2003, the IBP Board of Governors approved the report of investigating commissioner Datiles, finding the
respondent guilty of violating the rule on privileged communication between attorney and client, and recommending his
suspension from the practice of law for one (1) year.

On August 6, 2003, complainant, upon receiving a copy of the IBP report and recommendation, wrote Chief Justice Hilario
Davide, Jr., a letter of desistance. She stated that after the passage of so many years, she has now found forgiveness for
those who have wronged her.

At the outset, we stress that we shall not inquire into the merits of the various criminal and administrative cases filed
against respondent. It is the duty of the tribunals where these cases are pending to determine the guilt or innocence of
the respondent.

We also emphasize that the Court is not bound by any withdrawal of the complaint or desistance by the complainant. The
letter of complainant to the Chief Justice imparting forgiveness upon respondent is inconsequential in disbarment
proceedings.

We now resolve whether respondent violated the rule on privileged communication between attorney and client when he
filed a criminal case for falsification of public document against his former client.

A brief discussion of the nature of the relationship between attorney and client and the rule on attorney-client privilege
that is designed to protect such relation is in order.

In engaging the services of an attorney, the client reposes on him special powers of trust and confidence. Their
relationship is strictly personal and highly confidential and fiduciary. The relation is of such delicate, exacting and
confidential nature that is required by necessity and public interest. 15 Only by such confidentiality and protection will a
person be encouraged to repose his confidence in an attorney. The hypothesis is that abstinence from seeking legal
advice in a good cause is an evil which is fatal to the administration of justice.16 Thus, the preservation and protection of
that relation will encourage a client to entrust his legal problems to an attorney, which is of paramount importance to the
administration of justice.17 One rule adopted to serve this purpose is the attorney-client privilege: an attorney is to keep
inviolate his client's secrets or confidence and not to abuse them. 18 Thus, the duty of a lawyer to preserve his client's
secrets and confidence outlasts the termination of the attorney-client relationship,19 and continues even after the client's
death.20 It is the glory of the legal profession that its fidelity to its client can be depended on, and that a man may safely
go to a lawyer and converse with him upon his rights or supposed rights in any litigation with absolute assurance that the
lawyer's tongue is tied from ever disclosing it.21 With full disclosure of the facts of the case by the client to his attorney,
adequate legal representation will result in the ascertainment and enforcement of rights or the prosecution or defense of
the client's cause.

Now, we go to the rule on attorney-client privilege. Dean Wigmore cites the factors essential to establish the existence of
the privilege, viz:

(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the
communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently
protected (7) from disclosure by himself or by the legal advisor, (8) except the protection be waived.22

In fine, the factors are as follows:

(1) There exists an attorney-client relationship, or a prospective attorney-client relationship, and it is by reason of this
relationship that the client made the communication.

Matters disclosed by a prospective client to a lawyer are protected by the rule on privileged communication even if the
prospective client does not thereafter retain the lawyer or the latter declines the employment. 23 The reason for this is to
make the prospective client free to discuss whatever he wishes with the lawyer without fear that what he tells the lawyer
will be divulged or used against him, and for the lawyer to be equally free to obtain information from the prospective
client.24

On the other hand, a communication from a (prospective) client to a lawyer for some purpose other than on account of
the (prospective) attorney-client relation is not privileged. Instructive is the case of Pfleider v. Palanca,25 where the client
and his wife leased to their attorney a 1,328-hectare agricultural land for a period of ten years. In their contract, the parties
agreed, among others, that a specified portion of the lease rentals would be paid to the client-lessors, and the remainder
would be delivered by counsel-lessee to client's listed creditors. The client alleged that the list of creditors which he had
"confidentially" supplied counsel for the purpose of carrying out the terms of payment contained in the lease contract was
disclosed by counsel, in violation of their lawyer-client relation, to parties whose interests are adverse to those of the
client. As the client himself, however, states, in the execution of the terms of the aforesaid lease contract between the
parties, he furnished counsel with the "confidential" list of his creditors. We ruled that this indicates that client delivered
the list of his creditors to counsel not because of the professional relation then existing between them, but on account of
the lease agreement. We then held that a violation of the confidence that accompanied the delivery of that list would
partake more of a private and civil wrong than of a breach of the fidelity owing from a lawyer to his client.

(2) The client made the communication in confidence.

The mere relation of attorney and client does not raise a presumption of confidentiality. 26 The client must intend the
communication to be confidential.27

A confidential communication refers to information transmitted by voluntary act of disclosure between attorney and client
in confidence and by means which, so far as the client is aware, discloses the information to no third person other than
one reasonably necessary for the transmission of the information or the accomplishment of the purpose for which it was
given.28

Our jurisprudence on the matter rests on quiescent ground. Thus, a compromise agreement prepared by a lawyer
pursuant to the instruction of his client and delivered to the opposing party, 29 an offer and counter-offer for
settlement,30 or a document given by a client to his counsel not in his professional capacity, 31 are not privileged
communications, the element of confidentiality not being present.32

(3) The legal advice must be sought from the attorney in his professional capacity.33
The communication made by a client to his attorney must not be intended for mere information, but for the purpose of
seeking legal advice from his attorney as to his rights or obligations. The communication must have been transmitted by a
client to his attorney for the purpose of seeking legal advice. 34

If the client seeks an accounting service,35 or business or personal assistance,36 and not legal advice, the privilege does not
attach to a communication disclosed for such purpose.

Applying all these rules to the case at bar, we hold that the evidence on record fails to substantiate complainant's
allegations. We note that complainant did not even specify the alleged communication in confidence disclosed by
respondent. All her claims were couched in general terms and lacked specificity. She contends that respondent violated
the rule on privileged communication when he instituted a criminal action against her for falsification of public documents
because the criminal complaint disclosed facts relating to the civil case for annulment then handled by respondent. She
did not, however, spell out these facts which will determine the merit of her complaint. The Court cannot be involved in a
guessing game as to the existence of facts which the complainant must prove.

Indeed, complainant failed to attend the hearings at the IBP. Without any testimony from the complainant as to the
specific confidential information allegedly divulged by respondent without her consent, it is difficult, if not impossible to
determine if there was any violation of the rule on privileged communication. Such confidential information is a crucial link
in establishing a breach of the rule on privileged communication between attorney and client. It is not enough to merely
assert the attorney-client privilege.37 The burden of proving that the privilege applies is placed upon the party asserting
the privilege.38

IN VIEW WHEREOF, the complaint against respondent Atty. Julito D. Vitriolo is hereby DISMISSED for lack of merit.

SO ORDERED.

Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Tinga, J., out of the country.
G.R. No. 179786 July 24, 2013

JOSIELENE LARA CHAN, Petitioner,

vs.
JOHNNY T. CHAN, Respondent.

DECISION

ABAD, J.:

This case is about the propriety of issuing a subpoena duces tecum for the production and submission in court of the
respondent husband's hospital record in a case for declaration of nullity of marriage where one of the issues is his mental
fitness as a husband.

The Facts and the Case

On February 6, 2006 petitioner Josielene Lara Chan (Josielene) filed before the Regional Trial Court (RTC) of Makati City,
Branch 144 a petition for the declaration of nullity of her marriage to respondent Johnny Chan (Johnny), the dissolution of
their conjugal partnership of gains, and the award of custody of their children to her. Josielene claimed that Johnny failed
to care for and support his family and that a psychiatrist diagnosed him as mentally deficient due to incessant drinking
and excessive use of prohibited drugs. Indeed, she had convinced him to undergo hospital confinement for detoxification
and rehabilitation.

Johnny resisted the action, claiming that it was Josielene who failed in her wifely duties. To save their marriage, he agreed
to marriage counseling but when he and Josielene got to the hospital, two men forcibly held him by both arms while
another gave him an injection. The marriage relations got worse when the police temporarily detained Josielene for an
unrelated crime and released her only after the case against her ended. By then, their marriage relationship could no
longer be repaired.

During the pre-trial conference, Josielene pre-marked the Philhealth Claim Form1 that Johnny attached to his answer as
proof that he was forcibly confined at the rehabilitation unit of a hospital. The form carried a physician’s handwritten note
that Johnny suffered from "methamphetamine and alcohol abuse." Following up on this point, on August 22, 2006
Josielene filed with the RTC a request for the issuance of a subpoena duces tecum addressed to Medical City, covering
Johnny’s medical records when he was there confined. The request was accompanied by a motion to "be allowed to
submit in evidence" the records sought by subpoena duces tecum.2

Johnny opposed the motion, arguing that the medical records were covered by physician-patient privilege. On September
13, 2006 the RTC sustained the opposition and denied Josielene’s motion. It also denied her motion for reconsideration,
prompting her to file a special civil action of certiorari before the Court of Appeals (CA) in CA-G.R. SP 97913, imputing
grave abuse of discretion to the RTC.

On September 17, 2007 the CA3 denied Josielene’s petition. It ruled that, if courts were to allow the production of medical
records, then patients would be left with no assurance that whatever relevant disclosures they may have made to their
physicians would be kept confidential. The prohibition covers not only testimonies, but also affidavits, certificates, and
pertinent hospital records. The CA added that, although Johnny can waive the privilege, he did not do so in this case. He
attached the Philhealth form to his answer for the limited purpose of showing his alleged forcible confinement.

Question Presented

The central question presented in this case is:

Whether or not the CA erred in ruling that the trial court correctly denied the issuance of a subpoena duces tecum
covering Johnny’s hospital records on the ground that these are covered by the privileged character of the physician-
patient communication.

The Ruling of the Court

Josielene requested the issuance of a subpoena duces tecum covering the hospital records of Johnny’s confinement,
which records she wanted to present in court as evidence in support of her action to have their marriage declared a nullity.
Respondent Johnny resisted her request for subpoena, however, invoking the privileged character of those records. He
cites Section 24(c), Rule 130 of the Rules of Evidence which reads:

SEC. 24. Disqualification by reason of privileged communication.— The following persons cannot testify as to matters
learned in confidence in the following cases:

xxxx

(c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil case, without the consent of the
patient, be examined as to any advice or treatment given by him or any information which he may have acquired in
attending such patient in a professional capacity, which information was necessary to enable him to act in that capacity,
and which would blacken the reputation of the patient.

The physician-patient privileged communication rule essentially means that a physician who gets information while
professionally attending a patient cannot in a civil case be examined without the patient’s consent as to any facts which
would blacken the latter’s reputation. This rule is intended to encourage the patient to open up to the physician, relate to
him the history of his ailment, and give him access to his body, enabling the physician to make a correct diagnosis of that
ailment and provide the appropriate cure. Any fear that a physician could be compelled in the future to come to court and
narrate all that had transpired between him and the patient might prompt the latter to clam up, thus putting his own
health at great risk.4

1. The case presents a procedural issue, given that the time to object to the admission of evidence, such as the hospital
records, would be at the time they are offered. The offer could be made part of the physician’s testimony or as
independent evidence that he had made entries in those records that concern the patient’s health problems.

Section 36, Rule 132, states that objections to evidence must be made after the offer of such evidence for admission in
court. Thus:

SEC. 36. Objection.— Objection to evidence offered orally must be made immediately after the offer is made.

Objection to a question propounded in the course of the oral examination of a witness shall be made as soon as the
grounds therefor shall become reasonably apparent.

An offer of evidence in writing shall be objected to within three (3) days after notice of the offer unless a different period is
allowed by the court.

In any case, the grounds for the objections must be specified.

Since the offer of evidence is made at the trial, Josielene’s request for subpoena duces tecum is premature. She will have
to wait for trial to begin before making a request for the issuance of a subpoena duces tecum covering Johnny’s hospital
records. It is when those records are produced for examination at the trial, that Johnny may opt to object, not just to their
admission in evidence, but more so to their disclosure. Section 24(c), Rule 130 of the Rules of Evidence quoted above is
about non-disclosure of privileged matters.
2. It is of course possible to treat Josielene’s motion for the issuance of a subpoena duces tecum covering the hospital
records as a motion for production of documents, a discovery procedure available to a litigant prior to trial. Section 1, Rule
27 of the Rules of Civil Procedure provides:

SEC. 1. Motion for production or inspection; order.— Upon motion of any party showing good cause therefor, the court in
which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing,
by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects
or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and
which are in his possession, custody or control; or (b) order any party to permit entry upon designated land or other
property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property
or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the
inspection and taking copies and photographs, and may prescribe such terms and conditions as are just. (Emphasis
supplied)

But the above right to compel the production of documents has a limitation: the documents to be disclosed are "not
privileged."

Josielene of course claims that the hospital records subject of this case are not privileged since it is the "testimonial"
evidence of the physician that may be regarded as privileged. Section 24(c) of Rule 130 states that the physician "cannot in
a civil case, without the consent of the patient, be examined" regarding their professional conversation. The privilege, says
Josielene, does not cover the hospital records, but only the examination of the physician at the trial.

To allow, however, the disclosure during discovery procedure of the hospital records—the results of tests that the
physician ordered, the diagnosis of the patient’s illness, and the advice or treatment he gave him—would be to allow
access to evidence that is inadmissible without the

patient’s consent. Physician memorializes all these information in the patient’s records. Disclosing them would be the
equivalent of compelling the physician to testify on privileged matters he gained while dealing with the patient, without
the latter’s prior consent.

3. Josielene argues that since Johnny admitted in his answer to the petition before the RTC that he had been confined in a
hospital against his will and in fact attached to his answer a Philhealth claim form covering that confinement, he should be
deemed to have waived the privileged character of its records. Josielene invokes Section 17, Rule 132 of the Rules of
Evidence that provides:

SEC. 17. When part of transaction, writing or record given in evidence, the remainder admissible.— When part of an act,
declaration, conversation, writing or record is given in evidence by one party, the whole of the same subject may be
inquired into by the other, and when a detached act, declaration, conversation, writing or record is given in evidence, any
other act, declaration, conversation, writing or record necessary to its understanding may also be given in
evidence.1âwphi1

But, trial in the case had not yet begun. Consequently, it cannot be said that Johnny had already presented the Philhealth
claim form in evidence, the act contemplated above which would justify Josielene into requesting an inquiry into the
details of his hospital confinement. Johnny was not yet bound to adduce evidence in the case when he filed his answer.
Any request for disclosure of his hospital records would again be premature.

For all of the above reasons, the CA and the RTC were justified in denying Josielene her request for the production in court
of Johnny’s hospital records.

ACCORDINGLY, the Court DENIES the petition and AFFIRMS the Decision of the Court of Appeals in CA-G.R. SP 97913
dated September 17, 2007.

SO ORDERED.
ROBERTO A. ABAD
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA JOSE CATRAL MENDOZA

Associate Justice Associate Justice

See separate concurring opinion

MARVIC MARIO VICTOR F. LEONEN
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above. Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
G.R. No. 117740 October 30, 1998

CAROLINA ABAD GONZALES, petitioner,

vs.
COURT OF APPEALS, HONORIA EMPAYNADO, CECILIA H. ABAD, MARIAN H. ABAD and ROSEMARIE S.
ABAD, respondents.

ROMERO, J.:

Before us is a petition for certiorari to annul the decision of the Court of Appeals dated October 19, 1994, finding private
respondents as the heirs of Ricardo de Mesa Abad as well as annulling petitioners' extra-judicial partition of the
decedent's estate.

The facts are as follows:

On April 18, 1972, petitioners Carolina Abad Gonzales, Dolores de Mesa Abad and Cesar de Mesa Tioseco sought the
settlement of the intestate estate of their brother, Ricardo de Mesa Abad, before the then Court of First Instance of Manila.
In their petition, docketed as Special Proceedings No. 86792, petitioners claimed that they were the only heirs of Ricardo
de Mesa Abad, as the latter allegedly died a bachelor, leaving no descendants or ascendants, whether legitimate or
illegitimate. On May 9, 1972, petitioners amended their petition by alleging that the real properties covered by TCT Nos.
13530, 53671, and 64021, listed therein as belonging to the decedent, were actually only administered by the latter, the
true owner being their late mother, Lucila de Mesa. On June 16, 1972, the trial court appointed Cesar de Mesa Tioseco as
administrator of the intestate estate of Ricardo de Mesa Abad.

Meanwhile, on May 2, 1972, petitioners executed an extrajudicial settlement of the estate of their late mother Lucila de
Mesa, copying therein the technical descriptions of the lots covered by TCT Nos. 13530, 53671, and 64021. By virtue
thereof, the Register of Deeds cancelled the above-mentioned TCTs in the name of Ricardo Abad and issued, in lieu
thereof, TCT No. 108482 in the name of Dolores de Mesa Abad, TCT No. 108483 in the name of Cesar de Mesa Tioseco
and TCT No. 108484 in the name of Carolina Abad Gonzales. The three promptly executed real estate mortgages over the
real properties in favor of Mrs. Josefina Viola, the wife of their counsel, Escolastico Viola.

On July 7, 1972, private respondents Honoria Empaynado, Cecilia Abad Empaynado, and Marian Abad Empaynado filed a
motion to set aside proceedings and for leave to file opposition in Special Proceedings No. 86792. In their motion, they
alleged that Honoria Empaynado had been the common-law wife of Ricardo Abad for twenty-seven years before his
death, or from 1943 to 1971, and that during this period, their union had produced two children, Cecilia Abad Empaynado
and Marian Abad Empaynado. Private respondents also disclosed the existence of Rosemarie Abad, a child allegedly
fathered by Ricardo Abad with another woman, Dolores Saracho. As the law awards the entire estate to the surviving
children to the exclusion of collateral relatives, private respondents charged petitioners with deliberately concealing the
existence of said three children in other to deprive the latter of their rights to the estate of Ricardo Abad.

On July 24, 1972, private respondents filed a motion to withdraw their first motion and, in lieu thereof, filed a motion for
reconsideration praying that Cecilia Abad be appointed administrator instead of Cesar Tioseco. The trial court denied
private respondents' motion to remove Cesar Tioseco as administrator, but allowed them to appear in the proceedings to
establish their right as alleged heirs of Ricardo Abad.

Private respondents later discovered that petitioners had managed to cancel TCT Nos. 13530, 53671, and 64021 through
the stratagem of extra-judicially partitioning their mother's estate. Accordingly, on October 4, 1973, private respondents
filed a motion to annul the extra-judicial partition executed by petitioners, as well as TCT Nos. 108482, 108483, and
108484, the Torrens titles issued in substitution of TCT Nos. 13530, 53671, and 64021 and the real estate mortgages
constituted by the latter on said properties.

After due trial, the lower court, on November 2, 1973, rendered the following judgment:
 WHEREFORE, judgment is hereby rendered as follows:

(1) Declaring Cecilia E. Abad, Marian E. Abad and Rosemarie S. Abad acknowledged
natural children of the deceased Ricardo M. Abad;

(2) Declaring said acknowledged natural children, namely: Cecilia E. Abad, Marian E. Abad,
and Rosemarie S. Abad the only surviving legal heirs of the deceased Ricardo M. Abad
and as such entitled to succeed to the entire estate of said deceased, subject to the rights
of Honoria Empaynado, if any, as co-owner of any of the property of said estate that may
have been acquired thru her joint efforts with the deceased during the period they lived
together as husband and wife;

(3) Denying the petition of decedent's collateral relatives, namely: Dolores M. Abad, Cesar
M. Tioseco and Carolina M. Abad to be declared as heirs and excluding them from
participating in the administration and settlement of the estate of Ricardo Abad;

(4) Appointing Honoria Empaynado as the administratrix in this intestacy with a bond of
THIRTY THOUSAND (P30,000.00) PESOS; and

(5) Ordering Cesar Tioseco to surrender to the new administratrix all property or
properties, monies and such papers that came into his possession by virtue of his
appointment as administrator, which appointment is hereby revoked. 1

The trial court, likewise, found in favor of private respondents with respect to the latter's motion for annulment of certain
documents. On November 19, 1974, it rendered the following judgment:

WHEREFORE, this Court finds oppositors' Motion for Annulment, dated October 4, 1973 to be meritorious
and accordingly —

1. Declares that the six (6) parcels of land described in TCT Nos. 13530, 53671 and 64021,
all registered in the name of Ricardo Abad, as replaced by TCT No. 108482 in the name of
Dolores de Mesa Abad, TCT No. 108483 in the name of Cesar de Mesa Tioseco and TCT
No. 108484 in the name of Carolina de Mesa Abad-Gonzales, and the residential house
situated at 2432 Opalo Street, San Andres Subdivision, Manila, to be the properties of the
late Ricardo Abad;

2. Declares the deed of Extra Judicial Settlement of the Estate of the Deceased Lucila de
Mesa, executed on May 2, 1972 (Doc. No. 445, Page No. 86, Book No. VII, Series of 1972
of the notarial book of Faustino S. Cruz) by petitioners and Carolina de Mesa Abad-
Gonzales, to be inexistent and void from the beginning;

3. Declares as null and void the cancellation of TCT Nos. 13530, 53671 and 64021 and
issuance in lieu thereof, of TCT Nos. 108482, 108483 and 108484;

4. Orders the Register of Deeds of Manila to cancel TCT No. 108482 of Dolores de Mesa
Abad; TCT No. 108483 of Cesar de Mesa Tioseco; and TCT No. 108484 of Carolina de
Mesa Abad-Gonzales and in lieu thereof, restore and/or issue the corresponding
certificate of title in the name of Ricardo Abad;

5. Declares as inexistent and void from the beginning the three (3) real estate mortgages
executed on July 7, 1972 executed by (a) petitioner Dolores de Mesa Abad, identified as
Doc. No. 145, Page No. 30, Book No. XX, Series of 1972, (b) petitioner Cesar de Mesa
Tioseco, identified as Doc. No. 146, Page 31, Book No. XX, Series of 1972; and (c) Carolina
 de Mesa Abad-Gonzales, identified as Doe. No. 144, Page No. 30, Book No. XX, Series of
1972, all of the notarial book of Ricardo P. Yap of Manila, in favor of Mrs. Josefina C. Viola,
and orders the Register of Deeds of Manila to cancel the registration or annotation
thereof from the back of the torrens title of Ricardo Abad; and

6. Orders Atty. Escolastico R. Viola and his law associate and wife, Josefina C. Viola, to
surrender to the new administratrix, Honoria Empaynado, TCT Nos. 108482, 108483, and
108484 within five (5) days from receipt hereof.

SO ORDERED. 2

Petitioners' motion for reconsideration of the November 2, 1973 decision was denied by the trial court. Their notice of
appeal was likewise denied on the ground that the same had been filed out of time. Because of this ruling, petitioners,
instituted certiorari and mandamus proceedings with the Court of Appeals, docketed there as C.A.-G.R. No. SP-03268-R.
On November 2, 1974, the appellate court granted petitioners' petition and ordered the lower court to give due course to
the latter's appeal. The trial court, however, again dismissed petitioners' appeal on the ground that their record on appeal
was filed out of time.

Likewise, on January 4, 1975, petitioners filed their notice of appeal of the November 19, 1974 ruling of the trial court. On
March 21, 1975, this appeal was similarly denied on the ground that it had been filed out of time.

Due to the dismissal of their two appeals, petitioners again instituted certiorari and mandamus proceedings with the Court
of Appeals, docketed therein as C.A.-G.R. No. SP-04352. The appellate court affirmed the dismissal of the two appeals,
prompting petitioners to appeal to the Supreme Court. On July 9, 1985, this Court directed the trial court to give due
course to petitioners' appeal from the order of November 2, 1973 declaring private respondents heirs of the deceased
Ricardo Abad, and the order dated November 19, 1974, annulling certain documents pertaining to the intestate estate of
deceased.

The two appeals were accordingly elevated by the trial court to the appellate court. On October 19, 1994, the Court of
Appeals rendered judgment as follows:

WHEREFORE, all the foregoing considered, the instant appeal is DENIED for lack of merit. The orders of
the court a quo in SP No. 86792, to wit:

1. Order dated November 2, 1973, declaring in substance that Cecilia, Marian and
Rosemarie, all surnamed Abad as the acknowledged natural children and the only
surviving heirs of the deceased Ricardo Abad;

2. Order dated November 19, 1974, declaring in substance that the six (6) parcels of land
described in TCT Nos. 13530, 53671 and 64021 are the properties of Ricardo Abad; that
the extra-judicial partition of the estate of the deceased Lucila de Mesa executed on May
2, 1972 is inexistent and void from the beginning, the cancellation of the aforementioned
TCTs is null and void; the Register of Deeds be ordered to restore and/or issue the
corresponding Certificates of Title in the name of Ricardo Abad; and

3. Order dated March 21, 1975 denying the appeal of Dolores de Mesa Abad and Cesar
de Mesa Tioseco from the latter Order, for being filed out of time, are all AFFIRMED in
toto. With costs against petitioner-appellants.

SO ORDERED. 3

Petitioners now seek to annul the foregoing judgment on the following grounds:
 I. THE COURT OF APPEALS AND THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT
RESPONDENTS CECILIA E. ABAD, MARIAN E. ABAD AND ROSEMARIE S. ABAD ARE THE
ACKNOWLEDGED NATURAL CHILDREN OF THE DECEASED RICARDO DE MESA ABAD.

II. PETITIONERS ARE ENTITLED TO THE SUBJECT ESTATE WHETHER THE SAME IS OWNED
BY THE DECEASED RICARDO DE MESA ABAD OR BY LUCILA DE MESA, THE MOTHER OF
PETITIONERS AND RICARDO DE MESA ABAD.

We are not persuaded.

Petitioners, in contesting Cecilia, Marian and Rosemarie Abad's filiation, submit the startling theory that the husband of
Honoria Empaynado, Jose Libunao, was still alive when Cecilia and Marian Abad were born in 1948 and 1954, respectively.

It is undisputed that prior to her relationship with Ricardo Abad, Honoria Empaynado was married to Jose Libunao, their
union having produced three children, Angelita, Cesar, and Maria Nina, prior to the birth of Cecilia and Marian. But while
private respondents claim that Jose Libunao died in 1943, petitioners claim that the latter died sometime in 1971.

The date of Jose Libunao's death is important, for if he was still alive in 1971, and given that he was legally married to
Honoria Empaynado, the presumption would be that Cecilia and Marian are not Ricardo Abad's children with the latter,
but of Jose Libunao and Honoria Empaynado. Article 256, the applicable provision of the Civil Code, provides:

Art. 256. The child shall be presumed legitimate, although the mother may have declared against its
legitimacy or may have been sentenced as an adulteress. 4

To bolster their theory, petitioners presented in evidence the application for enrolment at Mapua Institute of Technology
of Angelita Libunao, accomplished in 1956, which states:

Father's Name: Jose Libunao

Occupation: engineer (mining)

Mother's Name: Honoria Empaynado5

as well as Cesar Libunao's 1958 application for enrolment at the Mapua Institute of Technology, which states:

Father's Name: Jose Libunao

Occupation: none

Mother's Name: Honoria Empaynado6

Petitioners claim that had Jose Libunao been dead during the time when said applications were accomplished, the
enrolment forms of his children would have stated so. These not being the case, they conclude that Jose Libunao must
have still been alive in 1956 and 1958.

Additionally, petitioners presented the joint affidavit of Juan Quiambao and Alejandro Ramos 7 stating that to their
knowledge Jose Libunao had died in 1971, leaving as his widow, Honoria Empaynado, and that the former had
been interred at the Loyola Memorial Park.

Lastly, petitioners presented the affidavit of Dr. Pedro Arenas, 8 Ricardo Abad's physician, declaring that in 1935,
he had examined Ricardo Abad and found him to be infected with gonorrhea, and that the latter had become
sterile as a consequence thereof.
With these pieces of evidence, petitioners claim that Cecilia and Marian Abad are not the illegitimate children of
Ricardo Abad, but rather the legitimate children of the spouses Jose Libunao and Honoria Empaynado.

At the outset, it must be noted that petitioners are disputing the veracity of the trial court's finding of facts. It is a
fundamental and settled rule that factual findings of the trial court, adopted and confirmed by the Court of
Appeals, are final and conclusive and may not be reviewed on appeal.9 Petitioners, however, argue that factual
findings of the Court of Appeals are not binding on this Court when there appears in the record of the case some
fact or circumstance of weight and influence which has been overlooked, or the significance of which has been
misinterpreted, that if considered, would affect the result of the case. 10

This Court finds no justifiable reason to apply this exception to the case at bar.

First, the evidence presented by petitioners to prove that Jose Libunao died in 1971 are, to say the least, far from
conclusive. Failure to indicate on an enrolment form that one's parent is "deceased" is not necessarily proof that
said parent was still living during the time said form was being accomplished. Furthermore, the joint affidavit of
Juan Quiambao and Alejandro Ramos as to the supposed death of Jose Libunao in 1971 is not competent evidence
to prove the latter's death at that time, being merely secondary evidence thereof. Jose Libunao's death certificate
would have been the best evidence as to when the latter died. Petitioners have, however, inexplicably failed to
present the same, although there is no showing that said death certificate has been lost or destroyed as to be
unavailable as proof of Jose Libunao's death. More telling, while the records of Loyola Memorial Park show that a
certain Jose Bautista Libunao was indeed buried there in 1971, this person appears to be different from Honoria
Empaynado's first husband, the latter's name being Jose Santos Libunao. Even the name of the wife is different.
Jose Bautista Libunao's wife is listed as Josefa Reyes while the wife of Jose Santos Libunao was Honoria
Empaynado.

As to Dr. Arenas' affidavit, the same was objected to by private respondents as being privileged communication
under Section 24 (c), Rule 130 of the Rules of Court. 11 The rule on confidential communications between physician
and patient requires that: a) the action in which the advice or treatment given or any information is to be used is a
civil case; b) the relation of physician and patient existed between the person claiming the privilege or his legal
representative and the physician; c) the advice or treatment given by him or any information was acquired by the
physician while professionally attending the patient; d) the information was necessary for the performance of his
professional duty; and e) the disclosure of the information would tend to blacken the reputation of the patient. 12

Petitioners do not dispute that the affidavit meets the first four requisites. They assert, however, that the finding
as to Ricardo Abad's "sterility" does not blacken the character of the deceased. Petitioners conveniently forget
that Ricardo Abad's "sterility" arose when the latter contracted gonorrhea, a fact which most assuredly blackens
his reputation. In fact, given that society holds virility at a premium, sterility alone, without the attendant
embarrassment of contracting a sexually-transmitted disease, would be sufficient to blacken the reputation of any
patient. We thus hold the affidavit inadmissible in evidence. And the same remains inadmissible in evidence,
notwithstanding the death of Ricardo Abad. As stated by the trial court:

In the case of Westover vs. Aetna Life Insurance Company, 99 N.Y. 59, it was pointed out that: "The
privilege of secrecy is not abolished or terminated because of death as stated in established
precedents. It is an established rule that the purpose of the law would be thwarted and the policy
intended to be promoted thereby would be defeated, if death removed the seal of secrecy, from
the communications and disclosures which a patient should make to his physician. After one has
gone to his grave, the living are not permitted to impair his name and disgrace his memory by
dragging to light communications and disclosures made under the seal of the statute.

Given the above disquisition, it is clearly apparent that petitioners have failed to establish their claim by the
quantum of evidence required by law. On the other hand, the evidence presented by private respondents
overwhelmingly prove that they are the acknowledged natural children of Ricardo Abad. We quote with approval
the trial court's decision, thus:
 In his individual statements of income and assets for the calendar years 1958 and 1970, and in all
his individual income tax returns for the years 1964, 1965, 1967, 1968, 1969 and 1970, he has
declared therein as his legitimate wife, Honoria Empaynado; and as his legitimate dependent
children, Cecilia, Marian (except in Exh. 12) and Rosemarie Abad (Exhs. 12 to 19; TSN, February 26,
1973, pp. 33-44).

xxx xxx xxx

In December 1959, Ricardo Abad insured his daughters Cecilia, then eleven (11) years old, and
Marian, then (5) years old, on [a] twenty (20) year-endowment plan with the Insular Life Assurance
Co., Ltd. and paid for their premiums (Exh. 34 and 34-A; 34-B to C; 35, 35-A to D; TSN, February 27,
1973, pp. 7-20).

In 1966, he and his daughter Cecilia Abad opened a trust fund account of P100,000,00 with the
People's Bank and Trust Company which was renewed until (sic) 1971, payable to either of them in
the event of death (Exhs. 36-A; 36-E). On January 5, 1971, Ricardo Abad opened a trust fund of
P100,000.00 with the same bank, payable to his daughter Marian (Exh. 37-A). On January 4, 1971,
Ricardo Abad and his sister Dolores Abad had (sic) agreed to stipulate in their PBTC Trust
Agreement that the 9% income of their P100,000.00 trust fund shall (sic) be paid monthly to the
account reserved for Cecilia, under PBTC Savings Account No. 49053 in the name of Ricardo Abad
and/or Cecilia Abad (Exh. 38) where the income of the trust fund intended for Cecilia was also
deposited monthly (TSN, February 27, 1973, pp. 21-36). Ricardo Abad had also deposited (money)
with the Monte de Piedad and Savings Bank in the name of his daughter Marian, represented by
him, as father, under Savings Account 17348 which has (sic) a balance of P34,812.28 as of June 30,
1972. (Exh. 60-B). . .

With the finding that private respondents are the illegitimate children of Ricardo Abad, petitioners are precluded
from inheriting the estate of their brother. The applicable provisions are:

Art. 988. In the absence of legitimate descendants or ascendants, the illegitimate children shall
succeed to the entire estate of the deceased.

Art. 1003. If there are no . . . illegitimate children, or a surviving spouse, the collateral relatives
shall succeed to the entire estate of the deceased in accordance with the following articles.
(Emphasis supplied).

As to petitioners' claim that the properties m the name of Ricardo Abad actually belong to their mother Lucila de
Mesa, both the trial court and the appellate court ruled that the evidence presented by private respondents
proved that said properties in truth belong to Ricardo Abad. As stated earlier, the findings of fact by the trial court
are entitled to great weight and should not be disturbed on appeal, it being in a better position to examine the
real evidence, as well as to observe the demeanor of the witnesses while testifying in the case. 13 In fact,
petitioners seem to accept this conclusion, their contention being that they are entitled to the subject estate
whether the same is owned by Ricardo Abad or by Lucila de Mesa.

Digressing from the main issue, in its decision dated October 19, 1994, the Court of Appeals affirmed the trial
court's order dated March 21, 1975 denying the appeal of Dolores de Mesa Abad and Cesar de Mesa Tioseco on
the ground that the same was filed out of time. This affirmance is erroneous, for on July 9, 1985, this Court had
already ruled that the same was not filed out of time. Well-settled is the dictum that the rulings of the Supreme
Court are binding upon and may not be reversed by a lower court.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The decision of the Court of Appeals in
CA-G.R. CV No. 30184 dated October 19, 1994 is AFFIRMED with the MODIFICATION that the affirmance of the
Order dated March 21, 1975 denying the appeal of Dolores de Mesa Abad and Cesar de Mesa Tioseco for being
filed out of time is SET ASIDE. Costs against petitioners.

SO ORDERED.

Narvasa, Kapunan, Purisima and Pardo, JJ., concur.

G.R. No. 108854 June 14, 1994

MA. PAZ FERNANDEZ KROHN, petitioner,

vs.
COURT OF APPEALS and EDGAR KROHN, JR., respondents.

Cruz, Durian, Agabin, Atienza, Alday and Tuason for petitioner.

Oscar F. Martinez for private respondent.

BELLOSILLO, J.:

A confidential psychiatric evaluation report is being presented in evidence before the trial court in a petition for
annulment of marriage grounded on psychological incapacity. The witness testifying on the report is the husband who
initiated the annulment proceedings, not the physician who prepared the report.

The subject of the evaluation report, Ma. Paz Fernandez Krohn, invoking the rule on privileged communication between
physician and patient, seeks to enjoin her husband from disclosing the contents of the report. After failing to convince the
trial court and the appellate court, she is now before us on a petition for review on certiorari.

On 14 June 1964, Edgar Krohn, Jr., and Ma. Paz Fernandez were married at the Saint Vincent de Paul Church in San
Marcelino, Manila. The union produced three children, Edgar Johannes, Karl Wilhelm and Alexandra. Their blessings
notwithstanding, the relationship between the couple developed into a stormy one. In 1971, Ma. Paz underwent
psychological testing purportedly in an effort to ease the marital strain. The effort however proved futile. In 1973, they
finally separated in fact.

In 1975, Edgar was able to secure a copy of the confidential psychiatric report on Ma. Paz prepared and signed by Drs.
Cornelio Banaag, Jr., and Baltazar Reyes. On 2 November 1978, presenting the report among others, he obtained a decree
("Conclusion") from the Tribunal Metropolitanum Matrimoniale in Manila nullifying his church marriage with Ma. Paz on
the ground of "incapacitas assumendi onera conjugalia due to lack of due discretion existent at the time of the wedding
and thereafter." 1 On 10 July 1979, the decree was confirmed and pronounced "Final and Definite." 2

Meanwhile, on 30 July 1982, the then Court of First Instance (now Regional Trial Court) of Pasig, Br. II, issued an order
granting the voluntary dissolution of the conjugal partnership.

On 23 October 1990, Edgar filed a petition for the annulment of his marriage with Ma. Paz before the trial court. 3 In his
petition, he cited the Confidential Psychiatric Evaluation Report which Ma. Paz merely denied in her Answer as "either
unfounded or irrelevant." 4

At the hearing on 8 May 1991, Edgar took the witness stand and tried to testify on the contents of the Confidential
Psychiatric Evaluation Report. This was objected to on the ground that it violated the rule on privileged communication
between physician and patient. Subsequently, Ma. Paz filed a Manifestation expressing her "continuing objection" to any
evidence, oral or documentary, "that would thwart the physician-patient privileged communication rule," 5 and thereafter
submitted a Statement for the Record asserting among others that "there is no factual or legal basis whatsoever for
petitioner (Edgar) to claim 'psychological incapacity' to annul their marriage, such ground being completely false,
fabricated and merely an afterthought." 6 Before leaving for Spain where she has since resided after their separation, Ma.
Paz also authorized and instructed her counsel to oppose the suit and pursue her counterclaim even during her absence.

On 29 May 1991, Edgar opposed Ma. Paz' motion to disallow the introduction of the confidential psychiatric report as
evidence, 7 and afterwards moved to strike out Ma. Paz' Statement for the Record. 8

On 4 June 1991, the trial court issued an Order admitting the Confidential Psychiatric Evaluation Report in evidence and
ruling that —
 . . . the Court resolves to overrule the objection and to sustain the Opposition to the respondent's Motion;
first, because the very issue in this case is whether or not the respondent had been suffering from
psychological incapacity; and secondly, when the said psychiatric report was referred to in the complaint,
the respondent did not object thereto on the ground of the supposed privileged communication between
patient and physician. What was raised by the respondent was that the said psychiatric report was
irrelevant. So, the Court feels that in the interest of justice and for the purpose of determining whether the
respondent as alleged in the petition was suffering from psychological incapacity, the said psychiatric
report is very material and may be testified to by petitioner (Edgar Krohn, Jr.) without prejudice on the
part of the respondent to dispute the said report or to cross-examination first the petitioner and later the
psychiatrist who prepared the same if the latter will be presented. 9

On 27 November 1991, the trial court denied the Motion to Reconsider Order dated June 4, 1991, and directed that the
Statement for the Record filed by Ma. Paz be stricken off the record. A subsequent motion for reconsideration filed by her
counsel was likewise denied.

Counsel of Ma. Paz then elevated the issue to respondent Court of Appeals. In a Decision promulgated 30 October 1992,
the appellate court dismissed the petition for certiorari. 10 On 5 February 1993, the motion to reconsider the dismissal was
likewise denied. Hence, the instant petition for review.

Petitioner now seeks to enjoin the presentation and disclosure of the contents of the psychiatric report and prays for the
admission of her Statement for the Record to form part of the records of the case. She argues that since
Sec. 24, par. (c), Rule 130, of the Rules of Court 11 prohibits a physician from testifying on matters which he may have
acquired in attending to a patient in a professional capacity, "WITH MORE REASON should be third person (like
respondent-husband in this particular instance) be PROHIBITED from testifying on privileged matters between a physician
and patient or from submitting any medical report, findings or evaluation prepared by a physician which the latter has
acquired as a result of his confidential and privileged relation with a patient." 12 She says that the reason behind the
prohibition is —

. . . to facilitate and make safe, full and confidential disclosure by a patient to his physician of all facts,
circumstances and symptoms, untrammeled by apprehension of their subsequent and enforced disclosure
and publication on the witness stand, to the end that the physician may form a correct opinion, and be
enabled safely and efficaciously to treat his patient. 13

She further argues that to allow her husband to testify on the contents of the psychiatric evaluation report "will set a very
bad and dangerous precedent because it abets circumvention of the rule's intent in preserving the sanctity, security and
confidence to the relation of physician and his patient." 14 Her thesis is that what cannot be done directly should not be
allowed to be done indirectly.

Petitioner submits that her Statement for the Record simply reiterates under oath what she asserted in her Answer, which
she failed to verify as she had already left for Spain when her Answer was filed. She maintains that her "Statement for the
Record is a plain and simple pleading and is not as it has never been intended to take the place of her
testimony;" 15 hence, there is no factual and legal basis whatsoever to expunge it from the records.

Private respondent Edgar Krohn, Jr., however contends that "the rules are very explicit: the prohibition applies only to a
physician. Thus . . . the legal prohibition to testify is not applicable to the case at bar where the person sought to be barred
from testifying on the privileged communication is the husband and not the physician of the petitioner." 16 In fact,
according to him, the Rules sanction his testimony considering that a husband may testify against his wife in a civil case
filed by one against the other.

Besides, private respondent submits that privileged communication may be waived by the person entitled thereto, and this
petitioner expressly did when she gave her unconditional consent to the use of the psychiatric evaluation report when it
was presented to the Tribunal Metropolitanum Matrimoniale which took it into account among others in deciding the case
and declaring their marriage null and void. Private respondent further argues that petitioner also gave her implied consent
when she failed to specifically object to the admissibility of the report in her Answer where she merely described the
evaluation report as "either unfounded or irrelevant." At any rate, failure to interpose a timely objection at the earliest
opportunity to the evidence presented on privileged matters may be construed as an implied waiver.

With regard to the Statement for the Record filed by petitioner, private respondent posits that this in reality is an
amendment of her Answer and thus should comply with pertinent provisions of the Rules of Court, hence, its exclusion
from the records for failure to comply with the Rules is proper.

The treatise presented by petitioner on the privileged nature of the communication between physician and patient, as well
as the reasons therefor, is not doubted. Indeed, statutes making communications between physician and patient
privileged are intended to inspire confidence in the patient and encourage him to make a full disclosure to his physician of
his symptoms and condition. 17 Consequently, this prevents the physician from making public information that will result
in humiliation, embarrassment, or disgrace to the patient. 18 For, the patient should rest assured with the knowledge that
the law recognizes the communication as confidential, and guards against the possibility of his feelings being shocked or
his reputation tarnished by their subsequent disclosure. 19 The physician-patient privilege creates a zone of privacy,
intended to preclude the humiliation of the patient that may follow the disclosure of his ailments. Indeed, certain types of
information communicated in the context of the physician-patient relationship fall within the constitutionally protected
zone of privacy, 20 including a patient's interest in keeping his mental health records confidential. 21 Thus, it has been
observed that the psychotherapist-patient privilege is founded upon the notion that certain forms of antisocial behavior
may be prevented by encouraging those in need of treatment for emotional problems to secure the services of a
psychotherapist.

Petitioner's discourse while exhaustive is however misplaced. Lim v. Court of Appeals 22 clearly lays down the requisites in
order that the privilege may be successfully invoked: (a) the privilege is claimed in a civil case; (b) the person against whom
the privilege is claimed is one duly authorized to practice medicine, surgery or obstetrics; (c) such person acquired the
information while he was attending to the patient in his professional capacity; (d) the information was necessary to enable
him to act in that capacity; and, (e) the information was confidential and, if disclosed, would blacken the reputation
(formerly character) of the patient.

In the instant case, the person against whom the privilege is claimed is not one duly authorized to practice medicine,
surgery or obstetrics. He is simply the patient's husband who wishes to testify on a document executed by medical
practitioners. Plainly and clearly, this does not fall within the claimed prohibition. Neither can his testimony be considered
a circumvention of the prohibition because his testimony cannot have the force and effect of the testimony of the
physician who examined the patient and executed the report.

Counsel for petitioner indulged heavily in objecting to the testimony of private respondent on the ground that it was
privileged. In his Manifestation before the trial court dated 10 May 1991, he invoked the rule on privileged
communications but never questioned the testimony as hearsay. It was a fatal mistake. For, in failing to object to the
testimony on the ground that it was hearsay, counsel waived his right to make such objection and, consequently, the
evidence offered may be admitted.

The other issue raised by petitioner is too trivial to merit the full attention of this Court. The allegations contained in the
Statement for the Records are but refutations of private respondent's declarations which may be denied or disproved
during the trial.

The instant appeal has taken its toll on the petition for annulment. Three years have already lapsed and private respondent
herein, as petitioner before the trial court, has yet to conclude his testimony thereat. We thus enjoin the trial judge and the
parties' respective counsel to act with deliberate speed in resolving the main action, and avoid any and all stratagems that
may further delay this case. If all lawyers are allowed to appeal every perceived indiscretion of a judge in the course of trial
and include in their appeals depthless issues, there will be no end to litigations, and the docket of appellate courts will
forever be clogged with inconsequential cases. Hence, counsel should exercise prudence in appealing lower court rulings
and raise only legitimate issues so as not to retard the resolution of cases. Indeed, there is no point in unreasonably
delaying the resolution of the petition and prolonging the agony of the wedded couple who after coming out from a
storm still have the right to a renewed blissful life either alone or in the company of each other. 23

WHEREFORE, the instant petition for review is DENIED for lack of merit. The assailed Decision of respondent Court of
Appeals promulgated on 30 October 1992 is AFFIRMED.

SO ORDERED.

Cruz, Davide, Jr., Quiason and Kapunan, JJ., concur.

G.R. No. 70054 December 11, 1991

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,

vs.
THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA,
ARNULFO B. AURELLANO and RAMON V. TIAOQUI, respondents.

G.R. No. 68878 December 11, 1991

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT and CELESTINA S. PAHIMUNTUNG, assisted by her husband, respondents.

G.R. No. 77255-58 December 11, 1991

TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT CORPORATION, petitioners,

vs.
THE COURT OF APPEALS, The Executive Judge of the Regional Trial Court of Cavite, Ex-Officio Sheriff REGALADO
E. EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR,
HERNANDEZ AND GATMAITAN, respondents.

G.R. No. 78766 December 11, 1991

EL GRANDE CORPORATION, petitioner,

vs.
THE COURT OF APPEALS, THE EXECUTIVE JUDGE of The Regional Trial Court and Ex-Officio Sheriff REGALADO E.
EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR,
FELICIANO AND HERNANDEZ, respondents.

G.R. No. 78767 December 11, 1991

METROPOLIS DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA,
ARNULFO AURELLANO AND RAMON TIAOQUI, respondents.

G.R. No. 78894 December 11, 1991

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner

vs.
COURT OF APPEALS, THE CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P.
VALENZUELA, ARNULFO B. AURELLANO AND RAMON TIAOQUI, respondents.

G.R. No. 81303 December 11, 1991

PILAR DEVELOPMENT CORPORATION, petitioner

vs.
COURT OF APPEALS, HON. MANUEL M. COSICO, in his capacity as Presiding Judge of Branch 136 of the Regional
Trial Court of Makati, CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P. VALENZUELA, respondents.

G.R. No. 81304 December 11, 1991

BF HOMES DEVELOPMENT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, CENTRAL BANK AND CARLOTA P. VALENZUELA, respondents.

G.R. No. 90473 December 11, 1991

EL GRANDE DEVELOPMENT CORPORATION, petitioner,

vs.
THE COURT OF APPEALS, THE EXECUTIVE JUDGE of the Regional Trial Court of Cavite, CLERK OF COURT and Ex-
Officio Sheriff ADORACION VICTA, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA
AND SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents.

Panganiban, Benitez, Barinaga & Bautista Law Offices collaborating counsel for petitioner.

Florencio T. Domingo, Jr. and Crisanto S. Cornejo for intervenors.

MEDIALDEA, J.:

This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco
Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. Six
(6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and 90473 involve the common issue of
whether or not the liquidator appointed by the respondent Central Bank (CB for brevity) has the authority to prosecute as
well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the
receivership and liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is whether the CB
can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank Act. On the other
hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all seek to annul and set
aside M.B. Resolution No. 75 issued by respondents Monetary Board and Central Bank on January 25, 1985.

The antecedent facts of each of the nine (9) cases are as follows:

G.R No. 68878

This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of the decision promulgated by thisCourt
on April 8, 1986, granting the petition for review on certiorari and reversing the questioned decision of respondent
appellate court, which annulled the writ of possession issued by the trial court in favor of petitioner.

The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case
considering that petitioner bank was placed under receivership since January 25, 1985 by the Central Bank pursuant to the
resolution of the Monetary Board.

G.R. Nos. 77255-58

Petitioners Top Management Programs Corporation (Top Management for brevity) and Pilar Development Corporation
(Pilar Development for brevity) are corporations engaged in the business of developing residential subdivisions.

Top Management obtained a loan of P4,836,000 from Banco Filipino as evidenced by a promissory note dated January 7,
1982 payable in three years from date. The loan was secured by real estate mortgage in its various properties in Cavite.
Likewise, Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of
P6,000,000, P7,370,000 and P5,300,000 with maturity dates on December 28, 1984, January 5, 1985 and February 16, 1984,
respectively. To secure the loan, Pilar Development mortgaged to Banco Filipino various properties in Dasmariñas, Cavite.
On January 25, 1985, the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business
without loss to its creditors and depositors. It placed Banco Filipino under receivership of Carlota Valenzuela, Deputy
Governor of the Central Bank.

On March 22, 1985, the Monetary Board issued another resolution placing the bank under liquidation and designating
Valenzuela as liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al.
to represent Banco Filipino in all litigations.

On March 26, 1985, Banco Filipino filed the petition for certiorari in G.R. No. 70054 questioning the validity of the
resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino.

In a resolution dated August 29, 1985, this Court in G.R. No. 70054 resolved to issue a temporary restraining order,
effective during the same period of 30 days, enjoining the respondents from executing further acts of liquidation of the
bank; that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions
pertaining to normal operations of a bank are not enjoined. The Central Bank is ordered to designate a comptroller for
Banco Filipino.

Subsequently, Top Management failed to pay its loan on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as
counsel for Banco Filipino under authority of Valenzuela as liquidator, applied for extra-judicial foreclosure of the
mortgage over Top Management's properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a
notice of extra-judicial foreclosure sale of the properties on December 16, 1985.

On December 9, 1985, Top Management filed a petition for injunction and prohibition with the respondent appellate court
docketed as CA-G.R. SP No. 07892 seeking to enjoin the Regional Trial Court of Cavite, the ex-officio sheriff of said court
and Sycip, Salazar, et al. from proceeding with foreclosure sale.

Similarly, Pilar Development defaulted in the payment of its loans. The law firm of Sycip, Salazar, et al. filed separate
applications with the ex-officio sheriff of the Regional Trial Court of Cavite for the extra-judicial foreclosure of mortgage
over its properties.

Hence, Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance
of a writ of preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking to enjoin the same respondents from
enforcing the foreclosure sale of its properties. CA-G.R. SP Nos. 07892 and 08962-64 were consolidated and jointly
decided.

On October 30, 1986, the respondent appellate court rendered a decision dismissing the aforementioned petitions.

Hence, this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela,
who was appointed by the Monetary Board as liquidator of Banco Filipino, has no authority to proceed with the
foreclosure sale of petitioners' properties on the ground that the resolution of the issue on the validity of the closure and
liquidation of Banco Filipino is still pending with this Court in G.R. 70054.

G.R. No. 78766

Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential
subdivisions. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program.
Hence, petitioner was granted a loan in the amount of P8,034,130.00 secured by real estate mortgages on its various
estates located in Cavite.

On January 15, 1985, the Monetary Board forbade Banco Filipino to do business, placed it under receivership and
designated Deputy Governor Carlota Valenzuela as receiver. On March 22, 1985, the Monetary Board confirmed Banco
Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator.
When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter thru its liquidator, Carlota Valenzuela,
initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. Subsequently, on March 31, 1986, the
ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on April 30,
1986.

In order to stop the public auction sale, petitioner El Grande filed a petition for prohibition with the Court of Appeals
alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the
ground that this Court in G.R. No. 70054 issued a resolution dated August 29, 1985, which restrained Carlota Valenzuela
from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller.

On March 2, 1987, the Court of Appeals rendered a decision dismissing the petition.

Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision
that although Carlota P. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco
Filipino Savings & Mortgage Bank, she was not legally precluded from foreclosing the mortgage over the properties of the
petitioner through counsel retained by her for the purpose.

G.R. No. 81303

On November 8, 1985, petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against
Banco Filipino, the Central Bank and Carlota Valenzuela for specific performance, docketed as Civil Case No. 12191. It
appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino.
On June 12, 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino.

On June 17, 1986, petitioner filed a second amended complaint. The Central Bank and Carlota Valenzuela, thru the law
firm Sycip, Salazar, Hernandez and Gatmaitan filed an answer to the complaint.

On June 23, 1986, Sycip, et al., acting for all the defendants including Banco Filipino moved that the answer filed by
Quisumbing & Associates for defendant Banco Filipino be expunged from the records. Despite opposition from
Quisumbing & Associates, the trial court granted the motion to expunge in an order dated March 17, 1987. Petitioner Pilar
Development moved to reconsider the order but the motion was denied.

Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the
order of the trial court. The Court of Appeals rendered a decision dismissing the petition. A petition was filed with this
Court but was denied in a resolution dated March 22, 1988. Hence, this instant motion for reconsideration.

G.R. No. 81304

On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the
Central Bank to restore petitioner's; financing facility with Banco Filipino.

The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a supplemental complaint impleaded as
defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank.

On April 8, 1985, petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss.

On July 9, 1985, the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff
has no contractual relation with the defendants, and (2) that the Intermediate Appellate Court in a previous decision in
AC-G.R. SP. No. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending
liquidation, and thus, the continuation of the facility sued for by the plaintiff has become legally impossible and the suit
has become moot.
The order of dismissal was appealed by the petitioner to the Court of Appeals. On November 4, 1987, the respondent
appellate court dismissed the appeal and affirmed the order of the trial court.

Hence, this petition for review on certiorari was filed, alleging that the respondent court erred when it found that the
private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner
did not have any cause of action against the respondents Central Bank and Carlota Valenzuela.

G.R. No. 90473

Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount
of P8,034,130.00, secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer
Certificate of Title Nos. T-82187, T-109027, T-132897, T-148377, and T-79371 of the Registry of Deeds of Cavite.

When Banco Filipino was ordered closed and placed under receivership in 1985, the appointed liquidator of BF, thru its
counsel Sycip, Salazar, et al. applied with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial
foreclosure of the mortgage constituted over petitioner's properties. On March 24, 1986, the ex-officio sheriff issued a
notice of extrajudicial foreclosure sale of the properties of petitioner.

Thus, petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ of preliminary injunction to
enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure.

On June 16, 1989, respondent Court of Appeals rendered a decision dismissing the petition.

Not satisfied with the decision, petitioner filed the instant petition for review on certiorari.

G.R. No. 70054

Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.B. Resolution No. 223 dated
February 14, 1963. It commenced operations on July 9, 1964. It has eighty-nine (89) operating branches, forty-six (46) of
which are in Manila, with more than three (3) million depositors.

As of July 31, 1984, the list of stockholders showed the major stockholders to be: Metropolis Development Corporation,
Apex Mortgage and Loans Corporation, Filipino Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre.

Petitioner Bank had an approved emergency advance of P119.7 million under M.B. Resolution No. 839 dated June 29,
1984. This was augmented with a P3 billion credit line under M.B. Resolution No. 934 dated July 27, 1984.

On the same date, respondent Board issued M.B. Resolution No. 955 placing petitioner bank under conservatorship of
Basilio Estanislao. He was later replaced by Gilberto Teodoro as conservator on August 10, 1984. The latter submitted a
report dated January 8, 1985 to respondent Board on the conservatorship of petitioner bank, which report shall hereinafter
be referred to as the Teodoro report.

Subsequently, another report dated January 23, 1985 was submitted to the Monetary Board by Ramon Tiaoqui, Special
Assistant to the Governor and Head, SES Department II of the Central Bank, regarding the major findings of examination
on the financial condition of petitioner BF as of July 31, 1984. The report, which shall be referred to herein as the Tiaoqui
Report contained the following conclusion and recommendation:

The examination findings as of July 31, 1984, as shown earlier, indicate one of insolvency and illiquidity and further
confirms the above conclusion of the Conservator.

All the foregoing provides sufficient justification for forbidding the bank from engaging in banking.

Foregoing considered, the following are recommended:

 1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the
beginning of office January 1985, pursuant to Sec. 29 of R.A No. 265, as amended;

2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings &
Mortgage Bank, to immediately take charge of the assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the same for the benefit of all the creditors, and exercise
all the powers necessary for these purposes including but not limited to bringing suits and foreclosing
mortgages in the name of the bank.

3. The Board of Directors and the principal officers from Senior Vice Presidents, as listed in the attached
Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they
shall have cleared themselves.

4. Refer to the Central Bank's Legal Department and Office of Special Investigation the report on the
findings on Banco Filipino for investigation and possible prosecution of directors, officers, and employees
for activities which led to its insolvent position. (pp- 61-62, Rollo)

On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. 75 which ordered the closure of
BF and which further provides:

After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and
Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors
and creditors, and after discussing and finding to be true the statements of the Special Assistant to the
Governor and Head, Supervision and Examination Sector (SES) Department II as recited in his
memorandum dated January 23, 1985, that the Banco Filipino Savings & Mortgage Bank is insolvent and
that its continuance in business would involve probable loss to its depositors and creditors, and in
pursuance of Sec. 29 of RA 265, as amended, the Board decided:

1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the
Philippines;

2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver who is hereby directly
vested with jurisdiction and authority to immediately take charge of the bank's assets and
liabilities, and as expeditiously as possible collect and gather all the assets and administer the
same for the benefit of its creditors, exercising all the powers necessary for these purposes
including but not limited to, bringing suits and foreclosing mortgages in the name of the bank;

3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V.
Tiaoqui, Special Assistant to the Governor and Head, Supervision and Examination Sector
Department II, as Deputy Receivers who are likewise hereby directly vested with jurisdiction and
authority to do all things necessary or proper to carry out the functions entrusted to them by the
Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver
by law or Monetary Board Resolutions;

4. To direct and authorize Management to do all other things and carry out all other measures
necessary or proper to implement this Resolution and to safeguard the interests of depositors,
creditors and the general public; and

5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings
and Mortgage Bank. (pp. 10-11, Rollo, Vol. I)

On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case No. 9675 with the Regional
Trial Court of Makati to set aside the action of the Monetary Board placing BF under receivership.
On February 28, 1985, petitioner filed with this Court the instant petition for certiorari and mandamus
under Rule 65 of the Rules of Court seeking to annul the resolution of January 25, 1985 as made without
or in excess of jurisdiction or with grave abuse of discretion, to order respondents to furnish petitioner
with the reports of examination which led to its closure and to afford petitioner BF a hearing prior to any
resolution that may be issued under Section 29 of R.A. 265, also known as Central Bank Act.

On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy
Receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary Board, in
compliance with the mandate of Sec. 29 of R.A. 265 which provides that the Monetary Board shall
determine within sixty (60) days from date of receivership of a bank whether such bank may be
reorganized/permitted to resume business or ordered to be liquidated. The report contained the
following recommendation:

In view of the foregoing and considering that the condition of the banking institution continues
to be one of insolvency, i.e., its realizable assets are insufficient to meet all its liabilities and that
the bank cannot resume business with safety to its depositors, other creditors and the general
public, it is recommended that:

1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3, Sec. 29 of RA No. 265,
as amended;

2. The Legal Department, through the Solicitor General, be authorized to file in the proper court a petition
for assistance in th liquidation of the Bank;

3. The Statutory Receiver be designated as the Liquidator of said bank; and

4. Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bank of
the Monetary Board's decision liquidate the Bank. (p. 167, Rollo, Vol. I)

On July 23, 1985, petitioner filed a motion before this Court praying that a restraining order or a writ of
preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its
main office and 89 branches. This Court issued a resolution on August 8, 1985 ordering the issuance of
the aforesaid temporary restraining order.

On August 20, 1985, the case was submitted for resolution.

In a resolution dated August 29, 1985, this Court Resolved direct the respondents Monetary Board and
Central Bank hold hearings at which the petitioner should be heard, and terminate such hearings and
submit its resolution within thirty (30) days. This Court further resolved to issue a temporary restraining
order enjoining the respondents from executing further acts of liquidation of a bank. Acts such as
receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to
normal operations of a bank were no enjoined. The Central Bank was also ordered to designate
comptroller for the petitioner BF. This Court also ordered th consolidation of Civil Cases Nos. 8108, 9676
and 10183 in Branch 136 of the Regional Trial Court of Makati.

However, on September 12, 1985, this Court in the meantime suspended the hearing it ordered in its
resolution of August 29, 1985.

