Government Contracts Session 6

Nava vs.
Palattao
A meticulous review of the records and the evidence establishes the guilt of the accused beyond reasonable doubt. Clearly,
the prosecution was able to prove all the elements of the crime charged. Hence, the conviction of petitioner is inevitable.
The Case
Before us is a Petition for Certiorari 1 under Rule 65 of the Rules of Court, assailing the June 2, 2003 Decision 2 and
September 29, 2003 Resolution of the Sandiganbayan in Criminal Case No. 23627. The dispositive portion of the challenged
Decision reads:
"WHEREFORE, premises considered, judgment is hereby rendered convicting accused VENANCIO NAVA Y
RODRIGUEZ of the crime of violation of the Anti-Graft and Corrupt Practices Act particularly Section 3(g) thereof, or
entering on behalf of government in any contract or transaction manifestly and grossly disadvantageous to the same whether
or not the pubic officer profited or will profit thereby. In the absence of any aggravating or mitigating circumstances,
applying the Indeterminate Sentence Law, accused is hereby sentenced to suffer the penalty of imprisonment of six (6) years,
and one (1) day as minimum to twelve (12) years and one (1) day as maximum and to suffer perpetual disqualification from
public office. Accused Nava is further ordered to pay the government the amount of P380,013.60 which it suffered by way of
damages because of the unlawful act or omission committed by the herein accused Venancio Nava.
"From the narration of facts, there hardly appears any circumstance that would suggest the existence of conspiracy among
the other accused in the commission of the crime.
"Thus in the absence of conspiracy in the commission of the crime complained of and as the herein other accused only acted
upon the orders of accused Venancio Nava, in the absence of any criminal intent on their part to violate the law, the acts of
the remaining accused are not considered corrupt practices committed in the performance of their duties as public officers
and consequently, accused AJATIL JAIRAL Y PONGCA, ROSALINDA MERKA Y GUANZON & JOSEPH VENTURA Y
ABAD are hereby considered innocent of the crime charged and are hereby acquitted." 3
The assailed Resolution dated September 29, 2003, denied reconsideration.
The Facts
The Sandiganbayan narrated the facts of this case as follows:
"The complaint involving the herein accused was initiated by the COA, Region XI, Davao City, which resulted from an audit
conducted by a team which was created by the COA Regional Office per COA Regional Assignment Order No. 91-74 dated
January 8, 1991. The objective of the team [was] to conduct an audit of the 9.36 million allotment which was released in
1990 by the DECS, Region XI to its Division Offices.
"In the Audit Report, the amount of P603,265.00 was shown to have been released to the DECS Division of Davao del Sur
for distribution to the newly nationalized high schools located within the region. Through the initiative of accused Venancio
Nava, a meeting was called among his seven (7) schools division superintendents whom he persuaded to use the money or
allotment for the purchase of Science Laboratory Tools and Devices (SLTD). In other words, instead of referring the
allotment to the one hundred fifty-five (155) heads of the nationalized high schools for the improvement of their facilities,
accused Nava succeeded in persuading his seven (7) schools division superintendents to use the allotment for the purchase of
science education facilities for the calendar year 1990.
"In the purchase of the school materials, the law provides that the same shall be done through a public bidding pursuant to
Circular No. 85-55, series of 1985. But in the instant case, evidence shows that accused Nava persuaded his seven (7)
schools division superintendents to ignore the circular as allegedly time was of the essence in making the purchases and if
not done before the calendar year 1990, the funds allotted will revert back to the general fund.
"In the hurried purchase of SLTDs, the provision on the conduct of a public bidding was not followed. Instead the purchase
was done through negotiation. Evidence shows that the items were purchased from Jovens Trading, a business establishment
with principal address at Tayug, Pangasinan; D[I]mplacable Enterprise with principal business address at 115 West Capitol
Drive, Pasig, Metro Manila and from Evelyn Miranda of 1242 Oroqueta Street, Sta. Cruz, Manila. As disclosed by the audit
report, the prices of the [SLTDs] as purchased from the above-named sellers exceeded the prevailing market price ranging
from 56% to 1,175% based on the mathematical computation done by the COA audit team. The report concluded that the
government lost P380,013.60. That the injury to the government as quantified was the result of the non-observance by the
accused of the COA rules on public bidding and DECS Order No. 100 suspending the purchases of [SLTDs]." 4
The Commission on Audit (COA) Report recommended the filing of criminal and administrative charges against the persons
liable, including petitioner, before the Office of the Ombudsman-Mindanao.
Petitioner was subsequently charged in an Information 5 filed on April 8, 1997, worded as follows:
"That on or about the period between November to December 1990, and for sometime prior or subsequent thereto, in Digos,
Davao Del Sur and/or Davao City, Philippines and within the jurisdiction of this Honorable Court, the accused Venancio R.
Nava (DECS-Region XI Director) and Ajatil Jairal (Division Superintendent, DECS, Davao del Sur), both high[-]ranking
officials and Rosalinda Merka, and Teodora Indin (Administrative Officer and Assistant Division Superintendent,
respectively of DECS-Division of Davao Del Sur), all low ranking officials, while in the discharge of their respective official
functions, committing the offense in relation to their office and with grave abuse [of] authority, conniving and confederating
with one another, did then and there willfully, unlawfully and feloniously enter, on behalf of the government, into
transactions with DImplacable Enterprise and Jovens Trading, respectively, represented by accused Antonio S. Tan and
Evelyn Miranda and Joseph Ventura for the purchase of Science Laboratory Tools and Devices (SLTD) intended for use by
the public high schools in the area amounting to [P603,265.00], Philippine currency, without the requisite public bidding and
in violation of DECS Order No. 100, Series of 1990, which transaction involved an overprice in the amount of P380,013.60
and thus, is manifestly and grossly disadvantageous to the government." 6
Special Prosecution Officer II Evelyn T. Lucero-Agcaoili recommended the dismissal of the foregoing Information on the
ground, among others, that there was no probable cause. She argued that only estimates were made to show the discrepancy
of prices instead of a comparative listing on an item to item basis. 7 The recommendation was disapproved, however, by then
Ombudsman Aniano A. Desierto.
Ruling of the Sandiganbayan
8
After due trial, only petitioner was convicted, while all the other accused were acquitted.
Petitioner was found guilty of violating Section 3(g) of the Anti-Graft and Corrupt Practices Act, or entering on behalf of the
government any contract or transaction manifestly and grossly disadvantageous to the latter, whether or not the public officer
profited or would profit thereby.
The Sandiganbayan (SBN) said that, in the purchase of the Science Laboratory Tools and Devices (SLTDs), petitioner had
not conducted a public bidding in accordance with COA Circular No. 85-55A. As a result, the prices of the SLTDs, as
purchased, exceeded the prevailing market price from 56 percent to 1,175 percent, based on the mathematical computations
of the COA team. 9 In his defense, petitioner had argued that the said COA Circular was merely directory, not mandatory.
Further, the purchases in question had been done in the interest of public service. 10
The Sandiganbayan did not give credence to the foregoing defenses raised by petitioner. On the contrary, it found the
evidence adduced by petitioners co-accused, Superintendent Ajatil Jairal, to be "enlightening," manifesting an intricate web
of deceit spun by petitioner and involving all the other superintendents in the process. 11
The graft court did not accept the claim of petitioner that he signed the checks only after the other signatories had already
signed them. The evidence showed that blank Philippine National Bank (PNB) checks had been received by Nila E. Chavez,
a clerk in the regional office, for petitioners signature. The
Sandiganbayan opined that the evidence amply supported Jairals testimony that the questioned transactions had emanated
from the regional office, as in fact, all the documents pertinent to the transaction had already been prepared and signed by
petitioner when the meeting with the superintendents was called sometime in August 1990. 12
In that meeting, the superintendents were given prepared documents like the Purchase Orders and vouchers, together with
the justification. 13 This circumstance prompted Jairal to conduct his own canvass. The Sandiganbayan held that this act was
suggestive of the good faith of Jairal, thereby negating any claim of conspiracy with the other co-accused and, in particular,
petitioner.
In its assailed Resolution, the SBN denied petitioners Motion for Reconsideration. It held that the series of acts culminating
in the questioned transactions constituted violations of Department of Education, Culture and Sports (DECS) Order No. 100;
and COA Circular No. 85-55A. Those acts, ruled the SBN, sufficiently established that the contract or transaction entered
into was manifestly or grossly disadvantageous to the government.
Hence, this Petition. 14
The Issues
Petitioner raises the following issues for our consideration:
"I. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
upholding the findings of the Special Audit Team that irregularly conducted the audit beyond the authorized period and
which team falsified the Special Audit Report.
"II. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
upholding the findings in the special audit report where the Special Audit Team egregiously failed to comply with the
minimum standards set by the Supreme Court and adopted by the Commission on Audit in violation of petitioners right to
due process, and which report suppressed evidence favorable to the petitioner.
"III. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
upholding the findings in the Special Audit Report considering that none of the allegedly overpriced items were canvassed or
purchased by the Special Audit Team such that there is no competent evidence from which to determine that there was an
overprice and that the transaction was manifestly and grossly disadvantageous to the government.
"IV. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
finding that there was an overprice where none of the prices of the questioned items exceeded the amount set by the
Department of Budget and Management.
"V. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
selectively considering the findings in the decision in Administrative Case No. XI-91-088 and failing to consider the findings
thereon that petitioner was justified in undertaking a negotiated purchase and that there was no overpricing.
"VI. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
selectively considering the findings of XI-91-088 and failing to consider the findings thereon that petitioner was justified in
undertaking a negotiated purchase, there was no overpricing, and that the purchases did not violate DECS Order No. 100.
"VII. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
failing to absolve the petitioner where conspiracy was not proven and the suppliers who benefited from the alleged
overpricing were acquitted.
"VIII. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
admitting in evidence and giving probative value to Exhibit 8 the existence and contents of which are fictitious.
"IX. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
giving credence to the self-serving and perjurious testimony of co-accused Ajatil Jairal that the questioned transactions
emanated from the regional office [in spite] of the documentary evidence and the testimony of the accused supplier which
prove that the transaction emanated from the division office of Digos headed by co-accused Ajatil Jairal.
"X. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
finding that the petitioner entered into a transaction that was manifestly and grossly disadvantageous to the government
where the evidence clearly established that the questioned transactions were entered into by the division office of Digos
through co-accused Ajatil Jairal.
"XI. Whether the public respondent committed grave abuse of discretion amounting to a lack of or excess of jurisdiction in
convicting the petitioner in the absence of proof beyond reasonable doubt." 15
All these issues basically refer to the question of whether the Sandiganbayan committed reversible errors (not grave abuse of
discretion) in finding petitioner guilty beyond reasonable doubt of violation of Section 3(g), Republic Act No. 3019.
The Courts Ruling
The Petition has no merit.
Procedural Issue:
Propriety of Certiorari
At the outset, it must be stressed that to contest the Sandiganbayans Decision and Resolution on June 2, 2003 and
September 29, 2003, respectively, petitioner should have filed a petition for review on certiorari under Rule 45, not the
present Petition for Certiorari under Rule 65. Section 7 of Presidential Decree No. 1606, 16 as amended by Republic Act No.
8249, 17 provides that "[d]ecisions and final orders of the Sandiganbayan shall be appealable to the Supreme Court by
petition for review on certiorari raising pure questions of law in accordance with Rule 45 of the Rules of Court." Section 1 of
Rule 45 of the Rules of Court likewise provides that "[a] party desiring to appeal by certiorari from a judgment or final order
or resolution of the x x x Sandiganbayan x x x whenever authorized by law, may file with the Supreme Court a verified
petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth."
Basic is the principle that when Rule 45 is available, recourse under Rule 65 cannot be allowed either as an add-on or as a
substitute for appeal. 18 The special civil action for certiorari is not and cannot be a substitute for an appeal, when the latter
remedy is available. 19
This Court has consistently ruled that a petition for certiorari under Rule 65 lies only when there is no appeal or any other
plain, speedy and adequate remedy in the ordinary course of law. 20 A remedy is considered plain, speedy and adequate if it
will promptly relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or agency or as
in this case, the Sandiganbayan. 21 Since the assailed Decision and Resolution were dispositions on the merits, and the
Sandiganbayan had no remaining issue to resolve, an appeal would have been the plain, speedy and adequate remedy for
petitioner.
To be sure, the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. 22 For this
procedural lapse, the Petition should have been dismissed outright.
Nonetheless, inasmuch as it was filed within the 15-day period provided under Rule 45, the Court treated it as a petition for
review (not certiorari) under Rule 45 in order to accord substantial justice to the parties. Thus, it was given due course and
the Court required the parties to file their Memoranda.
Main Issue:
Sufficiency of Evidence
Petitioner argues that the Sandiganbayan erred in convicting him, because the pieces of evidence to support the charges were
not convincing. Specifically, he submits the following detailed argumentation:
"1. the Special Audit Report was fraudulent, incomplete, irregular, inaccurate, illicit and suppressed evidence in favor of the
Petitioner;
"2. there was no competent evidence to determine the overprice as none of the samples secured by the audit team from the
Division of Davao del Sur were canvassed or purchased by the audit team;
"3. the allegedly overpriced items did not exceed the amount set by the Department of Budget and Management;
"4. the decision in an administrative investigation were selectively lifted out of context;
"5. the administrative findings that Petitioner was justified in undertaking a negotiated purchase, that there was no
overpricing, and that the purchases did not violate DECS Order No. 100 were disregarded;
"6. Exhibit 8, the contents of which are fictitious, was admitted in evidence and given probative value;
"7. The suppliers who benefited from the transactions were acquitted, along with the other accused who directly participated
in the questioned transactions; and
"8. The self-serving and perjury-ridden statements of co-accused Jairal were given credence despite documentary and
testimonial evidence to the contrary." 23
Petitioner further avers that the findings of fact in the Decision dated October 21, 1996 in DECS Administrative Case No.
XI-91-088 24 denied any overpricing and justified the negotiated purchases in lieu of a public bidding. 25 Since there was no
overpricing and since he was justified in undertaking the negotiated purchase, petitioner submits that he cannot be convicted
of violating Section 3(g) of Republic Act No. 3019.
Validity of Audit
The principal evidence presented during trial was the COA Special Audit Report (COA Report). The COA is the agency
specifically given the power, authority and duty to examine, audit and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of fund and property owned by or pertaining to the government. 26 It has the exclusive
authority to define the scope of its audit and examination and to establish the required techniques and methods. 27
Thus, COAs findings are accorded not only respect but also finality, when they are not tainted with grave abuse of
discretion. 28 Only upon a clear showing of grave abuse of discretion may the courts set aside decisions of government
agencies entrusted with the regulation of activities coming under their special technical knowledge and training. 29 In this
case, the SBN correctly accorded credence to the COA Report. As will be shown later, the Report can withstand legal
scrutiny.
Initially, petitioner faults the audit team for conducting the investigation beyond the twenty-one day period stated in the COA
Regional Office Assignment Order No. 91-174 dated January 8, 1991. But this delay by itself did not destroy the credibility
of the Report. Neither was it sufficient to constitute fraud or indicate bad faith on the part of the audit team. Indeed, in the
conduct of an audit, the length of time the actual examination occurs is dependent upon the documents involved. If the
documents are voluminous, then it necessarily follows that more time would be needed. 30 What is important is that the
findings of the audit should be sufficiently supported by evidence.
Petitioner also imputes fraud to the audit team for making "it appear that the items released by the Division Office of Davao
Del Sur on 21 February 1991 were compared with and became the basis for the purchase of exactly the same items on 20
February 1991." 31
The discrepancy regarding the date when the samples were taken and the date of the purchase of the same items for
comparison was not very material. The discrepancy per se did not constitute fraud in the absence of ill motive. We agree with
respondents in their claim of clerical inadvertence. We accept their explanation that the wrong date was written by the
supplier concerned when the items were bought for comparison. Anyway, the logical sequence of events was clearly
indicated in the COA Report:
"1.5.1. Obtained samples of each laboratory tools and devices purchased by the Division of Davao del Sur, Memorandum
Receipts covering all the samples were issued by the agency to the audit team and are marked as Exhibits 1.2 and 3 of this
Report."
"1.5.2. Bought and presented these samples to reputable business establishments in Davao City like Mercury Drug Store,
Berovan Marketing Incorporated and [A]llied Medical Equipment and Supply Corporation (AMESCO) where these items
are also available, for price verification.
"1.5.3. Available items which were exactly the same as the samples presented were purchased from AMESCO and Berovan
Marketing Incorporated, the business establishments which quoted the lowest prices. Official receipts were issued by the
AMESCO and Berovan Marketing Incorporated which are hereto marked as Exhibits 4,5,6 and 7 respectively." 32
The COA team then tabulated the results as follows: 33
Recanvassed
% of Over- Quantity Total Amount of
Item Purchased Unit Cost Price + 10% Allow. Difference pricing Purchased Overpricing
Flask Brush made of Nylon P112.20 P8.80 P103.40 1,175% 400 P41,360.00
Test Tube Glass Pyrex (18x50

