MALAYAN INTEGRATED INDUSTRIES, CORPORATION, PETITIONER, VS. THE HON. COURT OF APPEALS, CITY OF MANDAUE, MAYOR ALFREDO M. OUANO, VICE-MAYOR PATERNO P. CANETE, SANGGUNIANG PAN­LUN…

Malayan Integrated Industries versus Court of Appeals

The Case

This is a special civil action of certiorari and prohibition brought by Malayan Integrated Industries Corporation against the Court of Appeals, the City of Mandaue, its Mayor and Vice-Mayor, its Sangguniang Panlungsod, and the private firms that took over the Mandaue reclamation project. Malayan asks the Supreme Court to annul the appellate court's resolutions and the writ of preliminary injunction that stopped the trial court from enforcing its own injunction against the reclamation contract of the City of Mandaue with F.F. Cruz and Company and its associates. The case matters because it fixes the boundary between judicial power and executive discretion over government infrastructure projects, and because it applies the statutory ban on court injunctions against such projects.

Procedural History

Malayan filed a petition for prohibitory and mandatory preliminary injunction in the Regional Trial Court of Cebu City, which was docketed as Civil Case Number CEB-9658. The trial court, through Judge Leonardo Cañares, issued a temporary restraining order, denied the motions to dismiss, and after hearing granted a writ of preliminary prohibitory injunction upon a five million peso bond. The respondents' motions for reconsideration were denied. The City of Mandaue, F.F. Cruz and Company, and the other private respondents then went up to the Court of Appeals by petition for certiorari with prayer for restraining order and injunction. The Court of Appeals issued a temporary restraining order, and later a writ of preliminary injunction upon a ten million peso bond posted by F.F. Cruz and Company. After the appellate court denied its motion for reconsideration, Malayan filed this petition for certiorari and prohibition in the Supreme Court to annul those resolutions and the writ.

Facts

On December 12, 1977, the City of Mandaue and Malayan signed a reclamation contract for the reclamation of offshore and foreshore land, later increased to 360 hectares, to be developed into an industrial and trading center with modern harbor and port facilities. The project was to be completed within four years after approval by the Office of the President. That transaction appeared unauthorized under Presidential Decree Number 3-A, which requires reclamation of areas under water to be done only by the national government or by a person authorized by it with a proper contract, and Executive Order Number 525 had designated the Public Estates Authority as the central authority for all reclamation projects.

The City passed resolutions authorizing a memorandum of understanding and a contract with the Public Estates Authority, and on November 26, 1979, the City and Malayan signed a Confirmatory Agreement. Malayan submitted feasibility studies, and the Public Estates Authority chairman recommended approval, but the contract remained pending. President Marcos approved the project only in principle. After the 1986 revolution the project was resubmitted to President Corazon Aquino, and as of May 1989 the feasibility studies remained pending approval by the Office of the President.

Wanting to proceed without further delay, the City negotiated with F.F. Cruz and Company in consortium with the Cebu Contractors Association. The Sangguniang Panlungsod authorized the contract, which was signed on April 26, 1989. The Public Estates Authority recommended approval in principle, conditioned among others on treating the earlier approval in principle granted to Malayan as abandoned and set aside. On June 27, 1989, Executive Secretary Catalino Macaraig, Junior, by authority of the President, approved the Mandaue reclamation project and expressly disapproved the 1977 contract with Malayan as entered in violation of Presidential Decree Number 3-A and for failure to implement the project within a reasonable time. Malayan then sued in the Regional Trial Court of Cebu City, and Judge Cañares enjoined the F.F. Cruz contract.

Issues

• Whether or not the Court of Appeals exceeded its jurisdiction or acted with grave abuse of discretion in issuing a writ of preliminary injunction that stopped the enforcement of the trial court's orders in the reclamation case.
• Whether or not the trial court's writ of preliminary prohibitory injunction was valid, considering the statutory prohibition on injunctions against government infrastructure projects.
• Whether or not the approval by the Office of the President of the F.F. Cruz contract and the disapproval of the Malayan contract may be reviewed by the courts.

Applicable Provisions

Presidential Decree Number 1818 prohibits courts from issuing restraining orders or preliminary injunctions in cases involving infrastructure and natural resource development projects of the government. Its first section provides:

SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation.

This provision is decisive because it strips the trial court of jurisdiction to stop the Mandaue reclamation project by injunction.

Section 2, Rule 131 of the Revised Rules on Evidence supplies the presumption of regularity relied upon for the Executive Secretary's action:

Section 2. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: x x x (m) That official duty has been regularly performed.

This presumption supports the validity of the approval signed by the Executive Secretary by authority of the President.

Section 1, Article VIII of the 1987 Constitution defines judicial power and its grave abuse of discretion clause:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law. Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

This provision is the only ground on which the Court may review the President's approval and disapproval of the reclamation contracts.

Ruling

On the first issue, the Court held that the Court of Appeals did not abuse its discretion in stopping Judge Cañares and Malayan from interfering with the prosecution of the project. The contract with F.F. Cruz and Company had been approved by the Office of the President, while the reclamation contract with Malayan was disapproved. The appellate court also found that in the balance of inconveniences the private petitioners stood to suffer grave and irreparable injury, having already reclaimed a total of 23.4710 hectares and spent 181,476,690.59 pesos as of December 31, 1990, while Malayan had done no reclamation work.

On the second issue, the Court held that Judge Cañares' writ of preliminary prohibitory injunction violated Presidential Decree Number 1818, which prohibits courts from issuing such a writ to stop any person, entity, or government official from proceeding with or continuing the execution or implementation of an infrastructure project, such as the reclamation of foreshore and submerged lands along the coast of Mandaue City up to the Cebu City boundary.

On the third issue, the Court held that the approval by the Office of the President of the contract in favor of F.F. Cruz and Company and the rejection of the contract with Malayan is not subject to review by the courts, in view of the principle of separation of powers, absent any showing that the President acted with grave abuse of discretion amounting to lack or excess of jurisdiction. The Court noted that Malayan did not implead the President, the Executive Secretary, the Deputy Executive Secretary, or the Public Estates Authority General Manager, nor charge them with grave abuse of discretion. The Court also held that although the letter was signed by the Executive Secretary by authority of the President and not by the President's own hand, the action is presumed valid and regularly performed, the Executive Secretary being an alter ego of the President whose acts in the regular course of business are presumptively the acts of the Chief Executive.

Doctrine

First, no court has jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction to stop any person, entity, or government official from proceeding with or continuing the execution or implementation of a government infrastructure project, under Presidential Decree Number 1818. Second, acts of the Executive Secretary performed by authority of the President are presumed valid and regularly performed, and are presumptively the acts of the Chief Executive. Third, the President's approval or disapproval of a government contract is an executive act that courts may not review except upon a showing of grave abuse of discretion amounting to lack or excess of jurisdiction under Section 1, Article VIII of the 1987 Constitution. A party that fails to implead and charge the approving officials with grave abuse of discretion cannot obtain judicial nullification of that approval.

Disposition

The petition for certiorari and prohibition was denied for lack of merit, with costs against Malayan, and the assailed resolution of the Court of Appeals was sustained.

Remember This

Remember the single line: courts cannot enjoin a government infrastructure project, and the President's approval of a contract is beyond judicial review absent grave abuse of discretion. Examiners use this case on the scope of Presidential Decree Number 1818, the presumption of regularity of the Executive Secretary's acts, and the separation of powers limit on reviewing executive contracts.