On October 8, 1985, this Court submitted a resolution order ing Branch 136 of the Regional Trial Court of
Makati the presided over by Judge Ricardo Francisco to conduct the hear ing contemplated in the
resolution of August 29, 1985 in the most expeditious manner and to submit its resolution to this Court.
In the Court's resolution of February 19, 1987, the Court stated that the hearing contemplated in the
resolution of August 29, 1985, which is to ascertain whether substantial administrative due process had
been observed by the respondent Monetary Board, may be expedited by Judge Manuel Cosico who now
presides the court vacated by Judge Ricardo Francisco, who was elevated to the Court of Appeals, there
being no legal impediment or justifiable reason to bar the former from conducting such hearing. Hence,
this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court.

On February 20, 1988, Judge Manuel Cosico submitted his report to this Court with the recommendation
that the resolutions of respondents Monetary Board and Central Bank authorizing the closure and
liquidation of petitioner BP be upheld.

On October 21, 1988, petitioner BF filed an urgent motion to reopen hearing to which respondents filed
their comment on December 16, 1988. Petitioner filed their reply to respondent's comment of January 11,
1989. After having deliberated on the grounds raised in the pleadings, this Court in its resolution dated
August 3, 1989 declared that its intention as expressed in its resolution of August 29, 1985 had not been
faithfully adhered to by the herein petitioner and respondents. The aforementioned resolution had
ordered a healing on the reports that led respondents to order petitioner's closure and its alleged pre-
planned liquidation. This Court noted that during the referral hearing however, a different scheme was
followed. Respondents merely submitted to the commissioner their findings on the examinations
conducted on petitioner, affidavits of the private respondents relative to the findings, their reports to the
Monetary Board and several other documents in support of their position while petitioner had merely
submitted objections to the findings of respondents, counter-affidavits of its officers and also documents
to prove its claims. Although the records disclose that both parties had not waived cross-examination of
their deponents, no such cross-examination has been conducted. The reception of evidence in the form of
affidavits was followed throughout, until the commissioner submitted his report and recommendations to
the Court. This Court also held that the documents pertinent to the resolution of the instant petition are
the Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and Tiaoqui Report and the supporting
documents which were made as the bases by the reporters of their conclusions contained in their
respective reports. This Court also Resolved in its resolution to re-open the referral hearing that was
terminated after Judge Cosico had submitted his report and recommendation with the end in view of
allowing petitioner to complete its presentation of evidence and also for respondents to adduce
additional evidence, if so minded, and for both parties to conduct the required cross-examination of
witnesses/deponents, to be done within a period of three months. To obviate all doubts on Judge
Cosico's impartiality, this Court designated a new hearing commissioner in the person of former Judge
Consuelo Santiago of the Regional Trial Court, Makati, Branch 149 (now Associate Justice of the Court of
Appeals).

Three motions for intervention were filed in this case as follows: First, in G.R. No. 70054 filed by Eduardo
Rodriguez and Fortunate M. Dizon, stockholders of petitioner bank for and on behalf of other
stockholders of petitioner; second, in G.R. No. 78894, filed by the same stockholders, and, third, again in
G.R. No. 70054 by BF Depositors' Association and others similarly situated. This Court, on March 1, 1990,
denied the aforesaid motions for intervention.

On January 28, 1991, the hearing commissioner, Justice Consuelo Santiago of the Court of Appeals
submitted her report and recommendation (to be hereinafter called, "Santiago Report") on the following
issues stated therein as follows:

l) Had the Monetary Board observed the procedural requirements laid down in Sec. 29 of R.A. 265,
as amended to justify th closure of the Banco Filipino Savings and Mortgage Bank?

2) On the date of BF's closure (January 25, 1985) was its condition one of insolvency or would its
continuance in business involve probable loss to its depositors or creditors?
The commissioner after evaluation of the evidence presented found and recommended the following:

1. That the TEODORO and TIAOQUI reports did not establish in accordance with See. 29 of the
R.A. 265, as amended, BF's insolvency as of July 31, 1984 or that its continuance in business
thereafter would involve probable loss to its depositors or creditors. On the contrary, the evidence
indicates that BF was solvent on July 31, 1984 and that on January 25, 1985, the day it was closed,
its insolvency was not clearly established;

2. That consequently, BF's closure on January 25, 1985, not having satisfied the requirements
prescribed under Sec. 29 of RA 265, as amended, was null and void.

3. That accordingly, by way of correction, BF should be allowed to re-open subject to such laws,
rules and regulations that apply to its situation.

Respondents thereafter filed a motion for leave to file objections to the Santiago Report. In the same
motion, respondents requested that the report and recommendation be set for oral argument before the
Court. On February 7, 1991, this Court denied the request for oral argument of the parties.

On February 25, 1991, respondents filed their objections to the Santiago Report. On March 5, 1991,
respondents submitted a motion for oral argument alleging that this Court is confronted with two
conflicting reports on the same subject, one upholding on all points the Monetary Board's closure of
petitioner, (Cosico Report dated February 19, 1988) and the other (Santiago Report dated January 25,
1991) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly
established before its closure; and that such a hearing on oral argrument will therefore allow the parties to
directly confront the issues before this Court.

On March 12, 1991 petitioner filed its opposition to the motion for oral argument. On March 20, 1991, it
filed its reply to respondents' objections to the Santiago Report.

On June 18, 1991, a hearing was held where both parties were heard on oral argument before this Court.
The parties, having submitted their respective memoranda, the case is now submitted for decision.

G.R. No. 78767

On February 2, 1985, Banco Filipino filed a complaint with the trial court docketed as Civil Case No. 9675
to annul the resolution of the Monetary Board dated January 25, 1985, which ordered the closure of the
bank and placed it under receivership.

On February 14, 1985, the Central Bank and the receivers filed a motion to dismiss the complaint on the
ground that the receivers had not authorized anyone to file the action. In a supplemental motion to
dismiss, the Central Bank cited the resolution of this Court dated October 15, 1985 in G.R. No. 65723
entitled, "Central Bank et al. v. Intermediate Appellate Court" whereby We held that a complaint
questioning the validity of the receivership established by the Central Bank becomes moot and academic
upon the initiation of liquidation proceedings.

While the motion to dismiss was pending resolution, petitioner herein Metropolis Development
Corporation (Metropolis for brevity) filed a motion to intervene in the aforestated civil case on the ground
that as a stockholder and creditor of Banco Filipino, it has an interest in the subject of the action.

On July 19, 1985, the trial court denied the motion to dismiss and also denied the motion for
reconsideration of the order later filed by Central Bank. On June 5, 1985, the trial court allowed the
motion for intervention.
Hence, the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the
respondent appellate court alleging that the trial court committed grave abuse of discretion in not
dismissing Civil Case No. 9675.

On March 17, 1986, the respondent appellate court rendered a decision annulling and setting aside the
questioned orders of the trial court, and ordering the dismissal of the complaint filed by Banco Filipino
with the trial court as well as the complaint in intervention of petitioner Metropolis Development
Corporation.

Hence this petition was filed by Metropolis Development Corporation questioning the decision of the
respondent appellate court.

G.R. No. 78894

On February 2, 1985, a complaint was filed with the trial court in the name of Banco Filipino to annul the
resolution o the Monetary Board dated January 25, 1985 which ordered the closure of Banco Filipino and
placed it under receivership. The receivers appointed by the Monetary Board were Carlota Valenzuela,
Arnulfo Aurellano and Ramon Tiaoqui.

On February 14, 1985, the Central Bank and the receiver filed a motion to dismiss the complaint on the
ground that the receiver had not authorized anyone to file the action.

On March 22, 1985, the Monetary Board placed the bank under liquidation and designated Valenzuela as
liquidator and Aurellano and Tiaoqui as deputy liquidators.

The Central Bank filed a supplemental motion to dismiss which was denied. Hence, the latter filed a
petition for certiorari with the respondent appellate court to set aside the order of the trial court denying
the motion to dismiss. On March 17, 1986, the respondent appellate court granted the petition and
dismissed the complaint of Banco Filipino with the trial court.

Thus, this petition for certiorari was filed with the petitioner contending that a bank which has been closed
and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its
name to contest such acts of the Central Bank, without the authorization of the CB-appointed receiver.

After deliberating on the pleadings in the following cases:

1. In G.R. No. 68878, the respondent's motion for reconsideration;

2. In G.R. Nos. 77255-58, the petition, comment, reply, rejoinder and sur-rejoinder;

2. In G.R. No. 78766, the petition, comment, reply and rejoinder;

3. In G.R. No. 81303, the petitioner's motion for reconsideration;

4. In G.R.No. 81304, the petition, comment and reply;

5. Finally, in G.R. No. 90473, the petition comment and reply.

We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and the petitions in G.R. Nos.
77255-58, 78766, 81304 and 90473 devoid of merit.

Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a
bank is forbidden to do business in the Philippines and placed under receivership, the person designated as
receiver shall immediately take charge of the bank's assets and liabilities, as expeditiously as possible, collect
and gather all the assets and administer the same for the benefit of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or proceedings for or against the
institution, exercising all the powers necessary for these purposes including, but not limited to, bringing
and foreclosing mortgages in the name of the bank. If the Monetary Board shall later determine and
confirm that banking institution is insolvent or cannot resume business safety to depositors, creditors and
the general public, it shall, public interest requires, order its liquidation and appoint a liquidator who shall
take over and continue the functions of receiver previously appointed by Monetary Board. The liquid for
may, in the name of the bank and with the assistance counsel as he may retain, institute such actions as
may necessary in the appropriate court to collect and recover a counts and assets of such institution or
defend any action ft against the institution.

When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R.
No. 70054, pendency of the case did not diminish the powers and authority of the designated liquidator
to effectuate and carry on the a ministration of the bank. In fact when We adopted a resolute on August
25, 1985 and issued a restraining order to respondents Monetary Board and Central Bank, We enjoined
me further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are
those which constitute the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such
institution. We did not prohibit however acts a as receiving collectibles and receivables or paying off
credits claims and other transactions pertaining to normal operate of a bank. There is no doubt that the
prosecution of suits collection and the foreclosure of mortgages against debtors the bank by the
liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. their
did Our order in the same resolution dated August 25, 1985 for the designation by the Central Bank of a
comptroller Banco Filipino alter the powers and functions; of the liquid insofar as the management of the
assets of the bank is concerned. The mere duty of the comptroller is to supervise counts and finances
undertaken by the liquidator and to d mine the propriety of the latter's expenditures incurred behalf of
the bank. Notwithstanding this, the liquidator is empowered under the law to continue the functions of
receiver is preserving and keeping intact the assets of the bank in substitution of its former management,
and to prevent the dissipation of its assets to the detriment of the creditors of the bank. These powers
and functions of the liquidator in directing the operations of the bank in place of the former management
or former officials of the bank include the retaining of counsel of his choice in actions and proceedings for
purposes of administration.

Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through counsel has
the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. In
G.R. No. 81303, the liquidator is likewise authorized to resist or defend suits instituted against the bank by
debtors and creditors of the bank and by other private persons. Similarly, in G.R. No. 81304, due to the
aforestated reasons, the Central Bank cannot be compelled to fulfill financial transactions entered into by
Banco Filipino when the operations of the latter were suspended by reason of its closure. The Central
Bank possesses those powers and functions only as provided for in Sec. 29 of the Central Bank Act.

While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its
operations, We cannot uphold the legality of its closure and thus, find the petitions in G.R. Nos. 70054,
78767 and 78894 impressed with merit. We hold that the closure and receivership of petitioner bank,
which was ordered by respondent Monetary Board on January 25, 1985, is null and void.

It is a well-recognized principle that administrative and discretionary functions may not be interfered with
by the courts. In general, courts have no supervising power over the proceedings and actions of the
administrative departments of the government. This is generally true with respect to acts involving the
exercise of judgment or discretion, and findings of fact. But when there is a grave abuse of discretion
which is equivalent to a capricious and whimsical exercise of judgment or where the power is exercised in
an arbitrary or despotic manner, then there is a justification for the courts to set aside the administrative
determination reached (Lim, Sr. v. Secretary of Agriculture and Natural Resources, L-26990, August 31,
1970, 34 SCRA 751)

The jurisdiction of this Court is called upon, once again, through these petitions, to undertake the delicate
task of ascertaining whether or not an administrative agency of the government, like the Central Bank of
the Philippines and the Monetary Board, has committed grave abuse of discretion or has acted without or
in excess of jurisdiction in issuing the assailed order. Coupled with this task is the duty of this Court not
only to strike down acts which violate constitutional protections or to nullify administrative decisions
contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction, as well as to
correct manifest abuses of discretion committed by the officer or tribunal involved.

The law applicable in the determination of these issues is Section 29 of Republic Act No. 265, as amended,
also known as the Central Bank Act, which provides:

SEC. 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the
appropriate supervising or examining department or his examiners or agents into the condition of
any bank or non-bank financial intermediary performing quasi-banking functions, it shall be
disclosed that the condition of the same is one of insolvency, or that its continuance in business
would involve probable loss to its depositors or creditors, it shall be the duty of the department
head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may,
upon finding the statements of the department head to be true, forbid the institution to do
business in the Philippines and designate an official of the Central Bank or a person of recognized
competence in banking or finance, as receiver to immediately take charge of its assets and
liabilities, as expeditiously as possible collect and gather all the assets and administer the same
for the benefit's of its creditors, and represent the bank personally or through counsel as he may
retain in all actions or proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in
the name of the bank or non-bank financial intermediary performing quasi-banking functions.

The Monetary Board shall thereupon determine within sixty days whether the institution may be
reorganized or otherwise placed in such a condition so that it may be permitted to resume
business with safety to its depositors and creditors and the general public and shall prescribe the
conditions under which such resumption of business shall take place as well as the time for
fulfillment of such conditions. In such case, the expenses and fees in the collection and
administration of the assets of the institution shall be determined by the Board and shall be paid
to the Central Bank out of the assets of such institution.

If the Monetary Board shall determine and confirm within the said period that the bank or non-
bank financial intermediary performing quasi-banking functions is insolvent or cannot resume
business with safety to its depositors, creditors, and the general public, it shall, if the public
interest requires, order its liquidation, indicate the manner of its liquidation and approve a
liquidation plan which may, when warranted, involve disposition of any or all assets in
consideration for the assumption of equivalent liabilities. The liquidator designated as hereunder
provided shall, by the Solicitor General, file a petition in the regional trial court reciting the
proceedings which have been taken and praying the assistance of the court in the liquidation of
such institutions. The court shall have jurisdiction in the same proceedings to assist in the
adjudication of the disputed claims against the bank or non-bank financial intermediary
performing quasi-banking functions and in the enforcement of individual liabilities of the
stockholders and do all that is necessary to preserve the assets of such institutions and to
implement the liquidation plan approved by the Monetary Board. The Monetary Board shall
designate an official of the Central bank or a person of recognized competence in banking or
finance, as liquidator who shall take over and continue the functions of the receiver previously
appointed by the Monetary Board under this Section. The liquidator shall, with all convenient
 speed, convert the assets of the banking institutions or non-bank financial intermediary
performing quasi-banking function to money or sell, assign or otherwise dispose of the same to
creditors and other parties for the purpose of paying the debts of such institution and he may, in
the name of the bank or non-bank financial intermediary performing quasi-banking functions and
with the assistance of counsel as he may retain, institute such actions as may be necessary in the
appropriate court to collect and recover accounts and assets of such institution or defend any
action filed against the institution: Provided, However, That after having reasonably established all
claims against the institution, the liquidator may, with the approval of the court, effect partial
payments of such claims for assets of the institution in accordance with their legal priority.

The assets of an institution under receivership or liquidation shall be deemed in custodia legis in
the hands of the receiver or liquidator and shall from the moment of such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, orexecution.

The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board
under this Section, Section 28-A, an the second paragraph of Section 34 of this Act shall be final
an executory, and can be set aside by a court only if there is convince proof, after hearing, that
the action is plainly arbitrary and made in bad faith: Provided, That the same is raised in an
appropriate pleading filed by the stockholders of record representing the majority of th capital
stock within ten (10) days from the date the receiver take charge of the assets and liabilities of the
bank or non-bank financial intermediary performing quasi-banking functions or, in case of
conservatorship or liquidation, within ten (10) days from receipt of notice by the said majority
stockholders of said bank or non-bank financial intermediary of the order of its placement under
conservatorship o liquidation. No restraining order or injunction shall be issued by an court
enjoining the Central Bank from implementing its actions under this Section and the second
paragraph of Section 34 of this Act in th absence of any convincing proof that the action of the
Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a
bond, executed in favor of the Central Bank, in an amount be fixed by the court. The restraining
order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central
Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount
twice the amount of the bond of th petitioner or plaintiff conditioned that it will pay the damages
which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The
provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not
inconsistent with the provision of this Section shall govern the issuance and dissolution of the re
straining order or injunction contemplated in this Section.

xxx xxx xxx

Based on the aforequoted provision, the Monetary Board may order the cessation of operations of a bank
in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in
business would involve probable loss its depositors or creditors. If the Monetary Board shall determine
and confirm within sixty (60) days that the bank is insolvent or can no longer resume business with safety
to its depositors, creditors and the general public, it shall, if public interest will be served, order its
liquidation.

Specifically, the basic question to be resolved in G.R. Nos. 70054, 78767 and 78894 is whether or not the
Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding and thereafter
concluding that petitioner bank is insolvent, and in ordering its closure on January 25, 1985.

As We have stated in Our resolution dated August 3, 1989, the documents pertinent to the resolution of
these petitions are the Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and Tiaoqui Report
and the supporting documents made as bases by the supporters of their conclusions contained in their
respective reports. We will focus Our study and discussion however on the Tiaoqui Report and the
Valenzuela, Aurellano and Tiaoqui Report. The former recommended the closure and receivership of
petitioner bank while the latter report made the recommendation to eventually place the petitioner bank
under liquidation. This Court shall likewise take into consideration the findings contained in the reports of
the two commissioners who were appointed by this Court to hold the referral hearings, namely the report
by Judge Manuel Cosico submitted February 20, 1988 and the report submitted by Justice Consuelo
Santiago on January 28, 1991.

There is no question that under Section 29 of the Central Bank Act, the following are the mandatory
requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to
do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate
supervising or examining department or his examiners or agents into the condition of the bank; secondly,
it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors; thirdly, the department
head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board
shall find the statements of the department head to be true.

Anent the first requirement, the Tiaoqui report, submitted on January 23, 1985, revealed that the finding
of insolvency of petitioner was based on the partial list of exceptions and findings on the regular
examination of the bank as of July 31, 1984 conducted by the Supervision and Examination Sector II of the
Central Bank of the PhilippinesCentral Bank (p. 1, Tiaoqui Report).

On December 17, 1984, this list of exceptions and finding was submitted to the petitioner bank (p. 6,
Tiaoqui Report) This was attached to the letter dated December 17, 1984, of examiner-in-charge Dionisio
Domingo of SES Department II of the Central Bank to Teodoro Arcenas, president of petitione bank, which
disclosed that the examination of the petitioner bank as to its financial condition as of July 31, 1984 was
not yet completed or finished on December 17, 1984 when the Central Bank submitted the partial list of
findings of examination to th petitioner bank. The letter reads:

In connection with the regular examination of your institution a of July 31, 1984, we
are submitting herewith a partial list of our exceptions/findings for your comments.

Please be informed that we have not yet officially terminated our examination (tentatively
scheduled last December 7, 1984) and that we are still awaiting for the unsubmitted replies to our
previous letters requests. Moreover, other findings/ observations are still being summarized
including the classification of loans and other risk assets. These shall be submitted to you in due
time (p. 810, Rollo, Vol. III; emphasis ours).

It is worthy to note that a conference was held on January 21, 1985 at the Central Bank between the
officials of the latter an of petitioner bank. What transpired and what was agreed upon during the
conference was explained in the Tiaoqui report.

... The discussion centered on the substantial exposure of the bank to the various entities which
would have a relationship with the bank; the manner by which some bank funds were made
indirectly available to several entities within the group; and the unhealth financial status of these
firms in which the bank was additionally exposed through new funds or refinancing
accommodation including accrued interest.

Queried in the impact of these clean loans, on the bank solvency Mr. Dizon (BF Executive Vice
President) intimated that, collectively these corporations have large undeveloped real estate
properties in the suburbs which can be made answerable for the unsecured loans a well as the
Central Bank's credit accommodations. A formal reply of the bank would still be forthcoming. (pp.
58-59, Rollo, Vol. I; emphasis ours)
Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly
concluded therein that the latter's financial status was one of insolvency or illiquidity. He arrived at the
said conclusion from the following facts: that as of July 31, 1984, total capital accounts consisting of paid-
in capital and other capital accounts such as surplus, surplus reserves and undivided profits aggregated
P351.8 million; that capital adjustments, however, wiped out the capital accounts and placed the bank
with a capital deficiency amounting to P334.956 million; that the biggest adjustment which contributed to
the deficit is the provision for estimated losses on accounts classified as doubtful and loss which was
computed at P600.4 million pursuant to the examination. This provision is also known as valuation
reserves which was set up or deducted against the capital accounts of the bank in arriving at the latter's
financial condition.

Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as to the setting
up of recommended valuation reserves from the assets of petitioner bank. He stated:

The recommended valuation reserves as bases for determining the financial status of the bank
would need to be discussed with the bank, consistent with standard examination procedure, for
which the bank would in turn reply. Also, the examination has not been officially terminated. (p. 7.
Tiaoqui report; p. 59, Rollo, Vol. I)

In his testimony in the second referral hearing before Justice Santiago, Tiaoqui testified that on January
21, 1985, he met with officers of petitioner bank to discuss the advanced findings and exceptions made by
Mr. Dionisio Domingo which covered 70%-80% of the bank's loan portfolio; that at that meeting,
Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to
various corporations, said corporations had large undeveloped real estate properties which could be
answerable for the said unsecured loans and that a reply from BF was forthcoming, that he (Tiaoqui)
however prepared his report despite the absence of such reply; that he believed, as in fact it is stated in
his report, that despite the meeting on January 21, 1985, there was still a need to discuss the
recommended valuation reserves of petitioner bank and; that he however, did not wait anymore for a
discussion of the recommended valuation reserves and instead prepared his report two days after January
21, 1985 (pp. 3313-3314, Rollo).

Records further show that the examination of petitioner bank was officially terminated only when Central
Bank Examination-charge Dionisio Domingo submitted his final report of examination on March 4,1985.

It is evident from the foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act
as a mandatory requirement was not completely and fully complied with. Despite the existence of the
partial list of findings in the examination of the bank, there were still highly significant items to be
weighed and determined such as the matter of valuation reserves, before these can be considered in the
financial condition of the bank. It would be a drastic move to conclude prematurely that a bank is
insolvent if the basis for such conclusion is lacking and insufficient, especially if doubt exists as to whether
such bases or findings faithfully represent the real financial status of the bank.

The actuation of the Monetary Board in closing petitioner bank on January 25, 1985 barely four days after
a conference with the latter on the examiners' partial findings on its financial position is also violative of
what was provided in the CB Manual of Examination Procedures. Said manual provides that only after the
examination is concluded, should a pre-closing conference led by the examiner-in-charge be held with
the officers/representatives of the institution on the findings/exception, and a copy of the summary of the
findings/violations should be furnished the institution examined so that corrective action may be taken by
them as soon as possible (Manual of Examination Procedures, General Instruction, p. 14). It is hard to
understand how a period of four days after the conference could be a reasonable opportunity for a bank
to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge.
We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the
monetary, banking and credit system of the country and that its powers and functions shall be exercised
by the Monetary Board pursuant to Rep. Act No. 265, known as the Central Bank Act. Consequently, the
power and authority of the Monetary Board to close banks and liquidate them thereafter when public
interest so requires is an exercise of the police power of the state. Police power, however, may not be
done arbitratrily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical,
arbitrary, unjust or is tantamount to a denial of due process and equal protection clauses of the
Constitution (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981, 106 SCRA 143).

In the instant case, the basic standards of substantial due process were not observed. Time and again, We
have held in several cases, that the procedure of administrative tribunals must satisfy the fundamentals of
fair play and that their judgment should express a well-supported conclusion.

In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, this Court laid down
several cardinal primary rights which must be respected in a proceeding before an administrative body.

However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not require a previous
hearing before the Monetary Board implements the closure of a bank, since its action is subject to judicial
scrutiny as provided for under the same law (Rural Bank of Bato v. IAC, G.R. No. 65642, October 15, 1984,
Rural Bank v. Court of Appeals, G.R. 61689, June 20, 1988,162 SCRA 288).

Notwithstanding the foregoing, administrative due process does not mean that the other important
principles may be dispensed with, namely: the decision of the administrative body must have something
to support itself and the evidence must be substantial. Substantial evidence is more than a mere scintilla.
It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion
(Ang Tibay vs. CIR, supra). Hence, where the decision is merely based upon pieces of documentary
evidence that are not sufficiently substantial and probative for the purpose and conclusion they are
presented, the standard of fairness mandated in the due process clause is not met. In the case at bar, the
conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position
on January 23, 1985, as to justify its closure on January 25, 1985 cannot be given weight and finality as the
report itself admits the inadequacy of its basis to support its conclusion.

The second requirement provided in Section 29, R.A. 265 before a bank may be closed is that the
examination should disclose that the condition of the bank is one of insolvency.

As to the concept of whether the bank is solvent or not, the respondents contend that under the Central
Bank Manual of Examination Procedures, Central Bank examiners must recommend valuation reserves,
when warranted, to be set up or deducted against the corresponding asset account to determine the
bank's true condition or net worth. In the case of loan accounts, to which practically all the questioned
valuation reserves refer, the manual provides that:

1. For doubtful loans, or loans the ultimate collection of which is doubtful and in which a substantial loss
is probable but not yet definitely ascertainable as to extent, valuation reserves of fifty per cent (50%) of
the accounts should be recommended to be set up.

2. For loans classified as loss, or loans regarded by the examiner as absolutely uncollectible or worthless,
valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up
(p. 8, Objections to Santiago report).

The foregoing criteria used by respondents in determining the financial condition of the bank is based on
Section 5 of RA 337, known as the General Banking Act which states:

Sec. 5. The following terms shall be held to be synonymous and interchangeable:

 ... f. Unimpaired Capital and Surplus, "Combined capital accounts," and "Net worth," which terms
shall mean for the purposes of this Act, the total of the "unimpaired paid-in capital, surplus, and
undivided profits net of such valuation reserves as may be required by the Central Bank."

There is no doubt that the Central Bank Act vests authority upon the Central Bank and Monetary Board to
take charge and administer the monetary and banking system of the country and this authority includes
the power to examine and determine the financial condition of banks for purposes provided for by law,
such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank
Act. But express grants of power to public officers should be subjected to a strict interpretation, and will
be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd
Mechem, Treatise on the Law of Public Offices and Officers, p. 335).

In this case, there can be no clearer explanation of the concept of insolvency than what the law itself
states. Sec. 29 of the Central Bank Act provides that insolvency under the Act, shall be understood to
mean that "the realizable assets of a bank or a non-bank financial intermediary performing quasi-banking
functions as determined by the Central Bank are insufficient to meet its liabilities."

Hence, the contention of the Central Bank that a bank's true financial condition is synonymous with the
terms "unimpaired capital and surplus," "combined capital accounts" and net worth after deducting
valuation reserves from the capital, surplus and unretained earnings, citing Sec. 5 of RA 337 is misplaced.

Firstly, it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. It is a basic
accounting principle that assets are composed of liabilities and capital. The term "assets" includes capital
and surplus" (Exley v. Harris, 267 p. 970, 973, 126 Kan., 302). On the other hand, the term "capital" includes
common and preferred stock, surplus reserves, surplus and undivided profits. (Manual of Examination
Procedures, Report of Examination on Department of Commercial and Savings Banks, p. 3-C). If valuation
reserves would be deducted from these items, the result would merely be the networth or the unimpaired
capital and surplus of the bank applying Sec. 5 of RA 337 but not the total financial condition of the bank.

Secondly, the statement of assets and liabilities is used in balance sheets. Banks use statements of
condition to reflect the amounts, nature and changes in the assets and liabilities. The Central Bank Manual
of Examination Procedures provides a format or checklist of a statement of condition to be used by
examiners as guide in the examination of banks. The format enumerates the items which will compose the
assets and liabilities of a bank. Assets include cash and those due from banks, loans, discounts and
advances, fixed assets and other property owned or acquired and other miscellaneous assets. The amount
of loans, discounts and advances to be stated in the statement of condition as provided for in the manual
is computed after deducting valuation reserves when deemed necessary. On the other hand, liabilities are
composed of demand deposits, time and savings deposits, cashier's, manager's and certified checks,
borrowings, due to head office, branches; and agencies, other liabilities and deferred credits (Manual of
Examination Procedure, p. 9). The amounts stated in the balance sheets or statements of condition
including the computation of valuation reserves when justified, are based however, on the assumption
that the bank or company will continue in business indefinitely, and therefore, the networth shown in the
statement is in no sense an indication of the amount that might be realized if the bank or company were
to be liquidated immediately (Prentice Hall Encyclopedic Dictionary of Business Finance, p. 48). Further,
based on respondents' submissions, the allowance for probable losses on loans and discounts represents
the amount set up against current operations to provide for possible losses arising from non-collection of
loans and advances, and this account is also referred to as valuation reserve (p. 9, Objections to Santiago
report). Clearly, the statement of condition which contains a provision for recommended valuation
reserves should not be used as the ultimate basis to determine the solvency of an institution for the
purpose of termination of its operations.

Respondents acknowledge that under the said CB manual, CB examiners must recommend valuation
reserves, when warranted, to be set up against the corresponding asset account (p. 8, Objections to
Santiago report). Tiaoqui himself, as author of the report recommending the closure of petitioner bank
admits that the valuation reserves should still be discussed with the petitioner bank in compliance with
standard examination procedure. Hence, for the Monetary Board to unilaterally deduct an uncertain
amount as valuation reserves from the assets of a bank and to conclude therefrom without sufficient basis
that the bank is insolvent, would be totally unjust and unfair.

The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining
whether the realizable assets of a bank are leas than its liabilities. Hence, a bank is solvent if the fair cash
value of all its assets, realizable within a reasonable time by a reasonable prudent person, would equal or
exceed its total liabilities exclusive of stock liability; but if such fair cash value so realizable is not sufficient
to pay such liabilities within a reasonable time, the bank is insolvent. (Gillian v. State, 194 N.E. 360, 363,
207 Ind. 661). Stated in other words, the insolvency of a bank occurs when the actual cash market value of
its assets is insufficient to pay its liabilities, not considering capital stock and surplus which are not
liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v. Llewellyn, Mo. App.,
70 S.W. 2n 115,117).

In arriving at the computation of realizable assets of petitioner bank, respondents used its books which
undoubtedly are not reflective of the actual cash or fair market value of its assets. This is not the proper
procedure contemplated in Sec. 29 of the Central Bank Act. Even the CB Manual of Examination
Procedures does not confine examination of a bank solely with the determination of the books of the
bank. The latter is part of auditing which should not be confused with examination. Examination appraises
the soundness of the institution's assets, the quality and character of management and determines the
institution's compliance with laws, rules and regulations. Audit is a detailed inspection of the institution's
books, accounts, vouchers, ledgers, etc. to determine the recording of all assets and liabilities. Hence,
examination concerns itself with review and appraisal, while audit concerns itself with verification (CB
Manual of Examination Procedures, General Instructions, p. 5). This Court however, is not in the position to
determine how much cash or market value shall be assigned to each of the assets and liabilities of the
bank to determine their total realizable value. The proper determination of these matters by using the
actual cash value criteria belongs to the field of fact-finding expertise of the Central Bank and the
Monetary Board. Notwithstanding the fact that the figures arrived at by the respondent Board as to assets
and liabilities do not truly indicate their realizable value as they were merely based on book value, We will
however, take a look at the figures presented by the Tiaoqui Report in concluding insolvency as of July 31,
1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela, Aurellano
and Tiaoqui Report which recommended the liquidation of the bank by reason of insolvency as o January
25,1985.

The Tiaoqui report dated January 23, 1985, which was based on partial examination findings on the bank's
condition as of July 31, 1984, states that total liabilities of P5,282.1 million exceeds total assets of P4,947.2
million after deducting from the assets valuation reserves of P612.2 million. Since, as We have explained in
our previous discussion that valuation reserves can not be legally deducted as there was no truthful and
complete evaluation thereof as admitted by the Tiaoqui report itself, then an adjustment of the figures
win show that the liabilities of P5,282.1 million will not exceed the total assets which will amount to
P5,559.4 if the 612.2 million allotted to valuation reserves will not be deducted from the assets. There can
be no basis therefore for both the conclusion of insolvency and for the decision of the respondent Board
to close petitioner bank and place it under receivership.

Concerning the financial position of the bank as of January 25, 1985, the date of the closure of the bank,
the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela,
Aurellano and Tiaoqui report on the receivership of petitioner bank, dated March 19, 1985, indicates that
total liabilities of 4,540.84 million does not exceed the total assets of 4,981.53 million. Likewise, the
consolidated statement of condition of petitioner bank as of January 25, 1985 prepared by the Central
Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4,981,522,996.22
even exceeds total liabilities amounting to P4,540,836,834.15. Based on the foregoing, there was no valid
reason for the Valenzuela, Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner
bank instead of its rehabilitation.

We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having
engaged in unsafe, unsound and fraudulent banking practices by the granting of huge unsecured loans to
several subsidiaries and related companies. We do not see, however, that this has any material bearing on
the validity of the closure. Section 34 of the RA 265, Central Bank Act empowers the Monetary Board to
take action under Section 29 of the Central Bank Act when a bank "persists in carrying on its business in
an unlawful or unsafe manner." There was no showing whatsoever that the bank had persisted in
committing unlawful banking practices and that the respondent Board had attempted to take effective
action on the bank's alleged activities. During the period from July 27, 1984 up to January 25, 1985, when
petitioner bank was under conservatorship no official of the bank was ever prosecuted, suspended or
removed for any participation in unsafe and unsound banking practices, and neither was the entire
management of the bank replaced or substituted. In fact, in her testimony during the second referral
hearing, Carlota Valenzuela, CB Deputy Governor, testified that the reason for petitioner bank's closure
was not unsound, unsafe and fraudulent banking practices but the alleged insolvency position of the bank
(TSN, August 3, 1990, p. 3316, Rollo, Vol. VIII).

Finally, another circumstance which point to the solvency of petitioner bank is the granting by the
Monetary Board in favor of the former a credit line in the amount of P3 billion along with the placing of
petitioner bank under conservatorship by virtue of M.B. Resolution No. 955 dated July 27, 1984. This
paved the way for the reopening of the bank on August 1, 1984 after a self-imposed bank holiday on July
23, 1984.

On emergency loans and advances, Section 90 of RA 265 provides two types of emergency loans that can
be granted by the Central Bank to a financially distressed bank:

Sec. 90. ... In periods of emergency or of imminent financial panic which directly threaten monetary
and banking stability, the Central Bank may grant banking institutions extraordinary advances
secured by any assets which are defined as acceptable by by a concurrent vote of at least five
members of the Monetary Board. While such advances are outstanding, the debtor institution
may not expand the total volume of its loans or investments without the prior authorization of the
Monetary Board.

The Central Bank may, at its discretion, likewise grant advances to banking institutions, even
during normal periods, for the purpose of assisting a bank in a precarious financial condition or
under serious financial pressures brought about by unforeseen events, or events which, though
foreseeable, could not be prevented by the bank concerned. Provided, however, That the
Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to
secure the advances. Provided, further, That a concurrent vote of at least five members of the
Monetary Board is obtained. (Emphasis ours)

The first paragraph of the aforequoted provision contemplates a situation where the whole banking
community is confronted with financial and economic crisis giving rise to serious and widespread
confusion among the public, which may eventually threaten and gravely prejudice the stability of the
banking system. Here, the emergency or financial confusion involves the whole banking community and
not one bank or institution only. The second situation on the other hand, provides for a situation where
the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent.

As alleged by the respondents, the following are the reasons of the Central Bank in approving the
resolution granting the P3 billion loan to petitioner bank and the latter's reopening after a brief self-
imposed banking holiday:
 WHEREAS, the closure by Banco Filipino Savings and Mortgage Bank of its Banking offices on its
own initiative has worked serious hardships on its depositors and has affected confidence levels in
the banking system resulting in a feeling of apprehension among depositors and unnecessary
deposit withdrawals;

WHEREAS, the Central Bank is charged with the function of administering the banking system;

WHEREAS, the reopening of Banco Filipino would require additional credit resources from the
Central Bank as well as an independent management acceptable to the Central Bank;

WHEREAS, it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently
exists;

... (M.B. Min. No. 35 dated July 27, 1984 cited in Respondents' Objections to Santiago Report, p.
26; p. 3387, Rollo, Vol. IX; Emphasis ours).

A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for the decision to
grant the emergency loan to petitioner bank was that the latter was suffering from financial distress and
severe bank "run" as a result of which it closed on July 23, 1984 and that the release of the said amount is
in accordance with the Central Bank's full support to meet Banco Filipino's depositors' withdrawal
requirements (Excerpts of minutes of meeting on MB Min. No. 35, p. 25, Rollo, Vol. IX). Nothing therein
shows that an extraordinary emergency situation exists affecting most banks, not only as regards
petitioner bank. This Court thereby finds that the grant of the said emergency loan was intended from the
beginning to fall under the second paragraph of Section 90 of the Central Bank Act, which could not have
occurred if the petitioner bank was not solvent. Where notwithstanding knowledge of the irregularities
and unsafe banking practices allegedly committed by the petitioner bank, the Central Bank even granted
financial support to the latter and placed it under conservatorship, such actuation means that petitioner
bank could still be saved from its financial distress by adequate aid and management reform, which was
required by Central Bank's duty to maintain the stability of the banking system and the preservation of
public confidence in it (Ramos v. Central Bank, No. L-29352, October 4, 1971, 41 SCRA 565).

In view of the foregoing premises, We believe that the closure of the petitioner bank was arbitrary and
committed with grave abuse of discretion. Granting in gratia argumenti that the closure was based on
justified grounds to protect the public, the fact that petitioner bank was suffering from serious financial
problems should not automatically lead to its liquidation. Section 29 of the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to
resume business with safety to its depositors, creditors and the general public.

We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as well as its
creditors including itself which had granted substantial financial assistance up to the time of the latter's
closure. But there are alternatives to permanent closure and liquidation to safeguard those interests as
well as those of the general public for the failure of Banco Filipino or any bank for that matter may be
viewed as an irreversible decline of the country's entire banking system and ultimately, it may reflect on
the Central Bank's own viability. For one thing, the Central Bank and the Monetary Board should exercise
strict supervision over Banco Filipino. They should take all the necessary steps not violative of the laws
that will fully secure the repayment of the total financial assistance that the Central Bank had already
granted or would grant in the future.

ACCORDINGLY, decision is hereby rendered as follows:

1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions in G.R. Nos. 77255-58,
78766, 81304 and 90473 are DENIED;
2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the assailed order of the Central
Bank and the Monetary Board dated January 25, 1985 is hereby ANNULLED AND SET ASIDE. The Central
Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage
Bank and allow the latter to resume business in the Philippines under the comptrollership of both the
Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in
connection with its reorganization until such time that petitioner bank can continue in business with
safety to its creditors, depositors and the general public.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Bidin and Regalado, JJ., concur.
Paras, Feliciano, Padilla, Davide, Jr. and Nocon, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny the prayer, in G.R. No. 70054, to
annul Monetary Board Resolution No. 75 placing Banco Filipino (BF) under receivership.

Even assuming that the BF was not, as alleged, in a literal state of insolvency at the time of the passage of
said Resolution, there was a finding in the Teodoro report that, based on that Bank's illiquidity, to have
allowed it to continue in operation would have meant probable loss to depositors and creditors. That is
also a ground for placing the bank under receivership, as a first step, pursuant to Section 29 of the Central
Bank Act (Rep. Act No. 265, as amended). The closure of BF, therefore, can not be said to have been
arbitrary or made in bad faith. There was sufficient justification, considering its inability to meet the heavy
withdrawals by its depositors and to pay its liabilities as they fell due, to forbid the bank from further
engaging in banking.

The matter of reopening, reorganization or rehabilitation of BF is not within the competence of this Court
to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's
enormous infusion of capital into BF to the tune of approximately P3.5 Billion in total accommodations,
after a thorough assessment of whether or not BF is, indeed, possessed, as it stoutly contends, of
sufficient assets and capabilities with which to repay such huge indebtedness, and can operate without
loss to its many depositors and creditors.

GRIÑO-AQUINO, J., dissenting:

Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia, all of them
except one, raise issues unrelated to the receivership and liquidation of said bank. In fact, two of these
cases (G.R. No. 68878 and 81303) have already been decided by this Court and are only awaiting the
resolution of the motions for reconsideration filed therein. Only G.R. No. 70054 "Banco Filipino Savings
and Mortgage Bank (BF) vs. the Monetary Board (MB), Central Bank of the Philippines (CB), et al.," is an
original action for mandamus and certiorari filed in this Court by former officials of BF to annul the
Monetary Board Resolution No. 75 dated January 25, 1985 (ordering the closure of Banco Filipino [BF] and
appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued
"without affording BF a hearing on the reports" on which the Monetary Board based its decision to close
the bank, hence, without "administrative due process.", The prayer of the petition reads:

WHEREFORE, petitioner respectfully prays that a writ of mandamus be issued commanding

respondents immediately to furnish it copies of the reports of examination of BF employed by
respondent Monetary Board to support its Resolution of January 25, 1985 and thereafter to afford
it a hearing prior to any resolution that may be issued under Section 29 of R.A. 265, meanwhile
 annulling said Resolution of January 25, 1985 by writ of certiorari as made without or in excess
ofjurisdiction or with grave abuse of discretion.

So as to expedite proceedings, petitioner prays that the assessment of the damages respondents
should pay it be deferred and referred to commissioners.

Petitioner prays for such other remedy as the Court may deem just and equitable in the premises.

Quezon City for Manila, February 28, 1985. (p. 8, Rollo I-)

and the prayer of the Supplement to Petition reads:

WHEREFORE, in addition to its prayer for mandamus and certiorari contained in its original
petition, petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R.A.
265) including its amendatory Presidential Decrees Nos. 72, 1771, 1827 and 1937 be annulled as
unconstitutional.

Quezon City for Manila, March 4, 1985. (p. 11-G, Rollo I.)

The other eight (8) cases merely involve transactions of BF with third persons and certain "related"
corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the
mortgages on their properties by the receiver of BF. These eight (8) cases are:

1. G.R. No. 68878 "BF vs. Intermediate Appellate Court and Celestina Pahimutang" involves the
repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for
on the installment plan. The appellate court's judgment for the buyer was reversed by this Court. The
buyer's motion for reconsideration is awaiting resolution by this Court;

2. G.R. Nos. 77255-58, "Top Management Programs Corporation and Pilar Development Corporation vs.
Court of appeals, et al." (CA-G.R. SP No. 07892) and "Pilar Development Corporation vs. Executive Judge,
RTC, Cavite" (CA-G.R. SP Nos. 0896264) is a consolidated petition for review of the Court of Appeals' joint
decision dismissing the petitions for prohibition in which the petitioners seek to prevent the
receiver/liquidator of BF from extrajudicially foreclosing the P4.8 million mortgage on Top Management's
properties and the P18-67 million mortgage on Pilar Development properties. The Court of Appeals
dismissed the petitions on October 30, 1986 on the ground that "the functions of the liquidator, as
receiver under Section 29 (R.A. 265), include taking charge of the insolvent's assets and administering the
same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the
bank;"

3. G.R. No. 78766, "El Grande Corporation vs. Court of Appeals, et al.," is an appeal from the Court of
Appeals' decision in CA-G.R. SP No. 08809 dismissing El Grande's petition for prohibition to prevent the
foreclosure of BF's P8 million mortgage on El Grande's properties;

4. G.R. No. 78894, "Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, et al." is an appeal of
BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G.R. SP No.
07503 entitled, "Central Bank, et al. vs. Judge Zoilo Aguinaldo, et al" dismissing the complaint of "BF" to
annul the receivership, for no suit may be brought or defended in the name of the bank except by its
receiver;

5. G.R. No. 87867, "Metropolis Development Corporation vs. Court of Appeals" (formerly AC-G.R. No. 07503,
"Central Bank, et al. vs. Honorable Zoilo Aguinaldo, et al.') is an appeal of the intervenor (Metropolis) from
the same Court of Appeals' decision subject of G.R. No. 78894, which also dismissed Metropolis'
complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of
BF while the latter is under receivership, without the authority of the receiver;

6. G.R. No. 81303, "Pilar Development Corporation vs. Court of Appeals, et al." is an appeal from the
decision dated October 22, 1987 of the Court of Appeals in CA-G.R. SP No. 12368, "Pilar Development
Corporation, et al. vs. Honorable Manuel Cosico, et al.," dismissing the petition for certiorari against Judge
Manuel Cosico, Br. 136, RTC, Makati, who dismissed the complaint filed by Pilar Development Corporation
against BF, for specific performance of certain developer contracts. An answer filed by Norberto
Quisumbing and Associates, as BF's supposed counsel, virtually confessed judgment in favor of Pilar
Development. On motion of the receiver, the answer was expunged and the complaint was dismissed. On
a petition for certiorari in this Court, we held that: "As liquidator of BF by virtue of a valid appointment
from the Central Bank, private respondent Carlota Valenzuela has the authority to direct the operation of
the bank in substitution of the former management, which authority includes the retainer of counsel to
represent it in bringing or resisting suits in connection with such liquidation and, in the case at bar, to take
the proper steps to prevent collusion, to the prejudice of the legitimate creditors, between BF and the
petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p. 49,
Rollo). The petitioners' motion for reconsideration of that decision is pending resolution.

7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of Appeals, et al." is an appeal from the
decision dated November 4, 1987 of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial
court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of
BF, because the plaintiff (BF Homes) has no cause of action against the CB.

8. G.R. No. 90473, "El Grande Development Corporation vs. Court of Appeals, et al.," is a petition to review
the decision dated June 6, 1989 in CA-G.R. SP No. 08676 dismissing El Grande's petition for prohibition to
stop foreclosure proceedings against it by the receiver of BF.

As previously stated, G.R. No. 70054 "BF vs. Monetary Board, et al.," is an original special civil action
for certiorari and mandamus filed in this Court by the old management of BF, through their counsel, N.J.
Quisumbing & Associates, using the name of the bank and praying for the annulment of MB Resolution
No. 75 which ordered the closure of BF and placed it under receivership. It is a "forum-shopping" case
because it was filed here on February 28, 1985 three weeks after they had filed on February 2, 1985 Civil
Case No. 9675 "Banco Filipino vs. Monetary Board, et al." in the Regional Trial Court of Makati, Br. 143
(presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of
MB Resolution No. 75 dated January 25, 1985.

On August 25, 1985, this Court ordered the transfer and consolidation of Civil Case No. 9676 (to annul the
receivership) from Br. 143 to Br. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil
Case No. 8108 (to annul the conservatorship) and Civil Case No. 10183 (to annul the liquidation) of BF
were and are still pending. All these three (3) cases were archived on June 30, 1988 by Judge Cosico
pending the resolution of G.R. No. 70054 by this Court.

Because of my previous participation, as a former member of the Court of Appeals, in the disposition of
AC-G.R. No. 02617 (now G.R. No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 78894), I am
taking no part in G.R. Nos. 68878, 78767 and 78894. It may be mentioned in this connection that neither
in AC-G.R. SP No. 02617, nor in AC-G.R. SP No. 07503, did the Court of Appeals rule on the
constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act), as amended, and the
validity of MB Resolution No. 75, for those issues were not raised in the Court of Appeals.

I concur with the ponencia insofar as it denies the motion for reconsideration in G.R. No. 81303, and
dismisses the petitions for review in G.R. Nos. 77255-58, 78766, 81304, and 90473.
I respectfully dissent from the majority opinion in G.R. No. 70054 annulling and setting aside MB
Resolution No. 75 and ordering the respondents, Central Bank of the Philippines and the Monetary Board
—

to reorganize petitioner Banco Filipino Savings and Mortgage Bank, and allow the latter to
resume business in the Philippines under the comptrollership of both the Central Bank and the
Monetary Board and under such conditions as may be prescribed by the latter until such time that
petitioner bank can continue in business with safety to its creditors, depositors and the general
public.

for I believe that this Court has neither the authority nor the competence to determine whether or not,
and under what conditions, BF should be reorganized and reopened. That decision should be made by the
Central Bank and the Monetary Board, not by this Court.

All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board
in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith.

Section 29 of Republic Act No. 265 provides:

Section 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the
appropriate supervising and examining department or his examiners or agents into the condition of
any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or
that its continuance in business would involve probable loss to its depositors or creditors, it shall be
the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of
the facts, and the Board may, upon finding the statements of the department head to be true,
forbid the institution to do business in the Philippines and shall designate an official of the
Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as
possible collect and gather all the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes including, but not limited to, bringing suits
and foreclosing mortgages in the name of the banking institution.

The Monetary Board shall thereupon determine within sixty days whether the institution may be
reorganized or otherwise placed in such a condition so that it may be permitted to resume
business with safety to its depositors and creditors and the general public and shall prescribe the
conditions under which such resumption of business shall take place as well as the time for
fulfillment of such conditions. In such case, the expenses and fees in the collection and
administration of the assets of the institution shall be determined by the Board and shall be paid
to the Central Bank out of the assets of such banking institution.

If the Monetary Board shall determine and confirm within the said period that the banking
institution is insolvent or cannot resume business with safety to its depositors, creditors and the
general public, it shall, if the public interest requires, order its liquidation, indicate the manner of
its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file
a petition in the Court of First Instance, reciting the proceedings which have been taken and
praying the assistance of the court in the liquidation of the banking institutions. The court shall
have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and
enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets
of the banking institution and to implement the liquidation plan approved by the Monetary
Board. The Monetary Board shall designate an official of the Central Bank as liquidator who shall
take over the functions of the receiver previously appointed by the Monetary Board under this
section. The liquidator shall, with all convenient speed, convert the assets of the banking
institution to money or sell, assign or otherwise dispose of the same to creditors and other parties
for the purpose of paying the debts of such bank and he may, in the name of the banking
 institution, institute such actions as may be necessary in the appropriate court to collect and
recover accounts and assets of the banking institution.

The provisions of any law to the contrary notwithstanding, the actions of the Monetary
Board under this section and the second paragraph of Section 34 of this Act shall be final and
executory, and can be set aside by the court only if there is convincing proof that theaction is plainly
arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court
enjoining the Central Bank from implementing its actions under this section and the second
paragraph of Section 34 of this Act, unless there is convincing proof that the action of the
Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with
the clerk or judge of the court in which the action is pending a bond executed in favor of the
Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be
refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be
in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of
the petitioner or plaintiff, conditioned that it will paythe which the petitioner or plaintiff may
suffer by the refusalor the dissolution of the injunction. The provisions of Rule 58 of the new Rules
of Court insofar as they are applicable and not inconsistent with the provisions of this section
shall govern the issuance and dissolution of the restraining order or injunction contemplated in
this section.

Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay
its liabilities as they fall due in the usual and ordinary course of business, provided, however, that
this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-
ordinary demands induced by financial panic commonly evidenced by a run on the banks in the
banking community.

The determinative factor in the closure, receivership, and liquidation of a bank is the finding, upon
examination by the SES of the Central Bank, that its condition "is one of insolvency, or that its continuance
in business would involve probable loss to its depositors and creditors." (Sec. 29, R.A. 265.) It should be
pointed out that insolvency is not the only statutory ground for the closure of a bank. The other ground is
when "its continuance in business would involve probable loss to its depositors and creditors.

Was BF insolvent i.e., unable to pay its liabilities as they fell due in the usual and ordinary course of
business, on and for some time before January 25, 1985 when the Monetary Board issued Resolution No.
75 closing the bank and placing it under receivership? Would its continued operation involve probable
loss to its depositors and creditors?

The answer to both questions is yes. Both the conservator Gilberts Teodoro and the head of the SES
(Supervision and Examination Sector) Ramon V. Tiaoqui opined that BF's continuance in business would
cause probable loss to depositors and creditors. Tiaoqui further categorically found that BF was insolvent.
Why was this so?

The Teodoro and Tiaoqui reports as well as the report of the receivers, Carlota Valenzuela, Arnulfo B.
Aurellano and Ramon V. Tiaoqui, showed that since the end of November 1983 BF had already been
incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. So much so, that it had
become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million
emergency loan from the Central Bank. (p. 2, Receiver's Report.) Additional emergencyt loans (a total of
P119.7 millions) were extended by the Central Bank to BF that month (MB Res. No. 839 dated June
29,1984). On July 12, 1984, BFs chairman, Anthony Aguirre, offered to "turn over the administration of the
affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez, Annex 7 of
Manifestation dated May 3,1991). On July 23,1984, unable to meet heavy deposit withdrawals, BF's
management motu proprio, without obtaining the conformity of the Central Bank, closed the bank and
declared a bank holiday. On July 27, 1984, the CB, responding to BFs pleas for additional financial
assistance, granted BF a P3 billion credit line (MB Res. No. 934 of July 27, 1984) to enable it to reopen and
resume business on August 1, 1984. P2.3601 billions of the credit line were availed of by the end of 1984
exclusive of an overdraft of P932.4 millions (p. 2, Tiaoqui Report). Total accommodations granted to BF
amounted to P3.4122 billions (p. 19, Cosico Report).

Presumably to assure that the financial assistance would be properly used, the MB appointed Basilio
Estanislao as conservator of the bank. A conservatorship team of 78 examiners and accountants was
assigned at the bank to keep track of its activities and ascertain its financial condition (p. 8, Tiaoqui
Report).

Estanislao resigned after two weeks for health reasons. He was succeeded by Gilberto Teodoro as
conservator in August, 1984 up to January 8, 1985.

Besides the conservatorship team, Teodoro hired financial consultants Messrs. Tirso G. Santillan, Jr. and
Plorido P. Casuela to make an analysis of BF's financial condition. Teodoro also engaged the accounting
firm of Sycip, Gorres, Velayo and Company to make an asset evaluation. The Philippine Appraisal
Company (PAC) appraised BFs real estate properties, acquired assets, and collaterals held. On January 9,
1985, Teodoro submitted his Report. Three weeks later, on January 23, 1985, Tiaoqui also submitted his
Report. Both reports showedthat, in violation of Section 37 of the General Banking Act (R.A.337): 2

1. BF had been continually deficient in liquidity reserves (Teodoro Report). The bank had been
experiencing a severe drop in liquidity levels. The ratio of liquid assets to deposits and borrowings
plunged from about 20% at end-1983, to about 8.6% by end-May 1984, much below the statutory
requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time
deposits. (p. 2, Tiaoqui Report.)

2. Deficiencies in average daily legal reserves rose from P63.0 million during the week of
November 21-25, 1983 to a high of P435.9 million during the week of June 11-15, 1984 (pp. 2-3,
Tiaoqui Report). Accumulated penalties on reserve deficiencies amounted to P37.4 million by July
31, and rose to P48 million by the end of 1984. (Tiaoqui Report.)

3. Deposit levels, which were at P3,845 million at end-May l984 (its last "normal" month), dropped
to P935 million at the end of November 1984 or a loss of P2,910 million. This represented an
average monthly loss of P485 million vs. an average monthly gain of P26 million during the first 5
months of 1984. (pp. 2-3, Tiaoqui Report.)

4. Deposits had declined at the rate of P20 million during the month of December 1984, but
expenses of about P17 million per month were required to maintain the bank's operation. (p. 6,
Teodoro Report.)

5. Based on the projected outlook, the Bank's average yield on assets of 16.3% p.a., was
insufficient to meet the average cost of funds of 19.5% p.a. and operating expenses of 4.8% p.a.
(p. 5 Teodoro Report.)

6. An imprudently large proportion of assets were locked into long-term applications. (Teodoro
Report.)

7. BF overextended itself in lending to the real estate industry, committing as much as 52% of its
peso deposits to its affiliates or "related accounts" to which it continued lending even when it was
already suffering from liquidity stresses. (Teodoro Report.) This was done in violation of Section
38 of the General Banking Act (R.A. 337). 3
8. During the period of marked decline in liquidity levels the loan portfolio grew by P417.3 million in the first five months of 1984 — and by another

P105.l million in the next two months. (pp. 2-3, Tiaoqui Report.)

9. The loan portfolio stood at P3.679 billion at the end of July 1984, 56.2% of it channeled to companies whose stockholders, directors and officers

were related to the officers, directors, and some stockholders of BF. (p. 8, Tiaoqui Report.) Here again BF violated the General Banking Act (R.A. 337). 4

10. Some of the loans were used to acquire preferred stocks of BF. Between September 17, 1983 and February 10, 1984, P49.9 million of preferred non-

convertible stocks were issued. About 85% or P42.4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the

bank (Annex D). Around P18.8 million were issued in the name of an entity other than the purchaser of the stocks. (Tiaoqui Report.)

11. Loans amounting to some P69.3 million were granted simply to pay-off old loans including accrued interest, as an accommodation for the direct

maturing loans of some firms and as a way of paying-off loans of other borrower firms which have their own credit lines with the bank. These helped

to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio. (Tiaoqui Report.)

12. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31, 1984, showed that:

(a) 2,658 TCT's which BF evaluated to be worth P1,487 million were appraised by PAC to be worth only P1,196 million, hence, deficient by

P291 million.

(b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank

were insufficient;

(c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC), the latter confirmed only P427

million. P247 million in loans were not guaranteed by HFC. (Teodoro Report.)

(d) Per SGV's report, loans totalling P1.882 million including accrued interest, were secured by collateral worth only Pl.54 billion. Hence,

BFs unsecured exposure amounted to P586.2 million. BF Homes, Inc., a related company which has filed with the SEC a petition for

suspension of payments, owes P502 million to BF.

13. BF had been suffering heavy losses. —

a) For the eleven (11) months ended November 30, 1984, the estimated net loss was P372.6 Million;

b) For the twelve (12) months from November 1984, the projected net loss would be P390.7 Million and would continue unabated; (p. 2,

Teodoro Report)

c) Around 71.7% of the total accommodations of P2.0677 billions to the related/linked entities were adversely classified. Close to 33.7% or

P697.1 millions were clean loans or against PNs (promissory notes) of these entities. Of the latter, 52.6% were classified as loss." (P. 5,

Tiaoqui Report.)

d) The bank's financial condition as of date of examination, after setting up the additional valuation reserves of P612.2 millions and

accumulated net loss of P48.2 millions, indicates one of insolvency. Total liabilities of P5,282.1 million exceeds total assets of P4,947.2

million by 6.8%. Total capital account of P334.9 million) is deficient by P322.7 million against the minimum capital required of P657.6

million (Annex F). Capital to risk assets ratio is negative 10.38%.

e) Total loans and investment portfolio amounted to P3,914.3 millions (gross), of which P194.0 millions or 5.0% were past due and

P1,657.1 millions or 42.3% were adversely classified (Substandard — P1,011.4 millions; Doubtful — P274.6 millions and Loss — P371.1

millions). Accounts adversely classified included unmatured loan of Pl,482.0 million to entities related with each other and to the bank,

several of which showed distressed conditions. (p. 7, Tiaoqui Report.)

Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors." He recommended

"that the Monetary Board take a more effective and responsible action to protect the depositors and creditors ... in the light of the bank's worsening

condition." (p. 5, Teodoro Report.)

On January 23, 1985, Tiaoqui submitted his report to the Monetary Board, Like Teodoro, Tiaoqui believed that the principal cause of the bank's failure

was that in violation of the General Banking Law and CB rules and regulations, BF's major stockholders, directors and officers, through their "related"

companies: (i.e. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors. His

Conclusion and Recommendations were:

The Conservator, in his report to the Monetary Board dated January 8, 1985, has stated that the continuance of the bank in business would

involve probable loss to its depositors and creditors. It has recommended that a more effective action be taken to protect depositors and

creditors.

The examination findings as of July 31, 1984 as shown earlier, indicate one of insolvency and illiquidity and further confirms the above

conclusion of the Conservator.

All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking.

Foregoing considered, the following are recommended:

1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on

January, 1985, pursuant to Sec. 29 of R.A. No. 265, as amended;

2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings & Mortgage Bank, to

immediately take charge of the assets and liabilities, as expeditiously as possible collect and gather all the assets and

administer the same for the benefit of all the creditors, and exercise all the powers necessary for these purposes including but

not limited to bringing suits and foreclosing mortgages in the name of the bank.

3. The Board of directors and the principal officers from Senior Vice President, as listed in the attached Annex "A" be included

in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves.

4. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco

Filipino for investigation and possible prosecution of directors, officers and employees for activities which led to its insolvent

position." (pp. 9-10, Tiaoqui Report.)

On January 25, 1985 or two days after the submission of Tiaoqui's Report, and three weeks after it received Teodoro's Report, the

Monetary Board, then composed of:

Chairman: Jose B. Fernandez, Jr.