mm) 22.36 14.30 8.06 56% 350 2,821.00
Graduated Cylinder Pyrex

(100ml) 713.00 159.50 553.50 347% 324 179,334.00
Glass Spirit Burner (alcohol
lamp) 163.50 38.50 125.00 325% 144 18,000.00
Spring Balance (12.5kg)Germany 551.00 93.50 457.50 489% 102 46,665.00
Iron Wire Gauge 16.20 9.90 6.30 64% 47 296.10
Bunsen Burner 701.00 90.75 610.25 672% 150 91,537.50
Total P380,013.60
What is glaring is the discrepancy in prices. The tabulated figures are supported by Exhibits "E-1," "E-2," "E-3," and "E-4,"
the Official Receipts evidencing the equipment purchased by the audit team for purposes of comparison with those procured
by petitioner. 34 The authenticity of these Exhibits is not disputed by petitioner. As the SBN stated in its Decision, the fact of
overpricing -- as reflected in the aforementioned exhibits -- was testified to or identified by Laura S. Soriano, team leader of
the audit team. 35 It is hornbook doctrine that the findings of the trial court are accorded great weight, since it was able to
observe the demeanor of witnesses firsthand and up close. 36 In the absence of contrary evidence, these findings are
conclusive on this Court.
It was therefore incumbent on petitioner to prove that the audit team or any of its members thereof was so motivated by ill
feelings against him that it came up with a fraudulent report. Since he was not able to show any evidence to this end, his
contention as to the irregularity of the audit due to the discrepancy of the dates involved must necessarily fail.
An audit is conducted to determine whether the amounts allotted for certain expenditures were spent wisely, in keeping with
official guidelines and regulations. It is not a witch hunt to terrorize accountable public officials. The presumption is always
that official duty has been regularly performed 37 -- both on the part of those involved with the expense allotment being
audited and on the part of the audit team -- unless there is evidence to the contrary.
Due Process
Petitioner likewise invokes Arriola v. Commission on Audit 38 to support his claim that his right to due process was violated.
In that case, this Court ruled that the disallowance made by the COA was not sufficiently supported by evidence, as it was
based on undocumented claims. Moreover, in Arriola, the documents that were used as basis of the COA Decision were not
shown to petitioners, despite their repeated demands to see them. They were denied access to the actual canvass sheets or
price quotations from accredited suppliers.
As the present petitioner pointed out in his Memorandum, the foregoing jurisprudence became the basis for the COA to issue
Memorandum Order No. 97-012 dated March 31, 1997, which states:
"3.2 To firm up the findings to a reliable degree of certainty, initial findings of overpricing based on market price indicators
mentioned in pa. 2.1 above have to be supported with canvass sheet and/or price quotations indicating:
a) the identities of the suppliers or sellers;
b) the availability of stock sufficient in quantity to meet the requirements of the procuring agency;
c) the specifications of the items which should match those involved in the finding of overpricing;
d) the purchase/contract terms and conditions which should be the same as those of the questioned transaction"
Petitioners reliance on Arriola is misplaced. First, that Decision, more so, the COA Memorandum Order that was issued
pursuant to the former, was promulgated after the period when the audit in the present case was conducted. Neither Arriola
nor the COA Memorandum Order can be given any retroactive effect.
Second and more important, the circumstances in Arriola are different from those in the present case. In the earlier case, the
COA merely referred to a cost comparison made by the engineer of COA-Technical Services Office (TSO), based on unit
costs furnished by the Price Monitoring Division of the COA-TSO. The COA even refused to show the canvass sheets to the
petitioners, explaining that the source document was confidential.
In the present case, the audit team examined several documents before they arrived at their conclusion that the subject
transactions were grossly disadvantageous to the government. These documents were included in the Formal Offer of
Evidence submitted to the Sandiganbayan. 39 Petitioner was likewise presented an opportunity to controvert the findings of
the audit team during the exit conference held at the end of the audit, but he failed to do so. 40
Further, the fact that only three canvass sheets/price quotations were presented by the audit team does not bolster petitioners
claim that his right to due process was violated. To be sure, there is no rule stating that all price canvass sheets must be
presented. It is enough that those that are made the basis of comparison be submitted for scrutiny to the parties being audited.
Indubitably, these documents were properly submitted and testified to by the principal prosecution witness, Laura Soriano.
Moreover, petitioner had ample opportunity to controvert them.
Public Bidding
Petitioner oscillates between denying that he was responsible for the procurement of the questioned SLTDs, on the one hand;
and, on the other, stating that the negotiated purchase was justifiable under the circumstances.
On his disavowal of responsibility for the questioned procurement, he claims that the transactions emanated from the
Division Office of Digos headed by Jairal. 41 However, in the administrative case 42 filed against petitioner before the DECS,
it was established that he "gave the go signal" 43 that prompted the division superintendents to procure the SLTDs through
negotiated purchase. This fact is not disputed by petitioner, who quotes the same DECS Decision in stating that his "acts
were justifiable under the circumstances then obtaining at that time and for reasons of efficient and prompt distribution of the
SLTDs to the high schools." 44
In justifying the negotiated purchase without public bidding, petitioner claims that "any delay in the enrichment of the minds
of the public high school students of Davao del Sur is detrimental and antithetical to public service." 45 Although this
reasoning is quite laudable, there was nothing presented to substantiate it.
Executive Order No. 301 states the general rule that no contract for public services or for furnishing supplies, materials and
equipment to the government or any of its branches, agencies or instrumentalities may be renewed or entered into without
public bidding. The rule however, is not without exceptions. Specifically, negotiated contracts may be entered into under any
of the following circumstances:
"a. Whenever the supplies are urgently needed to meet an emergency which may involve the loss of, or danger to, life and/or
property;
"b. Whenever the supplies are to be used in connection with a project or activity which cannot be delayed without causing
detriment to the public service;
"c. Whenever the materials are sold by an exclusive distributor or manufacturer who does not have subdealers selling at
lower prices and for which no suitable substitute can be obtained elsewhere at more advantageous terms to the government;
"d. Whenever the supplies under procurement have been unsuccessfully placed on bid for at least two consecutive times,
either due to lack of bidders or the offers received in each instance were exorbitant or non-conforming to specifications;
"e. In cases where it is apparent that the requisition of the needed supplies through negotiated purchase is most advantageous
to the government to be determined by the Department Head concerned;
"f. Whenever the purchase is made from an agency of the government." 46
National Center for Mental Health v. Commission on Audit 47 upheld the validity of the negotiated contracts for the
renovation and the improvement of the National Center for Mental Health. In that case, petitioners were able to show that the
long overdue need to renovate the Center "made it compelling to fast track what had been felt to be essential in providing
due and proper treatment and care for the centers patients." 48
This justification was likewise accepted in Baylon v. Ombudsman 49 in which we recognized that the purchases were made in
response to an emergency brought about by the shortage in the blood supply available to the public. The shortage was a
matter recognized and addressed by then Secretary of Health Juan M. Flavier, who attested that "he directed the NKTI
[National Kidney and Transplant Institute] to do something about the situation and immediately fast-track the
implementation of the Voluntary Blood Donation Program of the government in order to prevent further deaths owing to the
lack of blood." 50
Unfortunately for petitioner, there was no showing of any immediate and compelling justification for dispensing with the
requirement of public bidding. We cannot accept his unsubstantiated reasoning that a public bidding would unnecessarily
delay the purchase of the SLTDs. Not only would he have to prove that indeed there would be a delay but, more important,
he would have to show how a public bidding would be detrimental and antithetical to public service.
As the COA Report aptly states, the law on public bidding is not an empty formality. It aims to secure the lowest possible
price and obtain the best bargain for the government. It is based on the principle that under ordinary circumstances, fair
competition in the market tends to lower prices and eliminate favoritism. 51
In this case, the DECS Division Office of Davao del Sur failed to conduct public bidding on the subject transactions. The
procurement of laboratory tools and devices was consummated with only the following documents to compensate for the
absence of a public bidding:
"1.13.a Price lists furnished by the Supply Coordination Office
1.13.b. Price lists furnished by the Procurement Services of the Department of Budget and Management
1.13.c. Price lists of Esteem Enterprises" 52
The COA Report states that the Division Office merely relied on the above documents as basis for concluding that the prices
offered by DImplacable Enterprises and Jovens Trading were reasonable. But as found by the COA, reliance on the
foregoing supporting documents was completely without merit on the following grounds:
"a. The Supply Coordination Office was already dissolved or abolished at the time when the transactions were consummated,
thus, it is illogical for the management to consider the price lists furnished by the Supply Coordination Office.
"b. The indorsement letter made by the Procurement Services of the Department of Budget and Management containing the
price lists specifically mentions Griffin and George brands, made in England. However, the management did not procure
these brands of [SLTDs].
"c. The price lists furnished by the Esteem Enterprises does not deserve the scantest consideration, since there is no law or
regulation specifically mentioning that the price lists of the Esteem Enterprises will be used as basis for buying [SLTDs]." 53
Granting arguendo that petitioner did not have a hand in the procurement and that the transactions emanated from the
Division Office of Davao del Sur, we still find him liable as the final approving authority. In fact, Exhibit "B-2" -- Purchase
Order No. 90-024, amounting to P231,012 and dated December 17, 1990 -- was recommended by Jairal and approved by
petitioner. 54 This exhibit was part of the evidence adduced in the Sandiganbayan to prove that the purchase of the SLTDs
was consummated and duly paid by the DECS without any proof of public bidding.
Although this Court has previously ruled 55 that all heads of offices have to rely to a reasonable extent on their subordinates
and on the good faith of those who prepare bids, purchase supplies or enter into negotiations, it is not unreasonable to expect
petitioner to exercise the necessary diligence in making sure at the very least, that the proper formalities in the questioned
transaction were observed -- that a public bidding was conducted. This step does not entail delving into intricate details of
product quality, complete delivery or fair and accurate pricing.
Unlike other minute requirements in government procurement, compliance or non-compliance with the rules on public
bidding is readily apparent; and the approving authority can easily call the attention of the subordinates concerned. To rule
otherwise would be to render meaningless the accountability of high-ranking public officials and to reduce their approving
authority to nothing more than a mere rubber stamp. The process of approval is not a ministerial duty of approving
authorities to sign every document that comes across their desks, and then point
to their subordinates as the parties responsible if something goes awry.
Suspension of Purchases
Obviously working against petitioner is DECS Order No. 100 dated September 3, 1990 which states thus:
"In view of the Governments call for economy measures coupled with the deficiency in allotments intended for the payment
of salary standardization, retirement benefits, bonus and other priority items, the procurement of reference and
supplementary materials, tools and devices equipment, furniture, including land acquisition and land improvement shall be
suspended for CY 1990. However, the following items shall be exempted from the said suspension:
a) textbooks published by the Instructional Materials Corporation and its commercial edition;
b) elementary school desks and tablet arm chairs[.]"
As the COA Report succinctly states, the Administrative Order is explicit in its provisions that tools and devices were among
the items whose procurement was suspended by the DECS for the year 1990.
Petitioner claims that in the administrative case against him, there was no mention of a violation of DECS Order No. 100. 56
He alleges that the purchases of SLTDs by the division superintendents were entered into and perfected on July 1, 1990; that
is, more than two (2) months before the issuance of DECS Order No. 100. He also alleged that the Sub-Allotment Advice
(SAA) to the DECS Regional Office No. XI in the amount of P9.36M -- out of which P603,265.00 was used for the
procurement of the questioned SLTDs -- had been released by the DECS Central Office in August 1990, a month before the
issuance of DECS Order No. 100.
The Court notes that these arguments are mere assertions bereft of any proof. There was no evidence presented to prove that
the SAA was issued prior to the effectivity of DECS Order No. 100. On the other hand, the COA Report states that the DECS
Division of Davao del Sur received the following Letters of Advice of Allotments (LAA): 57
"LAA NO. AMOUNT DATE OF LAA
DO CO471-774-90 P141,956.00 October 24, 1990
DO-CO471-797-90 P161,309.00 November 16, 1990
DO-CO471-1007-90 P300,000.00 December 14, 1990"
The foregoing LAAs were attached as annexes 58 to the COA Report and were presented during trial in the Sandiganbayan. 59
Also, Schools Division Superintendent Jairal had sent a letter to petitioner, requesting favorable consideration of a
forthcoming release of funding for the different barangay and municipal high schools. The letter was dated October 16, 1990,
60
and was made well within the effectivity of the DECS Order. In that letter, Jairal mentioned the receipt by his office of
DECS Order No. 100, albeit wrongly interpreting it as suspending only the purchases of reference books, supplementary
readers, and so on, but allegedly silent on the purchase of laboratory supplies and materials. 61
Finally, the SLTDs were purchased within the covered period of DECS Order No. 100, as evidenced by the following
relevant
documents adduced by the COA audit team, among others:
1) Disbursement Voucher dated November 27, 1990 for the payment of various laboratory supplies and materials by DECS,
Davao del Sur in the amount of P303,29.40 62
2) Official Receipt No. 455 dated January 7, 1991 amounting to P68,424.00 issued by Jovens Trading 63
3) Report of Inspection dated November 26, 1990 signed by Jacinta Villareal and Felicisimo Canoy 64
4) Sales Invoice No. 044 dated November 26, 1990 issued by Jovens Trading in favor of DECS amounting to P303,259.40 65
5) Certificate of Acceptance dated November 27, 1990 signed by Felicismo Canoy 66
6) Purchase Order No. 90-021 in favor of Jovens Trading dated November 26, 1990 recommended for approval by Ajatil
Jairal 67
7) Official Receipt No. 92356 dated January 7, 1991 issued by DImplacable Enterprises amounting to P231,012.00 68
8) Purchase Order No. 90-024 dated December 17, 1990 recommended for approval by Ajatil Jairal and approved Director
Venancio Nava amounting to P231,012.00." 69
The confluence of the foregoing circumstances indubitably establishes that petitioner indeed wantonly disregarded
regulations. Additionally, DECS Order No. 100 negates his claim that the negotiated transaction -- done instead of a public
bidding -- was justified. If that Order suspended the acquisition of tools and devices, then there was all the more reason for
making purchases by public bidding. Since the buying of tools and devices was specifically suspended, petitioner cannot
argue that the purchases were done in the interest of public service.
Proof of Guilt
To sustain a conviction under Section 3(g) of Republic Act No. 3019, it must be clearly proven that 1) the accused is a public
officer; 2) the public officer entered into a contract or transaction on behalf of the government; and 3) the contract or
transaction was grossly and manifestly disadvantageous to the government. 70
From the foregoing, it is clear that the Sandiganbayan did not err in ruling that the evidence presented warranted a verdict of
conviction. Petitioner is a public officer, who approved the transactions on behalf of the government, which thereby suffered
a substantial loss. The discrepancy between the prices of the SLTDs purchased by the DECS and the samples purchased by
the COA audit team clearly established such undue injury. Indeed, the discrepancy was grossly and manifestly
disadvantageous to the government.
We must emphasize however, that the lack of a public bidding and the violation of an administrative order do not by
themselves satisfy the third element of Republic Act No. 3019, Section 3(g); namely, that the contract or transaction entered
into was manifestly and grossly disadvantageous to the government, as seems to be stated in the Resolution of the
Sandiganbayan denying the Motion for Reconsideration. 71 Lack of public bidding alone does not result in a manifest and
gross disadvantage. Indeed, the absence of a public bidding may mean that the government was not able to secure the lowest
bargain in its favor and may open the door to graft and corruption. Nevertheless, the law requires that the disadvantage must
be manifest and gross. Penal laws are strictly construed against the government. 72
If the accused is to be sent to jail, it must be because there is solid evidence to pin that person down, not because of the
omission of a procedural matter alone. Indeed, all the elements of a violation of Section 3(g) of Republic Act No. 3019
should be established to prove the culpability of the accused. In this case, there is a clear showing that all the elements of the
offense are present. Thus, there can be no other conclusion other than conviction.
We note, however, that petitioner was sentenced to suffer the penalty of six (6) years and one (1) day as minimum to twelve
(12) years and one (1) day as maximum. Under Section 9 of Republic Act 3019, petitioner should be punished with
imprisonment of not less than six (6) years and one (1) month nor more than fifteen years. Thus, we adjust the minimum
penalty imposed on petitioner in accordance with the law.
WHEREFORE, the Petition is DENIED. The assailed Decision and Resolution are AFFIRMED, with the MODIFICATION
that the minimum sentence imposed shall be six (6) years and one (1) month, not six (6) years and one (1) day. Costs against
petitioner.
SO ORDERED.
Caunan vs. People
At bar are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court which assail the Decision 1
dated August 30, 2007 and Resolution2 dated March 10, 2008 of the Sandiganbayan in Criminal Case Nos. 27944, 27946,
27952, 27953, & 27954, finding petitioners Joey P. Marquez (Marquez) and Ofelia C. Caunan (Caunan) guilty of violation of
Section 3(g) of Republic Act (R.A.) No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act.
Marquez and Caunan, along with four (4) other local government officials of Paraaque City 3 and private individual Antonio
Razo (Razo), were charged under five (5) Informations, to wit:
The Information in Criminal Case No. 27944 states:
That on January 11, 1996 or thereabout, in Paraaque City, Philippines, and within the jurisdiction of this Honorable Court,
accused Public Officers JOEY P. MARQUEZ, a high ranking public official, being the City Mayor of Paraaque City and
Chairman, Committee on Awards, together with the members of the aforesaid Committee, namely: SILVESTRE DE LEON,
being then the City Treasurer, MARILOU TANAEL, the City Accountant (SG 26), FLOCERFIDA M. BABIDA, the City
Budget Officer (SG 26), OFELIA C. CAUNAN, the OIC General Services Office (SG 26) and AILYN ROMEA, the Head
Staff, Office of the Mayor (SG 26), acting as such and committing the offense in relation to their official duties and taking
advantage of their official positions, conspiring, confederating and mutually helping one another and with the accused
private individual ANTONIO RAZO, the owner and proprietor of ZARO Trading, a business entity registered with the
Bureau of Domestic Trade and Industry, with evident bad faith and manifest partiality (or at the very least, with gross
inexcusable negligence), did then and there willfully, unlawfully and criminally enter into manifestly and grossly
disadvantageous transactions, through personal canvass, with said ZARO Trading, for the purchase of 5,998 pieces of "walis
ting-ting" at P25 per piece as per Disbursement Voucher No. 101-96-12-8629 in the total amount of ONE HUNDRED
FORTY-NINE THOUSAND NINE HUNDRED FIFTY PESOS (P149,950.00), without complying with the Commission on
Audit (COA) Rules and Regulations and other requirements on Procurement and Public Bidding, and which transactions
were clearly grossly overpriced as the actual cost per piece of the "walis ting-ting" was only P11.00 as found by the
Commission on Audit (COA) in its Decision No. 2003-079 dated May 13, 2003 with a difference, therefore, of P14.00 per
piece or a total overpriced amount of EIGHTY THREE THOUSAND NINE HUNDRED SEVENTY TWO PESOS
(P83,972.00), thus, causing damage and prejudice to the government in the aforesaid sum.
That on June 30, 1997 or thereabout, in Paraaque City, Philippines and within the jurisdiction of this Honorable Court,
Chairman, Committee on Awards, together with members of the aforesaid committee, namely: SILVESTRE DE LEON,
Budget officer (SG 26), OFELIA C. CAUNAN, the OIC General Services Office (SG 26) and AILYN ROMEA, the Head
advantage of their official positions, conspiring, confederating and mutually helping one another and with accused private
individual ANTONIO RAZO, the owner and proprietor of ZAR[O] Trading, a business entity registered with the Bureau of
Domestic Trade and Industry, with evident bad faith and manifest partiality (or at the very least, with gross inexcusable
negligence), did then and there willfully, unlawfully and criminally enter into manifestly and grossly disadvantageous
transactions, through personal canvass, with ZAR[O] Trading for the purchase of 23,334 pieces of "walis ting-ting" at
P15.00 per piece as per Disbursement Voucher No. 101-98-02-447 in the total amount of THREE HUNDRED FIFTY
THOUSAND TEN PESOS (P350,010.00), without complying with the Commission on Audit (COA) Rules and Regulations
and other requirements on Procurement and Public Bidding, and which transactions were clearly grossly overpriced as the
actual cost per piece of the "walis ting-ting" was only P11.00 as found by the Commission on Audit (COA) in its Decision
No. 2003-079 dated May 13, 2003 with a difference, therefore, of P4.00 per piece or a total overpriced amount of NINETY
THREE THOUSAND THREE HUNDRED THIRTY SIX PESOS (P93,336.00), thus causing damage and prejudice to the
government in the aforesaid sum.
That [in] September 1997, or thereabout, in Paraaque City, Philippines and within the jurisdiction of this Honorable Court,
Chairman, Committee on Awards, together with members of the aforesaid committee, namely: SILVESTRE DE LEON,
Budget officer (SG 26), OFELIA C. CAUNAN, the OIC General Services Office (SG 26) and AILYN ROMEA, the Head
advantage of their official positions, conspiring, confederating and mutually helping one another and with accused private
individual ANTONIO RAZO, the owner and proprietor of ZAR[O] Trading, a business entity registered with the Bureau of
Domestic Trade and Industry, with evident bad faith and manifest partiality (or at the very least, with gross inexcusable
negligence), did then and there willfully, unlawfully and criminally enter into manifestly and grossly disadvantageous
transactions, through personal canvass, with ZAR[O] Trading for the purchase of 8,000 pieces of "walis ting-ting" at P15.00
per piece as per Disbursement Voucher No. 101-98-02-561 in the total amount of ONE HUNDRED TWENTY THOUSAND
PESOS (P120,000.00), without complying with the Commission on Audit (COA) Rules and Regulations and other
requirements on Procurement and Public Bidding, and which transactions were clearly grossly overpriced as the actual cost
per piece of the "walis ting-ting" was only P11.00 as found by the Commission on Audit (COA) in its Decision No. 2003-
079 dated May 13, 2003 with a difference, therefore, of P4.00 per piece or a total overpriced amount of THIRTY TWO
THOUSAND PESOS (P32,000.00), thus causing damage and prejudice to the government in the aforesaid sum.
That during the period from February 11, 1997 to February 20, 1997, or thereabout, in Paraaque City, Philippines and
within the jurisdiction of this Honorable Court, accused Public Officers JOEY P. MARQUEZ, a high ranking public official,
being the City Mayor of Paraaque City and Chairman, Committee on Awards, together with members of the aforesaid
committee, namely: SILVESTRE DE LEON, being then the City Treasurer, MARILOU TANAEL, the City Accountant (SG
26), FLOCERFIDA M. BABIDA, the City Budget officer (SG 26), OFELIA C. CAUNAN, the OIC General Services office
(SG 26) and AILYN ROMEA, the Head Staff, Office of the Mayor (SG 26), acting as such and committing the offense in
relation to their official duties and taking advance of their official positions, conspiring, confederating and mutually helping
one another and with accused private individual ANTONIO RAZO, the owner and proprietor of ZAR[O] Trading, a business
entity registered with the Bureau of Domestic Trade and Industry, with evident bad faith and manifest partiality (or at the
very least, with gross inexcusable negligence), did then and there willfully, unlawfully and criminally enter into manifestly
and grossly disadvantageous transactions, through personal canvass, with ZAR[O] Trading for the purchase of 10,100 pieces
of "walis ting-ting" on several occasions at P25.00 per piece without complying with the Commission on Audit (COA) Rules
and Regulations and other requirements on procurement and Public Bidding and which purchases are hereunder enumerated
as follows:
Date of Transaction Voucher No. Amount Quantity
February 20, 1997 101-97-04-1755 P 3,000.00 120 pcs.
February 12, 1997 101-97-04-1756 P100,000.00 4,000 pcs.
February 11, 1997 101-97-04-1759 P149,500.00 5,980 pcs.
in the total amount of TWO HUNDRED FIFTY TWO THOUSAND PESOS (P252,000.00), and which transactions were
clearly overpriced as the actual cost per piece of the "walis ting-ting" was only P11.00 as found by the Commission on Audit
(COA) in its Decision No. 2003-079 dated May 13, 2003 with a difference, therefore, of P14.00 per piece or a total
overpriced amount of ONE HUNDRED FORTY ONE THOUSAND FOUR HUNDRED PESOS (P141,400.00), thus,
causing damage and prejudice to the government in the aforesaid sum.
That during the period from October 15, 1996 to October 18, 1996 or thereabout, in Paraaque City, Philippines and within
the jurisdiction of this Honorable Court, accused Public Officers JOEY P. MARQUEZ, a high ranking public official, being
the City Mayor of Paraaque City and Chairman, Committee on Awards, together with members of the aforesaid committee,
namely: SILVESTRE DE LEON, being then the City Treasurer, MARILOU TANAEL, the City Accountant (SG 26),
FLOCERFIDA M. BABIDA, the City Budget officer (SG 26), OFELIA C. CAUNAN, the OIC General Services Office (SG
26) and AILYN ROMEA, the Head Staff, Office of the Mayor (SG 26), acting as such and committing the offense in relation
to their official duties and taking advantage of their official positions, conspiring, confederating and mutually helping one
another and with accused private individual ANTONIO RAZO, the owner and proprietor of ZAR[O] Trading, a business
entity registered with the Bureau of Domestic Trade and Industry, with evident bad faith and manifest partiality (or at the
very least, with gross inexcusable negligence), did then and there willfully, unlawfully and criminally enter into manifestly
and grossly disadvantageous transactions, through personal canvass, with ZAR[O] Trading for the purchase of 8,000 pieces
of "walis ting-ting" on several occasions at P25.00 per piece without complying with the Commission on Audit (COA) Rules
and Regulations and other requirements on procurement and Public Bidding and which purchases are hereunder enumerated
as follows:
Date of Transaction Voucher Number Amount Quantity
October 15, 1996 101-96-11-7604 P 100,000.00 4,000 pcs.
October 18, 1996 101-96-11-7605 P 100,000.00 4,000 pcs.
in the total amount of TWO HUNDRED THOUSAND PESOS (P200,000.00), and which transactions were clearly grossly
overpriced as the actual cost per piece of the "walis ting-ting" was only P11.00 as found by the Commission on Audit (COA)
in its Decision No. 2003-079 dated May 13, 2003 with a difference, therefore, of P14.00 per piece or a total overpriced
amount of ONE HUNDRED TWELVE THOUSAND PESOS (P112,000.00), thus, causing damage and prejudice to the
government in the aforesaid sum. 4
The five (5) Informations were filed based on the findings of the Commission on Audit (COA) Special Audit Team that there
was overpricing in certain purchase transactions of Paraaque City. In March 1999, a Special Audit Team composed of
Fatima Bermudez (Bermudez), Carolina Supsup, Gerry Estrada, and Yolando Atienza, by virtue of Local Government Audit
Office Assignment Order No. 99-002, audited selected transactions of Paraaque City for the calendar years 1996 to 1998,
including the walis tingting purchases.
In connection with the walis tingting purchases audit, the audit team gathered the following evidence:
1. Documents furnished by the Office of the City Mayor of Paraaque City upon request of the audit team;
2. Sample walis tingting with handle likewise submitted by the Office of the City Mayor of Paraaque City;
3. Samples of walis tingting without handle actually utilized by the street sweepers upon ocular inspection of the
audit team;
4. Survey forms accomplished by the street sweepers containing questions on the walis tingting;
5. Evaluation by the Technical Services Department 5 of the reasonableness of the walis tingting procurement
compared to current prices thereof;
6. A separate canvass by the audit team on the prices of the walis tingting, including purchases thereof at various
merchandising stores;6 and
7. Documents on the conduct and process of procurement of walis tingting by the neighboring city of Las Pias.
Parenthetically, to ascertain the prevailing price of walis tingting for the years 1996 to 1998, the audit team made a canvass
of the purchase prices of the different merchandise dealers of Paraaque City. All, however, were reluctant to provide the
team with signed quotations of purchase prices for walis tingting. In addition, the audit team attempted to purchase walis
tingting from the named suppliers of Paraaque City. Curiously, when the audit team went to the listed addresses of the
suppliers, these were occupied by other business establishments. Thereafter, the audit team located, and purchased from, a
lone supplier that sold walis tingting.
As previously adverted to, the audit team made a report which contained the following findings:
1. The purchase of walis tingting was undertaken without public bidding;
2. The purchase of walis tingting was divided into several purchase orders and requests to evade the requirement of
public bidding and instead avail of personal canvass as a mode of procurement;
3. The purchase of walis tingting through personal canvass was attended with irregularities; and
4. There was glaring overpricing in the purchase transactions.
Consequently, the COA issued Notices of Disallowance Nos. 01-001-101 (96) to 01-006-101 (96), 01-001-101 (97) to 01-
011-101 (97), and 01-001-101 (98) to 01-004-101 (98) covering the overpriced amount of P1,302,878.00 for the purchases
of 142,612 walis tingting, with or without handle, by Paraaque City in the years 1996-1998. 7
Objecting to the disallowances, petitioners Marquez and Caunan, along with the other concerned local government officials
of Paraaque City, filed a request for reconsideration with the audit team which the latter subsequently denied in a letter to
petitioner Marquez.
Aggrieved, petitioners and the other accused appealed to the COA which eventually denied the appeal. Surprisingly, on
motion for reconsideration, the COA excluded petitioner Marquez from liability for the disallowances based on our rulings
in Arias v. Sandiganbayan8 and Magsuci v. Sandiganbayan.9
On the other litigation front, the criminal aspect subject of this appeal, the Ombudsman found probable cause to indict
petitioners and the other local government officials of Paraaque City for violation of Section 3(g) of R.A. No. 3019.
Consequently, the five (5) Informations against petitioners, et al. were filed before the Sandiganbayan.
After trial and a flurry of pleadings, the Sandiganbayan rendered judgment finding petitioners Caunan and Marquez, along
with Silvestre de Leon and Marilou Tanael, guilty of violating Section 3(g) of R.A. No. 3019. As for accused Flocerfida
Babida, Ailyn Romea and private individual Razo, the Sandiganbayan acquitted them for lack of sufficient evidence to hold
them guilty beyond reasonable doubt of the offenses charged. The Sandiganbayan ruled as follows:
1. The prosecution evidence, specifically the testimony of Bermudez and the Special Audit Teams report, did not
constitute hearsay evidence, considering that all the prosecution witnesses testified on matters within their personal
knowledge;
2. The defense failed to question, and timely object to, the admissibility of documentary evidence, such as the Las
Pias City documents and the Department of Budget and Management (DBM) price listing downloaded from the
Internet, which were certified true copies and not the originals of the respective documents;
3. The Bids and Awards Committee was not properly constituted; the accused did not abide by the prohibition
against splitting of orders; and Paraaque City had not been afforded the best possible advantage for the most
objective price in the purchase of walis tingting for failure to observe the required public bidding;
4. The contracts for procurement of walis tingting in Paraaque City for the years 1996-1998 were awarded to pre-
selected suppliers; and
5. On the whole, the transactions undertaken were manifestly and grossly disadvantageous to the government.
Expectedly, the remaining accused, Caunan, Marquez and Tanael, moved for reconsideration of the Sandiganbayan decision.
Caunan and Tanael, represented by the same counsel, collectively filed a Motion for Reconsideration (with Written Notice of
Death of Accused Silvestre S. de Leon). Marquez filed several motions, 10 including a separate Motion for Reconsideration.
All the motions filed by Marquez, as well as Caunans motion, were denied by the Sandiganbayan. However, with respect to
Tanael, the Sandiganbayan found reason to reconsider her conviction.
Hence, these separate appeals by petitioners Marquez and Caunan.
Petitioner Caunan posits the following issues:
1. [WHETHER] THE PROSECUTIONS PROOF OF OVERPRICING [IS] HEARSAY.
2. [WHETHER THE] RESPONDENT SANDIGANBAYAN [ERRED] IN ADMITTING WITNESS FATIMA V.

