SM LAND INC v.

BCDA
G.R. No. 203655

Date of Promulgation: March 18, 2015

Ponente: Velasco, Jr., J.
Petition: Reconsideration
Petitioner: SM Land, Inc.
Respondents: Bases Conversion and Development Authority and Arnel Paciano Casanova, Esq.

Facts:
The dispute involves an unsolicited proposal from petitioner SM Land, Inc. (SMLI) to develop
the multi-billion-peso Bonifacio South Property in Bonifacio Global City. In January 2013,
SMLI sued respondent Bases Conversion and Development Authority (BCDA) for supposedly
changing the negotiation rules from a competitive challenge to public bidding, when the former
was already well into talks with the latter over its proposal. According to SMLI, BCDA had
violated a contract by doing so. In its Decision dated August 13, 2014, the Court ordered BCDA
and its president to subject SMLI’s unsolicited proposal to a competitive challenge. It is this
Decision that is placed before the Court for reconsideration.

Issues/Held:
WON BCDA and SMLI have a contract that would bestow upon the latter the right to demand
that its unsolicited proposal be subjected to a competitive challenge - YES

Ratio:
The Court breaks down its ruling into the following points:

1. There exists a valid agreement between SMLI and BCDA.

Art. 1318 of the New Civil Code defines the essential requsities of a valid contract as: a)
Consent of the contracting parties; b) object certain which is the contract’s subject matter;
and c) cause of the obligation which is established. Consent was manifested when, after
SMLI submitted its first unsolicited proposal to BCDA on December 14, 2009, the latter
accepted the final form of the proposal after negotiations. The cause of the agreement is
SMLI’s interest in developing the Bonifacio South Property, as shown by the Certification of
Successful Negotiations and BCDA’s Terms of Reference (TOR). Finally, the BCDA’s
agreement to subject SMLI’s proposal to competitive challenge constitutes the agreement’s
object certain.

2. The NEDA JV Guidelines have the force and effect of law.

Under Sec. 5 of E.O. 109, Sec. 8 of E.O. 109-A, and Sec. 8 of E.O. 423, the President’s
executive power to issue rules and regulations on procurement was delegated to subordinate
executive officials as her alter egos. It must be noted that it is a well-established rule that
administrative issuances promulgated pursuant to the rule-making power granted by statute
have the force and effect of law. This rule clearly applies to the NEDA JV Guidelines, which
were issued in accordance with the President’s repeated directives.
 3. Articles III(4) and VIII(3) only refer to Private Sector Entities (PSE), effectively
excluding the Original Proponent.
The Terms of Reference (TOR) containing the said provisions outlines the eligibility
requirements for PSEs to submit proposals to the JV. However, SMLI is classified as an
Original Proponent since unlike PSEs, its unsolicited proposal has been accepted by BCDA.
In fact, a contrary reading that the TOR’s provisions entitle BCDA to cancel the Swiss
challenge would violate the NEDA JV Guidelines.

4. Estoppel can be invoked against respondents.

Despite BCDA’s repeated assurances that it would respect SMLI’s rights as an original
proponent, the former reneged on its promises and ultimately cancelled its obligations. The
Court has held that the State’s immunity to estoppel cannot be invoked when the government
deals dishonorably or capriciously with citizens.

5. The perceived government losses remain speculative.

The perceived low floor price for the Bonifacio South Property project, based on SMLI’s
proposal, merely remains a floor price. In other words, there is an opportunity to increase the
price or allow better offers that surpass the property’s market value.

Decision:
The August 13, 2014 Decision is affirmed.