CB Governor

Members:

1. Cesar E.A. Virata, Prime Minister & Concurrently Minister of Finance

2. Roberto V. Ongpin, Minister of Trade & Industry & Chairman of Board of Investment

3. Vicente B. Valdepeñas, Jr., Minister of Economic Planning & Director General of NEDA

4. Cesar A. Buenaventura, President of Filipinas Shell Petroleum Corp. (p. 37, Annual Report 1985)
issued Resolution No. 75 closing BF and placing it under receivership. The MB Resolution reads as follows:

After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the

continuance in business of the bank would involve probable loss to its depositors and creditors, and after discussing and

finding to be true the statements of the Special Assistant to the Governor and Head, Supervision and Examination Sector

(SES) Department II, as recited in his memorandum dated January 23, 1985. that the Banco Filipino Savings and Mortgage

Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors, and in

pursuance of Section 29 of R.A. No. 265, as amended, the Board decided:

1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines;

2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor, as Receiver who is hereby directly vested with

jurisdiction and authority to immediately take charge of the bank's assets and liabilities, and as expeditiously as

possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all

the- powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages

in the name of the bank;

3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V. Tiaoqui, Special

Assistant to the Governor and Head, Supervision and Examination Sector Department II. as Deputy Receivers who

are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out

the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions

vested in the Receiver by law or Monetary Board resolutions;

4. To direct and authorize Management to do all other things and carry out all other measures necessary or

proper to implement this Resolution and to safeguard the interests of depositors/credition and the general

public; and

5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings and Mortgage

Bank. (pp. 126-127, Rollo I.)

On March 19,1985, the receiver, Carlota Valenzuela, and the deputy receivers, Arnulfo B. Aurellano and Ramon V. Tiaoqui,

submitted a report to the Monetary Board as required in Section 29, 2nd paragraph of R.A. 265 which provides that within

sixty (60) days from date of the receivership, the Monetary Board shall determine whether the bank may be reorganized and

permitted to resume business, or be liquidated. The receivers recommended that BF be placed under litigation. For, among

other things, they found that:

1. BF had been suffering a capital deficiency of P336.5 million as of July 31, 1984 (pp. 2 and 4, Receivers' Report).

2. The bank's weekly reserve deficiencies averaged P146.67 million from November 25, 1983 up to March 16, 1984, rising to a

peak of P338.09 million until July 27, 1984. Its reserve deficiencies against deposits and deposit substitutes began on the

week ending June 15, 1984 up to December 7, 1984, with average daily reserve deficiencies of P2.98 million.

3. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors

and officers of the bank amounted to P600.5 million. Combined with other adjustments in the amount of P73.2 million, they

will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336.5 million. The bank was already

insolvent on July 31, 1984. The capital deficiency increased to P908.4 million as of January 26, 1985 on account of unhooked

penalties for deficiencies in legal reserves (P49.07 million), unhooked interest on overdrawings, emergency advance of

P569.49 million from Central Bank, and additional valuation reserves of P124.5 million. (pp. 3-4, Receivers' Report.)

The Receivers further noted that —

 After BF was closed as of January 25, 1985, there were no collections from loans granted to firms related to each

other and to BF classified as "doubtful" or "loss," there were no substantial improvements on other loans

classified "doubtful"or "loss;" there was no further increase in the value of assets owned/acquired supported by

new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF

remained at P3,909.23, (millions) while the total liabilities amounted to P5,159.44 (millions). Thus, BF

remains insolvent with estimated deficiency to creditors of Pl,250.21 (millions).

Moreover, there were no efforts on the part of the stockholders of the bank to improve its financial condition

and the possibility of rehabilitation has become more remote. (P. 8, Receivers' Report.)

In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams, I do not find that the CB's Resolution

No. 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad

faith." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its

depositors and creditors. Insolvency, as defined in Rep. Act 265, means 'the inability of a banking institution to pay its

liabilities as they fall due in the usual and ordinary course of business. Since June 1984, BF had been unable to meet the

heavy cash withdrawals of its depositors and pay its liabilities to its creditors, the biggest of them being the Central Bank,

hence, the Monetary Board correctly found its condition to be one of insolvency.

All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or

insolvency is irrelevant and inconsequential, for under Section 29 of Rep. Act. 265, a bank's insolvency is not determined by its

excess of liabilities over assets, but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and

it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was

placed under receivership.

Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or

before January 25, 1985, the result would be no different. The bank's assets as of the end of 1984 amounted to P4.891 billions

(not P6 billions) according to the Report signed and submitted to the CB by BF's own president, and its total liabilities were

P4.478 billions (p. 58, Cosico Report). While Aguirre's Report showed BF ahead with a net worth of P412.961 millions, said

report did not make any provision for estimated valuation reserves amounting to P600.5 millions, (50% of face value

of doubtful loans and 100% of face value of loss accounts) which BF had granted to its related/linked companies. The

estimated valuation reserves of P600.5 millions plus BF's admitted liabilities of P4.478 billions, put together, would wipe out

BFs realizable assets of P4.891 billions and confirm its insolvent condition to the tune of P187.538 millions.

BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument that valuation reserves should not be considered because

the matter was not discussed by Tiaoqui with BF officials is not well taken for:

(1) The records of the defaulting debtors were in the possession of BF.

(2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations

of laws and CB rules and regulations) prepared by the SES, a copy of which was furnished BF on December 1 7, 1984;

(3) A conference on the matter washeld on January 2l, 1985 with senior officials of BF headed by EVP F. Dizon,. (pp. 14-15,

Cosico Report.) BF did not formally protest against the CBs estimate of valuation reserves. The CB could not wait forever for

BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the

bank continued to operate.

(4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January

25, 1985 none of the loans, except three, had been paid either partially or in full, even if they had already matured (p. 53,

Cosico Report).

The recommended provision for valuation reserves of P600.5 millions for "doubtful" and "loss" accounts was a proper factor

to consider in the capital adjustments of BF and was in accordance with accounting rules. For, if the uncollectible loan

accounts would be entered in the assets column as "receivables," without a corresponding entry in the liabilities column for
estimated losses or valuation reserves arising from their uncollectability, the result would be a gravely distorted picture of the

financial condition of BF.

BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not

merit serious consideration for precisely BF needed financial assistance because it was insolvent.

Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on

January 23, 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it, 'plainly

arbitrary and in bad faith." For what had been examined by the SES was more than enough to warrant a finding that the bank

was "insolvent and could not continue in business without probable loss to its depositors or creditors," and what had not

been examined was negligible and would not have materially altered the result. In any event, the official termination of the

examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985, did not

contradict, but in fact confirmed, the findings in the Tiaoqui Report.

The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose

duty it is to use the powers granted to it under the law to achieve the objective, among others, of maintaining monetary

stability in the country (Sec. 2, Rep. Act 265). I do not think it would be proper and advisable for this Court to interfere with

the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal, unsafe, unsound

and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and

creditors and generating widespread distrust and loss of confidence in the banking system. The damage to the banking

system and to the depositing public is bigger when the bank, like Banco Filipino, is big. With 89 branches nationwide, 46 of

them in Metro Manila alone, pumping the hard-earned savings of 3 million depositors into the bank, BF had no reason to go

bankrupt if it were properly managed. The Central Bank had to infuse almost P3.5 billions into the bank in its endeavor to

save it. But even this financial assistance was misused, for instead of satisfying the depositors' demands for the withdrawal of

their money, BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies. Up

to this time, its officers, directors and major stockholders have neither repaid the Central Bank's P3.6 billion financial

assistance, nor put up adequate collaterals therefor, nor submitted a credible plan for the rehabilitation of the bank. What

authority has this Court to require the Central Bank to reopen and rehabilitate the bank, and in effect risk more of the

Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank, not for this Court, to

make.

WHEREFORE, I vote to dismiss the petition for certiorari and mandamus in G.R. No. 70054 for lack of merit.

Romero, J., concurs.

# Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny the prayer, in G.R. No. 70054, to annul Monetary Board

Resolution No. 75 placing Banco Filipino (BF) under receivership.

Even assuming that the BF was not, as alleged, in a literal state of insolvency at the time of the passage of said Resolution,

there was a finding in the Teodoro report that, based on that Bank's illiquidity, to have allowed it to continue in operation

would have meant probable loss to depositors and creditors. That is also a ground for placing the bank under receivership, as

a first step, pursuant to Section 29 of the Central Bank Act (Rep. Act No. 265, as amended). The closure of BF, therefore, can

not be said to have been arbitrary or made in bad faith. There was sufficient justification, considering its inability to meet the

heavy withdrawals by its depositors and to pay its liabilities as they fell due, to forbid the bank from further engaging in

banking.

The matter of reopening, reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is

better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to

the tune of approximately P3.5 Billion in total accommodations, after a thorough assessment of whether or not BF is, indeed,
possessed, as it stoutly contends, of sufficient assets and capabilities with which to repay such huge indebtedness, and can

operate without loss to its many depositors and creditors.

GRIÑO-AQUINO, J., dissenting:

Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia, all of them except one, raise

issues unrelated to the receivership and liquidation of said bank. In fact, two of these cases (G.R. No. 68878 and 81303) have

already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein. Only

G.R. No. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs. the Monetary Board (MB), Central Bank of the Philippines

(CB), et al.," is an original action for mandamus and certiorari filed in this Court by former officials of BF to annul the Monetary

Board Resolution No. 75 dated January 25, 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota

Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the

reports" on which the Monetary Board based its decision to close the bank, hence, without "administrative due process.", The

prayer of the petition reads:

WHEREFORE, petitioner respectfully prays that a writ of mandamus be issued commanding respondents

immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to

support its Resolution of January 25, 1985 and thereafter to afford it a hearing prior to any resolution that may

be issued under Section 29 of R.A. 265, meanwhile annulling said Resolution of January 25, 1985 by writ

of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion.

So as to expedite proceedings, petitioner prays that the assessment of the damages respondents should pay it

be deferred and referred to commissioners.

Petitioner prays for such other remedy as the Court may deem just and equitable in the premises.

Quezon City for Manila, February 28, 1985. (p. 8, Rollo I-)

and the prayer of the Supplement to Petition reads:

WHEREFORE, in addition to its prayer for mandamus and certiorari contained in its original petition, petitioner

respectfully prays that Sections 28-A and 29 of the Central Bank charter (R.A. 265) including its amendatory

Presidential Decrees Nos. 72, 1771, 1827 and 1937 be annulled as unconstitutional.

Quezon City for Manila, March 4, 1985. (p. 11-G, Rollo I.)

The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had

defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the

receiver of BF. These eight (8) cases are:

1. G.R. No. 68878 "BF vs. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house

and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. The appellate court's

judgment for the buyer was reversed by this Court. The buyer's motion for reconsideration is awaiting resolution by this

Court;

2. G.R. Nos. 77255-58, "Top Management Programs Corporation and Pilar Development Corporation vs. Court of appeals, et

al." (CA-G.R. SP No. 07892) and "Pilar Development Corporation vs. Executive Judge, RTC, Cavite" (CA-G.R. SP Nos. 0896264) is

a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the

petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4.8 million mortgage on Top

Management's properties and the P18-67 million mortgage on Pilar Development properties. The Court of Appeals dismissed

the petitions on October 30, 1986 on the ground that "the functions of the liquidator, as receiver under Section 29 (R.A. 265),

include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits

and foreclosing mortgages in the name of the bank;"

3. G.R. No. 78766, "El Grande Corporation vs. Court of Appeals, et al.," is an appeal from the Court of Appeals' decision in CA-

G.R. SP No. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El

Grande's properties;

4. G.R. No. 78894, "Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, et al." is an appeal of BFs old management

(using the name of BF) from the decision of the Court of Appeals in CA-G.R. SP No. 07503 entitled, "Central Bank, et al. vs.

Judge Zoilo Aguinaldo, et al" dismissing the complaint of "BF" to annul the receivership, for no suit may be brought or

defended in the name of the bank except by its receiver;

5. G.R. No. 87867, "Metropolis Development Corporation vs. Court of Appeals" (formerly AC-G.R. No. 07503, "Central Bank, et al.

vs. Honorable Zoilo Aguinaldo, et al.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision

subject of G.R. No. 78894, which also dismissed Metropolis' complaint in intervention on the ground that a stockholder

(Metropolis) may not bring suit in the name of BF while the latter is under receivership, without the authority of the receiver;

6. G.R. No. 81303, "Pilar Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated October

22, 1987 of the Court of Appeals in CA-G.R. SP No. 12368, "Pilar Development Corporation, et al. vs. Honorable Manuel

Cosico, et al.," dismissing the petition for certiorari against Judge Manuel Cosico, Br. 136, RTC, Makati, who dismissed the

complaint filed by Pilar Development Corporation against BF, for specific performance of certain developer contracts. An

answer filed by Norberto Quisumbing and Associates, as BF's supposed counsel, virtually confessed judgment in favor of Pilar

Development. On motion of the receiver, the answer was expunged and the complaint was dismissed. On a petition

for certiorari in this Court, we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank, private

respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former

management, which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with

such liquidation and, in the case at bar, to take the proper steps to prevent collusion, to the prejudice of the legitimate

creditors, between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling

BF" (p. 49, Rollo). The petitioners' motion for reconsideration of that decision is pending resolution.

7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated

November 4, 1987 of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial court's order dismissing BF Homes'

action to compel the Central Bank to restore the financing facilities of BF, because the plaintiff (BF Homes) has no cause of

action against the CB.

8. G.R. No. 90473, "El Grande Development Corporation vs. Court of Appeals, et al.," is a petition to review the decision dated

June 6, 1989 in CA-G.R. SP No. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against

it by the receiver of BF.

As previously stated, G.R. No. 70054 "BF vs. Monetary Board, et al.," is an original special civil action for certiorari and

mandamus filed in this Court by the old management of BF, through their counsel, N.J. Quisumbing & Associates, using the

name of the bank and praying for the annulment of MB Resolution No. 75 which ordered the closure of BF and placed it

under receivership. It is a "forum-shopping" case because it was filed here on February 28, 1985 three weeks after they had

filed on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs. Monetary Board, et al." in the Regional Trial Court of Makati,

Br. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB

Resolution No. 75 dated January 25, 1985.

On August 25, 1985, this Court ordered the transfer and consolidation of Civil Case No. 9676 (to annul the receivership) from

Br. 143 to Br. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. 8108 (to annul the

conservatorship) and Civil Case No. 10183 (to annul the liquidation) of BF were and are still pending. All these three (3) cases

were archived on June 30, 1988 by Judge Cosico pending the resolution of G.R. No. 70054 by this Court.

Because of my previous participation, as a former member of the Court of Appeals, in the disposition of AC-G.R. No. 02617

(now G.R. No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 78894), I am taking no part in G.R. Nos. 68878,

78767 and 78894. It may be mentioned in this connection that neither in AC-G.R. SP No. 02617, nor in AC-G.R. SP No. 07503,
did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act), as

amended, and the validity of MB Resolution No. 75, for those issues were not raised in the Court of Appeals.

I concur with the ponencia insofar as it denies the motion for reconsideration in G.R. No. 81303, and dismisses the petitions

for review in G.R. Nos. 77255-58, 78766, 81304, and 90473.

I respectfully dissent from the majority opinion in G.R. No. 70054 annulling and setting aside MB Resolution No. 75 and

ordering the respondents, Central Bank of the Philippines and the Monetary Board —

to reorganize petitioner Banco Filipino Savings and Mortgage Bank, and allow the latter to resume business in

the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such

conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with

safety to its creditors, depositors and the general public.

for I believe that this Court has neither the authority nor the competence to determine whether or not, and under what

conditions, BF should be reorganized and reopened. That decision should be made by the Central Bank and the Monetary

Board, not by this Court.

All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and

placing it under receivership were "plainly arbitrary and made in bad faith.

Section 29 of Republic Act No. 265 provides:

Section 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the appropriate

supervising and examining department or his examiners or agents into the condition of any banking institution, it

shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would

involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned

forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements

of the department head to be true, forbid the institution to do business in the Philippines and shall designate an

official of the Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as

possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all

the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages

in the name of the banking institution.

The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or

otherwise placed in such a condition so that it may be permitted to resume business with safety to

its depositors and creditors and the general public and shall prescribe the conditions under which such

resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the

expenses and fees in the collection and administration of the assets of the institution shall be determined by the

Board and shall be paid to the Central Bank out of the assets of such banking institution.

If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent

or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public

interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The

Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance, reciting the proceedings

which have been taken and praying the assistance of the court in the liquidation of the banking institutions. The

court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce

individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking

institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall

designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously

appointed by the Monetary Board under this section. The liquidator shall, with all convenient speed, convert the

assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other

parties for the purpose of paying the debts of such bank and he may, in the name of the banking institution,
 institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of

the banking institution.

The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this section

and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court

only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. No restraining order or

injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this

section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of

the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or

judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to

be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon

filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an

amount twice the amount of the bond of the petitioner or plaintiff, conditioned that it will paythe which the

petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction. The provisions of Rule 58 of

the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall

govern the issuance and dissolution of the restraining order or injunction contemplated in this section.

Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as

they fall due in the usual and ordinary course of business, provided, however, that this shall not include the

inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic

commonly evidenced by a run on the banks in the banking community.

The determinative factor in the closure, receivership, and liquidation of a bank is the finding, upon examination by the SES of

the Central Bank, that its condition "is one of insolvency, or that its continuance in business would involve probable loss to its

depositors and creditors." (Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the only statutory ground for the

closure of a bank. The other ground is when "its continuance in business would involve probable loss to its depositors and

creditors.

Was BF insolvent i.e., unable to pay its liabilities as they fell due in the usual and ordinary course of business, on and for some

time before January 25, 1985 when the Monetary Board issued Resolution No. 75 closing the bank and placing it under

receivership? Would its continued operation involve probable loss to its depositors and creditors?

The answer to both questions is yes. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and

Examination Sector) Ramon V. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and

creditors. Tiaoqui further categorically found that BF was insolvent. Why was this so?

The Teodoro and Tiaoqui reports as well as the report of the receivers, Carlota Valenzuela, Arnulfo B. Aurellano and Ramon V.

Tiaoqui, showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and

experiencing severe liquidity problems. So much so, that it had become "a substantial borrower in the call loans market" and

in June 1984 it obtained a P30 million emergency loan from the Central Bank. (p. 2, Receiver's Report.) Additional emergencyt

loans (a total of P119.7 millions) were extended by the Central Bank to BF that month (MB Res. No. 839 dated June 29,1984).

On July 12, 1984, BFs chairman, Anthony Aguirre, offered to "turn over the administration of the affairs of the bank" to the

Central Bank (Aguirre's letter to Governor Jose Fernandez, Annex 7 of Manifestation dated May 3,1991). On July 23,1984,

unable to meet heavy deposit withdrawals, BF's management motu proprio, without obtaining the conformity of the Central

Bank, closed the bank and declared a bank holiday. On July 27, 1984, the CB, responding to BFs pleas for additional financial

assistance, granted BF a P3 billion credit line (MB Res. No. 934 of July 27, 1984) to enable it to reopen and resume business

on August 1, 1984. P2.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932.4

millions (p. 2, Tiaoqui Report). Total accommodations granted to BF amounted to P3.4122 billions (p. 19, Cosico Report).

Presumably to assure that the financial assistance would be properly used, the MB appointed Basilio Estanislao as conservator

of the bank. A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities

and ascertain its financial condition (p. 8, Tiaoqui Report).

Estanislao resigned after two weeks for health reasons. He was succeeded by Gilberto Teodoro as conservator in August, 1984

up to January 8, 1985.

Besides the conservatorship team, Teodoro hired financial consultants Messrs. Tirso G. Santillan, Jr. and Plorido P. Casuela to

make an analysis of BF's financial condition. Teodoro also engaged the accounting firm of Sycip, Gorres, Velayo and Company

to make an asset evaluation. The Philippine Appraisal Company (PAC) appraised BFs real estate properties, acquired assets,

and collaterals held. On January 9, 1985, Teodoro submitted his Report. Three weeks later, on January 23, 1985, Tiaoqui also

submitted his Report. Both reports showedthat, in violation of Section 37 of the General Banking Act (R.A.337): 2

1. BF had been continually deficient in liquidity reserves (Teodoro

Report). The bank had been experiencing a severe drop in liquidity
levels. The ratio of liquid assets to deposits and borrowings plunged from
about 20% at end-1983, to about 8.6% by end-May 1984, much below the
statutory requirements of 24% for demand deposits/deposit substitutes
and 14% for savings and time deposits. (p. 2, Tiaoqui Report.)

2. Deficiencies in average daily legal reserves rose from P63.0 million

during the week of November 21-25, 1983 to a high of P435.9 million
during the week of June 11-15, 1984 (pp. 2-3, Tiaoqui Report).
Accumulated penalties on reserve deficiencies amounted to P37.4 million
by July 31, and rose to P48 million by the end of 1984. (Tiaoqui Report.)

3. Deposit levels, which were at P3,845 million at end-May l984 (its last
"normal" month), dropped to P935 million at the end of November 1984
or a loss of P2,910 million. This represented an average monthly loss of
P485 million vs. an average monthly gain of P26 million during the first 5
months of 1984. (pp. 2-3, Tiaoqui Report.)

4. Deposits had declined at the rate of P20 million during the month of
December 1984, but expenses of about P17 million per month were
required to maintain the bank's operation. (p. 6, Teodoro Report.)

5. Based on the projected outlook, the Bank's average yield on assets of

16.3% p.a., was insufficient to meet the average cost of funds of 19.5%
p.a. and operating expenses of 4.8% p.a. (p. 5 Teodoro Report.)

6. An imprudently large proportion of assets were locked into long-term

applications. (Teodoro Report.)

7. BF overextended itself in lending to the real estate industry,

committing as much as 52% of its peso deposits to its affiliates or
"related accounts" to which it continued lending even when it was
already suffering from liquidity stresses. (Teodoro Report.) This was done
in violation of Section 38 of the General Banking Act (R.A. 337). 3

8. During the period of marked decline in liquidity levels the loan portfolio grew by P417.3 million in the first five

months of 1984 — and by another P105.l million in the next two months. (pp. 2-3, Tiaoqui Report.)
9. The loan portfolio stood at P3.679 billion at the end of July 1984, 56.2% of it channeled to companies whose

stockholders, directors and officers were related to the officers, directors, and some stockholders of BF. (p. 8,

Tiaoqui Report.) Here again BF violated the General Banking Act (R.A. 337). 4

10. Some of the loans were used to acquire preferred stocks of BF. Between September 17, 1983 and February

10, 1984, P49.9 million of preferred non-convertible stocks were issued. About 85% or P42.4 million was paid out

of the proceeds of loans to stockholders/ borrowers with relationship to the bank (Annex D). Around P18.8

million were issued in the name of an entity other than the purchaser of the stocks. (Tiaoqui Report.)

11. Loans amounting to some P69.3 million were granted simply to pay-off old loans including accrued interest,

as an accommodation for the direct maturing loans of some firms and as a way of paying-off loans of other

borrower firms which have their own credit lines with the bank. These helped to make otherwise delinquent loans

appear "current" and deceptively "improved" the quality of the loan portfolio. (Tiaoqui Report.)

12. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers

as of July 31, 1984, showed that:

(a) 2,658 TCT's which BF evaluated to be worth P1,487 million were appraised by PAC to be worth

only P1,196 million, hence, deficient by P291 million.

(b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC

because the details submitted by the bank were insufficient;

(c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation

(HFIC), the latter confirmed only P427 million. P247 million in loans were not guaranteed by HFC.

(Teodoro Report.)

(d) Per SGV's report, loans totalling P1.882 million including accrued interest, were secured by

collateral worth only Pl.54 billion. Hence, BFs unsecured exposure amounted to P586.2 million. BF

Homes, Inc., a related company which has filed with the SEC a petition for suspension of payments,

owes P502 million to BF.

13. BF had been suffering heavy losses. —

a) For the eleven (11) months ended November 30, 1984, the estimated net loss was P372.6 Million;

b) For the twelve (12) months from November 1984, the projected net loss would be P390.7

Million and would continue unabated; (p. 2, Teodoro Report)

c) Around 71.7% of the total accommodations of P2.0677 billions to the related/linked entities were

adversely classified. Close to 33.7% or P697.1 millions were clean loans or against PNs (promissory

notes) of these entities. Of the latter, 52.6% were classified as loss." (P. 5, Tiaoqui Report.)

d) The bank's financial condition as of date of examination, after setting up the additional valuation

reserves of P612.2 millions and accumulated net loss of P48.2 millions, indicates one of

insolvency. Total liabilities of P5,282.1 million exceeds total assets of P4,947.2 million by 6.8%. Total

capital account of P334.9 million) is deficient by P322.7 million against the minimum capital required

of P657.6 million (Annex F). Capital to risk assets ratio is negative 10.38%.

e) Total loans and investment portfolio amounted to P3,914.3 millions (gross), of which P194.0

millions or 5.0% were past due and P1,657.1 millions or 42.3% were adversely classified
 (Substandard — P1,011.4 millions; Doubtful — P274.6 millions and Loss — P371.1 millions).

Accounts adversely classified included unmatured loan of Pl,482.0 million to entities related with

each other and to the bank, several of which showed distressed conditions. (p. 7, Tiaoqui Report.)

Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its

depositors and creditors." He recommended "that the Monetary Board take a more effective and responsible

action to protect the depositors and creditors ... in the light of the bank's worsening condition." (p. 5, Teodoro

Report.)

On January 23, 1985, Tiaoqui submitted his report to the Monetary Board, Like Teodoro, Tiaoqui believed that

the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and

regulations, BF's major stockholders, directors and officers, through their "related" companies: (i.e. companies

owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the

depositors. His Conclusion and Recommendations were:

The Conservator, in his report to the Monetary Board dated January 8, 1985, has stated that

the continuance of the bank in business would involve probable loss to its depositors and creditors. It

has recommended that a more effective action be taken to protect depositors and creditors.

The examination findings as of July 31, 1984 as shown earlier, indicate one of insolvency and

illiquidity and further confirms the above conclusion of the Conservator.

All the foregoing provides sufficient justification for forbidding the bank from further engaging in

banking.

Foregoing considered, the following are recommended:

1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines

effective the beginning of office on January, 1985, pursuant to Sec. 29 of R.A. No. 265,

as amended;

2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco

Filipino Savings & Mortgage Bank, to immediately take charge of the assets and

liabilities, as expeditiously as possible collect and gather all the assets and administer

the same for the benefit of all the creditors, and exercise all the powers necessary for

these purposes including but not limited to bringing suits and foreclosing mortgages in

the name of the bank.

3. The Board of directors and the principal officers from Senior Vice President, as listed

in the attached Annex "A" be included in the watchlist of the Supervision and

Examination Sector until such time that they shall have cleared themselves.

4. Refer to the Central Banles Legal Department and Office of Special Investigation the

report on the findings on Banco Filipino for investigation and possible prosecution of

directors, officers and employees for activities which led to its insolvent position." (pp.

9-10, Tiaoqui Report.)

On January 25, 1985 or two days after the submission of Tiaoqui's Report, and three weeks after it

received Teodoro's Report, the Monetary Board, then composed of:

Chairman: Jose B. Fernandez, Jr.

CB Governor
Members:

1. Cesar E.A. Virata, Prime Minister & Concurrently Minister of Finance

2. Roberto V. Ongpin, Minister of Trade & Industry & Chairman of Board of Investment

3. Vicente B. Valdepeñas, Jr., Minister of Economic Planning & Director General of NEDA

4. Cesar A. Buenaventura, President of Filipinas Shell Petroleum Corp. (p. 37, Annual

Report 1985)

issued Resolution No. 75 closing BF and placing it under receivership. The MB Resolution reads as

follows:

After considering the report dated January 8, 1985 of the Conservator for Banco Filipino

Savings and Mortgage Bank that the continuance in business of the bank would involve

probable loss to its depositors and creditors, and after discussing and finding to be true

the statements of the Special Assistant to the Governor and Head, Supervision and

Examination Sector (SES) Department II, as recited in his memorandum dated January

23, 1985. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its

continuance in business would involve probable loss to its depositors and creditors, and

in pursuance of Section 29 of R.A. No. 265, as amended, the Board decided:

1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches

to do business in the Philippines;

2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor, as Receiver

who is hereby directly vested with jurisdiction and authority to immediately

take charge of the bank's assets and liabilities, and as expeditiously as

possible collect and gather all the assets and administer the same for the

benefit of its creditors, exercising all the- powers necessary for these

purposes including, but not limited to, bringing suits and foreclosing

mortgages in the name of the bank;

3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor,

and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head,

Supervision and Examination Sector Department II. as Deputy Receivers

who are likewise hereby directly vested with jurisdiction and authority to

do all things necessary or proper to carry out the functions entrusted to

them by the Receiver and otherwise to assist the Receiver in carrying out

the functions vested in the Receiver by law or Monetary Board resolutions;

4. To direct and authorize Management to do all other things and carry out

all other measures necessary or proper to implement this Resolution and to

safeguard the interests of depositors/credition and the general public; and

5. In consequence of the foregoing, to terminate the conservatorship over

Banco Filipino Savings and Mortgage Bank. (pp. 126-127, Rollo I.)

On March 19,1985, the receiver, Carlota Valenzuela, and the deputy receivers, Arnulfo B.

Aurellano and Ramon V. Tiaoqui, submitted a report to the Monetary Board as required

in Section 29, 2nd paragraph of R.A. 265 which provides that within sixty (60) days from

date of the receivership, the Monetary Board shall determine whether the bank may be
reorganized and permitted to resume business, or be liquidated. The receivers

recommended that BF be placed under litigation. For, among other things, they found

that:

1. BF had been suffering a capital deficiency of P336.5 million as of July 31, 1984 (pp. 2

and 4, Receivers' Report).

2. The bank's weekly reserve deficiencies averaged P146.67 million from November 25,

1983 up to March 16, 1984, rising to a peak of P338.09 million until July 27, 1984. Its

reserve deficiencies against deposits and deposit substitutes began on the week ending

June 15, 1984 up to December 7, 1984, with average daily reserve deficiencies of P2.98

million.

3. Estimated losses or "unhooked valuation reserves" for loans to entities with

relationships to certain stockholder/directors and officers of the bank amounted to

P600.5 million. Combined with other adjustments in the amount of P73.2 million, they

will entirely wipe out the bank's entire capital account and leave a capital deficiency of

P336.5 million. The bank was already insolvent on July 31, 1984. The capital deficiency

increased to P908.4 million as of January 26, 1985 on account of unhooked penalties for

deficiencies in legal reserves (P49.07 million), unhooked interest on overdrawings,

emergency advance of P569.49 million from Central Bank, and additional valuation

reserves of P124.5 million. (pp. 3-4, Receivers' Report.)

The Receivers further noted that —

After BF was closed as of January 25, 1985, there were no collections from

loans granted to firms related to each other and to BF classified as

"doubtful" or "loss," there were no substantial improvements on other

loans classified "doubtful"or "loss;" there was no further increase in the

value of assets owned/acquired supported by new appraisals and there

was no infusion of additional capital such that the estimated realizable

assets of BF remained at P3,909.23, (millions) while the total liabilities

amounted to P5,159.44 (millions). Thus, BF remains insolvent with

estimated deficiency to creditors of Pl,250.21 (millions).

Moreover, there were no efforts on the part of the stockholders of the

bank to improve its financial condition and the possibility of rehabilitation

has become more remote. (P. 8, Receivers' Report.)

In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams, I

do not find that the CB's Resolution No. 75 ordering BF to cease banking operations

and placing it under receivership was "plainly arbitrary and made in bad faith." The

receivership was justified because BF was insolvent and its continuance in business

would cause loss to its depositors and creditors. Insolvency, as defined in Rep. Act 265,

means 'the inability of a banking institution to pay its liabilities as they fall due in the

usual and ordinary course of business. Since June 1984, BF had been unable to meet the

heavy cash withdrawals of its depositors and pay its liabilities to its creditors, the

biggest of them being the Central Bank, hence, the Monetary Board correctly found its

condition to be one of insolvency.

All the discussion in the Santiago Report concerning the bank's assets and liabilities as

determinants of BF's solvency or insolvency is irrelevant and inconsequential, for under

Section 29 of Rep. Act. 265, a bank's insolvency is not determined by its excess of
liabilities over assets, but by its "inability to pay its liabilities as they fall due in the

ordinary course of business" and it was abundantly shown that BF was unable to pay its

liabilities to depositors for over a six-month-period before it was placed under

receivership.

Even if assets and liabilities were to be factored into a formula for determining whether

or not BF was already insolvent on or before January 25, 1985, the result would be no

different. The bank's assets as of the end of 1984 amounted to P4.891 billions (not P6

billions) according to the Report signed and submitted to the CB by BF's own president,

and its total liabilities were P4.478 billions (p. 58, Cosico Report). While Aguirre's Report

showed BF ahead with a net worth of P412.961 millions, said report did not make any

provision for estimated valuation reserves amounting to P600.5 millions, (50% of face

value of doubtful loans and 100% of face value of loss accounts) which BF had granted

to its related/linked companies. The estimated valuation reserves of P600.5 millions plus

BF's admitted liabilities of P4.478 billions, put together, would wipe out BFs realizable

assets of P4.891 billions and confirm its insolvent condition to the tune of P187.538

millions.

BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument that valuation

reserves should not be considered because the matter was not discussed by Tiaoqui

with BF officials is not well taken for:

(1) The records of the defaulting debtors were in the possession of BF.

(2) The "adversely classified" loans were in fact included in the List of Exceptions and

Findings (of irregularities and violations of laws and CB rules and regulations) prepared

by the SES, a copy of which was furnished BF on December 1 7, 1984;

(3) A conference on the matter washeld on January 2l, 1985 with senior officials of BF

headed by EVP F. Dizon,. (pp. 14-15, Cosico Report.) BF did not formally protest against

the CBs estimate of valuation reserves. The CB could not wait forever for BF to respond

for the CB had to act with reasonable promptness to protect the depositors and

creditors of BF because the bank continued to operate.

(4) Subsequent events proved correct the SES classification of the loan accounts as

"doubtful" or "loss' because as of January 25, 1985 none of the loans, except three, had

been paid either partially or in full, even if they had already matured (p. 53, Cosico

Report).

The recommended provision for valuation reserves of P600.5 millions for "doubtful" and

"loss" accounts was a proper factor to consider in the capital adjustments of BF and was

in accordance with accounting rules. For, if the uncollectible loan accounts would be

entered in the assets column as "receivables," without a corresponding entry in the

liabilities column for estimated losses or valuation reserves arising from their

uncollectability, the result would be a gravely distorted picture of the financial condition

of BF.

BF's strange argument that it was not insolvent for otherwise the CB would not have

given it financial assistance does not merit serious consideration for precisely BF

needed financial assistance because it was insolvent.

Tiaoqui's admission that the examination of BF had "not yet been officially terminated"

when he submitted his report on January 23, 1985 did not make the action of the
 Monetary Board of closing the bank and appointing receivers for it, 'plainly arbitrary

and in bad faith." For what had been examined by the SES was more than enough to

warrant a finding that the bank was "insolvent and could not continue in business

without probable loss to its depositors or creditors," and what had not been examined

was negligible and would not have materially altered the result. In any event, the official

termination of the examination with the submission by the Chief Examiner of his report

to the Monetary Board in March 1985, did not contradict, but in fact confirmed, the

findings in the Tiaoqui Report.

The responsibility of administering the Philippine monetary and banking systems is

vested by law in the Central Bank whose duty it is to use the powers granted to it under

the law to achieve the objective, among others, of maintaining monetary stability in the

country (Sec. 2, Rep. Act 265). I do not think it would be proper and advisable for this

Court to interfere with the CB's exercise of its prerogative and duty to discipline banks

which have persistently engaged in illegal, unsafe, unsound and fraudulent banking

practices causing tremendous losses and unimaginable anxiety and prejudice to

depositors and creditors and generating widespread distrust and loss of confidence in

the banking system. The damage to the banking system and to the depositing public is

bigger when the bank, like Banco Filipino, is big. With 89 branches nationwide, 46 of

them in Metro Manila alone, pumping the hard-earned savings of 3 million depositors

into the bank, BF had no reason to go bankrupt if it were properly managed. The

Central Bank had to infuse almost P3.5 billions into the bank in its endeavor to save it.

But even this financial assistance was misused, for instead of satisfying the depositors'

demands for the withdrawal of their money, BF channeled and diverted a substantial

portion of the finds into the coffers of its related/linked companies. Up to this time, its

officers, directors and major stockholders have neither repaid the Central Bank's P3.6

billion financial assistance, nor put up adequate collaterals therefor, nor submitted a

credible plan for the rehabilitation of the bank. What authority has this Court to require

the Central Bank to reopen and rehabilitate the bank, and in effect risk more of the

Government's money in the moribund bank? I respectfully submit that decision is for

the Central Bank, not for this Court, to make.

WHEREFORE, I vote to dismiss the petition for certiorari and mandamus in G.R. No.

70054 for lack of merit.

Romero, J., concurs.

G.R. No. 169777* April 20, 2006

SENATE OF THE PHILIPPINES, represented by FRANKLIN M. DRILON, in his capacity as Senate President, JUAN M.
FLAVIER, in his capacity as Senate President Pro Tempore, FRANCIS N. PANGILINAN, in his capacity as Majority
Leader, AQUILINO Q. PIMENTEL, JR., in his capacity as Minority Leader, SENATORS RODOLFO G. BIAZON,
"COMPANERA" PIA S. CAYETANO, JINGGOY EJERCITO ESTRADA, LUISA "LOI" EJERCITO ESTRADA, JUAN PONCE
ENRILE, RICHARD J. GORDON, PANFILO M. LACSON, ALFREDO S.LIM, M. A. MADRIGAL, SERGIO OSMENA III,
RALPH G. RECTO, and MAR ROXAS, Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria Macapagal-Arroyo,
and anyone acting in his stead and in behalf of the President of the Philippines, Respondents.

x-------------------------x

G.R. No. 169659 April 20, 2006

BAYAN MUNA represented by DR. REYNALDO LESACA, JR., Rep. SATUR OCAMPO, Rep. CRISPIN BELTRAN, Rep.
RAFAEL MARIANO, Rep. LIZA MAZA, Rep. TEODORO CASINO, Rep. JOEL VIRADOR, COURAGE represented by
FERDINAND GAITE, and COUNSELS FOR THE DEFENSE OF LIBERTIES (CODAL) represented by ATTY. REMEDIOS
BALBIN, Petitioners,
vs.
EDUARDO ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria Macapagal-
Arroyo, Respondent.

x-------------------------x

G.R. No. 169660 April 20, 2006

FRANCISCO I. CHAVEZ, Petitioner,

vs.
EDUARDO R. ERMITA, in his capacity as Executive Secretary, AVELINO J. CRUZ, JR., in his capacity as Secretary of
Defense, and GENEROSO S. SENGA, in his capacity as AFP Chief of Staff, Respondents.

x-------------------------x

G.R. No. 169667 April 20, 2006

ALTERNATIVE LAW GROUPS, INC. (ALG), Petitioner,

vs.
HON. EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondent.

x-------------------------x

G.R. No. 169834 April 20, 2006

PDP- LABAN, Petitioner,

vs.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent.

x-------------------------x

G.R. No. 171246 April 20, 2006

JOSE ANSELMO I. CADIZ, FELICIANO M. BAUTISTA, ROMULO R. RIVERA, JOSE AMOR AMORANDO, ALICIA A.
RISOS-VIDAL, FILEMON C. ABELITA III, MANUEL P. LEGASPI, J. B. JOVY C. BERNABE, BERNARD L. DAGCUTA,
ROGELIO V. GARCIA, and the INTEGRATED BAR FOR THE PHILIPPINES, Petitioners,
vs.
HON. EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent.

DECISION

CARPIO MORALES, J.:

A transparent government is one of the hallmarks of a truly republican state. Even in the early history of republican
thought, however, it has been recognized that the head of government may keep certain information confidential in
pursuit of the public interest. Explaining the reason for vesting executive power in only one magistrate, a distinguished
delegate to the U.S. Constitutional Convention said: "Decision, activity, secrecy, and dispatch will generally characterize the
proceedings of one man, in a much more eminent degree than the proceedings of any greater number; and in proportion
as the number is increased, these qualities will be diminished."1

History has been witness, however, to the fact that the power to withhold information lends itself to abuse, hence, the
necessity to guard it zealously.

The present consolidated petitions for certiorari and prohibition proffer that the President has abused such power by
issuing Executive Order No. 464 (E.O. 464) last September 28, 2005. They thus pray for its declaration as null and void for
being unconstitutional.

In resolving the controversy, this Court shall proceed with the recognition that the issuance under review has come from a
co-equal branch of government, which thus entitles it to a strong presumption of constitutionality. Once the challenged
order is found to be indeed violative of the Constitution, it is duty-bound to declare it so. For the Constitution, being the
highest expression of the sovereign will of the Filipino people, must prevail over any issuance of the government that
contravenes its mandates.

In the exercise of its legislative power, the Senate of the Philippines, through its various Senate Committees, conducts
inquiries or investigations in aid of legislation which call for, inter alia, the attendance of officials and employees of the
executive department, bureaus, and offices including those employed in Government Owned and Controlled Corporations,
the Armed Forces of the Philippines (AFP), and the Philippine National Police (PNP).

On September 21 to 23, 2005, the Committee of the Senate as a whole issued invitations to various officials of the
Executive Department for them to appear on September 29, 2005 as resource speakers in a public hearing on the railway
project of the North Luzon Railways Corporation with the China National Machinery and Equipment Group (hereinafter
North Rail Project). The public hearing was sparked by a privilege speech of Senator Juan Ponce Enrile urging the Senate
to investigate the alleged overpricing and other unlawful provisions of the contract covering the North Rail Project.

The Senate Committee on National Defense and Security likewise issued invitations 2 dated September 22, 2005 to the
following officials of the AFP: the Commanding General of the Philippine Army, Lt. Gen. Hermogenes C. Esperon; Inspector
General of the AFP Vice Admiral Mateo M. Mayuga; Deputy Chief of Staff for Intelligence of the AFP Rear Admiral Tirso R.
Danga; Chief of the Intelligence Service of the AFP Brig. Gen. Marlu Q. Quevedo; Assistant Superintendent of the Philippine
Military Academy (PMA) Brig. Gen. Francisco V. Gudani; and Assistant Commandant, Corps of Cadets of the PMA, Col.
Alexander F. Balutan, for them to attend as resource persons in a public hearing scheduled on September 28, 2005 on the
following: (1) Privilege Speech of Senator Aquilino Q. Pimentel Jr., delivered on June 6, 2005 entitled "Bunye has Provided
Smoking Gun or has Opened a Can of Worms that Show Massive Electoral Fraud in the Presidential Election of May 2005";
(2) Privilege Speech of Senator Jinggoy E. Estrada delivered on July 26, 2005 entitled "The Philippines as the Wire-Tapping
Capital of the World"; (3) Privilege Speech of Senator Rodolfo Biazon delivered on August 1, 2005 entitled "Clear and
Present Danger"; (4) Senate Resolution No. 285 filed by Senator Maria Ana Consuelo Madrigal – Resolution Directing the
Committee on National Defense and Security to Conduct an Inquiry, in Aid of Legislation, and in the National Interest, on
the Role of the Military in the So-called "Gloriagate Scandal"; and (5) Senate Resolution No. 295 filed by Senator Biazon –
Resolution Directing the Committee on National Defense and Security to Conduct an Inquiry, in Aid of Legislation, on the
Wire-Tapping of the President of the Philippines.

Also invited to the above-said hearing scheduled on September 28 2005 was the AFP Chief of Staff, General Generoso S.
Senga who, by letter3 dated September 27, 2005, requested for its postponement "due to a pressing operational situation
that demands [his utmost personal attention" while "some of the invited AFP officers are currently attending to other
urgent operational matters."

On September 28, 2005, Senate President Franklin M. Drilon received from Executive Secretary Eduardo R. Ermita a
letter4 dated September 27, 2005 "respectfully request[ing] for the postponement of the hearing [regarding the NorthRail
project] to which various officials of the Executive Department have been invited" in order to "afford said officials ample
time and opportunity to study and prepare for the various issues so that they may better enlighten the Senate Committee
on its investigation."

Senate President Drilon, however, wrote5 Executive Secretary Ermita that the Senators "are unable to accede to [his
request]" as it "was sent belatedly" and "[a]ll preparations and arrangements as well as notices to all resource persons
were completed [the previous] week."

Senate President Drilon likewise received on September 28, 2005 a letter 6 from the President of the North Luzon Railways
Corporation Jose L. Cortes, Jr. requesting that the hearing on the NorthRail project be postponed or cancelled until a copy
of the report of the UP Law Center on the contract agreements relative to the project had been secured.

On September 28, 2005, the President issued E.O. 464, "Ensuring Observance of the Principle of Separation of Powers,
Adherence to the Rule on Executive Privilege and Respect for the Rights of Public Officials Appearing in Legislative
Inquiries in Aid of Legislation Under the Constitution, and For Other Purposes," 7 which, pursuant to Section 6 thereof, took
effect immediately. The salient provisions of the Order are as follows:

SECTION 1. Appearance by Heads of Departments Before Congress. – In accordance with Article VI, Section 22 of the
Constitution and to implement the Constitutional provisions on the separation of powers between co-equal branches of
the government, all heads of departments of the Executive Branch of the government shall secure the consent of the
President prior to appearing before either House of Congress.

When the security of the State or the public interest so requires and the President so states in writing, the appearance
shall only be conducted in executive session.

SECTION. 2. Nature, Scope and Coverage of Executive Privilege. –

(a) Nature and Scope. - The rule of confidentiality based on executive privilege is fundamental to the operation of
government and rooted in the separation of powers under the Constitution (Almonte vs. Vasquez, G.R. No. 95367, 23 May
1995). Further, Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees
provides that Public Officials and Employees shall not use or divulge confidential or classified information officially known
to them by reason of their office and not made available to the public to prejudice the public interest.

Executive privilege covers all confidential or classified information between the President and the public officers covered
by this executive order, including:

Conversations and correspondence between the President and the public official covered by this executive order (Almonte
vs. Vasquez G.R. No. 95367, 23 May 1995; Chavez v. Public Estates Authority, G.R. No. 133250, 9 July 2002);

Military, diplomatic and other national security matters which in the interest of national security should not be divulged
(Almonte vs. Vasquez, G.R. No. 95367, 23 May 1995; Chavez v. Presidential Commission on Good Government, G.R. No.
130716, 9 December 1998).
Information between inter-government agencies prior to the conclusion of treaties and executive agreements (Chavez v.
Presidential Commission on Good Government, G.R. No. 130716, 9 December 1998);

Discussion in close-door Cabinet meetings (Chavez v. Presidential Commission on Good Government, G.R. No. 130716, 9
December 1998);

Matters affecting national security and public order (Chavez v. Public Estates Authority, G.R. No. 133250, 9 July 2002).

(b) Who are covered. – The following are covered by this executive order:

Senior officials of executive departments who in the judgment of the department heads are covered by the executive
privilege;

Generals and flag officers of the Armed Forces of the Philippines and such other officers who in the judgment of the Chief
of Staff are covered by the executive privilege;

Philippine National Police (PNP) officers with rank of chief superintendent or higher and such other officers who in the
judgment of the Chief of the PNP are covered by the executive privilege;

Senior national security officials who in the judgment of the National Security Adviser are covered by the executive
privilege; and

Such other officers as may be determined by the President.

SECTION 3. Appearance of Other Public Officials Before Congress. – All public officials enumerated in Section 2 (b) hereof
shall secure prior consent of the President prior to appearing before either House of Congress to ensure the observance of
the principle of separation of powers, adherence to the rule on executive privilege and respect for the rights of public
officials appearing in inquiries in aid of legislation. (Emphasis and underscoring supplied)

Also on September 28, 2005, Senate President Drilon received from Executive Secretary Ermita a copy of E.O. 464, and
another letter8 informing him "that officials of the Executive Department invited to appear at the meeting [regarding the
NorthRail project] will not be able to attend the same without the consent of the President, pursuant to [E.O. 464]" and
that "said officials have not secured the required consent from the President." On even date which was also the scheduled
date of the hearing on the alleged wiretapping, Gen. Senga sent a letter9 to Senator Biazon, Chairperson of the Committee
on National Defense and Security, informing him "that per instruction of [President Arroyo], thru the Secretary of National
Defense, no officer of the [AFP] is authorized to appear before any Senate or Congressional hearings without seeking a
written approval from the President" and "that no approval has been granted by the President to any AFP officer to appear
before the public hearing of the Senate Committee on National Defense and Security scheduled [on] 28 September 2005."

Despite the communications received from Executive Secretary Ermita and Gen. Senga, the investigation scheduled by the
Committee on National Defense and Security pushed through, with only Col. Balutan and Brig. Gen. Gudani among all the
AFP officials invited attending.

For defying President Arroyo’s order barring military personnel from testifying before legislative inquiries without her
approval, Brig. Gen. Gudani and Col. Balutan were relieved from their military posts and were made to face court martial
proceedings.

As to the NorthRail project hearing scheduled on September 29, 2005, Executive Secretary Ermita, citing E.O. 464, sent
letter of regrets, in response to the invitations sent to the following government officials: Light Railway Transit Authority
Administrator Melquiades Robles, Metro Rail Transit Authority Administrator Roberto Lastimoso, Department of Justice
(DOJ) Chief State Counsel Ricardo V. Perez, then Presidential Legal Counsel Merceditas Gutierrez, Department of
Transportation and Communication (DOTC) Undersecretary Guiling Mamonding, DOTC Secretary Leandro Mendoza,
Philippine National Railways General Manager Jose Serase II, Monetary Board Member Juanita Amatong, Bases Conversion
Development Authority Chairperson Gen. Narciso Abaya and Secretary Romulo L. Neri.10 NorthRail President Cortes sent
personal regrets likewise citing E.O. 464.11

On October 3, 2005, three petitions, docketed as G.R. Nos. 169659, 169660, and 169667, for certiorari and prohibition,
were filed before this Court challenging the constitutionality of E.O. 464.

In G.R. No. 169659, petitioners party-list Bayan Muna, House of Representatives Members Satur Ocampo, Crispin Beltran,
Rafael Mariano, Liza Maza, Joel Virador and Teodoro Casino, Courage, an organization of government employees, and
Counsels for the Defense of Liberties (CODAL), a group of lawyers dedicated to the promotion of justice, democracy and
peace, all claiming to have standing to file the suit because of the transcendental importance of the issues they posed,
pray, in their petition that E.O. 464 be declared null and void for being unconstitutional; that respondent Executive
Secretary Ermita, in his capacity as Executive Secretary and alter-ego of President Arroyo, be prohibited from imposing,
and threatening to impose sanctions on officials who appear before Congress due to congressional summons.
Additionally, petitioners claim that E.O. 464 infringes on their rights and impedes them from fulfilling their respective
obligations. Thus, Bayan Muna alleges that E.O. 464 infringes on its right as a political party entitled to participate in
governance; Satur Ocampo, et al. allege that E.O. 464 infringes on their rights and duties as members of Congress to
conduct investigation in aid of legislation and conduct oversight functions in the implementation of laws; Courage alleges
that the tenure of its members in public office is predicated on, and threatened by, their submission to the requirements
of E.O. 464 should they be summoned by Congress; and CODAL alleges that its members have a sworn duty to uphold the
rule of law, and their rights to information and to transparent governance are threatened by the imposition of E.O. 464.

In G.R. No. 169660, petitioner Francisco I. Chavez, claiming that his constitutional rights as a citizen, taxpayer and law
practitioner, are affected by the enforcement of E.O. 464, prays in his petition that E.O. 464 be declared null and void for
being unconstitutional.

In G.R. No. 169667, petitioner Alternative Law Groups, Inc.12 (ALG), alleging that as a coalition of 17 legal resource non-
governmental organizations engaged in developmental lawyering and work with the poor and marginalized sectors in
different parts of the country, and as an organization of citizens of the Philippines and a part of the general public, it has
legal standing to institute the petition to enforce its constitutional right to information on matters of public concern, a
right which was denied to the public by E.O. 464,13 prays, that said order be declared null and void for being
unconstitutional and that respondent Executive Secretary Ermita be ordered to cease from implementing it.

On October 11, 2005, Petitioner Senate of the Philippines, alleging that it has a vital interest in the resolution of the issue
of the validity of E.O. 464 for it stands to suffer imminent and material injury, as it has already sustained the same with its
continued enforcement since it directly interferes with and impedes the valid exercise of the Senate’s powers and
functions and conceals information of great public interest and concern, filed its petition for certiorari and prohibition,
docketed as G.R. No. 169777 and prays that E.O. 464 be declared unconstitutional.

On October 14, 2005, PDP-Laban, a registered political party with members duly elected into the Philippine Senate and
House of Representatives, filed a similar petition for certiorari and prohibition, docketed as G.R. No. 169834, alleging that
it is affected by the challenged E.O. 464 because it hampers its legislative agenda to be implemented through its members
in Congress, particularly in the conduct of inquiries in aid of legislation and transcendental issues need to be resolved to
avert a constitutional crisis between the executive and legislative branches of the government.

Meanwhile, by letter14 dated February 6, 2006, Senator Biazon reiterated his invitation to Gen. Senga for him and other
military officers to attend the hearing on the alleged wiretapping scheduled on February 10, 2005. Gen. Senga replied,
however, by letter15 dated February 8, 2006, that "[p]ursuant to Executive Order No. 464, th[e] Headquarters requested for
a clearance from the President to allow [them] to appear before the public hearing" and that "they will attend once [their]
request is approved by the President." As none of those invited appeared, the hearing on February 10, 2006 was
cancelled.16

In another investigation conducted jointly by the Senate Committee on Agriculture and Food and the Blue Ribbon
Committee on the alleged mismanagement and use of the fertilizer fund under the Ginintuang Masaganang Ani program
of the Department of Agriculture (DA), several Cabinet officials were invited to the hearings scheduled on October 5 and
26, November 24 and December 12, 2005 but most of them failed to attend, DA Undersecretary Belinda Gonzales, DA
Assistant Secretary Felix Jose Montes, Fertilizer and Pesticide Authority Executive Director Norlito R. Gicana,17 and those
from the Department of Budget and Management18 having invoked E.O. 464.

In the budget hearings set by the Senate on February 8 and 13, 2006, Press Secretary and Presidential Spokesperson
Ignacio R. Bunye,19 DOJ Secretary Raul M. Gonzalez20 and Department of Interior and Local Government Undersecretary
Marius P. Corpus21 communicated their inability to attend due to lack of appropriate clearance from the President
pursuant to E.O. 464. During the February 13, 2005 budget hearing, however, Secretary Bunye was allowed to attend by
Executive Secretary Ermita.

On February 13, 2006, Jose Anselmo I. Cadiz and the incumbent members of the Board of Governors of the Integrated Bar
of the Philippines, as taxpayers, and the Integrated Bar of the Philippines as the official organization of all Philippine
lawyers, all invoking their constitutional right to be informed on matters of public interest, filed their petition for certiorari
and prohibition, docketed as G.R. No. 171246, and pray that E.O. 464 be declared null and void.

All the petitions pray for the issuance of a Temporary Restraining Order enjoining respondents from implementing,
enforcing, and observing E.O. 464.

In the oral arguments on the petitions conducted on February 21, 2006, the following substantive issues were ventilated:
(1) whether respondents committed grave abuse of discretion in implementing E.O. 464 prior to its publication in the
Official Gazette or in a newspaper of general circulation; and (2) whether E.O. 464 violates the following provisions of the
Constitution: Art. II, Sec. 28, Art. III, Sec. 4, Art. III, Sec. 7, Art. IV. Sec. 1, Art. VI, Sec. 21, Art. VI, Sec. 22, Art. XI, Sec. 1, and
Art. XIII, Sec. 16. The procedural issue of whether there is an actual case or controversy that calls for judicial review was not
taken up; instead, the parties were instructed to discuss it in their respective memoranda.

After the conclusion of the oral arguments, the parties were directed to submit their respective memoranda, paying
particular attention to the following propositions: (1) that E.O. 464 is, on its face, unconstitutional; and (2) assuming that it
is not, it is unconstitutional as applied in four instances, namely: (a) the so called Fertilizer scam; (b) the NorthRail
investigation (c) the Wiretapping activity of the ISAFP; and (d) the investigation on the Venable contract. 22

Petitioners in G.R. No. 16966023 and G.R. No. 16977724 filed their memoranda on March 7, 2006, while those in G.R. No.
16966725 and G.R. No. 16983426 filed theirs the next day or on March 8, 2006. Petitioners in G.R. No. 171246 did not file
any memorandum.

Petitioners Bayan Muna et al. in G.R. No. 169659, after their motion for extension to file memorandum 27 was granted,
subsequently filed a manifestation28 dated March 14, 2006 that it would no longer file its memorandum in the interest of
having the issues resolved soonest, prompting this Court to issue a Resolution reprimanding them. 29

Petitioners submit that E.O. 464 violates the following constitutional provisions:

Art. VI, Sec. 2130

Art. VI, Sec. 2231

Art. VI, Sec. 132

Art. XI, Sec. 133

Art. III, Sec. 734

Art. III, Sec. 435

 Art. XIII, Sec. 16 36

Art. II, Sec. 2837

Respondents Executive Secretary Ermita et al., on the other hand, pray in their consolidated memorandum38 on March 13,
2006 for the dismissal of the petitions for lack of merit.

The Court synthesizes the issues to be resolved as follows:

1. Whether E.O. 464 contravenes the power of inquiry vested in Congress;

2. Whether E.O. 464 violates the right of the people to information on matters of public concern; and

3. Whether respondents have committed grave abuse of discretion when they implemented E.O. 464 prior to its
publication in a newspaper of general circulation.

Essential requisites for judicial review

Before proceeding to resolve the issue of the constitutionality of E.O. 464, ascertainment of whether the requisites for a
valid exercise of the Court’s power of judicial review are present is in order.

Like almost all powers conferred by the Constitution, the power of judicial review is subject to limitations, to wit: (1) there
must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must
have standing to challenge the validity of the subject act or issuance; otherwise stated, he must have a personal and
substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the
question of constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be the
very lis mota of the case.39

Except with respect to the requisites of standing and existence of an actual case or controversy where the disagreement
between the parties lies, discussion of the rest of the requisites shall be omitted.

Standing

Respondents, through the Solicitor General, assert that the allegations in G.R. Nos. 169659, 169660 and 169667 make it
clear that they, adverting to the non-appearance of several officials of the executive department in the investigations
called by the different committees of the Senate, were brought to vindicate the constitutional duty of the Senate or its
different committees to conduct inquiry in aid of legislation or in the exercise of its oversight functions. They maintain that
Representatives Ocampo et al. have not shown any specific prerogative, power, and privilege of the House of
Representatives which had been effectively impaired by E.O. 464, there being no mention of any investigation called by
the House of Representatives or any of its committees which was aborted due to the implementation of E.O. 464.

As for Bayan Muna’s alleged interest as a party-list representing the marginalized and underrepresented, and that of the
other petitioner groups and individuals who profess to have standing as advocates and defenders of the Constitution,
respondents contend that such interest falls short of that required to confer standing on them as parties "injured-in-
fact."40

Respecting petitioner Chavez, respondents contend that Chavez may not claim an interest as a taxpayer for the
implementation of E.O. 464 does not involve the exercise of taxing or spending power. 41

With regard to the petition filed by the Senate, respondents argue that in the absence of a personal or direct injury by
reason of the issuance of E.O. 464, the Senate and its individual members are not the proper parties to assail the
constitutionality of E.O. 464.
Invoking this Court’s ruling in National Economic Protectionism Association v. Ongpin42 and Valmonte v. Philippine Charity
Sweepstakes Office,43 respondents assert that to be considered a proper party, one must have a personal and substantial
interest in the case, such that he has sustained or will sustain direct injury due to the enforcement of E.O. 464. 44

That the Senate of the Philippines has a fundamental right essential not only for intelligent public decision-making in a
democratic system, but more especially for sound legislation45 is not disputed. E.O. 464, however, allegedly stifles the
ability of the members of Congress to access information that is crucial to law-making.46 Verily, the Senate, including its
individual members, has a substantial and direct interest over the outcome of the controversy and is the proper party to
assail the constitutionality of E.O. 464. Indeed, legislators have standing to maintain inviolate the prerogative, powers and
privileges vested by the Constitution in their office and are allowed to sue to question the validity of any official action
which they claim infringes their prerogatives as legislators.47

In the same vein, party-list representatives Satur Ocampo (Bayan Muna), Teodoro Casino (Bayan Muna), Joel Virador
(Bayan Muna), Crispin Beltran (Anakpawis), Rafael Mariano (Anakpawis), and Liza Maza (Gabriela) are allowed to sue to
question the constitutionality of E.O. 464, the absence of any claim that an investigation called by the House of
Representatives or any of its committees was aborted due to the implementation of E.O. 464 notwithstanding, it being
sufficient that a claim is made that E.O. 464 infringes on their constitutional rights and duties as members of Congress to
conduct investigation in aid of legislation and conduct oversight functions in the implementation of laws.

The national political party, Bayan Muna, likewise meets the standing requirement as it obtained three seats in the House
of Representatives in the 2004 elections and is, therefore, entitled to participate in the legislative process consonant with
the declared policy underlying the party list system of affording citizens belonging to marginalized and underrepresented
sectors, organizations and parties who lack well-defined political constituencies to contribute to the formulation and
enactment of legislation that will benefit the nation.48

As Bayan Muna and Representatives Ocampo et al. have the standing to file their petitions, passing on the standing of
their co-petitioners Courage and Codal is rendered unnecessary. 49

In filing their respective petitions, Chavez, the ALG which claims to be an organization of citizens, and the incumbent
members of the IBP Board of Governors and the IBP in behalf of its lawyer members, 50 invoke their constitutional right to
information on matters of public concern, asserting that the right to information, curtailed and violated by E.O. 464, is
essential to the effective exercise of other constitutional rights 51 and to the maintenance of the balance of power among
the three branches of the government through the principle of checks and balances.52

It is well-settled that when suing as a citizen, the interest of the petitioner in assailing the constitutionality of laws,
presidential decrees, orders, and other regulations, must be direct and personal. In Franciso v. House of
Representatives,53 this Court held that when the proceeding involves the assertion of a public right, the mere fact that he
is a citizen satisfies the requirement of personal interest.