BERMUDEZ TESTIMONY DESPITE THE FACT THAT ITS SOURCES ARE THEMSELVES ADMITTEDLY AND
PATENTLY HEARSAY.
3. [WHETHER THE] RESPONDENT SANDIGANBAYAN GRAVELY [ERRED] IN APPLYING AN EXCEPTION TO

THE HEARSAY RULE[.] UNDER THIS EXCEPTION, "PUBLIC DOCUMENTS CONSISTING OF ENTRIES IN
PUBLIC RECORDS, ETC.," x x x ARE PRIMA FACIE EVIDENCE OF THE FACTS STATED THEREIN.
4. CONSEQUENTLY, [WHETHER] RESPONDENT SANDIGANBAYAN GRAVELY ERRED IN NOT ACQUITTING

[CAUNAN].11
For his part, petitioner Marquez raises the following:
1. WHETHER [MARQUEZ] MUST BE ACQUITTED FROM THE SUBJECT CRIMINAL CASES BASED ON THE
DOCTRINES LAID DOWN IN THE ARIAS AND MAGSUCI CASES EARLIER DECIDED BY THIS HONORABLE
COURT AND THE PERTINENT PROVISIONS OF THE LOCAL GOVERNMENT CODE AND OTHER EXISTING
REGULATIONS[;]
2. WHETHER [MARQUEZ] MUST BE ACQUITTED FROM THE SUBJECT CRIMINAL CASES SINCE HE WAS
ALREADY EXCLUDED FROM LIABILITY BY THE COMMISSION ON AUDIT[;]
3. WHETHER THE ACQUITTAL OF CO-ACCUSED 1) SUPPLIER ANTONIO RAZO WHO WAS THE OTHER PARTY
TO, AND RECEIVED THE TOTAL AMOUNT OF, THE QUESTIONED CONTRACTS OR TRANSACTIONS, 2) CITY
ACCOUNTANT MARILOU TANAEL WHO PRE-AUDITED THE CLAIMS AND SIGNED THE VOUCHERS, 3) CITY
BUDGET OFFICER FLOCERFIDA M. BABIDA, AND 4) HEAD OF STAFF AILYN ROMEA CASTS A BIG CLOUD OF
DOUBT ON THE FINDING OF [MARQUEZS] GUILT BY THE SANDIGANBAYAN FOURTH DIVISION[;]
4. WHETHER [MARQUEZ] CAN BE CONVICTED ON PLAIN HEARSAY, IF NOT DUBIOUS EVIDENCE OF

OVERPRICING OR ON MERE CIRCUMSTANTIAL EVIDENCE THAT DO NOT AMOUNT TO PROOF OF GUILT
BEYOND REASONABLE DOUBT IN THE SUBJECT CRIMINAL CASES[;]
5. WHETHER THE ALLEGED OVERPRICING WHICH WAS THE BASIS FOR CLAIMING THAT THE CONTRACTS
OR TRANSACTIONS ENTERED INTO BY [MARQUEZ] IN BEHALF OF PARAAQUE CITY WERE MANIFESTLY
AND GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT WAS ASCERTAINED OR DETERMINED WITH
REASONABLE CERTAINTY IN ACCORDANCE WITH THE REQUIREMENTS OR PROCEDURES PRESCRIBED
UNDER COA MEMORANDUM NO. 97-012 DATED MARCH 31, 1997[;]
6. WHETHER THE QUANTUM OF PROSECUTION EVIDENCE HAS OVERCOME THE CONSTITUTIONAL

PRESUMPTION OF INNOCENCE WHICH [MARQUEZ] ENJOYS IN THE SUBJECT CRIMINAL CASES[;]
7. WHETHER THE RIGHT OF [MARQUEZ] TO DUE PROCESS WAS VIOLATED WHEN THE CHAIRMAN
(JUSTICE GREGORY ONG) OF THE SANDIGANBAYAN FOURTH DIVISION REFUSED TO INHIBIT DESPITE
SERIOUS CONFLICT OF INTEREST[;]
8. WHETHER [MARQUEZ] IS ENTITLED TO THE REOPENING OF THE SUBJECT CRIMINAL CASES[;]
9. WHETHER THE RIGHT OF [MARQUEZ] TO BE INFORMED OF THE NATURE OF THE ACCUSATION AGAINST
HIM WAS VIOLATED WHEN INSTEAD OF ONLY ONE OFFENSE, SEVERAL INFORMATION HAD BEEN FILED
IN THE TRIAL COURT ON THE THEORY OF OVERPRICING IN THE PROCUREMENT OF BROOMSTICKS
(WALIS TINGTING) BY WAY OF SPLITTING CONTRACTS OR PURCHASE ORDERS[; and]
10. WHETHER [MARQUEZ] IS ENTITLED TO NEW TRIAL SINCE HIS RIGHT TO AN IMPARTIAL TRIAL WAS
VIOLATED IN THE SUBJECT CRIMINAL CASES WHEN THE CHAIRMAN (JUSTICE GREGORY ONG) REFUSED
TO INHIBIT DESPITE THE EXISTENCE OF SERIOUS CONFLICT OF INTEREST RAISED BY THE FORMER
BEFORE THE JUDGMENT BECAME FINAL.12
In a Resolution dated February 23, 2009, we directed the consolidation of these cases. Thus, we impale petitioners issues for
our resolution:
1. First and foremost, whether the Sandiganbayan erred in finding petitioners guilty of violation of Section 3(g) of
R.A. No. 3019.
2. Whether the testimony of Bermudez and the report of the Special Audit Team constitute hearsay and are,
therefore, inadmissible in evidence against petitioners.
3. Whether petitioner Marquez should be excluded from liability based on our rulings in Arias v. Sandiganbayan 13
and Magsuci v. Sandiganbayan.14
Both petitioners insist that the fact of overpricing, upon which the charge against them of graft and corruption is based, had
not been established by the quantum of evidence required in criminal cases, i.e., proof beyond reasonable doubt. 15 Petitioners
maintain that the evidence of overpricing, consisting of the report of the Special Audit Team and the testimony thereon of
Bermudez, constitutes hearsay and, as such, is inadmissible against them. In addition, petitioner Marquez points out that the
finding of overpricing was not shown to a reliable degree of certainty as required by COA Memorandum No. 97-012 dated
March 31, 1997.16 In all, petitioners asseverate that, as the overpricing was not sufficiently established, necessarily, the last
criminal element of Section 3(g) of R.A. No. 3019 a contract or transaction grossly and manifestly disadvantageous to the
government was not proven.lavvphil
Section 3(g) of R.A. No. 3019 provides:
Section 3. Corrupt practices of public officersIn addition to acts or omissions of public officers already penalized by
existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:
xxxx
(g) Entering on behalf of the Government, into any contract or transaction, manifestly and grossly disadvantageous to the
same, whether or not the public officer profited or will profit thereby.
For a charge under Section 3(g) to prosper, the following elements must be present: (1) that the accused is a public officer;
(2) that he entered into a contract or transaction on behalf of the government; and (3) that such contract or transaction is
grossly and manifestly disadvantageous to the government. 17
The presence of the first two elements of the crime is not disputed. Hence, the threshold question we should resolve is
whether the walis tingting purchase contracts were grossly and manifestly injurious or disadvantageous to the government.
We agree with petitioners that the fact of overpricing is embedded in the third criminal element of Section 3 (g) of R.A. No.
3019. Given the factual milieu of this case, the subject contracts would be grossly and manifestly disadvantageous to the
government if characterized by an overpriced procurement. However, the gross and manifest disadvantage to the government
was not sufficiently shown because the conclusion of overpricing was erroneous since it was not also adequately proven.
Thus, we grant the petitions.
In criminal cases, to justify a conviction, the culpability of an accused must be established by proof beyond a reasonable
doubt.18 The burden of proof is on the prosecution, as the accused enjoys a constitutionally enshrined disputable presumption
of innocence.19 The court, in ascertaining the guilt of an accused, must, after having marshaled the facts and circumstances,
reach a moral certainty as to the accuseds guilt. Moral certainty is that degree of proof which produces conviction in an
unprejudiced mind.20 Otherwise, where there is reasonable doubt, the accused must be acquitted.
In finding that the walis tingting purchase contracts were grossly and manifestly disadvantageous to the government, the
Sandiganbayan relied on the COAs finding of overpricing which was, in turn, based on the special audit teams report. The
audit teams conclusion on the standard price of a walis tingting was pegged on the basis of the following documentary and
object evidence: (1) samples of walis tingting without handle actually used by the street sweepers; (2) survey forms on the
walis tingting accomplished by the street sweepers; (3) invoices from six merchandising stores where the audit team
purchased walis tingting; (4) price listing of the DBM Procurement Service; and (5) documents relative to the walis tingting
purchases of Las Pias City. These documents were then compared with the documents furnished by petitioners and the
other accused relative to Paraaque Citys walis tingting transactions.
Notably, however, and this the petitioners have consistently pointed out, the evidence of the prosecution did not include a
signed price quotation from the walis tingting suppliers of Paraaque City. In fact, even the walis tingting furnished the audit
team by petitioners and the other accused was different from the walis tingting actually utilized by the Paraaque City street
sweepers at the time of ocular inspection by the audit team. At the barest minimum, the evidence presented by the
prosecution, in order to substantiate the allegation of overpricing, should have been identical to the walis tingting purchased
in 1996-1998. Only then could it be concluded that the walis tingting purchases were disadvantageous to the government
because only then could a determination have been made to show that the disadvantage was so manifest and gross as to make
a public official liable under Section 3(g) of R.A. No. 3019.
On the issue of hearsay, the Sandiganbayan hastily shot down petitioners arguments thereon, in this wise:
We find no application of the hearsay rule here. In fact, all the witnesses in this case testified on matters within their personal
knowledge. The prosecutions principal witness, Ms. Bermudez, was a State Auditor and the Assistant Division Chief of the
Local Government Audit Office who was tasked to head a special audit team to audit selected transactions of Paraaque City.
The report which she identified and testified on [was] made by [the] Special Audit Team she herself headed. The
disbursement vouchers, purchase orders, purchase requests and other documents constituting the supporting papers of the
teams report were public documents requested from the City Auditor of Paraaque and from the accused Mayor Marquez.
Such documents were submitted to the Special Audit Team for the specific purpose of reviewing them. The documents were
not executed by Ms. Bermudez or by any member of the Special Audit Team for the obvious reason that, as auditors, they are
only reviewing acts of others. The Special Audit Teams official task was to review the documents of the walis tingting
transactions. In the process of [the] review, they found many irregularities in the documentations violations of the Local
Government Code and pertinent COA rules and regulations. They found that the transactions were grossly overpriced. The
findings of the team were consolidated in a report. The same report was the basis of Ms. Bermudezs testimony. x x x. 21
The reasoning of the Sandiganbayan is specious and off tangent. The audit team reached a conclusion of gross overpricing
based on documents which, at best, would merely indicate the present market price of walis tingting of a different
specification, purchased from a non-supplier of Paraaque City, and the price of walis tingting purchases in Las Pias City.
Effectively, the prosecution was unable to demonstrate the requisite burden of proof, i.e., proof beyond reasonable doubt, in
order to overcome the presumption of innocence in favor of petitioners.
As pointed out by petitioner Caunan, not all of the contents of the audit teams report constituted hearsay. Indeed, as declared
by the Sandiganbayan, Bermudez could very well testify thereon since the conclusions reached therein were made by her and
her team. However, these conclusions were based on incompetent evidence. Most obvious would be the market price of
walis tingting in Las Pias City which was used as proof of overpricing in Paraaque City. The prosecution should have
presented evidence of the actual price of the particular walis tingting purchased by petitioners and the other accused at the
time of the audited transaction or, at the least, an approximation thereof. Failing in these, there is no basis to declare that
there was a glaring overprice resulting in gross and manifest disadvantage to the government.
We are not unmindful of the fact that petitioners failed to conduct the requisite public bidding for the questioned
procurements. However, the lack of public bidding alone does not automatically equate to a manifest and gross disadvantage
to the government. As we had occasion to declare in Nava v. Sandiganbayan, 22 the absence of a public bidding may mean
that the government was not able to secure the lowest bargain in its favor and may open the door to graft and corruption.
However, this does not satisfy the third element of the offense charged, because the law requires that the disadvantage must
be manifest and gross. After all, penal laws are strictly construed against the government.
With the foregoing disquisition, we find no necessity to rule on the applicability of our rulings in Arias and Magsuci to
petitioner Marquez. Nonetheless, we wish to reiterate herein the doctrines laid down in those cases. We call specific attention
to the sweeping conclusion made by the Sandiganbayan that a conspiracy existed among petitioners and the other accused,
most of whom were acquitted, particularly private individual Razo, the proprietor of Zaro Trading.
Our ruling in Magsuci, citing our holding in Arias, should be instructive, viz.:
The Sandiganbayan predicated its conviction of [Magsuci] on its finding of conspiracy among Magsuci, Ancla and now
deceased Enriquez.
There is conspiracy "when two or more persons come to an agreement concerning the commission of a felony and decide to
commit it." Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of conspiracy must
be proven beyond reasonable doubt. While conspiracy need not be established by direct evidence, for it may be inferred from
the conduct of the accused before, during and after the commission of the crime, all taken together, however, the evidence
therefore must reasonably be strong enough to show a community of criminal design.
xxxx
Fairly evident, however, is the fact that the actions taken by Magsuci involved the very functions he had to discharge in the
performance of his official duties. There has been no intimation at all that he had foreknowledge of any irregularity
committed by either or both Engr. Enriquez and Ancla. Petitioner might have indeed been lax and administratively remiss in
placing too much reliance on the official reports submitted by his subordinate (Engineer Enriquez), but for conspiracy to
exist, it is essential that there must be a conscious design to commit an offense. Conspiracy is not the product of negligence
but of intentionality on the part of cohorts.
In Arias v. Sandiganbayan, this Court, aware of the dire consequences that a different rule could bring, has aptly concluded:
"We would be setting a bad precedent if a head of office plagued by all too common problemsdishonest or negligent
subordinates, overwork, multiple assignments or positions, or plain incompetenceis suddenly swept into a conspiracy
conviction simply because he did not personally examine every single detail, painstakingly trace every step from inception,
and investigate the motives of every person involved in a transaction before affixing his signature as the final approving
authority.
"x x x x
"x x x. All heads of offices have to rely to a reasonable extent on their subordinates and on the good faith of those who
prepare bids, purchase supplies, or enter into negotiations. x x x. There has to be some added reason why he should examine
each voucher in such detail. Any executive head of even small government agencies or commissions can attest to the volume
of papers that must be signed. There are hundreds of documents, letters, memoranda, vouchers, and supporting papers that
routinely pass through his hands. The number in bigger offices or department is even more appalling." 23
WHEREFORE, premises considered, the Decision dated August 30, 2007 and Resolution dated March 10, 2008 of the
Sandiganbayan in Criminal Case Nos. 27944, 27946, 27952, 27953, & 27954 are REVERSED and SET ASIDE. Petitioners
Joey P. Marquez in G.R. Nos. 182020-24 and Ofelia C. Caunan in G.R. Nos. 181999 and 182001-04 are ACQUITTED of the
charges against them. Costs de oficio.
SO ORDERED.
GARCIA vs. BURGOS
Presidential Decree 1818 prohibits courts from issuing an injunction against any infrastructure project, such as the Cebu
South Reclamation Project, "in order not to disrupt or hamper the pursuit of essential government project" or frustrate "the
economic development effort of the nation." This Court will not tolerate a violation of this prohibition.
Statement of the Case
Petitioners, through Rule 65 of the Rules of Court, assail the validity of the Orders of Judge Jose P. Burgos of the Regional
Trial Court of Cebu. 1 The first assailed Order, dated February 22, 1996, denied herein Petitioner Tomas R. Osmea's
Omnibus Motion with Opposition to the Application for Writ of Preliminary Injunction, which prayed that said application
be cancelled or its hearing deferred, and that the temporary restraining order already in favor of herein private respondent be
lifted. 2
The respondent judge's previous voluntary inhibition was set aside by the second assailed Order dated March 12, 1996,
which reads as follows:
WHEREFORE, premises considered, the motion for reconsideration is granted and accordingly, the
order of the Presiding Judge in voluntarily inhibiting himself from further sitting in the case dated
February 26, 1996 is reconsidered and set aside.
Set this case for another hearing on the application for preliminary injunction on March 15, 1996 at 10
o'clock in the morning whereby defendants are ordered to show cause if any they have why the
injunction should not be granted.
SO ORDERED. 3
Meanwhile, the preliminary injunction sought by herein private respondent was granted by respondent judge who, in his
third assailed Order dated March 18, 1996, ruled in this wise:
WHEREFORE, premises considered, and in order to preserve the status quo, upon the filing of an
injunction bond with this Court in the amount of Two Million (P2,000,000.00) Pesos, let a writ of
preliminary injunction be issued, hereby enjoining all the defendants, their assigns, agents and
representatives or anyone acting for any or all of them or in their behalf from implementing the
memorandum of agreement dated September 11, 1995, attached and marked as Annex "V" in the original
complaint dated January 18, 1996, except the construction of the Cebu South Coastal Road, and all other
agreements/contracts of defendants concerning the Cebu South Reclamation Project tending to deprive
plaintiff of its prior contractual rights in the said Cebu South Reclamation Project until further orders
from this Court.
The amount of the required bond shall answer for all damages that the defendants may sustain by reason
of the injunction should the Court finally decide that plaintiff was not entitled thereto.
SO ORDERED. 4
The Facts
In their pleading, the parties tried their best to give detailed accounts of the factual antecedents of this case. In fairness to
them, the Court hereby reproduces in toto their respective narrations.
Petitioner's Version
A. The Project
1. The Cebu South Reclamation Project (hereinafter referred to as the "PROJECT") is a FOUR
BILLION PESO (P4,000,000,000.00) project of the, Government of the Republic of the Philippines
(hereinafter referred to as the "GOVERNMENT"), funded out of a loan taken out by the government
from the Government of Japan, through its international financing institution, the Overseas Economic
Cooperation Fund (hereinafter referred to as the "OECF").
2. The loan was made possible by virtue of an Exchange of Notes between the Governments of the
Republic of the Philippines and Japan, whereby the latter extended a total loan package of ONE
HUNDRED BILLION NINE HUNDRED SIXTY-FOUR MILLION YEN (Y101,964,000,000.00) [sic]
to finance certain specified and listed projects of the former. Among these projects to be financed by the
loan is the Cebu South Reclamation Project. (Refer to Annex "E" - Petition)
3. The project is an integral part of the Third Phase of the Metro Cebu Development Projects (hereinafter
referred to as "MCDP III"), which has been favorably endorsed and approved by the President of the
Republic of the Philippines, Fidel V. Ramos, as "one of the projects of the national government." (Refer
to Annex "F" - Petition).
4. The project has likewise been approved by the National Economic and Development Board (the
"NEDA"), of which the President is the Chairman, as an ICC Project, by virtue of NEDA Resolution No.
1, Series of 1995. (Refer to Annex "G" - Petition)
5. The project is further certified as a project of the Government of the Republic of the Philippines, by
the Department of Foreign [Affairs], through its Secretary, Domingo E. Siazon. (Refer to Annex "H" -
Petition)
6. In due course, loan agreements in implementation of the Exchange of Notes between the two
governments were executed between the OECF and [P]etitioner Land Bank of the Philippines (the
"LANDBANK"). Under these agreements, the City of Cebu was designated as the project's
implementing agency. (Refer to Annex "I" - Petition)
7. In accordance with the Constitution, the loan package to finance, among others, the Cebu South
Reclamation Project, was granted final approval by the Monetary Board, by virtue of Resolution No.
1260 issued on 07 November 1995. (Refer to Annex "J" - Petition)
8. The loan arrangements having been entered into, and the funds ready for release to the City of Cebu,
the implementing agency of the project, the City of Cebu, the Department of Public Works and
Highways (the "DPWH") and the Metro Cebu Development Project Office (the "MCDPO") executed, on
11 September 1995, the "implementing Arrangement for Metro Cebu Development Project Phase III
(MCDP III)" (Refer to Annex "K" - Petition), under which agreement is outlined the procedure for
implementation of the project as well as the rights and obligations of the parties thereto.
B. The Suit Filed Below by Private Respondent
9. On 19 January 1996, [P]rivate [R]espondent Malayan Integrated Industries Corporation (hereinafter