As for petitioner PDP-Laban, it asseverates that it is clothed with legal standing in view of the transcendental issues raised
in its petition which this Court needs to resolve in order to avert a constitutional crisis. For it to be accorded standing on
the ground of transcendental importance, however, it must establish (1) the character of the funds (that it is public) or
other assets involved in the case, (2) the presence of a clear case of disregard of a constitutional or statutory prohibition
by the public respondent agency or instrumentality of the government, and (3) the lack of any party with a more direct
and specific interest in raising the questions being raised.54 The first and last determinants not being present as no public
funds or assets are involved and petitioners in G.R. Nos. 169777 and 169659 have direct and specific interests in the
resolution of the controversy, petitioner PDP-Laban is bereft of standing to file its petition. Its allegation that E.O. 464
hampers its legislative agenda is vague and uncertain, and at best is only a "generalized interest" which it shares with the
rest of the political parties. Concrete injury, whether actual or threatened, is that indispensable element of a dispute which
serves in part to cast it in a form traditionally capable of judicial resolution.55 In fine, PDP-Laban’s alleged interest as a
political party does not suffice to clothe it with legal standing.

Actual Case or Controversy

Petitioners assert that an actual case exists, they citing the absence of the executive officials invited by the Senate to its
hearings after the issuance of E.O. 464, particularly those on the NorthRail project and the wiretapping controversy.

Respondents counter that there is no case or controversy, there being no showing that President Arroyo has actually
withheld her consent or prohibited the appearance of the invited officials. 56 These officials, they claim, merely
communicated to the Senate that they have not yet secured the consent of the President, not that the President
prohibited their attendance.57 Specifically with regard to the AFP officers who did not attend the hearing on September 28,
2005, respondents claim that the instruction not to attend without the President’s consent was based on its role as
Commander-in-Chief of the Armed Forces, not on E.O. 464.

Respondents thus conclude that the petitions merely rest on an unfounded apprehension that the President will abuse its
power of preventing the appearance of officials before Congress, and that such apprehension is not sufficient for
challenging the validity of E.O. 464.

The Court finds respondents’ assertion that the President has not withheld her consent or prohibited the appearance of
the officials concerned immaterial in determining the existence of an actual case or controversy insofar as E.O. 464 is
concerned. For E.O. 464 does not require either a deliberate withholding of consent or an express prohibition issuing from
the President in order to bar officials from appearing before Congress.

As the implementation of the challenged order has already resulted in the absence of officials invited to the hearings of
petitioner Senate of the Philippines, it would make no sense to wait for any further event before considering the present
case ripe for adjudication. Indeed, it would be sheer abandonment of duty if this Court would now refrain from passing on
the constitutionality of E.O. 464.

Constitutionality of E.O. 464

E.O. 464, to the extent that it bars the appearance of executive officials before Congress, deprives Congress of the
information in the possession of these officials. To resolve the question of whether such withholding of information
violates the Constitution, consideration of the general power of Congress to obtain information, otherwise known as the
power of inquiry, is in order.

The power of inquiry

The Congress power of inquiry is expressly recognized in Section 21 of Article VI of the Constitution which reads:

SECTION 21. The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid
of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by
such inquiries shall be respected. (Underscoring supplied)

This provision is worded exactly as Section 8 of Article VIII of the 1973 Constitution except that, in the latter, it vests the
power of inquiry in the unicameral legislature established therein – the Batasang Pambansa – and its committees.

The 1935 Constitution did not contain a similar provision. Nonetheless, in Arnault v. Nazareno, 58 a case decided in 1950
under that Constitution, the Court already recognized that the power of inquiry is inherent in the power to legislate.

Arnault involved a Senate investigation of the reportedly anomalous purchase of the Buenavista and Tambobong Estates
by the Rural Progress Administration. Arnault, who was considered a leading witness in the controversy, was called to
testify thereon by the Senate. On account of his refusal to answer the questions of the senators on an important point, he
was, by resolution of the Senate, detained for contempt. Upholding the Senate’s power to punish Arnault for contempt,
this Court held:

Although there is no provision in the Constitution expressly investing either House of Congress with power to make
investigations and exact testimony to the end that it may exercise its legislative functions advisedly and effectively, such
power is so far incidental to the legislative function as to be implied. In other words, the power of inquiry – with process to
enforce it – is an essential and appropriate auxiliary to the legislative function. A legislative body cannot legislate wisely or
effectively in the absence of information respecting the conditions which the legislation is intended to affect or change;
and where the legislative body does not itself possess the requisite information – which is not infrequently true – recourse
must be had to others who do possess it. Experience has shown that mere requests for such information are often
unavailing, and also that information which is volunteered is not always accurate or complete; so some means of
compulsion is essential to obtain what is needed.59 . . . (Emphasis and underscoring supplied)

That this power of inquiry is broad enough to cover officials of the executive branch may be deduced from the same case.
The power of inquiry, the Court therein ruled, is co-extensive with the power to legislate.60 The matters which may be a
proper subject of legislation and those which may be a proper subject of investigation are one. It follows that the
operation of government, being a legitimate subject for legislation, is a proper subject for investigation.

Thus, the Court found that the Senate investigation of the government transaction involved in Arnault was a proper
exercise of the power of inquiry. Besides being related to the expenditure of public funds of which Congress is the
guardian, the transaction, the Court held, "also involved government agencies created by Congress and officers whose
positions it is within the power of Congress to regulate or even abolish."

Since Congress has authority to inquire into the operations of the executive branch, it would be incongruous to hold that
the power of inquiry does not extend to executive officials who are the most familiar with and informed on executive
operations.

As discussed in Arnault, the power of inquiry, "with process to enforce it," is grounded on the necessity of information in
the legislative process. If the information possessed by executive officials on the operation of their offices is necessary for
wise legislation on that subject, by parity of reasoning, Congress has the right to that information and the power to
compel the disclosure thereof.

As evidenced by the American experience during the so-called "McCarthy era," however, the right of Congress to conduct
inquiries in aid of legislation is, in theory, no less susceptible to abuse than executive or judicial power. It may thus be
subjected to judicial review pursuant to the Court’s certiorari powers under Section 1, Article VIII of the Constitution.

For one, as noted in Bengzon v. Senate Blue Ribbon Committee, 61 the inquiry itself might not properly be in aid of
legislation, and thus beyond the constitutional power of Congress. Such inquiry could not usurp judicial functions.
Parenthetically, one possible way for Congress to avoid such a result as occurred in Bengzon is to indicate in its invitations
to the public officials concerned, or to any person for that matter, the possible needed statute which prompted the need
for the inquiry. Given such statement in its invitations, along with the usual indication of the subject of inquiry and the
questions relative to and in furtherance thereof, there would be less room for speculation on the part of the person invited
on whether the inquiry is in aid of legislation.

Section 21, Article VI likewise establishes crucial safeguards that proscribe the legislative power of inquiry. The provision
requires that the inquiry be done in accordance with the Senate or House’s duly published rules of procedure, necessarily
implying the constitutional infirmity of an inquiry conducted without duly published rules of procedure. Section 21 also
mandates that the rights of persons appearing in or affected by such inquiries be respected, an imposition that obligates
Congress to adhere to the guarantees in the Bill of Rights.

These abuses are, of course, remediable before the courts, upon the proper suit filed by the persons affected, even if they
belong to the executive branch. Nonetheless, there may be exceptional circumstances, none appearing to obtain at
present, wherein a clear pattern of abuse of the legislative power of inquiry might be established, resulting in palpable
violations of the rights guaranteed to members of the executive department under the Bill of Rights. In such instances,
depending on the particulars of each case, attempts by the Executive Branch to forestall these abuses may be accorded
judicial sanction.
Even where the inquiry is in aid of legislation, there are still recognized exemptions to the power of inquiry, which
exemptions fall under the rubric of "executive privilege." Since this term figures prominently in the challenged order, it
being mentioned in its provisions, its preambular clauses,62 and in its very title, a discussion of executive privilege is crucial
for determining the constitutionality of E.O. 464.

Executive privilege

The phrase "executive privilege" is not new in this jurisdiction. It has been used even prior to the promulgation of the 1986
Constitution.63 Being of American origin, it is best understood in light of how it has been defined and used in the legal
literature of the United States.

Schwartz defines executive privilege as "the power of the Government to withhold information from the public, the courts,
and the Congress."64 Similarly, Rozell defines it as "the right of the President and high-level executive branch officers to
withhold information from Congress, the courts, and ultimately the public." 65

Executive privilege is, nonetheless, not a clear or unitary concept. 66 It has encompassed claims of varying kinds.67 Tribe, in
fact, comments that while it is customary to employ the phrase "executive privilege," it may be more accurate to speak of
executive privileges "since presidential refusals to furnish information may be actuated by any of at least three distinct
kinds of considerations, and may be asserted, with differing degrees of success, in the context of either judicial or
legislative investigations."

One variety of the privilege, Tribe explains, is the state secrets privilege invoked by U.S. Presidents, beginning with
Washington, on the ground that the information is of such nature that its disclosure would subvert crucial military or
diplomatic objectives. Another variety is the informer’s privilege, or the privilege of the Government not to disclose the
identity of persons who furnish information of violations of law to officers charged with the enforcement of that law.
Finally, a generic privilege for internal deliberations has been said to attach to intragovernmental documents reflecting
advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and
policies are formulated. 68

Tribe’s comment is supported by the ruling in In re Sealed Case, thus:

Since the beginnings of our nation, executive officials have claimed a variety of privileges to resist disclosure of
information the confidentiality of which they felt was crucial to fulfillment of the unique role and responsibilities of the
executive branch of our government. Courts ruled early that the executive had a right to withhold documents that might
reveal military or state secrets. The courts have also granted the executive a right to withhold the identity of government
informers in some circumstances and a qualified right to withhold information related to pending investigations. x x
x"69 (Emphasis and underscoring supplied)

The entry in Black’s Law Dictionary on "executive privilege" is similarly instructive regarding the scope of the doctrine.

This privilege, based on the constitutional doctrine of separation of powers, exempts the executive from disclosure
requirements applicable to the ordinary citizen or organization where such exemption is necessary to the discharge of
highly important executive responsibilities involved in maintaining governmental operations, and extends not only to
military and diplomatic secrets but also to documents integral to an appropriate exercise of the executive’ domestic
decisional and policy making functions, that is, those documents reflecting the frank expression necessary in intra-
governmental advisory and deliberative communications.70 (Emphasis and underscoring supplied)

That a type of information is recognized as privileged does not, however, necessarily mean that it would be considered
privileged in all instances. For in determining the validity of a claim of privilege, the question that must be asked is not
only whether the requested information falls within one of the traditional privileges, but also whether that privilege should
be honored in a given procedural setting.71
The leading case on executive privilege in the United States is U.S. v. Nixon, 72 decided in 1974. In issue in that case was
the validity of President Nixon’s claim of executive privilege against a subpoena issued by a district court requiring the
production of certain tapes and documents relating to the Watergate investigations. The claim of privilege was based on
the President’s general interest in the confidentiality of his conversations and correspondence. The U.S. Court held that
while there is no explicit reference to a privilege of confidentiality in the U.S. Constitution, it is constitutionally based to the
extent that it relates to the effective discharge of a President’s powers. The Court, nonetheless, rejected the President’s
claim of privilege, ruling that the privilege must be balanced against the public interest in the fair administration of
criminal justice. Notably, the Court was careful to clarify that it was not there addressing the issue of claims of privilege in
a civil litigation or against congressional demands for information.

Cases in the U.S. which involve claims of executive privilege against Congress are rare. 73 Despite frequent assertion of the
privilege to deny information to Congress, beginning with President Washington’s refusal to turn over treaty negotiation
records to the House of Representatives, the U.S. Supreme Court has never adjudicated the issue. 74 However, the U.S.
Court of Appeals for the District of Columbia Circuit, in a case decided earlier in the same year as Nixon, recognized the
President’s privilege over his conversations against a congressional subpoena.75 Anticipating the balancing approach
adopted by the U.S. Supreme Court in Nixon, the Court of Appeals weighed the public interest protected by the claim of
privilege against the interest that would be served by disclosure to the Committee. Ruling that the balance favored the
President, the Court declined to enforce the subpoena. 76

In this jurisdiction, the doctrine of executive privilege was recognized by this Court in Almonte v. Vasquez. 77 Almonte used
the term in reference to the same privilege subject of Nixon. It quoted the following portion of the Nixon decision which
explains the basis for the privilege:

"The expectation of a President to the confidentiality of his conversations and correspondences, like the claim of
confidentiality of judicial deliberations, for example, has all the values to which we accord deference for the privacy of all
citizens and, added to those values, is the necessity for protection of the public interest in candid, objective, and even
blunt or harsh opinions in Presidential decision-making. A President and those who assist him must be free to explore
alternatives in the process of shaping policies and making decisions and to do so in a way many would be unwilling to
express except privately. These are the considerations justifying a presumptive privilege for Presidential communications.
The privilege is fundamental to the operation of government and inextricably rooted in the separation of powers under
the Constitution x x x " (Emphasis and underscoring supplied)

Almonte involved a subpoena duces tecum issued by the Ombudsman against the therein petitioners. It did not involve, as
expressly stated in the decision, the right of the people to information. 78 Nonetheless, the Court recognized that there are
certain types of information which the government may withhold from the public, thus acknowledging, in substance if not
in name, that executive privilege may be claimed against citizens’ demands for information.

In Chavez v. PCGG,79 the Court held that this jurisdiction recognizes the common law holding that there is a "governmental
privilege against public disclosure with respect to state secrets regarding military, diplomatic and other national security
matters."80 The same case held that closed-door Cabinet meetings are also a recognized limitation on the right to
information.

Similarly, in Chavez v. Public Estates Authority, 81 the Court ruled that the right to information does not extend to matters
recognized as "privileged information under the separation of powers," 82 by which the Court meant Presidential
conversations, correspondences, and discussions in closed-door Cabinet meetings. It also held that information on military
and diplomatic secrets and those affecting national security, and information on investigations of crimes by law
enforcement agencies before the prosecution of the accused were exempted from the right to information.

From the above discussion on the meaning and scope of executive privilege, both in the United States and in this
jurisdiction, a clear principle emerges. Executive privilege, whether asserted against Congress, the courts, or the public, is
recognized only in relation to certain types of information of a sensitive character. While executive privilege is a
constitutional concept, a claim thereof may be valid or not depending on the ground invoked to justify it and the context
in which it is made. Noticeably absent is any recognition that executive officials are exempt from the duty to disclose
information by the mere fact of being executive officials. Indeed, the extraordinary character of the exemptions indicates
that the presumption inclines heavily against executive secrecy and in favor of disclosure.

Validity of Section 1

Section 1 is similar to Section 3 in that both require the officials covered by them to secure the consent of the President
prior to appearing before Congress. There are significant differences between the two provisions, however, which
constrain this Court to discuss the validity of these provisions separately.

Section 1 specifically applies to department heads. It does not, unlike Section 3, require a prior determination by any
official whether they are covered by E.O. 464. The President herself has, through the challenged order, made the
determination that they are. Further, unlike also Section 3, the coverage of department heads under Section 1 is not made
to depend on the department heads’ possession of any information which might be covered by executive privilege. In fact,
in marked contrast to Section 3 vis-à-vis Section 2, there is no reference to executive privilege at all. Rather, the required
prior consent under Section 1 is grounded on Article VI, Section 22 of the Constitution on what has been referred to as the
question hour.

SECTION 22. The heads of departments may upon their own initiative, with the consent of the President, or upon the
request of either House, as the rules of each House shall provide, appear before and be heard by such House on any
matter pertaining to their departments. Written questions shall be submitted to the President of the Senate or the Speaker
of the House of Representatives at least three days before their scheduled appearance. Interpellations shall not be limited
to written questions, but may cover matters related thereto. When the security of the State or the public interest so
requires and the President so states in writing, the appearance shall be conducted in executive session.

Determining the validity of Section 1 thus requires an examination of the meaning of Section 22 of Article VI. Section 22
which provides for the question hour must be interpreted vis-à-vis Section 21 which provides for the power of either
House of Congress to "conduct inquiries in aid of legislation." As the following excerpt of the deliberations of the
Constitutional Commission shows, the framers were aware that these two provisions involved distinct functions of
Congress.

MR. MAAMBONG. x x x When we amended Section 20 [now Section 22 on the Question Hour] yesterday, I noticed that
members of the Cabinet cannot be compelled anymore to appear before the House of Representatives or before the
Senate. I have a particular problem in this regard, Madam President, because in our experience in the Regular Batasang
Pambansa – as the Gentleman himself has experienced in the interim Batasang Pambansa – one of the most competent
inputs that we can put in our committee deliberations, either in aid of legislation or in congressional investigations, is the
testimonies of Cabinet ministers. We usually invite them, but if they do not come and it is a congressional investigation,
we usually issue subpoenas.

I want to be clarified on a statement made by Commissioner Suarez when he said that the fact that the Cabinet ministers
may refuse to come to the House of Representatives or the Senate [when requested under Section 22] does not mean that
they need not come when they are invited or subpoenaed by the committee of either House when it comes to inquiries in
aid of legislation or congressional investigation. According to Commissioner Suarez, that is allowed and their presence can
be had under Section 21. Does the gentleman confirm this, Madam President?

MR. DAVIDE. We confirm that, Madam President, because Section 20 refers only to what was originally the Question Hour,
whereas, Section 21 would refer specifically to inquiries in aid of legislation, under which anybody for that matter, may be
summoned and if he refuses, he can be held in contempt of the House. 83 (Emphasis and underscoring supplied)

A distinction was thus made between inquiries in aid of legislation and the question hour. While attendance was meant to
be discretionary in the question hour, it was compulsory in inquiries in aid of legislation. The reference to Commissioner
Suarez bears noting, he being one of the proponents of the amendment to make the appearance of department heads
discretionary in the question hour.
So clearly was this distinction conveyed to the members of the Commission that the Committee on Style, precisely in
recognition of this distinction, later moved the provision on question hour from its original position as Section 20 in the
original draft down to Section 31, far from the provision on inquiries in aid of legislation. This gave rise to the following
exchange during the deliberations:

MR. GUINGONA. [speaking in his capacity as Chairman of the Committee on Style] We now go, Mr. Presiding Officer, to
the Article on Legislative and may I request the chairperson of the Legislative Department, Commissioner Davide, to give
his reaction.

THE PRESIDING OFFICER (Mr. Jamir). Commissioner Davide is recognized.|avvphi|.net

MR. DAVIDE. Thank you, Mr. Presiding Officer. I have only one reaction to the Question Hour. I propose that instead of
putting it as Section 31, it should follow Legislative Inquiries.

THE PRESIDING OFFICER. What does the committee say?

MR. GUINGONA. I ask Commissioner Maambong to reply, Mr. Presiding Officer.

MR. MAAMBONG. Actually, we considered that previously when we sequenced this but we reasoned that in Section 21,
which is Legislative Inquiry, it is actually a power of Congress in terms of its own lawmaking; whereas, a Question Hour is
not actually a power in terms of its own lawmaking power because in Legislative Inquiry, it is in aid of legislation. And so
we put Question Hour as Section 31. I hope Commissioner Davide will consider this.

MR. DAVIDE. The Question Hour is closely related with the legislative power, and it is precisely as a complement to or a
supplement of the Legislative Inquiry. The appearance of the members of Cabinet would be very, very essential not only in
the application of check and balance but also, in effect, in aid of legislation.

MR. MAAMBONG. After conferring with the committee, we find merit in the suggestion of Commissioner Davide. In other
words, we are accepting that and so this Section 31 would now become Section 22. Would it be, Commissioner Davide?

MR. DAVIDE. Yes.84 (Emphasis and underscoring supplied)

Consistent with their statements earlier in the deliberations, Commissioners Davide and Maambong proceeded from the
same assumption that these provisions pertained to two different functions of the legislature. Both Commissioners
understood that the power to conduct inquiries in aid of legislation is different from the power to conduct inquiries during
the question hour. Commissioner Davide’s only concern was that the two provisions on these distinct powers be placed
closely together, they being complementary to each other. Neither Commissioner considered them as identical functions
of Congress.

The foregoing opinion was not the two Commissioners’ alone. From the above-quoted exchange, Commissioner
Maambong’s committee – the Committee on Style – shared the view that the two provisions reflected distinct functions of
Congress. Commissioner Davide, on the other hand, was speaking in his capacity as Chairman of the Committee on the
Legislative Department. His views may thus be presumed as representing that of his Committee.

In the context of a parliamentary system of government, the "question hour" has a definite meaning. It is a period of
confrontation initiated by Parliament to hold the Prime Minister and the other ministers accountable for their acts and the
operation of the government,85 corresponding to what is known in Britain as the question period. There was a specific
provision for a question hour in the 1973 Constitution86 which made the appearance of ministers mandatory. The same
perfectly conformed to the parliamentary system established by that Constitution, where the ministers are also members
of the legislature and are directly accountable to it.

An essential feature of the parliamentary system of government is the immediate accountability of the Prime Minister and
the Cabinet to the National Assembly. They shall be responsible to the National Assembly for the program of government
and shall determine the guidelines of national policy. Unlike in the presidential system where the tenure of office of all
elected officials cannot be terminated before their term expired, the Prime Minister and the Cabinet remain in office only
as long as they enjoy the confidence of the National Assembly. The moment this confidence is lost the Prime Minister and
the Cabinet may be changed.87

The framers of the 1987 Constitution removed the mandatory nature of such appearance during the question hour in the
present Constitution so as to conform more fully to a system of separation of powers. 88 To that extent, the question hour,
as it is presently understood in this jurisdiction, departs from the question period of the parliamentary system. That
department heads may not be required to appear in a question hour does not, however, mean that the legislature is
rendered powerless to elicit information from them in all circumstances. In fact, in light of the absence of a mandatory
question period, the need to enforce Congress’ right to executive information in the performance of its legislative function
becomes more imperative. As Schwartz observes:

Indeed, if the separation of powers has anything to tell us on the subject under discussion, it is that the Congress has the
right to obtain information from any source – even from officials of departments and agencies in the executive branch. In
the United States there is, unlike the situation which prevails in a parliamentary system such as that in Britain, a clear
separation between the legislative and executive branches. It is this very separation that makes the congressional right to
obtain information from the executive so essential, if the functions of the Congress as the elected representatives of the
people are adequately to be carried out. The absence of close rapport between the legislative and executive branches in
this country, comparable to those which exist under a parliamentary system, and the nonexistence in the Congress of an
institution such as the British question period have perforce made reliance by the Congress upon its right to obtain
information from the executive essential, if it is intelligently to perform its legislative tasks. Unless the Congress possesses
the right to obtain executive information, its power of oversight of administration in a system such as ours becomes a
power devoid of most of its practical content, since it depends for its effectiveness solely upon information parceled out
ex gratia by the executive.89 (Emphasis and underscoring supplied)

Sections 21 and 22, therefore, while closely related and complementary to each other, should not be considered as
pertaining to the same power of Congress. One specifically relates to the power to conduct inquiries in aid of legislation,
the aim of which is to elicit information that may be used for legislation, while the other pertains to the power to conduct
a question hour, the objective of which is to obtain information in pursuit of Congress’ oversight function.

When Congress merely seeks to be informed on how department heads are implementing the statutes which it has issued,
its right to such information is not as imperative as that of the President to whom, as Chief Executive, such department
heads must give a report of their performance as a matter of duty. In such instances, Section 22, in keeping with the
separation of powers, states that Congress may only request their appearance. Nonetheless, when the inquiry in which
Congress requires their appearance is "in aid of legislation" under Section 21, the appearance is mandatory for the same
reasons stated in Arnault.90

In fine, the oversight function of Congress may be facilitated by compulsory process only to the extent that it is performed
in pursuit of legislation. This is consistent with the intent discerned from the deliberations of the Constitutional
Commission.

Ultimately, the power of Congress to compel the appearance of executive officials under Section 21 and the lack of it
under Section 22 find their basis in the principle of separation of powers. While the executive branch is a co-equal branch
of the legislature, it cannot frustrate the power of Congress to legislate by refusing to comply with its demands for
information.

When Congress exercises its power of inquiry, the only way for department heads to exempt themselves therefrom is by a
valid claim of privilege. They are not exempt by the mere fact that they are department heads. Only one executive official
may be exempted from this power — the President on whom executive power is vested, hence, beyond the reach of
Congress except through the power of impeachment. It is based on her being the highest official of the executive branch,
and the due respect accorded to a co-equal branch of government which is sanctioned by a long-standing custom.
By the same token, members of the Supreme Court are also exempt from this power of inquiry. Unlike the Presidency,
judicial power is vested in a collegial body; hence, each member thereof is exempt on the basis not only of separation of
powers but also on the fiscal autonomy and the constitutional independence of the judiciary. This point is not in dispute,
as even counsel for the Senate, Sen. Joker Arroyo, admitted it during the oral argument upon interpellation of the Chief
Justice.

Having established the proper interpretation of Section 22, Article VI of the Constitution, the Court now proceeds to pass
on the constitutionality of Section 1 of E.O. 464.

Section 1, in view of its specific reference to Section 22 of Article VI of the Constitution and the absence of any reference
to inquiries in aid of legislation, must be construed as limited in its application to appearances of department heads in the
question hour contemplated in the provision of said Section 22 of Article VI. The reading is dictated by the basic rule of
construction that issuances must be interpreted, as much as possible, in a way that will render it constitutional.

The requirement then to secure presidential consent under Section 1, limited as it is only to appearances in the question
hour, is valid on its face. For under Section 22, Article VI of the Constitution, the appearance of department heads in the
question hour is discretionary on their part.

Section 1 cannot, however, be applied to appearances of department heads in inquiries in aid of legislation. Congress is
not bound in such instances to respect the refusal of the department head to appear in such inquiry, unless a valid claim
of privilege is subsequently made, either by the President herself or by the Executive Secretary.

Validity of Sections 2 and 3

Section 3 of E.O. 464 requires all the public officials enumerated in Section 2(b) to secure the consent of the President
prior to appearing before either house of Congress. The enumeration is broad. It covers all senior officials of executive
departments, all officers of the AFP and the PNP, and all senior national security officials who, in the judgment of the
heads of offices designated in the same section (i.e. department heads, Chief of Staff of the AFP, Chief of the PNP, and the
National Security Adviser), are "covered by the executive privilege."

The enumeration also includes such other officers as may be determined by the President. Given the title of Section 2 —
"Nature, Scope and Coverage of Executive Privilege" —, it is evident that under the rule of ejusdem generis, the
determination by the President under this provision is intended to be based on a similar finding of coverage under
executive privilege.

En passant, the Court notes that Section 2(b) of E.O. 464 virtually states that executive privilege actually covers persons.
Such is a misuse of the doctrine. Executive privilege, as discussed above, is properly invoked in relation to specific
categories of information and not to categories of persons.

In light, however, of Sec 2(a) of E.O. 464 which deals with the nature, scope and coverage of executive privilege, the
reference to persons being "covered by the executive privilege" may be read as an abbreviated way of saying that the
person is in possession of information which is, in the judgment of the head of office concerned, privileged as defined in
Section 2(a). The Court shall thus proceed on the assumption that this is the intention of the challenged order.

Upon a determination by the designated head of office or by the President that an official is "covered by the executive
privilege," such official is subjected to the requirement that he first secure the consent of the President prior to appearing
before Congress. This requirement effectively bars the appearance of the official concerned unless the same is permitted
by the President. The proviso allowing the President to give its consent means nothing more than that the President may
reverse a prohibition which already exists by virtue of E.O. 464.

Thus, underlying this requirement of prior consent is the determination by a head of office, authorized by the President
under E.O. 464, or by the President herself, that such official is in possession of information that is covered by executive
privilege. This determination then becomes the basis for the official’s not showing up in the legislative investigation.
In view thereof, whenever an official invokes E.O. 464 to justify his failure to be present, such invocation must be construed
as a declaration to Congress that the President, or a head of office authorized by the President, has determined that the
requested information is privileged, and that the President has not reversed such determination. Such declaration,
however, even without mentioning the term "executive privilege," amounts to an implied claim that the information is
being withheld by the executive branch, by authority of the President, on the basis of executive privilege. Verily, there is an
implied claim of privilege.

The letter dated September 28, 2005 of respondent Executive Secretary Ermita to Senate President Drilon illustrates the
implied nature of the claim of privilege authorized by E.O. 464. It reads:

In connection with the inquiry to be conducted by the Committee of the Whole regarding the Northrail Project of the
North Luzon Railways Corporation on 29 September 2005 at 10:00 a.m., please be informed that officials of the Executive
Department invited to appear at the meeting will not be able to attend the same without the consent of the President,
pursuant to Executive Order No. 464 (s. 2005), entitled "Ensuring Observance Of The Principle Of Separation Of Powers,
Adherence To The Rule On Executive Privilege And Respect For The Rights Of Public Officials Appearing In Legislative
Inquiries In Aid Of Legislation Under The Constitution, And For Other Purposes". Said officials have not secured the
required consent from the President. (Underscoring supplied)

The letter does not explicitly invoke executive privilege or that the matter on which these officials are being requested to
be resource persons falls under the recognized grounds of the privilege to justify their absence. Nor does it expressly state
that in view of the lack of consent from the President under E.O. 464, they cannot attend the hearing.

Significant premises in this letter, however, are left unstated, deliberately or not. The letter assumes that the invited
officials are covered by E.O. 464. As explained earlier, however, to be covered by the order means that a determination has
been made, by the designated head of office or the President, that the invited official possesses information that is
covered by executive privilege. Thus, although it is not stated in the letter that such determination has been made, the
same must be deemed implied. Respecting the statement that the invited officials have not secured the consent of the
President, it only means that the President has not reversed the standing prohibition against their appearance before
Congress.

Inevitably, Executive Secretary Ermita’s letter leads to the conclusion that the executive branch, either through the
President or the heads of offices authorized under E.O. 464, has made a determination that the information required by
the Senate is privileged, and that, at the time of writing, there has been no contrary pronouncement from the President. In
fine, an implied claim of privilege has been made by the executive.

While there is no Philippine case that directly addresses the issue of whether executive privilege may be invoked against
Congress, it is gathered from Chavez v. PEA that certain information in the possession of the executive may validly be
claimed as privileged even against Congress. Thus, the case holds:

There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of
powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door
Cabinet meetings which, like internal-deliberations of the Supreme Court and other collegiate courts, or executive sessions
of either house of Congress, are recognized as confidential. This kind of information cannot be pried open by a co-equal
branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and
pressure by interested parties, is essential to protect the independence of decision-making of those tasked to exercise
Presidential, Legislative and Judicial power. This is not the situation in the instant case.91 (Emphasis and underscoring
supplied)

Section 3 of E.O. 464, therefore, cannot be dismissed outright as invalid by the mere fact that it sanctions claims of
executive privilege. This Court must look further and assess the claim of privilege authorized by the Order to determine
whether it is valid.
While the validity of claims of privilege must be assessed on a case to case basis, examining the ground invoked therefor
and the particular circumstances surrounding it, there is, in an implied claim of privilege, a defect that renders it invalid per
se. By its very nature, and as demonstrated by the letter of respondent Executive Secretary quoted above, the implied
claim authorized by Section 3 of E.O. 464 is not accompanied by any specific allegation of the basis thereof (e.g., whether
the information demanded involves military or diplomatic secrets, closed-door Cabinet meetings, etc.). While Section 2(a)
enumerates the types of information that are covered by the privilege under the challenged order, Congress is left to
speculate as to which among them is being referred to by the executive. The enumeration is not even intended to be
comprehensive, but a mere statement of what is included in the phrase "confidential or classified information between the
President and the public officers covered by this executive order."

Certainly, Congress has the right to know why the executive considers the requested information privileged. It does not
suffice to merely declare that the President, or an authorized head of office, has determined that it is so, and that the
President has not overturned that determination. Such declaration leaves Congress in the dark on how the requested
information could be classified as privileged. That the message is couched in terms that, on first impression, do not seem
like a claim of privilege only makes it more pernicious. It threatens to make Congress doubly blind to the question of why
the executive branch is not providing it with the information that it has requested.

A claim of privilege, being a claim of exemption from an obligation to disclose information, must, therefore, be clearly
asserted. As U.S. v. Reynolds teaches:

The privilege belongs to the government and must be asserted by it; it can neither be claimed nor waived by a private
party. It is not to be lightly invoked. There must be a formal claim of privilege, lodged by the head of the department
which has control over the matter, after actual personal consideration by that officer. The court itself must determine
whether the circumstances are appropriate for the claim of privilege, and yet do so without forcing a disclosure of the very
thing the privilege is designed to protect.92 (Underscoring supplied)

Absent then a statement of the specific basis of a claim of executive privilege, there is no way of determining whether it
falls under one of the traditional privileges, or whether, given the circumstances in which it is made, it should be
respected.93 These, in substance, were the same criteria in assessing the claim of privilege asserted against the
Ombudsman in Almonte v. Vasquez94 and, more in point, against a committee of the Senate in Senate Select Committee
on Presidential Campaign Activities v. Nixon.95

A.O. Smith v. Federal Trade Commission is enlightening:

[T]he lack of specificity renders an assessment of the potential harm resulting from disclosure impossible, thereby
preventing the Court from balancing such harm against plaintiffs’ needs to determine whether to override any claims of
privilege.96 (Underscoring supplied)

And so is U.S. v. Article of Drug:97

On the present state of the record, this Court is not called upon to perform this balancing operation. In stating its
objection to claimant’s interrogatories, government asserts, and nothing more, that the disclosures sought by claimant
would inhibit the free expression of opinion that non-disclosure is designed to protect. The government has not shown –
nor even alleged – that those who evaluated claimant’s product were involved in internal policymaking, generally, or in
this particular instance. Privilege cannot be set up by an unsupported claim. The facts upon which the privilege is based
must be established. To find these interrogatories objectionable, this Court would have to assume that the evaluation and
classification of claimant’s products was a matter of internal policy formulation, an assumption in which this Court is
unwilling to indulge sua sponte.98 (Emphasis and underscoring supplied)

Mobil Oil Corp. v. Department of Energy99 similarly emphasizes that "an agency must provide ‘precise and certain’ reasons
for preserving the confidentiality of requested information."

Black v. Sheraton Corp. of America100 amplifies, thus:

A formal and proper claim of executive privilege requires a specific designation and description of the documents within
its scope as well as precise and certain reasons for preserving their confidentiality. Without this specificity, it is impossible
for a court to analyze the claim short of disclosure of the very thing sought to be protected. As the affidavit now stands,
the Court has little more than its sua sponte speculation with which to weigh the applicability of the claim. An improperly
asserted claim of privilege is no claim of privilege. Therefore, despite the fact that a claim was made by the proper
executive as Reynolds requires, the Court can not recognize the claim in the instant case because it is legally insufficient to
allow the Court to make a just and reasonable determination as to its applicability. To recognize such a broad claim in
which the Defendant has given no precise or compelling reasons to shield these documents from outside scrutiny, would
make a farce of the whole procedure.101 (Emphasis and underscoring supplied)

Due respect for a co-equal branch of government, moreover, demands no less than a claim of privilege clearly stating the
grounds therefor. Apropos is the following ruling in McPhaul v. U.S:102

We think the Court’s decision in United States v. Bryan, 339 U.S. 323, 70 S. Ct. 724, is highly relevant to these questions. For
it is as true here as it was there, that ‘if (petitioner) had legitimate reasons for failing to produce the records of the
association, a decent respect for the House of Representatives, by whose authority the subpoenas issued, would have
required that (he) state (his) reasons for noncompliance upon the return of the writ. Such a statement would have given
the Subcommittee an opportunity to avoid the blocking of its inquiry by taking other appropriate steps to obtain the
records. ‘To deny the Committee the opportunity to consider the objection or remedy is in itself a contempt of its
authority and an obstruction of its processes. His failure to make any such statement was "a patent evasion of the duty of
one summoned to produce papers before a congressional committee[, and] cannot be condoned." (Emphasis and
underscoring supplied; citations omitted)

Upon the other hand, Congress must not require the executive to state the reasons for the claim with such particularity as
to compel disclosure of the information which the privilege is meant to protect. 103 A useful analogy in determining the
requisite degree of particularity would be the privilege against self-incrimination. Thus, Hoffman v. U.S.104 declares:

The witness is not exonerated from answering merely because he declares that in so doing he would incriminate himself –
his say-so does not of itself establish the hazard of incrimination. It is for the court to say whether his silence is justified,
and to require him to answer if ‘it clearly appears to the court that he is mistaken.’ However, if the witness, upon
interposing his claim, were required to prove the hazard in the sense in which a claim is usually required to be established
in court, he would be compelled to surrender the very protection which the privilege is designed to guarantee. To sustain
the privilege, it need only be evident from the implications of the question, in the setting in which it is asked, that a
responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious
disclosure could result." x x x (Emphasis and underscoring supplied)

The claim of privilege under Section 3 of E.O. 464 in relation to Section 2(b) is thus invalid per se. It is not asserted. It is
merely implied. Instead of providing precise and certain reasons for the claim, it merely invokes E.O. 464, coupled with an
announcement that the President has not given her consent. It is woefully insufficient for Congress to determine whether
the withholding of information is justified under the circumstances of each case. It severely frustrates the power of inquiry
of Congress.

In fine, Section 3 and Section 2(b) of E.O. 464 must be invalidated.

No infirmity, however, can be imputed to Section 2(a) as it merely provides guidelines, binding only on the heads of office
mentioned in Section 2(b), on what is covered by executive privilege. It does not purport to be conclusive on the other
branches of government. It may thus be construed as a mere expression of opinion by the President regarding the nature
and scope of executive privilege.

Petitioners, however, assert as another ground for invalidating the challenged order the alleged unlawful delegation of
authority to the heads of offices in Section 2(b). Petitioner Senate of the Philippines, in particular, cites the case of the
United States where, so it claims, only the President can assert executive privilege to withhold information from Congress.
Section 2(b) in relation to Section 3 virtually provides that, once the head of office determines that a certain information is
privileged, such determination is presumed to bear the President’s authority and has the effect of prohibiting the official
from appearing before Congress, subject only to the express pronouncement of the President that it is allowing the
appearance of such official. These provisions thus allow the President to authorize claims of privilege by mere silence.

Such presumptive authorization, however, is contrary to the exceptional nature of the privilege. Executive privilege, as
already discussed, is recognized with respect to information the confidential nature of which is crucial to the fulfillment of
the unique role and responsibilities of the executive branch,105 or in those instances where exemption from disclosure is
necessary to the discharge of highly important executive responsibilities.106 The doctrine of executive privilege is thus
premised on the fact that certain informations must, as a matter of necessity, be kept confidential in pursuit of the public
interest. The privilege being, by definition, an exemption from the obligation to disclose information, in this case to
Congress, the necessity must be of such high degree as to outweigh the public interest in enforcing that obligation in a
particular case.

In light of this highly exceptional nature of the privilege, the Court finds it essential to limit to the President the power to
invoke the privilege. She may of course authorize the Executive Secretary to invoke the privilege on her behalf, in which
case the Executive Secretary must state that the authority is "By order of the President," which means that he personally
consulted with her. The privilege being an extraordinary power, it must be wielded only by the highest official in the
executive hierarchy. In other words, the President may not authorize her subordinates to exercise such power. There is
even less reason to uphold such authorization in the instant case where the authorization is not explicit but by mere
silence. Section 3, in relation to Section 2(b), is further invalid on this score.

It follows, therefore, that when an official is being summoned by Congress on a matter which, in his own judgment, might
be covered by executive privilege, he must be afforded reasonable time to inform the President or the Executive Secretary
of the possible need for invoking the privilege. This is necessary in order to provide the President or the Executive
Secretary with fair opportunity to consider whether the matter indeed calls for a claim of executive privilege. If, after the
lapse of that reasonable time, neither the President nor the Executive Secretary invokes the privilege, Congress is no
longer bound to respect the failure of the official to appear before Congress and may then opt to avail of the necessary
legal means to compel his appearance.

The Court notes that one of the expressed purposes for requiring officials to secure the consent of the President under
Section 3 of E.O. 464 is to ensure "respect for the rights of public officials appearing in inquiries in aid of legislation." That
such rights must indeed be respected by Congress is an echo from Article VI Section 21 of the Constitution mandating
that "[t]he rights of persons appearing in or affected by such inquiries shall be respected."

In light of the above discussion of Section 3, it is clear that it is essentially an authorization for implied claims of executive
privilege, for which reason it must be invalidated. That such authorization is partly motivated by the need to ensure
respect for such officials does not change the infirm nature of the authorization itself.

Right to Information

E.O 464 is concerned only with the demands of Congress for the appearance of executive officials in the hearings
conducted by it, and not with the demands of citizens for information pursuant to their right to information on matters of
public concern. Petitioners are not amiss in claiming, however, that what is involved in the present controversy is not
merely the legislative power of inquiry, but the right of the people to information.

There are, it bears noting, clear distinctions between the right of Congress to information which underlies the power of
inquiry and the right of the people to information on matters of public concern. For one, the demand of a citizen for the
production of documents pursuant to his right to information does not have the same obligatory force as a subpoena
duces tecum issued by Congress. Neither does the right to information grant a citizen the power to exact testimony from
government officials. These powers belong only to Congress and not to an individual citizen.
Thus, while Congress is composed of representatives elected by the people, it does not follow, except in a highly qualified
sense, that in every exercise of its power of inquiry, the people are exercising their right to information.

To the extent that investigations in aid of legislation are generally conducted in public, however, any executive issuance
tending to unduly limit disclosures of information in such investigations necessarily deprives the people of information
which, being presumed to be in aid of legislation, is presumed to be a matter of public concern. The citizens are thereby
denied access to information which they can use in formulating their own opinions on the matter before Congress —
opinions which they can then communicate to their representatives and other government officials through the various
legal means allowed by their freedom of expression. Thus holds Valmonte v. Belmonte:

It is in the interest of the State that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the people’s will. Yet, this open dialogue can be effective only to the
extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the
discussion are aware of the issues and have access to information relating thereto can such bear fruit.107 (Emphasis and
underscoring supplied)

The impairment of the right of the people to information as a consequence of E.O. 464 is, therefore, in the sense explained
above, just as direct as its violation of the legislature’s power of inquiry.

Implementation of E.O. 464 prior to its publication

While E.O. 464 applies only to officials of the executive branch, it does not follow that the same is exempt from the need
for publication. On the need for publishing even those statutes that do not directly apply to people in general, Tañada v.
Tuvera states:

The term "laws" should refer to all laws and not only to those of general application, for strictly speaking all laws relate to
the people in general albeit there are some that do not apply to them directly. An example is a law granting citizenship to
a particular individual, like a relative of President Marcos who was decreed instant naturalization. It surely cannot be said
that such a law does not affect the public although it unquestionably does not apply directly to all the people. The subject
of such law is a matter of public interest which any member of the body politic may question in the political forums or, if
he is a proper party, even in courts of justice.108 (Emphasis and underscoring supplied)

Although the above statement was made in reference to statutes, logic dictates that the challenged order must be covered
by the publication requirement. As explained above, E.O. 464 has a direct effect on the right of the people to information
on matters of public concern. It is, therefore, a matter of public interest which members of the body politic may question
before this Court. Due process thus requires that the people should have been apprised of this issuance before it was
implemented.

Conclusion

Congress undoubtedly has a right to information from the executive branch whenever it is sought in aid of legislation. If
the executive branch withholds such information on the ground that it is privileged, it must so assert it and state the
reason therefor and why it must be respected.

The infirm provisions of E.O. 464, however, allow the executive branch to evade congressional requests for information
without need of clearly asserting a right to do so and/or proffering its reasons therefor. By the mere expedient of invoking
said provisions, the power of Congress to conduct inquiries in aid of legislation is frustrated. That is impermissible. For

[w]hat republican theory did accomplish…was to reverse the old presumption in favor of secrecy, based on the divine right
of kings and nobles, and replace it with a presumption in favor of publicity, based on the doctrine of popular sovereignty.
(Underscoring supplied)109
Resort to any means then by which officials of the executive branch could refuse to divulge information cannot be
presumed valid. Otherwise, we shall not have merely nullified the power of our legislature to inquire into the operations of
government, but we shall have given up something of much greater value – our right as a people to take part in
government.

WHEREFORE, the petitions are PARTLY GRANTED. Sections 2(b) and 3 of Executive Order No. 464 (series of 2005),
"Ensuring Observance of the Principle of Separation of Powers, Adherence to the Rule on Executive

Privilege and Respect for the Rights of Public Officials Appearing in Legislative Inquiries in Aid of Legislation Under the
Constitution, and For Other Purposes," are declared VOID. Sections 1 and 2(a) are, however, VALID.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

(ON LEAVE)
REYNATO S. PUNO CONSUELO YNARES- SANTIAGO
Associate Justice Asscociate Justice

LEONARDO A. QUISUMBING ANGELINA SANDOVAL-GUTIERREZ

Associate Justice Asscociate Justice

ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Asscociate Justice

RENATO C. CORONA ADOLFO S. AZCUNA

Associate Justice Asscociate Justice

ROMEO J. CALLEJO, SR. DANTE O. TINGA

Associate Justice Asscociate Justice

MINITA V. CHICO-NAZARIO CANCIO C. GARCIA

Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice
G.R. No. 180643 March 25, 2008

ROMULO L. NERI, petitioner,

vs.
SENATE COMMITTEE ON ACCOUNTABILITY OF PUBLIC OFFICERS AND INVESTIGATIONS, SENATE COMMITTEE ON
TRADE AND COMMERCE, AND SENATE COMMITTEE ON NATIONAL DEFENSE AND SECURITY, respondents.

DECISION

LEONARDO-DE CASTRO, J.:

At bar is a petition for certiorari under Rule 65 of the Rules of Court assailing the show cause Letter1 dated November 22,
2007 and contempt Order2 dated January 30, 2008 concurrently issued by respondent

Senate Committees on Accountability of Public Officers and Investigations, 3 Trade and Commerce,4 and National Defense
and Security5 against petitioner Romulo L. Neri, former Director General of the National Economic and Development
Authority (NEDA).

The facts, as culled from the pleadings, are as follows:

On April 21, 2007, the Department of Transportation and Communication (DOTC) entered into a contract with Zhong Xing
Telecommunications Equipment (ZTE) for the supply of equipment and services for the National Broadband Network
(NBN) Project in the amount of U.S. $ 329,481,290 (approximately P16 Billion Pesos). The Project was to be financed by the
People's Republic of China.

In connection with this NBN Project, various Resolutions were introduced in the Senate, as follows:

(1) P.S. Res. No. 127, introduced by Senator Aquilino Q. Pimentel, Jr., entitled RESOLUTION DIRECTING THE BLUE
RIBBON COMMITTEE AND THE COMMITTEE ON TRADE AND INDUSTRY TO INVESTIGATE, IN AID OF
LEGISLATION, THE CIRCUMSTANCES LEADING TO THE APPROVAL OF THE BROADBAND CONTRACT WITH ZTE
AND THE ROLE PLAYED BY THE OFFICIALS CONCERNED IN GETTING IT CONSUMMATED AND TO MAKE
RECOMMENDATIONS TO HALE TO THE COURTS OF LAW THE PERSONS RESPONSIBLE FOR ANY ANOMALY IN
CONNECTION THEREWITH AND TO PLUG THE LOOPHOLES, IF ANY IN THE BOT LAW AND OTHER PERTINENT
LEGISLATIONS.

(2) P.S. Res. No. 144, introduced by Senator Mar Roxas, entitled Á RESOLUTION URGING PRESIDENT GLORIA
MACAPAGAL ARROYO TO DIRECT THE CANCELLATION OF THE ZTE CONTRACT

(3) P.S. Res. No. 129, introduced by Senator Panfilo M. Lacson, entitled RESOLUTION DIRECTING THE
COMMITTEE ON NATIONAL DEFENSE AND SECURITY TO CONDUCT AN INQUIRY IN AID OF LEGISLATION INTO
THE NATIONAL SECURITY IMPLICATIONS OF AWARDING THE NATIONAL BROADBAND NETWORK CONTRACT TO
THE CHINESE FIRM ZHONG XING TELECOMMUNICATIONS EQUIPMENT COMPANY LIMITED (ZTE CORPORATION)
WITH THE END IN VIEW OF PROVIDING REMEDIAL LEGISLATION THAT WILL PROTECT OUR NATIONAL
SOVEREIGNTY, SECURITY AND TERRITORIAL INTEGRITY.

(4) P.S. Res. No. 136, introduced by Senator Miriam Defensor Santiago, entitled RESOLUTION DIRECTING THE
PROPER SENATE COMMITTEE TO CONDUCT AN INQUIRY, IN AID OF LEGISLATION, ON THE LEGAL AND
ECONOMIC JUSTIFICATION OF THE NATIONAL BROADBAND NETWORK (NBN) PROJECT OF THE NATIONAL
GOVERNMENT.

At the same time, the investigation was claimed to be relevant to the consideration of three (3) pending bills in the Senate,
to wit:
 1. Senate Bill No. 1793, introduced by Senator Mar Roxas, entitled AN ACT SUBJECTING TREATIES,
INTERNATIONAL OR EXECUTIVE AGREEMENTS INVOLVING FUNDING IN THE PROCUREMENT OF
INFRASTRUCTURE PROJECTS, GOODS, AND CONSULTING SERVICES TO BE INCLUDED IN THE SCOPE AND
APPLICATION OF PHILIPPINE PROCUREMENT LAWS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 9184,
OTHERWISE KNOWN AS THE GOVERNMENT PROCUREMENT REFORM ACT, AND FOR OTHER PURPOSES;

2. Senate Bill No. 1794, introduced by Senator Mar Roxas, entitled AN ACT IMPOSING SAFEGUARDS IN
CONTRACTING LOANS CLASSIFIED AS OFFICIAL DEVELOPMENT ASSISTANCE, AMENDING FOR THE PURPOSE
REPUBLIC ACT NO. 8182, AS AMENDED BY REPUBLIC ACT NO. 8555, OTHERWISE KNOWN AS THE OFFICIAL
DEVELOPMENT ASSISTANCE ACT OF 1996, AND FOR OTHER PURPOSES; and

3. Senate Bill No. 1317, introduced by Senator Miriam Defensor Santiago, entitled AN ACT MANDATING
CONCURRENCE TO INTERNATIONAL AGREEMENTS AND EXECUTIVE AGREEMENTS.

Respondent Committees initiated the investigation by sending invitations to certain personalities and cabinet officials
involved in the NBN Project. Petitioner was among those invited. He was summoned to appear and testify on September
18, 20, and 26 and October 25, 2007. However, he attended only the September 26 hearing, claiming he was "out of town"
during the other dates.

In the September 18, 2007 hearing, businessman Jose de Venecia III testified that several high executive officials and
power brokers were using their influence to push the approval of the NBN Project by the NEDA. It appeared that the
Project was initially approved as a Build-Operate-Transfer (BOT) project but, on March 29, 2007, the NEDA acquiesced to
convert it into a government-to-government project, to be financed through a loan from the Chinese Government.

On September 26, 2007, petitioner testified before respondent Committees for eleven (11) hours. He disclosed that then
Commission on Elections (COMELEC) Chairman Benjamin Abalos offered him P200 Million in exchange for his approval of
the NBN Project. He further narrated that he informed President Arroyo about the bribery attempt and that she instructed
him not to accept the bribe. However, when probed further on what they discussed about the NBN Project, petitioner
refused to answer, invoking "executive privilege". In particular, he refused to answer the questions on (a) whether or not
President Arroyo followed up the NBN Project,6 (b) whether or not she directed him to prioritize it,7 and (c) whether or not
she directed him to approve.8

Unrelenting, respondent Committees issued a Subpoena Ad Testificandum to petitioner, requiring him to appear and
testify on November 20, 2007.

However, in the Letter dated November 15, 2007, Executive Secretary Eduardo R. Ermita requested respondent
Committees to dispense with petitioner's testimony on the ground of executive privilege. The pertinent portion of the
letter reads:

With reference to the subpoena ad testificandum issued to Secretary Romulo Neri to appear and testify again on
20 November 2007 before the Joint Committees you chair, it will be recalled that Sec. Neri had already testified
and exhaustively discussed the ZTE / NBN project, including his conversation with the President thereon last 26
September 2007.

Asked to elaborate further on his conversation with the President, Sec. Neri asked for time to consult with his
superiors in line with the ruling of the Supreme Court in Senate v. Ermita, 488 SCRA 1 (2006).

Specifically, Sec. Neri sought guidance on the possible invocation of executive privilege on the following
questions, to wit:

a) Whether the President followed up the (NBN) project?

b) Were you dictated to prioritize the ZTE?

 c) Whether the President said to go ahead and approve the project after being told about the
alleged bribe?

Following the ruling in Senate v. Ermita, the foregoing questions fall under conversations and correspondence
between the President and public officials which are considered executive privilege (Almonte v. Vasquez, G.R.
95637, 23 May 1995; Chavez v. PEA, G.R. 133250, July 9, 2002). Maintaining the confidentiality of conversations of
the President is necessary in the exercise of her executive and policy decision making process. The expectation of
a President to the confidentiality of her conversations and correspondences, like the value which we accord
deference for the privacy of all citizens, is the necessity for protection of the public interest in candid, objective,
and even blunt or harsh opinions in Presidential decision-making. Disclosure of conversations of the President will
have a chilling effect on the President, and will hamper her in the effective discharge of her duties and
responsibilities, if she is not protected by the confidentiality of her conversations.

The context in which executive privilege is being invoked is that the information sought to be disclosed might
impair our diplomatic as well as economic relations with the People's Republic of China. Given the confidential
nature in which these information were conveyed to the President, he cannot provide the Committee any further
details of these conversations, without disclosing the very thing the privilege is designed to protect.

In light of the above considerations, this Office is constrained to invoke the settled doctrine of executive privilege
as refined in Senate v. Ermita, and has advised Secretary Neri accordingly.

Considering that Sec. Neri has been lengthily interrogated on the subject in an unprecedented 11-hour hearing,
wherein he has answered all questions propounded to him except the foregoing questions involving executive
privilege, we therefore request that his testimony on 20 November 2007 on the ZTE / NBN project be dispensed
with.

On November 20, 2007, petitioner did not appear before respondent Committees. Thus, on November 22, 2007, the latter
issued the show cause Letter requiring him to explain why he should not be cited in contempt. The Letter reads:

Since you have failed to appear in the said hearing, the Committees on Accountability of Public Officers and
Investigations (Blue Ribbon), Trade and Commerce and National Defense and Security require you to show cause
why you should not be cited in contempt under Section 6, Article 6 of the Rules of the Committee on
Accountability of Public Officers and Investigations (Blue Ribbon).

The Senate expects your explanation on or before 2 December 2007.

On November 29, 2007, petitioner replied to respondent Committees, manifesting that it was not his intention to ignore
the Senate hearing and that he thought the only remaining questions were those he claimed to be covered by executive
privilege, thus:

It was not my intention to snub the last Senate hearing. In fact, I have cooperated with the task of the Senate in its
inquiry in aid of legislation as shown by my almost 11 hours stay during the hearing on 26 September 2007.
During said hearing, I answered all the questions that were asked of me, save for those which I thought was
covered by executive privilege, and which was confirmed by the Executive Secretary in his Letter 15 November
2007. In good faith, after that exhaustive testimony, I thought that what remained were only the three questions,
where the Executive Secretary claimed executive privilege. Hence, his request that my presence be dispensed with.

Be that as it may, should there be new matters that were not yet taken up during the 26 September 2007 hearing,
may I be furnished in advance as to what else I need to clarify, so that as a resource person, I may adequately
prepare myself.

In addition, petitioner submitted a letter prepared by his counsel, Atty. Antonio R. Bautista, stating, among others that: (1)
his (petitioner) non-appearance was upon the order of the President; and (2) his conversation with President Arroyo dealt
with delicate and sensitive national security and diplomatic matters relating to the impact of the bribery scandal involving
high government officials and the possible loss of confidence of foreign investors and lenders in the Philippines. The letter
ended with a reiteration of petitioner's request that he "be furnished in advance" as to what else he needs to clarify so that
he may adequately prepare for the hearing.

In the interim, on December 7, 2007, petitioner filed with this Court the present petition for certiorari assailing the show
cause Letter dated November 22, 2007.

Respondent Committees found petitioner's explanations unsatisfactory. Without responding to his request for advance
notice of the matters that he should still clarify, they issued the Order dated January 30, 2008, citing him in contempt of
respondent Committees and ordering his arrest and detention at the Office of the Senate Sergeant-At-Arms until such
time that he would appear and give his testimony. The said Order states:

ORDER

For failure to appear and testify in the Committee's hearing on Tuesday, September 18, 2007; Thursday,
September 20, 2007; Thursday, October 25, 2007; and Tuesday, November 20, 2007, despite personal notice and
Subpoenas Ad Testificandum sent to and received by him, which thereby delays, impedes and obstructs, as it has
in fact delayed, impeded and obstructed the inquiry into the subject reported irregularities, AND for failure to
explain satisfactorily why he should not be cited for contempt (Neri letter of 29 November 2007), herein
attached) ROMULO L. NERI is hereby cited in contempt of this (sic) Committees and ordered arrested and
detained in the Office of the Senate Sergeant-At-Arms until such time that he will appear and give his
testimony.

The Sergeant-At-Arms is hereby directed to carry out and implement this Order and make a return hereof within
twenty four (24) hours from its enforcement.

SO ORDERED.

On the same date, petitioner moved for the reconsideration of the above Order.9 He insisted that he has not shown "any
contemptible conduct worthy of contempt and arrest." He emphasized his willingness to testify on new matters, however,
respondent Committees did not respond to his request for advance notice of questions. He also mentioned the petition
for certiorari he filed on December 7, 2007. According to him, this should restrain respondent Committees from enforcing
the show cause Letter "through the issuance of declaration of contempt" and arrest.

In view of respondent Committees' issuance of the contempt Order, petitioner filed on February 1, 2008 a Supplemental
Petition for Certiorari (With Urgent Application for TRO/Preliminary Injunction), seeking to restrain the implementation of
the said contempt Order.

On February 5, 2008, the Court issued a Status Quo Ante Order (a) enjoining respondent Committees from implementing
their contempt Order, (b) requiring the parties to observe the status quo prevailing prior to the issuance of the assailed
order, and (c) requiring respondent Committees to file their comment.

Petitioner contends that respondent Committees' show cause Letter and contempt Order were issued with grave abuse of
discretion amounting to lack or excess of jurisdiction. He stresses that his conversations with President Arroyo are "candid
discussions meant to explore options in making policy decisions." According to him, these discussions "dwelt on the
impact of the bribery scandal involving high government officials on the country's diplomatic relations and
economic and military affairs and the possible loss of confidence of foreign investors and lenders in the
Philippines." He also emphasizes that his claim of executive privilege is upon the order of the President and within the
parameters laid down in Senate v. Ermita10 and United States v. Reynolds.11 Lastly, he argues that he is precluded from
disclosing communications made
to him in official confidence under Section 712 of Republic Act No. 6713, otherwise known as Code of Conduct and Ethical
Standards for Public Officials and Employees, and Section 2413 (e) of Rule 130 of the Rules of Court.

Respondent Committees assert the contrary. They argue that (1) petitioner's testimony is material and pertinent in the
investigation conducted in aid of legislation; (2) there is no valid justification for petitioner to claim executive privilege; (3)
there is no abuse of their authority to order petitioner's arrest; and (4) petitioner has not come to court with clean hands.

In the oral argument held last March 4, 2008, the following issues were ventilated:

1. What communications between the President and petitioner Neri are covered by the principle of 'executive
privilege'?

1.a Did Executive Secretary Ermita correctly invoke the principle of executive privilege, by order of the
President, to cover (i) conversations of the President in the exercise of her executive and policy decision-
making and (ii) information, which might impair our diplomatic as well as economic relations with the
People's Republic of China?

1.b. Did petitioner Neri correctly invoke executive privilege to avoid testifying on his conversations with
the President on the NBN contract on his assertions that the said conversations "dealt with delicate and
sensitive national security and diplomatic matters relating to the impact of bribery scandal
involving high government officials and the possible loss of confidence of foreign investors and
lenders in the Philippines" x x x within the principles laid down in Senate v. Ermita (488 SCRA 1 [2006])?

1.c Will the claim of executive privilege in this case violate the following provisions of the Constitution:

Sec. 28, Art. II (Full public disclosure of all transactions involving public interest)

Sec. 7, Art. III (The right of the people to information on matters of public concern)

Sec. 1, Art. XI (Public office is a public trust)

Sec. 17, Art. VII (The President shall ensure that the laws be faithfully executed)

and the due process clause and the principle of separation of powers?

2. What is the proper procedure to be followed in invoking executive privilege?

3. Did the Senate Committees gravely abuse their discretion in ordering the arrest of petitioner for non-
compliance with the subpoena?

After the oral argument, the parties were directed to manifest to the Court within twenty-four (24) hours if they are
amenable to the Court's proposal of allowing petitioner to immediately resume his testimony before the Senate
Committees to answer the other questions of the Senators without prejudice to the decision on the merits of this pending
petition. It was understood that petitioner may invoke executive privilege in the course of the Senate Committees
proceedings, and if the respondent Committees disagree thereto, the unanswered questions will be the subject of a
supplemental pleading to be resolved along with the three (3) questions subject of the present petition. 14 At the same
time, respondent Committees were directed to submit several pertinent documents.15

The Senate did not agree with the proposal for the reasons stated in the Manifestation dated March 5, 2008. As to the
required documents, the Senate and respondent Committees manifested that they would not be able to submit the
latter's "Minutes of all meetings" and the "Minute Book" because it has never been the "historical and traditional
legislative practice to keep them."16 They instead submitted the Transcript of Stenographic Notes of respondent
Committees' joint public hearings.
On March 17, 2008, the Office of the Solicitor General (OSG) filed a Motion for Leave to Intervene and to Admit Attached
Memorandum, founded on the following arguments:

(1) The communications between petitioner and the President are covered by the principle of "executive
privilege."

(2) Petitioner was not summoned by respondent Senate Committees in accordance with the law-making body's
power to conduct inquiries in aid of legislation as laid down in Section 21, Article VI of the Constitution and Senate
v. Ermita.

(3) Respondent Senate Committees gravely abused its discretion for alleged non-compliance with
the Subpoena dated November 13, 2007.

The Court granted the OSG's motion the next day, March 18, 2008.

As the foregoing facts unfold, related events transpired.

On March 6, 2008, President Arroyo issued Memorandum Circular No. 151, revoking Executive Order No. 464 and
Memorandum Circular No. 108. She advised executive officials and employees to follow and abide by the Constitution,
existing laws and jurisprudence, including, among others, the case of Senate v. Ermita17 when they are invited to legislative
inquiries in aid of legislation.

At the core of this controversy are the two (2) crucial queries, to wit:

First, are the communications elicited by the subject three (3) questions covered by executive privilege?

And second, did respondent Committees commit grave abuse of discretion in issuing the contempt Order?

We grant the petition.

At the outset, a glimpse at the landmark case of Senate v. Ermita18 becomes imperative. Senate draws in bold strokes the
distinction between the legislative and oversight powers of the Congress, as embodied under Sections 21 and 22,
respectively, of Article VI of the Constitution, to wit:

SECTION 21. The Senate or the House of Representatives or any of its respective committees may conduct
inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons
appearing in or affected by such inquiries shall be respected.

SECTION 22. The heads of department may upon their own initiative, with the consent of the President, or upon
the request of either House, or as the rules of each House shall provide, appear before and be heard by such
House on any matter pertaining to their departments. Written questions shall be submitted to the President of the
Senate or the Speaker of the House of Representatives at least three days before their scheduled appearance.
Interpellations shall not be limited to written questions, but may cover matters related thereto. When the security
of the state or the public interest so requires and the President so states in writing, the appearance shall be
conducted in executive session.

Senate cautions that while the above provisions are closely related and complementary to each other, they should not be
considered as pertaining to the same power of Congress. Section 21 relates to the power to conduct inquiries in aid of
legislation. Its aim is to elicit information that may be used for legislation. On the other hand, Section 22 pertains to the
power to conduct a question hour, the objective of which is to obtain information in pursuit of Congress' oversight
function.19 Simply stated, while both powers allow Congress or any of its committees to conduct inquiry,
their objectives are different.
This distinction gives birth to another distinction with regard to the use of compulsory process. Unlike in Section 21,
Congress cannot compel the appearance of executive officials under Section 22. The Court's pronouncement in Senate v.
Ermita20 is clear:

When Congress merely seeks to be informed on how department heads are implementing the statutes which it
has issued, its right to such information is not as imperative as that of the President to whom, as Chief Executive,
such department heads must give a report of their performance as a matter of duty. In such instances, Section 22,
in keeping with the separation of powers, states that Congress may only request their appearance. Nonetheless,
when the inquiry in which Congress requires their appearance is 'in aid of legislation' under Section 21, the
appearance is mandatory for the same reasons stated in Arnault.

In fine, the oversight function of Congress may be facilitated by compulsory process only to the extent
that it is performed in pursuit of legislation. This is consistent with the intent discerned from the deliberations
of the Constitutional Commission

Ultimately, the power of Congress to compel the appearance of executive officials under section 21 and the lack of
it under Section 22 find their basis in the principle of separation of powers. While the executive branch is a co-
equal branch of the legislature, it cannot frustrate the power of Congress to legislate by refusing to comply with
its demands for information. (Emphasis supplied.)

The availability of the power of judicial review to resolve the issues raised in this case has also been settled in Senate v.
Ermita, when it held:

As evidenced by the American experience during the so-called "McCarthy era," however, the right of Congress to
conduct inquiries in aid of legislation is, in theory, no less susceptible to abuse than executive or judicial power. It
may thus be subjected to judicial review pursuant to the Court's certiorari powers under Section 1, Article VIII of
the Constitution.

Hence, this decision.

The Communications Elicited by the Three (3) Questions are Covered by Executive Privilege

We start with the basic premises where the parties have conceded.

The power of Congress to conduct inquiries in aid of legislation is broad. This is based on the proposition that a legislative
body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is
intended to affect or change.21 Inevitably, adjunct thereto is the compulsory process to enforce it. But, the power, broad as
it is, has limitations. To be valid, it is imperative that it is done in accordance with the Senate or House duly published rules
of procedure and that the rights of the persons appearing in or affected by such inquiries be respected.

The power extends even to executive officials and the only way for them to be exempted is through a valid claim of
executive privilege.22 This directs us to the consideration of the question -- is there a recognized claim of executive
privilege despite the revocation of E.O. 464?

A- There is a Recognized Claim

of Executive Privilege Despite the
Revocation of E.O. 464

At this juncture, it must be stressed that the revocation of E.O. 464 does not in any way diminish our concept of executive
privilege. This is because this concept has Constitutional underpinnings. Unlike the United States which has further
accorded the concept with statutory status by enacting the Freedom of Information Act23 and the Federal Advisory
Committee Act,24 the Philippines has retained its constitutional origination, occasionally interpreted only by this Court in
various cases. The most recent of these is the case of Senate v. Ermita where this Court declared unconstitutional
substantial portions of E.O. 464. In this regard, it is worthy to note that Executive Ermita's Letter dated November 15, 2007
limits its bases for the claim of executive privilege to Senate v. Ermita, Almonte v. Vasquez,25 and Chavez v. PEA.26 There
was never a mention of E.O. 464.

While these cases, especially Senate v. Ermita,27 have comprehensively discussed the concept of executive privilege, we
deem it imperative to explore it once more in view of the clamor for this Court to clearly define the communications
covered by executive privilege.

The Nixon and post-Watergate cases established the broad contours of the presidential communications
privilege.28 In United States v. Nixon,29 the U.S. Court recognized a great public interest in preserving "the confidentiality
of conversations that take place in the President's performance of his official duties." It thus considered presidential
communications as "presumptively privileged." Apparently, the presumption is founded on the "President's
generalized interest in confidentiality." The privilege is said to be necessary to guarantee the candor of presidential
advisors and to provide "the President and those who assist him… with freedom to explore alternatives in the
process of shaping policies and making decisions and to do so in a way many would be unwilling to express except
privately."

In In Re: Sealed Case,30 the U.S. Court of Appeals delved deeper. It ruled that there are two (2) kinds of executive privilege;
one is the presidential communications privilege and, the other is the deliberative process privilege. The former
pertains to "communications, documents or other materials that reflect presidential decision-making and
deliberations and that the President believes should remain confidential." The latter includes 'advisory opinions,
recommendations and deliberations comprising part of a process by which governmental decisions and policies
are formulated."

Accordingly, they are characterized by marked distinctions. Presidential communications privilege applies to decision-
making of the President while, the deliberative process privilege, to decision-making of executive officials. The first
is rooted in the constitutional principle of separation of power and the President's unique constitutional role;
the second on common law privilege. Unlike the deliberative process privilege, the presidential communications
privilege applies to documents in their entirety, and covers final and post-decisional materials as well as pre-
deliberative ones31 As a consequence, congressional or judicial negation of the presidential communications
privilege is always subject to greater scrutiny than denial of the deliberative process privilege.

Turning on who are the officials covered by the presidential communications privilege, In Re: Sealed Case confines the
privilege only to White House Staff that has "operational proximity" to direct presidential decision-making. Thus, the
privilege is meant to encompass only those functions that form the core of presidential authority, involving what the court
characterized as "quintessential and non-delegable Presidential power," such as commander-in-chief power, appointment
and removal power, the power to grant pardons and reprieves, the sole-authority to receive ambassadors and other public
officers, the power to negotiate treaties, etc.32

The situation in Judicial Watch, Inc. v. Department of Justice33 tested the In Re: Sealed Case principles. There, while the
presidential decision involved is the exercise of the President's pardon power, a non-delegable, core-presidential function,
the Deputy Attorney General and the Pardon Attorney were deemed to be too remote from the President and his senior
White House advisors to be protected. The Court conceded that

functionally those officials were performing a task directly related to the President's pardon power, but concluded that an
organizational test was more appropriate for confining the potentially broad sweep that would result from the In Re:
Sealed Case's functional test. The majority concluded that, the lesser protections of the deliberative process privilege
would suffice. That privilege was, however, found insufficient to justify the confidentiality of the 4,341 withheld documents.

But more specific classifications of communications covered by executive privilege are made in older cases. Courts ruled
early that the Executive has a right to withhold documents that might reveal military or state secrets,34 identity of
government informers in some circumstances,,35 and information related to pending investigations.36 An area where
the privilege is highly revered is in foreign relations. In United States v. Curtiss-Wright Export Corp.37 the U.S. Court, citing
President George Washington, pronounced:

The nature of foreign negotiations requires caution, and their success must often depend on secrecy, and even
when brought to a conclusion, a full disclosure of all the measures, demands, or eventual concessions which may
have been proposed or contemplated would be extremely impolitic, for this might have a pernicious influence on
future negotiations or produce immediate inconveniences, perhaps danger and mischief, in relation to other
powers. The necessity of such caution and secrecy was one cogent reason for vesting the power of making treaties
in the President, with the advice and consent of the Senate, the principle on which the body was formed confining
it to a small number of members. To admit, then, a right in the House of Representatives to demand and to have
as a matter of course all the papers respecting a negotiation with a foreign power would be to establish a
dangerous precedent.

Majority of the above jurisprudence have found their way in our jurisdiction. In Chavez v. PCGG38, this Court held that
there is a "governmental privilege against public disclosure with respect to state secrets regarding military, diplomatic and
other security matters." In Chavez v. PEA,39 there is also a recognition of the confidentiality of Presidential conversations,
correspondences, and discussions in closed-door Cabinet meetings. In Senate v. Ermita, the concept of presidential
communications privilege is fully discussed.

As may be gleaned from the above discussion, the claim of executive privilege is highly recognized in cases where the
subject of inquiry relates to a power textually committed by the Constitution to the President, such as the area of military
and foreign relations. Under our Constitution, the President is the repository of the commander-in-
chief,40 appointing,41 pardoning,42 and diplomatic43 powers. Consistent with the doctrine of separation of powers, the
information relating to these powers may enjoy greater confidentiality than others.

The above cases, especially, Nixon, In Re Sealed Case and Judicial Watch, somehow provide the elements of presidential
communications privilege, to wit:

1) The protected communication must relate to a "quintessential and non-delegable presidential power."

2) The communication must be authored or "solicited and received" by a close advisor of the President or the
President himself. The judicial test is that an advisor must be in "operational proximity" with the President.

3) The presidential communications privilege remains a qualified privilege that may be overcome by a showing
of adequate need, such that the information sought "likely contains important evidence" and by the unavailability
of the information elsewhere by an appropriate investigating authority. 44

In the case at bar, Executive Secretary Ermita premised his claim of executive privilege on the ground that the
communications elicited by the three (3) questions "fall under conversation and correspondence between the President
and public officials" necessary in "her executive and policy decision-making process" and, that "the information sought to
be disclosed might impair our diplomatic as well as economic relations with the People's Republic of China." Simply put,
the bases are presidential communications privilege and executive privilege on matters relating to diplomacy or
foreign relations.

Using the above elements, we are convinced that, indeed, the communications elicited by the three (3) questions are
covered by the presidential communications privilege. First, the communications relate to a "quintessential and non-
delegable power" of the President, i.e. the power to enter into an executive agreement with other countries. This authority
of the President to enter into executive agreements without the concurrence of the Legislature has traditionally been
recognized in Philippine jurisprudence.45 Second, the communications are "received" by a close advisor of the President.
Under the "operational proximity" test, petitioner can be considered a close advisor, being a member of President Arroyo's
cabinet. And third, there is no adequate showing of a compelling need that would justify the limitation of the privilege
and of the unavailability of the information elsewhere by an appropriate investigating authority.
The third element deserves a lengthy discussion.

United States v. Nixon held that a claim of executive privilege is subject to balancing against other interest. In other
words, confidentiality in executive privilege is not absolutely protected by the Constitution. The U.S. Court held:

[N]either the doctrine of separation of powers, nor the need for confidentiality of high-level communications,
without more, can sustain an absolute, unqualified Presidential privilege of immunity from judicial process under
all circumstances.

The foregoing is consistent with the earlier case of Nixon v. Sirica,46 where it was held that presidential
communications are presumptively privileged and that the presumption can be overcome only by mere showing of
public need by the branch seeking access to conversations. The courts are enjoined to resolve the competing interests of
the political branches of the government "in the manner that preserves the essential functions of each Branch." 47 Here, the
record is bereft of any categorical explanation from respondent Committees to show a compelling or citical need for the
answers to the three (3) questions in the enactment of a law. Instead, the questions veer more towards the exercise of the
legislative oversight function under Section 22 of Article VI rather than Section 21 of the same Article. Senate v.
Ermita ruled that the "the oversight function of Congress may be facilitated by compulsory process only to the
extent that it is performed in pursuit of legislation." It is conceded that it is difficult to draw the line between an
inquiry in aid of legislation and an inquiry in the exercise of oversight function of Congress. In this regard, much will
depend on the content of the questions and the manner the inquiry is conducted.

Respondent Committees argue that a claim of executive privilege does not guard against a possible disclosure of a crime
or wrongdoing. We see no dispute on this. It is settled in United States v. Nixon48 that "demonstrated, specific need for
evidence in pending criminal trial" outweighs the President's "generalized interest in confidentiality." However, the
present case's distinction with the Nixon case is very evident. In Nixon, there is a pending criminal proceeding where the
information is requested and it is the demands of due process of law and the fair administration of criminal justice that the
information be disclosed. This is the reason why the U.S. Court was quick to "limit the scope of its decision." It stressed
that it is "not concerned here with the balance between the President's generalized interest in confidentiality x x x
and congressional demands for information." Unlike in Nixon, the information here is elicited, not in a criminal
proceeding, but in a legislative inquiry. In this regard, Senate v. Ermita stressed that the validity of the claim of executive
privilege depends not only on the ground invoked but, also, on the procedural setting or the context in which the claim
is made. Furthermore, in Nixon, the President did not interpose any claim of need to protect military, diplomatic or
sensitive national security secrets. In the present case, Executive Secretary Ermita categorically claims executive privilege
on the grounds of presidential communications privilege in relation to her executive and policy decision-making
process and diplomatic secrets.

The respondent Committees should cautiously tread into the investigation of matters which may present a conflict of
interest that may provide a ground to inhibit the Senators participating in the inquiry if later on an impeachment
proceeding is initiated on the same subject matter of the present Senate inquiry. Pertinently, in Senate Select Committee
on Presidential Campaign Activities v. Nixon,49 it was held that since an impeachment proceeding had been initiated by a
House Committee, the Senate Select Committee's immediate oversight need for five presidential tapes should give way to
the House Judiciary Committee which has the constitutional authority to inquire into presidential impeachment. The Court
expounded on this issue in this wise:

It is true, of course, that the Executive cannot, any more than the other branches of government, invoke a general
confidentiality privilege to shield its officials and employees from investigations by the proper governmental
institutions into possible criminal wrongdoing. The Congress learned this as to its own privileges in Gravel v.
United States, as did the judicial branch, in a sense, in Clark v. United States, and the executive branch itself
in Nixon v. Sirica. But under Nixon v. Sirica, the showing required to overcome the presumption favoring
confidentiality turned, not on the nature of the presidential conduct that the subpoenaed material might reveal,
but, instead, on the nature and appropriateness of the function in the performance of which the material
was sought, and the degree to which the material was necessary to its fulfillment. Here also our task
requires and our decision implies no judgment whatever concerning possible presidential involvement in
 culpable activity. On the contrary, we think the sufficiency of the Committee's showing must depend solely
on whether the subpoenaed evidence is demonstrably critical to the responsible fulfillment of the
Committee's functions.

In its initial briefs here, the Committee argued that it has shown exactly this. It contended that resolution, on the
basis of the subpoenaed tapes, of the conflicts in the testimony before it 'would aid in a determination whether
legislative involvement in political campaigns is necessary' and 'could help engender the public support needed
for basic reforms in our electoral system.' Moreover, Congress has, according to the Committee, power to oversee
the operations of the executive branch, to investigate instances of possible corruption and malfeasance in office,
and to expose the results of its investigations to public view. The Committee says that with respect to Watergate-
related matters, this power has been delegated to it by the Senate, and that to exercise its power responsibly, it
must have access to the subpoenaed tapes.

We turn first to the latter contention. In the circumstances of this case, we need neither deny that the Congress
may have, quite apart from its legislative responsibilities, a general oversight power, nor explore what the lawful
reach of that power might be under the Committee's constituent resolution. Since passage of that resolution, the
House Committee on the Judiciary has begun an inquiry into presidential impeachment. The investigative
authority of the Judiciary Committee with respect to presidential conduct has an express constitutional source. x x
x We have been shown no evidence indicating that Congress itself attaches any particular value to this
interest. In these circumstances, we think the need for the tapes premised solely on an asserted power to
investigate and inform cannot justify enforcement of the Committee's subpoena.

The sufficiency of the Committee's showing of need has come to depend, therefore, entirely on whether the
subpoenaed materials are critical to the performance of its legislative functions. There is a clear difference
between Congress' legislative tasks and the responsibility of a grand jury, or any institution engaged in like
functions. While fact-finding by a legislative committee is undeniably a part of its task, legislative
judgments normally depend more on the predicted consequences of proposed legislative actions and their
political acceptability, than on precise reconstruction of past events; Congress frequently legislates on the
basis of conflicting information provided in its hearings. In contrast, the responsibility of the grand jury turns
entirely on its ability to determine whether there is probable cause to believe that certain named individuals did or
did not commit specific crimes. If, for example, as in Nixon v. Sirica, one of those crimes is perjury concerning the
content of certain conversations, the grand jury's need for the most precise evidence, the exact text of oral
statements recorded in their original form, is undeniable. We see no comparable need in the legislative
process, at least not in the circumstances of this case. Indeed, whatever force there might once have been in
the Committee's argument that the subpoenaed materials are necessary to its legislative judgments has been
substantially undermined by subsequent events. (Emphasis supplied)

Respondent Committees further contend that the grant of petitioner's claim of executive privilege violates the
constitutional provisions on the right of the people to information on matters of public concern.50 We might have agreed
with such contention if petitioner did not appear before them at all. But petitioner made himself available to them during
the September 26 hearing, where he was questioned for eleven (11) hours. Not only that, he expressly manifested his
willingness to answer more questions from the Senators, with the exception only of those covered by his claim of
executive privilege.

The right to public information, like any other right, is subject to limitation. Section 7 of Article III provides:

The right of the people to information on matters of public concern shall be recognized. Access to official records,
and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government
research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as
may be provided by law.

The provision itself expressly provides the limitation, i.e. as may be provided by law. Some of these laws are Section 7 of
Republic Act (R.A.) No. 6713,51 Article 22952 of the Revised Penal Code, Section 3 (k)53 of R.A. No. 3019, and Section
24(e)54 of Rule 130 of the Rules of Court. These are in addition to what our body of jurisprudence classifies as
confidential55 and what our Constitution considers as belonging to the larger concept of executive privilege. Clearly, there
is a recognized public interest in the confidentiality of certain information. We find the information subject of this case
belonging to such kind.

More than anything else, though, the right of Congress or any of its Committees to obtain information in aid of
legislation cannot be equated with the people's right to public information. The former cannot claim that every legislative
inquiry is an exercise of the people's right to information. The distinction between such rights is laid down in Senate v.
Ermita:

There are, it bears noting, clear distinctions between the right of Congress to information which underlies the
power of inquiry and the right of people to information on matters of public concern. For one, the demand of a
citizen for the production of documents pursuant to his right to information does not have the same obligatory
force as a subpoena duces tecum issued by Congress. Neither does the right to information grant a citizen the
power to exact testimony from government officials. These powers belong only to Congress, not to an individual
citizen.

Thus, while Congress is composed of representatives elected by the people, it does not follow, except in a
highly qualified sense, that in every exercise of its power of inquiry, the people are exercising their right to
information.

The members of respondent Committees should not invoke as justification in their exercise of power a right properly
belonging to the people in general. This is because when they discharge their power, they do so as public officials and
members of Congress. Be that as it may, the right to information must be balanced with and should give way, in
appropriate cases, to constitutional precepts particularly those pertaining to delicate interplay of executive-legislative
powers and privileges which is the subject of careful review by numerous decided cases.

B- The Claim of Executive Privilege

is Properly Invoked

We now proceed to the issue -- whether the claim is properly invoked by the President. Jurisprudence teaches that for
the claim to be properly invoked, there must be a formal claim of privilege, lodged by the head of the department which
has control over the matter."56 A formal and proper claim of executive privilege requires a "precise and certain reason" for
preserving their confidentiality.57

The Letter dated November 17, 2007 of Executive Secretary Ermita satisfies the requirement. It serves as the formal claim
of privilege. There, he expressly states that "this Office is constrained to invoke the settled doctrine of executive
privilege as refined in Senate v. Ermita, and has advised Secretary Neri accordingly." Obviously, he is referring to the
Office of the President. That is more than enough compliance. In Senate v. Ermita, a less categorical letter was even
adjudged to be sufficient.

With regard to the existence of "precise and certain reason," we find the grounds relied upon by Executive Secretary
Ermita specific enough so as not "to leave respondent Committees in the dark on how the requested information could be
classified as privileged." The case of Senate v. Ermita only requires that an allegation be made "whether the information
demanded involves military or diplomatic secrets, closed-door Cabinet meetings, etc." The particular ground must only be
specified. The enumeration is not even intended to be comprehensive." 58 The following statement of grounds satisfies the
requirement:

The context in which executive privilege is being invoked is that the information sought to be disclosed might
impair our diplomatic as well as economic relations with the People's Republic of China. Given the confidential
nature in which these information were conveyed to the President, he cannot provide the Committee any further
details of these conversations, without disclosing the very thing the privilege is designed to protect.
At any rate, as held further in Senate v. Ermita, 59 the Congress must not require the executive to state the reasons for the
claim with such particularity as to compel disclosure of the information which the privilege is meant to protect. This is a
matter of respect to a coordinate and co-equal department.

II

Respondent Committees Committed Grave Abuse of Discretion

in Issuing the Contempt Order

Grave abuse of discretion means "such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law." 60

It must be reiterated that when respondent Committees issued the show cause Letter dated November 22, 2007,
petitioner replied immediately, manifesting that it was not his intention to ignore the Senate hearing and that he thought
the only remaining questions were the three (3) questions he claimed to be covered by executive privilege. In addition
thereto, he submitted Atty. Bautista's letter, stating that his non-appearance was upon the order of the President and
specifying the reasons why his conversations with President Arroyo are covered by executive privilege. Both
correspondences include an expression of his willingness to testify again, provided he "be furnished in advance"
copies of the questions. Without responding to his request for advance list of questions, respondent Committees issued
the Order dated January 30, 2008, citing him in contempt of respondent Committees and ordering his arrest and
detention at the Office of the Senate Sergeant-At-Arms until such time that he would appear and give his testimony.
Thereupon, petitioner filed a motion for reconsideration, informing respondent Committees that he had filed the present
petition for certiorari.

Respondent Committees committed grave abuse of discretion in issuing the contempt Order in view of five (5) reasons.

First, there being a legitimate claim of executive privilege, the issuance of the contempt Order suffers from constitutional
infirmity.

Second, respondent Committees did not comply with the requirement laid down in Senate v. Ermita that the invitations
should contain the "possible needed statute which prompted the need for the inquiry," along with "the usual indication of
the subject of inquiry and the questions relative to and in furtherance thereof." Compliance with this requirement is
imperative, both under Sections 21 and 22 of Article VI of the Constitution. This must be so to ensure that the rights of
both persons appearing in or affected by such inquiry are respected as mandated by said Section 21 and by virtue of the
express language of Section 22. Unfortunately, despite petitioner's repeated demands, respondent Committees did not
send him an advance list of questions.

Third, a reading of the transcript of respondent Committees' January 30, 2008 proceeding reveals that only a minority of
the members of the Senate Blue Ribbon Committee was present during the deliberation. 61 Section 18 of the Rules of
Procedure Governing Inquiries in Aid of Legislation provides that:

"The Committee, by a vote of majority of all its members, may punish for contempt any witness before it who
disobeys any order of the Committee or refuses to be sworn or to testify or to answer proper questions by the
Committee or any of its members."

Clearly, the needed vote is a majority of all the members of the Committee. Apparently, members who did not actually
participate in the deliberation were made to sign the contempt Order. Thus, there is a cloud of doubt as to the validity of
the contempt Order dated January 30, 2008. We quote the pertinent portion of the transcript, thus:

THE CHAIRMAN (SEN. CAYETANO, A). For clarification. x x x The Chair will call either a caucus or will ask
the Committee on Rules if there is a problem. Meaning, if we do not have the sufficient numbers. But if we
have a sufficient number, we will just hold a caucus to be able to implement that right away
because…Again, our Rules provide that any one held in contempt and ordered arrested, need the
concurrence of a majority of all members of the said committee and we have three committees conducting
this.

So thank you very much to the members…

SEN. PIMENTEL. Mr. Chairman.

THE CHAIRMAN (SEN. CAYETANO,A). May I recognize the Minority Leader and give him the floor, Senator
Pimentel.

SEN. PIMENTEL. Mr. Chairman, there is no problem, I think, with consulting the other committees. But I am
of the opinion that the Blue Ribbon Committee is the lead committee, and therefore, it should have
preference in enforcing its own decisions. Meaning to say, it is not something that is subject to
consultation with other committees. I am not sure that is the right interpretation. I think that once we
decide here, we enforce what we decide, because otherwise, before we know it, our determination is
watered down by delay and, you know, the so-called "consultation" that inevitably will have to take place
if we follow the premise that has been explained.

So my suggestion, Mr. Chairman, is the Blue Ribbon Committee should not forget it's the lead committee here,
and therefore, the will of the lead committee prevails over all the other, you, know reservations that other
committees might have who are only secondary or even tertiary committees, Mr. Chairman.

THE CHAIRMAN (SEN. CAYETANO, A.) Thank you very much to the Minority Leader. And I agree with the
wisdom of his statements. I was merely mentioning that under Section 6 of the Rules of the Committee and under
Section 6, "The Committee by a vote of a majority of all its members may punish for contempt any witness before
it who disobeys any order of the Committee."

So the Blue Ribbon Committee is more than willing to take that responsibility. But we only have six members
here today, I am the seventh as chair and so we have not met that number. So I am merely stating that, sir,
that when we will prepare the documentation, if a majority of all members sign and I am following the Sabio v.
Gordon rule wherein I do believe, if I am not mistaken, Chairman Gordon prepared the documentation and then
either in caucus or in session asked the other members to sign. And once the signatures are obtained, solely for
the purpose that Secretary Neri or Mr. Lozada will not be able to legally question our subpoena as being
insufficient in accordance with law.

SEN. PIMENTEL. Mr. Chairman, the caution that the chair is suggesting is very well-taken. But I'd like to advert to
the fact that the quorum of the committee is only two as far as I remember. Any two-member senators attending
a Senate committee hearing provide that quorum, and therefore there is more than a quorum demanded by our
Rules as far as we are concerned now, and acting as Blue Ribbon Committee, as Senator Enrile pointed out. In any
event, the signatures that will follow by the additional members will only tend to strengthen the determination of
this Committee to put its foot forward – put down on what is happening in this country, Mr. Chairman, because it
really looks terrible if the primary Committee of the Senate, which is the Blue Ribbon Committee, cannot even
sanction people who openly defy, you know, the summons of this Committee. I know that the Chair is going
through an agonizing moment here. I know that. But nonetheless, I think we have to uphold, you know, the
institution that we are representing because the alternative will be a disaster for all of us, Mr. Chairman. So having
said that, I'd like to reiterate my point.

THE CHAIRMAN (SEN. CAYETANO, A.) First of all, I agree 100 percent with the intentions of the Minority
Leader. But let me very respectfully disagree with the legal requirements. Because, yes, we can have a
hearing if we are only two but both under Section 18 of the Rules of the Senate and under Section 6 of the
Rules of the Blue Ribbon Committee, there is a need for a majority of all members if it is a case of
 contempt and arrest. So, I am simply trying to avoid the court rebuking the Committee, which will instead of
strengthening will weaken us. But I do agree, Mr. Minority Leader, that we should push for this and show the
executive branch that the well-decided – the issue has been decided upon the Sabio versus Gordon case. And it's
very clear that we are all allowed to call witnesses. And if they refure or they disobey not only can we cite them in
contempt and have them arrested. x x x 62

Fourth, we find merit in the argument of the OSG that respondent Committees likewise violated Section 21 of Article VI of
the Constitution, requiring that the inquiry be in accordance with the "duly published rules of procedure." We quote the
OSG's explanation:

The phrase 'duly published rules of procedure' requires the Senate of every Congress to publish its rules of
procedure governing inquiries in aid of legislation because every Senate is distinct from the one before it or after
it. Since Senatorial elections are held every three (3) years for one-half of the Senate's membership, the
composition of the Senate also changes by the end of each term. Each Senate may thus enact a different set of
rules as it may deem fit. Not having published its Rules of Procedure, the subject hearings in aid of
legislation conducted by the 14th Senate, are therefore, procedurally infirm.

And fifth, respondent Committees' issuance of the contempt Order is arbitrary and precipitate. It must be pointed out
that respondent Committees did not first pass upon the claim of executive privilege and inform petitioner of their ruling.
Instead, they curtly dismissed his explanation as "unsatisfactory" and simultaneously issued the Order citing him in
contempt and ordering his immediate arrest and detention.

A fact worth highlighting is that petitioner is not an unwilling witness. He manifested several times his readiness to
testify before respondent Committees. He refused to answer the three (3) questions because he was ordered by the
President to claim executive privilege. It behooves respondent Committees to first rule on the claim of executive privilege
and inform petitioner of their finding thereon, instead of peremptorily dismissing his explanation as "unsatisfactory."
Undoubtedly, respondent Committees' actions constitute grave abuse of discretion for being arbitrary and for denying
petitioner due process of law. The same quality afflicted their conduct when they (a) disregarded petitioner's motion for
reconsideration alleging that he had filed the present petition before this Court and (b) ignored petitioner's repeated
request for an advance list of questions, if there be any aside from the three (3) questions as to which he claimed to be
covered by executive privilege.

Even the courts are repeatedly advised to exercise the power of contempt judiciously and sparingly with utmost self-
restraint with the end in view of utilizing the same for correction and preservation of the dignity of the court, not for
retaliation or vindication.63 Respondent Committees should have exercised the same restraint, after all petitioner is not
even an ordinary witness. He holds a high position in a co-equal branch of government.

In this regard, it is important to mention that many incidents of judicial review could have been avoided if powers are
discharged with circumspection and deference. Concomitant with the doctrine of separation of powers is the mandate to
observe respect to a co-equal branch of the government.

One last word.

The Court was accused of attempting to abandon its constitutional duty when it required the parties to consider a
proposal that would lead to a possible compromise. The accusation is far from the truth. The Court did so, only to test a
tool that other jurisdictions find to be effective in settling similar cases, to avoid a piecemeal consideration of the
questions for review and to avert a constitutional crisis between the executive and legislative branches of government.

In United States v. American Tel. & Tel Co.,64 the court refrained from deciding the case because of its desire to avoid a
resolution that might disturb the balance of power between the two branches and inaccurately reflect their true needs.
Instead, it remanded the record to the District Court for further proceedings during which the parties are required to
negotiate a settlement. In the subsequent case of United States v. American Tel. &Tel Co.,65 it was held that "much of this
spirit of compromise is reflected in the generality of language found in the Constitution." It proceeded to state:
 Under this view, the coordinate branches do not exist in an exclusively adversary relationship to one another when
a conflict in authority arises. Rather each branch should take cognizance of an implicit constitutional mandate to
seek optimal accommodation through a realistic evaluation of the needs of the conflicting branches in the
particular fact situation.

It thereafter concluded that: "The Separation of Powers often impairs efficiency, in terms of dispatch and the
immediate functioning of government. It is the long-term staying power of government that is enhanced by the
mutual accommodation required by the separation of powers."

In rendering this decision, the Court emphasizes once more that the basic principles of constitutional law cannot be
subordinated to the needs of a particular situation. As magistrates, our mandate is to rule objectively and dispassionately,
always mindful of Mr. Justice Holmes' warning on the dangers inherent in cases of this nature, thus:

"some accident of immediate and overwhelming interest…appeals to the feelings and distorts the judgment.
These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem
doubtful, and before which even well settled principles of law will bend." 66

In this present crusade to "search for truth," we should turn to the fundamental constitutional principles which underlie
our tripartite system of government, where the Legislature enacts the law, the Judiciary interprets it and the Executive
implements it. They are considered separate, co-equal, coordinate and supreme within their respective spheres but,
imbued with a system of checks and balances to prevent unwarranted exercise of power. The Court's mandate is to
preserve these constitutional principles at all times to keep the political branches of government within constitutional
bounds in the exercise of their respective powers and prerogatives, even if it be in the search for truth. This is the only way
we can preserve the stability of our democratic institutions and uphold the Rule of Law.

WHEREFORE, the petition is hereby GRANTED. The subject Order dated January 30, 2008, citing petitioner Romulo L.
Neri in contempt of the Senate Committees and directing his arrest and detention, is hereby nullified.

SO ORDERED.

Puno, C.J., Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Azcuna, Tinga, Chico-
Nazario, Velasco, Jr., Nachura, Reyes, Brion, JJ., concur.
G.R. No. 170516 July 16, 2008

AKBAYAN CITIZENS ACTION PARTY ("AKBAYAN"), PAMBANSANG KATIPUNAN NG MGA SAMAHAN SA

KANAYUNAN ("PKSK"), ALLIANCE OF PROGRESSIVE LABOR ("APL"), VICENTE A. FABE, ANGELITO R. MENDOZA,
MANUEL P. QUIAMBAO, ROSE BEATRIX CRUZ-ANGELES, CONG. LORENZO R. TANADA III, CONG. MARIO JOYO
AGUJA, CONG. LORETA ANN P. ROSALES, CONG. ANA THERESIA HONTIVEROS-BARAQUEL, AND CONG.
EMMANUEL JOEL J. VILLANUEVA, Petitioners,
vs.
THOMAS G. AQUINO, in his capacity as Undersecretary of the Department of Trade and Industry (DTI) and
Chairman and Chief Delegate of the Philippine Coordinating Committee (PCC) for the Japan-Philippines Economic
Partnership Agreement, EDSEL T. CUSTODIO, in his capacity as Undersecretary of the Department of Foreign
Affairs (DFA) and Co-Chair of the PCC for the JPEPA, EDGARDO ABON, in his capacity as Chairman of the Tariff
Commission and lead negotiator for Competition Policy and Emergency Measures of the JPEPA, MARGARITA
SONGCO, in her capacity as Assistant Director-General of the National Economic Development Authority (NEDA)
and lead negotiator for Trade in Services and Cooperation of the JPEPA, MALOU MONTERO, in her capacity as
Foreign Service Officer I, Office of the Undersecretary for International Economic Relations of the DFA and lead
negotiator for the General and Final Provisions of the JPEPA, ERLINDA ARCELLANA, in her capacity as Director of
the Board of Investments and lead negotiator for Trade in Goods (General Rules) of the JPEPA, RAQUEL ECHAGUE,
in her capacity as lead negotiator for Rules of Origin of the JPEPA, GALLANT SORIANO, in his official capacity as
Deputy Commissioner of the Bureau of Customs and lead negotiator for Customs Procedures and Paperless
Trading of the JPEPA, MA. LUISA GIGETTE IMPERIAL, in her capacity as Director of the Bureau of Local
Employment of the Department of Labor and Employment (DOLE) and lead negotiator for Movement of Natural
Persons of the JPEPA, PASCUAL DE GUZMAN, in his capacity as Director of the Board of Investments and lead
negotiator for Investment of the JPEPA, JESUS MOTOOMULL, in his capacity as Director for the Bureau of Product
Standards of the DTI and lead negotiator for Mutual Recognition of the JPEPA, LOUIE CALVARIO, in his capacity as
lead negotiator for Intellectual Property of the JPEPA, ELMER H. DORADO, in his capacity as Officer-in-Charge of
the Government Procurement Policy Board Technical Support Office, the government agency that is leading the
negotiations on Government Procurement of the JPEPA, RICARDO V. PARAS, in his capacity as Chief State Counsel
of the Department of Justice (DOJ) and lead negotiator for Dispute Avoidance and Settlement of the JPEPA,
ADONIS SULIT, in his capacity as lead negotiator for the General and Final Provisions of the JPEPA, EDUARDO R.
ERMITA, in his capacity as Executive Secretary, and ALBERTO ROMULO, in his capacity as Secretary of the
DFA,* Respondents.

DECISION

CARPIO MORALES, J.:

Petitioners – non-government organizations, Congresspersons, citizens and taxpayers – seek via the present petition for
mandamus and prohibition to obtain from respondents the full text of the Japan-Philippines Economic Partnership
Agreement (JPEPA) including the Philippine and Japanese offers submitted during the negotiation process and all
pertinent attachments and annexes thereto.

Petitioners Congressmen Lorenzo R. Tañada III and Mario Joyo Aguja filed on January 25, 2005 House Resolution No. 551
calling for an inquiry into the bilateral trade agreements then being negotiated by the Philippine government, particularly
the JPEPA. The Resolution became the basis of an inquiry subsequently conducted by the House Special Committee on
Globalization (the House Committee) into the negotiations of the JPEPA.

In the course of its inquiry, the House Committee requested herein respondent Undersecretary Tomas Aquino (Usec.
Aquino), Chairman of the Philippine Coordinating Committee created under Executive Order No. 213 ("Creation of A
Philippine Coordinating Committee to Study the Feasibility of the Japan-Philippines Economic Partnership Agreement")1 to
study and negotiate the proposed JPEPA, and to furnish the Committee with a copy of the latest draft of the JPEPA. Usec.
Aquino did not heed the request, however.
Congressman Aguja later requested for the same document, but Usec. Aquino, by letter of November 2, 2005, replied that
the Congressman shall be provided with a copy thereof "once the negotiations are completed and as soon as a thorough
legal review of the proposed agreement has been conducted."

In a separate move, the House Committee, through Congressman Herminio G. Teves, requested Executive Secretary
Eduardo Ermita to furnish it with "all documents on the subject including the latest draft of the proposed agreement, the
requests and offers etc."2 Acting on the request, Secretary Ermita, by letter of June 23, 2005, wrote Congressman Teves as
follows:

In its letter dated 15 June 2005 (copy enclosed), [the] D[epartment of] F[oreign] A[ffairs] explains that the Committee’s
request to be furnished all documents on the JPEPA may be difficult to accomplish at this time, since the proposed
Agreement has been a work in progress for about three years. A copy of the draft JPEPA will however be forwarded to
the Committee as soon as the text thereof is settled and complete. (Emphasis supplied)

Congressman Aguja also requested NEDA Director-General Romulo Neri and Tariff Commission Chairman Edgardo Abon,
by letter of July 1, 2005, for copies of the latest text of the JPEPA.
Chairman Abon replied, however, by letter of July 12, 2005 that the Tariff Commission does not have a copy of the
documents being requested, albeit he was certain that Usec. Aquino would provide the Congressman with a copy "once
the negotiation is completed." And by letter of July 18, 2005, NEDA Assistant Director-General Margarita R. Songco
informed the Congressman that his request addressed to Director-General Neri had been forwarded to Usec. Aquino who
would be "in the best position to respond" to the request.

In its third hearing conducted on August 31, 2005, the House Committee resolved to issue a subpoena for the most recent
draft of the JPEPA, but the same was not pursued because by Committee Chairman Congressman Teves’ information, then
House Speaker Jose de Venecia had requested him to hold in abeyance the issuance of the subpoena until the President
gives her consent to the disclosure of the documents.3

Amid speculations that the JPEPA might be signed by the Philippine government within December 2005, the present
petition was filed on December 9, 2005.4 The agreement was to be later signed on September 9, 2006 by President Gloria
Macapagal-Arroyo and Japanese Prime Minister Junichiro Koizumi in Helsinki, Finland, following which the President
endorsed it to the Senate for its concurrence pursuant to Article VII, Section 21 of the Constitution. To date, the JPEPA is
still being deliberated upon by the Senate.

The JPEPA, which will be the first bilateral free trade agreement to be entered into by the Philippines with another country
in the event the Senate grants its consent to it, covers a broad range of topics which respondents enumerate as follows:
trade in goods, rules of origin, customs procedures, paperless trading, trade in services, investment, intellectual property
rights, government procurement, movement of natural persons, cooperation, competition policy, mutual recognition,
dispute avoidance and settlement, improvement of the business environment, and general and final provisions.5

While the final text of the JPEPA has now been made accessible to the public since September 11, 2006,6 respondents do
not dispute that, at the time the petition was filed up to the filing of petitioners’ Reply – when the JPEPA was still being
negotiated – the initial drafts thereof were kept from public view.

Before delving on the substantive grounds relied upon by petitioners in support of the petition, the Court finds it
necessary to first resolve some material procedural issues.

Standing

For a petition for mandamus such as the one at bar to be given due course, it must be instituted by a party aggrieved by
the alleged inaction of any tribunal, corporation, board or person which unlawfully excludes said party from the enjoyment
of a legal right.7 Respondents deny that petitioners have such standing to sue. "[I]n the interest of a speedy and definitive
resolution of the substantive issues raised," however, respondents consider it sufficient to cite a portion of the ruling
in Pimentel v. Office of Executive Secretary8 which emphasizes the need for a "personal stake in the outcome of the
controversy" on questions of standing.

In a petition anchored upon the right of the people to information on matters of public concern, which is a public right by
its very nature, petitioners need not show that they have any legal or special interest in the result, it being sufficient to
show that they are citizens and, therefore, part of the general public which possesses the right. 9 As the present petition is
anchored on the right to information and petitioners are all suing in their capacity as citizens and groups of citizens
including petitioners-members of the House of Representatives who additionally are suing in their capacity as such, the
standing of petitioners to file the present suit is grounded in jurisprudence.

Mootness

Considering, however, that "[t]he principal relief petitioners are praying for is the disclosure of the contents of the
JPEPA prior to its finalization between the two States parties,"10 public disclosure of the text of the JPEPA after its signing
by the President, during the pendency of the present petition, has been largely rendered moot and academic.

With the Senate deliberations on the JPEPA still pending, the agreement as it now stands cannot yet be considered as final
and binding between the two States. Article 164 of the JPEPA itself provides that the agreement does not take effect
immediately upon the signing thereof. For it must still go through the procedures required by the laws of each country for
its entry into force, viz:

Article 164
Entry into Force

This Agreement shall enter into force on the thirtieth day after the date on which the Governments of the Parties exchange
diplomatic notes informing each other that their respective legal procedures necessary for entry into force of this
Agreement have been completed. It shall remain in force unless terminated as provided for in Article 165.11 (Emphasis
supplied)

President Arroyo’s endorsement of the JPEPA to the Senate for concurrence is part of the legal procedures which must be
met prior to the agreement’s entry into force.

The text of the JPEPA having then been made accessible to the public, the petition has become moot and academic to the
extent that it seeks the disclosure of the "full text" thereof.

The petition is not entirely moot, however, because petitioners seek to obtain, not merely the text of the JPEPA, but also
the Philippine and Japanese offers in the course of the negotiations.12

A discussion of the substantive issues, insofar as they impinge on petitioners’ demand for access to the Philippine and
Japanese offers, is thus in order.

Grounds relied upon by petitioners

Petitioners assert, first, that the refusal of the government to disclose the documents bearing on the JPEPA negotiations
violates their right to information on matters of public concern 13 and contravenes other constitutional provisions on
transparency, such as that on the policy of full public disclosure of all transactions involving public interest. 14 Second, they
contend that non-disclosure of the same documents undermines their right to effective and reasonable participation in all
levels of social, political, and economic decision-making.15 Lastly, they proffer that divulging the contents of the JPEPA
only after the agreement has been concluded will effectively make the Senate into a mere rubber stamp of the Executive,
in violation of the principle of separation of powers.

Significantly, the grounds relied upon by petitioners for the disclosure of the latest text of the JPEPA are, except for the
last, the same as those cited for the disclosure of the Philippine and Japanese offers.
The first two grounds relied upon by petitioners which bear on the merits of respondents’ claim of privilege shall be
discussed. The last, being purely speculatory given that the Senate is still deliberating on the JPEPA, shall not.

The JPEPA is a matter of public concern

To be covered by the right to information, the information sought must meet the threshold requirement that it be a
matter of public concern. Apropos is the teaching of Legaspi v. Civil Service Commission:

In determining whether or not a particular information is of public concern there is no rigid test which can be applied.
‘Public concern’ like ‘public interest’ is a term that eludes exact definition. Both terms embrace a broad spectrum of
subjects which the public may want to know, either because these directly affect their lives, or simply because such
matters naturally arouse the interest of an ordinary citizen. In the final analysis, it is for the courts to determine on a case
by case basis whether the matter at issue is of interest or importance, as it relates to or affects the public.16 (Underscoring
supplied)

From the nature of the JPEPA as an international trade agreement, it is evident that the Philippine and Japanese offers
submitted during the negotiations towards its execution are matters of public concern. This, respondents do not dispute.
They only claim that diplomatic negotiations are covered by the doctrine of executive privilege, thus constituting an
exception to the right to information and the policy of full public disclosure.

Respondents’ claim of privilege

It is well-established in jurisprudence that neither the right to information nor the policy of full public disclosure is
absolute, there being matters which, albeit of public concern or public interest, are recognized as privileged in nature. The
types of information which may be considered privileged have been elucidated in Almonte v. Vasquez,17 Chavez v.
PCGG,18 Chavez v. Public Estate’s Authority,19 and most recently in Senate v. Ermita20 where the Court reaffirmed the
validity of the doctrine of executive privilege in this jurisdiction and dwelt on its scope.

Whether a claim of executive privilege is valid depends on the ground invoked to justify it and the context in which it is
made.21 In the present case, the ground for respondents’ claim of privilege is set forth in their Comment, viz:

x x x The categories of information that may be considered privileged includes matters of diplomatic character and under
negotiation and review. In this case, the privileged character of the diplomatic negotiations has been categorically invoked
and clearly explained by respondents particularly respondent DTI Senior Undersecretary.

The documents on the proposed JPEPA as well as the text which is subject to negotiations and legal review by the parties
fall under the exceptions to the right of access to information on matters of public concern and policy of public
disclosure. They come within the coverage of executive privilege. At the time when the Committee was requesting for
copies of such documents, the negotiations were ongoing as they are still now and the text of the proposed JPEPA is still
uncertain and subject to change. Considering the status and nature of such documents then and now, these are evidently
covered by executive privilege consistent with existing legal provisions and settled jurisprudence.

Practical and strategic considerations likewise counsel against the disclosure of the "rolling texts" which may undergo
radical change or portions of which may be totally abandoned. Furthermore, the negotiations of the representatives of
the Philippines as well as of Japan must be allowed to explore alternatives in the course of the negotiations in the
same manner as judicial deliberations and working drafts of opinions are accorded strict
confidentiality.22 (Emphasis and underscoring supplied)

The ground relied upon by respondents is thus not simply that the information sought involves a diplomatic matter, but
that it pertains to diplomatic negotiations then in progress.

Privileged character of diplomatic negotiations

The privileged character of diplomatic negotiations has been recognized in this jurisdiction. In discussing valid limitations
on the right to information, the Court in Chavez v. PCGG held that "information on inter-government exchanges prior to
the conclusion of treaties and executive agreements may be subject to reasonable safeguards for the sake of national
interest."23 Even earlier, the same privilege was upheld in People’s Movement for Press Freedom (PMPF) v.
Manglapus24 wherein the Court discussed the reasons for the privilege in more precise terms.

In PMPF v. Manglapus, the therein petitioners were seeking information from the President’s representatives on the state
of the then on-going negotiations of the RP-US Military Bases Agreement.25 The Court denied the petition, stressing that
"secrecy of negotiations with foreign countries is not violative of the constitutional provisions of freedom of speech or
of the press nor of the freedom of access to information." The Resolution went on to state, thus:

The nature of diplomacy requires centralization of authority and expedition of decision which are inherent in
executive action. Another essential characteristic of diplomacy is its confidential nature. Although much has been
said about "open" and "secret" diplomacy, with disparagement of the latter, Secretaries of State Hughes and Stimson have
clearly analyzed and justified the practice. In the words of Mr. Stimson:

"A complicated negotiation . . . cannot be carried through without many, many private talks and discussion, man
to man; many tentative suggestions and proposals. Delegates from other countries come and tell you in
confidence of their troubles at home and of their differences with other countries and with other delegates; they
tell you of what they would do under certain circumstances and would not do under other circumstances. . . If
these reports . . . should become public . . . who would ever trust American Delegations in another
conference? (United States Department of State, Press Releases, June 7, 1930, pp. 282-284.)."

xxxx

There is frequent criticism of the secrecy in which negotiation with foreign powers on nearly all subjects is
concerned. This, it is claimed, is incompatible with the substance of democracy. As expressed by one writer, "It can
be said that there is no more rigid system of silence anywhere in the world." (E.J. Young, Looking Behind the Censorship, J.
B. Lippincott Co., 1938) President Wilson in starting his efforts for the conclusion of the World War declared that we must
have "open covenants, openly arrived at." He quickly abandoned his thought.

No one who has studied the question believes that such a method of publicity is possible. In the moment that
negotiations are started, pressure groups attempt to "muscle in." An ill-timed speech by one of the parties or a
frank declaration of the concession which are exacted or offered on both sides would quickly lead to widespread
propaganda to block the negotiations. After a treaty has been drafted and its terms are fully published, there is
ample opportunity for discussion before it is approved. (The New American Government and Its Works, James T.
Young, 4th Edition, p. 194) (Emphasis and underscoring supplied)

Still in PMPF v. Manglapus, the Court adopted the doctrine in U.S. v. Curtiss-Wright Export Corp.26 that the President is
the sole organ of the nation in its negotiations with foreign countries, viz:

"x x x In this vast external realm, with its important, complicated, delicate and manifold problems, the President alone has
the power to speak or listen as a representative of the nation. He makes treaties with the advice and consent of the
Senate; but he alone negotiates. Into the field of negotiation the Senate cannot intrude; and Congress itself is powerless to
invade it. As Marshall said in his great argument of March 7, 1800, in the House of Representatives, "The President is the
sole organ of the nation in its external relations, and its sole representative with foreign nations." Annals, 6th
Cong., col. 613. . . (Emphasis supplied; underscoring in the original)

Applying the principles adopted in PMPF v. Manglapus, it is clear that while the final text of the JPEPA may not be kept
perpetually confidential – since there should be "ample opportunity for discussion before [a treaty] is approved" –
the offers exchanged by the parties during the negotiations continue to be privileged even after the JPEPA is published. It
is reasonable to conclude that the Japanese representatives submitted their offers with the understanding that "historic
confidentiality"27 would govern the same. Disclosing these offers could impair the ability of the Philippines to deal not
only with Japan but with other foreign governments in future negotiations.

A ruling that Philippine offers in treaty negotiations should now be open to public scrutiny would discourage future
Philippine representatives from frankly expressing their views during negotiations. While, on first impression, it appears
wise to deter Philippine representatives from entering into compromises, it bears noting that treaty negotiations, or any
negotiation for that matter, normally involve a process of quid pro quo, and oftentimes negotiators have to be willing
to grant concessions in an area of lesser importance in order to obtain more favorable terms in an area of greater
national interest. Apropos are the following observations of Benjamin S. Duval, Jr.:

x x x [T]hose involved in the practice of negotiations appear to be in agreement that publicity leads to "grandstanding,"
tends to freeze negotiating positions, and inhibits the give-and-take essential to successful negotiation. As Sissela Bok
points out, if "negotiators have more to gain from being approved by their own sides than by making a reasoned
agreement with competitors or adversaries, then they are inclined to 'play to the gallery . . .'' In fact, the public reaction
may leave them little option. It would be a brave, or foolish, Arab leader who expressed publicly a willingness for peace
with Israel that did not involve the return of the entire West Bank, or Israeli leader who stated publicly a willingness to
remove Israel's existing settlements from Judea and Samaria in return for peace. 28 (Emphasis supplied)

Indeed, by hampering the ability of our representatives to compromise, we may be jeopardizing higher national goals for
the sake of securing less critical ones.

Diplomatic negotiations, therefore, are recognized as privileged in this jurisdiction, the JPEPA negotiations constituting no
exception. It bears emphasis, however, that such privilege is only presumptive. For as Senate v. Ermita holds, recognizing
a type of information as privileged does not mean that it will be considered privileged in all instances. Only after a
consideration of the context in which the claim is made may it be determined if there is a public interest that calls for the
disclosure of the desired information, strong enough to overcome its traditionally privileged status.

Whether petitioners have established the presence of such a public interest shall be discussed later. For now, the Court
shall first pass upon the arguments raised by petitioners against the application of PMPF v. Manglapus to the present case.

Arguments proffered by petitioners against the application of PMPF v. Manglapus

Petitioners argue that PMPF v. Manglapus cannot be applied in toto to the present case, there being substantial factual
distinctions between the two.

To petitioners, the first and most fundamental distinction lies in the nature of the treaty involved. They stress that PMPF v.
Manglapus involved the Military Bases Agreement which necessarily pertained to matters affecting national security;
whereas the present case involves an economic treaty that seeks to regulate trade and commerce between the Philippines
and Japan, matters which, unlike those covered by the Military Bases Agreement, are not so vital to national security to
disallow their disclosure.

Petitioners’ argument betrays a faulty assumption that information, to be considered privileged, must involve national
security. The recognition in Senate v. Ermita29 that executive privilege has encompassed claims of varying kinds, such that
it may even be more accurate to speak of "executive privileges," cautions against such generalization.

While there certainly are privileges grounded on the necessity of safeguarding national security such as those involving
military secrets, not all are founded thereon. One example is the "informer’s privilege," or the privilege of the Government
not to disclose the identity of a person or persons who furnish information of violations of law to officers charged with the
enforcement of that law.30 The suspect involved need not be so notorious as to be a threat to national security for this
privilege to apply in any given instance. Otherwise, the privilege would be inapplicable in all but the most high-profile
cases, in which case not only would this be contrary to long-standing practice. It would also be highly prejudicial to law
enforcement efforts in general.
Also illustrative is the privilege accorded to presidential communications, which are presumed privileged without
distinguishing between those which involve matters of national security and those which do not, the rationale for the
privilege being that

x x x [a] frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested
parties, is essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative
and Judicial power. x x x31 (Emphasis supplied)

In the same way that the privilege for judicial deliberations does not depend on the nature of the case deliberated upon,
so presidential communications are privileged whether they involve matters of national security.

It bears emphasis, however, that the privilege accorded to presidential communications is not absolute, one significant
qualification being that "the Executive cannot, any more than the other branches of government, invoke a general
confidentiality privilege to shield its officials and employees from investigations by the proper governmental institutions
into possible criminal wrongdoing." 32 This qualification applies whether the privilege is being invoked in the context of a
judicial trial or a congressional investigation conducted in aid of legislation. 33

Closely related to the "presidential communications" privilege is the deliberative process privilege recognized in the
United States. As discussed by the U.S. Supreme Court in NLRB v. Sears, Roebuck & Co,34 deliberative process covers
documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which
governmental decisions and policies are formulated. Notably, the privileged status of such documents rests, not on the
need to protect national security but, on the "obvious realization that officials will not communicate candidly among
themselves if each remark is a potential item of discovery and front page news," the objective of the privilege being to
enhance the quality of agency
decisionshttp://web2.westlaw.com/find/default.wl?rs=WLW7.07&serialnum=1975129772&fn=_top&sv=Split&tc=-
1&findtype=Y&tf=-1&db=708&utid=%7b532A6DBF-9B4C-4A5A-8F16-
C20D9BAA36C4%7d&vr=2.0&rp=%2ffind%2fdefault.wl&mt=WLIGeneralSubscription. 35

The diplomatic negotiations privilege bears a close resemblance to the deliberative process and presidential
communications privilege. It may be readily perceived that the rationale for the confidential character of diplomatic
negotiations, deliberative process, and presidential communications is similar, if not identical.

The earlier discussion on PMPF v. Manglapus36 shows that the privilege for diplomatic negotiations is meant to encourage
a frank exchange of exploratory ideas between the negotiating parties by shielding such negotiations from public view.
Similar to the privilege for presidential communications, the diplomatic negotiations privilege seeks, through the same
means, to protect the independence in decision-making of the President, particularly in its capacity as "the sole organ of
the nation in its external relations, and its sole representative with foreign nations." And, as with the deliberative process
privilege, the privilege accorded to diplomatic negotiations arises, not on account of the content of the information per se,
but because the information is part of a process of deliberation which, in pursuit of the public interest, must be presumed
confidential.

The decision of the U.S. District Court, District of Columbia in Fulbright & Jaworski v. Department of the
Treasury37 enlightens on the close relation between diplomatic negotiations and deliberative process privileges. The
plaintiffs in that case sought access to notes taken by a member of the U.S. negotiating team during the U.S.-
French tax treaty negotiations. Among the points noted therein were the issues to be discussed, positions which the
French and U.S. teams took on some points, the draft language agreed on, and articles which needed to be amended.
Upholding the confidentiality of those notes, Judge Green ruled, thus:

Negotiations between two countries to draft a treaty represent a true example of a deliberative process. Much
give-and-take must occur for the countries to reach an accord. A description of the negotiations at any one point
would not provide an onlooker a summary of the discussions which could later be relied on as law. It would not be
"working law" as the points discussed and positions agreed on would be subject to change at any date until the treaty was
signed by the President and ratified by the Senate.
The policies behind the deliberative process privilege support non-disclosure. Much harm could accrue to the
negotiations process if these notes were revealed. Exposure of the pre-agreement positions of the French
negotiators might well offend foreign governments and would lead to less candor by the U. S. in recording the
events of the negotiations process. As several months pass in between negotiations, this lack of record could hinder
readily the U. S. negotiating team. Further disclosure would reveal prematurely adopted policies. If these policies should
be changed, public confusion would result easily.

Finally, releasing these snapshot views of the negotiations would be comparable to releasing drafts of the treaty,
particularly when the notes state the tentative provisions and language agreed on. As drafts of regulations
typically are protected by the deliberative process privilege, Arthur Andersen & Co. v. Internal Revenue Service, C.A.
No. 80-705 (D.C.Cir., May 21, 1982), drafts of treaties should be accorded the same protection. (Emphasis and
underscoring supplied)

Clearly, the privilege accorded to diplomatic negotiations follows as a logical consequence from the privileged character
of the deliberative process.

The Court is not unaware that in Center for International Environmental Law (CIEL), et al. v. Office of U.S. Trade
Representative38 – where the plaintiffs sought information relating to the just-completed negotiation of a United States-
Chile Free Trade Agreement – the same district court, this time under Judge Friedman, consciously refrained from applying
the doctrine in Fulbright and ordered the disclosure of the information being sought.

Since the factual milieu in CIEL seemed to call for the straight application of the doctrine in Fulbright, a discussion of why
the district court did not apply the same would help illumine this Court’s own reasons for deciding the present case along
the lines of Fulbright.

In both Fulbright and CIEL, the U.S. government cited a statutory basis for withholding information, namely, Exemption 5
of the Freedom of Information Act (FOIA).39 In order to qualify for protection under Exemption 5, a document must satisfy
two conditions: (1) it must be either inter-agency or intra-agency in nature, and (2) it must be both pre-decisional and
part of the agency's deliberative or decision-making process.40

Judge Friedman, in CIEL, himself cognizant of a "superficial similarity of context" between the two cases, based his decision
on what he perceived to be a significant distinction: he found the negotiator’s notes that were sought in Fulbright to be
"clearly internal," whereas the documents being sought in CIEL were those produced by or exchanged with an outside
party, i.e. Chile. The documents subject of Fulbright being clearly internal in character, the question of disclosure therein
turned not on the threshold requirement of Exemption 5 that the document be inter-agency, but on whether the
documents were part of the agency's pre-decisional deliberative process. On this basis, Judge Friedman found that "Judge
Green's discussion [in Fulbright] of the harm that could result from disclosure therefore is irrelevant, since the documents
at issue [in CIEL] are not inter-agency, and the Court does not reach the question of deliberative process."
(Emphasis supplied)

In fine, Fulbright was not overturned. The court in CIEL merely found the same to be irrelevant in light of its distinct factual
setting. Whether this conclusion was valid – a question on which this Court would not pass – the ruling in Fulbright that
"[n]egotiations between two countries to draft a treaty represent a true example of a deliberative process" was left
standing, since the CIEL court explicitly stated that it did not reach the question of deliberative process.