referred to as "MALAYAN"), filed a case for "Specific Performance, Declaration of Nullity, Damages
and Injunction, with Writ of Preliminary Injunction and Temporary Restraining Order" against herein
petitioners, docketed as Civil Case No. CEB-18292, before the Regional Trial Court of Cebu City. (Refer
to Annex "L" - Petition) The case was raffled to Branch 17 of the said court.
10. Pursuant to Supreme Court Administrative Circular No. 20-95, a summary hearing was conducted by
respondent [j]udge to determine the propriety of issuing the temporary restraining order (TRO) prayed
for by [R]espondent Malayan in its complaint.
11. During the summary hearing to determine whether the temporary restraining order (TRO) should
issue, defendants questioned the jurisdiction of the court to issue the same, citing Section 1 of
Presidential Decree No. 1818, which provides:
Sec. 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 officials 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.(Sec. 1, P.D. 1818; emphasis supplied)
12. It was also pointed out to herein respondent [j]udge that the Supreme Court, in Administrative,
Circular 13-93, pursuant to P.D. 1818, and in implementation of the policy behind the law, prohibited all
judges of all courts from issuing TRO's and/or writs of preliminary injunction against the
implementation of government infrastructure projects.
13. It was further manifested that the Supreme Court, observing non-compliance with the above-cited
Circular by judges of trial courts was compelled to reiterate its earlier prohibition, with a warning against
further violation, for their "strict compliance", under Administrative Circular No. 68-94, issued on 3
November 1994, which states:
There have been reports that despite Circular 13-93, dated March 5, 1993, some
courts are still issuing temporary restraining orders and/or preliminary injunctions
even in cases, disputes, or controversies involving government infrastructure projects
in violation of Section 1 of P. D. 1818 . . .
xxx xxx xxx
In order to obviate complaints against the indiscriminate issuance of restraining

orders and court injunctions against government public utilities and infrastructure
projects in gross violation of the aforesaid Presidential Decree, the provision of
Circular No. 13-93 issued on March 5, 1993 is hereby reiterated for your strict
compliance.
xxx xxx xxx (Supreme Court Administrative Circular No 68-94; emphasis supplied)
14. In gross violation of the law and the circulars of the Honorable Supreme Court, however, respondent
[j]udge issued a temporary restraining order on 5 February 1996, the dispositive portion of which reads
as follows:
The verified complaint being sufficient in form and substance and in order to preserve the status quo, all
the defendants and their agents, employees, workers and all persons acting in their behalf are temporarily
restrained from implementing the alleged memorandum of agreement dated September 11, 1995, and
any and all such other agreements/contracts entered into by any and all of the defendants, covering the
Cebu South Reclamation Project consisting of 330 hectares more or less" (Refer to Annex "M" -
Petition)
15. The hearing on [R]espondent Malayan's application for the writ of preliminary injunction was set for
14 February 1996. During the said hearing, [P]etitioner Tomas R. Osmea filed an Omnibus Motion for:
(a) the immediate lifting of the Temporary Restraining Order; (b) the cancellation of the hearing on the
application for the writ of preliminary injunction; and (c) the outright dismissal of the complaint. The
Omnibus Motion was subsequently adopted by the defendants below. (Refer to Annex "N" - Petition)
16. The thrust of the Omnibus Motion was that the court below had, under P.D. 1818, no jurisdiction and
no compelling reason to issue any TRO and/or writ of preliminary injunction against the implementation
of a government infrastructure project. Since it had no jurisdiction to issue such TRO and/or writ of
preliminary injunction, much less does it have the jurisdiction to entertain any application for the
injunctive writ.
17. The Omnibus Motion likewise refuted respondent [j]udge's arguments in its Order dated 5 February
1996 granting the TRO, wherein he attempted to remove the case from the ambit of P.D. 1818 thus:
(a) the ruling in Genaro R. Reyes Construction, Inc. v. Court of Appeals, 234 SCRA
116 applies to the case at bar;
(b) "plaintiff is not asking for enjoining the infrastructure project . . . [but] the
enjoining of the contract to be awarded to another entity";
(c) "inclusion of reclamation of submerged lands as being covered under the term
"infrastructure project" [is a] classification [that] has yet to be determined in the light
of existing Presidential Proclamations, Orders Executive Memorandums."
18. Respondent Judge apparently to verify whether the project was an infrastructure project of the
national government required defendants below, petitioners herein, to show proof that the project had
the approval of the President of the Republic of the Philippines.
19. In compliance with the order of respondent [j]udge, petitioners, during the continuation of the
hearing on the Omnibus Motion, set on 16 February 1996, presented the documents mentioned above
(Refer to Annexes "D" to "J" - Petition), proving that the project had the favorable recommendation and
approval, not only of the President, but likewise of the NEDA, and certified as a project of the
Government of the Republic of the Philippines by the Department of Foreign Affairs. Insofar as the loan
agreements were concerned, the Exchange of Notes (Annex "D") and the resolution of the Monetary
Board (annex "J") approving the loan agreement were presented. All requirements for the
implementation of a perfected contract are present and submitted to the court.
20. Following the presentation of the foregoing documents, respondent [j]udge gave the parties five (5)
days to submit their respective memoranda on the Omnibus Motion, after which the incident would be
deemed submitted for resolution.
21. On 21 February 1996, the parties filed their respective memoranda. As the memorandum for
[R]espondent Malayan contained misstatements of the facts of the case, petitioner Tomas R. Osmea
filed a "Reply to Plaintiff's Memorandum" at 9:00 o'clock in the morning of the following day, 22
February 1996.
22. With unusual dispatch in a time frame of only a few hours, however, and under suspicious
circumstances, in the afternoon of the same day, 22 February 1996, respondent [j]udge had issued an
Order (Refer to Annex "A" - Petition), a quite comprehensive five-page resolution denying petitioners'
Omnibus Motion, received by petitioners on 23 February 1996.
23. Without having to consider the unusual haste with which the Order was issued considering that it
was issued the day immediately after the last day for the filing of the memoranda, and on the day, and
just hours after petitioner Osmea's "Reply to Plaintiff's Memorandum" was filed, the Order dated 22
February 1996 was highly irregular for the most obvious reasons.
24. A cursory review of the Order dated 22 February 1996 would reveal that it has practically decided the
case on the merits, on a mere resolution of an incident in the main case. The Order denying the Omnibus
Motion has practically ruled that: (a) [R]espondent Malayan has valid, existing and enforceable contracts
of reclamation approved by the President of the Philippines; (b) petitioners' reclamation project did not
have the approval of the President; and (c) petitioners were violating [R]espondent Malayan's contracts.
These were precisely the issue[s] in the main case for specific performance.
24.1 It would be relevant to mention that in so ruling, respondent Judge practically

considered "evidence" which were non-existent in favor of [R]espondent Malayan,
and suppressed the evidence presented by petitioners.
25. [I]n view of the actions of respondent [j]udge, [P]etitioner Osmea filed, on 23 February 1996, an
Omnibus Motion, praying, among other things, for the voluntary inhibition of respondent [j]udge on the
ground of partiality manifested by the Order of 22 February 1996, which practically decided the case on
the merits in favor of [R]espondent Malayan, in a resolution of a mere incident in the case.
26. In an Order dated 26 February 1996, respondent [j]udge voluntarily inhibited himself. (Refer to
Annex "O" - Petition)
27. Respondent Malayan, however, filed a motion for reconsideration of the Order of voluntary
inhibition, to which petitioner Osmea filed an Opposition.
28. In the meantime, petitioner Osmea had filed a Motion for Reconsideration of the Order dated 22
February 1996 denying the Omnibus Motion, with the cautionary notice that it was not to be deemed as a
waiver of their opposition to the motion for reconsideration filed by [R]espondent Malayan of
respondent [j]udge's Order of voluntary inhibition. Instead, the said Motion for Reconsideration with
Cautionary Notice was to be heard by the court to which the case was to be eventually re-raffled, and
scheduled for hearing on 22 March 1996.
29. On 12 March 1996, however, respondent [j]udge reversed himself and reconsidered his Order of
voluntary inhibition dated 26 February 1996, and set the hearing on [R]espondent Malayan's application
for the writ of preliminary injunction for 15 March 1996. (Refer to Annex "C" - Petition)
30. Since the Motion for Reconsideration with Cautionary Notice was still pending resolution (and the
hearing thereon yet to be conducted on 22 March 1996), petitioner filed an Urgent Motion for Resetting
of the hearing, considering that the Motion for Reconsideration with Cautionary Notice which
questioned the court's jurisdiction to entertain the application for the writ of preliminary injunction
was prejudicial to the hearing set for 15 March 1996, since it would determine whether or not such
proceedings should continue or not.
31. During the hearing on 15 March 1996, however, respondent [j]udge denied petitioner Osmea's
Urgent Motion for Resetting.
32. Again, with unusual dispatch, on 18 March 1996, respondent [j]udge issued two (2) Orders, one
granting the writ of preliminary injunction prayed for by [R]espondent Malayan (Refer to Annex "B" -
Petition), and another one denying petitioner's Motion for Reconsideration with Cautionary Notice
both issued even before the hearing on the Motion for Reconsideration with Cautionary Notice which
was yet scheduled for 22 March 1996.
33. Hence, this petition for certiorari, questioning: (a) the validity of the Orders of respondent [j]udge
dated 22 February 1996 claiming it had the jurisdiction to entertain and issue a writ of preliminary
injunction against petitioners' government infrastructure project, and the Order of 18 March 1996,
granting the writ of Preliminary injunction; and (b) the validity of the Order of respondent [j]udge dated
12 March 1996, reconsidering his earlier Order of voluntary inhibition, there being no other plain,
speedy and adequate remedy in the ordinary course of law. 5
Private Respondent's Version
On May 22, 1967, Proclamation No. 200-A was issued which reserved for national improvement
purposes, a certain parcel of land of the [p]ublic [d]omain situated in the foreshore of the District of San
Nicolas, Pardo, Cebu City and Tangkey, Talisay, Cebu. This area was transferred and relinquished by the
President of the Philippines to the Province of Cebu in behalf of the [n]ational [g]overnment, subject to
private rights, if any there be. Copy of said proclamation was attached as Annex "4" to respondents'
Comment.
On January 11, 1973, Presidential Decree No. 3-A was issued which decreed that the reclamation of land
under water, whether foreshore or inland, throughout the Philippines belong to and are owned by and
limited to the [n]ational [g]overnment or to any person authorized by it under a proper contract.
On October 14, 1977, pursuant to and in accordance with the above-said Proclamation No. 200-A and
Sec. 1 of P.D. No. 3-A, the Sangguniang Panlalawigan of Cebu and the then Cebu Provincial Governor
Eduardo R. Gullas granted, awarded and authorized private respondent to undertake the actual and
physical reclamation and development works of the foreshore, submerged and offshore areas of Three
Hundred Fifty (350) hectares, more or less, which is a portion of the approximate area of 5,386,800
square meters or 438.6800 hectares, as described in Proclamation No. 200-A. Copy of said Award was
attached as Annex "5" to the Comment of respondents.
On October 31, 1977, a Contract of Reclamation and Development was entered into, signed and
executed by and between the Province of Cebu, represented by then Governor Eduardo R. Gullas, and
private respondent. Copy of said Contract was attached as Annex "6" to the Comment.
The said Contract of Reclamation and Development dated October 31, 1977 between Cebu Province and
private respondent was authorized by Resolution No. 475 dated October 4, 1977 of the Sangguniang
Bayan [sic] Panlalawigan of Cebu.
On September 15, 1978, the Sangguniang Panlalawigan of Cebu and then Cebu Governor Eduardo R.
Gullas considered and approved the request of private respondent dated August 25, 1978 that the
reclamation area of 350 hectares to 625 hectares, more or less. Copy of said resolution was attached as
Annex "7" to respondent's Comment.
On October 7, 1978, the Second Supplemental Contract of Reclamation and Development between the
Province of Cebu and private respondent was entered into, signed and execu[t]ed by and between the
Province of Cebu and private respondent. Copy of said contract was attached as Annex "8" to the
respondents' Comment.
On January 15, 1979, a Contract of Reclamation and Port Development was entered into, executed and
signed by and between private respondent and Amsterdam Ballast Dredging Corporation (BALLAST) in
connection with and regarding the reclamation area of 625 hectares of the foreshore, submerged and
offshore areas from Pasil, Cebu City, to Tangke Talisay, Cebu to Kawit Island and then to Pasil, Cebu
City. Copy of said contract was attached as Annex "9" to respondents' Comment.
On February 7, 1979, a Memorandum dated February 7, 1979 addressed to then President Marcos, was
submitted by Province of Cebu, represented and signed by then Governor Eduardo R. Gullas, and the
City of Mandaue, represented and signed by then City Mayor Demetrio M. Cortes for final consideration
and approval. Copy of said memorandum was attached as Annex "10" to respondents' Comment.
When the Province of Cebu and the City of Mandaue submitted to the President the Cebu South
Reclamation Project for approval per memorandum dated February 7, 1979, attached as Annex "10" to
respondents' Comment it was premised on the following consideration as stated in the first paragraph of
said memo:
In our earnest desire to contribute our share to the program of Your Excellency and
of our government on industrialization, industrial dispersal and regional
development in the New Society, the Province of Cebu and the City of Mandaue
have authorized, subject to your Excellency's reclamation of 625 and 360 hectares of
foreshore and offshore lands in South Cebu from Pasil, Cebu City to Tangke, Talisay,
Cebu by virtue of Presidential Proclamation No. 200-A, promulgated on May 22,
1967 (ANNEX "B"), which gives the Province of Cebu the authority to administer
these areas, within the City of Cebu, and in Mandaue City, from Subangdaku to the
Cabahug Coastways, by virtue of Sec. 94 of Republic Act No. 5519, which vests
ownership and possession of all foreshore lands and submerged lands of the public
domain in the City of Mandaue (ANNEX "C"), respectively, under contracts of
Reclamation and Port Development with Malayan Integrated Industries
Corporation, hereto attached as Annexes "D" and "E", which we believe offer the
most advantageous terms for the Province of Cebu, and City of Mandaue and the
[n]ational [g]overnment because not a single centavo will be spent by the
government in return for its share in the reclaimed areas and the operation of the
international and domestic port facilities thereof, not to mention the socio-economic
impact that the projects will create in the Visayas and Mindanao. (Emphasis ours)
On August 13, 1979, the Cebu South Reclamation Project was presented by the Province of Cebu and
Mandaue City, was considered and approved in principle by then President E. Marcos, as per
Presidential Memorandum directive dated August 13, 1979 and a copy thereof is attached as Annex "Q"
of the petition. Among the salient provisions of said presidential approval are:
a. That within twelve (12) months after the issuance of [p]residential directive
authorizing the Project, a detailed and integrated development plan on land use
including technical, economic, marketing and financial feasibility studies be
submitted to the President for approval, otherwise, project approval may be deemed
automatically revoked; to enable the PEA to exercise its responsibilities as the
representative of the [n]ational [g]overnment as landowner, the person or entity
chosen by the contractor to undertake the detailed feasibility studies shall report
directly to the PEA;
xxx xxx xxx
d. That Cebu City and Mandaue City shall enter into contract with Public Estates
Authority for the reclamation project pursuant to E.O. 525. The PEA is authorized to
determine the terms and conditions necessary for the implementation of the
aforecited conditions including specification of the sharing scheme and other
requirements of government entities on the reclaimed areas. Furthermore, the PEA is
authorized to review, modify, and approve all contracts entered into or arising out of
the reclamation project consistent with existing government regulations and national
interests considerations. Finally, consideration of equity requires that option rights
of first refusal for a period as may be determined by PEA, shall be granted to private
entities which have made initial investments on the project. (Emphasis ours)
In other words, herein private respondent was granted by said [p]residential directive option rights of
first refusal to undertake the project because of the initial investments it made on the project.
On August 1, 1980, as provided in Presidential Memorandum directive dated August 13, 1979 to submit
within twelve (12) months after the issuance of the said Presidential Memorandum directive the detailed
feasibility study for approval and "to enable the PEA to exercise its responsibilities as the representative
of the [n]ational [g]overnment as land owner, the person or entity chosen by the contractor to undertake
the detailed feasibility studies shall report directly to the PEA", the Province of Cebu, the City of
Mandaue, the City of Lapulapu and the Municipality of Cordova submitted said feasibility study to the
President for approval, copy of which was attached as Annex "12" to respondents' Comment.
The Province of Cebu and private respondent entered into, signed and executed a Confirmatory
Agreement dated November 1979, by virtue of which the services of MALAYAN was contracted to
undertake the preparation and making of the said Detailed and Integrated Development Plan on Land
use, etc., of the Cebu South Reclamation Project at no cost to the Province of Cebu. Copy of said
Confirmatory Agreement was attached as Annex "13" to the respondents' Comment.
The said Confirmatory Agreement acknowledged that it was the private respondent which made initial
investments in the Cebu South Reclamation Project and the entity granted the right of first refusal or
option rights to undertake the project as follows:
WHEREAS, the Memorandum dated 13 August 1979 embodied the proviso rights of
first refusal shall be granted to private entities who have made initial investments in
the reclamation projects;
WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION,

which had made initial investments in the projects and had, as a matter of fact, been
previously bound by a contract with the PROVINCE OF CEBU to undertake the
reclamation project in South Cebu evidenced by Document No. 145; Page No. 30;
Book No VI; Series of 1977 before Notary Public Justino K. Hermosisima, by these
presents have offered to undertake and prepare, for and in behalf of the PROVINCE
OF CEBU, the detailed feasibility study for the reclamation of the areas in the
Municipalities of Talisay and Cordova, Province of Cebu, in conjunction and
coordination with the Cebu South and the Mandaue Reclamation Projects, and which
offer had been accepted by the PROVINCE OF CEBU as the consequence of the
Reclamation contract by and between the two entities similarly reconfirmed in a
communication dated October 4, 1979;
On January 4, 1980, a Confirmatory Agreement was entered into, executed and signed by and between
the City of Cebu, and private respondent in which they confirmed, affirmed, approved and agreed that
the Cebu South Reclamation Project dated January 15, 1979 between MALAYAN and BALLAST which
was approved by the Province of Cebu and City of Mandaue and were approved in principle by then
President Ferdinand E. Marcos, that its corresponding plan on land use, including technical, economic,
marketing and financial feasibility studies of the Project be undertaken by the aforesaid Local
Government units concerned and to be submitted to the PEA and the President of the Philippines within
twelve (12) months after the issuance of the Presidential Memorandum directive dated August 13, 1979,
and in compliance with the above-said requirements, the City of Cebu hired, awarded, engaged and
contracted the services of private respondent to undertake and prepare in behalf of the City of Cebu the
detailed and integrated development plan on land use, etc., of the Project covering the reclamation area
of 400 to 625 hectares, more or less, without any single expense, funding and at no cost whatsoever to
the City of Cebu. Copy of said Confirmatory Agreemen[t] was attached as Annex "14" to the
Again, the City of Cebu recognized the option right or right of first refusal of private respondent to
undertake the project as the entity [which] had made initial investments in the project as follows:
WHEREAS, the President also directed that option rights of first refusal shall be
granted to private entities which have made initial investments in the reclamation
projects;
WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION,

which has made initial investments on the project, and in fact, was previously
contracted by the Province of Cebu by virtue of Proclamation No. 200-A, P.D. No. 3-
A and Executive Order No. 525 to undertake the reclamation project for and in the
City of Cebu and the Municipality of Talisay, Province of Cebu, and prior to which
MALAYAN INTEGRATED had already invested substantial sums of money, time
and effort in preparatory activities on said reclamation projects, by these presents
have offered to undertake the detailed and integrated development plan on land use,
[including] feasibility studies as required by the President, and the CITY OF CEBU
has accepted the said offer of MALAYAN INTEGRATED INDUSTRIES
CORPORATION;
On January 24, 1980, the public Estates Authority (PEA) and the City of Cebu entered into a
Memorandum of Understanding which recognized the pre-emptive right of plaintiff to undertake the
Project as recognized in the Presidential directive dated August 13, 1979.
6. Pursuant to the Presidential Directive dated August 13, 1979, to accord pre-
emptive rights for the actual prosecution of the reclamation project to private entities
which have made initial investments on the project:
Copy of said Memorandum of Understanding was attached as Annex "15" to respondents' Comment.
On August 11, 1980, on the basis of the Confirmatory Agreement dated November 1979 between the
Province of Cebu and private respondent and the Confirmatory Agreement dated January 4, 1980
between the City of Cebu and the City of Cebu have awarded, hired, engaged and contracted the services
of private respondent to undertake and prepare, in behalf of the Province of Cebu and the City of Cebu
without any single expense, funding and at no cost to said Province of Cebu and City of Cebu, the
detailed and integrated development plan on land use, etc., of the Cebu South Reclamation Project, the
Province of Cebu thru then Eduardo R. Gullas, the City of Cebu thru then City Mayor Florentino S.
Solon, the city of Mandaue thru then City Mayor Demetrio M. Cortes, the City of Lapulapu thru then
City Mayor Maximo V. Patalingjug, Jr., and the Municipality of Cordova, Cebu thru Municipal Mayor
Celedonio B. Sitoy, filed and submitted on August 1, 1980 the corresponding Detailed and Integrated
Development Plan on Land use, including technical, economic, marketing and financial feasibility
studies of the Cebu South Reclamation Project for the final consideration and approval by the Public
Estates Authority and the Office of the President and the President of the Philippines. Copy of said
document was attached as Annex "12" to respondents' Comment.
On August 12, 1980, private respondent, for and in behalf of the Province of Cebu, City of Cebu, City of
Mandaue, City of Lapulapu, Municipality of Talisay, Municipality of Cordova, in relation to the above-
said Memorandum dated in August 1, 1980 as required, also filed and submitted to the Office of the
President and the President of the Philippines thru the PEA the additional copies of the said complete
Project Studies and the Detailed and Integrated Development Plan on Land Use, etc., of the Metro Cebu
Reclamation and Development Project which includes the Cebu South Reclamation Project. Copy of
said document was attached as Annex "16" to respondents' Comment.
On September 29, 1980, on the basis of the aforesaid Memorandum dated August 1, 1980 the PEA, in its
MEMO FOR THE PRESIDENT dated September 29, 1980 indorsed and recommended to the President
the final consideration and approval of the Detailed and Integrated Development Plan on Land Use of
the Cebu South Reclamation Project. Copy of said document was hereto attached as Annex "17" to the
Since Septembe[r] 19, 1980, when the PEA approved the Metro Cebu Reclamation and Development
Project covering the reclamation area of 4,910 hectares, which include the Cebu South Reclamation
Project covering 625 hectares, and its corresponding detailed and integrated development plan on land
use, etc., as per MEMO FOR THE PRESIDENT dated September 29, 1980, the President of the
Philippines has not yet approved the detailed and integrated development plan on land use, including
technical, economic, marketing and financial feasibility studies of the said project.
On December 29, 1995, the Office of the President thru President Staff Director Vicente A. Galang,
issued 1st Indorsement to the effect that the detailed and integrated development plan on land use of the
project is still pending final consideration and approval by the [O]ffice of the President until now or at
the present date. Copy of said resolution was attached as Annex "18" to the respondents' Comment.
On January 12, 1996, the Office of the President thru Presidential Staff Director Vicente A. Galang,
issued an official certification that the Cebu South Reclamation Proj[e]ct covering 360 hectares, has
already long been considered and approved by the Office of the President and the President of the
Philippines as per Presidential Memorandum directive dated August 13, 1979 but its corresponding
detailed and integrated development plan on land use, including technical, economic, marketing and
financial feasibility studies of the project which was filed and submitted by the Province of Cebu, City of
Cebu, City of Mandaue, City of Lapulapu and Municipality of Cordova with the PEA and the Office of
the President on August 1, 1980 per Memorandum dated August 1, 1980 and approved by the PEA in
favor of the above-mentioned Local Government units concerned per MEMO FOR THE PRESIDENT
dated September 29, 1980, is still pending final consideration and approval by the Office of the
President. Copy of said certification was attached as Annex "19" to respondents' Comment.
When the Province of Cebu and the City of Mandaue submitted to the President the Cebu South
Reclamation Project for approval per memorandum dated February 7, 1979, it was premised on the
following consideration as stated in the first paragraph of said memo:
In our earnest desire to contribute our share to the program of Your Excellency and
of our government on industrialization, industrial dispersal and regional
development in the New Society, the Province of Cebu and the City of Mandaue
have authorized, subject to your Excellency's approval, pursuant to PD 3-A (ANNEX
"A"), the reclamation of 625 and 360 hectares of foreshore and offshore lands in
South Cebu from Pasil, Cebu City to Tangke, Talisay, Cebu by virtue of Presidential
Proclamation No. 200-A, promulgated on May 22, 1967 (ANNEX "B"), which gives
the province of Cebu the authority to administer these areas within the City of Cebu,
and, in Mandaue City, from Subangdaku to the Cabahug Coastways, by virtue of
Sec. 94 of Republic Act No. 5519, which vests ownership and possession of all
foreshore lands and submerged lands of the public domain in the City of Mandaue
(ANNEX "C"), respectively, under contracts of Reclamation and Port Development
with Malayan Integrated Industries Corporation, hereto attached as Annexes "D"
and "E", which we believe offer the most advantageous terms for the Province of
Cebu, and City of Mandaue and the National Government because not a single
centavo will be spent by the government in return for its share in the reclaimed areas
and the operation of the international and domestic port facilities thereof, not to
mention the socio-economic impact that the projects will create in the Visayas and
Mindanao. (Emphasis ours)
This was so because under Executive Order No. 525 dated February 14, 1979, all reclamation projects'
are subject are subject to approval by the President. After the reclamation project is approved by the
President, the project shall be undertaken by the Public Estates Authority (PEA) or through a proper
contract executed by the PEA with any person or entity. This is so provided in Section 1 of said
Executive Order which reads as follows:
Sec. 1 The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of
the National Government. All reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or
through a proper contract executed by it with any person or entity; provided, that,
reclamation projects of any National Government agency or entity authorized under
its Charter shall be undertaken in consultation with the PEA upon approval of the
President.
In other words, the President does not approve reclamation contracts but approves only the reclamation
project.
The President approved in principle the Cebu South Reclamation Project on August 13, 1979 as shown
by Exhibit "A-13". The approval was in principle only pending submission and presidential approval of a
detailed and integrated feasibility study on the land use of said project. What is unique in said
presidential approval was that it recognized the reclamation contracts earlier entered into by plaintiff
with the Province of Cebu and the City of Mandaue by giving plaintiff option rights of first refusal to
undertake the project, when said presidential memorandum stated:
xxx xxx xxx
Finally, considerations of equity requires that option rights of first refusal for a
period as may be determined by PEA, shall be granted to private entities which have
made initial investments on the project.
The presidential memorandum also directed the PEA, City of Cebu and the City of Mandaue to enter
into contracts with the PEA for the Cebu South Reclamation Project and the Mandaue Reclamation
project, respectively.
Conformably, with said presidential directive the PEA and the City of Cebu entered into a memorandum
of understanding with respect to the Cebu South Reclamation project wherein, paragraph 6 of its Section
II, it [sic] provided that the City of Cebu was obliged "to accord pre-emptive rights for the actual
prosecution of the reclamation project to private entities which have made initial investments on the
project", which entity is no other than herein plaintiff. This option of first refusal or pre-emptive rights of
plaintiff to undertake the actual prosecution of the project has never been cancelled, or rescinded.
The herein private respondent filed this case for injunction when the respondents issued an invitation to
bidders. Exhibit "A-21" particularly section 3.2 thereof which provides "for the conduct of tenders and
subsequent evaluation of bids" for the Cebu South Reclamation Project. In, other words, the petitioners
were going to entertain bids from private contractors for the undertaking of the Cebu South Reclamation
Project in violation of the preemptive rights or right of first refusal of private respondent to prosecute the
project. 6
In a Resolution dated March 27, 1997, the Court granted petitioners' prayer and issued a temporary restraining order
enjoining the trial judge from enforcing the assailed orders and from conducting further proceedings in this
case. 7
The Issues
In their Memorandum dated July 30, 1997, petitioners summarized the issues as follows: 8
Whether or not respondent judge gravely abused his discretion in issuing the orders dated 22 February
1996 and 18 March 1996, in contumacious violation of Presidential Decree No. 1818, and Supreme
Court Administrative Circulars Nos. 13-93 and 68-94.
II
Whether or not, in grave abuse of discretion, the order dated 22 February 1996 and the order granting the
writ of preliminary injunction had the effect of practically deciding the case on the merits.
III
Whether or not respondent judge acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in granting the writ of preliminary injunction, as the applicant, [R]espondent Malayan, had
no clear and unmistakable right to be protected by the injunctive writ.
IV
Respondent judge gravely abused his discretion in not dismissing the complaint outright, the alleged
cause of action being admittedly premature, and a mere expectancy, or having otherwise been barred by
Prescription and/or laches.
Whether respondent judge gravely abused his discretion in issuing the order dated 12 March 1996,
reconsidering his earlier order of voluntary inhibition, there being strong grounds as respondent judge
himself admits for his voluntary inhibition.
VI
Whether or not, as claimed by private respondent, the omnibus motion to dismiss filed below by
petitioners was a mere scrap of paper.
VII
Whether or not, as claimed by private respondent, a motion for reconsideration was necessary before the
filing of the present petition.
The first, second, third and fourth issues are closely related and will be discussed together.
The Court's Ruling

The petition is meritorious.
First Issue:
Preliminary Injunction Void and Improper
Sec. 1 of PD 1818 distinctly provides that "[n]o 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 . . . of the government, . . . to prohibit any person or persons, entity or government official from proceeding with, or
continuing the execution or implementation of any such project, . . . or pursuing any lawful activity necessary for such
execution, implementation or operation." 9 At the risk of being repetitious, we stress that the foregoing statutory provision
expressly deprives courts of jurisdiction to issue injunctive writs against the implementation or execution of an infrastructure
project. 10
In the case at bar, the assailed March 18, 1996 Order of respondent judge specifically enjoined petitioners from
implementing their Memorandum of Agreement dated September 11, 1995 11 (except as to the Cebu South Coastal Road),
which pertains to the implementation of the Metro Cebu Development Project, Phase III, a major component of which is the
Cebu South Reclamation Project. The petitioners were also enjoined from acting on or implementing all other contracts
involving the said reclamation project. The issuance of said writ of preliminary injunction evidently constitutes a blatant
violation of PD 1818. The assailed Order is therefore void for being issued with grave abuse of discretion and without
jurisdiction. On this ground alone, the Court may already grant the petition. Nonetheless, we will proceed to discuss the
other issues raised.
Reclamation Is an
Infrastructure Project
Private respondent claims that the Cebu South Reclamation Project is not an infrastructure project. 12 This is erroneous and
misleading. In Malayan Integrated Industries Corporation vs. Court of Appeals, 13 the Court unequivocally held that "the
reclamation of foreshore and submerged land along the coast of Mandaue City up to the Cebu City boundary for the purpose
of developing the reclaimed area into an industrial and trading center with a modern harbor and port facilities for both
domestic and international commerce" is an infrastructure project as contemplated under PD 1818. 14 Private respondent
should know this not only because everyone is presumed to know the law, but also because it was a principal party in that
case.
Cebu South Reclamation Project
Approved by the President
Private respondent further contends that, in spite of the prohibition in PD 1818, the questioned injunctive writ may still
validly issue against petitioners, because the latter have not sufficiently shown that (1) "[t]he City of Cebu has a contract
with the Public Estates Authority (PEA) to undertake the Cebu South Reclamation Project under P.D. 3-A," (2) "[t]he PEA
has favorably endorsed the Cebu South Reclamation Project for approval by the President pursuant to Executive Order No.
525," and (3) "[t]he President has approved the Cebu South Reclamation Project pursuant to P.D. 525." 15 The Court is not
persuaded.
In the August 13, 1979 16 Memorandum on the Cebu South and Mandaue Reclamation Project, the President of the
Philippines addressed this clear statement to the city mayors of Cebu and Mandaue, the chairman of the PEA and others
concerned: "Pursuant to P.D. 3-A and E.O. 525, and upon recommendation of the Public Estates Authority (PEA), the
reclamation project covering 985 ha.[,] more or less, of Cebu South and Mandaue foreshore areas is hereby approved in
principle; and the City of Cebu and the City of Mandaue are hereby authorized to undertake the reclamation of subject
areas . . ." 17 Furthermore, even the certification from the Office of the President dated January 12, 1996, 18 presented in
evidence by respondent itself, certifies that the Cebu South (and Mandaue) Reclamation Project "has been previously
considered and approved by the Office of the President and by the President of the Philippines, then His Excellency
President Ferdinand E. Marcos, in favor of the Province of Cebu, City of Cebu, City of Mandaue, the Public Estates
Authority and others concerned as the proponents . . ." 19 The approved reclamation project is distinct from the reclamation
contract itself.
Private Respondent Has No Vested
Right Violated by a Public Bidding

Private respondent argues that PD 1818 cannot be invoked to stop the issuance of a preliminary injunction in this case, as the
acts of petitioners are tantamount to a violation of its vested rights. It claims ". . . a right to seek judicial intervention and
relief when petitioners violated its right of first refusal by issuing invitations to bid the project to other contractors, without
affording private respondent its right of first refusal." 20 We disagree.
Undisputed is the fact that the private respondent and the government have not entered into any validly approved and
effective reclamation contract covering the Cebu South Reclamation Project. The City of Cebu and private respondent's
Contract of Reclamation dated
October 31, 1977 21 was never approved by the President. Their Confirmatory Agreement dated January 4, 1980 merely
shows that the City of Cebu engaged private respondent "to undertake and prepare the detailed and integrated development
plan on land use, including technical, economic, marketing and financial feasibility studies . . ." of the Cebu South
Reclamation Project. 22 Incidentally, the aforementioned certification, issued by the Office of the President on January 12,
1996, manifests that private respondent's development plan and feasibility studies, submitted pursuant to the said
Confirmatory Agreement, are the items pending final consideration and approval of the President.
Private respondent alleges that the injunctive writ merely protected its alleged right of first refusal which arose from the
President's August 13, 1979 Memorandum addressed to the concerned public officials, stating that "considerations of equity
[require] that option right of first refusal for a period as may be determined by the PEA shall be granted to private entities
which have made initial investments on the project." 23 This memorandum, however, must be construed in harmony with the
aforecited PD 1818 and PD 1594, 24 which prescribe the policies, guidelines, rules and regulations for government
infrastructure contracts. Said memorandum certainly could not be construed as a law authorizing a repeal of PD 1818 and
PD 1594. Indeed, laws are repealed only by subsequent ones, 25 whether expressly or impliedly. There is no express repeal of
said law, as they were not even mentioned in the memorandum, either by number or by text. Neither can there be an implied
repeal, since was not "convincingly and unambiguously demonstrated" that the mention in the memorandum of a right of
first refusal was so repugnant and inconsistent with said laws as to defy harmonization. Basic is the rule in statutory
construction that implied repeals are not favored. 26 In addition, the memorandum was merely an expression of an executive
directive to subordinates, not a legislative enactment. Hence, it cannot obviate the operation of PD 1818 and PD 1594.
Section 4 of PD 1594 provides:
Sec. 4. Bidding. Construction projects shall generally be undertaken by contract after competitive
public bidding. Projects may be undertaken by administration or force account or by negotiated contract
only in exceptional cases where time is of the essence, or where there is lack of qualified bidders or
contractors, or where there is a conclusive evidence that greater economy and efficiency would be
achieved through this arrangement, and in accordance with provision of laws and acts on the matter,
subject to the approval of the Ministry of Public Works, Transportation and Communications, the
Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is less
than P1 Million, and of the President of the Philippines, upon the recommendation of the Minister, if the
project cost is P1 Million or more.
In the award of government contracts, the law requires a competitive public bidding. This is reasonable because "[a]
competitive public bidding aims to protect the public interest by giving the public the best possible advantages thru open
competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the execution of public
contracts." 27 Lawful and laudable, therefore, is the petitioners' Memorandum of Agreement mandating the City of Cebu to
conduct a competitive public bidding in implementing the Cebu South Reclamation Project. The conduct of such public
bidding is not violative of private respondent's alleged vested right. In the Court's viewpoint, the said right may be
considered for the purpose of awarding the contract of reclamation, only when the latter's proposal are in all aspects equal to
the bid of another proponent. In this kind of situation, the private respondent's claim to a right of first refusal indeed entitles
it to priority in the award of the contract. But this claimed right of first refusal cannot bar another proponent from submitting
a bid or proposal.
Note, however, that under Section 4 of PD 1594, a negotiated contract may be allowed in exceptional circumstances
enumerated therein, subject to approval by the President. Executive Order No. 380, 28 which took effect November 27, 1989,
also provided for the President's approval of negotiated infrastructure contracts, the cost of which, for the Department of
Transportation and Communications, amounts to P100 million and, for other departments and government corporations, P50
million. Since the project cost of the Cebu South Reclamation Project is over 4 billion pesos, 29 it is ineluctable that the
President's approval is required. Consequently untenable is private respondent's contention that its right or first refusal ipso
facto entitles it to a contract of reclamation, because it fails to take into consideration the legal requirement that negotiated
infrastructure contracts with costs beyond the specified ceiling must be approved by the President. Private respondent has no
legal basis to claim that, because of its initial expenses in preparing its proposed plans and feasibility studies, it could
dispense with or, worse, arrogate unto itself the President's power to ultimately decide or approve a contract of reclamation.
In Malayan Integrated Industries Corporation vs. Court of Appeals, 30 the Court recognized the President's authority to
disapprove the reclamation contract proposed by private respondent despite the latter's initial investments; in that case, the
President approved, instead, the contract between the City of Mandaue and F.F. Cruz, Inc. et al. 31
Issuance of Writ of Preliminary
Injunction Unjustified
From the foregoing discussion, it is clear that the respondent judge gravely abused his discretion in issuing the Writ of
Preliminary Injunction. Section 3, Rule 58 of the Rules of Court, enumerates the grounds for the issuance of a preliminary
injunction. Although private respondent alleged these grounds, 32 respondent judge had the duty to take judicial notice 33 of
PD 1818 and PD 1594. These laws, based on the foregoing discussion, ineludibly show that private respondent had no right
to the relief it sought. It is well-settled that, "before a writ of preliminary injunction may be issued, there must be a clear
showing, by the complaint that there exists a right to be protected, and that the acts against which the writ is to be directed
are violative of the said right." 34 In hindsight, the respondent judge's grant of the writ is truly regrettable, as it unnecessarily
delayed the implementation of an important infrastructure project, a delay which had far-reaching consequences on the
economic development and interest of Cebu, as well as the nation.
Second Issue:
Respondent Judge's Voluntary Inhibition
Petitioners 35 contend that the respondent judge gravely abused his discretion, when he made a volte face on his previous
Order dated February 26, 1996 36 inhibiting himself from hearing the case. In issuing said Order, Judge Burgos noted that
Petitioner Tomas Osmea's Motion for Inhibition raised the ground of "prejudgment" on the basis of statements made in his
Order dated February 22, 1996. Judge Burgos disposed as follows:
WHEREFORE, premises considered, the motion is granted, and accordingly, in order to disabuse the
mind of the movant and to further faithfully serve the cause of justice, the Presiding Judge of this Court
hereby voluntarily inhibits himself from further sitting in the present case with instruction to the Branch
Clerk of Court to send the records to the Office of the Clerk of Court for approval by the Honorable
Executive Judge Priscila S. Agana for final re-raffling.
The scheduled hearing for February 26, 1996 is cancelled.
SO ORDERED. 37
However, respondent judge reversed his voluntary inhibition, 38 meekly stating in his Order dated March 12, 1996 that "[t]he
allegation of prejudgment and partiality is so bare and empty as movant Osmea failed to present sufficient ground or proof
for the Presiding Judge to disqualify himself. The Judge realized the mistake in granting the motion for inhibition when
defendant Osmea misled the Court in asserting that on the same day February 26, 1996, he would be filling an
administrative case against the judge for violation of PD 1818 and Supreme Court Circulars issued in relation to said decree .
. . . In that eventuality, Osmea said, the Judge would be bias[ed] and partial to him because he [was] the complainant in the
pending administrative case." 39
We find merit in petitioners' contention. Judge Burgos inhibited himself on the basis of Petitioner Osmea's allegation of
prejudgment. In reversing his voluntary inhibition, respondent judge nebulously branded Osmea's allegations as "so bare
and empty." Judge Burgos' claim that the was misled by Osmea's threat of an administrative case is obviously a mere
afterthought that does not inspire belief. Although inhibition is truly discretionary 40 on the part of the judge, the flimsy
reasons proffered above are insufficient to justify reversal of his previous voluntary inhibition. As aptly pointed out by
petitioners in their Memorandum,
". . . a judge may not rescind his action and reassume jurisdiction where good cause exists for the
disqualification. Furthermore, because a presumption arises, by reason of the judge's prior order of
disqualification, of the existence of the factual reason for such disqualification, where the regular judge
who has been disqualified revokes the order of disqualification, and objection is made to such
revocation, it is not sufficient for the judge to enter an order merely saying that he or she is not
disqualified; the record should clearly reveal the facts upon which the revocation is made." (46 Am Jur
2d 234, p. 321) 41
We deem it important to point out that a judge must preserve the trust and faith reposed in him by the parties as an impartial
and objective administrator of justice. When he exhibits actions that give rise, fairly or unfairly, to perceptions of bias, such
faith and confidence are eroded, and he has no choice but to inhibit himself voluntarily. It is basic that "[a] judge may not be
legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt [on] his honest actuations
and probity in favor of either party, or incite such state of mind, he should conduct a careful self-examination. He should
exercise his discretion on in a way that the people's faith in the courts of justice is not impaired. The better course for the
judge is to disqualify himself." 42
Third Issue:
Omnibus Motion Ineffective
Private respondent insists that the petitioners' Omnibus Motion 43 dated February 14, 1996 is a mere scrap of paper, as it
contained a notice of hearing addressed only to the clerk of court with no proof of its service to the opposing counsel. 44
Private respondent is clutching at straws. The petitioners' Omnibus Motion was filed pursuant to the trial court's own order to
show cause why the injunction should not issue. It actually partakes of a brief or memorandum showing the trial court's lack
of jurisdiction to issue the preliminary injunction. The Omnibus Motion raised a very important matter which the court itself
could have ruled on, even motu proprio, considering that a jurisdictional question may be raised at any time, even for the
first time on appeal. 45 Moreover, as expressed by petitioners, the issue is now moot, since the private respondent filed an
Amended Complaint giving petitioner another fifteen days to file a responsive pleading. Within the said period, "petitioners
filed a Manifestation and Motion dated 7 March 1996, adopting the Omnibus Motion of 14 February 1996 and the Motion
for Reconsideration with Cautionary Notice against the Amended Complaint and the application for writ of preliminary
injunction therein contained." 46
Fourth Issue: Motion for Reconsideration Actually Filed
Finally, private respondent alleges that the petition should be dismissed on the ground that petitioners did not file a motion
for reconsideration. 47 This allegation is negated by the simple fact that a Motion for Reconsideration with Cautionary
Notice, 48 although denied by the trial court, was actually filed by petitioners within the prescribed period.
Epilogue
Litigants, lawyers and judges sometimes forget that they share the responsibility of unclogging the dockets of the judiciary.
As a lamentable consequence, this Court is compelled to resolve cases which are utterly bereft of merit. This is one of those
cases.
Private Respondent Malayan Integrated Industries Corporation ("Malayan," for brevity) was the petitioner in Malayan
Integrated Industries Corp. vs. Court of Appeals, et al., 49 in which this Court, citing PD 1818, held that no writ of injunction
may be issued to prevent the implementation of the reclamation project along the coast of Mandaue City, which was deemed
an infrastructure project. In the present case, Private Respondent Malayan nevertheless sought again the issuance of an
injunctive writ to restrain the implementation of a similar reclamation project in adjacent Cebu City. In initiating the present
proceedings, private respondent evidently ignored our earlier pronouncement and unnecessarily clogged the dockets of our
courts.
The respondent trial judge, on the other hand, abetted Malayan's brazen disregard of this Court's earlier ruling. Worse, he
ruled that the earlier case did not apply, because "E.O. No. 380 was not presented by the parties for consideration by the
High Court." 50 He maintained that EO 380, dated November 27, 1989, did not include reclamation projects in the definition
of infrastructure projects.
As earlier stated, the ruling of the trial court is lamentable. We note that, in the first place, EO 380 did not purport to be an
exclusive enumeration of infrastructure projects. Moreover, the Supreme Court itself held after the effectivity of EO 380
that reclamation projects are deemed infrastructure projects, thereby resolving the present question with finality. It is
unfortunate that the trial court cavalierly contravened a categorical ruling of the Supreme Court. But even more deplorable, it
insinuated that this Court did not take into account all applicable extant laws. To propound such view is to undermine the
people's trust and confidence in the judiciary. This we cannot countenance. It is opportune to remind judges of their sworn
duty to follow the doctrines and rulings of this Court.
In issuing writs of injunction, judges should observe the admonition of the Court in Olalia vs. Hizon: 51
It has been consistently held that there is no power the exercise of which is more delicate, which,
requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than
the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases
of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages.
Every court should remember that an injunction is a limitation upon the freedom of action of the
defendant and should not be granted lightly or precipitately. It should be granted only when the court is
fully satisfied that the law permits it and the emergency demands it.
WHEREFORE, the petition is hereby GRANTED. The Orders of the Regional Trial Court in Civil Case No. CEB-18292,
dated February 22, 1996, March 12, 1996 and March 18, 1996, are REVERSED and SET ASIDE. The temporary restraining
order earlier issued is MADE PERMANENT. Respondent judge is ordered to INHIBIT himself from further hearing this
case. Let Civil Case No. CEB-18292 be re-raffled and the proceedings therein proceed with all deliberate dispatch.
SO ORDERED.
Malaga vs. Penachos
This controversy involves the extent and applicability of P.D. 1818, which prohibits any court from issuing injunctions in
cases involving infrastructure projects of the government.chanrobles.com.ph : virtual law library
The facts are not disputed.
The Iloilo State College of Fisheries (henceforth ISCOF) through its Pre-qualification, Bids and Awards Committee
(henceforth PBAC) caused the publication in the November 25, 26, 28, 1988 issues of the Western Visayas Daily an
Invitation to Bid for the construction of the Micro Laboratory Building at ISCOF. The notice announced that the last day for
the submission of pre-qualification requirements (PRE C-1) ** was December 2, 1988, and that the bids would be received
and opened on December 12, 1988, 3 oclock in the afternoon. 1
Petitioners Maria Elena Malaga and Josieleen Najarro, respectively doing business under the name of the B.E. Construction
and Best Built Construction, submitted their pre-qualification documents at two oclock in the afternoon of December 2,
1988. Petitioner Jose Occea submitted his own PRE-C1 on December 5, 1988. All three of them were not allowed to
participate in the bidding because their documents were considered late, having been submitted after the cut-off time of ten
oclock in the morning of December 2, 1988.
On December 12, 1988, the petitioners filed a complaint with the Regional Trial Court of Iloilo against the chairman and
members of PBAC in their official and personal capacities. The plaintiffs claimed that although they had submitted their
PRE-C1 on time, the PBAC refused without just cause to accept them. As a result, they were not included in the list of pre-
qualified bidders, could not secure the needed plans and other documents, and were unable to participate in the scheduled
bidding.
In their prayer, they sought the resetting of the December 12, 1988 bidding and the acceptance of their PRE-C1 documents.
They also asked that if the bidding had already been conducted, the defendants be directed not to award the project pending
resolution of their complaint.
On the same date, Judge Lodrigio L. Lebaquin issued a restraining order prohibiting PBAC from conducting the bidding and
awarding the project. 2
On December 16, 1988, the defendants filed a motion to lift the restraining order on the ground that the Court was prohibited
from issued restraining orders, preliminary injunctions and preliminary mandatory injunctions by P.D.
1818.chanroblesvirtualawlibrary
The decree reads pertinently as follows:chanrob1es virtual 1aw library
Section 1. No Court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or
preliminary 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 and 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.
The movants also contended that the question of the propriety of a preliminary injunction had become moot and academic
because the restraining order was received late, at 2 oclock in the afternoon of December 12, 1988, after the bidding had
been conducted and closed at eleven thirty in the morning of that date.
In their opposition of the motion, the plaintiffs argued against the applicability of P.D. 1818, pointing out that while ISCOF
was a state college, it had its own charter and separate existence and was not part of the national government or of any local
political subdivision. Even if P.D. 1818 were applicable, the prohibition presumed a valid and legal government project, not
one tainted with anomalies like the project at bar.
They also cited Filipinas Marble Corp. v. IAC, 3 where the Court allowed the issuance of a writ of preliminary injunction
despite a similar prohibition found in P.D. 385. The Court therein stated that:chanrob1es virtual 1aw library
The government, however, is bound by basic principles of fairness and decency under the due process clauses of the Bill of
Rights. P.D. 385 was never meant to protect officials of government-lending institutions who take over the management of a
borrower corporation, lead that corporation to bankruptcy through mismanagement or misappropriation of its funds, and
who, after ruining it, use the mandatory provisions of the decree to avoid the consequences of their misleads (p. 188,
Emphasis supplied).
On January 2, 1989, the trial court lifted the restraining order and denied the petition for preliminary injunction. It declared
that the building sought to be construed at the ISCOF was an infrastructure project of the government falling within the
coverage of P.D. 1818. Even if it were not, the petition for the issuance of a writ of preliminary injunction would still fail
because the sheriffs return showed that PBAC was served a copy of the restraining order after the bidding sought to be
restrained had already been held. Furthermore, the members of the PBAC could not be restrained from awarding the project
because the authority to do so was lodged in the President of the ISCOF, who was not a party to the case. 4
In the petition now before us, it is reiterated that P.D. 1818 does not cover the ISCOF because of its separate and distinct
corporate personality. It is also stressed again that the prohibition under P.D. 1818 could not apply to the present controversy
because the project was vitiated with irregularities, to wit:chanrobles.com : virtual law library
1. The invitation to bid as published fixed the deadline of submission of pre-qualification document on December 2, 1988
without indicating any time, yet after 10:00 oclock of the given late, the PBAC already refused to accept petitioners
documents.
2. The time and date of bidding was published as December 12, 1988 at 3:00 p.m. yet it was held at 10:00 oclock in the
morning.
3. Private respondents, for the purpose of inviting bidders to participate, issued a mimeographed "Invitation to Bid" form,
which by law (P.D. 1594 and Implementing Rules, Exh. B-1) is to contain the particulars of the project subject of bidding for
the purpose of.
(i) enabling bidders to make an intelligent and accurate bids;
(ii) for PBAC to have a uniform basis for evaluating the bids;
(iii) to prevent collusion between a bidder and the PBAC, by opening to all the particulars of a project.
Additionally, the Invitation to Bid prepared by the respondents and the Itemized Bill of Quantities therein were left blank. 5
And although the project in question was a "Construction," the private respondents used an Invitation to Bid form for
"Materials." 6
The petitioners also point out that the validity of the writ of preliminary injunction had not yet become moot and academic
because even if the bids had been opened before the restraining order was issued, the project itself had not yet been awarded.
The ISCOF president was not an indispensable party because the signing of the award was merely a ministerial function
which he could perform only upon the recommendation of the Award Committee. At any rate, the complaint had already
been duly amended to include him as a party defendant.
In their Comment, the private respondents maintain that since the members of the board of trustees of the ISCOF are all
government officials under Section 7 of P.D. 1523 and since the operations and maintenance of the ISCOF are provided for
in the General Appropriations Law, it is should be considered a government institution whose infrastructure project is
covered by P.D. 1818.
Regarding the schedule for pre-qualification, the private respondents insist that PBAC posted on the ISCOF bulletin board
an announcement that the deadline for the submission of pre-qualifications documents was at 10 oclock of December 2,
1988, and the opening of bids would be held at 1 oclock in the afternoon of December 12, 1988. As of ten oclock in the
morning of December 2, 1988, B.E. construction and Best Built construction had filed only their letters of intent. At two
oclock in the afternoon, B.E., and Best Built filed through their common representative, Nenette Garuello, their pre-
qualification documents which were admitted but stamped "submitted late." The petitioners were informed of their
disqualification on the same date, and the disqualification became final on December 6, 1988. Having failed to take
immediate action to compel PBAC to pre-qualify them despite their notice of disqualification, they cannot now come to this
Court to question the binding proper in which they had not participated.
In the petitioners Reply, they raise as an additional irregularity the violation of the rule that where the estimate project cost
is from P1M to P5M, the issuance of plans, specifications and proposal book forms should made thirty days before the date
of bidding. 7 They point out that these forms were issued only on December 2, 1988, and not at the latest on November 12,
1988, the beginning of the 30-day period prior to the scheduled bidding.
In their Rejoinder, the private respondents aver that the documents of B.E. and Best Built were received although filed late
and were reviewed by the Award Committee, which discovered that the contractors had expired licenses. B.E.s temporary
certificate of Renewal of Contractors License was valid only until September 30, 1988, while Best Builts license was valid
only up to June 30, 1988.chanrobles lawlibrary : rednad
The Court has considered the arguments of the parties in light of their testimonial and documentary evidence and the
applicable laws and jurisprudence. It finds for the petitioners.
The 1987 Administrative Code defines a government instrumentality as follows:chanrob1es virtual 1aw library
Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions,
and government-owned or controlled corporations. (Sec. 2 (5) Introductory Provisions).
The same Code describes a chartered institution thus:chanrob1es virtual 1aw library
Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions
relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the
monetary authority of the state. (Sec. 2 (12) Introductory Provisions).
It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by P.D. 1818.
There are also indications in its charter that ISCOF is a government instrumentality. First, it was created in pursuance of the
integrated fisheries development policy of the State, a priority program of the government of effect the socio-economic life
of the nation. Second, the Treasurer of the Republic of the Philippines also be the ex-officio Treasurer of the state college
with its accounts and expenses to be audited by the Commission on Audit or its duly authorized representative. Third, heads
of bureaus and offices of the National Government are authorized to loan or transfer to it, upon request of the president of
the state college, such apparatus, equipment, or supplies and even the services of such employees as can be spared without
serious detriment to public service. Lastly, an additional amount of P1.5M had been appropriated out of the funds of the
National Treasury and it was also decreed in its charter that the funds and maintenance of the state college would henceforth
be included in the General Appropriations Law. 8
Nevertheless, it does not automatically follow that ISCOF is covered by the prohibition in the said decree.
In the case of Datiles and Co. v. Sucaldito, 9 this Court interpreted a similar prohibition contained in P.D. 605, the law after
which P.D. 1818 was patterned. It was there declared that the prohibition pertained to the issuance of injunctions or
restraining orders by courts against administrative acts in controversies involving facts or the exercise of discretion in
technical cases. The Court observed that to allow the courts to judge these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla made it clear, however, that on issues definitely outside of this
dimension and involving questions of law, courts could not be prevented by P.D. No. 605 from exercising their power to
restrain or prohibit administrative acts.
We see no reason why the above ruling should not apply to P.D. 1818.
There are at least two irregularities committed by PBAC that justified injunction of the bidding and the award of the
project.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
First, PBAC set deadlines for the filing of the PRE-C1 and the opening of bids and then changed these deadlines without
prior notice to prospective participants.
Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government infrastructure contracts, PBAC
shall provide prospective bidders with the Notice of Pre-qualification and other relevant information regarding the proposed
work. Prospective contractors shall be required to file their ARC-Contractors Confidential Application for Registration &
Classifications & the PRE-C2 Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules,
this was referred to as PRE-C1) not later than the deadline set in the published Invitation to Bid, after which date no PRE-C2
shall be submitted and received. Invitations to Bid shall be advertised for at least three times within a reasonable period but
in no case less than two weeks in at least two newspapers of general circulations. 10
PBAC advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and announced that
the opening of bids would be at 3 oclock in the afternoon of December 12, 1988. This schedule was changed and a notice of
such change was merely posted at the ISCOF bulletin board. The notice advanced the cut-off time for the submission of pre-
qualification documents to 10 oclock in the morning of December 2, 1988, and the opening of bids to 1 oclock in the
afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the PBAC meeting held on
December 6, 1988. While it may be true that there were fourteen contractors who were pre-qualified despite the change in
schedule, this fact did not cure the defect of the irregular notice. Notably, the petitioners were disqualified because they
failed to meet the new deadline and not because of their expired licenses. ***
We have held that where the law requires a previous advertisement before government contracts can be awarded, non-
compliance with the requirement will, as a general rule, render the same void and of no effect 11 The facts that an invitation
for bids has been communicated to a number of possible bidders is not necessarily sufficient to establish compliance with the
requirements of the law if it is shown that other public bidders have not been similarly notified. 12
Second, PBAC was required to issue to pre-qualified applicants the plans, specifications and proposal book forms for the
project to be bid thirty days before the date of bidding if the estimate project cost was between P1M and P5M. PBAC has not
denied that these forms were issued only on December 2, 1988, or only ten days before the bidding scheduled for December
12, 1988. At the very latest, PBAC should have issued them on November 12, 1988, or 30 days before the scheduled
bidding.
It is apparent that the present controversy did not arise from the discretionary acts of the administrative body nor does it
involve merely technical matters. What is involved here is non-compliance with the procedural rules on bidding which
required strict observance. The purpose of the rules implementing P.D. 1594 is to secure competitive bidding and to prevent
favoritism, collusion and fraud in the award of these contracts to the detriment of the public. This purpose was defeated by
the irregularities committed by PBAC.chanrobles law library : red
It has been held that the three principles in public bidding are the offer to the public, an opportunity for competition and a
basis for exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive
character of the system and thwarts and purpose of its adoption. 13
In the case at bar, it was the lack of proper notice regarding the pre-qualification requirement and the bidding that caused the
elimination of petitioners B.E. and Best Built. It was not because of their expired licenses, as private respondents now claim.
Moreover, the plans and specifications which are the contractors guide to an intelligent bid, were not issued on time, thus
defeating the guaranty that contractors be placed on equal footing when they submit their bids. The purpose of competitive
bidding is negated if some contractors are informed ahead of their rivals of the plans and specifications that are to be the
subject of their bids.
P.D. 1818 was not intended to shield from judicial scrutiny irregularities committed by administrative agencies such as the
anomalies above described. Hence, the challenged restraining order was not improperly issued by the respondent judge and
the writ of preliminary injunction should not have been denied. We note from Annex Q of the private respondents
memorandum, however, that the subject project has already been "100% completed as to the Engineering Standard." This fait
accompli has made the petition for a writ of preliminary injunction moot and academic.
We come now to the liabilities of the private respondents.
It has been held in a long line of cases that a contract granted without the competitive bidding required by law is void, and
the party to whom it is awarded cannot benefit from it. 14 It has not been shown that the irregularities committed by PBAC
were induced by or participated in by any of the contractors. Hence, liability shall attach only to the private respondents for
the prejudice sustained by the petitioners as a result of the anomalies described above.
As there is no evidence of the actual loss suffered by the petitioners, compensatory damage may not be awarded to them.
Moral damages do not appear to be due either. Even so, the Court cannot close its eyes to the evident bad faith that
characterized the conduct of the private respondents, including the irregularities in the announcement of the bidding and their
efforts to persuade the ISCOF president to award the project after two days from receipt of the restraining order and before
they moved to lift such order. For such questionable acts, they are liable in nominal damages at least in accordance with
Article 2221 of the Civil Code, which states:jgc:chanrobles.com.ph
"Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant may be vindicated or, recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by
him.
These damages are to assessed against the private respondents in the amount of P10,000.00 each, to be paid separately for
each of petitioners B.E. Construction and Best Built Construction. The other petitioner, Occea Builders, is not entitled to
relief because it admittedly submitted its pre-qualification documents on December 5, 1988, or three days after the
deadline.chanrobles virtual lawlibrary
WHEREFORE, judgment is hereby rendered: a) upholding the restraining order dated December 12, 1988, as not covered by
the prohibition in P.D. 1818; b) ordering the chairman and the members of the PBAC board of trustees, namely Manuel R.
Penachos, Jr., Alfredo Matangga, Enrico Ticar, and Teresita Villanueva, to each pay separately to petitioners Maria Elena
Malaga and Josieleen Najarro nominal damages P10,000.00 each; and c) removing the said chairman and members from the
PBAC board of trustees, or whoever among them is still incumbent therein, for their malfeasance in office. Costs against
PBAC.
Let a copy of this decision be sent to the Office of the Ombudsman.
SO ORDERED.
MANILA PRINCE HOTEL vs. GSIS