Going back to the present case, the Court recognizes that the information sought by petitioners includes documents
produced and communicated by a party external to the Philippine government, namely, the Japanese representatives in
the JPEPA negotiations, and to that extent this case is closer to the factual circumstances of CIEL than those of Fulbright.

Nonetheless, for reasons which shall be discussed shortly, this Court echoes the principle articulated in Fulbright that the
public policy underlying the deliberative process privilege requires that diplomatic negotiations should also be accorded
privileged status, even if the documents subject of the present case cannot be described as purely internal in character.
It need not be stressed that in CIEL, the court ordered the disclosure of information based on its finding that the first
requirement of FOIA Exemption 5 – that the documents be inter-agency – was not met. In determining whether the
government may validly refuse disclosure of the exchanges between the U.S. and Chile, it necessarily had to deal with this
requirement, it being laid down by a statute binding on them.

In this jurisdiction, however, there is no counterpart of the FOIA, nor is there any statutory requirement similar to FOIA
Exemption 5 in particular. Hence, Philippine courts, when assessing a claim of privilege for diplomatic negotiations, are
more free to focus directly on the issue of whether the privilege being claimed is indeed supported by public policy,
without having to consider – as the CIEL court did – if these negotiations fulfill a formal requirement of being "inter-
agency." Important though that requirement may be in the context of domestic negotiations, it need not be accorded the
same significance when dealing with international negotiations.

There being a public policy supporting a privilege for diplomatic negotiations for the reasons explained above, the Court
sees no reason to modify, much less abandon, the doctrine in PMPF v. Manglapus.

A second point petitioners proffer in their attempt to differentiate PMPF v. Manglapus from the present case is the fact
that the petitioners therein consisted entirely of members of the mass media, while petitioners in the present case include
members of the House of Representatives who invoke their right to information not just as citizens but as members of
Congress.

Petitioners thus conclude that the present case involves the right of members of Congress to demand information on
negotiations of international trade agreements from the Executive branch, a matter which was not raised in PMPF v.
Manglapus.

While indeed the petitioners in PMPF v. Manglapus consisted only of members of the mass media, it would be incorrect to
claim that the doctrine laid down therein has no bearing on a controversy such as the present, where the demand for
information has come from members of Congress, not only from private citizens.

The privileged character accorded to diplomatic negotiations does not ipso facto lose all force and effect simply
because the same privilege is now being claimed under different circumstances. The probability of the claim
succeeding in the new context might differ, but to say that the privilege, as such, has no validity at all in that context is
another matter altogether.

The Court’s statement in Senate v. Ermita that "presidential refusals to furnish information may be actuated by any of at
least three distinct kinds of considerations [state secrets privilege, informer’s privilege, and a generic privilege for internal
deliberations], and may be asserted, with differing degrees of success, in the context of either judicial or legislative
investigations,"41 implies that a privilege, once recognized, may be invoked under different procedural settings. That this
principle holds true particularly with respect to diplomatic negotiations may be inferred from PMPF v. Manglapus itself,
where the Court held that it is the President alone who negotiates treaties, and not even the Senate or the House of
Representatives, unless asked, may intrude upon that process.

Clearly, the privilege for diplomatic negotiations may be invoked not only against citizens’ demands for information, but
also in the context of legislative investigations.

Hence, the recognition granted in PMPF v. Manglapus to the privileged character of diplomatic negotiations cannot be
considered irrelevant in resolving the present case, the contextual differences between the two cases notwithstanding.

As third and last point raised against the application of PMPF v. Manglapus in this case, petitioners proffer that "the socio-
political and historical contexts of the two cases are worlds apart." They claim that the constitutional traditions and
concepts prevailing at the time PMPF v. Manglapus came about, particularly the school of thought that the requirements
of foreign policy and the ideals of transparency were incompatible with each other or the "incompatibility hypothesis,"
while valid when international relations were still governed by power, politics and wars, are no longer so in this age of
international cooperation.42
Without delving into petitioners’ assertions respecting the "incompatibility hypothesis," the Court notes that the ruling
in PMPF v. Manglapus is grounded more on the nature of treaty negotiations as such than on a particular socio-political
school of thought. If petitioners are suggesting that the nature of treaty negotiations have so changed that "[a]n ill-timed
speech by one of the parties or a frank declaration of the concession which are exacted or offered on both sides" no
longer "lead[s] to widespread propaganda to block the negotiations," or that parties in treaty negotiations no
longer expect their communications to be governed by historic confidentiality, the burden is on them to substantiate the
same. This petitioners failed to discharge.

Whether the privilege applies only at certain stages of the negotiation process

Petitioners admit that "diplomatic negotiations on the JPEPA are entitled to a reasonable amount of confidentiality so as
not to jeopardize the diplomatic process." They argue, however, that the same is privileged "only at certain stages of the
negotiating process, after which such information must necessarily be revealed to the public." 43 They add that the duty to
disclose this information was vested in the government when the negotiations moved from the formulation and
exploratory stage to the firming up of definite propositions or official recommendations, citing Chavez v.
PCGG44 and Chavez v. PEA.45

The following statement in Chavez v. PEA, however, suffices to show that the doctrine in both that case and Chavez v.
PCGG with regard to the duty to disclose "definite propositions of the government" does not apply to diplomatic
negotiations:

We rule, therefore, that the constitutional right to information includes official information on on-going
negotiations before a final contract. The information, however, must constitute definite propositions by the
government and should not cover recognized exceptions like privileged information, military and diplomatic
secrets and similar matters affecting national security and public order. x x x46 (Emphasis and underscoring supplied)

It follows from this ruling that even definite propositions of the government may not be disclosed if they fall under
"recognized exceptions." The privilege for diplomatic negotiations is clearly among the recognized exceptions, for the
footnote to the immediately quoted ruling cites PMPF v. Manglapus itself as an authority.

Whether there is sufficient public interest to overcome the claim of privilege

It being established that diplomatic negotiations enjoy a presumptive privilege against disclosure, even against the
demands of members of Congress for information, the Court shall now determine whether petitioners have shown the
existence of a public interest sufficient to overcome the privilege in this instance.

To clarify, there are at least two kinds of public interest that must be taken into account. One is the presumed public
interest in favor of keeping the subject information confidential, which is the reason for the privilege in the first place,
and the other is the public interest in favor of disclosure, the existence of which must be shown by the party asking for
information. 47

The criteria to be employed in determining whether there is a sufficient public interest in favor of disclosure may be
gathered from cases such as U.S. v. Nixon,48 Senate Select Committee on Presidential Campaign Activities v. Nixon,49 and In
re Sealed Case.50

U.S. v. Nixon, which involved a claim of the presidential communications privilege against the subpoena duces tecum of a
district court in a criminal case, emphasized the need to balance such claim of privilege against the constitutional duty of
courts to ensure a fair administration of criminal justice.

x x x the allowance of the privilege to withhold evidence that is demonstrably relevant in a criminal trial would cut
deeply into the guarantee of due process of law and gravely impair the basic function of the courts. A President’s
acknowledged need for confidentiality in the communications of his office is general in nature, whereas
the constitutional need for production of relevant evidence in a criminal proceeding is specific and central to the
fair adjudication of a particular criminal case in the administration of justice. Without access to specific facts a
criminal prosecution may be totally frustrated. The President’s broad interest in confidentiality of communications will not
be vitiated by disclosure of a limited number of conversations preliminarily shown to have some bearing on the pending
criminal cases. (Emphasis, italics and underscoring supplied)

Similarly, Senate Select Committee v. Nixon,51 which involved a claim of the presidential communications privilege against
the subpoena duces tecum of a Senate committee, spoke of the need to balance such claim with the duty of Congress to
perform its legislative functions.

The staged decisional structure established in Nixon v. Sirica was designed to ensure that the President and those upon
whom he directly relies in the performance of his duties could continue to work under a general assurance that their
deliberations would remain confidential. So long as the presumption that the public interest favors confidentiality can
be defeated only by a strong showing of need by another institution of government- a showing that the
responsibilities of that institution cannot responsibly be fulfilled without access to records of the President's
deliberations- we believed in Nixon v. Sirica, and continue to believe, that the effective functioning of the presidential
office will not be impaired. x x x

xxxx

The sufficiency of the Committee's showing of need has come to depend, therefore, entirely on whether the
subpoenaed materials are critical to the performance of its legislative functions. x x x (Emphasis and underscoring
supplied)

In re Sealed Case52 involved a claim of the deliberative process and presidential communications privileges against a
subpoena duces tecum of a grand jury. On the claim of deliberative process privilege, the court stated:

The deliberative process privilege is a qualified privilege and can be overcome by a sufficient showing of need. This
need determination is to be made flexibly on a case-by-case, ad hoc basis. "[E]ach time [the deliberative process
privilege] is asserted the district court must undertake a fresh balancing of the competing interests," taking into account
factors such as "the relevance of the evidence," "the availability of other evidence," "the seriousness of the
litigation," "the role of the government," and the "possibility of future timidity by government employees. x x x
(Emphasis, italics and underscoring supplied)

Petitioners have failed to present the strong and "sufficient showing of need" referred to in the immediately cited cases.
The arguments they proffer to establish their entitlement to the subject documents fall short of this standard.

Petitioners go on to assert that the non-involvement of the Filipino people in the JPEPA negotiation process effectively
results in the bargaining away of their economic and property rights without their knowledge and participation, in
violation of the due process clause of the Constitution. They claim, moreover, that it is essential for the people to have
access to the initial offers exchanged during the negotiations since only through such disclosure can their constitutional
right to effectively participate in decision-making be brought to life in the context of international trade agreements.

Whether it can accurately be said that the Filipino people were not involved in the JPEPA negotiations is a question of fact
which this Court need not resolve. Suffice it to state that respondents had presented documents purporting to show that
public consultations were conducted on the JPEPA. Parenthetically, petitioners consider these "alleged consultations" as
"woefully selective and inadequate."53

AT ALL EVENTS, since it is not disputed that the offers exchanged by the Philippine and Japanese representatives have not
been disclosed to the public, the Court shall pass upon the issue of whether access to the documents bearing on them is,
as petitioners claim, essential to their right to participate in decision-making.

The case for petitioners has, of course, been immensely weakened by the disclosure of the full text of the JPEPA to the
public since September 11, 2006, even as it is still being deliberated upon by the Senate and, therefore, not yet binding on
the Philippines. Were the Senate to concur with the validity of the JPEPA at this moment, there has already been, in the
words of PMPF v. Manglapus, "ample opportunity for discussion before [the treaty] is approved."

The text of the JPEPA having been published, petitioners have failed to convince this Court that they will not be able to
meaningfully exercise their right to participate in decision-making unless the initial offers are also published.

It is of public knowledge that various non-government sectors and private citizens have already publicly expressed their
views on the JPEPA, their comments not being limited to general observations thereon but on its specific provisions.
Numerous articles and statements critical of the JPEPA have been posted on the Internet. 54 Given these developments,
there is no basis for petitioners’ claim that access to the Philippine and Japanese offers is essential to the exercise of their
right to participate in decision-making.

Petitioner-members of the House of Representatives additionally anchor their claim to have a right to the subject
documents on the basis of Congress’ inherent power to regulate commerce, be it domestic or international. They allege
that Congress cannot meaningfully exercise the power to regulate international trade agreements such as the JPEPA
without being given copies of the initial offers exchanged during the negotiations thereof. In the same vein, they argue
that the President cannot exclude Congress from the JPEPA negotiations since whatever power and authority the President
has to negotiate international trade agreements is derived only by delegation of Congress, pursuant to Article VI, Section
28(2) of the Constitution and Sections 401 and 402 of Presidential Decree No. 1464.55

The subject of Article VI Section 28(2) of the Constitution is not the power to negotiate treaties and international
agreements, but the power to fix tariff rates, import and export quotas, and other taxes. Thus it provides:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the Government.

As to the power to negotiate treaties, the constitutional basis thereof is Section 21 of Article VII – the article on the
Executive Department – which states:

No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the
Members of the Senate.

The doctrine in PMPF v. Manglapus that the treaty-making power is exclusive to the President, being the sole organ of the
nation in its external relations, was echoed in BAYAN v. Executive Secretary56 where the Court held:

By constitutional fiat and by the intrinsic nature of his office, the President, as head of State, is the sole organ and
authority in the external affairs of the country. In many ways, the President is the chief architect of the nation's foreign
policy; his "dominance in the field of foreign relations is (then) conceded." Wielding vast powers and influence, his conduct
in the external affairs of the nation, as Jefferson describes, is "executive altogether."

As regards the power to enter into treaties or international agreements, the Constitution vests the same in the
President, subject only to the concurrence of at least two thirds vote of all the members of the Senate. In this light,
the negotiation of the VFA and the subsequent ratification of the agreement are exclusive acts which pertain solely to the
President, in the lawful exercise of his vast executive and diplomatic powers granted him no less than by the
fundamental law itself. Into the field of negotiation the Senate cannot intrude, and Congress itself is powerless to
invade it. x x x (Italics in the original; emphasis and underscoring supplied)

The same doctrine was reiterated even more recently in Pimentel v. Executive Secretary57 where the Court ruled:

In our system of government, the President, being the head of state, is regarded as the sole organ and authority in
external relations and is the country's sole representative with foreign nations. As the chief architect of foreign
policy, the President acts as the country's mouthpiece with respect to international affairs. Hence, the President is vested
with the authority to deal with foreign states and governments, extend or withhold recognition, maintain diplomatic
relations, enter into treaties, and otherwise transact the business of foreign relations. In the realm of treaty-making,
the President has the sole authority to negotiate with other states.

Nonetheless, while the President has the sole authority to negotiate and enter into treaties, the Constitution
provides a limitation to his power by requiring the concurrence of 2/3 of all the members of the Senate for
the validity of the treaty entered into by him. x x x (Emphasis and underscoring supplied)

While the power then to fix tariff rates and other taxes clearly belongs to Congress, and is exercised by the President only
by delegation of that body, it has long been recognized that the power to enter into treaties is vested directly and
exclusively in the President, subject only to the concurrence of at least two-thirds of all the Members of the Senate for the
validity of the treaty. In this light, the authority of the President to enter into trade agreements with foreign nations
provided under P.D. 146458 may be interpreted as an acknowledgment of a power already inherent in its office. It may not
be used as basis to hold the President or its representatives accountable to Congress for the conduct of treaty
negotiations.

This is not to say, of course, that the President’s power to enter into treaties is unlimited but for the requirement of Senate
concurrence, since the President must still ensure that all treaties will substantively conform to all the relevant provisions
of the Constitution.

It follows from the above discussion that Congress, while possessing vast legislative powers, may not interfere in the field
of treaty negotiations. While Article VII, Section 21 provides for Senate concurrence, such pertains only to the validity of
the treaty under consideration, not to the conduct of negotiations attendant to its conclusion. Moreover, it is not even
Congress as a whole that has been given the authority to concur as a means of checking the treaty-making power of the
President, but only the Senate.

Thus, as in the case of petitioners suing in their capacity as private citizens, petitioners-members of the House of
Representatives fail to present a "sufficient showing of need" that the information sought is critical to the performance of
the functions of Congress, functions that do not include treaty-negotiation.

Respondents’ alleged failure to timely claim executive privilege

On respondents’ invocation of executive privilege, petitioners find the same defective, not having been done seasonably
as it was raised only in their Comment to the present petition and not during the House Committee hearings.

That respondents invoked the privilege for the first time only in their Comment to the present petition does not mean that
the claim of privilege should not be credited. Petitioners’ position presupposes that an assertion of the privilege should
have been made during the House Committee investigations, failing which respondents are deemed to have waived it.

When the House Committee and petitioner-Congressman Aguja requested respondents for copies of the documents
subject of this case, respondents replied that the negotiations were still on-going and that the draft of the JPEPA would be
released once the text thereof is settled and complete. There was no intimation that the requested copies are confidential
in nature by reason of public policy. The response may not thus be deemed a claim of privilege by the standards of Senate
v. Ermita, which recognizes as claims of privilege only those which are accompanied by precise and certain reasons for
preserving the confidentiality of the information being sought.

Respondents’ failure to claim the privilege during the House Committee hearings may not, however, be construed as a
waiver thereof by the Executive branch. As the immediately preceding paragraph indicates, what respondents received
from the House Committee and petitioner-Congressman Aguja were mere requests for information. And as priorly stated,
the House Committee itself refrained from pursuing its earlier resolution to issue a subpoena duces tecum on account of
then Speaker Jose de Venecia’s alleged request to Committee Chairperson Congressman Teves to hold the same in
abeyance.
While it is a salutary and noble practice for Congress to refrain from issuing subpoenas to executive officials – out of
respect for their office – until resort to it becomes necessary, the fact remains that such requests are not a compulsory
process. Being mere requests, they do not strictly call for an assertion of executive privilege.

The privilege is an exemption to Congress’ power of inquiry.59 So long as Congress itself finds no cause to enforce such
power, there is no strict necessity to assert the privilege. In this light, respondents’ failure to invoke the privilege during
the House Committee investigations did not amount to a waiver thereof.

The Court observes, however, that the claim of privilege appearing in respondents’ Comment to this petition fails to satisfy
in full the requirement laid down in Senate v. Ermita that the claim should be invoked by the President or through the
Executive Secretary "by order of the President."60 Respondents’ claim of privilege is being sustained, however, its flaw
notwithstanding, because of circumstances peculiar to the case.

The assertion of executive privilege by the Executive Secretary, who is one of the respondents herein, without him adding
the phrase "by order of the President," shall be considered as partially complying with the requirement laid down in
Senate v. Ermita. The requirement that the phrase "by order of the President" should accompany the Executive Secretary’s
claim of privilege is a new rule laid down for the first time in Senate v. Ermita, which was not yet final and executory at the
time respondents filed their Comment to the petition.61 A strict application of this requirement would thus be unwarranted
in this case.

Response to the Dissenting Opinion of the Chief Justice

We are aware that behind the dissent of the Chief Justice lies a genuine zeal to protect our people’s right to information
against any abuse of executive privilege. It is a zeal that We fully share.

The Court, however, in its endeavor to guard against the abuse of executive privilege, should be careful not to veer
towards the opposite extreme, to the point that it would strike down as invalid even a legitimate exercise thereof.

We respond only to the salient arguments of the Dissenting Opinion which have not yet been sufficiently addressed
above.

1. After its historical discussion on the allocation of power over international trade agreements in the United States, the
dissent concludes that "it will be turning somersaults with history to contend that the President is the sole organ for
external relations" in that jurisdiction. With regard to this opinion, We make only the following observations:

There is, at least, a core meaning of the phrase "sole organ of the nation in its external relations" which is not being
disputed, namely, that the power to directly negotiate treaties and international agreements is vested by our
Constitution only in the Executive. Thus, the dissent states that "Congress has the power to regulate commerce with
foreign nations but does not have the power to negotiate international agreements directly."62

What is disputed is how this principle applies to the case at bar.

The dissent opines that petitioner-members of the House of Representatives, by asking for the subject JPEPA documents,
are not seeking to directly participate in the negotiations of the JPEPA, hence, they cannot be prevented from gaining
access to these documents.

On the other hand, We hold that this is one occasion where the following ruling in Agan v. PIATCO63 – and in other cases
both before and since – should be applied:

This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be
done indirectly. To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government
guarantee would not only make a mockery of what the BOT Law seeks to prevent -- which is to expose the government to the
risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to
which the Government is not a party to -- but would also render the BOT Law useless for what it seeks to achieve –- to make
use of the resources of the private sector in the "financing, operation and maintenance of infrastructure and development
projects" which are necessary for national growth and development but which the government, unfortunately, could ill-afford
to finance at this point in time.64

Similarly, while herein petitioners-members of the House of Representatives may not have been aiming to participate in
the negotiations directly, opening the JPEPA negotiations to their scrutiny – even to the point of giving them access to the
offers exchanged between the Japanese and Philippine delegations – would have made a mockery of what the
Constitution sought to prevent and rendered it useless for what it sought to achieve when it vested the power of direct
negotiation solely with the President.

What the U.S. Constitution sought to prevent and aimed to achieve in defining the treaty-making power of the President,
which our Constitution similarly defines, may be gathered from Hamilton’s explanation of why the U.S. Constitution
excludes the House of Representatives from the treaty-making process:

x x x The fluctuating, and taking its future increase into account, the multitudinous composition of that body, forbid us to
expect in it those qualities which are essential to the proper execution of such a trust. Accurate and comprehensive
knowledge of foreign politics; a steady and systematic adherence to the same views; a nice and uniform sensibility to
national character, decision, secrecy and dispatch; are incompatible with a body so variable and so numerous. The very
complication of the business by introducing a necessity of the concurrence of so many different bodies, would of itself
afford a solid objection. The greater frequency of the calls upon the house of representatives, and the greater length of
time which it would often be necessary to keep them together when convened, to obtain their sanction in the progressive
stages of a treaty, would be source of so great inconvenience and expense, as alone ought to condemn the project.65

These considerations a fortiori apply in this jurisdiction, since the Philippine Constitution, unlike that of the U.S., does not
even grant the Senate the power to advise the Executive in the making of treaties, but only vests in that body the power
to concur in the validity of the treaty after negotiations have been concluded. 66 Much less, therefore, should it be inferred
that the House of Representatives has this power.

Since allowing petitioner-members of the House of Representatives access to the subject JPEPA documents would set a
precedent for future negotiations, leading to the contravention of the public interests articulated above which the
Constitution sought to protect, the subject documents should not be disclosed.

2. The dissent also asserts that respondents can no longer claim the diplomatic secrets privilege over the subject JPEPA
documents now that negotiations have been concluded, since their reasons for nondisclosure cited in the June 23, 2005
letter of Sec. Ermita, and later in their Comment, necessarily apply only for as long as the negotiations were still pending;

In their Comment, respondents contend that "the negotiations of the representatives of the Philippines as well as of Japan
must be allowed to explore alternatives in the course of the negotiations in the same manner as judicial deliberations and
working drafts of opinions are accorded strict confidentiality." That respondents liken the documents involved in the
JPEPA negotiations to judicial deliberations and working drafts of opinions evinces, by itself, that they were
claiming confidentiality not only until, but even after, the conclusion of the negotiations.

Judicial deliberations do not lose their confidential character once a decision has been promulgated by the courts. The
same holds true with respect to working drafts of opinions, which are comparable to intra-agency recommendations. Such
intra-agency recommendations are privileged even after the position under consideration by the agency has developed
into a definite proposition, hence, the rule in this jurisdiction that agencies have the duty to disclose only definite
propositions, and not the inter-agency and intra-agency communications during the stage when common assertions are
still being formulated.67

3. The dissent claims that petitioner-members of the House of Representatives have sufficiently shown their need for the
same documents to overcome the privilege. Again, We disagree.
The House Committee that initiated the investigations on the JPEPA did not pursue its earlier intention to subpoena the
documents. This strongly undermines the assertion that access to the same documents by the House Committee is critical
to the performance of its legislative functions. If the documents were indeed critical, the House Committee should have, at
the very least, issued a subpoena duces tecum or, like what the Senate did in Senate v. Ermita, filed the present petition as a
legislative body, rather than leaving it to the discretion of individual Congressmen whether to pursue an action or not.
Such acts would have served as strong indicia that Congress itself finds the subject information to be critical to its
legislative functions.

Further, given that respondents have claimed executive privilege, petitioner-members of the House of Representatives
should have, at least, shown how its lack of access to the Philippine and Japanese offers would hinder the intelligent
crafting of legislation. Mere assertion that the JPEPA covers a subject matter over which Congress has the power to
legislate would not suffice. As Senate Select Committee v. Nixon68 held, the showing required to overcome the
presumption favoring confidentiality turns, not only on the nature and appropriateness of the function in the performance
of which the material was sought, but also the degree to which the material was necessary to its fulfillment. This
petitioners failed to do.

Furthermore, from the time the final text of the JPEPA including its annexes and attachments was published, petitioner-
members of the House of Representatives have been free to use it for any legislative purpose they may see fit. Since such
publication, petitioners’ need, if any, specifically for the Philippine and Japanese offers leading to the final version of the
JPEPA, has become even less apparent.

In asserting that the balance in this instance tilts in favor of disclosing the JPEPA documents, the dissent contends that the
Executive has failed to show how disclosing them after the conclusion of negotiations would impair the performance of its
functions. The contention, with due respect, misplaces the onus probandi. While, in keeping with the general presumption
of transparency, the burden is initially on the Executive to provide precise and certain reasons for upholding its claim of
privilege, once the Executive is able to show that the documents being sought are covered by a recognized privilege, the
burden shifts to the party seeking information to overcome the privilege by a strong showing of need.

When it was thus established that the JPEPA documents are covered by the privilege for diplomatic negotiations pursuant
to PMPF v. Manglapus, the presumption arose that their disclosure would impair the performance of executive functions. It
was then incumbent on petitioner- requesting parties to show that they have a strong need for the information sufficient
to overcome the privilege. They have not, however.

4. Respecting the failure of the Executive Secretary to explicitly state that he is claiming the privilege "by order of the
President," the same may not be strictly applied to the privilege claim subject of this case.

When the Court in Senate v. Ermita limited the power of invoking the privilege to the President alone, it was laying down a
new rule for which there is no counterpart even in the United States from which the concept of executive privilege was
adopted. As held in the 2004 case of Judicial Watch, Inc. v. Department of Justice,69 citing In re Sealed Case,70 "the issue of
whether a President must personally invoke the [presidential communications] privilege remains an open question." U.S. v.
Reynolds,71 on the other hand, held that "[t]here must be a formal claim of privilege, lodged by the head of the
department which has control over the matter, after actual personal consideration by that officer."

The rule was thus laid down by this Court, not in adherence to any established precedent, but with the aim of preventing
the abuse of the privilege in light of its highly exceptional nature. The Court’s recognition that the Executive Secretary also
bears the power to invoke the privilege, provided he does so "by order of the President," is meant to avoid laying down
too rigid a rule, the Court being aware that it was laying down a new restriction on executive privilege. It is with the same
spirit that the Court should not be overly strict with applying the same rule in this peculiar instance, where the claim of
executive privilege occurred before the judgment in Senate v. Ermita became final.

5. To show that PMPF v. Manglapus may not be applied in the present case, the dissent implies that the Court therein
erred in citing US v. Curtiss Wright72 and the book entitled The New American Government and Its Work73 since these
authorities, so the dissent claims, may not be used to calibrate the importance of the right to information in the Philippine
setting.

The dissent argues that since Curtiss-Wright referred to a conflict between the executive and legislative branches of
government, the factual setting thereof was different from that of PMPF v. Manglapus which involved a collision between
governmental power over the conduct of foreign affairs and the citizen’s right to information.

That the Court could freely cite Curtiss-Wright – a case that upholds the secrecy of diplomatic negotiations
against congressional demands for information – in the course of laying down a ruling on the public right to
information only serves to underscore the principle mentioned earlier that the privileged character accorded to diplomatic
negotiations does not ipso facto lose all force and effect simply because the same privilege is now being claimed under
different circumstances.

PMPF v. Manglapus indeed involved a demand for information from private citizens and not an executive-legislative
conflict, but so did Chavez v. PEA74 which held that "the [public’s] right to information . . . does not extend to matters
recognized as privileged information under the separation of powers." What counts as privileged information in an
executive-legislative conflict is thus also recognized as such in cases involving the public’s right to information.

Chavez v. PCGG75 also involved the public’s right to information, yet the Court recognized as a valid limitation to that right
the same privileged information based on separation of powers – closed-door Cabinet meetings, executive sessions of
either house of Congress, and the internal deliberations of the Supreme Court.

These cases show that the Court has always regarded claims of privilege, whether in the context of an executive-legislative
conflict or a citizen’s demand for information, as closely intertwined, such that the principles applicable to one are also
applicable to the other.

The reason is obvious. If the validity of claims of privilege were to be assessed by entirely different criteria in each context,
this may give rise to the absurd result where Congress would be denied access to a particular information because of a
claim of executive privilege, but the general public would have access to the same information, the claim of privilege
notwithstanding.

Absurdity would be the ultimate result if, for instance, the Court adopts the "clear and present danger" test for the
assessment of claims of privilege against citizens’ demands for information. If executive information, when demanded by a
citizen, is privileged only when there is a clear and present danger of a substantive evil that the State has a right to
prevent, it would be very difficult for the Executive to establish the validity of its claim in each instance. In contrast, if the
demand comes from Congress, the Executive merely has to show that the information is covered by a recognized privilege
in order to shift the burden on Congress to present a strong showing of need. This would lead to a situation where it
would be more difficult for Congress to access executive information than it would be for private citizens.

We maintain then that when the Executive has already shown that an information is covered by executive privilege, the
party demanding the information must present a "strong showing of need," whether that party is Congress or a private
citizen.

The rule that the same "showing of need" test applies in both these contexts, however, should not be construed as a
denial of the importance of analyzing the context in which an executive privilege controversy may happen to be placed.
Rather, it affirms it, for it means that the specific need being shown by the party seeking information in
every particular instance is highly significant in determining whether to uphold a claim of privilege. This "need" is,
precisely, part of the context in light of which every claim of privilege should be assessed.

Since, as demonstrated above, there are common principles that should be applied to executive privilege controversies
across different contexts, the Court in PMPF v. Manglapus did not err when it cited the Curtiss-Wright case.
The claim that the book cited in PMPF v. Manglapus entitled The New American Government and Its Work could not have
taken into account the expanded statutory right to information in the FOIA assumes that the observations in that book in
support of the confidentiality of treaty negotiations would be different had it been written after the FOIA. Such
assumption is, with due respect, at best, speculative.

As to the claim in the dissent that "[i]t is more doubtful if the same book be used to calibrate the importance of the right
of access to information in the Philippine setting considering its elevation as a constitutional right," we submit that the
elevation of such right as a constitutional right did not set it free from the legitimate restrictions of executive privilege
which is itself constitutionally-based.76 Hence, the comments in that book which were cited in PMPF v. Manglapus remain
valid doctrine.

6. The dissent further asserts that the Court has never used "need" as a test to uphold or allow inroads into rights
guaranteed under the Constitution. With due respect, we assert otherwise. The Court has done so before, albeit without
using the term "need."

In executive privilege controversies, the requirement that parties present a "sufficient showing of need" only means, in
substance, that they should show a public interest in favor of disclosure sufficient in degree to overcome the claim of
privilege.77 Verily, the Court in such cases engages in a balancing of interests. Such a balancing of interests is certainly
not new in constitutional adjudication involving fundamental rights. Secretary of Justice v. Lantion,78 which was cited in the
dissent, applied just such a test.

Given that the dissent has clarified that it does not seek to apply the "clear and present danger" test to the present
controversy, but the balancing test, there seems to be no substantial dispute between the position laid down in
this ponencia and that reflected in the dissent as to what test to apply. It would appear that the only disagreement is on
the results of applying that test in this instance.

The dissent, nonetheless, maintains that "it suffices that information is of public concern for it to be covered by the right,
regardless of the public’s need for the information," and that the same would hold true even "if they simply want to know
it because it interests them." As has been stated earlier, however, there is no dispute that the information subject of this
case is a matter of public concern. The Court has earlier concluded that it is a matter of public concern, not on the basis of
any specific need shown by petitioners, but from the very nature of the JPEPA as an international trade agreement.

However, when the Executive has – as in this case – invoked the privilege, and it has been established that the subject
information is indeed covered by the privilege being claimed, can a party overcome the same by merely asserting that the
information being demanded is a matter of public concern, without any further showing required? Certainly not, for that
would render the doctrine of executive privilege of no force and effect whatsoever as a limitation on the right to
information, because then the sole test in such controversies would be whether an information is a matter of public
concern.

Moreover, in view of the earlier discussions, we must bear in mind that, by disclosing the documents of the JPEPA
negotiations, the Philippine government runs the grave risk of betraying the trust reposed in it by the Japanese
representatives, indeed, by the Japanese government itself. How would the Philippine government then explain itself when
that happens? Surely, it cannot bear to say that it just had to release the information because certain persons simply
wanted to know it "because it interests them."

Thus, the Court holds that, in determining whether an information is covered by the right to information, a specific
"showing of need" for such information is not a relevant consideration, but only whether the same is a matter of public
concern. When, however, the government has claimed executive privilege, and it has established that the information is
indeed covered by the same, then the party demanding it, if it is to overcome the privilege, must show that that the
information is vital, not simply for the satisfaction of its curiosity, but for its ability to effectively and reasonably participate
in social, political, and economic decision-making.79
7. The dissent maintains that "[t]he treaty has thus entered the ultimate stage where the people can exercise their right to
participate in the discussion whether the Senate should concur in its ratification or not." (Emphasis supplied) It adds that
this right "will be diluted unless the people can have access to the subject JPEPA documents". What, to the dissent, is a
dilution of the right to participate in decision-making is, to Us, simply a recognition of the qualified nature of the public’s
right to information. It is beyond dispute that the right to information is not absolute and that the doctrine of executive
privilege is a recognized limitation on that right.

Moreover, contrary to the submission that the right to participate in decision-making would be diluted, We reiterate that
our people have been exercising their right to participate in the discussion on the issue of the JPEPA, and they have been
able to articulate their different opinions without need of access to the JPEPA negotiation documents.

Thus, we hold that the balance in this case tilts in favor of executive privilege.

8. Against our ruling that the principles applied in U.S. v. Nixon, the Senate Select Committee case, and In re Sealed Case,
are similarly applicable to the present controversy, the dissent cites the caveat in the Nixon case that the U.S. Court was
there addressing only the President’s assertion of privilege in the context of a criminal trial, not a civil litigation nor a
congressional demand for information. What this caveat means, however, is only that courts must be careful not to hastily
apply the ruling therein to other contexts. It does not, however, absolutely mean that the principles applied in that case
may never be applied in such contexts.

Hence, U.S. courts have cited U.S. v. Nixon in support of their rulings on claims of executive privilege in contexts other than
a criminal trial, as in the case of Nixon v. Administrator of General Services80 – which involved former President Nixon’s
invocation of executive privilege to challenge the constitutionality of the "Presidential Recordings and Materials
Preservation Act"81 – and the above-mentioned In re Sealed Case which involved a claim of privilege against a subpoena
duces tecum issued in a grand jury investigation.

Indeed, in applying to the present case the principles found in U.S. v. Nixon and in the other cases already mentioned, We
are merely affirming what the Chief Justice stated in his Dissenting Opinion in Neri v. Senate Committee on
Accountability82 – a case involving an executive-legislative conflict over executive privilege. That dissenting opinion stated
that, while Nixon was not concerned with the balance between the President’s generalized interest in confidentiality and
congressional demands for information, "[n]onetheless the [U.S.] Court laid down principles and procedures that can
serve as torch lights to illumine us on the scope and use of Presidential communication privilege in the case at
bar."83 While the Court was divided in Neri, this opinion of the Chief Justice was not among the points of disagreement,
and We similarly hold now that the Nixon case is a useful guide in the proper resolution of the present controversy,
notwithstanding the difference in context.

Verily, while the Court should guard against the abuse of executive privilege, it should also give full recognition to
the validity of the privilege whenever it is claimed within the proper bounds of executive power, as in this
case. Otherwise, the Court would undermine its own credibility, for it would be perceived as no longer aiming to strike a
balance, but seeking merely to water down executive privilege to the point of irrelevance.

Conclusion

To recapitulate, petitioners’ demand to be furnished with a copy of the full text of the JPEPA has become moot and
academic, it having been made accessible to the public since September 11, 2006. As for their demand for copies of the
Philippine and Japanese offers submitted during the JPEPA negotiations, the same must be denied, respondents’ claim of
executive privilege being valid.

Diplomatic negotiations have, since the Court promulgated its Resolution in PMPF v. Manglapus on September 13, 1988,
been recognized as privileged in this jurisdiction and the reasons proffered by petitioners against the application of the
ruling therein to the present case have not persuaded the Court. Moreover, petitioners – both private citizens and
members of the House of Representatives – have failed to present a "sufficient showing of need" to overcome the claim of
privilege in this case.
That the privilege was asserted for the first time in respondents’ Comment to the present petition, and not during the
hearings of the House Special Committee on Globalization, is of no moment, since it cannot be interpreted as a waiver of
the privilege on the part of the Executive branch.

For reasons already explained, this Decision shall not be interpreted as departing from the ruling in Senate v. Ermita that
executive privilege should be invoked by the President or through the Executive Secretary "by order of the President."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO

Associate Justice Associate Justice

CONSUELO YNARES- SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

RENATO C. CORONA ADOLFO S. AZCUNA

Associate Justice Associate Justice

DANTE O. TINGA PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

RUBEN T. REYES TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice
 DISSENTING OPINION

PUNO, C.J.:

Some 22,000 years ago, the homo sapiens in the Tabon caves of Palawan gathered food, hunted, and used stone tools to
survive. Advancing by thousands of years, the early inhabitants of our land began to trade with neighboring countries.
They exchanged wax, rattan, and pearls for porcelain, silk, and gold of China, Indo-China, and Malaysia.1 The 16th century
then ushered in the galleon trade between Manila and Acapulco. The 1700s saw the genesis of the Filipino trading with
the British, followed by the German and the French in the 1800s. The 1900s opened commerce between the Philippines
and the United States of America.2 Today, with the onset of globalization of the economy and the shrinking of the world
through technology, a far more complicated international trade has become a matter of survival - much like gathering
food and hunting 22,000 years ago - to both countries and individuals.

The growth and development envisioned by globalization are premised on the proposition that the whole world economy
would expand and become more efficient if barriers and protectionist policies are eliminated. Expansion will happen as
each country opens its doors to every other producer, and more efficient producers start to compete successfully with
countries that produce at higher costs because of special protections that domestic laws and regulations provide. Smaller
countries and small enterprises will then concentrate their resources where they can be most competitive. The logic is that
ultimately, the individual consumer will benefit and lower cost will stimulate consumption, thus increasing trade and the
production of goods and services where it is economically advantageous. 3

Not a few world leaders, however, have cautioned against the downside of globalization. Pope John Paul II observed that
"(g)lobalization has also worked to the detriment of the poor, tending to push poorer countries to the margin of
international economic and political relations. Many Asian nations are unable to hold their own in a global market
economy."4 Mahatma Gandhi’s words, although referring to infant industrialization, are prescient and of similar import:
"The world we must strive to build needs to be based on the concept of genuine social equality…economic progress
cannot mean that few people charge ahead and more and more are left behind."

The key to resolving the decisive issue in the case at bar turns on the proper framework of analysis. The instant case
involves primarily not an assessment of globalization and international trade or of the extent of executive privilege in this
global arena, but a valuation of the right of the individual and his representatives in Congress to participate in economic
governance. Economic decisions such as forging comprehensive free trade agreements impact not only on the growth of
our nation, but also on the lives of individuals, especially those who are powerless and vulnerable in the margins of
society.

First, the facts.

In 2002, Japanese Prime Minister Junichiro Koizumi introduced the "Initiative for Japan-ASEAN Comprehensive Economic
Partnership."5 President Gloria Macapagal-Arroyo proposed the creation of a working group to study the feasibility of an
economic partnership with Japan.6 In October of that year, the Working Group on the Japan-Philippine Economic
Partnership Agreement (JPEPA) was formed, consisting of representatives from concerned government agencies of the
Philippines and Japan. It was tasked to study the possible coverage and content of a mutually beneficial economic
partnership between the two countries.71avvphi1

On 28 May 2003, the Philippine Coordinating Committee (PCC), composed of representatives from eighteen (18)
government agencies, was created under Executive Order No. 213. It was tasked to negotiate with the Japanese
representatives on the proposed JPEPA, conduct consultations with concerned government and private sector
representatives, and draft a proposed framework for the JPEPA and its implementing agreements.8

In June 2003, the Working Group signified that both countries were ready to proceed to the next level of discussions and
thus concluded its work. The Joint Coordinating Team (JCT) for JPEPA, composed of representatives from concerned
government agencies and the private sector, was then created. 9
On 11 December 2003, Prime Minister Koizumi and President Macapagal-Arroyo agreed that the Japanese and Philippine
governments should start negotiations on JPEPA in 2004 based on the discussions and outputs of the Working Group and
the Joint Coordinating Team. In February 2004, negotiations on JPEPA commenced.10

On 25 January 2005, petitioners Congressman Lorenzo R. Tañada III and Congressman Mario Joyo Aguja jointly filed
House Resolution No. 551, "Directing the Special Committee on Globalization to Conduct an Urgent Inquiry in Aid of
Legislation on Bilateral Trade and Investment Agreements that Government Has Been Forging, with Far Reaching Impact
on People’s Lives and the Constitution But with Very Little Public Scrutiny and Debate."11 In the course of the inquiry
conducted by the Special Committee on Globalization (Committee), respondent DTI Undersecretary Thomas G. Aquino
was requested to furnish the Committee a copy of the latest draft of the JPEPA. Respondent Undersecretary Aquino was
the Chairperson of the PCC. He did not accede to the request.12

On 10 May 2005, Congressman Herminio G. Teves, as Chairperson of the Special Committee on Globalization, wrote to
respondent Executive Secretary Eduardo Ermita, requesting that the Committee be furnished all documents on the JPEPA,
including the latest drafts of the agreement, the requests and the offers. 13 Executive Secretary Ermita wrote Congressman
Teves on 23 June 2005, informing him that the DFA would be unable to furnish the Committee all documents on the
JPEPA, since the proposed agreement "has been a work in progress for about three years." He also said that a copy of the
draft agreement would be forwarded to the Committee "as soon as the text thereof is settled and complete." 14

On 1 July 2005, petitioner Congressman Aguja, as member of the Committee, wrote NEDA Director-General Romulo Neri
and respondent Tariff Commission Chairperson Abon to request copies of the latest text of the JPEPA. Respondent
Chairperson Abon wrote petitioner Congressman Aguja on 12 July 2005 that the former did not have a copy of the
document being requested. He also stated that "the negotiation is still ongoing" and that he was certain respondent
Undersecretary Aquino would provide petitioner Congressman Aguja a copy "once the negotiation was completed." 15 For
its part, NEDA replied through respondent Assistant Director-General Songco that petitioner Congressman Aguja’s request
had been forwarded to the office of respondent Undersecretary Aquino, who would be in the best position to respond to
the request.16

In view of the failure to furnish the Committee the requested document, the Committee resolved to subpoena the records
of the DTI with respect to the JPEPA. However, House Speaker Jose de Venecia requested the Committee to hold the
subpoena in abeyance, as he wanted to secure first the consent of President Macapagal-Arroyo to furnish the Committee
a copy of the JPEPA.17

On 25 October 2005, petitioner Congressman Aguja, as member of the Committee, wrote to the individual members of
the PCC, reiterating the Committee’s request for an update on the status of the JPEPA negotiations, the timetable for the
conclusion and signing of the agreement, and a copy of the latest working draft of the JPEPA.18 None of the members
provided the Committee the requested JPEPA draft. In his letter dated 2 November 2005, respondent Undersecretary
Aquino replied that the Committee would be provided the latest draft of the agreement "once the negotiations are
completed and as soon as a thorough legal review of the proposed agreement has been conducted." 19

As the Committee has not secured a copy of the full text of the JPEPA and its attachments and annexes despite the
Committee’s many requests, petitioners filed the instant Urgent Petition for Mandamus and Prohibition on 9 December
2005. They pray that the Court (1) order respondents to provide them the full text of the JPEPA, including the Philippine
and Japanese offers and all pertinent attachments and annexes thereto; and (2) restrain respondents from concluding the
JPEPA negotiations, signing the JPEPA, and transmitting it to the President until said documents have been furnished the
petitioners.

On 17 May 2006, respondents filed their Comment. Petitioners filed their Reply on 5 September 2006.

On 11 September 2006, a certified true copy of the full text of the JPEPA signed by President Macapagal-Arroyo and Prime
Minister Koizumi with annexes and the implementing agreement was posted on the website of the Department of Trade
and Industry and made accessible to the public.20 Despite the accessibility of the signed full text of the JPEPA, petitioners
reiterated in their Manifestation and Motion filed on 19 September 2007 their prayer that respondents furnish them
copies of the initial offers (of the Philippines and of Japan) of the JPEPA, including all pertinent attachments and annexes
thereto, and the final text of the JPEPA prior to signing by the President (the "subject JPEPA documents").21

I respectfully submit that the ponencia overlooks the fact that it is the final text of the JPEPA prior to its signing by the
President that petitioners seek to access when the ponencia holds at the outset, viz:

Considering, however, that "[t]he principal relief petitioners are praying for is the disclosure of the contents of the
JPEPA prior to its finalization between the two States parties," (Reply to the Comment of the Solicitor General, rollo, p. 319
[underscoring supplied]) public disclosure of the text of the JPEPA after its signing by the President, during the pendency
of the present petition, has been largely rendered moot and academic.

xxx xxx xxx

The text of the JPEPA having been made accessible to the public, the petition has become moot and academic to the
extent that it seeks the disclosure of the "full text" thereof.22 (emphasis supplied)

Thus, insofar as petitioners’ access to the final text of the JPEPA prior to signing by the President is concerned, the
ponencia failed to include the same among the issues for the Court to resolve.

The issues for resolution in the case at bar are substantive and procedural, viz:

I. Do petitioners have standing to bring this action for mandamus in their capacity as citizens of the Republic,
taxpayers and members of Congress?

II. Does the Court have jurisdiction over the instant petition?

III. Do petitioners have a right of access to the documents and information being requested in relation to the
JPEPA?

IV. Will petitioners’ right to effective participation in economic decision-making be violated by the deferral of the
public disclosure of the requested documents until such time that the JPEPA has been concluded and signed by
the President?

I shall focus on the jugular issue of whether or not petitioners have a right of access to the subject JPEPA documents. Let
me first take up petitioners’ demand for these documents as members of the House of Representatives.

I. The context: the question of access

of the members of the House of Representatives
to the subject JPEPA documents is raised
in relation to international trade agreement negotiations

In demanding the subject JPEPA documents, petitioners suing as members of the House of Representatives invoke their
power over foreign trade under Article VI, Section 28 (2) of the 1987 Constitution which provides, viz:

Sec. 28 (2). The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations
and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the Government. (emphasis supplied)

Respondents, on the other hand, deny petitioners’ demand for information by contending that the President is the sole
organ of the nation in external relations and has sole authority in the negotiation of a treaty; hence, petitioners as
members of the House of Representatives cannot have access to the subject JPEPA documents. 23 On closer examination,
respondents’ contention can be reduced into two claims: (1) the executive has sole authority in treaty negotiations, hence,
the House of Representatives has no power in relation to treaty negotiations; and (2) the information and documents used
by the executive in treaty negotiations are confidential.

To buttress their contention, which the ponencia upholds, respondents rely on United States v. Curtiss-Wright Export
Corporation,24 a case that has become a classic authority on recognizing executive primacy or even exclusivity in foreign
affairs in the U.S.25 and in the Philippines.26 They also cite People’s Movement for Press Freedom (PMPF) v. Manglapus, the
only Philippine case wherein the Court, in an unpublished Resolution, had occasion to rule on the issue of access to
information on treaty negotiations. PMPF v. Manglapus extensively quoted Curtiss-Wright, viz:

In this vast external realm, with its important, complicated, delicate and manifold problems, the President alone has the
power to speak or listen as a representative of the nation. He makes treaties with the advice and consent of the Senate;
but he alone negotiates. Into the field of negotiation the Senate cannot intrude; and Congress itself is powerless to invade
it. As Marshall said in his great argument of March 7, 1800, in the House of Representatives, ‘The President is the sole
organ of the nation in its external relations, and its sole representative with foreign nations.’ Annals, 6th Cong., col. 613.
The Senate Committee on Foreign Relations at a very early day in our history (February 15, 1816), reported to the Senate,
among other things, as follows:

‘The President is the constitutional representative of the United States with regard to foreign nations. He manages our
concerns with foreign nations and must necessarily be most competent to determine when, how, and upon what subjects
negotiation may be urged with the greatest prospect of success. For his conduct he is responsible to the Constitution. The
committee considers this responsibility the surest pledge for the faithful discharge of his duty. They think the interference
of the Senate in the direction of foreign negotiations calculated to diminish that responsibility and thereby to impair the
best security for the national safety. The nature of transactions with foreign nations, moreover, requires caution and unity
of design, and their success frequently depends on secrecy and dispatch.’ 8 U.S. Sen. Reports Comm. on Foreign Relations,
p. 24.

It is important to bear in mind that we are here dealing not alone with an authority vested in the President by an exertion
of legislative power, but with such an authority plus the very delicate, plenary and exclusive power of the President as the
sole organ of the federal government in the field of international relations - a power which does not require as a basis for
its exercise an act of Congress, but which, of course, like every other governmental power, must be exercised in
subordination to the applicable provisions of the Constitution. It is quite apparent that if, in the maintenance of our
international relations, embarrassment -perhaps serious embarrassment- is to be avoided and success for our aims
achieved, congressional legislation which is to be made effective through negotiation and inquiry within the international
field must often accord to the President a degree of discretion and freedom from statutory restriction which would not be
admissible were domestic affairs alone involved. Moreover, he, not Congress, has the better opportunity of knowing the
conditions which prevail in foreign countries, and especially is this true in time of war. He has his confidential sources of
information. He has his agents in the form of diplomatic, consular and other officials. Secrecy in respect of information
gathered by them may be highly necessary, and the premature disclosure of it productive of harmful results. Indeed, so
clearly is this true that the first President refused to accede to a request to lay before the House of Representatives the
instructions, correspondence and documents relating to the negotiation of the Jay Treaty - a refusal the wisdom of which
was recognized by the House itself and has never since been doubted. 27 (emphasis supplied)

In examining the validity of respondents’ contention and the ponencia’s affirmation thereof, that the executive has sole
authority in treaty negotiations, and that information pertaining to treaty negotiations is confidential, let me begin by
tracing respondents’ and the ponencia’s steps back to U.S. jurisdiction as they heavily rely on Curtiss-Wright, which was
quoted in PMPF v. Manglapus, for their position.

In the U.S., there is a long-standing debate on the locus of the primary or even exclusive power over foreign
affairs.28 Ironically, while Curtiss-Wright is considered a most influential decision on asserting presidential primacy in
foreign affairs, the issue in that case was the validity of Congress’ delegation of its foreign affairs power to the President;
President Franklin D. Roosevelt ordered an embargo on ammunition sales to two South American countries in execution of
a Joint Resolution of Congress. Towards the end of the ponencia, Justice Sutherland stated that "it was not within the
power of the President to repeal the Joint Resolution." 29 The oft-quoted "sole organ" remark in Curtiss-Wright has not a
few times been regarded in the U.S. as dictum in that case.30 I make this observation to caution against over-reliance on
Curtiss-Wright, but the case at bar is not the occasion to delve into and settle the debate on the locus of the primary
power in the broad area of foreign affairs. In this vast landscape, I shall limit my view only to the subject matter of the
instant case -- the openness or secrecy of treaty negotiations and, more particularly, of trade agreement negotiations.

Aside from the fact that Curtiss-Wright did not involve treaty negotiations, much less trade agreement negotiations, that
case was decided in 1936 or more than 70 years ago. Since then, the dynamics of the allocation of power over
international trade agreements between the executive and the legislature has dramatically changed. An appreciation of
these developments would provide a useful backdrop in resolving the issue of access to the subject JPEPA documents.

A. Negotiation of trade agreements:

the question of power allocation between
the executive and Congress in U.S. jurisdiction

The U.S. constitution is a good place to start in understanding the allocation of power over international trade agreements
between the executive and the legislative branches of government.

Article II of the U.S. Constitution grants the President the power to make treaties, but only with the approval of a super-
majority of the Senate.31 Under Article I, Congress has the power to regulate foreign trade,32 including the power to "lay
and collect Taxes, Duties, Imposts and Excises."33

While the drafters of the U.S. Constitution discussed the commerce power and the power to make treaties, 34 there is scant
information on how they intended to allocate the powers of foreign commerce between the political branches of
government.35 "The well-recognized utility of Congressional involvement in treaty and international agreement
negotiation applies with even greater force when it comes to international trade. For here, the making of international
agreements intersects with the Constitution’s express grant of authority to Congress to regulate commerce with foreign
nations." (emphasis supplied)36

The drafters of the Constitution gave the President power to negotiate because of the need to demonstrate clear
leadership and a unified front when dealing with other nations. 37 The Senate was given the power to ratify treaties
because, as the more "contemplative" arm of the legislature, it was less subject to short-term interests than the House
while still directly representing the interests of the people.38 Congress was granted the power to set tariffs and to regulate
commerce in order to check the powers of the Executive.39

Thus, under the U.S. Constitution, the President has the power to negotiate international treaties, but does not have the
constitutional authority to regulate commerce or to determine tariffs and duties. On the other hand, Congress has the
power to regulate commerce with foreign nations, but does not have the power to negotiate international agreements
directly.40 That there is a question on the demarcation of powers between the President and Congress in international
trade agreements cannot escape the eye. Throughout U.S. history, answers to this question have come in various
permutations.

In the late 1700s, after the U.S. established its independence, it had a weak military and relied on trade policies to maintain
its independence and guard its national security through restriction of imports or exports with offending great
powers.41 Congress implemented these trade policies through legislation 42 and ratification of commercial treaties
negotiated by the

President.43 This continued in the 1800s – the President negotiated treaties, including trade treaties, and secured the
requisite Senate concurrence. 44

But beginning in the 1920s, Congress began to reassert its power over the development of international trade policy. 45 It
began passing protectionist legislation to respond to pressure from domestic industries and agriculture. 46 In 1930,
Congress passed the Smoot-Hawley Tariff Act of 1930,47 which increased tariffs to an average of fifty-three percent and
increased the number of products subject to duties.48 In retaliation, other countries quickly subjected the U.S. to similar
tariffs. In the mid-1930s, Congress realized that its setting of tariffs was at best inefficient49 and thus passed the Reciprocal
Trade Agreement Act of 1934 (the 1934 Act).50

The 1934 Act allowed the President to reduce tariffs within guidelines prescribed by Congress. 51 It permitted the President
to issue a Presidential Proclamation enacting international agreements that lowered tariffs without any further action by
Congress.52 Needless to state, the 1934 Act was a significant delegation of Congress’ power to set tariffs. But the Act had a
limited lifespan and, with each extension of the Act, Congress issued more guidelines and restrictions on the powers it had
delegated to the President.53

The modern period saw a drastic alteration in the U.S. approach to negotiating trade agreements. 54 Instead of making
additional changes to the 1934 Act, Congress passed the Trade Act of 1974 (the 1974 Act), which created modern
procedures called the "fast track."55 Fast track legislation was enacted to address conflicts between the President and
Congress.56 These conflicts stemmed from the presidential exercise of the executive trade agreement authority and the
ordinary congressional approval procedures, which resulted in ongoing amendments and a slower, less reliable trade
negotiation process.57 Fast track procedures were intended as a "consultative" solution to foreign trade disputes between
Congress and the President.58 It was designed to benefit both branches of government by allowing congressional input
into trade agreement negotiations while enabling "the President to guarantee to international trading partners that
Congress will decide on the final agreement promptly." 59

The 1974 Act broadened the scope of powers delegated to the President who was given the authority to make
international trade agreements affecting both tariff and non-tariff barriers.60 With the 1974 Act, Congress delegated to the
President both the power to set tariffs and the power to regulate commerce with foreign nations.61 But while the scope of
the powers granted to the President was broader, the extent of the grant was limited. Unlike in the 1934 Act, Congress did
not give the President the authority to enact international trade agreement by a simple proclamation. 62 Instead, the
President had to seek congressional approval.63 To facilitate approval, the fast track mechanism put in place procedures
for congressional review of the agreement during the negotiation process.64 The most significant feature of the fast track
procedure was that Congress could only approve or disapprove, but not modify, the text of the agreement.65 This
mechanism gave the President greater credibility when negotiating international agreements, because other countries
knew that the agreements would not be subject to prolonged debates and drastic changes by Congress. 66

In the 1980s, legislation made the fast track procedure increasingly complicated.67 The Trade and Tariff Act of 1984 added
a requirement that the President consult with the House Ways and Means Committee and the Senate Finance Committee
before giving notice of his intent to sign the agreement so that the committees could disapprove the negotiations before
formal talks even began.68 Congress effectively retained a bigger portion of its constitutional authority over regulation of
international trade.69 In 1988, Congress passed the Omnibus Trade and Competitiveness Act of 1988.70 The Act further
"enhance(d) Congress’ power in two respects: by reserving for either House the power to block extension of the Fast Track
authority past the original expiration date and for both houses to derail already authorized agreements from the Fast
Track."71 Aside from the House Ways and Means and Senate Finance Committees, the House Rules Committee was given
the power to "derail" an extension of the fast track.72 The Act extended the fast-track for only three years.73

The fast track legislation saw its end in 1994.74 For the first time after fifty years, the executive branch was without
authority to enter into international trade agreements except through treaties subject to Senate approval. Despite
persistent attempts by President William J. Clinton and President George H.W. Bush to renew the fast track,75 Congress
refused to grant the executive branch the power to enter directly into international trade agreements from 1994 until
August 2002.76

Finally, with the dawn of the new millennium, Congress enacted the Bipartisan Trade Promotion Authority Act of 2002
(Trade Act of 2002),77 which provided for a revised fast-track procedure under the new label, "trade promotion authority
(TPA)."78 The Trade Act of 2002 was billed as "establish(ing) a partnership of equals. It recognizes that Congress’
constitutional authority to regulate foreign trade and the President’s constitutional authority to negotiate with foreign
nations are interdependent. It requires a working relationship that reflects that interdependence." 79 (emphasis supplied)
The purpose of the Act was to attempt again to resolve the ambiguity in the constitutional separation of powers in the
area of international trade.80
The Trade Act of 2002 was intended for Congress to retain its constitutional authority over foreign trade while allowing
performance by the President of the role of negotiatior,81 but with Congress keeping a closer watch on the
President.82 Aside from providing strict negotiating objectives to the President, Congress reserved the right to veto a
negotiated agreement.83 The President’s power is limited by specific guidelines and concerns identified by Congress and
his negotiations may address only the issues identified by Congress in the statute and must follow specific
guidelines.84 Authorization to negotiate is given if the President determines that foreign trade is "unduly burden(ed) and
restrict(ed)" and "the purposes, policies, priorities, and objectives of (the Trade Act of 2002) will be promoted" by the
negotiations.85 The Act provides five additional limitations on the negotiation of agreements regarding tariff
barriers.86 Negotiation of agreements regarding non-tariff barriers is subject to the objectives, limitations and requirement
of consultation and notice provided in the Act.87 In addition, the President must notify Congress prior to initiating
negotiations, in order for the final negotiated agreement to be eligible for TPA. 88 The President is also required to consult
Congress regarding the negotiations "before and after submission of the notice." 89 The Act also requires the President to
make specific determinations and special consultations with Congress in the areas of agriculture and textiles.90

As oversight to ensure that the President follows the guidelines laid out by Congress, the Trade Act of 2002 created a
Congressional Oversight Group (COG) composed of members of Congress, in order to provide direct participation and
oversight to trade negotiations initiated under the Act. 91 The COG membership includes four members of the House
Committee on Ways and Means, four members of the Senate Committee on Finance, and members of the committees of
the House and the Senate, "which would have . . . jurisdiction over provisions of law affected by a (sic) trade agreement
negotiations . . . ."92 Each member of the COG is an official advisor to the U.S. delegation in negotiations for any trade
agreement under the Act.93 The COG was created "to provide an additional consultative mechanism for Members of
Congress and to provide advice to the (United States Trade Representative) on trade negotiations." 94

To enter into an international agreement using the TPA procedures, the President must first consult with the Senate
Committee on Finance, the House Committee on Ways and Means, and the COG. 95 He must then provide written notice to
Congress of his intention to enter into negotiations.96 The notice must include the date that negotiations are scheduled to
begin, the specific objectives of the negotiations, and whether the President seeks to create a new agreement or modify
an existing agreement.97 Six months prior to signing an agreement, the President must "send a report to Congress . . . that
lays out what he plans to do with respect to (U.S.) trade laws."98 At that time, Congress reviews the proposed agreement.
The Trade Act of 2002 "provides for a resolution process where Congress can specifically find that the proposed changes
are ‘inconsistent’ with the negotiating objectives."99

In defending the complexity of the Trade Act of 2002, Congress points out that "the negotiating objectives and
procedures . . . represent a very careful substantive and political balance on some very complex and difficult issues such as
investment, labor and the environment, and the relationship between Congress and the Executive branch during
international trade negotiations."100 Without doubt, the Act ultimately places much more stringent limitations on the
President’s ability to negotiate effectively with foreign nations than previous fast-track legislation
did.101 Document1zzF106300298861

Given this slice of U.S. history showing the allocation of power over international trade agreement negotiations between
the executive and Congress in U.S. jurisdiction, it will be turning somersaults with history to contend that the President is
the sole organ for external relations. The "sole organ" remark in Curtiss-Wright simply does not apply to the negotiation
of international trade agreements in the U.S. where Congress is allowed, at the very least, to indirectly participate in trade
negotiations through the setting of statutory limits to negotiating objectives and procedures, and to almost directly
negotiate through the Congressional Oversight Group.

Let me now discuss the allocation of power over international trade agreements between the Executive and Congress in
Philippine jurisdiction.

B. Negotiation of trade agreements:

the question of power allocation between
the Executive and Congress in Philippine jurisdiction
In their Reply, petitioners refute respondents’ contention that the President is the sole organ of the nation in its external
relations and has exclusive authority in treaty negotiation by asserting that Congress has the power to legislate on matters
dealing with foreign trade; hence, they should have access to the subject JPEPA documents.

Specifically, as aforementioned, petitioners as members of the House of Representatives point to Article VI, Section 28 (2)
of the 1987 Constitution, as basis of their power over foreign trade. It provides, viz:

Sec. 28 (2). The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations
and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the Government. (emphasis supplied)

They contend that, pursuant to this provision, the Executive’s authority to enter into international trade agreements is a
legislative power delegated to the President through Sections 401 and 402 of Presidential Decree No. 1464 or the Tariff
and Customs Code of the Philippines, viz:

Sec. 401. Flexible Clause. —

a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein
prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter
referred to as NEDA), is hereby empowered: (1) to increase, reduce or remove existing protective rates of import duty
(including any necessary change in classification). The existing rates may be increased or decreased to any level, in one or
several stages but in no case shall the increased rate of import duty be higher than a maximum of one hundred (100) per
cent ad valorem; (2) to establish import quota or to ban imports of any commodity, as may be necessary; and (3) to
impose an additional duty on all imports not exceeding ten (10%) percent ad valorem whenever necessary;

xxx xxx xxx

c. The power of the President to increase or decrease rates of import duty within the limits fixed in subsection "a" shall
include the authority to modify the form of duty. In modifying the form of duty, the corresponding ad valorem or specific
equivalents of the duty with respect to imports from the principal competing foreign country for the most recent
representative period shall be used as bases.

xxx xxx xxx

Sec. 402. Promotion of Foreign Trade. —

a. For the purpose of expanding foreign markets for Philippine products as a means of assistance in the economic
development of the country, in overcoming domestic unemployment, in increasing the purchasing power of the
Philippine peso, and in establishing and maintaining better relations between the Philippines and other countries,
the President, is authorized from time to time:

(1) To enter into trade agreements with foreign governments or instrumentalities thereof; and

(2) To modify import duties (including any necessary change in classification) and other import
restrictions, as are required or appropriate to carry out and promote foreign trade with other countries:…

b. The duties and other import restrictions as modified in subsection "a" above, shall apply to articles which are
the growth, produce or manufacture of the specific country, whether imported directly or indirectly, with which
the Philippines has entered into a trade agreement: xxx

c. Nothing in this section shall be construed to give any authority to cancel or reduce in any manner any of the
indebtedness of any foreign country to the Philippines or any claim of the Philippines against any foreign country.
 d. Before any trade agreement is concluded with any foreign government or instrumentality thereof, reasonable
public notice of the intention to negotiate an agreement with such government or instrumentality shall be given
in order that any interested person may have an opportunity to present his views to the Commission which shall
seek information and advice from the Department of Agriculture, Department of Natural Resources, Department
of Trade and Industry, Department of Tourism, the Central Bank of the Philippines, the Department of Foreign
Affairs, the Board of Investments and from such other sources as it may deem appropriate. 102 (emphasis supplied)

Indeed, it is indubitable that Article VI, Section 28 (2) of the 1987 Constitution, vests Congress with power over foreign
trade, at least with respect to the fixing of tariff rates, import and export quotas, tonnage and wharfage dues and other
duties and imposts, similar to the power of Congress under the U.S. Constitution. This grant of power to the Philippine
Congress is not new in the 1987 Constitution. The 1935 Constitution, in almost similar terms, provides for the same power
under Article VI, Section 22(2), viz:

Sec. 22(2). The Congress may by law authorize the President, subject to such limitations and restrictions as it may impose
to fix, within specified limits, tariff rates, import and export quotas, and tonnage and wharfage dues. 103 (emphasis
supplied)

Pursuant to this provision, Congress enacted Republic Act. No. 1937, entitled, "An Act to Revise and Codify the Tariff and
Customs Laws of the Philippines," in 1957. Section 402 of the Act is the precursor of Section 402 of the Tariff and Customs
Code of the Philippines of 1978,104 which petitioners cite. In almost identical words, these sections provide for the
authority of the President to "enter into trade agreements with foreign governments or instrumentalities
thereof."105 Section 401 of both the Tariff and Customs Code of 1978 and Republic Act No. 1937 also provide for the
power of the President to, among others, increase or reduce rates of import duty. 106

The provision in Article VI, Section 22(2) of the 1935 Constitution --to authorize the President, by law, to fix, within
specified limits, tariff rates, import and export quotas, and tonnage and wharfage dues -- was inspired by a desire to
enable the nation, through the President, to carry out a unified national economic program and to administer the laws of
the country to the end that its economic interests would be adequately protected. 107 This intention to implement a unified
national economic program was made explicit in the 1987 Constitution with the addition of the phrase "within the
framework of the national development program of the government," upon motion of Commissioner Christian Monsod.
He explained the rationale for adding the phrase, viz:

The reason I am proposing this insertion is that an economic program has to be internally consistent. While it is directory
to the President – and it says "within specified limits" on line 2 – there are situations where the limits prescribed to the
President might, in fact be distortive of the economic program.

xxx xxx xxx

We are not taking away any power from Congress. We are just saying that as a frame of reference, the authority and the
limits prescribed should be consistent with the economic program of government which the legislature itself
approves.108 (emphasis supplied)

In sum, while provision was made for granting authority to the President with respect to the fixing of tariffs, import and
export quotas, and tonnage and wharfage dues, the power of Congress over foreign trade, and its authority to delegate
the same to the President by law, has consistently been constitutionally recognized. 109 Even Curtiss-Wright, which
respondents and the ponencia rely on, make a qualification that the foreign relations power of the President, "like every
other governmental power, must be exercised in subordination to the applicable provisions of the
Constitution."110 Congress’ power over foreign trade is one such provision that must be considered in interpreting the
treaty-making power of the President.

Moreover, while Curtiss-Wright admonished that "…if, in the maintenance of our international relations, embarrassment -
perhaps serious embarrassment- is to be avoided and success for our aims achieved, congressional legislation which is to
be made effective through negotiation and inquiry within the international field must often accord to the President a
degree of discretion and freedom from statutory restriction which would not be admissible were domestic affairs alone
involved,"111 the 1987 Constitution itself, reiterating the 1935 and the 1973 Constitutions, provides that Congress may, by
law, authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues within specified
limits, and subject to such limitations and restrictions as Congress may impose. One cannot simply turn a blind eye on
Congress’ foreign trade power granted by the Constitution in interpreting the power of the Executive to negotiate
international trade agreements.

Turning to the case at bar, Congress undoubtedly has power over the subject matter of the JPEPA,112 as this agreement
touches on the fixing of "tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts."
Congress can, in fact, revoke or amend the power of the President to fix these as authorized by law or the Tariff and
Customs Code of 1978. Congress can legislate and conduct an inquiry in aid of legislation on this subject matter, as it did
pursuant to House Resolution No. 551. The purpose of the legislative inquiry in which the subject JPEPA documents are
needed is to aid legislation, which is different from the purpose of the negotiations conducted by the Executive, which is
to conclude a treaty. Exercised within their proper limits, the power of the House of Representatives to conduct a
legislative inquiry in aid of legislation and the power of the executive to negotiate a treaty should not collide with each
other.

It is worth noting that petitioner members of the House of Representatives are not seeking to directly participate in the
negotiation of the JPEPA, nor are they indirectly interfering with the Executive’s negotiation of the JPEPA. They seek access
to the subject JPEPA documents for purposes of their inquiry, in aid of legislation, on the forging of bilateral trade and
investment agreements with minimal public scrutiny and debate, as evinced in the title of House Resolution No. 551,
"Directing the Special Committee on Globalization to Conduct an Urgent Inquiry in Aid of Legislation on Bilateral Trade
and Investment Agreements that Government Has Been Forging, with Far Reaching Impact on People’s Lives and the
Constitution But with Very Little Public Scrutiny and Debate."113 In relation to this, the ponencia states, viz:

Whether it can accurately be said that the Filipino people were not involved in the JPEPA negotiations is a question of fact
which this Court need not resolve. Suffice it to state that respondents had presented documents purporting to show that
public consultations were conducted on the JPEPA. Parenthetically, petitioners consider these "alleged consultations" as
"woefully selective and inadequate."114

Precisely, the inquiry in aid of legislation under House Resolution No. 551 seeks to investigate the sufficiency of public
scrutiny and debate on the JPEPA, considering its expansiveness, which is well within the foreign trade power of Congress.
At this point, it is in fact impossible for petitioners to interfere with the JPEPA negotiations, whether directly or indirectly,
as the negotiations have already been concluded. Be that as it may, the earlier discussion on the allocation of international
trade powers between the Executive and Congress in U.S. jurisdiction has shown that it is not anathema to the
preservation of the treaty-making powers of the President for Congress to indirectly participate in trade agreement
negotiations.

Let us now proceed to respondents’ argument that the subject JPEPA documents are covered by the diplomatic secrets
privilege and should therefore be withheld from Congress. In so proceeding, it is important to bear in mind the
interdependence of the power of Congress over foreign trade and the power of the executive over treaty negotiations.

C. The power of Congress to conduct inquiry

in aid of legislation on foreign trade
vis-à-vis executive privilege

115
the Court defined "executive privilege" as the right of the President and high-level executive branch officials to
withhold information from Congress, the courts, and the public.

In the U.S., it is recognized that there are at least four kinds of executive privilege: (1) military and state secrets, (2)
presidential communications, (3) deliberative process, and (4) law enforcement privileges. 116 In the case at bar,
respondents invoke the state secrets privilege covering diplomatic or foreign relations and the deliberative process
privilege. Let me first take up the diplomatic secrets privilege.
 1. Diplomatic secrets privilege

In Almonte v. Vasquez,117 the Court recognized a common law governmental privilege against disclosure, with respect to
state secrets bearing on diplomatic matters.118 In Chavez v. PCGG,119 the Court also recognized the confidentiality of
information on inter-government exchanges prior to the conclusion of treaties and executive agreements subject to
reasonable safeguards on the national interest. 120 It also reiterated the privilege against disclosure of state secrets bearing
on diplomatic matters, as held in Almonte. Citing Chavez, Senate v. Ermita also acknowledged the states secrets privilege
bearing on diplomatic matters. In PMPF v. Manglapus, the Court upheld the confidentiality of treaty negotiations. In that
case, petitioners sought to compel the representatives of the President in the then ongoing negotiations of the RP-U.S.
Military Bases Agreement to give them access to the negotiations, to treaty items already agreed upon, and to the R.P.
and U.S. positions on items that were still being contested.

In determining the applicability of the diplomatic secrets privilege to the case at bar, I reiterate the primordial principle in
Senate v. Ermita that a claim of executive privilege may be valid or not depending on the ground invoked to justify it and
the context in which it is made. Thus, even while Almonte and Senate v. Ermita both recognized the state secrets privilege
over diplomatic matters, and Chavez and PMPF v. Manglapus both acknowledged the confidentiality of inter-government
exchanges during treaty negotiations, the validity of the claim of the diplomatic secrets privilege over the subject JPEPA
documents shall be examined under the particular circumstances of the case at bar. I especially take note of the fact that
unlike PMPF v. Manglapus, which involved a request for access to information during negotiations of a military treaty, the
case at bar involves a request for information after the conclusion of negotiations of an international trade agreement.
Bearing this context in mind, let me now delve into the merits of the invocation of executive privilege.

Almonte, Chavez, Senate v. Ermita, and PMPF v. Manglapus did not discuss the manner of invoking the diplomatic secrets
privilege. For the proper invocation of this privilege, U.S. v. Reynolds 121 is instructive. This case involved the military secrets
privilege, which can be analogized to the diplomatic secrets privilege, insofar as they are both based on the nature and the
content of the information withheld. I submit that we should follow the procedure laid down in Reynolds to determine
whether the diplomatic secrets privilege is properly invoked, viz:

The privilege belongs to the Government and must be asserted by it; it can neither be claimed nor waived by a private
party. It is not to be lightly invoked. There must be a formal claim of privilege, lodged by the head of the department
which has control over the matter, after actual personal consideration by that officer. The court itself must determine
whether the circumstances are appropriate for the claim of privilege, and yet do so without forcing a disclosure of the very
thing the privilege is designed to protect.

xxx xxx xxx

It may be possible to satisfy the court, from all the circumstances of the case, that there is a reasonable danger that
compulsion of the evidence will expose military matters which, in the interest of national security, should not be divulged.
When this is the case, the occasion for the privilege is appropriate, and the court should not jeopardize the security which
the privilege is meant to protect by insisting upon an examination of the evidence, even by the judge alone, in
chambers.122 (emphasis supplied) (footnotes omitted)

In the case at bar, the reasons for nondisclosure of the subject JPEPA documents are stated in the 23 June 2005 letter of
respondent Secretary Ermita to Congressman Teves, Chairperson of the House Special Committee on Globalization, viz:

"Dear Congressman Teves,

xxx xxx xxx

In its letter dated 15 June 2005 (copy enclosed), DFA explains that the Committee’s request to be furnished all documents
on the JPEPA may be difficult to accomplish at this time, since the proposed Agreement has been a work in progress for
about three years. A copy of the draft JPEPA will however be forwarded to the Committee as soon as the text thereof is
settled and complete. (emphasis supplied)
In the meantime, DFA submits copies of the following documents:

· Joint Statement on the JPEPA issued in December 2002

· JPEPA Joint Coordinating Team Report dated December 2003

· Joint Announcement of the Philippine President and the Japanese Prime Minister issued in December
2003

· Joint Press Statement on the JPEPA issued in November 2004

xxx xxx xxx

For your information.

Very truly yours,

(Signed)
Eduardo R. Ermita
Executive Secretary"123

Respondents’ Comment further warned of the danger of premature disclosure of the subject JPEPA documents, viz:

… At the time when the Committee was requesting the copies of such documents, the negotiations were ongoing as they
are still now and the text of the proposed JPEPA is still uncertain and subject to change. Considering the status and nature
of such documents then and now, these are evidently covered by executive privilege…

Practical and strategic considerations likewise counsel against the disclosure of the "rolling texts" which may undergo
radical change or portions of which may be totally abandoned. Furthermore, the negotiations of the representatives of the
Philippines as well as of Japan must be allowed to explore alternatives in the course of the negotiations… 124

The reasons cited by respondents for refusing to furnish petitioners the subject JPEPA documents demonstrate that these
documents contain matters that should not be disclosed, lest the ongoing negotiations be hampered. As respondents
further explain in their Comment, if premature disclosure is made while negotiations are ongoing, the Philippine panel and
the President would be "hampered and embarrassed by criticisms or comments from persons with inadequate knowledge
of the nuances of treaty negotiations or worse by publicity seekers or idle kibitzers."125

Without ruling on the confidentiality of the subject JPEPA documents during negotiations (as this is no longer in issue), I
submit that the reasons provided by respondents for invoking the diplomatic secrets privilege while the JPEPA
negotiations were ongoing no longer hold now that the negotiations have been concluded. That respondents were
claiming confidentiality of the subject JPEPA documents during -- not after -- negotiations and providing reasons therefor
is indubitable. The 23 June 2005 letter of respondent Secretary Ermita to Congressman Teves states that the "proposed
Agreement has been a work in progress for about three years." Likewise, respondents’ Comment states that "(a)t the time
when the Committee was requesting the copies of such documents, the negotiations were ongoing as they are still now."
Both statements show that the subject JPEPA documents were being withheld from petitioners during and not after
negotiations, and that the reasons provided for withholding them refer to the dangers of disclosure while negotiations are
ongoing and not after they have been concluded.

In fact, respondent Secretary Ermita’s 23 June 2005 letter states that a "copy of the draft JPEPA" as soon as "the text
thereof is settled and complete" would be forwarded to the Committee, which is precisely one of the subject JPEPA
documents, i.e., the final text of the JPEPA prior to its signing by the President. Similarly, in his letter dated 2 November
2005, respondent Undersecretary Aquino replied that the Committee would be provided the latest draft of the agreement
"once the negotiations are completed and as soon as a thorough legal review of the proposed agreement has been
conducted."126 Both letters of Secretary Ermita and Undersecretary Aquino refer to the draft texts of the JPEPA that they
would provide to the Committee once the negotiations and text are completed, and not to the final text of the JPEPA after
it has been signed by the President. The discussion infra will show that in the case of the North American Free Trade
Agreement (NAFTA), the complete text of the agreement was released prior to its signing by the Presidents of the U.S.,
Canada and Mexico. Likewise, draft texts of the Free Trade Area of the Americas (FTAA) have been made accessible to the
public. It is not a timeless absolute in foreign relations that the text of an international trade agreement prior to its signing
by the President should not be made public.

For a claim of diplomatic secrets privilege to succeed, it is incumbent upon respondents to satisfy the Court that the
disclosure of the subject JPEPA documents after the negotiations have been concluded would prejudice our national
interest, and that they should therefore be cloaked by the diplomatic secrets privilege. It is the task of the Executive to
show the Court the reason for the privilege in the context in which it is invoked, as required by Senate v. Ermita, just as the
U.S. government did in Reynolds.127 Otherwise, the Court, which has the duty to determine with finality whether the
circumstances are appropriate for a claim of privilege, 128 will not have any basis for upholding or rejecting respondents’
invocation of the privilege. The requirement to show the reason for the privilege is especially important in the case at bar,
considering that the subject JPEPA documents are part of trade agreement negotiations, which involve the interdependent
powers of the Executive over treaty negotiations and the legislature over foreign trade, as recognized in both Philippine
and U.S. jurisdictions. Upon the Executive’s showing of the reason and circumstances for invoking the diplomatic secrets
privilege, the Court can then consider whether the application of the privilege to the information or document in dispute
is warranted. As the Executive is given the opportunity to show the applicability of the privilege, there is a safeguard for
protecting what should rightfully be considered privileged information to uphold national interest.

With respondents’ failure to provide reasons for claiming the diplomatic secrets privilege after the conclusion of
negotiations, the inevitable conclusion is that respondents cannot withhold the subject JPEPA documents.

The contentions in the Concurring Opinion of Justice Carpio that a State may wish to keep its offers "confidential even
after the signing of the treaty because it plans to negotiate similar treaties with other countries and it does not want its
negotiating positions known beforehand by such countries," and that "(i)f the Philippines does not respect the
confidentiality of the offers and counter-offers of its negotiating partner State, then other countries will be reluctant to
negotiate in a candid and frank manner with the Philippines"129 are speculative and matters for respondents to show the
Court. The same holds true as regards the assertion in the Separate Opinion of Justice Tinga that "with respect to the
subject treaty, the Government of the Philippines should expectedly heed Japan’s normal interest in preserving the
confidentiality of the treaty negotiations and conduct itself accordingly in the same manner that our Government expects
the Japanese Government to observe the protocol of confidentiality." 130

Respondents having failed in shielding the subject JPEPA documents with the diplomatic secrets privilege, let us now
proceed to determine whether they can keep these documents secret under the deliberative process privilege, which is a
distinct kind of executive privilege. The Separate Opinion of Justice Tinga asserts, however, that while there is a distinction
between the diplomatic secrets privilege and the deliberative process privilege, "they should be jointly considered if the
question at hand, as in this case, involves such diplomatic correspondences related to treaty negotiations…Thus, it would
not be enough to consider the question of privilege from only one of these two perspectives as both species of privilege
should be ultimately weighed and applied in conjunction with each other."

Indeed, the diplomatic character of the JPEPA deliberations or negotiations and the subject JPEPA documents was
considered in determining the applicability of the diplomatic secrets privilege in the above discussion. But as respondents
have failed in protecting the subject JPEPA documents with this kind of privilege that considers the diplomatic character of
negotiations, the next question to consider is whether another kind of privilege -- that does not hinge on the diplomatic
nature of negotiations, but on the deliberative status of information alone – can shield the subject JPEPA documents.

2. Deliberative process privilege

The "deliberative process privilege" was not literally invoked in the 23 June 2005 letter of respondent Secretary Ermita or
in respondents’ Comment. Nevertheless, Secretary Ermita’s statement that "the Committee’s request to be furnished all
documents on the JPEPA may be difficult to accomplish at this time, since the proposed Agreement has been a work in
progress for about three years, (a) copy of the draft JPEPA will however be forwarded to the Committee as soon as the text
thereof is settled and complete," and respondents’ afore-quoted assertion of danger of premature disclosure131 in their
Comment show reliance on the deliberative process privilege.

In the U.S., it is settled jurisprudence that the deliberative process privilege justifies the government’s withholding of
documents and other materials that would reveal "advisory opinions, recommendations and deliberations comprising part
of a process by which governmental decisions and policies are formulated." 132 In 1958, the privilege was first recognized in
a U.S. federal case, Kaiser Aluminum Chemical Corp. v. United States,133 in which the term "executive privilege" was also
originally used.

Kaiser was a suit filed against the U.S. in the Federal Court of Claims. Plaintiff Kaiser sought documents from the General
Services Administration in the context of an action for breach of the most favored purchaser clause of a contract for the
sale of war aluminum plants to plaintiff. The Court of Claims held that the production of advisory opinion on intra-office
policy in relation to the sale of aluminum plants to plaintiff and to another entity was contrary to public interest; thus, the
U.S. must be allowed to claim the executive privilege of nondisclosure. The Court sustained the following justification of
the government for withholding a document:

The document . . . contains opinions that were rendered to the Liquidator of War Assets by a member of his staff
concerning a proposed sale of aluminum plants. Those opinions do not necessarily reflect the views of, or represent the
position ultimately taken by, the Liquidator of War Assets. A disclosure of the contents of documents of this nature would
tend to discourage the staffs of Government agencies preparing such papers from giving complete and candid advice and
would thereby impede effective administration of the functions of such agencies. 134 (emphasis supplied)

Thereupon, the Court etched out the classic justification of the deliberative process privilege, 135 viz:

Free and open comments on the advantages and disadvantages of a proposed course of governmental management
would be adversely affected if the civil servant or executive assistant were compelled by publicity to bear the blame for
errors or bad judgment properly chargeable to the responsible individual with power to decide and act. 136 (emphasis
supplied)

The Court also threw in public policy and public interest as bases for the deliberative process privilege, viz:

…Government from its nature has necessarily been granted a certain freedom from control beyond that given the
citizen…There is a public policy involved in this claim of privilege for this advisory opinion -the policy of open, frank
discussion between subordinate and chief concerning administrative action.137

xxx xxx xxx

… Viewing this claim of privilege for the intra-agency advisory opinion in its entirety, we determine that the Government’s
claim of privilege for the document is well-founded. It would be definitely contrary to the public interest in our view for
such an advisory opinion on governmental course of action to be produced by the United States under the coercion of a
bar against production of any evidence in defense of this suit for contract damages. 138 (emphasis supplied)

The Court also held that the judicial branch, and not the executive branch, is the final arbiter of whether the privilege
should apply, contrary to the government’s assertion that the head of the relevant agency should be allowed to assert the
privilege unilaterally.139

Courts and scholars have identified three purposes140 of the privilege: (1) to protect candid discussions within an
agency;141 (2) to prevent public confusion from premature disclosure of agency opinions before the agency has
established a final policy;142 and (3) to protect against confusing the issues and misleading the public by dissemination of
documents suggesting reasons and rationales for a course of action, when these were not in fact the ultimate reasons for
the agency’s action.143
Two requisites are essential for a valid assertion of the privilege: the material must be pre-decisional and deliberative. To
be "pre-decisional," a document must be generated before the adoption of an agency policy. To be "deliberative," it must
reflect the give-and-take of the consultative process.144 Both requirements stem from the privilege’s "ultimate purpose
(which) ... is to prevent injury to the quality of agency decisions" by allowing government officials freedom to debate
alternative approaches in private.145 The deliberative process privilege does not shield documents that simply state or
explain a decision the government has already made; nor does the privilege cover material that is purely factual, unless the
material is so inextricably intertwined with the deliberative sections of documents that its disclosure would inevitably
reveal the government’s deliberations.146 There must also be a formal assertion of the privilege by the head of the
department in control of the information based on his actual personal consideration of the matter and an explanation as
to why the information sought falls within the scope of the privilege. 147

Once the agency has shown that the material is both pre-decisional and deliberative, the material enjoys a qualified
privilege that may be overcome by a sufficient showing of need, as held in In re Sealed Case (Espy).148 In general, courts
balance the need for information against the harm that may result from disclosure. Thus, "each time (the deliberative
process privilege) is asserted, the district court must undertake a fresh balancing of the competing interests," taking into
account factors such as "the relevance of the evidence," "the availability of other evidence," "the seriousness of the
litigation," "the role of the government," and the "possibility of future timidity by government employees." 149 These
rulings were made in the context of the refusal of the White House to submit some documents sought by a grand jury
subpoena.150

In our jurisdiction, the Court has had no occasion to recognize and rule on the applicability of the deliberative process
privilege. In the recent case Neri v. Senate Committees, 151 the Court recognized the claim of the presidential
communications privilege, which is closely associated with the deliberative process privilege. 152 In In re Sealed Case (Espy),
the distinction between the two privileges was explained, viz:

Both are executive privileges designed to protect executive branch decision-making, but one (deliberative process
privilege) applies to decision-making of executive officials generally, the other specifically to decision-making of the
President. The presidential privilege is rooted in constitutional separation of powers principles and the President’s unique
constitutional role; the deliberative process privilege is primarily a common law privilege… Consequently, congressional or
judicial negation of the presidential communications privilege is subject to greater scrutiny than denial of the deliberative
privilege… Unlike the deliberative process privilege (which covers only material that is pre-decisional and
deliberative),153 the presidential communications privilege applies to documents in their entirety, and covers final and
post-decisional materials as well as pre-deliberative ones."154 (emphasis supplied)

The distinction notwithstanding, there is no reason not to recognize in our jurisdiction the deliberative process privilege,
which has essentially the same purpose as the presidential communications privilege, except that it applies to executive
officials in general.

Let us now determine whether the deliberative process privilege will shield from disclosure the following JPEPA documents
sought by petitioners: (1) the initial offers (of the Philippines and Japan) of the JPEPA, including all pertinent attachments
and annexes thereto; and (2) the final text of the JPEPA prior to the signing by the President. The answer is in the negative.

It is my considered view that the subject JPEPA documents do not come within the purview of the kind of information
which the deliberative process privilege shields in order to promote frank and candid discussions and protect executive
branch decision-making of the Philippine government. The initial offers are not in the nature of "advisory opinions,
recommendations and deliberations"155 similar to those submitted by the subordinate to the chief in a government
agency, as in the seminal case of Kaiser. The initial offer of the Philippines is not a document that offers alternative courses
of action to an executive official to aid in the decision-making of the latter, but is instead a proposal to another
government, the Japanese government, to institute negotiations. The end in view of these negotiations is not a decision or
policy of the Philippine government, but a joint decision or agreement between the Philippine and the Japanese
governments.
Likewise, the final text of the JPEPA prior to signing by the President is not in the nature of an advice or recommendation
or deliberation by executive officials of the Philippine government, as it is the handiwork of the Philippine and the
Japanese negotiating panels working together. The documents sought to be disclosed are not of the same nature as
internal deliberations of the Department of Trade and Industry or the Philippine negotiating panel in crafting and deciding
the initial offer of the Philippines or internal memoranda of Philippine government agencies to advise President
Macapagal-Arroyo in her decision to sign the JPEPA. Extending the mantle of protection of the deliberative process
privilege to the initial offers of the Philippines and of Japan and the final JPEPA text prior to signing by President
Macapagal-Arroyo will be tantamount to extending the protection of executive branch decision-making to the executive
branch not only of the Philippine government, but also of the Japanese government, which, in trade agreement
negotiations, represents an interest adverse to that of the Philippine government. As seen from the rationale and history
of the deliberative process privilege, this is not the intent of the deliberative process privilege. 156 Given the nature of the
subject JPEPA documents, it is the diplomatic secrets privilege that can properly shield them upon sufficient showing of
reasons for their confidentiality. Hence, the invocation of deliberative process privilege to protect the subject JPEPA
documents must fail.

But this is not all. In Senate v. Ermita, the Court also required that executive privilege must be invoked by the President, or
the Executive Secretary "by order of the President," unlike in U.S. jurisdiction where, as afore-discussed, the formal
assertion of the head of the department claiming the privilege suffices.157 In the case at bar, the Executive Secretary
invoked both the deliberative process privilege and the diplomatic secrets privilege not "by order of the President," as his
23 June 2005 letter quoted above shows. Accordingly, the invocation of executive privilege was not properly made and
was therefore without legal effect.

Senate v. Ermita was decided on 20 April 2006 and became final and executory on 21 July 2006. Hence, it may be argued
that it cannot be used as a yardstick to measure whether respondent Secretary Ermita properly invoked executive privilege
in his 23 June 2005 letter. It must be noted, however, that the case at bar has been pending decision even after the finality
of Senate v. Ermita. During the time of its pendency, respondents failed to inform the Court whether Executive Secretary
Ermita’s position bore the imprimatur of the Chief Executive. The period of nearly two years from the time Senate v. Ermita
became final up to the present is more than enough leeway for the respondents to comply with the requirement that
executive privilege be invoked by the President, or the Executive Secretary "by order of the President." Contrary to the
assertion of the ponencia,158 the Court would not be overly strict in exacting compliance with the Senate v. Ermita
requirement, considering the two-year margin the Court has afforded respondents.

Let us now determine whether the public’s constitutional right to information and participation can be trumped by a claim
of executive privilege over the documents sought to be disclosed.

II. The context: the question of the right of access of the petitioner private citizens to the subject JPEPA documents is
raised in relation to international trade agreement negotiations on the strength of a constitutional right to information
and participation

A. The developing openness

of trade agreement negotiations in U.S. jurisdiction

The waning of the exclusivity of executive power over negotiations of international trade agreements vis-à-vis
Congressional power over foreign trade was accompanied by a developing openness to the public of international trade
agreement negotiations in U.S. jurisdiction.

Historically, the American public only had an indirect participation in the trade negotiation process. Public involvement
primarily centered on electing representatives who were responsible for shaping U.S. trade policy. 159 From the 18th
century until the early 1930s, U.S. international trade relations 160 were largely left to the interplay between these public
delegates in the legislative and the executive branches and similar officials in foreign nations. 161 But this trend began to
see changes during the Great Depression in the early 1930s and the enactment of the Trade Agreements Act of
1934,162 under which regime the 1936 case Curtiss-Wright was decided.
As afore-discussed, the U.S. Congress passed the Reciprocal Trade Agreement Act of 1934 (the 1934 Act). As an economic
stimulus, the 1934 Act authorized the President to address economic stagnation by reducing tariffs on foreign goods by as
much as fifty percent.163 When the President took such an action, America’s trading partners reciprocated by reducing
tariffs placed on U.S. goods, thereby stimulating the U.S. economy.164 Confronted with the Great Depression and the
subsequent deterioration of the global economy, the 1934 Act called for a single, strong voice to deal effectively with
foreign nations. Thus, the President, with this Congressional mandate, became the chief American trade negotiator with
complete and unrestricted authority to enter into binding international trade agreements.165

While the 1934 Act gave trading muscle to the President, it also created the first formal method of public participation in
the international trade negotiation process. Section 4 of the 1934 Act required "reasonable public notice" of the
President’s intention to enter into agreements with foreign states,166 thereby giving American citizens the opportunity to
know with which foreign nations the U.S. government proposed to negotiate. Pursuant to the 1934 Act, the President
established the Trade Agreements Committee, which was composed of high-ranking members of the executive
branch.167 The Trade Agreements Committee, commonly known as the Committee for Reciprocity Information, conducted
public hearings at which specific items up for negotiation with a particular country would be discussed. 168 But with the
Congress left almost completely outside the trade negotiation process and agreements being concluded and
implemented in relative obscurity, the attention of Congress and the public turned more toward the pressing domestic
issues, at least until the dawn of the ‘70s.169

The Cold War and the lingering Vietnam War made international relations increasingly significant to the general welfare of
the U.S. By the mid-1970s, the post-World War II economic dominance of the U.S. began to deteriorate. 170 Under Japan’s
lead, Asia began gaining economic strength, quickly joining Europe as a major global industrial competitor to the U.S. At
the same time, increased media coverage brought international trade issues to the public’s attention 171 and moved the
public to challenge the traditions, institutions, and authority of government with respect to trade issues.

With the swell of public activism, the U.S. Congress re-analyzed its transfer of powers over international trade issues. Thus,
as afore-discussed, in 1974, after forty years of continuous presidential authority over international trade matters,
Congress passed the Trade Act of 1974.172 The Trade Act of 1974 increased the levels of public involvement in
international trade negotiations, far beyond the requirement of notice of a proposed trading partner under the 1934 Act.
The 1974 Act required international agreements to include provisions creating domestic procedures through which
interested public parties could participate in the international trade process. 173 It also required the President to seek
information and advice from both private and public sectors.174 For this purpose, it incorporated the use of advisory
committees and included spontaneous opportunities for acceptance of information from the public. 175 Thus, the 1974 Act,
supplemented by several amendments passed in 1979 and 1988, opened the door to unprecedented formal and direct
public participation176 in the negotiation of international trade agreements and contributed to a rekindled awareness of
government activities and their impact on the public.177

Towards the latter half of the 1980s, government leaders and trade experts again began to advocate reduced trade
barriers as an answer to economic difficulty. They became convinced that increased emphasis on free global trade was the
key to future economic prosperity. The idea of increasing the size and strength of the national economy by reducing
restrictions on foreign trade was the impetus behind trade agreements such as the 1993 North American Free Trade
Agreement (NAFTA)178 concluded among the U.S., Mexico and Canada. The launch of the NAFTA and the completion of
the World Trade Organization’s (WTO) Uruguay round in the mid-‘90s swept in a new era of unprecedented international
collaboration on trade policy.179

In the 1990s, the changing nature of world politics and economics focused international issues on economic well-being
rather than on political and military dominance. Fearing environmental destruction and increased unemployment,
members of Congress, commentators, and special interest groups have used trade agreements such as NAFTA and the
mass media to heighten public awareness and participation in international trade relationships. 180 The 1990s led the
American public to realize that international trade issues had a direct impact on their standard of living and way of
life,181 thus fomenting public participation in international trade negotiations. With the growing concern over the far-
reaching implications of bilateral and multilateral international trade agreements and the increased focus upon the
processes by which they are negotiated, calls for greater openness and public participation in their negotiation have come
in many forms and from many corners, particularly in the U.S. A central component of the demand for participation has
been to gain access to negotiating documents shared by the U.S. with other governments prior to the conclusion of a free
trade agreement.182

The 1990s saw a continuous expansion of public access to the international trade agreement process. Rather than simply
being left to point out failures in already existing agreements, individuals were now allowed to help shape future
agreements. In reemphasizing the open government mentality of the 1970s, the 1990s marked the beginning of a new era
in trade negotiations. Private individuals now played an important role in many areas throughout the international trade
agreement process.183 The Trade Act of 2002 was then passed, enhancing transparency through increased and more timely
access to information regarding trade issues and activities of international trade institutions; increased public access to
meetings, proceedings, and submissions at the World Trade Organization (WTO); and increased and more timely public
access to all notifications and supporting documentation by parties to the WTO. 184

Public participation in international trade negotiations affects trade negotiations in two distinct ways. First, it serves as a
check on the power of elected and bureaucratic leaders by generating and limiting the issues that require government
action. Second, it provides those in positions of power and influence with specific, detailed information upon which to
base their decisions; for in the absence of public input, government officials risk making decisions based on incomplete
information, thereby compromising public policy.185

The public participates in trade negotiations in various ways. Individuals influence governmental action by electing the
President and members of Congress, joining special interest groups that lobby influential members of the executive and
the legislative branches, initiating litigation, serving on presidentially appointed advisory committees, testifying at
international trade commission hearings, and protesting individually or as a group. But ultimately, the degree of public
involvement in any area of government policy depends on the amount of available access. 186

Although the NAFTA negotiations have been criticized for being shrouded in much secrecy, the U.S. government released
on 6 September 1992, the most recent text of the NAFTA, prior to its signing by Canadian Prime Minister Brian Mulroney,
U.S. President George H.W. Bush and Mexican President Carlos Salinas on October 7, 1992. 187

The negotiation of the Free Trade Area of the Americas (FTAA) that began in 1995 has also shown a changing landscape
that allows for greater public participation in international trade negotiations. In their Santiago Summit in 1998, the heads
of thirty-four Western Hemisphere states extended principles of participation explicitly to the FTAA:

The FTAA negotiating process will be transparent . . . in order to create the opportunities for the full participation by all
countries. We encourage all segments of civil society to participate in and contribute to the process in a constructive
manner, through our respective mechanisms of dialogue and consultation and by presenting their views through the
mechanism created in the FTAA negotiating process.188

The Santiago Declaration also includes a pledge to "promote the necessary actions for government institutions to become
more participatory structures." 189 (emphasis supplied) In the Quebec Summit in 2001, the heads of State went even
further and declared their commitment to "the full participation of all persons in the political, economic, social and cultural
life of our countries."190 They also addressed participation in the context of an FTAA and committed to --

Ensure the transparency of the negotiating process, including through publication of the preliminary draft FTAA
Agreement in the four official languages as soon as possible and the dissemination of additional information on the
progress of negotiations; [and to] Foster through their respective national dialogue mechanisms and through appropriate
FTAA mechanisms, a process of increasing and sustained communication with civil society to ensure that it has a clear
perception of the development of the FTAA negotiating process; [and to] invite civil society to continue to contribute to
the FTAA process . . .191 (emphasis supplied)

Thus, the Presidential summits, which have established both the impetus and the context for an FTAA, unmistakably
contemplate public access to the negotiating process, and the FTAA itself is a central part of that process. 192 In July 2001
came the first public release of the preliminary official text of the FTAA. A revised draft of the text was released in
November 2002 and again in 2003.193 This notwithstanding, civil society organizations have expressed great concern for
and emphasis on the timeliness of information given to the public and input given to negotiators. They have observed
that the draft text is published long after issues are actually negotiated; they have thus proposed specific mechanisms for
the timely release of negotiating documents, many of which were procedures already in place in the World Trade
Organization (WTO).194

The need to create meaningful public participation during negotiation and implementation applies to both multilateral
agreements, such as the FTAA, and to bilateral agreements. 195 Public participation gives legitimacy to the process and
result, and it strengthens the political will of populations who must support ratification and implementation once the text
is finalized. The wide range of expertise available outside of governmental corridors would also be more fully accessible to
officials if an organic and meaningful exchange of ideas is part of the process. While it is true that participation implies
resource allocation and sometimes delay, these are investments in a democratic outcome and should not be seen as
costs.196

Secrecy has long played an integral but also controversial role in the negotiation of international agreements. It facilitates
frank discussion, minimizes posturing and allows flexibility in negotiating positions. But it is also prone to abuse and is
often assailed as undemocratic and facilitating abuse of power. In the public eye, excessive secrecy can weaken
accountability and undermine the legitimacy of government action.197 Generally, it can also undermine the faith of the
public in the need for secrecy198 for "secrecy can best be preserved only when credibility is truly maintained." 199

The tension between secrecy and the demand for openness continues, but circumstances have changed, as the
international trade agreements of today tend to be far more authoritative and comprehensive than those negotiated by
Presidents Woodrow Wilson, George Washington and John Jay. These trade agreements have broader and more direct
consequences on private conduct. As the trend on international trade agreements will only continue, it is important to
revisit the tension between secrecy and openness. The fact alone that secrecy shrouded negotiations of international
agreements three hundred or even twenty-five years ago can no longer justify the continuation of that approach in
today’s era of the NAFTA, CAFTA (Central American Free Trade Agreement), and a prospective FTAA. 200

These developments in the openness to the public of international trade agreement negotiations show that secrecy in the
negotiation of treaties is not a rule written in stone. Revisiting the balance between secrecy and openness is an imperative,
especially in the Philippines where the right to information has been elevated to a constitutional right essential to our
democratic society.

B. Democracy and the rights to information and participation

1. Philippine Constitutional provisions on information and transparency

Of all the organic laws of our country, the 1987 Constitution holds most sacrosanct the people’s role in governance. As a
first principle of government, the 1987 Constitution declares in Article II, Section 1, Declaration of Principles and State
Policies, that the Philippines is not only a republican but also a democratic state. The word "democratic" was added to
"republican" as a "pardonable redundancy" to highlight the importance of the people’s role in government, as evinced by
the exchanges in the 1986 Constitutional Commission, viz:

MR. NOLLEDO. I am putting the word "democratic" because of the provisions that we are now adopting which are
covering consultations with the people. For example, we have provisions on recall, initiative, the right of the people even
to participate in lawmaking and other instances that recognize the validity of interference by the people through people’s
organizations . . .201

xxx xxx xxx

MR. OPLE. The Committee added the word "democratic" to "republican," and, therefore, the first sentence states: "The
Philippines is a republican and democratic state."
May I know from the committee the reason for adding the word "democratic" to "republican"? The constitutional framers
of the 1935 and 1973 Constitutions were content with "republican." Was this done merely for the sake of emphasis?

MR. NOLLEDO. Madam President, that question has been asked several times, but being the proponent of this
amendment, I would like the Commissioner to know that "democratic" was added because of the need to emphasize
people power and the many provisions in the Constitution that we have approved related to recall, people’s organizations,
initiative and the like, which recognize the participation of the people in policy-making in certain circumstances."

MR. OPLE. I thank the Commissioner. That is a very clear answer and I think it does meet a need. . .

xxx xxx xxx

MR. NOLLEDO. According to Commissioner Rosario Braid, "democracy" here is understood as participatory
democracy.202 (emphasis supplied)

Of a similar tenor is the following exchange between Commissioners Abraham Sarmiento and Adolfo Azcuna:

MR. SARMIENTO. When we speak of republican democratic state, are we referring to representative democracy?

MR. AZCUNA. That is right.

MR. SARMIENTO. So, why do we not retain the old formulation under the 1973 and 1935 Constitutions which used the
words "republican state" because "republican state" would refer to a democratic state where people choose their
representatives?

MR. AZCUNA. We wanted to emphasize the participation of the people in government. 203 (emphasis supplied)

In line with this desideratum, our fundamental law enshrined in rubric the indispensability of the people’s participation in
government through recall,204 initiative,205 and referendum.206

Similarly, it expressly provided for the people’s right to effective and reasonable participation in Article XIII, Section 16, on
Social Justice and Human Rights, viz:

The right of the people and their organizations to effective and reasonable participation at all levels of social, political, and
economic decision-making shall not be abridged. The State shall, by law, facilitate the establishment of adequate
consultation mechanisms. (emphasis supplied)

To prevent the participation of the people in government from being a mere chimera, the 1987 Constitution also gave
more muscle to their right to information, protected in the Bill of Rights, by strengthening it with the provision on
transparency in government, and by underscoring the importance of communication. Thus, the 1987 Constitution provides
in Article III, Section 7 of the Bill of Rights, viz:

The right of the people to information on matters of public concern shall be recognized. Access to official records, and to
documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used
as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.
(emphasis supplied)

Symmetrical to this right to information are the following provisions of the 1987 Constitution:

Article II, Section 28, Declaration of State Principles and Policies:

Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of
all its transactions involving public interest. (emphasis supplied)
Article XI, Section 21, National Economy and Patrimony:

Foreign loans may be incurred in accordance with law and the regulation of the monetary authority. Information on
foreign loans obtained or guaranteed by the Government shall be made available to the public. (emphasis supplied)

The objective of the 1987 Constitution is to attain an open and honest government predicated on the people’s right to
know, as shown by the following portion of the deliberations of the 1986 Constitutional Commission, viz:

MR. OPLE. Mr. Presiding Officer, this amendment is proposed jointly by Commissioners Ople, Rama, Treñas, Romulo,
Regalado and Rosario Braid. It reads as follows: "SECTION 24. THE STATE SHALL ADOPT AND IMPLEMENT A POLICY OF
FULL PUBLIC DISCLOSURE OF ALL ITS TRANSACTIONS SUBJECT TO REASONABLE SAFEGUARDS ON NATIONAL INTEREST
AS MAY BE PROVIDED BY LAW."

xxx xxx xxx

In the United States, President Aquino has made much of the point that the government should be open and accessible to
the public. This amendment is by way of providing an umbrella statement in the Declaration of Principles for all these
safeguards for an open and honest government distributed all over the draft Constitution. It establishes a concrete, ethical
principle for the conduct of public affairs in a genuinely open democracy, with the people’s right to know as the
centerpiece.207 (emphasis supplied)

The correlative policy of public disclosure and the people’s right to information were also expounded by Constitutional
Commissioners Joaquin Bernas and Napoleon Rama, viz:

FR. BERNAS. Just one observation, Mr. Presiding Officer. I want to comment that Section 6 (referring to Section 7, Article III
on the right to information) talks about the right of the people to information, and corresponding to every right is a duty.
In this particular case, corresponding to this right of the people is precisely the duty of the State to make available
whatever information there may be needed that is of public concern. Section 6 is very broadly stated so that it covers
anything that is of public concern. It would seem also that the advantage of Section 6 is that it challenges citizens to be
active in seeking information rather than being dependent on whatever the State may release to them.

xxx xxx xxx

MR. RAMA. There is a difference between the provisions under the Declaration of Principles and the provision under the
Bill of Rights. The basic difference is that the Bill of Rights contemplates collision between the rights of the citizens and the
State. Therefore, it is the right of the citizen to demand information. While under the Declaration of Principles, the State
must have a policy, even without being demanded, by the citizens, without being sued by the citizen, to disclose
information and transactions. So there is a basic difference here because of the very nature of the Bill of Rights and the
nature of the Declaration of Principles.208 (emphases supplied)

Going full circle, the 1987 Constitution provides for the vital role of information in nation-building in the opening
Declaration of State Principles and Policies and in the General Provisions towards the end of the Constitution.

Article II, Section 24, provides, viz:

Sec. 24. The State recognizes the vital role of communication and information in nation-building. (emphasis supplied).

Article XVI, Section 10, General Provisions provides, viz:

Sec. 10. The State shall provide the policy environment for the full development of Filipino capability and the emergence
of communication structures suitable to the needs and aspirations of the nation and the balanced flow of information into,
out of, and across the country, in accordance with a policy that respects the freedom of speech and of the press.
(emphasis supplied)
Constitutional Commissioner Rosario Braid explained the rationale of these provisions on information and communication
in her sponsorship speech, viz:

MS. ROSARIO BRAID. We cannot talk of the functions of communication unless we have a philosophy of communication,
unless we have a vision of society. Here we have a preferred vision where opportunities are provided for participation by
as many people, where there is unity even in cultural diversity, for there is freedom to have options in a pluralistic society.
Communication and information provide the leverage for power. They enable the people to act, to make decisions, to
share consciousness in the mobilization of the nation.209 (emphasis supplied)

With the constitutional provisions on transparency and information brightlined in neon as backdrop, we now focus on the
people’s right to information.

2. Focusing on the right to information

The constitutional provision on the people’s right to information made its maiden appearance in the Bill of Rights of the
1973 Constitution, but without the phrase "as well as to government research data used as basis for policy development."
The phrase was added in the 1987 Constitution to stop the government practice during Martial Law of withholding social
research data from the knowledge of the public whenever such data contradicted policies that the government wanted to
espouse.210

Likewise, the framers of the 1987 Constitution expanded the scope of "transactions" that may be accessed, to include
negotiations leading to the consummation of contracts and treaties, but subject to "reasonable safeguards on national
interest."211

The intent of the constitutional right to information, as pointed out by Constitutional Commissioner Wilfrido V. Villacorta,
is "to adequately inform the public so that nothing vital in state affairs is kept from them" 212 In Valmonte v.
Belmonte,213 we explained the rationale of the right of access to information, viz:

An informed citizenry with access to the diverse currents in political, moral and artistic thought and data relative to them,
and the free exchange of ideas and discussion of issues thereon is vital to the democratic government envisioned under
our Constitution. The cornerstone of this republican system of government is delegation of power by the people to the
State. In this system, governmental agencies and institutions operate within the limits of the authority conferred by the
people. Denied access to information on the inner workings of government, the citizenry can become prey to the whims
and caprices of those to whom the power had been delegated…

xxx xxx xxx

…The right of access to information ensures that these freedoms are not rendered nugatory by the government’s
monopolizing pertinent information. For an essential element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is in the interest of the State that the channels for
free political discussion be maintained to the end that the government may perceive and be responsive to the people’s
will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its
will intelligently. Only when the participants in a discussion are aware of the issues and have access to information relating
thereto can such bear fruit.

The right to information is an essential premise of a meaningful right to speech and expression. But this is not to say that
the right to information is merely an adjunct of and therefore restricted in application by the exercise of the freedoms of
speech and of the press. Far from it. The right to information goes hand-in-hand with the constitutional policies of full
public disclosure (footnote omitted) and honesty in the public service (footnote omitted). It is meant to enhance the
widening role of the citizenry in governmental decision-making as well as in checking abuse in government.214 (emphases
supplied)
Notably, the right to information was written in broad strokes, as it merely required that information sought to be
disclosed must be a matter of public concern. 215 In Legaspi v. Civil Service Commission,216 the Court elucidated on the
meaning of "matters of public concern," viz:

In determining whether or not a particular information is of public concern, there is no rigid test which can be applied.
"Public concern" like "public interest" is a term that eludes exact definition. Both terms embrace a broad spectrum of
subjects which the public may want to know, either because these directly affect their lives, or simply because such
matters naturally arouse the interest of an ordinary citizen. In the final analysis, it is for the courts to determine on a case
by case basis whether the matter at issue is of interest or importance, as it relates to or affects the public. 217 (emphasis
supplied)

Under both the 1973 and the 1987 Constitutions, the right to information is self-executory. It is a public right that belongs
to and can be invoked by the people. Consequently, every citizen has the "standing" to challenge any violation of the right
and may seek its enforcement.218 The self-executory status and the significance in a democracy of the right of access to
information were emphasized by the Court in Gonzales v. Narvasa,219 viz:

Under both the 1973 (footnote omitted) and 1987 Constitutions, this (the right to information) is a self-executory
provision which can be invoked by any citizen before the courts…

Elaborating on the significance of the right to information, the Court said in Baldoza v. Dimaano (71 SCRA 14 [1976]…) that
"[t]he incorporation of this right in the Constitution is a recognition of the fundamental role of free exchange of
information in a democracy. There can be no realistic perception by the public of the nation’s problems, nor a meaningful
democratic decision-making if they are denied access to information of general interest. Information is needed to enable
the members of society to cope with the exigencies of the times." 220 (emphases supplied)

Prior to the 1973 Constitution, this right was merely statutory in character, as stressed in Subido v. Ozaeta.221 In said case,
Subido was an editor of the Manila Post. He filed a petition for mandamus to compel the respondents Secretary of Justice
and Register of Deeds of Manila to furnish him the list of real estate properties sold to aliens and registered with the
Register of Deeds of Manila since the promulgation of Department of Justice Circular No. 128, or to allow him to examine
all records in the respondents’ custody relative to the said transactions, after his requests to the Secretary of Justice and
the Register of Deeds were denied.

The Court upheld the contention of the respondents that the 1935 Constitution did not guarantee freedom of information
or freedom to obtain information for publication. The Court ruled that "the right to examine or inspect public records is
purely a question of statutory construction."222 Section 56 of Act No. 496, as amended by Act No. 3300, saved the day for
Subido, as it provided that "all records relating to registered lands in the office of the Register of Deeds shall be open to
the public subject to such reasonable regulations as may be prescribed by the Chief of the General Land Registration
Office with the approval of the Secretary of Justice." Hence, the petition for mandamus was granted.

The Subido Court’s interpretation of the 1935 Constitution followed U.S. jurisprudence that did not and continues not to
recognize a constitutional right of access to information on matters of public concern. Let us briefly examine the right of
access to information in U.S. and other jurisdictions.

3. Right to information in U.S. and other jurisdictions a. U.S. jurisdiction

The U.S. Supreme Court has recognized a constitutional right to receive information integral to the freedom of speech
under the First Amendment to the U.S. Constitution. It has ruled, however, that the right of access to information is not
constitutionally mandated, but statutorily granted.223

The U.S. Supreme Court first identified a constitutional right to receive information in the 1936 case Grosjean v. American
Press Company.224 In that case, the U.S. High Court, citing Judge Cooley, held that a free and general discussion of public
matters is essential to prepare the people for an intelligent exercise of their rights as citizens. 225 In the 1976 case Virginia
State Board of Pharmacy v. Virginia Citizens Consumer Council,226 widely considered to be the seminal "right to receive"
case,227 a Virginia statute forbidding pharmacists from advertising the prices of prescription drugs was held
unconstitutional by the U.S. High Court. It reasoned that the free speech guarantee of the First Amendment covered not
only the speaker, but also the recipient of the speech. While commercial speech was involved in that case, the Court left
no doubt that the constitutional protection for receipt of information would apply with even more force when more
directly related to self-government and public policy.228

On the premise that information is a prerequisite to meaningful participation in government, the U.S. Congress passed the
Freedom of Information Act of 1966 (FOIA).229 In the leading FOIA case, Environmental Protection Agency v. Mink,230 the
U.S. Supreme Court held that the FOIA "seeks to permit access to official information long shielded unnecessarily from
public view and attempts to create a judicially enforceable public right to secure such information from possibly unwilling
official hands."231 In Department of Air Force v. Rose,232 the same Court held that the basic purpose of the law was "to
open agency action to the light of public scrutiny." In National Labor Relations Board v. Robbins Tire & Rubber Co.,233 the
U.S. High Court ruled that the basic purpose of the FOIA "is to ensure an informed citizenry, vital to the functioning of a
democratic society, needed to check against corruption and to hold the governors accountable to the governed." 234

Under the FOIA, the reason for the request for information has no bearing on the merits of the request.235 But while the
FOIA promotes a policy of public disclosure, it recognizes certain exemptions from disclosure, among which are matters
"specifically authorized under criteria established by an Executive order to be kept secret in the interest of national
defense or foreign policy and are in fact properly classified pursuant to such Executive order." 236

Still and all, the U.S. Supreme Court characterized the right of access to information as statutory and not constitutional in
Houchins v. KQED, Inc., et al.,237 viz: "(T)here is no constitutional right to have access to particular government information,
or to require openness from the bureaucracy. . . The Constitution itself is neither a Freedom of Information Act nor an
Official Secrets Act."238 Neither the U.S. courts nor the U.S. Congress recognizes an affirmative constitutional obligation to
disclose information concerning governmental affairs; such a duty cannot be inferred from the language of the U.S.
Constitution itself.239

Like the U.S., other countries also recognize a statutory right to information as discussed below.

b. Other jurisdictions
(i.e., UK, Australia and New Zealand)

In the United Kingdom, the last four decades of the 20th century saw a gradual increase in the rights of the individual to
elicit information from the public authorities.240 This trend culminated in the passage of the "Freedom of Information Act
2000" (FOIA 2000). FOIA 2000 conferred a right of access to official information to every person, irrespective of that
person’s interest in the information. It covers all information, regardless of subject matter, but also provides for specific
exemptions.

Exemptions under FOIA 2000 can be either absolute or qualified. When the exemption is absolute, the right to disclosure
does not apply; but when it is qualified, the right will not be applied only if the public interest in maintaining the
exemption outweighs the public interest in disclosure of the information.241 The weighing of the public interest must be
carried out by reference to the particular circumstances existing at the time a request for information is made. "The central
question in every case is the content of the particular information in question. Every decision is specific to the particular
facts and circumstances under consideration."242 Thus, while a public authority may properly refuse to disclose information
subject to a qualified exemption, a change in surrounding circumstances may result in the public authority being obliged
to disclose the information upon a subsequent request. 243

Among the qualified exemptions are information that "would be likely to prejudice…relations between the United
Kingdom and any other State"244 and "confidential information obtained from a State other than the United Kingdom…" 245

Ahead of the United Kingdom, the Commonwealth of Australia passed its "Freedom of Information Act 1982 (Act 1982)."
Act 1982 gives every person a legally enforceable right to obtain access to information of a public agency without
requirement to demonstrate a need to know. 246 At the same time, it recognizes two basic kinds of exemptions: (1)
exemptions which protect a document of a particular class or kind without a need to refer to the effects of disclosure
(class exemption), and (2) exemptions which depend on demonstrating a certain likelihood that a particular harm would
result from disclosure of a document (harm-based exemption).

Covered by the harm-based exemptions are documents that "would, or could reasonably be expected to, cause damage
to…the international relations of the Commonwealth" or "would divulge any information or matter communicated in
confidence by or on behalf of a foreign government, an authority of a foreign government or an international organization
to the Government of the Commonwealth, to an authority of the Commonwealth or to a person receiving the
communication on behalf of the Commonwealth or of an authority of the Commonwealth." 247

Almost simultaneous with Australia, New Zealand enacted the "Official Information Act 1982 (OIA)," which allows its
citizens, residents, persons in New Zealand, and companies incorporated in New Zealand to request official information.
Under the OIA, exemptions may be divided into two broad classes: (1) "those that are engaged upon their terms being
satisfied," and (2) "those that will be disengaged if, in the circumstances, the withholding of particular information is
outweighed by other considerations which render it desirable in the public interest to make that information
available."248 Among the exemptions included in the first class is information that would be likely to prejudice the
entrusting of information to the Government of New Zealand on a basis of confidence by the government of any other
country or any agency of such government.249

Taking into account the higher constitutional status of the right of access to information in Philippine jurisdiction
compared with the statutorily granted right of access to information in U.S. and other jurisdictions, let me now turn to the
question of whether executive privilege can constitute an exception to the right of access and be used to withhold
information from the public.

C. Adjudicating the constitutional right to information

vis-à-vis executive privilege in Philippine jurisdiction

1. The general rule and the exception

With the elevation of the right to information to constitutional stature, the starting point of the inquiry is the general rule
that the public has a right to information on matters of public concern and the State has a corresponding duty to allow
public access to such information. It is recognized, however, that the constitutional guarantee admits of exceptions such as
"limitations as may be provided by law."250 Thus, as held in Legaspi, "in every case, the availability of access to a particular
public record" is circumscribed by two elements: (1) the information is "of public concern or one that involves public
interest," and, (2) it is "not exempt by law from the operation of the constitutional guarantee." 251

The question of access is first addressed to the government agency having custody of the information sought. Should the
government agency deny access, it "has the burden of showing that the information requested is not of public concern, or,
if it is of public concern, that the same has been exempted by law from the operation of the guarantee" because "(t)o hold
otherwise will serve to dilute the constitutional right. As aptly observed, ‘…the government is in an advantageous position
to marshal and interpret arguments against release…’ (87 Harvard Law Review 1511 [1974])." 252 Furthermore, the Court
ruled that "(t)o safeguard the constitutional right, every denial of access by the government agency concerned is subject
to review by the courts."253

There is no dispute that the subject JPEPA documents are matters of public concern that come within the purview of
Article III, Section 7 of the Bill of Rights. The thorny issue is whether these documents, despite being of public concern, are
exempt from being disclosed to petitioner private citizens on the ground that they are covered by executive privilege. 254

Unlike the U.S., U.K., Australia, and New Zealand, the Philippines does not have a comprehensive freedom of information
law that enumerates the exceptions or sources of exceptions255 to the right to information. In our jurisdiction, various laws
provide exceptions from the duty to disclose information to the public, such as Republic Act No. 8293 or the "Intellectual
Property Code," Republic Act No. 1405 or the "Secrecy of Bank Deposits Act," and Republic Act No. 6713 or the "Ethical
Standards Act."256
Respondents contend that Executive Order 464 (E.O. 464), "Ensuring Observance of the Principle of Separation of Powers,
Adherence to the Rule on Executive Privilege and Respect for the Rights of Public Officials Appearing in Legislative
Inquiries in Aid of Legislation under the Constitution, and for other Purposes," 257 provides basis for exemption of the
subject JPEPA documents from the operation of the constitutional guarantee of access to information. They argue that
while Senate v. Ermita struck down Sections 2(b) and 3 of E.O. 464 as unconstitutional, Section 2(a), which enumerates the
scope of executive privilege including information prior to the conclusion of treaties, was spared from a declaration of
constitutional infirmity.258 However, it is easily discernible from the title and provisions of E.O. 464 that this presidential
issuance applies to executive privilege invoked against the legislature in the context of inquiries in aid of legislation, and
not to executive privilege invoked against private citizens asserting their constitutional right to information. 259 It thus
cannot be used by respondents to discharge their burden of showing basis for exempting the subject JPEPA documents
from disclosure to petitioners suing as private citizens.

Respondents also rely on Almonte, Chavez v. PCGG, Senate v. Ermita, and PMPF v. Manglapus to carve out from the
coverage of the right to information the subject JPEPA documents. Let us put these cases under the lens of scrutiny to
determine the correctness of respondents’ reliance upon them.