The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and concessions covering
the national economy and patrimony, the State shall give preference to qualified Filipinos, 1 is in oked by petitioner in its bid
to acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing,
respondents maintain that the provision is not self-executing but requires an implementing legislation for its enforcement.
Corollarily, they ask whether the 51% shares form part of the national economy and patrimony covered by the protective
mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to the privatization
program of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided to sell through public
bidding 30% to 51% of the issued and outstanding shares of respondent MHC. The winning bidder, or the eventual "strategic
partner," is to provide management expertise and/or an international marketing/reservation system, and financial support to
strengthen the profitability and performance of the Manila Hotel. 2 In a close bidding held on 18 September 1995 only two
(2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the
MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel
operator, which bid for the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC
1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to
November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the
Management Contract, International Marketing/Reservation System Contract or
other type of contract specified by the Highest Bidder in its strategic plan for the
Manila Hotel. . . .
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with
GSIS . . . .
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions
are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23,
1995 (reset to November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on

Privatization)/OGCC (Office of the Government Corporate Counsel) are obtained. 3
Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the execution of the necessary
contracts, petitioner in a letter to respondent GSIS dated 28 September 1995 matched the bid price of P44.00 per share
tendered by Renong Berhad. 4 In a subsequent letter dated 10 October 1995 petitioner sent a manager's check issued by
Philtrust Bank for Thirty-three Million Pesos (P33.000.000.00) as Bid Security to match the bid of the Malaysian Group,
Messrs. Renong Berhad . . . 5 which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the matching bid and that the
sale of 51% of the MHC may be hastened by respondent GSIS and consummated with Renong Berhad, petitioner came to
this Court on prohibition and mandamus. On 18 October 1995 the Court issued a temporary restraining order enjoining
respondents from perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it by the First Division.
The case was then set for oral arguments with former Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as
amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the Manila Hotel has
been identified with the Filipino nation and has practically become a historical monument which reflects the vibrancy of
Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos who believed in the nobility and
sacredness of independence and its power and capacity to release the full potential of the Filipino people. To all intents and
purposes, it has become a part of the national patrimony. 6 Petitioner also argues that since 51% of the shares of the MHC
carries with it the ownership of the business of the hotel which is owned by respondent GSIS, a government-owned and
controlled corporation, the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of
the national economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term
national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies. 7
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business also unquestionably
part of the national economy petitioner should be preferred after it has matched the bid offer of the Malaysian firm. For the
bidding rules mandate that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this
to the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the
highest bid in terms of price per share. 8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution is merely a statement
of principle and policy since it is not a self-executing provision and requires implementing legislation(s) . . . Thus, for the
said provision to Operate, there must be existing laws "to lay down conditions under which business may be done." 9
Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national patrimony which
only refers to lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive marine
zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while
petitioner speaks of the guests who have slept in the hotel and the events that have transpired therein which make the hotel
historic, these alone do not make the hotel fall under the patrimony of the nation. What is more, the mandate of the
Constitution is addressed to the State, not to respondent GSIS which possesses a personality of its own separate and distinct
from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision invoked is still
inapplicable since what is being sold is only 51% of the outstanding shares of the corporation, not the hotel building nor the
land upon which the building stands. Certainly, 51% of the equity of the MHC cannot be considered part of the national
patrimony. Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution, petitioner should
have questioned it right from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if for any reason, the
Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly
submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share, is
misplaced. Respondents postulate that the privilege of submitting a matching bid has not yet arisen since it only takes place
if for any reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a
matching bid is premature since Renong Berhad could still very well be awarded the block of shares and the condition giving
rise to the exercise of the privilege to submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent GSIS did not exercise
its discretion in a capricious, whimsical manner, and if ever it did abuse its discretion it was not so patent and gross as to
amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. Similarly, the petition for
mandamus should fail as petitioner has no clear legal right to what it demands and respondents do not have an imperative
duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and administration of a nation. It is
supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the
fundamental and paramount law of the nation. 10 It prescribes the permanent framework of a system of government, assigns
to the different departments their respective powers and duties, and establishes certain fixed principles on which government
is founded. The fundamental conception in other words is that it is a supreme law to which all other laws must conform and
in accordance with which all private rights must be determined and all public authority administered. 11 Under the doctrine of
constitutional supremacy, if a law or contract violates any norm of the constitution that law or contract whether promulgated
by the legislative or by the executive branch or entered into by private persons for private purposes is null and void and
without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is
deemed written in every statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions command the legislature
to enact laws and carry out the purposes of the framers who merely establish an outline of government providing for the
different departments of the governmental machinery and securing certain fundamental and inalienable rights of citizens. 12 A
provision which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-
executing. But a provision which is complete in itself and becomes operative without the aid of supplementary or enabling
legislation, or that which supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if the nature and extent of the right conferred and the liability
imposed are fixed by the constitution itself, so that they can be determined by an examination and construction of its terms,
and there is no language indicating that the subject is referred to the legislature for action. 13
As against constitutions of the past, modern constitutions have been generally drafted upon a different principle and have
often become in effect extensive codes of laws intended to operate directly upon the people in a manner similar to that of
statutory enactments, and the function of constitutional conventions has evolved into one more like that of a legislative body.
Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption
now is that all provisions of the constitution are self-executing If the constitutional provisions are treated as requiring
legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the
fundamental law. 14 This can be cataclysmic. That is why the prevailing view is, as it has always been, that
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing . . . . Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply refusing to pass the needed implementing
statute. 15
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-executing, as they quote
from discussions on the floor of the 1986 Constitutional Commission
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of "PREFERENCE" is given to QUALIFIED
FILIPINOS," can it be understood as a preference to qualified Filipinos vis-a-vis
Filipinos who are not qualified. So, why do we not make it clear? To qualified
Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove

the word "QUALIFIED?".
MR. RODRIGO. No, no, but say definitely "TO QUALIFIED FILIPINOS" as
against whom? As against aliens or over aliens?
MR. NOLLEDO. Madam President, I think that is understood. We use the word
"QUALIFIED" because the existing laws or prospective laws will always lay down
conditions under which business may be done. For example, qualifications on the
setting up of other financial structures, et cetera (emphasis supplied by respondents)
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO Yes, 16
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear that it is non-self-
executing but simply for purposes of style. But, certainly, the legislature is not precluded from enacting other further laws to
enforce the constitutional provision so long as the contemplated statute squares with the Constitution. Minor details may be
left to the legislature without impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of powers
directly granted by the constitution, further the operation of such a provision, prescribe a practice to be used for its
enforcement, provide a convenient remedy for the protection of the rights secured or the determination thereof, or place
reasonable safeguards around the exercise of the right. The mere fact that legislation may supplement and add to or prescribe
a penalty for the violation of a self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a remedy for enforcing a right or
liability is not necessarily an indication that it was not intended to be self-executing. The rule is that a self-executing
provision of the constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in
harmony with the constitution, further the exercise of constitutional right and make it more available. 17 Subsequent
legislation however does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied from the tenor of the
first and third paragraphs of the same section which undoubtedly are not self-executing. 18 The argument is flawed. If the first
and third paragraphs are not self-executing because Congress is still to enact measures to encourage the formation and
operation of enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
exercise authority over foreign investments within its national jurisdiction, as in the third paragraph, then a fortiori, by the
same logic, the second paragraph can only be self-executing as it does not by its language require any legislation in order to
give preference to qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one part and non-self-executing in another. 19
Even the cases cited by respondents holding that certain constitutional provisions are merely statements of principles and
policies, which are basically not self-executing and only placed in the Constitution as moral incentives to legislation, not as
judicially enforceable rights are simply not in point. Basco v. Philippine Amusements and Gaming Corporation 20 speaks
of constitutional provisions on personal dignity, 21 the sanctity of family life, 22 the vital role of the youth in nation-building 23
the promotion of social justice, 24 and the values of education. 25 Tolentino v. Secretary of Finance 26 refers to the
constitutional provisions on social justice and human rights 27 and on education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites
provisions on the promotion of general welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-building 32
and the promotion of total human liberation and development. 33 A reading of these provisions indeed clearly shows that they
are not judicially enforceable constitutional rights but merely guidelines for legislation. The very terms of the provisions
manifest that they are only principles upon which the legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a mandatory, positive command which is
complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very
words the provision does not require any legislation to put it in operation. It is per se judicially enforceable When our
Constitution mandates that [i]n the grant of rights, privileges, and concessions covering national economy and patrimony,
the State shall give preference to qualified Filipinos, it means just that qualified Filipinos shall be preferred. And when
our Constitution declares that a right exists in certain specified circumstances an action may be maintained to enforce such
right notwithstanding the absence of any legislation on the subject; consequently, if there is no statute especially enacted to
enforce such constitutional right, such right enforces itself by its own inherent potency and puissance, and from which all
legislations must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission 34 explains
The patrimony of the Nation that should be conserved and developed refers not only to out rich natural
resources but also to the cultural heritage of out race. It also refers to our intelligence in arts, sciences
and letters. Therefore, we should develop not only our lands, forests, mines and other natural resources
but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage. 35 When the Constitution speaks of
national patrimony, it refers not only to the natural resources of the Philippines, as the Constitution could have very well
used the term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark a living testimonial of Philippine heritage. While it was restrictively an American
hotel when it first opened in 1912, it immediately evolved to be truly Filipino, Formerly a concourse for the elite, it has since
then become the venue of various significant events which have shaped Philippine history. It was called the Cultural Center
of the 1930's. It was the site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the
Official Guest House of the Philippine Government. it plays host to dignitaries and official visitors who are accorded the
traditional Philippine hospitality. 36
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of a City. 37 During
World War II the hotel was converted by the Japanese Military Administration into a military headquarters. When the
American forces returned to recapture Manila the hotel was selected by the Japanese together with Intramuros as the two (2)
places fro their final stand. Thereafter, in the 1950's and 1960's, the hotel became the center of political activities, playing
host to almost every political convention. In 1970 the hotel reopened after a renovation and reaped numerous international
recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986 the hotel was the site of a failed coup d' etat
where an aspirant for vice-president was "proclaimed" President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and frustrations of
the Filipinos; its existence is impressed with public interest; its own historicity associated with our struggle for sovereignty,
independence and nationhood. Verily, Manila Hotel has become part of our national economy and patrimony. For sure, 51%
of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority and controlling
stock, so that anyone who acquires or owns the 51% will have actual control and management of the hotel. In this instance,
51% of the MHC cannot be disassociated from the hotel and the land on which the hotel edifice stands. Consequently, we
cannot sustain respondents' claim that the Filipino First Policy provision is not applicable since what is being sold is only
51% of the outstanding shares of the corporation, not the Hotel building nor the land upon which the building stands. 38
The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution also includes corporations at least
60% of which is owned by Filipinos. This is very clear from the proceedings of the 1986 Constitutional Commission
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment.

And the amendment would consist in substituting the words "QUALIFIED
FILIPINOS" with the following: "CITIZENS OF THE PHILIPPINES OR
CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING
STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
xxx xxx xxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we

have to raise a question. Suppose it is a corporation that is 80-percent Filipino, do we
not give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What
about a corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the
preference should only be 100-percent Filipino.
MR: DAVIDE. I want to get that meaning clear because "QUALIFIED FILIPINOS"
may refer only to individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President. 39
xxx xxx xxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: "IN THE GRANT OF RIGHTS,
PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY
AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS." And the word "Filipinos" here, as intended by the proponents, will
include not only individual Filipinos but also Filipino-controlled entities or entities
fully-controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained thus
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to

please restate his amendment so that I can ask a question.
MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND

CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY,
THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS."
MR FOZ. In connection with that amendment, if a foreign enterprise is qualified and

a Filipino enterprise is also qualified, will the Filipino enterprise still be given a
preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino
enterprise, will the Filipino still be preferred?
MR. NOLLEDO. The answer is "yes."

MR. FOZ. Thank you, 41
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL THE STATE
SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called "Filipino
First" policy. That means that Filipinos should be given preference in the grant of concessions, privileges
and rights covering the national patrimony. 42
The exchange of views in the sessions of the Constitutional Commission regarding the subject provision was still further
clarified by Commissioner Nolledo 43
Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic concerns. It is
better known as the FILIPINO FIRST Policy . . . This provision was never found in previous
Constitutions . . . .
The term "qualified Filipinos" simply means that preference shall be given to those citizens who can
make a viable contribution to the common good, because of credible competence and efficiency. It
certainly does NOT mandate the pampering and preferential treatment to Filipino citizens or
organizations that are incompetent or inefficient, since such an indiscriminate preference would be
counter productive and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to be made between a
"qualified foreigner" end a "qualified Filipino," the latter shall be chosen over the former."
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and selected as one of the
qualified bidders. It was pre-qualified by respondent GSIS in accordance with its own guidelines so that the sole inference
here is that petitioner has been found to be possessed of proven management expertise in the hotel industry, or it has
significant equity ownership in another hotel company, or it has an overall management and marketing proficiency to
successfully operate the Manila Hotel. 44
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject provision is not self-
executory and requires implementing legislation is quite disturbing. The attempt to violate a clear constitutional provision
by the government itself is only too distressing. To adopt such a line of reasoning is to renounce the duty to ensure
faithfulness to the Constitution. For, even some of the provisions of the Constitution which evidently need implementing
legislation have juridical life of their own and can be the source of a judicial remedy. We cannot simply afford the
government a defense that arises out of the failure to enact further enabling, implementing or guiding legislation. In fine, the
discourse of Fr. Joaquin G. Bernas, S.J., on constitutional government is apt
The executive department has a constitutional duty to implement laws, including the Constitution, even
before Congress acts provided that there are discoverable legal standards for executive action. When
the executive acts, it must be guided by its own understanding of the constitutional command and of
applicable laws. The responsibility for reading and understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive would have to ask Congress, or perhaps the Court,
for an interpretation every time the executive is confronted by a constitutional command. That is not how
constitutional government operates. 45
Respondents further argue that the constitutional provision is addressed to the State, not to respondent GSIS which by itself
possesses a separate and distinct personality. This argument again is at best specious. It is undisputed that the sale of 51% of
the MHC could only be carried out with the prior approval of the State acting through respondent Committee on
Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of
respondents GSIS and MHC a "state action." In constitutional jurisprudence, the acts of persons distinct from the
government are considered "state action" covered by the Constitution (1) when the activity it engages in is a "public
function;" (2) when the government is so significantly involved with the private actor as to make the government responsible
for his action; and, (3) when the government has approved or authorized the action. It is evident that the act of respondent
GSIS in selling 51% of its share in respondent MHC comes under the second and third categories of "state action." Without
doubt therefore the transaction. although entered into by respondent GSIS, is in fact a transaction of the State and therefore
subject to the constitutional command. 46
When the Constitution addresses the State it refers not only to the people but also to the government as elements of the State.
After all, government is composed of three (3) divisions of power legislative, executive and judicial. Accordingly, a
constitutional mandate directed to the State is correspondingly directed to the three(3) branches of government. It is
undeniable that in this case the subject constitutional injunction is addressed among others to the Executive Department and
respondent GSIS, a government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning bidder. The bidding rules
expressly provide that the highest bidder shall only be declared the winning bidder after it has negotiated and executed the
necessary contracts, and secured the requisite approvals. Since the "Filipino First Policy provision of the Constitution
bestows preference on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder will
be declared the winning bidder. Resultantly, respondents are not bound to make the award yet, nor are they under obligation
to enter into one with the highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates of
the 1987 Constitution the provisions of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should be, impliedly
written in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified for being violative of the
Constitution. It is a basic principle in constitutional law that all laws and contracts must conform with the fundamental law
of the land. Those which violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders
are willing to match the highest bid in terms of price per
share. 47 Certainly, the constitutional mandate itself is reason enough not to award the block of shares immediately to the
foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact, we cannot conceive of a stronger
reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the grant of rights, privileges
and concessions covering the national economy and patrimony, thereby exceeding the bid of a Filipino, there is no question
that the Filipino will have to be allowed to match the bid of the foreign entity. And if the Filipino matches the bid of a
foreign firm the award should go to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy
provision of the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the bidding rules, the
constitutional fiat is, omnipresent to be simply disregarded. To ignore it would be to sanction a perilous skirting of the basic
law.
This Court does not discount the apprehension that this policy may discourage foreign investors. But the Constitution and
laws of the Philippines are understood to be always open to public scrutiny. These are given factors which investors must
consider when venturing into business in a foreign jurisdiction. Any person therefore desiring to do business in the
Philippines or with any of its agencies or instrumentalities is presumed to know his rights and obligations under the
Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to Renong Berhad since petitioner
was well aware from the beginning that a foreigner could participate in the bidding is meritless. Undoubtedly, Filipinos and
foreigners alike were invited to the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the
qualified Filipino fails to match the highest bid tendered by the foreign entity. In the case before us, while petitioner was
already preferred at the inception of the bidding because of the constitutional mandate, petitioner had not yet matched the bid
offered by Renong Berhad. Thus it did not have the right or personality then to compel respondent GSIS to accept its earlier
bid. Rightly, only after it had matched the bid of the foreign firm and the apparent disregard by respondent GSIS of
petitioner's matching bid did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award has been finally made. To
insist on selling the Manila Hotel to foreigners when there is a Filipino group willing to match the bid of the foreign group is
to insist that government be treated as any other ordinary market player, and bound by its mistakes or gross errors of
judgment, regardless of the consequences to the Filipino people. The miscomprehension of the Constitution is regrettable.
Thus we would rather remedy the indiscretion while there is still an opportunity to do so than let the government develop the
habit of forgetting that the Constitution lays down the basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules, respondent
GSIS is left with no alternative but to award to petitioner the block of shares of MHC and to execute the necessary
agreements and documents to effect the sale in accordance not only with the bidding guidelines and procedures but with the
Constitution as well. The refusal of respondent GSIS to execute the corresponding documents with petitioner as provided in
the bidding rules after the latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution not merely to be
used as a guideline for future legislation but primarily to be enforced; so must it be enforced. This Court as the ultimate
guardian of the Constitution will never shun, under any reasonable circumstance, the duty of upholding the majesty of the
Constitution which it is tasked to defend. It is worth emphasizing that it is not the intention of this Court to impede and
diminish, much less undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes more
business opportunities but avowedly sanctions the preference for Filipinos whenever such preference is ordained by the
Constitution. The position of the Court on this matter could have not been more appropriately articulated by Chief Justice
Narvasa
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of
the legislature or the executive about the wisdom and feasibility of legislation economic in nature, the
Supreme Court has not been spared criticism for decisions perceived as obstacles to economic progress
and development . . . in connection with a temporary injunction issued by the Court's First Division
against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were
published in a major daily to the effect that injunction "again demonstrates that the Philippine legal
system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene in contracts
of the kind referred to or set itself up as the judge of whether they are viable or attainable, it is its
bounden duty to make sure that they do not violate the Constitution or the laws, or are not adopted or
implemented with grave abuse of discretion amounting to lack or excess of jurisdiction. It will never
shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing its business viability and preventing further losses, regardless of
the character of the asset, should not take precedence over non-material values. A commercial, nay even a budgetary,
objective should not be pursued at the expense of national pride and dignity. For the Constitution enshrines higher and nobler
non-material values. Indeed, the Court will always defer to the Constitution in the proper governance of a free society; after
all, there is nothing so sacrosanct in any economic policy as to draw itself beyond judicial review when the Constitution is
involved. 49
Nationalism is inherent, in the very concept of the Philippines being a democratic and republican state, with sovereignty
residing in the Filipino people and from whom all government authority emanates. In nationalism, the happiness and welfare
of the people must be the goal. The nation-state can have no higher purpose. Any interpretation of any constitutional
provision must adhere to such basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot
override the demands of nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest bidder solely for
the sake of privatization. We are not talking about an ordinary piece of property in a commercial district. We are talking
about a historic relic that has hosted many of the most important events in the short history of the Philippines as a nation. We
are talking about a hotel where heads of states would prefer to be housed as a strong manifestation of their desire to cloak the
dignity of the highest state function to their official visits to the Philippines. Thus the Manila Hotel has played and continues
to play a significant role as an authentic repository of twentieth century Philippine history and culture. In this sense, it has
become truly a reflection of the Filipino soul a place with a history of grandeur; a most historical setting that has played
a part in the shaping of a country. 51
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the historical landmark this
Grand Old Dame of hotels in Asia to a total stranger. For, indeed, the conveyance of this epic exponent of the Filipino
psyche to alien hands cannot be less than mephistophelian for it is, in whatever manner viewed, a veritable alienation of a
nation's soul for some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from a
qualified Filipino, can be gained by the Filipinos Manila Hotel and all that it stands for is sold to a non-Filipino? How
much of national pride will vanish if the nation's cultural heritage is entrusted to a foreign entity? On the other hand, how
much dignity will be preserved and realized if the national patrimony is safekept in the hands of a qualified, zealous and
well-meaning Filipino? This is the plain and simple meaning of the Filipino First Policy provision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of being the elderly
watchman of the nation, will continue to respect and protect the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION,

COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to
CEASE and DESIST from selling 51% of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to
ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the
shares of the Manila Hotel Corporation at P44.00 per share and thereafter to execute the necessary clearances and to do such
other acts and deeds as may be necessary for purpose.
SO ORDERED.
First United Constructors Corp. vs. Poro Point

First United Constructors Corporation (FUCC) filed this special civil action for certiorari and prohibition with prayer for the
issuance of a temporary restraining order, seeking to annul (i) the re-bidding of the contract for the Upgrading of the San
Fernando Airport Project, Phase I, held on May 8, 2007; (ii) the Notice of Award 1 dated May 23, 2007 to Satrap Construction
Company, Inc. (SCCI); and (iii) Notice to Proceed2 dated May 29, 2007 also to SCCI. FUCC also seeks to permanently
enjoin the Special Bids and Awards Committee (SBAC) and Poro Point Management Corporation (PPMC) from
implementing the Contract3 in favor of SCCI.
The factual antecedents are as follows:
On January 26, 2007, PPMC approved the Contract for the Upgrading of the San Fernando Airport Phase I. The SBAC then
issued invitations to reputable contractors to pre-qualify for the project.
FUCC and two (2) other contractors - C.M. Pancho Construction, Inc. (C.M. Pancho) and EEI-New Kanlaon Construction,
Inc. Joint Venture (EEI-New Kanlaon JV) responded to the invitation and were pre-qualified to bid for the project. However,
upon evaluation, none of the pre-qualified bidders was chosen. C.M. Pancho was disqualified because it did not possess the
required minimum years of experience in airport projects, while EEI New Kanlaon JV was disqualified because it did not
submit a special license to bid as joint venture. FUCCs technical proposal, on the other hand, obtained a failing mark
because it failed to submit the automated weather observation system (AWOS) and its authorized representative did not sign
some pages of the narrative construction method and the tax returns. FUCC sought reconsideration of the SBAC decision,
but it was denied.4
FUCC then filed a protest5 with the PPMC. On March 26, 2007, Atty. Felix S. Racadio, PPMC Head, resolved FUCCs
protest, viz.:
In sum, based on the issues raised and [the] arguments presented by FUCC, this OFFICE finds NO REVERSIBLE
ERROR committed by SBAC, both on its findings of 06 March 2007 (giving FUCC the FAILED rating) and 12
March 2007 (denial of FUCCs Motion for Reconsideration).
In addition to the "NO REVERSIBLE ERROR FINDING," there exists a PRESUMPTION OF REGULARITY OF
OFFICIAL ACTION OF A PUBLIC OFFICER. In the case at bar, such presumption applies. The burden of proof lies
with the FUCC. On this score, FUCC failed to even just scratch the surface of the same.
The proceedings and findings of SBAC, in the Pre-Qualification stage not having been put into issue by the PROTEST, then,
FUCC had opted to leave them as they were, thus, let them remain UNDISTURBED.
WHEREFORE, in view of the foregoing, the PROTEST filed by FUCC which is under consideration is hereby
DISMISSED for lack of merit.
The FILING FEE paid by FUCC, the protestant, via Metro Bank Cashiers Check No. 0600018513, dated March 19, 2007,
in the amount of Four Million Seven Hundred Twenty-One Thousand Pesos (P4,721,000.00), Philippine Currency,
which is equivalent to one [percent] (%) of the ABC being NON-REFUNDABLE (Sec. 55.1, IRR-A, RA 1984), the same is
hereby ordered FORFEITED in favor of PPMC.
SO ORDERED.6
SBAC then scheduled a re-bidding and issued new invitations to bid for the project. To enjoin the re-bidding set on May 8,
2007, FUCC filed a petition for injunction with prayer for the issuance of a preliminary injunction or temporary restraining
order (TRO) with the Regional Trial Court (RTC) of La Union, docketed as Civil Case No. 7274.
On May 2, 2007, the RTC issued a TRO which, however, was lifted on May 4, 2007 because under Section 3 of Republic
Act No. 8975,7 no court, except the Supreme Court, shall issue a TRO or injunction or prohibit the bidding or award of a
government infrastructure project. SBAC thus proceeded with the re-bidding of the project on May 8, 2007 and awarded the
project to SCCI as the lowest qualified bidder.8 The Contract9 for the project was signed, and a notice to proceed10 was served
on SCCI on May 29, 2007.
FUCC filed an amended petition with the RTC to enjoin the implementation of the project. The Office of the Government
Corporate Counsel (OGCC) moved to dismiss the petition for lack of jurisdiction.
Pending resolution of OGCCs motion to dismiss, FUCC moved for the dismissal of its amended petition, which was granted
by the RTC on July 4, 2007, to wit:
Acting on the above-stated notice of dismissal, this Court hereby confirms the dismissal of the amended petition, in effect
the dismissal of the whole action, without prejudice, pursuant to Sec. 1, Rule 17 of the Rules of Court.
WHEREFORE, this case is hereby DISMISSED.
SO ORDERED.11
Claiming that there is no appeal, or any speedy and adequate remedy in the ordinary course of law, FUCC comes to us via
this petition. It also asks for the issuance of a TRO to enjoin the implementation of the project, asserting that SCCI is not
qualified to undertake the project and the award clearly poses a real threat to the public welfare and safety. In its November
12, 2007 Resolution, this Court denied FUCCs application for the issuance of a TRO for lack of merit.
FUCC filed this petition praying for the following relief, viz.:
(a) That upon receipt of this Petition, a Temporary Restraining Order (TRO) be issued enjoining the
implementation of the contract for the Upgrading of the San Fernando Airport Project, Phase I with respondent
[SCCI] as the contractor;
(b) That after proper proceeding, judgment be rendered: (1) permanently enjoining the implementation of the
contract for the Upgrading of the San Fernando Airport Project, Phase I with respondent [SCCI] as the contractor;
(2) declaring the re-bidding of the contract for the Upgrading of the San Fernando Airport Project, Phase I on 08
May 2007 illegal and nullifying the results thereof; (3) annulling the Notice of Award dated 23 May 2007, the
Contract for the Upgrading of the San Fernando Airport, Phase I entered into, by and between respondent PPMC
and respondent [SCCI] on 29 May 2007, and the Notice to Proceed dated 29 May 2007; and (4) directing
respondent SBAC and/or respondent PPMC and/or respondent Atty. Recadio to reconsider the "Failed" rating of
the bid of FUCC, open the Financial Proposal Envelope submitted by FUCC during the original bidding, declare
FUCC as the winning bidder, and forthwith award the contract to FUCC, as the winning bidder and being the only
qualified contractor for the project.12
It asserts that SBAC and PPMC committed grave abuse of discretion in disqualifying its bid, in denying its protest, in
conducting a re-bidding and in awarding the project to SCCI. It insists that it is the only qualified contractor for the project
and prays that it be declared the winning bidder.
We dismiss the petition.
Republic Act (RA) No. 9184, or the Government Procurement Reform Act, outlines the procedure to assail decisions of the
SBAC in this wise:
SEC. 55. Protests on Decisions of the BAC. Decisions of BAC in all stages of procurement may be protested to the head of
the procuring entity and shall be in writing. Decisions of the BAC may be protested by filing a verified position paper and
paying a nonrefundable protest fee. The amount of protest fee and the periods during which the protests may be filed and
resolved shall be specified in the IRR.
SEC. 56. Resolution of Protests. - The protests shall be resolved strictly on the basis of records of the BAC. Up to a certain
amount specified in the IRR, the decisions of the Head of the Procuring Entity shall be final.
SEC. 57. Non-interruption of the Bidding Process. In no case shall any protest taken from any decision treated in this
Article stay or delay the bidding process. Protests must first be resolved before any award is made.
SEC. 58. Resort to Regular Courts; Certiorari. Court action may be resorted only after the protest contemplated in this
Article shall have been completed. Cases that are filed in violation of the process specified in this Article shall be dismissed
for lack of jurisdiction. The regional trial court shall have jurisdiction over final decisions of the head of the procuring entity.
Court actions shall be governed by Rule 65 of the 1997 Rules of Civil Procedure.
This provision is without prejudice to any law conferring on the Supreme Court the sole jurisdiction to issue temporary
restraining orders and injunctions relating to Infrastructure Projects of Government.
FUCC challenged the decision of SBAC in a protest filed with Atty. Racadio of the PPMC who affirmed the SBAC decision.
Instead of filing a petition for certiorari, as provided in Section 58, FUCC filed a petition for injunction with prayer for the
issuance of a temporary restraining order and/or preliminary injunction with the RTC. FUCC, however, later moved for its
dismissal theorizing that the RTC had no jurisdiction over petitions for injunction. Thereafter, it filed this petition for
certiorari with this Court.
Section 4, Rule 65 of the 1997 Rules of Civil Procedure provides that a special civil action for certiorari shall be filed not
later than sixty (60) days from the notice of the judgment, order or resolution. 13 FUCC admitted that it received the PPMC
decision on March 27, 2007.14 However, it filed this petition assailing the said decision only on July 30, 2007. It is, therefore,
too late in the day for FUCC, via this petition, to assail the PPMC decision which rated its bid as failed.
Besides, FUCC violated the doctrine of judicial hierarchy in filing this petition for certiorari directly with this Court. Section
58 is clear that petitions for the issuance of a writ of certiorari against the decision of the head of the procuring agency, like
PPMC, should be filed with the Regional Trial Court. Indeed, the jurisdiction of the RTC over petitions for certiorari is
concurrent with this Court. However, such concurrence does not allow unrestricted freedom of choice of the court forum. A
direct invocation of the Supreme Courts original jurisdiction to issue this writ should be allowed only when there are special
and important reasons, clearly and specifically set out in the petition. 15
In the present case, FUCC adduced no special and important reason why direct recourse to this Court should be allowed.
Thus, we reaffirm the judicial policy that this Court will not entertain a direct invocation of its jurisdiction unless the redress
desired cannot be obtained in the appropriate lower courts, and exceptional and compelling circumstances justify the resort
to the extraordinary remedy of a writ of certiorari.
Similarly, the RTC is the proper venue to hear FUCCs prayer for permanent injunction. Unquestionably, RA No. 8975 16
enjoins all courts, except the Supreme Court, from issuing any temporary restraining order, preliminary injunction, or
preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity to
restrain, prohibit or compel the bidding or awarding of a contract or project of the national government. The proscription,
however, covers only temporary restraining orders or writs but not decisions on the merits granting permanent injunction.
Therefore, while courts below are prohibited by RA No. 8795 from issuing TROs or preliminary restraining orders pending
the adjudication of the case, said statute, however, does not explicitly proscribe the issuance of a permanent injunction
granted by a court of law arising from an adjudication of a case on the merits. 17
As we explained in Alvarez v. PICOP Resources, Inc.:18
x x x Republic Act No. 8975 merely proscribes the issuance of temporary restraining orders and writs of preliminary
injunction and preliminary mandatory injunction. [It] cannot, under pain of violating the Constitution, deprive the courts of
authority to take cognizance of the issues raised in the principal action, as long as such action and the relief sought are within
their jurisdiction.
Clearly, except for the prayer for the issuance of a TRO or preliminary injunction, the issues raised by FUCC and the relief it
sought are within the jurisdiction of the RTC. It is a procedural faux pas for FUCC to invoke the original jurisdiction of this
Court over the issuance of a writ of certiorari and permanent injunction.
In any event, the invitation to bid contains a reservation for PPMC to reject any bid. It has been held that where the right to
reject is so reserved, the lowest bid, or any bid for that matter, may be rejected on a mere technicality. 19 The discretion to
accept or reject bid and award contracts is vested in the government agencies entrusted with that function. This discretion is
of such wide latitude that the Courts will not interfere therewith or direct the committee on bids to do a particular act or to
enjoin such act within its prerogatives unless it is apparent that it is used as a shield to a fraudulent award; 20 or an unfairness
or injustice is shown;21 or when in the exercise of its authority, it gravely abuses or exceeds its jurisdiction. Thus, where
PPMC as advertiser, availing itself of that right, opts to reject any or all bids, the losing bidder has no cause to complain or
right to dispute that choice, unless fraudulent acts, injustice, unfairness or grave abuse of discretion is shown.
FUCC alleges that SBAC and PPMC, along with the SCCI and five (5) other bidders, colluded to rig the results of the re-
bidding so that SCCI would emerge as the so-called lowest bidder. The record, however, is bereft of any proof to substantiate
the allegation. Neither is there any evidence offered to establish unfairness, injustice, caprice or arbitrariness on the part of
the SBAC or the PPMC in awarding the contract to SCCI, the lowest bidder. The presumption of regularity of the bidding
must thus be upheld.
As we explained in JG Summit Holdings, Inc. v. Court of Appeals:22
The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that
function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere
therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x
x x The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation,
and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts. The role of the
Courts is to ascertain whether a branch or instrumentality of the Government has transgressed its constitutional boundaries.
But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it
strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a
government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest
Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must
be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as
to act at all in contemplation of law, where the power is exercised in an arbitrary and despotic manner by reason of passion
or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26 July 1988, 163 SCRA 489).
Accordingly, there being no showing of grave abuse of discretion, FUCC has no valid ground to demand annulment of the
contract between PPMC and SCCI.
WHEREFORE, the petition is DISMISSED. The assailed Decision of the PPMC is AFFIRMED.
SO ORDERED.
JG SUMMIT vs. CA
For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc. for reconsideration of
our Resolution dated September 24, 2003 and to elevate this case to the Court En Banc. The petitioner questions the
Resolution which reversed our Decision of November 20, 2000, which in turn reversed and set aside a Decision of the Court
of Appeals promulgated on July 18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:
On January 27, 1997, the National Investment and Development Corporation (NIDC), a government corporation, entered
into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the
construction, operation and management of the Subic National Shipyard, Inc. (SNS) which subsequently became the
Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will contribute
P330 million for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is
the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the
joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without
giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation
owned or controlled by the GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank
(PNB). Such interests were subsequently transferred to the National Government pursuant to Administrative Order No. 14.
On December 8, 1986, President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose
of non-performing assets of the National Government. Thereafter, on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the latter was named the trustee of the National Government's share
in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations to PNB, the
National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's shareholdings to
2.59%.
In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National
Government's share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they
agreed that the latter's right of first refusal under the JVA be "exchanged" for the right to top by five percent (5%) the highest
bid for the said shares. They further agreed that KAWASAKI would be entitled to name a company in which it was a
stockholder, which could exercise the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)1 would exercise its right to top.
At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between NIDC
and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity
share in PHILSECO. The provisions of the ASBR were explained to the interested bidders who were notified that the
bidding would be held on December 2, 1993. A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government's equity in
PHILSECO consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO's outstanding capital stock),
which will be sold as a whole block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the
Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Government's
87.67% equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for
the purpose of determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the latter
approves the same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings,
Inc., that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT within
which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent
thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest
Bid," they shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten
percent (10%) of the highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0
above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring
them as the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's notice within
which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their "Option to Top the
Highest Bid" within the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms, including
any addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible for informing
itself with respect to any and all conditions concerning the PHILSECO Shares which may, in any manner, affect the bidder's
proposal. Failure on the part of the bidder to so examine and inform itself shall be its sole risk and no relief for error or
omission will be given by APT or COP. . . .
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. 2 submitted a bid of Two Billion and Thirty
Million Pesos (P2,030,000,000.00) with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on APT's recommendation
based on the result of this bidding. Should the COP approve the highest bid, APT shall advise Kawasaki Heavy Industries,
Inc. and/or its nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National Government.
Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days
from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest Bid" by offering
a bid equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 "subject to the right of
Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that: (a)
the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular
Life violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and
prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to top
to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject bidding.
On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP
had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement.
Consequently, petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On May 11, 1994, said
petition was referred to the Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit. It
ruled that the petition for mandamus was not the proper remedy to question the constitutionality or legality of the right of
first refusal and the right to top that was exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper
party in the proper forum at the proper time and threshed out in a full blown trial." The Court of Appeals further ruled that
the right of first refusal and the right to top are prima facie legal and that the petitioner, "by participating in the public
bidding, with full knowledge of the right to top granted to KAWASAKI/[PHILYARDS] isestopped from questioning the
validity of the award given to [PHILYARDS] after the latter exercised the right to top and had paid in full the purchase price
of the subject shares, pursuant to the ASBR." Petitioner filed a Motion for Reconsideration of said Decision which was
denied on March 15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging grave abuse of discretion on
the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court of Appeals erred when it
dismissed the petition on the sole ground of the impropriety of the special civil action of mandamus because the petition was
also one of certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty
percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding
Rules (ASBR) drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal not only
because it violates the rules on competitive bidding but more so, because it allows foreign corporations to own more than
40% equity in the shipyard. It also held that "although the petitioner had the opportunity to examine the ASBR before it
participated in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and inequitable provisions
thereof." Thus, this Court voided the transfer of the national government's 87.67% share in PHILSECO to Philyard[s]
Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the
Court of Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty
Million Pesos (P2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is
ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total
capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether
PHILSECO is a public utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to
40% of the total capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the
principles of competitive bidding.3 (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that
Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public
utility4 and that no law declares a shipyard to be a public utility.5 On the second issue, we found nothing in the 1977 Joint
Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring
more than 40% of PHILSECOs total capitalization. 6 On the final issue, we held that the right to top granted to KAWASAKI
in exchange for its right of first refusal did not violate the principles of competitive bidding. 7
On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a Motion to Elevate This Case to the Court En
Banc.9 Public respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private respondent
Philyards Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.s (JG Summits) Motion for
Reconsideration and Motion to Elevate This Case to the Court En Banc on January 29, 2004 and February 3, 2004,
respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this litigation are the following:
1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.
2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration of
this Courts Resolution of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en banc on the following grounds:
1. The main issue of the propriety of the bidding process involved in the present case has been confused with the
policy issue of the supposed fate of the shipping industry which has never been an issue that is determinative of
this case.10
2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which
included among en banc cases those involving a novel question of law and those where a doctrine or principle laid
down by the Court en banc or in division may be modified or reversed.11
3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro
Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001,
attaching a copy of the Foreign Chambers Report dated October 17, 2001, which matter was placed in the agenda
of the Court and noted by it in a formal resolution dated November 28, 2001. 12
Opposing J.G. Summits motion to elevate the case en banc, PHILYARDS points out the petitioners inconsistency in
previously opposing PHILYARDS Motion to Refer the Case to the Court En Banc. PHILYARDS contends that J.G. Summit
should now be estopped from asking that the case be referred to the Court en banc. PHILYARDS further contends that the
Supreme Court en banc is not an appellate court to which decisions or resolutions of its divisions may be appealed citing
Supreme Court Circular No. 2-89 dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question of law
involved in the present case as the assailed Resolution was based on well-settled jurisprudence. Likewise, PHILYARDS
stresses that the Resolution was merely an outcome of the motions for reconsideration filed by it and the COP and APT and
is "consistent with the inherent power of courts to amend and control its process and orders so as to make them conformable
to law and justice. (Rule 135, sec. 5)"14 Private respondent belittles the petitioners allegations regarding the change in
ponente and the alleged executive interference as shown by former Secretary of Finance Jose Isidro Camachos
memorandum dated November 5, 2001 arguing that these do not justify a referral of the present case to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G. Summit further argued that: its
Opposition to the Office of the Solicitor Generals Motion to Refer is different from its own Motion to Elevate; different
grounds are invoked by the two motions; there was unwarranted "executive interference"; and the change in ponente is
merely noted in asserting that this case should be decided by the Court en banc.15
We find no merit in petitioners contention that the propriety of the bidding process involved in the present case has been
confused with the policy issue of the fate of the shipping industry which, petitioner maintains, has never been an issue that is
determinative of this case. The Courts Resolution of September 24, 2003 reveals a clear and definitive ruling on the
propriety of the bidding process. In discussing whether the right to top granted to KAWASAKI in exchange for its right of
first refusal violates the principles of competitive bidding, we made an exhaustive discourse on the rules and principles of
public bidding and whether they were complied with in the case at bar.16 This Court categorically ruled on the petitioners
argument that PHILSECO, as a shipyard, is a public utility which should maintain a 60%-40% Filipino-foreign equity ratio,
as it was a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding industry which was beyond
avoidance.17
We reject petitioners argument that the present case may be considered under the Supreme Court Resolution dated February
23, 1984 which included among en banc cases those involving a novel question of law and those where a doctrine or
principle laid down by the court en banc or in division may be modified or reversed. The case was resolved based on basic
principles of the right of first refusal in commercial law and estoppel in civil law. Contractual obligations arising from rights
of first refusal are not new in this jurisdiction and have been recognized in numerous cases. 18 Estoppel is too known a civil
law concept to require an elongated discussion. Fundamental principles on public bidding were likewise used to resolve the
issues raised by the petitioner. To be sure, petitioner leans on the right to top in a public bidding in arguing that the case at
bar involves a novel issue. We are not swayed. The right to top was merely a condition or a reservation made in the bidding
rules which was fully disclosed to all bidding parties. In Bureau Veritas, represented by Theodor H. Hunermann v.
Office of the President, et al., 19 we dealt with this conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA
1245), that in an "invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be
subject to the right of the government to reject any and all bids subject to its discretion. In the case at bar, the
government has made its choice and unless an unfairness or injustice is shown, the losing bidders have no cause to
complain nor right to dispute that choice. This is a well-settled doctrine in this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that
function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere
therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x
x x The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation,
and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts. The role of the
Courts is to ascertain whether a branch or instrumentality of the Government has transgressed its constitutional boundaries.
But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it
strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a
government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest
Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must
be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as
to act at all in contemplation of law, where the power is exercised in an arbitrary and despotic manner by reason of passion
or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of discretion on the part of public respondents when they awarded
the CISS contract to Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee
made an express reservation of the right of the Government to "reject any or all bids or any part thereof or waive any
defects contained thereon and accept an offer most advantageous to the Government." It is a well-settled rule that
where such reservation is made in an Invitation to Bid, the highest or lowest bidder, as the case may be, is not entitled
to an award as a matter of right (C & C Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even
the lowest Bid or any Bid may be rejected or, in the exercise of sound discretion, the award may be made to another than the
lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788). (emphases supplied)1awphi1.nt
Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding
rules which was made known to all parties. It was a condition imposed on all bidders equally, based on the APTs
exercise of its discretion in deciding on how best to privatize the governments shares in PHILSECO. It was not a
whimsical or arbitrary condition plucked from the ether and inserted in the bidding rules but a condition which the APT
approved as the best way the government could comply with its contractual obligations to KAWASAKI under the JVA and
its mandate of getting the most advantageous deal for the government. The right to top had its history in the mutual right of
first refusal in the JVA and was reached by agreement of the government and KAWASAKI.
Further, there is no "executive interference" in the functions of this Court by the mere filing of a memorandum by Secretary
of Finance Jose Isidro Camacho. The memorandum was merely "noted" to acknowledge its filing. It had no further legal
significance. Notably too, the assailed Resolution dated September 24, 2003 was decided unanimously by the Special
First Division in favor of the respondents.
Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court 20 and the Court en banc is not
an appellate court to which decisions or resolutions of a Division may be appealed. 21
For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners Motion for Reconsideration. First, that a fair resolution of the case
should be based on contract law, not on policy considerations; the contracts do not authorize the right to top to be derived
from the right of first refusal.22 Second, that neither the right of first refusal nor the right to top can be legally exercised by
the consortium which is not the proper party granted such right under either the JVA or the Asset Specific Bidding Rules
(ASBR).23 Third, that the maintenance of the 60%-40% relationship between the National Investment and Development
Corporation (NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is a landholding
corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation. 24
On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling reasons
to warrant a reconsideration of the Decision of the Court. 25 PHILYARDS denies that the Decision is based mainly on policy
considerations and points out that it is premised on principles governing obligations and contracts and corporate law such as
the rule requiring respect for contractual stipulations, upholding rights of first refusal, and recognizing the assignable nature
of contracts rights.26 Also, the ruling that shipyards are not public utilities relies on established case law and fundamental
rules of statutory construction. PHILYARDS stresses that KAWASAKIs right of first refusal or even the right to top is not
limited to the 40% equity of the latter.27 On the landholding issue raised by J.G. Summit, PHILYARDS emphasizes that this
is a non-issue and even involves a question of fact. Even assuming that this Court can take cognizance of such question of
fact even without the benefit of a trial, PHILYARDS opines that landholding by PHILSECO at the time of the bidding is
irrelevant because what is essential is that ultimately a qualified entity would eventually hold PHILSECOs real estate
properties.28 Further, given the assignable nature of the right of first refusal, any applicable nationality restrictions, including
landholding limitations, would not affect the right of first refusal itself, but only the manner of its exercise. 29 Also,
PHILYARDS argues that if this Court takes cognizance of J.G. Summits allegations of fact regarding PHILSECOs
landholding, it must also recognize PHILYARDS assertions that PHILSECOs landholdings were sold to another
corporation.30 As regards the right of first refusal, private respondent explains that KAWASAKIs reduced shareholdings
(from 40% to 2.59%) did not translate to a deprivation or loss of its contractually granted right of first refusal. 31 Also, the
bidding was valid because PHILYARDS exercised the right to top and it was of no moment that losing bidders later joined
PHILYARDS in raising the purchase price.32
In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA
between NIDC and KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign
ownership.
3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it
voluntarily submitted itself to the terms of the ASBR which included the provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS
formed a consortium to raise the required amount to exercise the right to top the highest bid by 5% does not violate
the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to
PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns real property.
6. Petitioners motion to elevate the case to the Court en banc is baseless and would only delay the termination of
this case.33
In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private
respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the
exercise of a right to top, which is contrary to law and the constitution is null and void for being violative of
substantive due process and the abuse of right provision in the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the
respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time
of the bidding are most relevant.
d. Whether a shipyard is a public utility is not the core issue in this case.
3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top.
a. The history behind the birth of the right to top shows fraud and bad faith.
b. The right of first refusal was, indeed, "effectively useless."
4. Petitioner is not legally estopped to challenge the right to top in this case.
a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public
policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from the right of first refusal is not new and we have already
ruled on the issue in our Resolution of September 24, 2003. We upheld the mutual right of first refusal in the JVA. 34 We also
ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECOs total capitalization. 35
Likewise, nothing in the JVA or ASBR bars the conversion of the right of first refusal to the right to top. In sum, nothing new
and of significance in the petitioners pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be
exercised by the consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we
held:
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and
ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131 billion necessary in exercising the right to top is not
contrary to law, public policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining either
the winning bidder (should the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did),
to raise the purchase price. The petitioner did not allege, nor was it shown by competent evidence, that the participation of
the losing bidders in the public bidding was done with fraudulent intent. Absent any proof of fraud, the formation by
[PHILYARDS] of a consortium is legitimate in a free enterprise system. The appellate court is thus correct in holding the
petitioner estopped from questioning the validity of the transfer of the National Government's shares in PHILSECO to
respondent.36
Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties who were losing bidders. This is a
purely commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that the
case at bar involves the disposition of shares in a corporation which the government sought to privatize. As such, the persons
with whom PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are basically its
business. This is in contrast to a case involving a contract for the operation of or construction of a government infrastructure
where the identity of the buyer/bidder or financier constitutes an important consideration. In such cases, the government
would have to take utmost precaution to protect public interest by ensuring that the parties with which it is contracting have
the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could
exercise its right of first refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on
landholding by corporations with more than 40% foreign-owned equity. It further argues that since KAWASAKI already held
at least 40% equity in PHILSECO, the right of first refusal was inutile and as such, could not subsequently be converted into
the right to top. 37 Petitioner also asserts that, at present, PHILSECO continues to violate the constitutional provision on
landholdings as its shares are more than 40% foreign-owned. 38 PHILYARDS admits that it may have previously held land
but had already divested such landholdings.39 It contends, however, that even if PHILSECO owned land, this would not
affect the right of first refusal but only the exercise thereof. If the land is retained, the right of first refusal, being a property
right, could be assigned to a qualified party. In the alternative, the land could be divested before the exercise of the right of
first refusal. In the case at bar, respondents assert that since the right of first refusal was validly converted into a right to top,
which was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are
owned by Filipinos), then there is no violation of the Constitution. 40 At first, it would seem that questions of fact beyond
cognizance by this Court were involved in the issue. However, the records show that PHILYARDS admits it had owned
land up until the time of the bidding.41 Hence, the only issue is whether KAWASAKI had a valid right of first refusal
over PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and
KAWASAKI already held 40% of PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the
right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA.
This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement
of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions
of the Constitution limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if
PHILSECO still owns land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain
the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any
fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right of first
refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case
KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it can even be said
that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders
ownership of the shares which is adversely affected but the capacity of the corporation to own land that is, the
corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation
and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the
shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot
deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding
corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from
owning land. This is the clear import of the following provisions in the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the
exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake
such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may
be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other
than the development of water power, beneficial use may be the measure and limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.42 (emphases supplied)
The petitioner further argues that "an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21
SCRA 52 [1967]). The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the
right to top, sourced from the right of first refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui
She did not that say "an option to buy land is void in itself," for we ruled as follows:
x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real
property on condition that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence
in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not
impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino
owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the
arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to
enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus
disponendi) rights the sum total of which make up ownership. It is just as if today the possession is transferred,
tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made
up are consolidated in an alien. And yet this is just exactly what the parties in this case did within this pace of one year, with
the result that Justina Santos'[s] ownership of her property was reduced to a hollow concept. If this can be done, then the
Constitutional ban against alien landholding in the Philippines, as announced in Krivenko vs. Register of Deeds, is indeed
in grave peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could not
sell or dispose of his properties. The contract in Lui She prohibited the owner of the land from selling, donating, mortgaging,
or encumbering the property during the 50-year period of the option to buy. This is not so in the case at bar where the mutual
right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In
fact, the case at bar involves a right of first refusal over shares of stock while the Lui She case involves an option to buy
the land itself. As discussed earlier, there is a distinction between the shareholders ownership of shares and the
corporations ownership of land arising from the separate juridical personalities of the corporation and its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution as
its foreign equity is above 40% and yet owns long-term leasehold rights which are real rights.45 It cites Article 415 of the
Civil Code which includes in the definition of immovable property, "contracts for public works, and servitudes and other real
rights over immovable property."46 Any existing landholding, however, is denied by PHILYARDS citing its recent financial
statements.47 First, these are questions of fact, the veracity of which would require introduction of evidence. The Court needs
to validate these factual allegations based on competent and reliable evidence. As such, the Court cannot resolve the
questions they pose. Second, J.G. Summit misreads the provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this
violates the Constitution x x x The violation continues to this day because under the law, it continues to own real
property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed
in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain."
32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at
least 60% of which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied)
As correctly observed by the public respondents, the prohibition in the Constitution applies only to ownership of land. 48 It
does not extend to immovable or real property as defined under Article 415 of the Civil Code. Otherwise, we would
have a strange situation where the ownership of immovable property such as trees, plants and growing fruit attached to the
land49 would be limited to Filipinos and Filipino corporations only.
III.
WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is DENIED WITH FINALITY and
the decision appealed from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for
lack of merit.
SO ORDERED.

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Nava vs.

The assailed Resolution dated September 29, 2003, denied reconsideration.

The Sandiganbayan narrated the facts of this case as follows:

Ruling of the Sandiganbayan

Hence, this Petition. 14

The Courts Ruling

The Petition has no merit.

The COA team then tabulated the results as follows: 33

Test Tube Glass Pyrex (18x50

Graduated Cylinder Pyrex

Spring Balance (12.5kg)Germany 551.00 93.50 457.50 489% 102 46,665.00

Iron Wire Gauge 16.20 9.90 6.30 64% 47 296.10

Bunsen Burner 701.00 90.75 610.25 672% 150 91,537.50

a) the identities of the suppliers or sellers;

"f. Whenever the purchase is made from an agency of the government." 46

"1.13.a Price lists furnished by the Supply Coordination Office

1.13.c. Price lists of Esteem Enterprises" 52

b) elementary school desks and tablet arm chairs[.]"

"LAA NO. AMOUNT DATE OF LAA

DO CO471-774-90 P141,956.00 October 24, 1990

DO-CO471-797-90 P161,309.00 November 16, 1990

DO-CO471-1007-90 P300,000.00 December 14, 1990"

5) Certificate of Acceptance dated November 27, 1990 signed by Felicismo Canoy 66

Caunan vs. People

The Information in Criminal Case No. 27944 states:

The Information in Criminal Case No. 27946 states:

The Information in Criminal Case No. 27952 states:

The Information in Criminal Case No. 27953 states:

Date of Transaction Voucher No. Amount Quantity

February 20, 1997 101-97-04-1755 P 3,000.00 120 pcs.

February 12, 1997 101-97-04-1756 P100,000.00 4,000 pcs.

February 11, 1997 101-97-04-1759 P149,500.00 5,980 pcs.

The Information in Criminal Case No. 27954 states:

Date of Transaction Voucher Number Amount Quantity

October 15, 1996 101-96-11-7604 P 100,000.00 4,000 pcs.

October 18, 1996 101-96-11-7605 P 100,000.00 4,000 pcs.

1. The purchase of walis tingting was undertaken without public bidding;

4. There was glaring overpricing in the purchase transactions.

Hence, these separate appeals by petitioners Marquez and Caunan.

Petitioner Caunan posits the following issues:

1. [WHETHER] THE PROSECUTIONS PROOF OF OVERPRICING [IS] HEARSAY.

2. [WHETHER THE] RESPONDENT SANDIGANBAYAN [ERRED] IN ADMITTING WITNESS FATIMA V.

3. [WHETHER THE] RESPONDENT SANDIGANBAYAN GRAVELY [ERRED] IN APPLYING AN EXCEPTION TO

4. CONSEQUENTLY, [WHETHER] RESPONDENT SANDIGANBAYAN GRAVELY ERRED IN NOT ACQUITTING

For his part, petitioner Marquez raises the following:

4. WHETHER [MARQUEZ] CAN BE CONVICTED ON PLAIN HEARSAY, IF NOT DUBIOUS EVIDENCE OF

6. WHETHER THE QUANTUM OF PROSECUTION EVIDENCE HAS OVERCOME THE CONSTITUTIONAL

8. WHETHER [MARQUEZ] IS ENTITLED TO THE REOPENING OF THE SUBJECT CRIMINAL CASES[;]

Section 3(g) of R.A. No. 3019 provides:

GARCIA vs. BURGOS

Statement of the Case

B. The Suit Filed Below by Private Respondent

9. On 19 January 1996, [P]rivate [R]espondent Malayan Integrated Industries Corporation (hereinafter

xxx xxx xxx

In order to obviate complaints against the indiscriminate issuance of restraining

24.1 It would be relevant to mention that in so ruling, respondent Judge practically

Private Respondent's Version

xxx xxx xxx

WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION,

WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION,

xxx xxx xxx

The Court's Ruling

Preliminary Injunction Void and Improper

Cebu South Reclamation Project