As noted earlier, Almonte recognized a common law governmental privilege against disclosure, with respect to state
secrets bearing on military and diplomatic matters. 260 This case involved an investigation by the Office of the Ombudsman
that required the Economic Intelligence and Investigation Bureau (EIIB) to produce records pertaining to their personnel.
As the Court found that no military or diplomatic secrets would be disclosed by the production of these records and there
was no law making them classified, it held that disclosure of the records to the Office of the Ombudsman was warranted.
In arriving at this conclusion, the Court noted that the case did not concern a demand by a citizen for information under
the freedom of information guarantee of the Constitution, but involved the power of the Office of the Ombudsman to
obtain evidence in connection with an investigation conducted by it vis-a-vis the claim of privilege of an agency of the
Government. It is thus not difficult to see that the facts and issue of Almonte starkly differ from the case of petitioner
private citizens who are enforcing their constitutional right to information. Given this distinction, I submit that Almonte
cannot provide the backbone for exemption of the subject JPEPA documents from disclosure. The same holds true with
respect to Senate v. Ermita in which the constitutionality of E.O. 464 was at issue, and the Court ruled, viz:

E.O 464 is concerned only with the demands of Congress for the appearance of executive officials in the hearings
conducted by it, and not with the demands of citizens for information pursuant to their right to information on matters of
public concern.261 (emphasis supplied)

In Chavez v. PCGG, the Court, citing the above-quoted exchanges of the Constitutional Commissioners regarding the
constitutional right to information, recognized that "information on inter-government exchanges prior to the conclusion
of treaties and executive agreements may be subject to reasonable safeguards for the sake of national interest." Be that as
it may, in Chavez v. PCGG, the Court resolved the issue whether the government, through the Presidential Commission on
Good Government (PCGG), could be compelled to disclose the proposed terms of a compromise agreement with the
Marcos heirs as regards their alleged ill-gotten wealth. The Court did not have occasion to rule on the diplomatic secrets
privilege vis-à-vis the constitutional right to information.

It was in PMPF v. Manglapus that the Court was confronted with a collision between a citizen’s constitutional right to
information and executive secrecy in foreign affairs. As afore-discussed, the Court, in denying the petition in an
unpublished Resolution, quoted at length Curtiss-Wright’s disquisition on the necessity of secrecy in foreign negotiations.
Again, the relevant portion of that quote, which was cited by respondents, reads, viz:

In this vast external realm, with its important, complicated, delicate and manifold problems, the President alone has the
power to speak or listen as a representative of the nation. He makes treaties with the advice and consent of the Senate;
but he alone negotiates. Into the field of negotiation the Senate cannot intrude; and Congress itself is powerless to invade
it. As Marshall said in his great argument of March 7, 1800, in the House of Representatives, ‘The President is the sole
organ of the nation in its external relations, and its sole representative with foreign nations.’ Annals, 6th Cong., col. 613.

xxx xxx xxx

It is important to bear in mind that we are here dealing not alone with an authority vested in the President by an exertion
of legislative power, but with such an authority plus the very delicate, plenary and exclusive power of the President as the
sole organ of the federal government in the field of international relations - a power which does not require as a basis for
its exercise an act of Congress, but which, of course, like every other governmental power, must be exercised in
subordination to the applicable provisions of the Constitution. It is quite apparent that if, in the maintenance of our
international relations, embarrassment -perhaps serious embarrassment- is to be avoided and success for our aims
achieved, congressional legislation which is to be made effective through negotiation and inquiry within the international
field must often accord to the President a degree of discretion and freedom from statutory restriction which would not be
admissible were domestic affairs alone involved. Moreover, he, not Congress, has the better opportunity of knowing the
conditions which prevail in foreign countries, and especially is this true in time of war. He has his confidential sources of
information. He has his agents in the form of diplomatic, consular and other officials. Secrecy in respect of information
gathered by them may be highly necessary, and the premature disclosure of it productive of harmful results. Indeed, so
clearly is this true that the first President refused to accede to a request to lay before the House of Representatives the
instructions, correspondence and documents relating to the negotiation of the Jay Treaty - a refusal the wisdom of which
was recognized by the House itself and has never since been doubted. 262 (emphasis supplied)

The Court followed this quote with the conclusion that "(w)e have the same doctrine of separation of powers in the
Constitution and the same grant of authority in foreign affairs to the President as in the American system. The same
reasoning applies to treaty negotiations by our Government."

Taking a hard look at the facts and circumstances of PMPF v. Manglapus, it cannot escape one’s eye that this case did not
involve a question of separation of powers arising from a legislative inquiry, as in the case of the House of
Representative’s demand on President Washington for papers relating to the Jay Treaty. In PMPF v. Manglapus, petitioners
invoked their right to information under Article III, Section 7; and freedom of speech and the press under Article III,
Section 4. They sought to compel the representatives of the President of the Philippines in the then ongoing negotiations
of the RP-U.S. Military Bases Agreement to (1) open to petitioners the negotiations/sessions of respondents with their U.S.
counterparts on the RP-U.S. Military Agreement; (2) reveal and/or give petitioners access to the items which they
(respondents) had already agreed upon with their American counterparts relative to the review of the RP-U.S. Military
Bases Agreement; and (3) reveal and/or make accessible to petitioners the respective positions of respondents and their
U.S. counterparts on items they had not agreed upon, particularly the compensation package for the continued use by the
U.S. of their military bases and facilities in the Philippines. The above quote from Curtiss-Wright, referring to a conflict
between the executive and the legislative branches of government, was therefore different from the factual setting of
PMPF v. Manglapus. The latter case which involved a collision between governmental power over the conduct of foreign
affairs with its secrecy prerogative on the one hand, and the citizen’s right to information under the Constitution on the
other.

The PMPF Court did stress that secrecy of negotiations with foreign countries did not violate freedom of access to
information and freedom of speech and of the press. Significantly, it quoted The New American Government and Its Work,
viz:

The nature of diplomacy requires centralization of authority and expedition of decision which are inherent in executive
action. Another essential characteristic of diplomacy is its confidential nature. Although much has been said about "open"
and "secret" diplomacy, with disparagement of the latter, Secretaries of State Hughes and Stimson have clearly analyzed
and justified the practice. In the words of Mr. Stimson:

"A complicated negotiation… cannot be carried through without many, many private talks and discussions, man to man;
many tentative suggestions and proposals. Delegates from other countries come and tell you in confidence of their
troubles at home and of their differences with other countries and with other delegates; they tell you of what they do
under certain circumstances and would not do under other circumstances… If these reports…should become public…who
would ever trust American Delegations in another conference? (United States Department of State, Press Releases, June 7,
1930, pp. 282-284).

xxx xxx xxx

"There is frequent criticism of the secrecy in which negotiation with foreign powers on nearly all subjects is concerned.
This, it is claimed, is incompatible with the substance of democracy. As expressed by one writer, ‘It can be said that there is
no more rigid system of silence anywhere in the world.’ (E.J. Young, Looking Behind the Censorship, J.B. Lippincott Co.,
1938) President Wilson in starting his efforts for the conclusion of the World War declared that we must have ‘open
covenants, openly arrived at.’ He quickly abandoned his thought.

"No one who has studied the question believes that such a method of publicity is possible. In the moment that
negotiations are started, pressure groups attempt to ‘muscle in.’ An ill-timed speech by one of the parties or a frank
declaration of the concessions which are extracted or offered on both sides would quickly lead to widespread propaganda
to block the negotiations. After a treaty has been drafted and its terms are fully published, there is ample opportunity for
discussion before it is approved." (The New American Government and Its Work, James T. Young, 4th edition, p.
194)263 (emphasis supplied)

It is worth noting that while the above quote speaks of the evil of "open" diplomacy, it does not discuss the value of the
right of access to information; much less, one that is constitutional in stature. The New American Government and Its
Work was published in 1940, long before the Freedom of Information Act was passed in the U.S. in 1966. It did not and
could not have taken into account the expanded statutory right to information in FOIA. It is more doubtful if this book can
be used to calibrate the importance of the right of access to information in the Philippine setting, considering its elevation
as a constitutional right.

Be that as it may, I submit that as both Chavez v. PCGG and PMPF v. Manglapus are extant case law recognizing the
constitutionally-based diplomatic secrets privilege over treaty negotiations, respondents have discharged the burden of
showing the bases for exempting the subject JPEPA documents from the scope of the constitutional right to information.

Prescinding from these premises, the next question to grapple with is whether the exemption or diplomatic secrets
privilege over treaty negotiations as recognized in Chavez v. PCGG and PMPF v. Manglapus is absolute or qualified.

2. Diplomatic secrets privilege covering treaty negotiations:

An absolute or qualified exemption?

It is my considered view that the diplomatic secrets privilege is a qualified privilege or qualified exemption from the
coverage of the right to information. In Chavez v. PCGG, the Court cited the following deliberations of the 1986
Constitutional Commission in recognizing that "inter-government exchanges prior to the conclusion of treaties and
executive agreements may be subject to reasonable safeguards for the sake of national interest," viz:

MR. SUAREZ. And when we say "transactions" which should be distinguished from contracts, agreements, or treaties or
whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the
contract itself?

MR. OPLE. The "transactions" used here, I suppose, is generic and, therefore, it can cover both steps leading to a contract,
and already a consummated contract, Mr. Presiding Officer.

MR. SUAREZ. This contemplates inclusion of negotiations leading to the consummation of the transaction?

MR. OPLE. Yes, subject to reasonable safeguards on the national interest.

MR. SUAREZ. Thank you. Will the word "transactions" here also refer to treaties, executive agreements and service
contracts particularly?

MR. OPLE. I suppose that is subject to reasonable safeguards on national interest which include the national
security."264 (emphasis supplied)
The above deliberations show that negotiation of treaties and executive agreements may or may not come within the
purview of "transactions" covered by the right to information, subject to reasonable safeguards to protect national
interest.265 In other words, the diplomatic secrets privilege over treaty negotiations may provide a ground for exemption,
but may be overcome if there are reasonable safeguards to protect the national interest. It is thus not an absolute
exemption or privilege, but a qualified one.

The Freedom of Information Act 2000 of the United Kingdom provides that when an exemption is qualified, the right to
information will not be upheld only if the public interest in maintaining the exemption outweighs the public interest in
disclosure of the information. The Act treats as qualified exemptions information that "would be likely to
prejudice…relations between the United Kingdom and any other State" 266 and "confidential information obtained from a
State other than the United Kingdom…."267 As such, these exemptions may be overcome by a higher public interest in
disclosure.

It may be argued that the subject JPEPA documents consist of information similar to information covered by the above-
cited qualified exemptions under the Freedom of Information Act 2000. The qualification of the above exemptions in the
United Kingdom is made in the context of a statutory grant of a right to information. In the Philippines where the right to
information has more force and effect as a constitutional right, there is all the more reason to give it stronger muscle by
qualifying the diplomatic secrets privilege exemption. This approach minimizes the risk of unjustifiably withholding
diplomatic information that is of public concern but covered by overly broad absolute exemptions.

We thus come to the task of cobbling the appropriate test to weigh the public interest in maintaining the exemption or
privilege over diplomatic secrets and the public interest in upholding the constitutional right to information and disclosing
the subject JPEPA documents.

3. The test to use in adjudicating the constitutional

right to information vis-à-vis executive privilege
is the "balancing of interests," and not the "showing of need"

While I agree with the ponencia’s treatment of the diplomatic secrets privilege as a qualified privilege and its recognition
of the need to formulate a weighing test, it is my humble view that, contrary to its position, we cannot use the test laid
down in U.S. v. Nixon,268 Senate Select Committee v. Nixon,269 and In re Sealed Case (Espy)270 that the Court should
determine whether there is a "sufficient showing of need" for the disclosure of disputed documents. None of these three
cases can provide the proper test. The requirement of "showing of need" applies when executive privilege is invoked
against an evidentiary need for information, such as in the case of another government entity seeking information in order
to perform its function; that is, the court in U.S. v. Nixon, the Senate in Senate Select Committee, and the grand jury in In
re Sealed Case (Espy).

In the adjudication of rights guaranteed in the Constitution, however, the Court has never used "showing of need" as a
test to uphold rights or allow inroads into them. I respectfully submit that we ought not to weigh the need to exercise the
right to free speech or free assembly or free practice of religion. These are freedoms that have been won by all for the
benefit of all, without the requisite showing of need for entitlement. When we valuate these constitutional rights, we do
not consider their necessity for the performance of a function, as in the case of government branches and entities. The
question in the adjudication of constitutional rights is whether the incursion into a right is peripheral or essential, as when
there is only a "soft restraint" on the potential extraditee’s right to procedural due process;271 or whether there is a heavier
public interest that must prevail over a constitutional right in order to preserve an ordered society, such as when there is a
"clear and present danger" of a substantive evil that the State has a right to prevent as demonstrated in free speech
cases,272 or when there is a "compelling state interest" that must override the free exercise of religion. 273

The right to information lies at the heart of a government that is not only republican but also democratic. For this reason,
Article III, Section 7274 of the 1987 Constitution, calls for "an informed citizenry with access to the diverse currents in
political, moral and artistic thought and data relative to them, and the free exchange of ideas and discussion of issues
thereon is vital to the democratic government envisioned under our Constitution." 275 Thus, employing the "balancing of
interests" test, the public interest in upholding this constitutional right of the public to information must be carefully
balanced with the public interest in nondisclosure of information in relation to treaty negotiations. This test is in line with
the approach adopted in the right to access statute of the United Kingdom and New Zealand.

There is a world of difference between employing the "balancing of interests" test and the "showing of need" test adopted
by the ponencia from U.S. v. Nixon, Senate Select Committee v. Nixon, and In re Sealed Case (Espy). In U.S. v. Nixon, the
"showing of need" was necessary, as the information was being sought by a court as evidence in a criminal proceeding. In
Senate Select Committee, the information was being sought by the Senate to resolve conflicting testimonies in an
investigation conducted in the exercise of its oversight functions over the executive branch and in aid of legislation
pertaining to executive wrongdoing. Finally, in In re Sealed Case (Espy), the information was being sought by the grand
jury to investigate whether a government official had committed a crime.

In weighing the "showing of need" in all three cases, the courts considered the relevance of the evidence, the availability
of other evidence, and the criticality of the information sought in the performance of the functions of the court, the
Senate, and the grand jury, respectively. These considerations have no meaning in petitioners’ assertion of their right to
information, for there is no proceeding in relation to which these considerations can be measured. It easily leaps to the
eye that these considerations do not apply to adjudication on the constitutional right to information in relation to
executive privilege, but the ponencia does not state what the "showing of need" consists of in the context of the public’s
assertion of the right to information.

Insofar as the constitutional right of access is concerned, the writing on the wall indicates that it suffices that information is
of public concern for it to be covered by the right, regardless of the public’s need for the information – whether to assess
the performance of the JPEPA Philippine negotiating panel and express satisfaction or dissatisfaction, or to protest the
inclusion of repulsive provisions in the JPEPA, or to keep public officials on their toes by making them aware that their
actions are subject to public scrutiny – or regardless of the public’s lack of need for the information, if they simply want to
know it because it interests them.276

The right to information is a constitutional right in and of itself and does not derive its significance only in relation to the
exercise of another right, such as the right to free speech or a free press if that is the kind of "function" of an individual
that can be equated with the functions of government agencies in the above cases cited by the ponencia. To reiterate,
Valmonte teaches that the right to information is not merely an adjunct of the right to free speech and a free press. Stated
another way, the right to information is an end in itself, even as it may be exercised in furtherance of other rights or
purposes of an individual. To say that one exercises the right to information simply to be informed, and not because of a
particular need, is not a meaningless tautology. Thus, instead of using "showing of need" as a passport to access
purportedly privileged information, as in the case of government entities needing information to perform a
constitutionally mandated duty, the yardstick with respect to individuals exercising a constitutionally granted right to
information should be the importance of the right and the public interest in upholding it.

Prescinding from these premises, I respectfully submit that the test laid down by the ponencia -- which predicates access
to information on a "showing of need" understood in the context of U.S. v. Nixon, Senate Select Committee v. Nixon, and
In re Sealed Case (Espy) -- will have the pernicious effect of subverting the nature, purpose and wisdom of including the
"right to information on matters of public concern" in the Bill of Rights as shown in the above-quoted deliberations of the
1986 Constitutional Commission. It sets an emasculating precedent on the interpretation of this all-important
constitutional right and throws into perdition the philosophy of an open government, painstakingly enshrined by the
framers of the 1987 Constitution in the many scattered provisions from beginning to end of our fundamental law.

Applying the balancing of interests test to the case at bar leads to the ineluctable conclusion that the scale must be tilted
in favor of the people’s right to information for, as shown earlier, the records are bereft of basis for finding a public
interest to justify the withholding of the subject JPEPA documents after the negotiations have been concluded.
Respondents have not shown a sufficient and specific public interest to defeat the recognized public interest in exercising
the constitutional right to information to widen the role of the citizenry in governmental decision-making by giving them
a better perspective of the vital issues confronting the nation,277 and to check abuse in government.278
As aforestated, the negotiations are already concluded and the JPEPA has been submitted to the Senate for its
concurrence. The treaty has thus entered the ultimate stage in which the people can exercise their right to participate in
the discussion on whether the Senate should concur in its ratification or not. This right will be diluted, unless the people
can have access to the subject JPEPA documents.

The ponencia cites PMPF v. Manglapus, Chavez v. PCGG and Chavez v. Public Estates Authority 279 and Senate v. Ermita as
authorities for holding that the subject JPEPA documents are traditionally privileged; and emphasizes that "(t)he privileged
character accorded to diplomatic negotiations does not ipso facto lose all force and effect simply because the same
privilege is now being claimed under different circumstances."280 This approach espoused by the ponencia, however,
deviates from the fundamental teaching of Senate v. Ermita that a claim of executive privilege may be held "valid or not
depending on the ground invoked to justify it and the context in which it is made."

In U.S. v. Nixon, the leading U.S. case on executive privilege, the U.S. Supreme Court was careful to delineate the
applicability of the principles of the case in stating that "(w)e are not here concerned with the balance between the
President’s generalized interest in confidentiality and the need for relevant evidence in civil litigation, nor with that
between the confidentiality interest and congressional demands for information, nor with the President’s interest in
preserving state secrets. We address only the conflict between the President’s assertion of a generalized privilege of
confidentiality and the constitutional need for relevant evidence in criminal trials."281 I respectfully submit that the Court
likewise ought to take half a pause in making comparisons and distinctions between the above Philippine cases cited by
the ponencia and the case at bar; and examine the underlying reasons for these comparisons and distinctions, lest we
mistake apples for oranges.

That the application of the "showing of need" test to executive privilege cases involving branches of government and of
the "balancing of interests" test to cases involving the constitutional right to information could yield different results is not
an absurdity. The difference in results would not be any more absurd than it would be for an accused to be adjudged
innocent in a criminal action but liable in a civil action arising from one and the same act he committed. 282 There is no
absurdity when a distinction is made where there are real differences.

Indeed, it is recognized that executive privilege is also constitutionally based. Proceeding from the respondents’ and the
ponencia’s reliance on Curtiss-Wright, even this case, as aforestated, makes a qualification that the foreign relations power
of the President, "like every other governmental power, must be exercised in subordination to the applicable provisions of
the Constitution."283 In drawing the contours and restrictions of executive privilege, which finds its origins in the U.S., the
constitutional status of the right to information in the Philippines -- which is not true of the statutory right to information
in the U.S. -- must at the same time be given life, especially considering the many contested provisions of the JPEPA as
shown in the ensuing discussion.

D. Right to information, informed debate,

and the contested provisions of the JPEPA

The exercise of the right to information and informed debate by the public on the JPEPA are crucial in light of the
comprehensiveness and impact of this agreement. It is an amalgam of two distinct agreements - a bilateral free trade
agreement and a bilateral investment agreement. Thus, international and constitutional law expert Justice Florentino P.
Feliciano cautions that we must be "twice as awake, twice as vigilant" in examining very carefully the provisions of the
agreement.284 The nearly 1,000-page JPEPA contains 16 chapters, 165 articles and eight annexes covering a wide range of
economic cooperation including trade in goods, rules of origin, customs procedures, paperless trading, mutual
recognition, trade in services, investment, movement of natural persons, intellectual property, government procurement,
competition, improvement of the business environment, cooperation and dispute avoidance and settlement.

The JPEPA’s comprehensive scope is paralleled by the widespread expression of concern over its ratification. In the Senate,
there is a move to concur in the President’s ratification provided that the JPEPA comply with our constitutional provisions
on public health, protection of Filipino enterprises, ownership of public lands and use of natural resources, ownership of
private lands, reservation of certain areas of investment to Filipinos, giving to Filipinos preference in the national economy
and patrimony, regulation of foreign investments, operation of public utilities, preferential use of Filipino labor and
materials, practice of professions, ownership of educational institutions, state regulation of transfer of technology,
ownership of mass media, and ownership of advertising firms.

Among scholars and the public, not a few have registered strong reservations on the ratification of the JPEPA for its being
studded with provisions that are detrimental to the Filipino interest. 285 While the executive branch and other groups have
expressed support for the JPEPA, these contested provisions, at the very least, merit public debate and access to the
subject JPEPA documents, for they have far-reaching effects on the public’s interest and welfare.

Two highly contested JPEPA provisions are Articles 89 and 94. Advocates against the JPEPA contend that these provisions
run afoul of the 1987 Constitution, primarily Article XII, on the National Economy and Patrimony. Article 89 of the JPEPA
provides for National Treatment, viz:

Article 89
National Treatment

Each Party shall accord to investors of the other Party and to their investments treatment no less favorable than that it
accords, in like circumstances, to its own investors and to their investments with respect to the establishment, acquisition,
expansion, management, operation, maintenance, use, possession, liquidation, sale, or other disposition of investments.

In the opinion rendered by Justice Feliciano in response to the invitation to deliver a statement at a hearing of the Senate
Joint Committee on Foreign Relations and the Committee on Trade and Commerce, he explained that the "national
treatment" obligation requires the Philippines to "treat Japanese investors as if they were Philippine nationals, and to treat
Japanese investments in the Philippines as if such investments were owned by Philippine nationals." 286 This provision raises
serious constitutional questions and need untrammeled discussion by the public, as entry into certain sectors of economic
activity in our country is restricted to natural persons who are Philippine citizens or to juridical persons that are at least
sixty, seventy or one hundred percent owned by Philippine citizens. Among these constitutional provisions are Article XII,
Section 2 on the utilization of lands and other natural resources of the Philippines; 287 Article XII, Section 11 on the
operation of public utilities;288 Article XII, Section 14, paragraph 2 on the practice of professions;289 and Article XIV, Section
4(2),290 among others.291

To be sure, Article 94 of the JPEPA provides for an option on the part of the Philippines to uphold the constitutional and
statutory provisions referred to above despite their collision with the "national treatment" obligation in Article 89. That
option is exercised by listing, in the Schedule to Part I of Annex 7 of the JPEPA, the existing non-conforming constitutional
and legal provisions that the Philippines would like to maintain in effect, notwithstanding the requirements of Article 89 of
the JPEPA.292 The Philippines exercised that option by attaching its Schedule to Part I of Annex 7 of the JPEPA. Be that as it
may, some scholars note that the Philippine Schedule is not a complete list of all the currently existing constitutional and
statutory provisions in our legal system that provide for exclusive access to certain economic sectors by Philippine citizens
and Philippine juridical entities that have a prescribed minimum Philippine equity content. They claim that the most
dramatic example of an omission is the aforementioned Article XII, Section 11 of the Constitution, relating to the operation
of public utilities. They cite other examples: the afore-mentioned Article XII, Section 14 relating to the practice of all
professions, save in cases prescribed by law; Article XIV, Section 4(2) relating to ownership and administration of
educational institutions; Article XVI, Section 11(1)293 relating to mass media; and Article XVI, Section 11(2)294 relating to the
advertising industry.295

On trade and investment, former U.P. College of Law Dean Merlin Magallona, an international law expert, explained as
resource person in the hearing of the Senate Joint Committee on Foreign Relations and the Committee on Trade and
Commerce that, under Articles 96 and 98 of the JPEPA, the Philippines stands as an insurance company for Japanese
investments against private acts.296

Articles 96 and 98 of the JPEPA provide, viz:

Article 96
Protection from Strife
1. Each Party shall accord to investors of the other Party that have suffered loss or damage relating to their investments in
the Area of the former Party due to armed conflict or state of emergency such as revolution, insurrection, civil disturbance
or any other similar event in the Area of that former Party, treatment, as regards restitution, indemnification,
compensation or any other settlement, that is no less favorable than the most favorable treatment which it accords to any
investors.

2. Any payments made pursuant to paragraph 1 above shall be effectively realizable, freely convertible and freely
transferable.

Article 98
Subrogation

1. If a Party or its designated agency makes a payment to any of its investors pursuant to an indemnity, guarantee
or insurance contract, arising from or pertaining to an investment of that investor within the Area of the other
Party, that other Party shall:

(a) recognize the assignment, to the former Party or its designated agency, of any right or claim of such
investor that formed the basis of such payment; and

(b) recognize the right of the former Party or its designated agency to exercise by virtue of subrogation
any such right or claim to the same extent as the original right or claim of the investor.

2. Articles 95, 96 and 97 shall apply mutatis mutandis as regards payment to be made to the Party or its
designated agency first mentioned in paragraph 1 above by virtue of such assignment of right or claim, and the
transfer of such payment.

Dean Magallona pointed out that under Articles 96 and 98 of the JPEPA, the Japanese government may execute with a
Japanese investor in the Philippines a contract of indemnity, guaranty, or insurance over loss or damage of its investments
in the Philippines due to revolution, insurrection, or civil disturbance. Compensation by the Japanese government to its
investor under such contract will give rise to the right of the Japanese government to be subrogated to the right or claim
of the Japanese investor against the Philippine government. The Philippines recognizes explicitly this assignment of right
or claim of the Japanese investor against the Philippine Government under Article 98. In effect, he warns that the
Philippines has made itself liable for acts of private individuals engaged in revolution, insurrection or civil disturbance. He
submits that this is an abdication of sovereign prerogative, considering that under general or customary international law,
the Philippines is subject to international responsibility only by reason of its own sovereign acts, not by acts of private
persons.297

Environmental concerns have also been raised in relation to several provisions of the JPEPA, among which is Article 29 on
Originating Goods, which provides, viz:

Article 29
Originating Goods

1. Except as otherwise provided for in this Chapter, a good shall qualify as an originating good of a Party where:

(a) the good is wholly obtained or produced entirely in the Party, as defined in paragraph 2 below;

(b) the good is produced entirely in the Party exclusively from originating materials of the Party; or

(c) the good satisfies the product specific rules set out in Annex 2, as well as all other applicable
requirements of this Chapter, when the good is produced entirely in the Party using nonoriginating
materials.
 2. For the purposes of subparagraph 1(a) above, the following goods shall be considered as being wholly obtained
or produced entirely in a Party:

xxx xxx xxx

(i) articles collected in the Party which can no longer perform their original purpose in the Party nor are
capable of being restored or repaired and which are fit only for disposal or for the recovery of parts or raw
materials;

(j) scrap and waste derived from manufacturing or processing operations or from consumption in the
Party and fit only for disposal or for the recovery of raw materials;

(k) parts or raw materials recovered in the Party from articles which can no longer perform their original
purpose nor are capable of being restored or repaired; and

(l) goods obtained or produced in the Party exclusively from the goods referred to in subparagraphs (a)
through (k) above.

Annex 1298 of the JPEPA reduced the tariff rates for these goods to zero percent, below the minimum set forth in the
current Philippine schedule, JPEPA opponents point out.299 There are allegations from the public that the above provisions
on trade of toxic and hazardous wastes were deleted in the working draft text of the JPEPA as of 21 April 2003, but these
provisions found their way back into the final text signed by President Macapagal-Arroyo. If true, it would be in the
public’s interest to know why said provisions were put back, as they affect the public welfare; and how it is in the
Philippine interest to include them in the JPEPA.300

Various concerned sectors have also expressed their objection to some provisions of the JPEPA. A substantial number of
fishermen harp on the inadequacy of protection given to their sector and the violation of the Philippine Constitution with
respect to deep-sea fishing. In Annex 7, 2B (Schedule of the Philippines)301 of the JPEPA, the Philippine government made
a reservation on national treatment by invoking Article 12 of the 1987 Constitution under the heading: "Sector: Fisheries,
Sub-sector: Utilization of Marine Resource."302 The measures invoked by the Philippine government are: 1) no foreign
participation is allowed for small-scale utilization of marine resources in archipelagic waters, territorial sea and Exclusive
Economic Zones; 2) for deep-sea fishing corporations, associations or partnerships having a maximum 40 percent foreign
equity can enter into co-production, joint venture or production-sharing agreement with the Philippine
government.303 Concerned sectors contend, however, that the second measure violates Article XII, Section 2 of the
Philippine Constitution which mandates, without qualification, the protection of the nation’s marine wealth in Philippine
archipelagic waters, territorial sea and EEZ; and reserves "its use and enjoyment exclusively to Filipino citizens." 304

The food sector also complains about the insufficiency of protection from export subsidies under Article 20 of the JPEPA,
which, according to it, makes it possible for Japan to engage in agriculture dumping, one of the most trade-distorting
practices of rich countries.305 Article 20 of the JPEPA, provides viz:

Article 20
Export Duties

Each Party shall exert its best efforts to eliminate its duties on goods exported from the Party to the other Party. (emphasis
supplied)

This sector raises the objection that while the JPEPA only requires "best efforts," both the Japan-Indonesia Economic
Partnership Agreement (JIEPA) and the Japan-Malaysia Economic Partnership Agreement (JMEPA) disallow the
introduction or the maintenance of agriculture export subsidies.306

Without adjudging the merits of objections to the above provisions of the JPEPA, the fact that these concerns are raised
and that these provisions will impact on the lives of our people stress the need for an informed debate by the public on
the JPEPA. Rooted in the unique Philippine experience, the 1987 Constitution strengthened participatory democracy not
only in our political realm but also in the economic arena. Uninformed participation in the governance of the country
impairs the right of our people to govern their lives while informed debate serves as the fountainhead from which truth
and the best interest of the country will spring.

By upholding the constitutional right to information over the invocation of executive privilege in the instant case, it is my
considered view that the subject JPEPA documents should be disclosed considering the particular circumstances of the
case at bar. In arriving at this conclusion, a balancing of interests test has to be employed which will allow the executive to
show the public interest it seeks to protect in invoking executive privilege. The test serves as a safeguard against
disclosure of information that should properly be kept secret. There is thus no foundation for the fears expressed in the
Separate Opinion of Justice Tinga, viz: "(The ruling) would establish a general rule that diplomatic negotiations of treaties
and other international agreements…belong to the public record since it is encompassed within the constitutional right to
information…if indeed the Philippines would become unique among the governments of the world in establishing that
these correspondences related to treaty negotiations are part of the public record, I fear that such doctrine would impair
the ability of the Philippines to negotiate treaties or agreements with foreign countries." As afore-discussed, allowing
public access to trade agreement negotiations and draft texts, in various degrees and ways, has gained momentum in the
landscape of U.S. diplomatic and foreign relations. I submit that, when warranted, we must overcome the entropy of the
old tradition of secrecy.

Contrary to the Separate Opinion of Justice Tinga, the Executive as the custodian of records of negotiations of treaties and
other international agreements has the discretion to classify information as confidential in accordance with applicable
laws, and not let it become part of the public record of a government in the sunshine. But when the executive is haled to
court to enforce a constitutional right to this information, it is the court’s task in each particular case to balance the
executive’s need for secrecy in treaty negotiations with the constitutional right to information, and decide whether that
particular information should be disclosed or kept confidential.307 Finally, the discussion in the Separate Opinion of Justice
Tinga on the application of Article 32, Supplementary Means of Interpretation, of the Vienna Convention on the Law of
Treaties308 and the question of whether the subject JPEPA documents constitute "preparatory work" under this provision
are premature, as the Philippine Senate has not concurred in the ratification of the JPEPA; hence, it has not entered into
force. I submit that the question is not relevant to the resolution of the case at bar, as we are not here engaged in an
interpretation of the JPEPA.

In sum, transparency and opacity are not either-or propositions in the conduct of international trade agreement
negotiations. The degree of confidentiality necessary in a particular negotiation is a point in a continuum where complete
disclosure and absolute secrecy are on opposite ends.309 In assigning this fulcrum point, it is my humble view that the
Court should balance the need for secrecy of the Executive and the demand for information by the legislature or the
public. The balancing act in every case safeguards against disclosure of information prejudicial to the public interest and
upholds the fundamental principle enunciated in Senate v. Ermita310 -- that a claim of executive privilege "may be valid or
not depending on the ground invoked to justify it and the context in which it is made." 311

We elevated the right to information to constitutional stature not without reason. In a democracy, debate -- by the people
directly or through their representatives in Congress – is a discussion of and by the informed and not an exchange of
surpluses of ignorance.312 In the arena of economic governance, the right to debate and participate is exercised not as an
end in itself. Especially for the powerless whose sword and shield against abuse is their voice, the exercise of the right is
not merely rhetoric. It is a fight from the gut to satisfy basic human needs and lead a humane life.

I vote to grant the petition.

REYNATO S. PUNO
Chief Justice
 SEPARATE DISSENTING OPINION

AZCUNA, J.:

I fully agree with the Dissenting Opinion of Chief Justice Reynato S. Puno.

The ponencia regrettably assumes that the power of Congress, when it investigates, is either in aid of legislation or by way
of oversight. What appears to have been forgotten is an equally important and fundamental power and duty of Congress
and that is its informing function by way of investigating for the purpose of enlightening the electorate.

Arthur M. Schlesinger, in THE IMPERIAL PRESIDENCY, aptly quotes Wilson on CONGRESSIONAL GOVERNMENT on this
power:

Congress’s "only whip," Wilson said, "is investigation," and that "the chief purpose of investigation, even more than the
direction of affairs, was the enlightenment of the electorate. The inquisitiveness of such bodies as Congress is the best
conceivable source of information…. The informing function of Congress should be preferred even to its legislative
function." For "the only really self-governing people is that people which discusses and interrogates its administration."1

This is all the more compelling in our polity because our Constitution is replete and suffused with provisions on
transparency, accountability and the right of the people to know the facts of governance, as pointed out by the Chief
Justice. Neither is the Philippines the only country that has done this. Only last year, 2007, Mexico amended its
Constitution to raise to the level of a fundamental right the public’s right to know the truth, thereby providing that: "All
information in the possession of any federal, state and municipal authority, entity, body or organization is public xxxx." The
amendment reads:

The Amendment to Article 6 of the Constitution

The Permanent Commission of the Honorable Congress, in full use of the power bestowed on it by Article 135 of the
Constitution, and after approval by both the Chamber of Deputies and the Senate of Mexico, as well as the legislatures,
decrees:

A second paragraph with seven subsections is hereby added to Article 6 of the Mexican Constitution.

Single Article. A second paragraph with seven subsections is added to Article 6 of the Mexican Constitution, which will
now read as follows:

Article 6…

For purposes of the exercise of the right to access to information, the federal government, the states of the Federal
District, each in their respective jurisdictions, will comply with the following principles and bases:

I. All information in the possession of any federal, state and municipal authority, entity, body and organism
[organs] is public and may only be temporarily withheld in the public interest in accordance with legislation. In
interpreting this right, the principle of the maximum public-ness must prevail.

II. Information referring to individual’s private lives and personal data shall be protected as stipulated in and with
the exceptions established by law.

III. Without having to show any involvement in the topic or justify its use, all individuals will have access, free of
charge, to public information, his/her personal data, or to the rectification of said data.

IV. Mechanisms for access and expeditious review procedures shall be established. These procedures will be
substantiated before specialized, impartial bodies with operational, managerial and decision-making autonomy.
 V. Entities herein mandated shall preserve their documents in updated administrative archives and shall publish in
the available electronic media complete, updated information about their management indicators and the
exercise of public resources.

VI. Legislation will determine the manner in which those mandated to comply will make public the information
about public resources given to individuals or entities.

VII. Incompliance [Noncompliance] with the stipulations regarding access to public information will be sanctioned
accordingly to the law.

TRANSITORY ARTICLES

First. The present Decree shall go into effect the day after its publication in the Official Federal Gazette.

Second. The federal government, the states and the Federal District, in their respective jurisdictions, shall issue
legislation about access to public information and transparency, or make the necessary changes no later than one
year after this Decree goes into effect.

Third. The federal government, the states and the Federal District must establish electronic systems so that any
person can use from a distance the mechanisms for access to information and the review procedures mentioned
in this Decree. Said systems must be functioning no later than two years after the Decree goes into effect. State
laws shall establish whatever is needed for municipalities with more than 60,000 inhabitants and the territorial
sub-divisions of the Federal District to have their own electronic systems within that same period of time.
[Emphasis supplied.]2

Transparency is in fact the prevalent trend and non-disclosure is the diminishing exception. The reason lies in the
recognition under international law of the fundamental human right of a citizen to take part in governance, as set forth in
the 1948 United Nations Universal Declaration of Human Rights, a right that cannot be realized without access to
information.

And even in the United States from where the privilege originated no President has claimed a general prerogative to
withhold but rather the Executive has claimed particular exceptions to the general rule of unlimited executive disclosure:

Conceding the idea of Congress as the grand inquest of the nation, Presidents only claimed particular exceptions to the
general rule of unlimited executive disclosures – Washington, the protector of the exclusive constitutional jurisdiction of
one house of Congress against invasion by the other house; Jefferson, the protector of presidential relationship within the
executive branch and the defense of that branch against congressional harassment; Taylor, the protection of ongoing
investigation and litigation; Polk, the protection of state secrets in intelligence and negotiation. While exceptions might
accumulate, no President had claimed a general and absolute prerogative to withhold.3

The President, therefore, has the burden to show that a particular exception obtains in every case where the privilege is
claimed. This has not been done in the present case. All that the Senate is asking for are copies of the starting offers of the
Philippines and of Japan. What is the deep secret in those papers? If the final product is and has been disclosed, why
cannot the starting offers be revealed? How can anyone, the Senate or the electorate included, fathom – to use the
favorite word of a counsel – the end product if one is not told the starting positions?

Furthermore, Executive Secretary Ermita did not really invoke the privilege. All he said was that, at the time of the request,
negotiations were on-going, so that it was difficult to provide all the papers relative to the proposed Treaty (which was
then the request of the Senate). He did not say it was privileged or secret or confidential but that it was difficult at the
time to comply with the request as the Executive understandably had its hands full in the midst of the negotiations.
Now the negotiations are over. The proposed treaty has been signed and submitted to the Senate for ratification. There is
no more difficulty in complying with the now reduced request of giving copies of the starting offers of the Philippines and
of Japan.

Since the privilege is an exception to the rule, it must be properly, seasonably and clearly invoked. Otherwise, it cannot be
applied and sustained.

Finally, as Ex parte Milligan4 sums it:

A country preserved at the sacrifice of all the cardinal principles of liberty is not worth the cost of preserving. 5

I vote to compel disclosure of the requested documents.

ADOLFO S. AZCUNA
Associate Justice

CONCURRING OPINION

CARPIO, J.:

I concur with the ponencia of Justice Conchita Carpio Morales on the following grounds:

1. Offers and counter-offers between States negotiating a treaty are expected by the negotiating States to remain
confidential during the negotiations prior to the signing of the treaty. There is no dispute on this.

2. After the signing of the treaty, the public disclosure of such offers and counter-offers depends on the consent
of both negotiating States. A State may wish to keep its offers and counter-offers confidential even after the
signing of the treaty because it plans to negotiate similar treaties with other countries and it does not want its
negotiating positions known beforehand by such other countries. The offers and counter-offers of a negotiating
State usually include references to or discussions of the offers and counter-offers of the other negotiating State.
Hence, a negotiating State cannot decide alone to disclose publicly its own offers and counter-offers if they refer
to or discuss the offers and counter-offers of the other negotiating State.

3. If the Philippines does not respect the confidentiality of the offers and counter-offers of its negotiating partner
State, then other countries will be reluctant to negotiate in a candid and frank manner with the Philippines.
Negotiators of other countries will know that Philippine negotiators can be forced to disclose publicly offers and
counter-offers that their countries want to remain confidential even after the treaty signing. Thus, negotiators of
such countries will simply repeat to Philippine negotiators offers and counter-offers that they can disclose publicly
to their own citizens, which offers and counter-offers are usually more favorable to their countries. This denies to
Philippine negotiators the opportunity to hear, and explore, other more balanced offers or counter-offers from
negotiators of such countries. A writer on diplomatic secrets puts it this way:

x x x Disclosure of negotiating strategy and goals impairs a party's ability to negotiate the most favorable terms,
because a negotiating party that discloses its minimum demands insures that it will get nothing more than the
minimum. Moreover, those involved in the practice of negotiations appear to be in agreement that publicity leads
to ‘grandstanding,’ tends to freeze negotiating positions, and inhibits the give-and-take essential to successful
negotiation. As Sissela Bok points out, if ‘negotiators have more to gain from being approved by their own sides
than by making a reasoned agreement with competitors or adversaries, then they are inclined to ‘play to the
gallery . . . .’ In fact, the public reaction may leave them little option. It would be a brave, or foolish, Arab leader
who expressed publicly a willingness for peace with Israel that did not involve the return of the entire West Bank,
or Israeli leader who stated publicly a willingness to remove Israel's existing settlements from Judea and Samaria
in return for peace.1
 4. In the present case, at least one negotiating State – the Philippines – does not want to disclose publicly the
offers and counter-offers, including its own. The Philippines is expected to enter into similar treaties with other
countries. The Court cannot force the Executive branch to telegraph to other countries its possible offers and
counter-offers that comprise our negotiating strategy. That will put Philippine negotiators at a great disadvantage
to the prejudice of national interest. Offers and counter-offers in treaty negotiations are part of diplomatic secrets
protected under the doctrine of executive privilege. Thus, in United States v. Curtiss-Wright,2 the leading case in
American jurisprudence on this issue, the U.S. Supreme Court, quoting with approval a letter of President George
Washington, held:

x x x Indeed, so clearly is this true that the first President refused to accede to a request to lay before the House of
Representatives the instructions, correspondence and documents relating to the negotiation of the Jay Treaty - a
refusal the wisdom of which was recognized by the House itself and has never since been doubted. In his reply to
the request, President Washington said:

The nature of foreign negotiations requires caution, and their success must often depend on secrecy; and even
when brought to a conclusion a full disclosure of all the measures, demands, or eventual concessions which may
have been proposed or contemplated would be extremely impolitic; for this might have a pernicious influence on
future negotiations, or produce immediate inconveniences, perhaps danger and mischief, in relation to other
powers. The necessity of such caution and secrecy was one cogent reason for vesting the power of making treaties
in the President, with the advice and consent of the Senate, the principle on which that body was formed
confining it to a small number of members. To admit, then, a right in the House of Representatives to demand and
to have as a matter of course all the papers respecting a negotiation with a foreign power would be to establish a
dangerous precedent. (Emphasis supplied)

5. The negotiation of treaties is different from the awarding of contracts by government agencies. In diplomatic
negotiations, there is a traditional expectation that the offers and counter-offers of the negotiating States will
remain confidential even after the treaty signing. States have honored this tradition and those that do not will
suffer the consequences. There is no such expectation of keeping confidential the internal deliberations of
government agencies after the awarding of contracts.

6. However, in the ratification of a treaty, the Senate has the right to see in executive session, the offers and
counter-offers made in the treaty negotiations even in the absence of consent from our treaty partner State.
Otherwise, the Senate cannot examine fully the wisdom of the treaty. In the present case, however, the Senate is
not a party.

Accordingly, I vote to DISMISS the petition.

ANTONIO T. CARPIO
Associate Justice

SEPARATE OPINION

TINGA, J.:

The dissent of our eminent Chief Justice raises several worthy points. Had the present question involved the legislative
consideration of a domestic enactment, rather than a bilateral treaty submitted for ratification by the Senate, I would have
no qualms in voting to grant the petition. However, my vote to dismiss the petition, joining in the result of the ponencia of
the esteemed Justice Morales, is due to my inability to blithely disregard the diplomatic and international ramifications
should this Court establish a rule that materials relevant to treaty negotiations are demandable as a matter of right. The
long-standing tradition of respecting the confidentiality of diplomatic negotiations is embodied in the rule according
executive privilege to diplomatic secrets.
The ponente engages in a thorough and enlightening discussion on the importance and vitality of the diplomatic secrets
privilege, and points out that such privilege, which is a specie of executive privilege, serves to balance the constitutional
right to information invoked in this case. If I may add, in response to the Dissenting Opinion which treats the deliberative
process privilege as "a distinct kind of executive privilege" from the "diplomatic secrets privilege", notwithstanding the
distinction, both deliberative process privilege and diplomatic secrets privilege should be jointly considered if the question
at hand, as in this case, involves such diplomatic correspondences related to treaty negotiations. The diplomatic character
of such correspondences places them squarely within the diplomatic secrets privilege, while the fact that the ratification of
such treaty will bestow on it the force and effect of law in the Philippines also places them within the ambit of the
deliberate process privilege. Thus, it would not be enough to consider the question of privilege from only one of those
two perspectives, as both species of executive privilege should be ultimately weighed and applied in conjunction with
each other.

In ascertaining the balance between executive privilege and the constitutional right to information in this case, I likewise
consider it material to consider the implications had the Court established a precedent that would classify such documents
relating to treaty negotiations as part of the public record since it is encompassed within the constitutional right to
information. The Dissenting Opinion is unfortunately unable to ultimately convince that establishing such a general rule
would not set the Philippines so far apart from the general practice of the community of nations. For if indeed the
Philippines would become unique among the governments of the world in establishing that these correspondences
related to treaty negotiations are part of the public record, I fear that such a doctrine would impair the ability of the
Philippines to negotiate treaties or agreements with foreign countries. The Philippines would become isolated from the
community of nations, and I need not expound on the negative and destabilizing implications of such a consequence.

It should be expected that national governments, including our own, would insist on maintaining the presumptive secrecy
of all documents and correspondences relating to treaty negotiations. Such approach would be maintained upon no
matter how innocuous, honest or above-board the privileged information actually is, since an acknowledgment that such
information belongs to the public record would diminish a nation’s bargaining power in the negotiation of treaties. This
truth may be borne moreso out of realpolitik, rather then the prevalence of a pristine legal principle, yet it is a political
reality which this Court has to contend with since it redounds to the ultimate wellbeing of the Philippines as a sovereign
nation. On the premise that at least a significant majority of the most relevant players in the international scene adhere to
the basic confidentiality of treaty negotiations no matter the domestic implications of such confidentiality, then it can only
be expected that such nations will hesitate, if not refuse outright, to negotiate treaties with countries which do not respect
that same rule.

The Dissenting Opinion does strive to establish that in certain countries such as the United States, the United Kingdom,
Australia and New Zealand, there is established a statutory right to information that allows those states’ citizens to
demand the release of documents pertinent to public affairs. However, even the dissent acknowledges that in the United
Kingdom for example, "confidential information obtained from a State other than the United Kingdom" or information
that would be likely to prejudice relations between the United Kingdom and other countries are exempt from its own
Freedom of Information Act of 2000. It is impossible to conclude, using the examples of those countries, that there is a
general presumptive right to access documents relevant to diplomatic negotiations.

It would be a different matter if the petitioners or the dissent were able to demonstrate that a significant number of
nations have adopted a paradigm that incorporates their treaty negotiations into the public record out of recognition of
the vital right to information, transparency, good governance, or whatever national interest revelation would promote; or
that there is an emerging trend in international law that recognizes that treaty negotiations are not privileged in character,
or even if so, that the privilege is of such weak character that it may easily be overcome. If either circumstance was
established, it would be easier to adopt the position of the dissent, which admirably attempts to infuse full vitality into the
constitutional rights of the people, as it would assure that such constitutional affirmation would not come at the expense
of the country’s isolation from the community of nations.

Unfortunately, neither the Dissenting Opinion nor the petitioners herein, have attempted to engage such perspective. A
cursory inquiry into foreign jurisprudence and international law does not reveal that either of the two trends exist a the
moment. In the United Kingdom, the concept of State interest immunity (formerly known as "Crown Privilege") guarantees
that information, the disclosure of which would be prejudicial to the interests of the State, may not be disclosed. In the
Corfu Channel Case,1 the International Court of Justice affirmed the United Kingdom’s refusal to turn over certain
documents relevant to its dispute with Albania on the ground of national security. In Australia, the Attorney General’s
certification that information may not be disclosed for the reason that it would prejudice the security, defense or
international relations of Australia is authoritative and must be adhered to by the court.2

According to commentaries on the law on evidence in Pakistan, "if the privilege is claimed on the ground that the
document relates to the affairs of the State which means maters of public nature in which a State is concerned and
disclosure of which will be prejudicial to public interest or endangers national defense or is detrimental to good
diplomatic relations then the general rule [of judicial review] ceases to apply and the Court shall not inspect the document
or show it to the opposite party unless the validity of the privilege claimed is determined." 3

The International Criminal Tribunal for the former Yugoslavia, in a decision dated 18 July 1997, did recognize an
international trend that in cases where national security or state secrets privilege is invoked, the courts may nonetheless
assess the validity of the claim, thus requiring the disclosure of such documents to the courts or its
designates.4 Nonetheless, assuming that such a ruling is indicative of an emerging norm in international law, it only
establishes that the invocation of state secrets cannot be taken at face value but must be assessed ;by the courts. The
Dissenting Opinion implicitly goes further and establishes that documents involved in diplomatic negotiations relating to
treaty agreements should form part of the public record as a consequence of the constitutional right to information. I
would have been more conformable to acknowledge such a doctrine if it is supported by a similar trend in foreign
jurisprudence or international law.

Where the contracting nations to a treaty share a common concern for the basic confidentiality of treaty negotiations it is
understandable that such concern may evolve unto a firm norm of conduct between them for as long as no conflict
between them in regard to the treaty emerges. Thus, with respect to the subject treaty the Government of the Philippines
should expectedly heed Japan’s normal interest in preserving the confidentiality of the treaty negotiations and conduct
itself accordingly in the same manner that our Government expects the Japanese Government to observe the protocol of
confidentiality.

Even if a case arises between the contracting nations concerning the treaty it does not necessarily follow that the
confidentiality of the treaty negotiations may be dispensed with and looked into by the tribunal hearing the case, except
for the purposes mentioned in Article 32 of the Vienna Convention of the Law of Treaties. The Article provides:

Article 32
Supplementary means of interpretation

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the
circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to
determine the meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leaves to a result which is manifestly absurd or unreasonable.

The aforequoted "preparatory work" or travaux preparatiores may be used either to confirm the meaning of the treaty or
as an aid to interpretation where, following the application of Article 32, the meaning is ambiguous or obscure or leads to
a result which is manifestly absurd or unreasonable. 5 The article may be limited in design as a rule in the interpretation of
treaties.

Moreover, it is less clear what exactly classifies documents or correspondences as "preparatory work." Should such
preparatory work have been cleared for disclosure by the negotiating countries? In 1995, the International Court of Justice,
in Qatar v. Bahrain,6 dealt with Bahrain’s claim that following Article 32, the ICJ should adopt its theory concerning a
territorial dispute based on the text of a documents headed "Minutes" signed at Doha on 25 December 1990 by the
Ministers for Foreign Affairs of Bahrain, Qatar and Saudi Arabia. While the ICJ ultimately rejected Bahrain’s contention on
the ground that such minutes could not provide conclusive supplementary elements for the interpretation of the text
adopted, it is useful to dwell on the fact that such a document classified as "preparatory work" was, at the very least,
expressly approved by the negotiating parties through their Foreign Ministers.

In the case at bar, it appears that the documents which the petitioners are particularly interested in their disclosure are the
various drafts of the JPEPA. It is not clear whether such drafts were ever signed by the Philippine and Japanese
governments, or incorporated in minutes or similar documents signed by the two governments. Even assuming that they
were signed but without any intention to release them for public documentation, would such signatures already classify
the minutes as part of "preparatory work" which, following the Vienna Convention, provides supplementary means of
interpretation and should logically be within the realm of public disclosure? These are manifestly difficult questions which
unfortunately, the petitioners and the Dissenting Opinion did not adequately address.

Finally, I wish to add that if the petitioner in this case is the Senate of the Philippines, and that it seeks the requested
documents in the process of deliberating on the ratification of the treaty, I will vote for the disclosure of such documents,
subject to mechanisms such as in camera inspection or executive sessions that would have accorded due regard to
executive privilege. However, the reason behind such a position will be based not on the right to information, but rather,
on the right of the Senate to fully exercise its constituent function of ratifying treaties.

DANTE O. TINGA
Associate Justice
G.R. No. 177861 July 13, 2010

IN RE: PETITION FOR CANCELLATION AND CORRECTION OF ENTRIES IN THE RECORD OF BIRTH,

EMMA K. LEE, Petitioner,

vs.
COURT OF APPEALS, RITA K. LEE, LEONCIO K. LEE, LUCIA K. LEE-ONG, JULIAN K. LEE, MARTIN K. LEE, ROSA LEE-
VANDERLEK, MELODY LEE-CHIN, HENRY K. LEE, NATIVIDAD LEE-MIGUEL, VICTORIANO K. LEE, and THOMAS K.
LEE, represented by RITA K. LEE, as Attorney-in-Fact, Respondents.

DECISION

ABAD, J.:

This case is about the grounds for quashing a subpoena ad testificandum and a parent’s right not to testify in a case
against his children.

The Facts and the Case

Spouses Lee Tek Sheng (Lee) and Keh Shiok Cheng (Keh) entered the Philippines in the 1930s as immigrants from China.
They had 11 children, namely, Rita K. Lee, Leoncio K. Lee, Lucia K. Lee-Ong, Julian K. Lee, Martin K. Lee, Rosa Lee-
Vanderlek, Melody Lee-Chin, Henry K. Lee, Natividad Lee-Miguel, Victoriano K. Lee, and Thomas K. Lee (collectively, the
Lee-Keh children).

In 1948, Lee brought from China a young woman named Tiu Chuan (Tiu), supposedly to serve as housemaid. The
respondent Lee-Keh children believe that Tiu left the Lee-Keh household, moved into another property of Lee nearby, and
had a relation with him.

Shortly after Keh died in 1989, the Lee-Keh children learned that Tiu’s children with Lee (collectively, the Lee’s other
children) claimed that they, too, were children of Lee and Keh. This prompted the Lee-Keh children to request the National
Bureau of Investigation (NBI) to investigate the matter. After conducting such an investigation, the NBI concluded in its
report:

[I]t is very obvious that the mother of these 8 children is certainly not KEH SHIOK CHENG, but a much younger woman,
most probably TIU CHUAN. Upon further evaluation and analysis by these Agents, LEE TEK SHENG is in a quandary in
fixing the age of KEH SHIOK CHENG possibly to conform with his grand design of making his 8 children as their own
legitimate children, consequently elevating the status of his second family and secure their future. The doctor lamented
that this complaint would not have been necessary had not the father and his second family kept on insisting that the 8
children are the legitimate children of KEH SHIOK CHENG.1

The NBI found, for example, that in the hospital records, the eldest of the Lee’s other children, Marcelo Lee (who was
recorded as the 12th child of Lee and Keh), was born of a 17-year-old mother, when Keh was already 38 years old at the
time. Another of the Lee’s other children, Mariano Lee, was born of a 23-year-old mother, when Keh was then already 40
years old, and so forth. In other words, by the hospital records of the Lee’s other children, Keh’s declared age did not
coincide with her actual age when she supposedly gave birth to such other children, numbering eight.

On the basis of this report, the respondent Lee-Keh children filed two separate petitions, one of them before the Regional
Trial Court (RTC) of Caloocan City2 in Special Proceeding C-1674 for the deletion from the certificate of live birth of the
petitioner Emma Lee, one of Lee’s other children, the name Keh and replace the same with the name Tiu to indicate her
true mother’s name.
In April 2005 the Lee-Keh children filed with the RTC an ex parte request for the issuance of a subpoena ad
testificandum to compel Tiu, Emma Lee’s presumed mother, to testify in the case. The RTC granted the motion but Tiu
moved to quash the subpoena, claiming that it was oppressive and violated Section 25, Rule 130 of the Rules of Court, the
rule on parental privilege, she being Emma Lee’s stepmother. 3 On August 5, 2005 the RTC quashed the subpoena it issued
for being unreasonable and oppressive considering that Tiu was already very old and that the obvious object of the
subpoena was to badger her into admitting that she was Emma Lee’s mother.

Because the RTC denied the Lee-Keh children’s motion for reconsideration, they filed a special civil action of certiorari
before the Court of Appeals (CA) in CA-G.R. SP 92555. On December 29, 2006 the CA rendered a decision, 4 setting aside
the RTC’s August 5, 2005 Order. The CA ruled that only a subpoena duces tecum, not a subpoena ad testificandum, may be
quashed for being oppressive or unreasonable under Section 4, Rule 21 of the Rules of Civil Procedure. The CA also held
that Tiu’s advanced age alone does not render her incapable of testifying. The party seeking to quash the subpoena for
that reason must prove that she would be unable to withstand the rigors of trial, something that petitioner Emma Lee
failed to do.

Since the CA denied Emma Lee’s motion for reconsideration by resolution of May 8, 2007,5 she filed the present petition
with this Court.

The Question Presented

The only question presented in this case is whether or not the CA erred in ruling that the trial court may compel Tiu to
testify in the correction of entry case that respondent Lee-Keh children filed for the correction of the certificate of birth of
petitioner Emma Lee to show that she is not Keh’s daughter.

The Ruling of the Court

Petitioner Emma Lee claims that the RTC correctly quashed the subpoena ad testificandum it issued against Tiu on the
ground that it was unreasonable and oppressive, given the likelihood that the latter would be badgered on oral
examination concerning the Lee-Keh children’s theory that she had illicit relation with Lee and gave birth to the other Lee
children.

But, as the CA correctly ruled, the grounds cited—unreasonable and oppressive—are proper for subpoena ad duces tecum
or for the production of documents and things in the possession of the witness, a command that has a tendency to
infringe on the right against invasion of privacy. Section 4, Rule 21 of the Rules of Civil Procedure, thus provides:

SECTION 4. Quashing a subpoena. — The court may quash a subpoena duces tecum upon motion promptly made and, in
any event, at or before the time specified therein if it is unreasonable and oppressive, or the relevancy of the books,
documents or things does not appear, or if the person in whose behalf the subpoena is issued fails to advance the
reasonable cost of the production thereof.

Notably, the Court previously decided in the related case of Lee v. Court of Appeals6 that the Lee-Keh children have the
right to file the action for correction of entries in the certificates of birth of Lee’s other children, Emma Lee included. The
Court recognized that the ultimate object of the suit was to establish the fact that Lee’s other children were not children of
Keh. Thus:

It is precisely the province of a special proceeding such as the one outlined under Rule 108 of the Revised Rules of Court
to establish the status or right of a party, or a particular fact. The petitions filed by private respondents for the
correction of entries in the petitioners' records of birth were intended to establish that for physical and/or
biological reasons it was impossible for Keh Shiok Cheng to have conceived and given birth to the petitioners as
shown in their birth records. Contrary to petitioners' contention that the petitions before the lower courts were
actually actions to impugn legitimacy, the prayer therein is not to declare that petitioners are illegitimate children
of Keh Shiok Cheng, but to establish that the former are not the latter's children. There is nothing to impugn as
there is no blood relation at all between Keh Shiok Cheng and petitioners. 7 (Underscoring supplied)
Taking in mind the ultimate purpose of the Lee-Keh children’s action, obviously, they would want Tiu to testify or admit
that she is the mother of Lee’s other children, including petitioner Emma Lee. Keh had died and so could not give
testimony that Lee’s other children were not hers. The Lee-Keh children have, therefore, a legitimate reason for seeking
Tiu’s testimony and, normally, the RTC cannot deprive them of their right to compel the attendance of such a material
witness.

But petitioner Emma Lee raises two other objections to requiring Tiu to come to court and testify: a) considering her
advance age, testifying in court would subject her to harsh physical and emotional stresses; and b) it would violate her
parental right not to be compelled to testify against her stepdaughter.

1. Regarding the physical and emotional punishment that would be inflicted on Tiu if she were compelled at her
age and condition to come to court to testify, petitioner Emma Lee must establish this claim to the satisfaction of
the trial court. About five years have passed from the time the Lee-Keh children sought the issuance of a
subpoena for Tiu to appear before the trial court. The RTC would have to update itself and determine if Tiu’s
current physical condition makes her fit to undergo the ordeal of coming to court and being questioned. If she is
fit, she must obey the subpoena issued to her.

Tiu has no need to worry that the oral examination might subject her to badgering by adverse counsel. The trial
court’s duty is to protect every witness against oppressive behavior of an examiner and this is especially true
where the witness is of advanced age.8

2. Tiu claimed before the trial court the right not to testify against her stepdaughter, petitioner Emma Lee,
invoking Section 25, Rule 130 of the Rules of Evidence, which reads:

SECTION 25. Parental and filial privilege.- No person may be compelled to testify against his parents, other direct
ascendants, children or other direct descendants.

The above is an adaptation from a similar provision in Article 315 of the Civil Code that applies only in criminal cases. But
those who revised the Rules of Civil Procedure chose to extend the prohibition to all kinds of actions, whether civil,
criminal, or administrative, filed against parents and other direct ascendants or descendants.

But here Tiu, who invokes the filial privilege, claims that she is the stepmother of petitioner Emma Lee. The privilege
cannot apply to them because the rule applies only to "direct" ascendants and descendants, a family tie connected by a
common ancestry.1avvphi1 A stepdaughter has no common ancestry by her stepmother. Article 965 thus provides:

Art. 965. The direct line is either descending or ascending. The former unites the head of the family with those who
descend from him. The latter binds a person with those from whom he descends.

Consequently, Tiu can be compelled to testify against petitioner Emma Lee.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision and resolution of the Court of Appeals in CA-G.R.
SP 92555.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
 MARTIN S. VILLARAMA, JR.* JOSE PORTUGAL PEREZ**
Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice