Phil. 332 Republic of the Philippines SUPREME COURT Manila EN BANC May 19, 1903 G.R. No. 1051 THE UNITED STATES, complainant-appellee, vs. FRED L. DORR, ET AL., defendants-appellants. F. G. Waite for appellants. Solicitor-General Araneta for appellee. LADD, J .: The defendants have been convicted upon a complaint charging them with the offense of writing, publishing, and circulating a scurrilous libel against the Government of the United States and the Insular Government of the Philippine Islands. The complaint is based upon section 8 of Act No. 292 of the Commission, which is as follows: Every person who shall utter seditious words or speeches, write, publish, or circulate scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands, or which tend to disturb or obstruct any lawful officer in executing his office, or which tend to instigate others to cabal or meet together for unlawful purposes, or which suggest or incite rebellious conspiracies or riots, or which tend to stir up the people against the lawful authorities, or to disturb the peace of the community, the safety and order of the Government, or who shall knowingly conceal such evil practices, shall be punished by a fine not exceeding two thousand dollars or by imprisonment not exceeding two years, or both, in the discretion of the court. The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April 6, 1902, under the caption of "A few hard facts." The Attorney-General in his brief indicates the following passages of the article as those upon which he relies to sustain the conviction: Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say of the action of the Civil Commission in appointing rascally natives to important Government positions: "It is a strong thing to say, but nevertheless true, that the Civil Commission, through its ex-insurgent office holders, and by its continual disregard for the records of natives obtained during the military rule of the Islands, has, in its distribution of offices, constituted a protectorate over a set of men who should be in jail or deported. . . . [Reference is then made to the appointment of one Tecson as justice of the peace.] This is the kind of foolish work that the Commission is doing all over the Islands, reinstating insurgents and rogues and turning down the men who have during the struggle, at the risk of their lives, aided the Americans." xxx xxx xxx There is no doubt but that the Filipino office holders of the Islands are in a good many instances rascals. xxx xxx xxx The commission has exalted to the highest positions in the Islands Filipinos who are alleged to be notoriously corrupt and rascally, and men of no personal character. xxx xxx xxx Editor Valdez, of "Miau," made serious charges against two of the native Commissioners charges against Trinidad H. Pardo de Tavera, which, if true, would brand the man as a coward and a rascal, and with what result? . . . [Reference is then made to the prosecution and conviction of Valdez for libel "under a law which specifies that the greater the truth the greater the libel."] Is it the desire of the people of the United States that the natives against whom these charges have been made (which, if true, absolutely vilify their personal characters) be permitted to retain their seats on the Civil Commission, the executive body of the Philippine Government, without an investigation? xxx xxx xxx It is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and corrupt. The fiscal system, upon which life, liberty, and justice depends, is admitted by the Attorney-General himself to be most unsatisfactory. It is a fact that the Philippine judiciary is far from being what it should. Neither fiscals nor judges can be persuaded to convict insurgents when they wish to protect them. xxx xxx xxx Now we hear all sorts of reports as to rottenness existing in the province [of Tayabas], and especially the northern end of it; it is said that it is impossible to secure the conviction of lawbreakers and outlaws by the native justices, or a prosecution by the native fiscals. xxx xxx xxx The long and short of it is that Americans will not stand for an arbitrary government, especially when evidences of carpetbagging and rumors of graft are too thick to be pleasant. We do not understand that it is claimed that the defendants succeeded in establishing at the trial the truth of any of the foregoing statements. The only question which we have considered is whether their publication constitutes an offense under section 8 ofAct No. 292, above cited. Several allied offenses or modes of committing the same offense are defined in that section, viz: (1) The uttering of seditious words or speeches; (2) the writing, publishing, or circulating of scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands; (3) the writing, publishing, or circulating of libels which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend to instigate others to cabal or meet together for unlawful purposes; (5) or which suggest or incite rebellious conspiracies or riots; (6) or which tend to stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the Government; (7) knowingly concealing such evil practices. The complaint appears to be framed upon the theory that a writing, in order to be punishable as a libel under this section, must be of a scurrilous nature and directed against the Government of the United States or the Insular Government of the Philippine Islands, and must, in addition, tend to some one of the results enumerated in the section. The article in question is described in the complaint as "a scurrilous libel against the Government of the United States and the Insular Government of the Philippine Islands, which tends to obstruct the lawful officers of the United States and the Insular Government of the Philippine Islands in the execution of their offices, and which tends to instigate others to cabal and meet together for unlawful purposes, and which suggests and incites rebellious conspiracies, and which tends to stir up the people against the lawful authorities, and which disturbs the safety and order of the Government of the United States and the Insular Government of the Philippine Islands." But it is "a well-settled rule in considering indictments that where an offense may be committed in any of several different modes, and the offense, in any particular instance, is alleged to have been committed in two or more modes specified, it is sufficient to prove the offense committed in any one of them, provided that it be such as to constitute the substantive offense" (Com. vs. Kneeland, 20 Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the substantive charges into which the complaint may be separated has been made out. We are all, however, agreed upon the proposition that the article in question has no appreciable tendency to "disturb or obstruct any lawful officer in executing his office," or to "instigate" any person or class of persons "to cabal or meet together for unlawful purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the Government." All these various tendencies, which are described in section 8 of Act No. 292, each one of which is made an element of a certain form of libel, may be characterized in general terms as seditious tendencies. This is recognized in the description of the offenses punished by this section, which is found in the title of the act, where they are defined as the crimes of the "seditious utterances, whether written or spoken." Excluding from consideration the offense of publishing "scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands," which may conceivably stand on a somewhat different footing, the offenses punished by this section all consist in inciting, orally or in writing, to acts of disloyalty or disobedience to the lawfully constituted authorities in these Islands. And while the article in question, which is, in the main, a virulent attack against the policy of the Civil Commission in appointing natives to office, may have had the effect of exciting among certain classes dissatisfaction with the Commission and its measures, we are unable to discover anything in it which can be regarded as having a tendency to produce anything like what may be called disaffection, or, in other words, a state of feeling incompatible with a disposition to remain loyal to the Government and obedient to the laws. There can be no conviction, therefore, for any of the offenses described in the section on which the complaint is based, unless it is for the offense of publishing a scurrilous libel against the Government of the of the United States or the Insular Government of the Philippine Islands. Can the article be regarded as embraced within the description of "scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands?" In the determination of this question we have encountered great difficulty, by reason of the almost entire lack of American precedents which might serve as a guide in the construction of the law. There are, indeed, numerous English decisions, most of them of the eighteenth century, on the subject of libelous attacks upon the "Government, the constitution, or the law generally," attacks upon the Houses of Parliament, the Cabinet, the Established Church, and other governmental organisms, but these decisions are not now accessible to us, and, if they were, they were made under such different conditions from those which prevail at the present day, and are founded upon theories of government so foreign to those which have inspired the legislation of which the enactment in question forms a part, that they would probably afford but little light in the present inquiry. In England, in the latter part of the eighteenth century, any "written censure upon public men for their conduct as such," as well as any written censure "upon the laws or upon the institutions of the country," would probably have been regarded as a libel upon the Government. (2 Stephen, History of the Criminal Law of England, 348.) This has ceased to be the law in England, and it is doubtful whether it was ever the common law of any American State. "It is true that there are ancient dicta to the effect that any publication tending to "possess the people with an ill opinion of the Government" is a seditious libel ( per Holt, C. J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine now. Unless the words used directly tend to foment riot or rebellion or otherwise to disturb the peace and tranquility of the Kingdom, the utmost latitude is allowed in the discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley says (Const. Lim., 528): "The English common law rule which made libels on the constitution or the government indictable, as it was administered by the courts, seems to us unsuited to the condition and circumstances of the people of America, and therefore never to have been adopted in the several States." We find no decisions construing the Tennessee statute (Code, sec. 6663), which is apparently the only existing American statute of a similar character to that in question, and from which much of the phraseology of then latter appears to have been taken, though with some essential modifications. The important question is to determine what is meant in section 8 of Act No. 292 by the expression "the Insular Government of the Philippine Islands." Does it mean in a general and abstract sense the existing laws and institutions of the Islands, or does it mean the aggregate of the individuals by whom the government of the Islands is, for the time being, administered? Either sense would doubtless be admissible. We understand, in modern political science, . . . by the term government, that institution or aggregate of institutions by which an independent society makes and carries out those rules of action which are unnecessary to enable men to live in a social state, or which are imposed upon the people forming that society by those who possess the power or authority of prescribing them. Government is the aggregate of authorities which rule a society. By "dministration, again, we understand in modern times, and especially in more or less free countries, the aggregate of those persons in whose hands the reins of government are for the time being (the chief ministers or heads of departments)." (Bouvier, Law Dictionary, 891.) But the writer adds that the terms "government" and "administration" are not always used in their strictness, and that "government" is often used for "administration." In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made an offense to "write, print, utter, or published," or to "knowingly and willingly assist or aid in writing, printing, uttering, or publishing any false, scandalous, and malicious writing or writings against the Government of the United States, or either House of the Congress of the United States, or the President of the United States, with intent to defame the said Government, or either House of the said Congress, or the said President, or to bring them, or either of them, into contempt or disrepute, or to excite against them or either or any of them the hatred of the good people of the United States," etc. The term "government" would appear to be used here in the abstract sense of the existing political system, as distinguished from the concrete organisms of the Government the Houses of Congress and the Executive which are also specially mentioned. Upon the whole, we are of the opinion that this is the sense in which the term is used in the enactment under consideration. It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel, upon an abstraction like the Government in the sense of the laws and institutions of a country, but we think an answer to this suggestion is that the expression "scurrilous libel" is not used in section 8 of Act No. 292 in the sense in which it is used in the general libel law (Act No. 277) that is, in the sense of written defamation of individuals but in the wider sense, in which it is applied in the common law to blasphemous, obscene, or seditious publications in which there may be no element of defamation whatever. "The word 'libel' as popularly used, seems to mean only defamatory words; but words written, if obscene, blasphemous, or seditious, are technically called libels, and the publication of them is, by the law of England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per Bramwell L. J. See Com. vs. Kneeland, 20 Pick., 206, 211.) While libels upon forms of government, unconnected with defamation of individuals, must in the nature of things be of uncommon occurrence, the offense is by no means an imaginary one. An instance of a prosecution for an offense essentially of this nature is Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted "as a factious and seditious person of a wicked mind and unquiet and turbulent disposition and conversation, seditiously, maliciously, and willfully intending, as much as in him lay, to bring into contempt and hatred the independence of the United States, the constitution of this Commonwealth and of the United States, to excite popular discontent and dissatisfaction against the scheme of polity instituted, and upon trial in the said United States and in the said Commonwealth, to molest, disturb, and destroy the peace and tranquility of the said United States and of the said Commonwealth, to condemn the principles of the Revolution, and revile, depreciate, and scandalize the characters of the Revolutionary patriots and statesmen, to endanger, subvert, and totally destroy the republican constitutions and free governments of the said United States and this Commonwealth, to involve the said United States and this Commonwealth in civil war, desolation, and anarchy, and to procure by art and force a radical change and alteration in the principles and forms of the said constitutions and governments, without the free will, wish, and concurrence of the people of the said United States and this Commonwealth, respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked, seditious, and detestable intentions aforesaid he . . . falsely, maliciously, factiously, and seditiously did make, compose, write, and publish the following libel, to wit; 'A democracy is scarcely tolerable at any period of national history. Its omens are always sinister and its powers are unpropitious. With all the lights or experience blazing before our eyes, it is impossible not to discover the futility of this form of government. It was weak and wicked at Athens, it was bad in Sparta, and worse in Rome. It has been tried in France and terminated in despotism. it was tried in England and rejected with the utmost loathing and abhorrence. It is on its trial here and its issue will be civil war, desolation, and anarchy. No wise man but discerns its imperfections; no good man but shudders at its miseries; no honest man but proclaims its fraud, and no brave man but draws his sword against its force. The institution of a scheme of polity so radically contemptible and vicious is a memorable example of what the villainy of some men can devise, the folly of others receive, and both establish, in despite of reason, reflection, and sensation.'" An attack upon the lawfully established system of civil government in the Philippine Islands, like that which Dennie was accused of making upon the republican form of government lawfully established in the United States and in the State of Pennsylvania would, we think, if couched in scandalous language, constitute the precise offense described in section 8 of Act No. 292 as a scurrilous libel against the Insular Government of the Philippine Islands. Defamation of individuals, whether holding official positions or not, and whether directed to their public conduct or to their private life, may always be adequately punished under the general libel law. Defamation of the Civil Commission as an aggregation, it being "a body of persons definite and small enough for its individual members to be recognized as such" (Stephen, Digest of the Criminal Law, art. 277), as well as defamation of any of the individual members of the Commission or of the Civil Governor, either in his public capacity or as a private individual, may be so punished. The general libel law enacted by the Commission was in force when Act No. 292, was passed. There was no occasion for any further legislation on the subject of libels against the individuals by whom the Insular Government is administered against the Insular Government in the sense of the aggregate of such individuals. There was occasion for stringent legislation against seditious words or libels, and that is the main if not the sole purpose of the section under consideration. It is not unreasonable to suppose that the Commission, in enacting this section, may have conceived of attacks of a malignant or scurrilous nature upon the existing political system of the United States, or the political system established in these Islands by the authority of the United States, as necessarily of a seditious tendency, but it is not so reasonable to suppose that they conceived of attacks upon the personnel of the government as necessarily tending to sedition. Had this been their view it seems probable that they would, like the framers of the Sedition Act of 1798, have expressly and specifically mentioned the various public officials and collegiate governmental bodies defamation of which they meant to punish as sedition. The article in question contains no attack upon the governmental system of the United States, and it is quite apparent that, though grossly abusive as respects both the Commission as a body and some of its individual members, it contains no attack upon the governmental system by which the authority of the United States is enforced in these Islands. The form of government by a Civil Commission and a Civil Governor is not assailed. It is the character of the men who are intrusted with the administration of the government that the writer is seeking to bring into disrepute by impugning the purity of their motives, their public integrity, and their private morals, and the wisdom of their policy. The publication of the article, therefore, no seditious tendency being apparent, constitutes no offense under Act No. 292, section 8. The judgment of conviction is reversed and the defendants are acquitted, with costs de oficio.
EN BANC [G.R. No. L-9657. November 29, 1956.] LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS, Defendants-Appellants.
D E C I S I O N BAUTISTA ANGELO, J.: Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico Alikpala, counsel forDefendant, requested said stenographers for copies of the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page. Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to reimburse said amounts on the strength of a circular of the Department of Justice wherein the opinion was expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of the fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every payday beginning March 30, 1954. To prevent deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court of First Instance of Manila. Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the stenographers fees under Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring (1) that Defendant National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court; chan roblesvirtualawlibrary(2) that the payments already made by said Defendant to Plaintiffs herein and received by the latter from the former in the total amount of P714, for copies of the stenographic transcripts in question, are valid, just and legal; chan roblesvirtualawlibraryand (3) that Plaintiffs are under no obligation whatsoever to make a refund of these payments already received by them. This is an appeal from said decision. Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the legal fees provided for therein, and among these fees are those which stenographers may charge for the transcript of notes taken by them that may be requested by any interested person (section 8). The fees in question are for the transcript of notes taken during the hearing of a case in which the National Coconut Corporation is interested, and the transcript was requested by its assistant corporate counsel for the use of said corporation. On the other hand, section 2 of the Revised Administrative Code defines the scope of the term Government of the Republic of the Philippines as follows:chanroblesvirtuallawlibrary The Government of the Philippine Islands is a term which refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippine Islands, including, save as the contrary appears from the context, the various arms through which political authority is made effective in said Islands, whether pertaining to the central Government or to the provincial or municipal branches or other form of local government. The question now to be determined is whether the National Coconut Corporation may be considered as included in the term Government of the Republic of the Philippines for the purposes of the exemption of the legal fees provided for in Rule 130 of the Rules of Court. As may be noted, the term Government of the Republic of the Philippines refers to a government entity through which the functions of government are exercised, including the various arms through which political authority is made effective in the Philippines, whether pertaining to the central government or to the provincial or municipal branches or other form of local government. This requires a little digression on the nature and functions of our government as instituted in our Constitution. To begin with, we state that the term Government may be defined as that institution or aggregate of institutions by which an independent society makes and carries out those rules of action which are necessary to enable men to live in a social state, or which are imposed upon the people forming that society by those who possess the power or authority of prescribing them (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the national government, has reference to what our Constitution has established composed of three great departments, the legislative, executive, and the judicial, through which the powers and functions of government are exercised. These functions are twofold:chanroblesvirtuallawlibrary constitute and ministrant. The former are those which constitute the very bonds of society and are compulsory in nature; chan roblesvirtualawlibrarythe latter are those that are undertaken only by way of advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows:chanroblesvirtuallawlibrary (1) The keeping of order and providing for the protection of persons and property from violence and robbery. (2) The fixing of the legal relations between man and wife and between parents and children. (3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime. (4) The determination of contract rights between individuals. (5) The definition and punishment of crime. (6) The administration of justice in civil cases. (7) The determination of the political duties, privileges, and relations of citizens. (8) Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the preservation of the state from external danger or encroachment and the advancement of its international interests. (Malcolm, The Government of the Philippine Islands, p. 19.) The most important of the ministrant functions are:chanrobl esvirtuallawlibrary public works, public education, public charity, health and safety regulations, and regulations of trade and industry. The principles deter mining whether or not a government shall exercise certain of these optional functions are:chanroblesvirtuallawlibrary (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.) From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporations under the Corporation Law. The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these corporation perform certain functions of government make them a part of the Government of the Philippines? The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the simple reason that they do not come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of adjusting the coconut industry to a position independent of trade preferences in the United States and of providing Facilities for the better curing of copra products and the proper utilization of coconut by-products, a function which our government has chosen to exercise to promote the coconut industry, however, it was given a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, The mere fact that the Government happens to be a majority stockholder does not make it a public corporation (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects the transactions of the corporation cralaw . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government. (Government of the Philippine Islands vs. Springer, 50 Phil., 288.) To recapitulate, we may mention that the term Government of the Republic of the Philippines used in section 2 of the Revised Administrative Code refers only to that government entity through which the functions of the government are exercised as an attribute of sovereignty, and in this are included those arms through which political authority is made effective whether they be provincial, municipal or other form of local government. These are what we call municipal corporations. They do not include government entities which are given a corporate personality separate and distinct from the government and which are governed by the Corporation Law. Their powers, duties and liabilities have to be determined in the light of that law and of their corporate charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court. Public corporations are those formed or organized for the government of a portion of the State. (Section 3, Republic Act No. 1459, Corporation Law). The generally accepted definition of a municipal corporation would only include organized cities and towns, and like organizations, with political and legislative powers for the local, civil government and police regulations of the inhabitants of the particular district included in the boundaries of the corporation. Heller vs. Stremmel, 52 Mo. 309, 312. In its more general sense the phrase municipal corporation may include both towns and counties, and other public corporations created by government for political purposes. In its more common and limited signification, it embraces only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661. (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.) We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by the authority of the government, of the inhabitants of a particular place or district, and authorizing them in their corporate capacity to exercise subordinate specified powers of legislation and regulation with respect to their local and internal concerns. This power of local government is the distinctive purpose and the distinguishing feature of a municipal corporation proper. (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.) It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words before the appeal is taken and P0.15 for each page after the filing of the appeal, but in this case the National Coconut Corporation has agreed and in fact has paid P1.00 per page for the services rendered by the Plaintiffs and has not raised any objection to the amount paid until its propriety was disputed by the Auditor General. The payment of the fees in question became therefore contractual and as such is valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court. As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial, considering that this case refers not to a money claim disapproved by the Auditor General but to an action of prohibition the purpose of which is to restrain the officials concerned from deducting from Plaintiffs salaries the amount paid to them as stenographers fees. This case does not come under section 1, Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General. Wherefore, the decision appealed from is affirmed, without pronouncement as to costs
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION
G.R. No. L-33022 April 22, 1975 CENTRAL BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE CORPORATION, respondents. F.E. Evangelista for petitioner. Cruz, Villarin & Laureta for private respondent.
BARREDO, J .:+.wph!1 Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CA-G.R. No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No. Q-10919 sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation damages for breach contract in that after having formally and officially awarded, pursuant to the results of the usual bidding to Ablaza in December 1965 the "contract" for the construction of its San Fernando, La Union branch building and allowed said contractor to commence the work up to about May, 1966, albeit without any written formal contract having been executed, the Bank failed and refused to proceed with the project, unless the plans were revised and a lower price were agreed to by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the then new President of the Philippines on December 30, 1965 and the Memorandum Circular No. 1 dated December 31, 1965 of the same President. The factual background of this case is related in the following portions of the decision of the trial court, which the Court of Appeals affirmed without modification: t. hqw Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and Instructions to Bidders for the purpose of receiving sealed proposals for the general construction of its various proposed regional offices, including the Central Bank regional office building in San Fernando, La Union. In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance Corporation, which was one of the qualified bidders, submitted a bid proposal for the general construction of defendant's proposed regional office building in San Fernando, La Union at the public bidding held on November 3, 1965. The said proposal was, as required by the defendant accompanied by a cash bidder's bond in the sum of P275,000.00. On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines, after evaluating all the bid proposals submitted during the above- mentioned bidding, unanimously voted and approved the award to the plaintiff of the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's Proposal Item No. 2. Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the Governor and concurrently the Chairman of the Management Building Committee of the defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the latter that the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, had been awarded to the plaintiff. The said telegram was followed by a formal letter, also dated December 10, 1965, duly signed by said Mr. Rizalino L. Mendoza, confirming the approval of the award of the above-stated contract under plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00. Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by means of a letter dated December 15, 1965, whereby plaintiff also requested permission for its workmen to enter the site of the project, build a temporary shelter and enclosure, and do some clearing job thereat. Accordingly, said permission was granted by the defendant as embodied in its letter dated January 4, 1966, addressed to the plaintiff.. Within five (5) days from receipt by the plaintiff of the said notice of award, and several times thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went personally to see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing of the corresponding contract. A performance bond in the total amount of P962,250.00 (P275,000.00 of which was in cash and P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in compliance with the above-stated Instructions to Bidders, which bond was duly accepted by the defendant. Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced actual construction work on the project about the middle of January, 1966. On February 8, 1966, by means of a formal letter, defendant requested the plaintiff to submit a schedule of deliveries of materials which, according to plaintiff's accepted proposal, shall be furnished by the defendant. In compliance therewith, on February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries requested for. During the period when the actual construction work on the project was in progress, Mr. Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's office in the Central Bank. During those meetings, they discussed the progress of the construction work being then undertaken by the plaintiff of the projects of the defendant in San Fernando, La Union, including the progress of the excavation work. Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the construction site of the said project. While he was there, he admitted having seen pile of soil in the premises. At that time, the excavation work being undertaken by the plaintiff was about 20% complete. On March 22, 1966, defendant again wrote the plaintiff, requesting the latter to submit the name of its representative authorized to sign the building contract with the defendant. In compliance with the said request, plaintiff submitted to the defendant the name of its duly authorized representative by means of a letter dated March 24, 1966. A meeting called by the defendant was held at the conference room of the Central Bank on May 20, 1966. At the said meeting, the defendant, thru Finance Secretary Eduardo Romualdez, announced, among other things, the reduction of the appropriations for the construction of the defendant's various proposed regional offices, including that of the proposed San Fernando, La Union regional office building, the construction of which had already been started by the plaintiff. He also stated that the Central Bank Associated Architects would be asked to prepare new plans and designs based on such reduced appropriations. The defendant, during that same meeting, also advised the plaintiff, thru Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff corporation at the said meeting), to stop its construction work on the Central Bank Regional office building in San Fernando, La Union. This was immediately complied with by the plaintiff, although its various construction equipment remained in the jobsite. The defendant likewise presented certain offer and proposals to the plaintiff, among which were: (a) the immediate return of plaintiff's cash bidder's bond of P275,000.00; (b) the payment of interest on said bidder's bond at 12% per annum; (c) the reimbursement to the plaintiff of the value of all the work accomplished at the site; (d) the entering into a negotiated contract with the plaintiff on the basis of the reduced appropriation for the project in question; and (e) the reimbursement of the premium on plaintiff's performance bond. Not one of these offers and proposals of the defendant, however, was accepted by the plaintiff during that meeting of May 20, 1966. On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal execution of the corresponding contract, without prejudice to its claim for damages. The defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to the said letter of the plaintiff, whereby the defendant claimed that an agreement was reached between the plaintiff and the defendant during the meeting held on May 20, 1966. On the following day, however, in its letter dated June 16, 1966, the plaintiff, thru counsel, vehemently denied that said parties concluded any agreement during the meeting in question. On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the return of the said cash bond, without prejudice, however, to its claims as contained in its letters to the defendant dated June 3, June 10, and June 16, 1966, and with further reservation regarding payment of the corresponding interest thereon. On July 7, 1966, the said sum of P275,000.00 was returned by the defendant to the plaintiff. On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated January 26, 1967, the construction equipment of the plaintiff were pulled out from the construction site, for which the plaintiff incurred hauling expenses. The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be futile; hence, the present action was instituted by plaintiff against the defendant." (Pp. 249-256, Rec. on Appeal). It may be added that the Instructions to Bidders on the basis of which the bid and award in question were submitted and made contained, among others, the following provisions: t.hqw IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution. xxx xxx xxx IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of the Owner in person, or, if a firm or corporation, a duly authorized representative shall so appear, and to execute that contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal. xxx xxx xxx IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.) In the light of these facts, petitioner has made the following assignment of errors: t. hqw I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION. II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS COMMITTED A BREACH OF CONTRACT. III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION. IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp. A & B, Petitioner-Appellant's Brief.) Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its proposition that there could be no perfected contract in this case, (contrary to the conclusion of the courts below) because there is no showing of compliance, and in fact, there has been no compliance with the requirement that there must be a certification of the availability of funds by the Auditor General pursuant to Section 607 of the Revised Administrative Code which provides thus: t. hqw Section 607. Certificate showing appropriation to meet contract. Except in the case of a contract for personal service or for supplies to be carried in stock, no contract involving an expenditure by the National Government of three thousand pesos or more shall be entered into or authorized until the Auditor General shall have certified to the officer entering into such obligation that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. When application is made to the Auditor General for the certificate herein required, a copy of the proposed contract or agreement shall be submitted to him accompanied by a statement in writing from the officer making the application showing all obligations not yet presented for audit which have been incurred against the appropriation to which the contract in question would be chargeable; and such certificate, when signed by the Auditor, shall be attached to and become a part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purposes until the Government is discharged from the contract in question. Except in the case of a contract for supplies to be carried in stock, no contract involving the expenditure by any province, municipality, chartered city, or municipal district of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. Such certificate, when signed by the said treasurer, shall be attached to and become part of the proposed contract and the sum so certified shall not thereafter be available for expenditure for any other purpose until the contract in question is lawfully abrogated or discharged. For the purpose of making the certificate hereinabove required ninety per centum of the estimated revenues and receipts which should accrue during the current fiscal year but which are yet uncollected, shall be deemed to be in the treasury of the particular branch of the Government against which the obligation in question would create a charge." (Pp. 23-25, Petitioner-Appellant's Brief.) It is contended that in view of such omission and considering the provisions of Section 608 of the same code to the effect that "a purported contract entered into contrary to the requirements of the next preceding section hereof shall be wholly void", "no contract between the petitioner and respondent Ablaza Construction and Finance Corporation for the general construction of the proposed regional office building of the Central Bank in San Fernando, La Union, was ever perfected because only the first stage, that is the award of the contract to the lowest responsible bidder, respondent Ablaza Construction and Finance Corporation, was completed." (p. 29, Petitioner- Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wrightthus: t.hqw The aforesaid requirements of the Revised Administrative Code for the perfection of government contracts have been upheld by this Honorable Court in the case of Tan C. Tee Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract to the lowest bidder does not amount to entering into the contract because of the requirement of Section 607 of the Revised Administrative Code that a copy of the proposed contract shall be submitted to the Auditor General together with a request for the availability of funds to cover the proposed contract. Thus, this Honorable Court held: t. hqw 'To award the contract to the lowest responsible bidder is not the equivalent of entering into the contract. Section 607 of the Administrative Code requires that a copy of the proposed contract shall be submitted along with the request for the certificate of availability of funds, but there could be no proposed contract to be submitted until after the award was made.' And to guide government authorities in the letting of government contracts, this Honorable Court, in said case of Tan C. Tee vs. Wright, supra, laid down the procedure which should be followed, as follows: t. hqw `PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF CONTRACTS FOR INSULAR WORKS. The procedure which should be followed in the letting of contracts for Insular works is the following: First, there is an award of the contract by the Director of Public Works to the lowest responsible bidder. Second, there is a certificate of availability of funds to be obtained from the Insular Auditor, and in some cases from the Insular Treasurer, to cover the proposed contract. And third, there is a contract to be executed on behalf of the Government by the Director of Public Works with the approval of the department head.'" (Pp. 27-28, Petitioner-Appellant's Brief.) The contention is without merit. To start with, the record reveals that it is more of an afterthought. Respondent never raised this question whether in its pleadings or at the hearings in the trial court. We have also read its brief in the appellate court and no mention is made therein of this point. Not even in its memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as it appears that emphasis was given therein to various portions of the Revised Manual of Instructions to Treasurers regarding the perfection and constitution of public contracts. In fact, reference was made therein to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959, requiring "all contracts of whatever nature involving P10,000 or more to be entered into by all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the Auditor General for examination and review before the same are perfected and/or consummated, etc.", without mentioning, however, that said administrative order was no longer in force, the same having been revoked on January 17, 1964 by President Macapagal under Administrative Order No. 81, s. 1964. Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer may not be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed, in the Court of Appeals, petitioner could only bring up such questions as are related to the issues made by the parties in their pleadings, particularly where factual matters may be involved, because to permit a party to change his theory on appeal "would be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate court cannot consider any error of the lower court "unless stated in the assignment of errors and properly argued in the brief." Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts entered into by petitioner Central Bank are not within the contemplation of Sections 607 and 608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the National Government" and that the term "National Government" may not be deemed to include the Central Bank. Under the Administrative Code itself, the term "National Government" refers only to the central government, consisting of the legislative, executive and judicial departments of the government, as distinguished from local governments and other governmental entities and is not synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine Government", which are the expressions broad enough to include not only the central government but also the provincial and municipal governments, chartered cities and other government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative Code, p. 15.) To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a corporate seal which shall be judicially noticed; to make contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result directly from operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget prepared by its own Monetary Board and otherwise appropriates money for its operations and other expenditures independently of the national budget. It does not depend on the National Government for the financing of its operations; it is the National Government that occasionally resorts to it for needed budgetary accommodations. Under Section 14 of the Bank's charter, the Monetary Board may authorize such expenditures by the Central Bank as are in the interest of the effective administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this case, it is not subject, like the Social Security Commission, to Section 1901 and related provisions of the Revised Administrative Code which require national government constructions to be done by or under the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the Bank ever considered itself subject thereto. In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the Administrative Code thus: The second question to be considered has reference to the applicability of section 607 of the Administrative Code to contracts made by the City of Manila. In the second paragraph of said section it is declared that no contract involving the expenditure by any province, municipality, township, or settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. It is admitted that no such certificate was made by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that the provision cited has no application to contracts of a chartered city, such as the City of Manila. Upon examining said provision (sec. 607) it will be found that the term chartered city, or other similar expression, such as would include the City of Manila, is not used; and it is quite manifest from the careful use of terms in said section that chartered cities were intended to be excluded. In this connection the definitions of "province," "municipality," and "chartered city," given in section 2 of the Administrative Code are instructive. The circumstance that for certain purposes the City of Manila has the status both of a province and a municipality (as is true in the distribution of revenue) is not inconsistent with this conclusion." 1
We perceive no valid reason why the Court should not follow the same view now in respect to the first paragraph of the section by confirming its application only to the offices comprised within the term National Government as above defined, particularly insofar as government-owned or created corporations or entities having powers to make expenditures and to incur liabilities by virtue of their own corporate authority independently of the national or local legislative bodies, as in the case of the petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other corporate board, makes all required appropriations directly from the funds of the Bank and does not need any official statement of availability from its treasurer or auditor and without submitting any papers to, much less securing the approval of the Auditor General or any outside authority before doing so. Indeed, this is readily to be inferred from the repeal already mentioned earlier of Administrative Order No. 290, s. 1959, which petitioner tried to invoke, overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank should submit to the Auditor General for examination and review before contracts involving P10,000 or more to be entered into by it "before the same are perfected and/or consummated" had already been eliminated at the time the transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly at that, by petitioner has no leg to stand on. The other main contention of petitioner is that the purported or alleged contract being relied upon by respondent never reached the stage of perfection which would make it binding upon the parties and entitle either of them to sue for specific performance in case of breach thereof. In this connection, since the transaction herein involved arose from the award of a construction contract 2 by a government corporation and the attempt on its part to discontinue with the construction several months after such award had been accepted by the contractor and after the latter had already commenced the work without any objection on the part of the corporation, so much so that entry into the site for the purpose was upon express permission from it, but before any written contract has been executed, it is preferable that certain pertinent points be clarified for the proper resolution of the issue between the parties here and the general guidance of all who might be similarly situated. Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the Instruction to Bidders: t. hqw IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution. xxx xxx xxx IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.) Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could become effective and binding only upon the execution of the formal contract, and since admittedly no formal contract has yet been signed by the parties herein, there is yet no perfected contract to speak of and respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's argument that it had already started the work with some clearing job and foundation excavations, which has never been stopped by petitioner who had previously given express permission to respondent to enter the jobsite, build a temporary shelter and enclosures thereon, petitioner counters that under the above instructions, respondent is supposed to commence the work "within ten (10) calendar days from the date he receives a copy of the fully executed Contract," and for said respondent to have started actual construction work before any contract has been signed was unauthorized and was consequently undertaken at his own risk, all the above circumstances indicative of estoppel notwithstanding. We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute the contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal." There can be no other meaning of this provision than that the Bank's acceptance of the bid of respondent Ablaza effected an actionable agreement between them. We cannot read it in the unilateral sense suggested by petitioner that it bound only the contractor, without any corresponding responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and when that point is reached in the negotiations between two parties intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter disengage himself therefrom without being liable to the other in an action for specific performance. The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the relation between the parties. This invoked paragraph stipulates that "the acceptance of (respondent's) Proposal shall bind said respondent to execute the Contract and to be responsible for liquidated damages as herein provided." And yet, even if the contractor is ready and willing to execute the formal contract within the five (5) day period given to him, petitioner now claims that under the invoked provision, it could refuse to execute such contract and still be absolutely free from any liability to the contractor who, in the meantime, has to make necessary arrangements and incur expenditures in order to be able to commence work "within ten (10) days from the date he receives a copy of the fully executed Contract," or be responsible for damages for delay. The unfairness of such a view is too evident to be justified by the invocation of the principle that every party to a contract who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable provisions may not subsequently complain about them when they are being enforced, if only because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting the public interest unceremoniously disregard contractual commitments to the prejudice of the other party. Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If there could be instances wherein a government corporation may justifiably withdraw from a commitment as a consequence of more paramount considerations, the case at bar is not, for the reasons already given, one of them. As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as determinative of the perfection of the contract here in question. Said provision only means that as regards the violation of any particular term or condition to be contained in the formal contract, the corresponding action therefor cannot arise until after the writing has been fully executed. Thus, after the Proposal of respondent was accepted by the Bank thru its telegram and letter both dated December 10, 1965 and respondent in turn accepted the award by its letter of December 15, 1965, both parties became bound to proceed with the subsequent steps needed to formalize and consummate their agreement. Failure on the part of either of them to do so, entities the other to compensation for the resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that the bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation arising from the unqualified acceptance of his offer. Much less did it affect the existence of a contract between him and respondent". (at p. 452) It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a government-owned corporation, financially and otherwise autonomous both from the National Government and the Bureau of Public Works, insofar as its construction contracts are concerned, binds only the bidder and not the corporation until the formal execution of the corresponding written contract. Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold petitioner's pose. Pertinently to the point under consideration, the trial court found as follows: To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and "15"), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account. There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters; that the value of the excavation work accomplished by the plaintiff at the site was P113,800.00; that the rental of the various construction equipment of the plaintiff from the stoppage of work until the removal thereof from the jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00 from November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for removing said construction equipment from the jobsite to Manila, plaintiff paid a hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55; and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the 3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these expenditures, totalling P298,433.35 is attached to the records of this case (Annex "B", Complaint) and forms part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified said document and affirmed the contents thereof when he testified during the hearing. The same witness likewise explained in detail the various figures contained therein, and identified the corresponding supporting papers. It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant assailed the accuracy and/or reasonableness of the figures presented by the plaintiff; neither does it appear that the defendant offered any evidence to refute said figures. While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To cite only an instance, in estimating, the value of the excavation work, the defendant merely measured the depth, length and width of the excavated, area which was submerged in water, without ascertaining the volume of rock and the volume of earth actually excavated as was done by the plaintiff who prepared a detailed plan showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the unit measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also the unit price used by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly indicated in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The Court, therefore, can not give credence to defendant's, aforementioned estimates in view of their evident inaccuracies. The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of P298,433.35 is meritorious. The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of the contract in question by the defendant. As previously stated, the plaintiff seeks to recover the amount of P814,190.00 by way of unrealized expected profit. This figure represents 18% of P4,523,275.00 which is the estimated direct cost of the subject project. As it has been established by the evidence that the defendant in fact was guilty of breach of contract and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to recover from the defendant unrealized expected profit as part of the actual or compensatory damages. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain (Art. 2200, New Civil Code). Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter would have been able to make had the contract been performed (Paz P. Arrieta, et al., plaintiffs-appellees, vs. National Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant- appellant, 38 Phil. 392). Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole amount of said expected profit although there was only partial performance of the contract? Would the 18% expected profit be based on the estimated direct cost of the subject in the amount of P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00? On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the one involved in the present case would be ample and reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in the construction business, testified that 15% to 20% contractor's profit would be in accordance with the standard engineering practice. Considering the type of the project involved in this case, he stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this percentage of profit is even lower than what defendant's witness considered to be ample and reasonable, the Court believes that the reasonable percentage should be 18% inasmuch as the actual work was not done completely and the plaintiff has not invested the whole amount of money called for by the project." (Pp. 263-268, Record on Appeal.) These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which We find to be adequately supported by the record, are stated in Respondents' brief thus: t. hqw 23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr. Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation of Facts, R.A., p. 146). 24. Acting upon this written permission, respondent Ablaza immediately brought its men and equipment from Manila to the construction site in San Fernando, La Union, and promptly commenced construction work thereat. This work, consisted of the setting up of an enclosure around the site, the building of temporary shelter for its workmen, and the making of the necessary excavation works. (Commissioner's Report, R.A., p. 181). 25. Following the commencement of such construction work, petitioner Central Bank, through a letter dated February 8, 1966, formally requested respondent Ablaza to submit to petitioner the following:t.hqw (a) A schedule of deliveries of material which, under the terms of respondent Ablaza's approved proposal, were to be furnished by petitioner. (b) A time-table for the accomplishment of the construction work. In short, as early as February 8, 1966, or more than three months prior to petitioner's repudiation of the contract in question the latter (petitioner) already took the above positive steps it compliance with its own obligations under the contract. 26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966, respondent Ablaza submitted the schedule of deliveries requested by petitioner. (Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs. "D" to "D-7", inclusive.) 27. During the period of actual construction, respondent Ablaza, on several occasions, actually discussed the progress of the work with Mr. Mendoza. In addition, in March 1966, the latter (Mr. Mendoza) personally visited the construction site. There he saw the work which respondent had by that time already accomplished which consisted of the completion of approximately 20% of the necessary excavation works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252). 28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22, 1966, the latter (Mendoza) wrote to respondent Ablaza, instructing the latter to formally designate the person to represent the corporation at the signing of the formal construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18, 1967). 29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above request. (Exh. "I"; also t.s.n., pp 121-123, December 18, 1967). 30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the total amount of P962,250.00, consisting of (a) a cash bond in the amount of P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount of P687,250.00. In this connection, it is important to note that the specific purpose of this bond was to guarantee "the faithful Performance of the Contract" by respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p. 141). This performance guaranty bond was duly accepted by petitioner.(Id.) 31. However, on May 20, 1966, petitioner Central Bank called for a meeting with representatives of respondent Ablaza and another contractor. This meeting was held at the Conference Room of the Central Bank Building. At this meeting, then Finance Secretary Eduardo Romualdez, who acted as the representative of petitioner, announced that the Monetary Board had decided to reduce the appropriations for the various proposed Central Bank regional office buildings, including the one for San Fernando, La Union. 32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new plans and designs for the proposed regional office building in San Fernando would have to be drawn up to take account of the reduction in appropriation. Secretary Romualdez then advised respondent to suspendwork at the construction site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-254). 33. After making the above announcements, Secretary Romualdez proposed that all existing contracts previously entered into between petitioner Central Bank and the several winning contractors (among them being respondent Ablaza) be considered set aside. 34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the following concessions to respondent Ablaza: t .hqw (a) That its cash bond in the amount of P275,000.00 be released immediately, and that interest be paid thereon at the rate of 12% per annum. (b) That respondent Ablaza be reimbursed for expenses incurred for the premiums on the performance bond which it posted, and which petitioner had already accepted. (Decision, R.A., pp. 253-254). 35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with respondent Ablaza for the construction of a more modest regional office building at San Fernando, La Union, on anegotiated basis. However, the sincerity and feasibility of this proposal was rendered dubious by a caveat attached to it, as follows: t. hqw '4. Where auditing regulations would permit, the Central Bank would enter into a negotiated contract with the said corporation (Ablaza) for the construction work on the building on the basis of the revised estimates.' (Annex "8" to Answer, R.A., p. 95). 36. The revised cost fixed for this proposed alternative regional office building was fixed at a maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract originally awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87). 37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34 and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the formal execution of the contract previously awarded to it, or in the alternative, to pay "all damages and expenses suffered by (it) in the total amount of P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-91; Decision, id., p. 254). 38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor Amado R. Brinas, replied to respondent Ablaza's demand denying any liability on the basis of the following claim:t. hqw `(That, allegedly) in line with the agreement ... reached between the Central Bank and Ablaza Construction and Finance Corporation at a meeting held ... on May 20, 1966,' "whatever agreements might have been previously agreed upon between (petitioner and respondent) would be considered set aside." (Decision, R.A., p. 255; Annex "8" to Answer, id., pp. 93-96.) 39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza, through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts, par. 9, R.A., p. 142, also Annex "G" thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)" (Appellee's Brief, pars. 23 to 39, pp. 14-19.) None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief. Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the execution of the formal contract comes a little too late to be believable. Even assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is doubtful, considering that under the provisions of its charter already referred to earlier, disbursements and expenditures of the Bank are supposed to be governed by rules and regulations promulgated by the Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the work being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual execution of the written contract is a mere formality which could not materially affect their respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as having waived such requirement. To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in question, both parties were supposed to have seen to it that the formal contract were duly signed. Under the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from notice of the award, and so, he called on the Bank at various times for that purpose. The Bank never indicated until May, 1966 that it would not comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a "schedule of deliveries of materials" which under the terms of the bid were to be furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to who would be Ablaza's representative to sign the formal contract. In the meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the Central Bank who had been signing for the Bank all the communications regarding the project at issue, had visited the construction site in March, 1966, just before he wrote the request abovementioned of the 22nd of that month for the nomination of the representative to sign the formal contract, and actually saw the progress of the work and that it was being continued, but he never protested or had it stopped. All these despite the fact that the Memorandum Circular being invoked by the Bank was issued way back on December 31, 1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of Ablaza regarding the idea of changing the plans to more economical ones, there was no mention of the non-execution of the contract as entitling the Bank to back out of it unconditionally. Rather, the talk, according to the findings of the lower courts, was about the possibility of setting aside whatever agreement there was already. Under these circumstances, it appears that respondent has been made to believe up to the time the Bank decided definitely not to honor any agreement at all that its execution was not indispensable to a contract to be considered as already operating and respondent could therefore proceed with the work, while the contract could be formalized later. Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract here in question was perfected before the issuance of said Memorandum Circular, it is elementary that the same may not be enforced in such a manner as to result in the impairment of the obligations of the contract, for that is not constitutionally permissible. Not even by means of a statute, which is much more weighty than a mere declaration of policy, may the government issue any regulation relieving itself or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.) Specially in the case of the Central Bank, perhaps, it might not have been really imperative that it should have revised its plans, considering that it has its own resources independent of those of the national government and that the funds of the Central Bank are derived from its own operations, not from taxes. In any event, if the memorandum circular had to be implemented, the corresponding action in that direction should have been taken without loss of time and before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its contract with respondent, petitioner has to suffer the consequences of its action. The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of the record, We do not find sufficient ground to disturb the appealed judgment even in this respect, except as to attorney's fees. There are three principal items of damages awarded by the courts below, namely: (1) compensation for actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to the P5,000 already paid as retaining fee. All of these items were the subject of evidence presented by the parties. According to the Court of Appeals: t.hqw As regard the accuracy and reasonableness of the award for damages, both actual and compensatory, it is to be noted that the trial court subjected the Commissioner's report and the evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial court's attention to the fact that the P814,190.00 unrealized expected profit being claimed by appellee represented 18% of P4,523,275.00 which was the estimated cost of the project, while the contract awarded to appellee was only in the amount of P3,749,000.00 as per its bid proposal, the Court made the necessary modification. It is further to be noted that the amount of 18% of the estimated cost considered in the said award is much less than that given by appellant's own expert witness, Ambrosio R. Flores. He testified that 25% as contractor's profit "would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)" (p. 17 A, Appellant's brief.) Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have not been shown that they are devoid of reasonable basis. There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has incurred in performing its part of the contract. Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter of law the award of damages n the amount of U.S. $286,000, payable in Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the Naric failed to proceed with the purchase of imported rice after having accepted and approved the bid of Arrieta and after she had already closed her contract with her foreign sellers. Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code thus: t. hqw ART. 2200. Identification for damages shall comprehend not only the value of the loss suffered, but also that of the profits, which the obligee failed to obtain.. ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have forseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non- performance of the obligation. Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392: t. hqw .... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may be recovered as damages, while article 1107 (now 2201) of the same Code provides that the damages recoverable for the breach of obligations not originating in fraud (dolo) are those which were or might have been foreseen at the time the contract was entered into. Applying these principles to the facts in this case, we think that it is unquestionable that defendant must be deemed to have foreseen at the time he made the contract that in the event of his failure to perform it, the plaintiff would be damaged by the loss of the profit he might reasonably have expected to derive from its use. When the existence of a loss is established, absolute certainty as to its amount is not required. The benefit to be derived from a contract which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the injured party is not to be denied all remedy for that reason alone. He must produce the best evidence of which his case is susceptible and if that evidence warrants the inference that he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177): The general rule is, then, that a plaintiff may recover compensation for any gain which he can make it appear with reasonable certainty the defendant's wrongful act prevented him from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325.) (At pp. 398-399.) Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil Code was again applied as follows: t. hqw Regarding the actual damages awarded to appellee, appellant contends that they are unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000 board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to demand payment of sales that were not effected it should have proved (1) that there are actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the volume they are ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers. Since these facts were not proven, appellee's right to unearned commissions must fail. This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the creditor fails to obtain. In other words, lucrum cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to make profits because of appellant's breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such unearned profits? Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the following board feet of logs, Breareton Scale: t. hqw Months Board Feet From June to August 1959 3,007,435 September, 1959 none October, 1959 2,299,805 November, 1959 801,021 December, 1959 1,297,510
Total 7,405,861 The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than six months' time appellee received by way of commission the amount of P117,859.54, while in its memorandum, appellant makes the following statement: `11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54. But, as there were always two prices Invoice F.O.B price and F.O.B. price as per contract, because of the sales difference amounting to P31,920.18, and the same was deducted from the commission, actually paid to plaintiff General is only P79,580.82.' " It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery incurred by appellant, appellee had been earning its commission whenever logs were delivered to it. But from January, 1960, appellee had ceased to earn any commission because appellant failed to deliver any log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to pursuant to the agreement it is reasonable to expect that it would have continued earning its commission in much the same manner as it used to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the commissions it should earn during this period of time. And this commission is not difficult to estimate. Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take the number of board feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission received by appellee thereon, which amounts to P79,580.82, we would have that appellee received a commission of P.0107456 per board feet. Multiplying 34 million board feet by P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to appellee. The award therefore, made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but based on reasonable estimate. In the light of these considerations, We cannot say that the Court of Appeals erred in making the aforementioned award of damages for unrealized profits to respondent Ablaza. With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra., an award of ten per centum (10%) of the amount of the total recovery should be enough. PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the modification that the award for attorney's fees made therein is hereby reduced to ten per centum (10%) of the total recovery of respondent Ablaza. Costs against petitioner.
Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-27275 November 18, 1967 C & C COMMERCIAL CORPORATION, plaintiff-appellee, vs. NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellant. The Government Corporate Counsel for defendant-appellant. Cesar R. Canonizado and E. Ignacio for plaintiff-appellee. ANGELES, J .: The main issue in this appeal is, whether or not the call for bids for the supply of steel and centrifugal cast iron pipes for the waterworks projects in Manila and suburbs, and in the cities of Davao and Iloilo, the National Waterworks & Sewerage Authority (NAWASA) violated the provisions of Republic Act 912, section 1 of which provides as follows: Sec. 1. In construction or repair work undertaken by the Government, whether done directly or through contract awards, Philippine made materials and products, whenever available, practicable and usable, and will serve the purpose as equally well as foreign made products or materials, shall be used in said construction or repair work, upon the proper certification of the availability, practicability, usability and durability of said materials or products by the Director of the Bureau of Public Works and/or his assistants. In the decision appealed from the Court of First Instance of Manila has permanently enjoined the NAWASA from the procurement of the materials needed for the projects involved which, according to the appellant, are designed to alleviate the sufferings of the millions of inhabitants in said places where there is a crying need for more water an item so vital to human existence and the delay occasioned by the injunctions complained of, has in no little way, further aggravated the inconvenience of the consuming public in said metropolitan areas where acute water crises have recurred through the years. Nevertheless, it is vehemently contended by the appellee that the declaration of an economic national policy as envisioned in the aforequoted provision of the law which, like the original Flag Law 1 is impressed with the clear nationalistic policy of giving preference to locally produced materials and products, has been violated; and if this is so, no amount of public clamor could justify the acts of the NAWASA complained of, for above all the supremacy of the law must be upheld. We have, therefore, examined the record of this case with these considerations foremost in Our minds. It appears that the case, originally commenced in the Court of First Instance of Manila, on July 7, 1965, as a petition for declaratory relief for the purpose of securing a judicial pronouncement on the interpretation of the word "practicable" as used in Republic Act No. 912, i.e., whether it means that the cheapest materials among the locally produced or manufactured products should be preferred and specified in construction and repair works undertaken by the Government, was later converted into, an action for prohibition with preliminary injunction through the process of supplemental pleadings. THE SAN PABLO WATERWORKS SYSTEM The corresponding complaint was filed on 19 July 1965, alleging that the NAWASA had started to negotiate: for direct purchase of centrifugally cast iron pipes (CCI) for the improvement of the San Pablo Waterworks System in violation of the provisions of Republic Act 912 and the law on public biddings, excluding the C & C Commercial Company, the plaintiff, which can supply instead asbestos cement pressure pipes which are available, practicableand usable, and will serve the purpose of the said project at a much lower cost. On 6 August 1965, the NAWASA filed its answer to the complaint. On 10 August 1965, the Filipino Pipe and Foundry Corporation, with leave of court, also filed its answer in intervention. On 16 August 1965, as prayed for in the complaint, the court issued a writ of preliminary injunction restraining the NAWASA from further negotiating the purchase of the CCI pipes from the intervenor. On 23 September 1965, the plaintiff and the NAWASA entered into a partial stipulation of facts, on the basis of which and the additional evidence adduced at the hearing, the court rendered a partial decision on 31 January 1966, dismissing the complaint insofar as the San Pablo Waterworks System was concerned and dissolving the preliminary injunction issued thereunder. This partial decision has become final. THE DAVAO METROPOLITAN WATERWORKS On 22 January 1965, the NAWASA called for bids for the furnishing of labor and the supply of materials for the construction of the proposed improvement of the Davao Metropolitan Waterworks System. In the call for bids, the bidders were required to submit proposals for the supply of 24-inch steel pipes, asbestos, cement pressure pipes, and cast iron pipes. The bidding was held on 23 February 1965. On 15 March 1965, the committee on award of the NAWASA recommended to the board of directors that the bid be awarded to the lowest bidder, Tirso del Rosario, under his proposal to supply steel pipes. On 10 August 1965, the plaintiff filed a (First) supplemental complaint seeking to restrain the NAWASA from proceeding with the award of the project in Davao, alleging that in specifying steel pipes for the project, which is admittedly imported material, without giving preference to locally produced asbestos cement pressure pipes manufactured by the plaintiff, violates the provisions of Republic Act 912. On 14 August 1965, the court admitted the supplemental complaint; and as prayed for therein on, 17 September 1965, the Court issued a writ of preliminary injunction. THE ILOILO WATERWORKS SYSTEM As early as on 26 November 1962, the NAWASA called for bids for the supply of 18-inch steel pipes for the improvement of the Iloilo Waterworks System. The bidding was conducted on 27 December 1962. C & C Commercial Co. participated in the bidding offering to supply the needed 18- inch steel pipes for the project, but lost in the bidding. The lowest bidder for the supply of the specified 18-inch steel pipes was the Regal Trading Corporation, and the bid was awarded to it. On 8 September 1965, almost three (3) years after the date of the bidding, the C & C Commercial Co. filed a (Second) supplemental complaint; seeking to restrain the NAWASA from formalizing or implementing the award on the aforesaid Iloilo project for the supply of 18-inch steel pipes, alleging that in specifying steel pipes for the particular project, the NAWASA has violated the provisions of Republic Act 912 which requires the purchase of Philippine made materials and products which are available, practicable and usable locally, like plaintiff's product asbestos cement pressure pipes in construction and repair undertaken by the government. On 24 September 1965, over the objection of the NAWASA, alleges second supplemental complaint was admitted by the court. The record is not clear when the restraining order under the second supplemental complaint was issued, although the NAWASA alleges that a restraining order was issued under date of 10 September 1965, which fact has not been traversed by the plaintiff. THE MANILA AND SUBURBS WATERWORKS SYSTEM On 13 September 1965, the NAWASA advertised for bids for the supply of 30 to 42-inch steel pipes for the use and improvement of the interim waterworks project in the City of Manila and suburbs, the bidding to take place on 14 December 1955. On 10 November 1965, the C & C Commercial Co. filed a (Third) Supplemental complaintseeking to restrain the NAWASA and its representatives from holding the balding under the aforementioned notice to bid, averring identical facts as those alleged in the previous supplemental complaints, that the call for bid for steel pipes for the Manila project and suburbs violates the provisions of Republic Act 912. Over the objection of the defendant NAWASA, the supplemental complaint was admitted; and as prayed for therein, on 20 November 1965, a writ of preliminary injunction was issued restraining the NAWASA from holding the bidding scheduled on 14 December 1965, or on any subsequent date, until further orders from the court. Pending the case in the court a quo, the NAWASA filed three separate motions praying for the dissolution of the preliminary injunctive writs issued in connection with the Davao, Iloilo and Manila projects, pleading to the court to consider the crying need for a more adequate supply of water in those cities, particularly in the City of Manila and its suburbs, where the lack of adequate supply of potable water has been a recurrent crisis which affected to a dangerous extent, the health and the life of the inhabitants, and that the continuation of the injunctive writs may bring about the cancellation of the $20,200,000.00 loan of the NAWASA from the World Bank, which would result from the failure of the NAWASA to comply with the formulated work schedule of the waterworks projects, which under the agreement with the World Bank, has to be completed in the month of October 1967; but the court failed to take any action on the motions. Parodying Shakespeare, "Set honor in one eye, and death in the other, and I will look on both indifferently." After a trial of the case, on 15 August 1966, the court rendered a decision finding and concluding that the act of the NAWASA in specifying steel pipes for the project of the city of Manila and its suburbs, and in awarding the contracts for the supply of steel pipes in the cases of the Davao and Iloilo Waterworks System, constituted a violation of the provisions of Republic Act 912; the dispositive portion of the decision reads as follows: (a) On the supplemental complaint, making permanent the preliminary injunction dated September 2, 1965, enjoining the defendant or its representatives and agents from formalizing or implementing the award for the construction of the Davao Waterworks Project in respect of the award of pipes to be used therein; rescinding the award made in favor of Tirso del Rosario; and ordering the reappraisal of the bids with a view to complying with the provisions of Republic Act No 912; (b) On the second supplemental complaint ordering the issuance of a permanent injunction to enjoin the defendants or its agents and representatives from formalizing the award of the contract for the furnishing of 18" steel pipes for the Iloilo Waterworks System; ordering a new bidding for the said project so as to include in the call for bids for the supply and delivery of materials, asbestos cement pipes, as well as CCI pipes; and rescinding the award of the contract in favor of the Regal Trading Corporation; (c) On the third supplemental complaint, making permanent the preliminary injunction dated December 14, 1965, or any other subsequent date calling for imported steel pipes from 30" to 42" diameter for the interim Development of Waterworks System for Manila and suburbs; and ordering the defendant to specify asbestos cement pressure pipes for the said project; and (d) Ordering the defendants to pay the costs. From the decision, NAWASA appealed to this Court. Appellant contends that the provisions of Republic Act 912, are applicable only to construction or repair works undertaken by the Government. It argues, that since the NAWASA, though a public corporation, is not a municipal corporation or agency of the State empowered to regulate or administer the local affairs of a town or city, 2 nor one of the various arms of the government through which political authority is made effective in the Islands, consequently, the NAWASA should not be included within the meaning of the term "Government" as used in the law. 3 It is to be noted, however, that Section 2 of the Revised Administrative Code defining the term "Government" which is heavily relied upon by the appellant recognizes an exception: "when a different meaning for the word or phrase is given a particular statute or is plainly to be collected from the context or connection where the term is used." In this context of the law, the term "government" without any qualification as used in Republic Act 912, should be construed in its implied sense and not in the strict signification of the term "Government of the Philippines" as the political entity through which political authority is exercised. A comparative analysis of Republic Act 912 and Commonwealth Act 138, otherwise known as the "Flag Law" the latter "An Act to give Native Products and Domestic Entities the Preference in the Purchase of Articles for the Government", and the former "An Act to Require the Use, Under Certain Conditions, of Philippine Made Materials or Products in Government Projects or Public Works Construction, Whether Done Directly by the Government or Awarded thru Contracts", discloses that both relate to the same subject matter and have the same nationalistic purpose or object: to give preference to locally produced materials in purchases, works or projects of the Government. The oberservation that Commonwealth Act 138 expressly includes purchases by Government-owned companies, while Republic Act 912 merely relates to construction or repair work done by the Government, is no argument for the proposition that government-owned or controlled corporations have been excepted from the operation of the latter law, for it is clear that Commonwealth Act 138 also ordains that the Purchase and Equipment Division of government- owned companies authorized to purchase or contract for materials and supplies for public use, buildings, or public works, shall give preference to locally produced materials or products. Being statutes in pari materia they should be construed together to attain the purpose of an expressed national policy. Thus, it has been aptly stated: On the presumption that whenever the legislature enacts a provision it has in mind the previous statutes relating to the same subject matter, it is held that in the absence of any express repeal or amendment therein, the new provision was enacted in accord with the legislative policy embodied in those prior statutes, and they all should be construed together. Provisions in an act which are omitted in another act relating to the same subject matter will be applied in a proceeding under the other act, when not inconsistent with its purpose. Prior statutes relating to the same subject matter are to be compared with the new provisions; and if possible by reasonable construction, both are to be construed that effect is given to every provision of each. Statutes in pari materia although in apparent conflict, are so far as reasonably possible construed to be in harmony with each other. 4
The main objective of the Government is to develop our domestic industries so that the country will be economically self-sufficient. And both Commonwealth Act 138 and Republic Act 912 aim to contribute to the realization of the aforesaid nationalistic policy by requiring, the use of Philippine made products or materials, whenever available, practicable and usable in government construction work or repair projects. The alleged conflict between the two laws is more apparent than real, and should not be allowed to defeat the purpose of these laws. We have to declare, therefore, that the NAWASA, like any other corporation exercising proprietary or governmental functions should be deemed embraced within the term "Government" found in Republic Act 912, and in the repair or construction of their works or projects or the purchase of materials therefor, local materials should be given preference when available, practicable and usable. The next issue for consideration is: Did the NAWASA violate the provisions of Republic Act 912? Appellant vehemently denies the charge and decries the holding of the lower court appealed from that in specifying steel pipes in the call for bids for the supply of materials for the waterworks projects under consideration it had defied the mandate of the law. Appellant insists that at the time it called for bids for the Davao project, followed by the call for the supply of materials, for the Iloilo project, herein appellee's plant was only capable of producing asbestos cement pressure pipes up to 12 inches diameter; while at the time the call for bids for the supply of materials for the Interim Project of Manila and suburbs was advertised, the largest size of asbestos cement pipes available were of 24 inches being produced at the time by another local manufacturer, the Eternit Corporation, which never protested against the bids in question. We have reexamined the record of the case with painstaking solicitude and, instead, We find the facts indubitable and conclusive that the C & C Commercial Corporation had not therefore and even up to the present time ever produced pipes larger than 12 inches in diameter. Said appellee corporation has implicitly admitted this as a fact; and although it claims to have a complete plant that is equipped with the necessary machinery, technicians and skilled laborers capable of producing pipes in the sizes called for in those bids (18 to 42 inches in diameter) had the NAWASA specified them in asbestos cement, the weakness of the argument is at once exposed by a mere examination of the pertinent evidence adduced during the trial of the case on this particular point. The claim is belied by Leopoldo del Rosario, a staff civil an engineer of the NAWASA, who testified as follows: Q. Engineer Del Rosario, what is the limitation of the local asbestos cement pressure pipes that are locally manufactured in the Philippines? A. We based on NAWASA's experience, we have purchased only sizes up to 12 inches, but on certification of the Bureau of Public Works, a report has been submitted to us that asbestos cement pressure pipes (is) being manufactured by one local manufacturing company in the Philippines, the Eternit Corporation, which is a pipe manufacturer. and we have recently purchased pipes for the Manila interim project of sizes up to 24 inches non-pressure pipes. Q. Is there any other local manufacturer of asbestos cement pressure pipes besides C & C Commercial Corporation? A. None, sir, only the C & C Commercial Corporation. 5
Q. Engineer del Rosario, as staff civil engineer and the specification engineer, member-secretary of the Pre-Qualifications Committee and the present chairman of all the bidding committees of the NAWASA, do you know if C & C Commercial Corporation, the plaintiff herein, is manufacturing asbestos cement pressure pipes from sizes thirty inches and up in diameter? A. The company does not manufacture size beyond twelve inches. Q. Why do you say that the C & C Commercial Corporation is not manufacturing asbestos cement pressure. pipes beyond twelve inches? A. Because we had bi-yearly inspection of all local plants here as a matter of policy of the committee to determine the capacity or capability of the local manufacturers to supply and even to bid. So every six months the pre-qualifications, committee in collaboration with the procurement inspect all the facilities of the chemical producing plant, this cast iron and asbestos plant, the galvanized iron pipe plant, these are regularly inspected every six months and so the pre-qualifications would know what is available. 6
And the foregoing testimony relative to the "non-availability" of appellee's products in sizes above 12 inches in diameter was corroborated by Mrs. Clara Reyes Pastor, herein appellee corporation's President, who declared as follows: Q. Is it not a fact Mrs. Reyes, that the sizes of asbestos cement pressure pipes locally manufactured by you and which you furnish the NAWASA is only 12 inches in diameter? Yes or No ? A. Yes, sir, because that is the only pipe required at the time I delivered it. Q. And the asbestos cement pressure pipes from sizes 12 to 42 inches that you have supplied the NAWASA in the past, they were all imported by you? A. Yes, sir. Q. I heard you testify Mrs. Reyes, that in case you win in this particular bidding, you intend to import equipments from abroad, is that correct? A. Not equipments, only mandril. Q. So that presently what is the biggest size of mandril that you have? A. I have a 16-inch mandril the biggest of them all. 7
From the foregoing testimony of witnesses, and in the light of other evidence submitted by the parties, the following may be deduced: that it is the practice of the NAWASA which we find both practical and logical to send out its own men to the various local manufacturing plants for the purpose of knowing the availability of materials needed for its projects; that at the time it specified 18 and 24 inches diameter steel pipes for the Davao and Iloilo waterworks projects, there were no locally produced materials in said sizes; and that with respect to those sizes that were already available, the NAWASA has actually specified and used them in various other construction and repair works even without the certification of the Director of Public Works. We really do not see Our way clear how herein appellee could have charged that the NAWASA had discriminated against its products under the circumstances when its own president admits that it has supplied the NAWASA before locally produced asbestos cement pressure pipes up to 12 inches diameter only and all those with diameters above 12 inches were of foreign manufacture. The evidence, therefore, is conclusive that locally produced asbestos pipes above 12 inches in diameter were not available for purposes of claiming any preference under the provisions of Republic Act 912. And this conclusion becomes even more cogent if We are to consider the fact that C & C Commercial Corporation failed to produce the necessary certification from the Director of Public Works to show that its products were already certified as available, practicable and usable at the time that the call for bids for the supply of materials for the Davao, Iloilo and Manila Interim projects were made to give some semblance of the right it claims to have been violated. Of course, appellee points out the fact that it has subsequently secured the necessary certification from the Director of Public Works certifying to the availability, practicability and durability of the asbestos cement pressure pipes produced from its plant. We agree, and there should be no quarrel at all that with respect to pipes of 4 to 12 inches in diameter which it is actually producing now, the preference claimed under the law may be allowed. Be that as it may, however, the certification referred to did not in any way improve its position; for the stubborn fact still remains that at the time said certification was issued on July 6,1966, C & C Commercial Corporation was actually producing asbestos pipe up to 12 inches only, which its existing equipment or machinery, when inspected by a representative of the Office that issued the certification, was found capable of producing. Hence, We cannot subscribe to the holding of the court below that locally produced asbestos cement pipes above 12 inches in diameter may be considered "'available" within the meaning of Republic Act 912 simply because the President of herein appellee corporation n had manifested or promised that it can procure bigger mandrels worth $25,000.00 fom abroad and will be able to produce pipes in the larger sizes called for in the questioned bids shortly after their installation, for that would be giving the term "available" a very strained meaning. It would really be unfair to require in order to be "available" within the meaning of the law that herein appellee should have in stock the sizes of pipes called for in the bids in the quantity needed by the appellant; but We cannot also believe, by any stretch of the imagination, that the Director of Public Works would certify to the availability, practicability, usability and durability of certain products even before the machinery, equipment or tools needed to produce said products are actually bought from abroad and installed in its plant by the manufacturer. Statutes granting advantages to private persons have in many instances created special privileges or monopolies for the grantees and thus have been viewed with suspicion and strictly construed. This is altogether appropriate in the majority of situations, for if public advantage is gained by the grant,it normally appears to be of secondary significance compared with the advantage gained by the grantee. 8 And rights which exist only by virtue of such statutes come into being only after strict compliance with all the conditions found in those statutes. 9 These rules should apply to the case at bar where the law invoked grants a preference to locally produced products or materials. Since Republic Act 912 grants preference only upon the certification of availability, practicability and usability of locally produced materials by the Director of Public Works, that certification must be existing and effective before any right arising therefrom may be claimed to have been violated. Notwithstanding the clear nationalistic policy of the law aforementioned, We cannot, by any mistaken sympathy towards herein appellee, recognize the existence of its right under the law alleged to have been violated, which C & C Commercial Corporation has miserably failed to prove in this case. With respect to the Interim Project for the City of Manila and its suburbs, it would seem that the decision appealed from had virtually become moot and academic by reason of the passage of Republic Act 4858 which authorizes the President to allow the procurement of supplies necessary for the rehabilitation of the project as an exception to the restrictions and preferences provided for in Republic Act 912, and the President appears to have authorized the General Manager of the NAWASA under the said statutory power to purchase all the pipes and materials necessary for the project by negotiated sales. For all the foregoing, We find it unnecessary to discuss further the other errors assigned by the appellant. WHEREFORE, the decision appealed from is hereby set aside, with costs against the appellee. The writs of preliminary injunctions issued by the lower court are set, aside, and declared null and void. Concepcion, C.J., Reyes J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur. Fernando, J., took no part.
ersy with the Regional Board of Canvassers was, therefore, one of which petitioners cannot be heard, nor have any reason, one of which petitioners cannot be heard, nor have any reason, to complain, for it even resulted in one KB candidate getting into the winners column. If the COMELEC stopped at a certain point in its examination, instead of going through all those questioned by the petitioners, evidently due to time constraint as fixed in the guidelines, set by this Court, and the character of pre-proclamation proceedings , it cannot be charged with abuse of discretion, much less a grave one. it did not have to conduct the additional examination, in the first place. The controversy which was heard and decided in the first instance, by the Regional Board of Canvassers, with guidelines set by this Court, was appealed to the COMELEC. The latter's appellate authority was thus limited to a review of the decision of the Board on the basis of the evidence presented before it, rendering its own decision on the basis of the evidence, and no more. It incorporated the result of its own examination of additional election returns, and found one KB as one of the candidate, a fact clearly showing that COMELEC did examine the said documents, otherwise , the result as previously declared by the Board of Canvassers with a clean sweep of the KBL candidate would have remained unaltered. Expounding more on the one circumstance inclining me to the theory that with the enlarged power and broadened authority of the COMELEC which to and cover virtually the entire electoral process, as exclusively as the power of legislation is constitutionally lodged in the law-making body, what is given to the Supreme Court as its reviewing authority over acts of the COMELEC is no more than what it could exercise under its power of judicial inquiry with to acts of the legislative body, which is the transfer to the COMELEC of the powers pertaining to the Electoral Tribunals and the courts under the old Constitution over election contests, it must not be hard to concede that with the composition of the electoral tribunals in which six of the justices of the Supreme Court sit in said bodies, the Supreme Court crowd no longer exercise any reviewing authority over the acts of the said electoral tribunals except possibly when violation of the Constitution or constitution rights are involved. With this limited concept of this Court's authority over the defunct electoral tribunals now applied to an equally constitutional body that the COMELEC is that took over the function of the Election Tribunal would hesitate to hold that Supreme Court may grant the relief as in prayed for in the present petition. If this is so under the law and the Constitution, it should also be upon consideration of public policy. The last elections were called by the President as a test or t as to how the vital reforms and changes of political and social discipline and moral values he has instituted to evolve a new order have affected the thinking and the attitudes of our Tribunal should be extreme caution, if not restraint, in any act on our part that might reflect on the success or failure of that experiment intended, at the time as a big stride in the way back to normalization. This is specially true in the field of politics where the ills of the Old Society has been most grave, because our elections then as a democratic process, have tarnished the image of our country as a representative democracy. Except on very compelling reasons then, which I believe do not exist in the case before Us, should we make any pronouncement that would detract on how successful the last political exercise had been, as the first election held under the new Constitution. We must refrain from imputing to the COMELEC which has been enlarged with fresh mandate and a bigger trust by the Constitution failure in the performance of its functions either by willfull neglect, official incompetence, much less by deliberate partiality, in the first real test of its capability. In the light of the foregoing, I vote, in concurrence with the majority, to dismiss the petition, first, as to the matter allegedly involving a violation of the petitioners' right of due process on the ground that there was no denial thereof, and second, as to the other matters involving no violation of constitutional rights, on the ground they are purely political questions, and that in any case, no grave abuse of discretion has been committed by, much leas is there lack or excess of jurisdiction on the part of, the Commission on Elections. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19337 September 30, 1969 ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents. Laurea, Laurea and Associates for petitioner. Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondents.
CASTRO, J .: This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of customs duties and special import tax, as well as the petitioner's alternative remedy to recover the said amount minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and Customs Code. The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two importations of jute bags. The first shipment consisting of 44,800 jute bags and declared under entry 48 on January 8, 1967, entered free of customs duties and special import tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned upon the exportation of the jute bags within one year from the date of importation. The second shipment consisting of 75,200 jute bags and declared under entry 243 on February 8, 1957, likewise entered free of customs duties and special import tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same conditions as stated in bond no. 1. Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only 25,000 were exported within the said period of one year. In other words, of the total number of imported jute bags only 33,647 bags were exported within one year after their importation. The remaining 86,353 bags were exported after the expiration of the one-year period but within three years from their importation. On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire the following day, giving the following as the reasons for its failure to export the remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the Central railroad line from November 6 to December 21, 1957 by certain union elements in the employ of the Philippine Railway Company, which hampered normal operations; and (c) delay in the arrival of the vessel aboard which the petitioner was to ship its sugar which was then ready for loading. This request was denied by the Commissioner per his letter of April 15, 1958. Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42 representing the customs duties and special import tax due thereon, which amount the petitioner paid under protest. In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the refund of the amount it had paid, on the ground that its request for extension of the period of one year was filed on time, and that its failure to export the jute bags within the required one-year period was due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the Central railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a drawback under section 106(b) in relation to section 105(x) of the Tariff and Customs Code. After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of the Commissioner of Customs. The petitioner imputes three errors to the Court of Tax Appeals, namely: 1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the failure of the petitioner to export the jute bags in question within the time required by the bonds. 2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner of Customs to extend the period of one (1) year within which the jute bags should be exported. 3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the provisions of section 106, par. (b), of the Tariff and Customs Code. 1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one year provided for in section 23 of the Act. Section 23 reads: SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in the opinion of the collector of customs, of such a character as to be readily identifiable may be delivered to the importer thereof upon identification and the giving of a bond with sureties satisfactory to the collector of customs in an amount equal to double the estimated duties thereon, conditioned for the exportation thereof or payment of the corresponding duties thereon within one year from the date of importation, under such rules and regulations as the Insular Collector of Customs shall provide. 1
To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and other containers are good for 12 months without extension," and paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of cylinders and other containers are not extendible." And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25, 1948 was issued, prescribing rules and regulations governing the importation, exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said administrative order provides: That importation of jute bags intended for use as containers of Philippine products for exportation to foreign countries shall be declared in a regular import entry supported by a surety bond in an amount equal to double the estimated duties, conditioned for the exportation or payment of the corresponding duties thereon within one year from the date of importation. It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff and Customs Code, while fixing at one year the period within which the containers therein mentioned must be exported, are silent as to whether the said period may be extended. It was surely by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already adverted to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more specifically, to make officially known its policy to consider the one-year period mentioned in the law as non-extendible. Considering that the statutory provisions in question have not been the subject of previous judicial interpretation, then the application of the doctrine of "judicial respect for administrative construction," 3 would, initially, be in order. Only where the court of last resort has not previously interpreted the statute is the rule applicable that courts will give consideration to construction by administrative or executive departments of the state. 4 1awphl. nt The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by the executive department or other agency charged with its administration or enforcement is entitled to consideration and the highest respect from the courts, and must be accorded appropriate weight in determining the meaning of the law, especially when the construction or interpretation is long continued and uniform or is contemporaneous with the first workings of the statute, or when the enactment of the statute was suggested by such agency. 5
The administrative orders in question appear to be in consonance with the intention of the legislature to limit the period within which to export imported containers to one year, without extension, from the date of importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the long-standing view of the Commissioner of Customs that the one-year period therein mentioned is not extendible. Implied legislative approval by failure to change a long-standing administrative construction is not essential to judicial respect for the construction but is an element which greatly increases the weight given such construction. 6
The correctness of the interpretation given a statute by the agency charged with administering its provision is indicated where it appears that Congress, with full knowledge of the agency's interpretation, has made significant additions to the statute without amending it to depart from the agency's view. 7
Considering that the Bureau of Customs is the office charged with implementing and enforcing the provisions of our Tariff and Customs Code, the construction placed by it thereon should be given controlling weight.1awphl. nt In applying the doctrine or principle of respect for administrative or practical construction, the courts often refer to several factors which may be regarded as bases of the principle, as factors leading the courts to give the principle controlling weight in particular instances, or as independent rules in themselves. These factors are the respect due the governmental agencies charged with administration, their competence, expertness, experience, and informed judgment and the fact that they frequently are the drafters of the law they interpret; that the agency is the one on which the legislature must rely to advise it as to the practical working out of the statute, and practical application of the statute presents the agency with unique opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the statute; ... 8
If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to export the jute bags and, consequently, to a refund of the amount it had paid as customs duties. In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory. The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute bags within the one-year period cannot be accorded credit, for several reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention of or reference to this argument of the petitioner, which can only be interpreted to mean that the court did not believe that the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to effectively prevent the exportation of the jute bags within the required one-year period. In point of fact nowhere in the record does the petitioner convincingly show that the so-called fortuitous events or force majeure referred to by it precluded the timely exportation of the jute bags. In the second place, assuming, arguendo, that the one-year period is extendible, the jute bags were not actually exported within the one-week extension the petitioner sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported within the period of one week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409, were actually exported only during the period from February 16 to May 24, 1958, long after the expiration of the one-week extension sought by the petitioner. Finally, it is clear from the record that the typhoons and floods which, according to the petitioner, helped render impossible the fulfillment of its obligation to export within the one-year period, assuming that they may be placed in the category of fortuitous events or force majeure, all occurred prior to the execution of the bonds in question, or prior to the commencement of the one-year period within which the petitioner was in law required to export the jute bags. 2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and Customs Code, which Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration following the word "containers" in the said statutes serves merely to give examples of containers and not to specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states, "containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the Tariff and Customs Code mentions "large containers," giving as examples "demijohn cylinders, drums, casks and other similar receptacles of metal, glass or other materials." (emphasis supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in Customs Administrative Order 389 to circumscribe the scope of the word "container," any more than the statures sought to be implemented actually intended to do. 3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106 (b) of the Tariff and Customs Code, 11 which reads: SEC. 106. Drawbacks: ... b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof. Upon the exportation of articles manufactured or produced in the Philippines, including the packing, covering, putting up, marking or labeling thereof, either in whole or in part of imported materials, or from similar domestic materials of equal quantity and productive manufacturing quality and value, such question to be determined by the Collector of Customs, there shall be allowed a drawback equal in amount to the duties paid on the imported materials so used, or where similar domestic materials are used, to the duties paid on the equivalent imported similar materials, less one per cent thereof: Provided, That the exportation shall be made within three years after the importation of the foreign material used or constituting the basis for drawback ... . The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of importation. The contention is palpably devoid of merit. The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the containers mentioned therein as long as he exports them within one year from the date of acceptance of the import entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b), contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the amount paid, provided the articles mentioned therein are exported within three years from importation. It would seem then that the Government would forego collecting duties on the articles mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same shall be exported within the relatively short period of one year from the date of acceptance of the import entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported merchandise, thereby building up export trade and encouraging manufacture in the country. 12 But there is a difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the provisions of section 105(x), may not, after having failed to comply with the conditions imposed thereby, avoid the consequences of such failure by being allowed a drawback under section 106(b) of the same Act without having complied with the conditions of the latter section. For it is not to be supposed that the legislature had intended to defeat compliance with the terms of section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather courts should proceed on the theory that parts of a statute may be harmonized and reconciled with each other. A construction of a statute which creates an inconsistency should be avoided when a reasonable interpretation can be adopted which will not do violence to the plain words of the act and will carry out the intention of Congress. In the construction of statutes, the courts start with the assumption that the legislature intended to enact an effective law, and the legislature is not to be presumed to have done a vain thing in the enactment of a statute. Hence, it is a general principle, embodied in the maxim, "ut res magis valeat quam pereat," that the courts should, if reasonably possible to do so without violence to the spirit and language of an act, so interpret the statute to give it efficient operation and effect as a whole. An interpretation should, if possible, be avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or nugatory. 14
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at petitioner's cost. Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur. Makalintal and Sanchez, JJ., took no part. Reyes, J.B.L., J., is on leave.
Republic of the Philippines SUPREME COURT Manila EN BANC
G.R. No. 96754 June 22, 1995 CONGRESSMAN JAMES L. CHIONGBIAN (Third District, South Cotobato) ADELBERT W. ANTONINO (First District, South Cotobato), WILFREDO G. CAINGLET (Third District, Zamboanga del Norte), HILARION RAMIRO, JR. (Second Division, Misamis Occidental), ERNESTO S. AMATONG (Second District, Zamboanga del Norte), ALVIN G. DANS (Lone District, Basilan), ABDULLAH M. DIMAPORO (Second District, Lanao del Norte), and CONGRESSWOMAN MARIA CLARA A. LOBREGAT (Lone District, Zamboanga City) petitioners, vs. HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE CHAIRMAN SEC. FIDEL V. RAMOS, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS X AND XII, CHAIRMAN OF THE REGIONAL DEVELOPMENT COUNCIL FOR REGION X, CHAIRMAN JESUS V. AYALA, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS XI and XII, DEPARTMENT OF LOCAL GOVERNMENT, NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY SECRETARIAT, PRESIDENTIAL MANAGEMENT STAFF, HON. GUILLERMO CARAGUE, Secretary of the DEPARTMENT OF BUDGET and MANAGEMENT; and HON. ROSALINA S. CAJUCUM, OIC National Treasurer, respondents. IMMANUEL JALDON, petitioner, vs. HON. EXECUTIVE SECRETARY OSCAR M. ORBOS, HON. FIDEL RAMOS, HON. SECRETARY LUIS SANTOS, AND HON. NATIONAL TREASURER ROSALINA CAJUCOM, respondents.
MENDOZA, J .: These suits challenge the validity of a provision of the Organic Act for the Autonomous Region in Muslim Mindanao (R.A. No. 6734), authorizing the President of the Philippines to "merge" by administrative determination the regions remaining after the establishment of the Autonomous Region, and the Executive Order issued by the President pursuant to such authority, "Providing for the Reorganization of Administrative Regions in Mindanao." A temporary restraining order prayed for by the petitioners was issued by this Court on January 29, 1991, enjoining the respondents from enforcing the Executive Order and statute in question. The facts are as follows: Pursuant to Art. X, 18 of the 1987 Constitution, Congress passed R.A. No. 6734, the Organic Act for the Autonomous Region in Muslim Mindanao, calling for a plebiscite to be held in the provinces of Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur, Maguindanao, Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian, Puerto Princesa and Zamboanga. In the ensuing plebiscite held on November 16, 1989, four provinces voted in favor of creating an autonomous region. These are the provinces of Lanao del Sur, Maguindanao, Sulu and Tawi-Tawi. In accordance with the constitutional provision, these provinces became the Autonomous Region in Muslim Mindanao. On the other hand, with respect to provinces and cities not voting in favor of the Autonomous Region, Art. XIX, 13 of R.A. No. 6734 provides, That only the provinces and cities voting favorably in such plebiscites shall be included in the Autonomous Region in Muslim Mindanao. The provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions. Provided, however, that the President may, by administrative determination, merge the existing regions. Pursuant to the authority granted by this provision, then President Corazon C. Aquino issued on October 12, 1990 Executive Order No. 429, "providing for the Reorganization of the Administrative Regions in Mindanao." Under this Order, as amended by E.O. No. 439 (1) Misamis Occidental, at present part of Region X, will become part of Region IX. (2) Oroquieta City, Tangub City and Ozamiz City, at present parts of Region X will become parts of Region IX. (3) South Cotobato, at present a part of Region XI, will become part of Region XII. (4) General Santos City, at present part of Region XI, will become part of Region XII. (5) Lanao del Norte, at present part of Region XII, will become part of Region IX. (6) Iligan City and Marawi City, at present part of Region XII, will become part of Region IX. Petitioners in G.R. No. 96754 are, or at least at the time of the filing of their petition, members of Congress representing various legislative districts in South Cotobato, Zamboanga del Norte, Basilan, Lanao del Norte and Zamboanga City. On November 12, 1990, they wrote then President Aquino protesting E.O. No. 429. They contended that There is no law which authorizes the President to pick certain provinces and cities within the existing regions some of which did not even take part in the plebiscite as in the case of the province of Misamis Occidental and the cities of Oroquieta, Tangub and Ozamiz and restructure them to new administrative regions. On the other hand, the law (Sec. 13, Art. XIX, R.A. 6734) is specific to the point, that is, that "the provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions." The transfer of the provinces of Misamis Occidental from Region X to Region IX; Lanao del Norte from Region XII to Region IX, and South Cotobato from Region XI to Region XII are alterations of the existing structures of governmental units, in other words, reorganization. This can be gleaned from Executive Order No. 429, thus Whereas, there is an urgent need to reorganize the administrative regions in Mindanao to guarantee the effective delivery of field services of government agencies taking into consideration the formation of the Autonomous Region in Muslim Mindanao. With due respect to Her Excellency, we submit that while the authority necessarily includes the authority to merge, the authority to merge does not include the authority to reorganize. Therefore, the President's authority under RA 6734 to "merge existing regions" cannot be construed to include the authority to reorganize them. To do so will violate the rules of statutory construction. The transfer of regional centers under Executive Order 429 is actually a restructuring (reorganization) of administrative regions. While this reorganization, as in Executive Order 429, does not affect the apportionment of congressional representatives, the same is not valid under the penultimate paragraph of Sec. 13, Art. XIX of R.A. 6734 and Ordinance appended to the 1986 Constitution apportioning the seats of the House of Representatives of Congress of the Philippines to the different legislative districts in provinces and cities. 1
As their protest went unheeded, while Inauguration Ceremonies of the New Administrative Region IX were scheduled on January 26, 1991, petitioners brought this suit for certiorari and prohibition. On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, is a resident of Zamboanga City, who is suing in the capacity of taxpayer and citizen of the Republic of the Philippines. Petitioners in both cases contend that Art. XIX, 13 of R.A. No. 6734 is unconstitutional because (1) it unduly delegates legislative power to the President by authorizing him to "merge [by administrative determination] the existing regions" or at any rate provides no standard for the exercise of the power delegated and (2) the power granted is not expressed in the title of the law. In addition, petitioner in G.R. No. 96673 challenges the validity of E.O. No. 429 on the ground that the power granted by Art. XIX, 13 to the President is only to "merge regions IX and XII" but not to reorganize the entire administrative regions in Mindanao and certainly not to transfer the regional center of Region IX from Zamboanga City to Pagadian City. The Solicitor General defends the reorganization of regions in Mindanao by E.O. No. 429 as merely the exercise of a power "traditionally lodged in the President," as held in Abbas v. Comelec, 2 and as a mere incident of his power of general supervision over local governments and control of executive departments, bureaus and offices under Art. X, 16 and Art. VII, 17, respectively, of the Constitution. He contends that there is no undue delegation of legislative power but only a grant of the power to "fill up" or provide the details of legislation because Congress did not have the facility to provide for them. He cites by analogy the case of Municipality of Cardona v. Municipality of Binangonan, 3 in which the power of the Governor-General to fix municipal boundaries was sustained on the ground that [such power] is simply a transference of certain details with respect to provinces, municipalities, and townships, many of them newly created, and all of them subject to a more or less rapid change both in development and centers of population, the proper regulation of which might require not only prompt action but action of such a detailed character as not to permit the legislative body, as such, to take it efficiently. The Solicitor General justifies the grant to the President of the power "to merge the existing regions" as something fairly embraced in the title of R.A. No. 6734, to wit, "An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao," because it is germane to it. He argues that the power is not limited to the merger of those regions in which the provinces and cities which took part in the plebiscite are located but that it extends to all regions in Mindanao as necessitated by the establishment of the autonomous region. Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772 which provides: 1. The President of the Philippines shall have the continuing authority to reorganize the National Government. In exercising this authority, the President shall be guided by generally acceptable principles of good government and responsive national government, including but not limited to the following guidelines for a more efficient, effective, economical and development-oriented governmental framework: (a) More effective planning implementation, and review functions; (b) Greater decentralization and responsiveness in decision-making process; (c) Further minimization, if not, elimination, of duplication or overlapping of purposes, functions, activities, and programs; (d) Further development of as standardized as possible ministerial, sub-ministerial and corporate organizational structures; (e) Further development of the regionalization process; and (f) Further rationalization of the functions of and administrative relationships among government entities. For purposes of this Decree, the coverage of the continuing authority of the President to reorganize shall be interpreted to encompass all agencies, entities, instrumentalities, and units of the National Government, including all government owned or controlled corporations as well as the entire range of the powers, functions, authorities, administrative relationships, acid related aspects pertaining to these agencies, entities, instrumentalities, and units. 2. [T]he President may, at his discretion, take the following actions: xxx xxx xxx f. Create, abolish, group, consolidate, merge, or integrate entities, agencies, instrumentalities, and units of the National Government, as well as expand, amend, change, or otherwise modify their powers, functions and authorities, including, with respect to government- owned or controlled corporations, their corporate life, capitalization, and other relevant aspects of their charters. g. Take such other related actions as may be necessary to carry out the purposes and objectives of this Decree. Considering the arguments of the parties, the issues are: (1) whether the power to "merge" administrative regions is legislative in character, as petitioners contend, or whether it is executive in character, as respondents claim it is, and, in any event, whether Art. XIX, 13 is invalid because it contains no standard to guide the President's discretion; (2) whether the power given is fairly expressed in the title of the statute; and (3) whether the power granted authorizes the reorganization even of regions the provinces and cities in which either did not take part in the plebiscite on the creation of the Autonomous Region or did not vote in favor of it; and (4) whether the power granted to the President includes the power to transfer the regional center of Region IX from Zamboanga City to Pagadian City. It will be useful to recall first the nature of administrative regions and the basis and purpose for their creation. On September 9, 1968, R.A. No. 5435 was passed "authorizing the President of the Philippines, with the help of a Commission on Reorganization, to reorganize the different executive departments, bureaus, offices, agencies and instrumentalities of the government, including banking or financial institutions and corporations owned or controlled by it." The purpose was to promote "simplicity, economy and efficiency in the government." 4 The Commission on Reorganization created under the law was required to submit an integrated reorganization plan not later than December 31, 1969 to the President who was in turn required to submit the plan to Congress within forty days after the opening of its next regular session. The law provided that any reorganization plan submitted would become effective only upon the approval of Congress. 5
Accordingly, the Reorganization Commission prepared an Integrated Reorganization Plan which divided the country into eleven administrative regions. 6 By P.D. No. 1, the Plan was approved and made part of the law of the land on September 24, 1972. P.D. No. 1 was twice amended in 1975, first by P.D. No. 742 which "restructur[ed] the regional organization of Mindanao, Basilan, Sulu and Tawi-Tawi" and later by P.D. No. 773 which further "restructur[ed] the regional organization of Mindanao and divid[ed] Region IX into two sub-regions." In 1978, P.D. No. 1555 transferred the regional center of Region IX from Jolo to Zamboanga City. Thus the creation and subsequent reorganization of administrative regions have been by the President pursuant to authority granted to him by law. In conferring on the President the power "to merge [by administrative determination] the existing regions" following the establishment of the Autonomous Region in Muslim Mindanao, Congress merely followed the pattern set in previous legislation dating back to the initial organization of administrative regions in 1972. The choice of the President as delegate is logical because the division of the country into regions is intended to facilitate not only the administration of local governments but also the direction of executive departments which the law requires should have regional offices. As this Court observed in Abbas, "while the power to merge administrative regions is not expressly provided for in the Constitution, it is a power which has traditionally been lodged with the President to facilitate the exercise of the power of general supervision over local governments [see Art. X, 4 of the Constitution]." The regions themselves are not territorial and political divisions like provinces, cities, municipalities and barangays but are "mere groupings of contiguous provinces for administrative purposes." 7 The power conferred on the President is similar to the power to adjust municipal boundaries 8 which has been described in Pelaez v. Auditor General 9 or as "administrative in nature." There is, therefore, no abdication by Congress of its legislative power in conferring on the President the power to merge administrative regions. The question is whether Congress has provided a sufficient standard by which the President is to be guided in the exercise of the power granted and whether in any event the grant of power to him is included in the subject expressed in the title of the law. First, the question of standard. A legislative standard need not be expressed. It may simply be gathered or implied. 10 Nor need it be found in the law challenged because it may be embodied in other statutes on the same subject as that of the challenged legislation. 11
With respect to the power to merge existing administrative regions, the standard is to be found in the same policy underlying the grant to the President in R.A. No. 5435 of the power to reorganize the Executive Department, to wit: "to promote simplicity, economy and efficiency in the government to enable it to pursue programs consistent with national goals for accelerated social and economic development and to improve the service in the transaction of the public business." 12 Indeed, as the original eleven administrative regions were established in accordance with this policy, it is logical to suppose that in authorizing the President to "merge [by administrative determination] the existing regions" in view of the withdrawal from some of those regions of the provinces now constituting the Autonomous Region, the purpose of Congress was to reconstitute the original basis for the organization of administrative regions. Nor is Art. XIX, 13 susceptible to charge that its subject is not embraced in the title of R.A. No. 6734. The constitutional requirement that "every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof" 13 has always been given a practical rather than a technical construction. The title is not required to be an index of the content of the bill. It is a sufficient compliance with the constitutional requirement if the title expresses the general subject and all provisions of the statute are germane to that subject. 14 Certainly the reorganization of the remaining administrative regions is germane to the general subject of R.A. No. 6734, which is the establishment of the Autonomous Region in Muslim Mindanao. Finally, it is contended that the power granted to the President is limited to the reorganization of administrative regions in which some of the provinces and cities which voted in favor of regional autonomy are found, because Art. XIX, 13 provides that those which did not vote for autonomy "shall remain in the existing administrative regions." More specifically, petitioner in G.R. No. 96673 claims: The questioned Executive Order No. 429 distorted and, in fact, contravened the clear intent of this provision by moving out or transferring certain political subdivisions (provinces/cities) out of their legally designated regions. Aggravating this unacceptable or untenable situation is EO No. 429's effecting certain movements on areas which did not even participate in the November 19, 1989 plebiscite. The unauthorized action of the President, as effected by and under the questioned EO No. 429, is shown by the following dispositions: (1) Misamis Occidental, formerly of Region X and which did not even participate in the plebiscite, was moved from said Region X to Region IX; (2) the cities of Ozamis, Oroquieta, and Tangub, all formerly belonging to Region X, which likewise did not participate in the said plebiscite, were transferred to Region IX; (3) South Cotobato, from Region XI to Region XII; (4) General Santos City: from Region XI to Region XII; (5) Lanao del Norte, from Region XII to Region IX; and (6) the cities of Marawi and Iligan from Region XII to Region IX. All of the said provinces and cities voted "NO", and thereby rejected their entry into the Autonomous Region in Muslim Mindanao, as provided under RA No. 6734. 15
The contention has no merit. While Art. XIX, 13 provides that "The provinces and cities which do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions," this provision is subject to the qualification that "the President may by administrative determination merge the existing regions." This means that while non-assenting provinces and cities are to remain in the regions as designated upon the creation of the Autonomous Region, they may nevertheless be regrouped with contiguous provinces forming other regions as the exigency of administration may require. The regrouping is done only on paper. It involves no more than are definition or redrawing of the lines separating administrative regions for the purpose of facilitating the administrative supervision of local government units by the President and insuring the efficient delivery of essential services. There will be no "transfer" of local governments from one region to another except as they may thus be regrouped so that a province like Lanao del Norte, which is at present part of Region XII, will become part of Region IX. The regrouping of contiguous provinces is not even analogous to a redistricting or to the division or merger of local governments, which all have political consequences on the right of people residing in those political units to vote and to be voted for. It cannot be overemphasized that administrative regions are mere groupings of contiguous provinces for administrative purposes, not for political representation. Petitioners nonetheless insist that only those regions, in which the provinces and cities which voted for inclusion in the Autonomous Region are located, can be "merged" by the President. To be fundamental reason Art. XIX, 13 is not so limited. But the more fundamental reason is that the President's power cannot be so limited without neglecting the necessities of administration. It is noteworthy that the petitioners do not claim that the reorganization of the regions in E.O. No. 429 is irrational. The fact is that, as they themselves admit, the reorganization of administrative regions in E.O. No. 429 is based on relevant criteria, to wit: (1) contiguity and geographical features; (2) transportation and communication facilities; (3) cultural and language groupings; (4) land area and population; (5) existing regional centers adopted by several agencies; (6) socio-economic development programs in the regions and (7) number of provinces and cities. What has been said above applies to the change of the regional center from Zamboanga City to Pagadian City. Petitioners contend that the determination of provincial capitals has always been by act of Congress. But as, this Court said in Abbas, 16 administrative regions are mere "groupings of contiguous provinces for administrative purposes, . . . [They] are not territorial and political subdivisions like provinces, cities, municipalities and barangays." There is, therefore, no basis for contending that only Congress can change or determine regional centers. To the contrary, the examples of P.D. Nos. 1, 742, 773 and 1555 suggest that the power to reorganize administrative regions carries with it the power to determine the regional center. It may be that the transfer of the regional center in Region IX from Zamboanga City to Pagadian City may entail the expenditure of large sums of money for the construction of buildings and other infrastructure to house regional offices. That contention is addressed to the wisdom of the transfer rather than to its legality and it is settled that courts are not the arbiters of the wisdom or expediency of legislation. In any event this is a question that we will consider only if fully briefed and upon a more adequate record than that presented by petitioners. WHEREFORE, the petitions for certiorari and prohibition are DISMISSED for lack of merit. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Francisco, JJ., concur.
Republic of the Philippines SUPREME COURT Manila EN BANC
G.R. No. 96266 July 18, 1991 ERNESTO M. MACEDA, petitioner, vs. ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL PETROLEUM CORPORATION AND PETRON CORPORATION, respondents. G.R. No. 96349 July 18, 1991 EUGENIO O. ORIGINAL, IRENEO N. AARON, JR., RENE LEDESMA, ROLANDO VALLE, ORLANDO MONTANO, STEVE ABITANG, NERI JINON, WILFREDO DELEONIO, RENATO BORRO, RODRIGO DE VERA, ALVIN BAYUANG, JESUS MELENDEZ, NUMERIANO CAJILIG JR., RUFINO DE LA CRUZ AND JOVELINO G. TIPON,petitioners, vs. ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL PETROLEUM CORPORATION AND PETRON CORPORATION, respondents. G.R. No. 96284 July 18,1991 CEFERINO S. PAREDES, JR., petitioner, vs. ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL, INC. AND PETROPHIL CORPORATION, respondents. R E S O L U T I O N
MEDIALDEA, J .:p In G.R. No. 96266, petitioner Maceda seeks nullification of the Energy Regulatory Board (ERB) Orders dated December 5 and 6, 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did not allow him substantial cross-examination, in effect, allegedly, a denial of due process. The facts of the case are as follows: Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil companies filed with the ERB their respective applications on oil price increases (docketed as ERB Case Nos. 90-106, 90-382 and 90-384, respectively). On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42 per liter. Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E. Maceda v. ERB, et al., G.R. No. 95203), seeking to nullify the provisional increase. We dismissed the petition on December 18, 1990, reaffirming ERB's authority to grant provisional increase even without prior hearing, pursuant to Sec. 8 of E.O. No. 172, clarifying as follows: What must be stressed is that while under Executive Order No. 172, a hearing is indispensable, it does not preclude the Board from ordering, ex-parte, a provisional increase, as it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny the application. Section 3, paragraph (e) is akin to a temporary restraining order or a writ of preliminary attachment issued by the courts, which are given ex-parte and which are subject to the resolution of the main case. Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate exclusively of the other, in that the Board may resort to one but not to both at the same time. Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may decree a price adjustment, subject to the requirements of notice and hearing. Pending that, however, it may order, under Section 8, an authority to increase provisionally, without need of a hearing, subject to the final outcome of the proceeding. The Board, of course, is not prevented from conducting a hearing on the grant of provisional authority-which is of course, the better procedure however, it cannot be stigmatized later if it failed to conduct one. (pp. 129-130, Rollo) (Emphasis supplied) In the same order of September 21, 1990, authorizing provisional increase, the ERB set the applications for hearing with due notice to all interested parties on October 16, 1990. Petitioner Maceda failed to appear at said hearing as well as on the second hearing on October 17, 1990. To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB set the continuation of the hearing to October 24, 1990. This was postponed to November 5, 1990, on written notice of petitioner Maceda. On November 5, 1990, the three oil companies filed their respective motions for leave to file or admit amended/supplemental applications to further increase the prices of petroleum products. The ERB admitted the respective supplemental/amended petitions on November 6, 1990 at the same time requiring applicants to publish the corresponding Notices of Public Hearing in two newspapers of general circulation (p. 4, Rollo and Annexes "F" and "G," pp. 60 and 62, Rollo). Hearing for the presentation of the evidence-in-chief commenced on November 21, 1990 with ERB ruling that testimonies of witnesses were to be in the form of Affidavits (p. 6, Rollo). ERB subsequently outlined the procedure to be observed in the reception of evidence, as follows: CHAIRMAN FERNANDO: Well, at the last hearing, applicant Caltex presented its evidence-in-chief and there is an understanding or it is the Board's wish that for purposes of good order in the presentation of the evidence considering that these are being heard together, we will defer the cross-examination of applicant Caltex's witness and ask the other applicants to present their evidence-in-chief so that the oppositors win have a better Idea of what an of these will lead to because as I mentioned earlier, it has been traditional and it is the intention of the Board to act on these applications on an industry-wide basis, whether to accept, reject, modify or whatever, the Board win do it on an industry wide basis, so, the best way to have (sic) the oppositors and the Board a clear picture of what the applicants are asking for is to have all the evidence- in-chief to be placed on record first and then the examination will come later, the cross-examination will come later. . . . (pp. 5-6, tsn., November 23, 1990, ERB Cases Nos. 90-106, 90382 and 90-384). (p. 162, Rollo) Petitioner Maceda maintains that this order of proof deprived him of his right to finish his cross-examination of Petron's witnesses and denied him his right to cross-examine each of the witnesses of Caltex and Shell. He points out that this relaxed procedure resulted in the denial of due process. We disagree. The Solicitor General has pointed out: . . . The order of testimony both with respect to the examination of the particular witness and to the general course of the trial is within the discretion of the court and the exercise of this discretion in permitting to be introduced out of the order prescribed by the rules is not improper (88 C.J.S. 206-207). Such a relaxed procedure is especially true in administrative bodies, such as the ERB which in matters of rate or price fixing is considered as exercising a quasi- legislative, not quasi-judicial, function As such administrative agency, it is not bound by the strict or technical rules of evidence governing court proceedings (Sec. 29, Public Service Act; Dickenson v. United States, 346, U.S. 389, 98 L. ed. 132, 74 S. St. 152). (Emphasis supplied) In fact, Section 2, Rule I of the Rules of Practice and Procedure Governing Hearings Before the ERB provides that These Rules shall govern pleadings, practice and procedure before the Energy Regulatory Board in all matters of inquiry, study, hearing, investigation and/or any other proceedings within the jurisdiction of the Board. However, in the broader interest of justice, the Board may, in any particular matter, except itself from these rules and apply such suitable procedure as shall promote the objectives of the Order. (pp. 163-164, Rollo) Petitioner Maceda also claims that there is no substantial evidence on record to support the provisional relief. We have, in G.R. Nos. 95203-05, previously taken judicial notice of matters and events related to the oil industry, as follows: . . . (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit is at P2.855 Billion as of the first nine months of the year. . . . (p. 150, Rollo) The Solicitor General likewise commented: Among the pieces of evidence considered by ERB in the grant of the contested provisional relief were: (1) certified copies of bins of lading issued by crude oil suppliers to the private respondents; (2) reports of the Bankers Association of the Philippines on the peso-dollar exchange rate at the BAP oil pit; and (3) OPSF status reports of the Office of Energy Affairs. The ERB was likewise guided in the determination of international crude oil prices by traditional authoritative sources of information on crude oil and petroleum products, such as Platt's Oilgram and Petroleum Intelligence Weekly. (p. 158,Rollo) Thus, We concede ERB's authority to grant the provisional increase in oil price, as We note that the Order of December 5, 1990 explicitly stated: in the light, therefore, of the rise in crude oil importation costs, which as earlier mentioned, reached an average of $30.3318 per barrel at $25.551/US $ in September-October 1990; the huge OPSF deficit which, as reported by the Office of Energy Affairs, has amounted to P5.7 Billion (based on filed claims only and net of the P5 Billion OPSF) as of September 30, 1990, and is estimated to further increase to over P10 Billion by end December 1990; the decision of the government to discontinue subsidizing oil prices in view of inflationary pressures; the apparent inadequacy of the proposed additional P5.1 Billion government appropriation for the OPSF and the sharp drop in the value of the peso in relation to the US dollar to P28/US $, this Board is left with no other recourse but to grant applicants oil companies further relief by increasing the prices of petroleum products sold by them. (p. 161, Rollo) Petitioner Maceda together with petitioner Original (G.R. No. 96349) also claim that the provisional increase involved amounts over and above that sought by the petitioning oil companies. The Solicitor General has pointed out that aside from the increase in crude oil prices, all the applications of the respondent oil companies filed with the ERB covered claims from the OPSF. We shall thus respect the ERB's Order of December 5, 1990 granting a provisional price increase on petroleum products premised on the oil companies' OPSF claims, crude cost peso differentials, forex risk for a subsidy on sale to NPC (p. 167, Rollo), since the oil companies are "entitled to as much relief as the fact alleged constituting the course of action may warrant," (Javellana v. D.O. Plaza Enterprises, Inc., G.R. No. L-28297, March 30, 1970, 32 SCRA 261 citing Rosales v. Reyes, 25 Phil. 495; Aguilar v. Rubiato, 40 Phil. 470) as follows: Per Liter Weighted Petron Shell Caltex Average Crude Cost P3.11 P3.6047 P2.9248 P3.1523 Peso Cost Diffn'l 2.1747 1.5203 1.5669 1.8123 Forex Risk Fee -0.1089 -0,0719 -0.0790 -0.0896 Subsidy on Sales to NPC 0.1955 0.0685 0.0590 0.1203 Total Price Increase Applied for P59.3713 P5.1216 P4.4717 P4.9954 Less: September 21 Price Relief Actual Price Increase P1.42 Actual Tax Reduction: Ad Valorem Tax (per Sept. 1, 1990 price build-up) P1.3333 Specific Tax (per Oct. 5, 1990 price build-up) .6264 .7069 2.1269 Net Price Increase Applied for 2.8685 Nonetheless, it is relevant to point out that on December 10, 1990, the ERB, in response to the President's appeal, brought back the increases in Premium and Regular gasoline to the levels mandated by the December 5, 1990 Order (P6.9600 and P6.3900, respectively), as follows: Product In Pesos Per Liter OPSF Premium Gasoline 6.9600 Regular Gasoline 6.3900 Avturbo 4.9950 Kerosene 1.4100 Diesel Oil 1.4100 Fuel Oil/Feedstock 0.2405 LPG 1.2200 Asphalt 2.5000 Thinner 2.5000 In G.R. No. 96349, petitioner Original additionally claims that if the price increase will be used to augment the OPSF this will constitute illegal taxation. In the Maceda case, (G.R. Nos. 95203- 05, supra) this Court has already ruled that "the Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act of taxation but is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137. The petitions of E.O. Original et al. (G.R. No. 96349) and C.S. Povedas, Jr. (G.R. No. 96284), insofar as they question the ERB's authority under Sec. 8 of E.O. 172, have become moot and academic. We lament Our helplessness over this second provisional increase in oil price. We have stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-05, G.R. Nos. 95119- 21, supra). We wish to reiterate Our previous pronouncements therein that while the government is able to justify a provisional increase, these findings "are not final, and it is up to petitioners to demonstrate that the present economic picture does not warrant a permanent increase." In this regard, We also note the Solicitor General's comments that "the ERB is not averse to the idea of a presidential review of its decision," except that there is no law at present authorizing the same. Perhaps, as pointed out by Justice Padilla, our lawmakers may see the wisdom of allowing presidential review of the decisions of the ERB since, despite its being a quasi-judicial body, it is still "an administrative body under the Office of the President whose decisions should be appealed to the President under the established principle of exhaustion of administrative remedies," especially on a matter as transcendental as oil price increases which affect the lives of almost an Filipinos. ACCORDINGLY, the petitions are hereby DISMISSED. SO ORDERED. Narvasa, Melencio-Herrera, Feliciano, Gancayco, Bidin, Grio-Aquino and Regalado, JJ., concur. Davide, J., concurs in the result. Fernan, C.J., took no part.
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION
G.R. No. L-31152 March 27, 1974 UNIVERSITY OF NUEVA CACERES, JAIME HERNANDEZ, SR., and JAIME HERNANDEZ, JR., petitioners, vs. HON. ARSENIO I. MARTINEZ, as Presiding Judge of the Court of Industrial Relations, and the UNIVERSITY OF NUEVA CACERES GUARDIANS UNION, respondents. Sycip Salazar, Luna, Manalo and Feliciano for petitioners. Mariano B. Tuason and Francisco M. de los Reyes for respondent Judge, CIR. Augusto A. Pardalis and Mariano M. Abes for respondent Union.
BARREDO, J .:p Petition for certiorari, prohibition and mandamus, with preliminary injunction, relative to the orders of respondent Presiding Judge of the Court of Industrial Relations dated July 30, 1969 and October 6, 1969, which in effect held that the determination of whether or not a charge of unfair labor practice, investigated by the Prosecution Division of said court, should be dismissed outright because of any fatal defect of form or substance is the exclusive prerogative of said Presiding Judge, to the exclusion of the court en banc, on the theory that the function involved in such determination is not judicial but purely administrative and hence entrusted to his exclusive administrative authority as head of said court. On June 17, 1969, respondent University of Nueva Caceres Guardians Union filed with the Bicol branch of respondent Court of Industrial Relations (CIR) an unfair labor practice charge against petitioners accompanied by the joint affidavit of Benito de la Paz and George Offemaria. At the hearing of said charge before the prosecutor of the CIR, petitioners moved to dismiss the same on the grounds: (1) it is not verified; (2) it does not specify the particular provisions of Section 4 (a) of the Industrial Peace Act, RA 875, as amended, supposed to have been violated, and (3) the supporting joint affidavit contains "falsities, misstatements and improbabilities on points otherwise material to the charge." Instead of dismissing the charge, the prosecutor, although finding the grounds of the dismissal motion to be more or less plausible, granted respondent Union five (5) days "to file an amended charge and amended affidavit," which said Union did on July 8, 1969. On July 14, 1969, petitioners moved to reconsider the ruling of the prosecutor, but on July 30, 1969, respondent Presiding Judge denied the same, admitted the amended charge and directed the Court Prosecutor to set the said amended charge for preliminary investigation. On August 16, 1969, petitioners moved again for reconsideration of the order of July 30, 1969. Apparently, petitioners assumed their motion for reconsideration would be acted upon by the court en banc, for when on October 6, 1969, respondent Judge issued an order, signed by him alone, denying it, the present petition was filed charging said respondent with having acted in excess of jurisdiction in acting on a matter addressed to and within the jurisdiction of the CIR en banc and of grave abuse of discretion in not ordering the dismissal of the charge upon the grounds invoked by them. The assertion by respondent Judge, implicit in his order of October 6, 1969, of jurisdiction, to the exclusion of the court en banc, over the matter herein involved cannot be sustained. It is Our considered view that unlike the preliminary investigation of criminal cases by fiscals which are under the supervision and control of the Secretary of Justice, 1 the peculiar procedure prescribed by law in unfair labor practices partakes of the nature of judicial investigations, since they are conducted, to quote the language of the law, by "the Court or any agency or agent designated by the Court", (Section 5 (b), Rep. Act 875) similarly to the preliminary investigations undertaken by courts of first instance in election cases 2 and charges of violation of the Anti-Subversion Act. 3 Surely, no one can pretend that in such preliminary investigations, the courts of first instance are performing administrative or non-judicial functions. In such cases, the courts act in the same judicial capacity as they do in trying the cases on the merits and cannot, in any respect or measure, be controlled by the Secretary of Justice. The fact that the law authorizes the CIR to delegate the investigation to "any agency or agent designated by the Court" does not alter the nature of the court's function in the premises, just as the appointment of commissioners by the courts under Rule 34 does not make the procedure administrative or less judicial. Indeed, under the provision aforementioned, the investigation could very well be assigned to one of the judges of the CIR, and in that event, how can it be maintained that the function is administrative? Withal, it is implicit in this procedure that the work of the "agency or agent designated by Court" is as much the responsibility of the court as if it were the court itself that were acting directly. The contention of respondent Judge that the function of overseering the Prosecution Division of the CIR in its work of filing and dismissing charges of unfair labor practice is purely administrative in nature and falls within his exclusive competence is without merit. It is true that reference to the court in the law must be construed to mean the Presiding Judge and not the court en banc when the action contemplated is purely administrative in character, but, precisely, the point missed is that, as already explained, the Industrial Peace Act does not consider the investigation by the CIR, either by itself or thru an agent, as an administrative matter but a judicial one like the preliminary investigations in election and anti-subversion cases. Maybe the development in the United States recounted by respondent Judge whereby the Taft- Hartley Law transferred from the National Labor Relations Board to its General Counsel the exclusive function and power to determine with finality whether or not an unfair labor practice charge should be filed with the Board is good, in the sense of avoiding that the Board be the accuser, investigator and judge all rolled into one, but there is nothing in either Commonwealth Act 103 or the Industrial Peace Act indicating that the American experience has influenced the enactment and phraseology of the pertinent provisions of our laws. Quite on the contrary, as already pointed out, Section 5(b) of RA 875 very explicitly confers the function of investigating unfair labor charges upon the CIR itself, albeit it allows the court to designate any other agency or agent for the purpose. As regards the other impugned order of July 30, 1969, the result of the foregoing discussion and ruling is that the same should first be submitted to the CIR en banc for appropriate action. Much as the writer of this opinion feels that the objections thereto raised by petitioners are rather strained and are not very consistent with the interests of justice, which would not permit the throwing out of an unfair labor practice charge merely because of non-jurisdictional defects which can anyway be corrected, the Court would not pre-empt the power of the CIR en bancto make the corresponding ruling relative thereto in the first instance. Before closing, it might be stated that, to be sure, the creation of the National Labor Relations Commission, may have altered the procedure in cases involving alleged unfair labor practices, but that point is not and cannot be raised anymore in this proceeding and We do not consider it necessary to pass on it now. WHEREFORE, the petition for certiorari and prohibition insofar as the assailed order of July 30, 1969 is concerned is denied, without prejudice to the appropriate action on petitioners' motion for reconsideration thereof by the CIRen banc, but the petition for certiorari and mandamus relative to the impugned order of respondent Presiding Judge of October 6, 1969 is granted, the said order is hereby declared null and void and set aside, as in excess of jurisdiction, and respondent Presiding Judge or whoever is acting in his stead is ordered to refer the motion for reconsideration of petitioners dated August 16, 1969 to the CIR en banc for appropriate action. The writ of preliminary injunction issued by the Court on November 24, 1969 is made permanent, without prejudice to the resolution by the CIR of petitioners' motion for reconsideration just referred to. The manifestation of Acting Presiding Judge Ansberto Paredes to the effect that he has desisted and continues to desist from following the practice of former Presiding Judge Martinez declared illegal in this decision is noted. Costs against private respondents. Zaldivar (Chairman), Fernandez and Aquino, JJ., concur.
FIRST DIVISION [G.R. NO. 166062 : September 26, 2006] SALVADOR M. PEREZ and JUANITA A. APOSTOL, Petitioners, v. HON. SANDIGANBAYAN (2nd Division) and PEOPLE OF THE PHILIPPINES represented by the Special Prosecutor of the Office of the Ombudsman, Respondents. D E C I S I O N CHICO-NAZARIO, J.: This is a Petition for Certiorari under Rule 65 of the Rules of Court, questioning the twin Resolutions 1 of the Sandiganbayan dated 7 May 2004 (promulgated 18 May 2004), 2 and 27 September 2004 (promulgated 1 October 2004). 3
The following facts were culled from the records of the case: In a resolution dated 24 April 2001, the Office of the Deputy Ombudsman for Luzon resolved to file charges of violation of Section 3(e) 4 of Republic Act No. 3019 5 against petitioners, San Manuel, Pangasinan Mayor Salvador M. Perez, and Municipal Treasurer Juanita Apostol. The Information alleges a crime committed as follows: That on or about September of 1998, or sometime prior or subsequent thereto, in the Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, SALVADOR PEREZ, being then the Municipal Mayor and JUANITA APOSTOL, ZAPANTA, Municipal Treasurer of said municipality, conspiring and confederating with one another, committing the crime herein charged in relation to and taking advantage of their official functions, and through manifest partiality, evident bad faith or gross inexcusable negligence, did then and there, wilfully, unlawfully and criminally cause the purchase of one (1) computer unit costing P120,000.00 acquisition by personal canvass which is in violation of Secs. 362 and 367 of R.A. 7160, thereby causing undue injury to the Municipality of San Manuel, Pangasinan. 6
On 16 January 2002, prior to the scheduled arraignment, petitioners filed with the Sandiganbayan a Motion for Leave of Court to File Motion for Reconsideration/Reinvestigation alleging the discovery of new evidence which will change the outcome of the case if presented and appreciated. The alleged newly discovered evidence consists in the reassessment by the auditors of the Commission on Audit (COA) that, though the prices between the subject computer and that canvassed by the COA are different, such difference is "not really that material." 7
The Sandiganbayan denied the Motion for Leave of Court to File Motion for Reconsideration/Reinvestigation in an Order dated 4 April 2002. On a subsequent Motion for Reconsideration, however, the Sandiganbayan reconsidered the 4 April 2002 Order, and granted petitioners ten days from receipt of the current 6 September 2002 Resolution within which to formalize their Motion for Reconsideration in the Office of the Ombudsman. Complying with the 6 September 2002 Resolution, petitioners formalized their Motion for Reconsideration in the Office of the Ombudsman. Accordingly, the Office of the Special Prosecutor conducted a reinvestigation. Assistant Special Prosecutor Warlito F. Galisanao prepared a Memorandum dated 23 October 2003, recommending the withdrawal of the Information. 8 However, in the portion of the Memorandum earmarked for the Special Prosecutor's action, Special Prosecutor Dennis M. Villa-Ignacio chose the action "DO NOT CONCUR" by drawing two lines on the action "I CONCUR," and wrote the following marginal note: I am, instead adopting the enclosed memorandum of Pros. Chua dated Jan. 22, 2004 recommending that in the meantime, further fact-finding be conducted, and an administrative case be filed against accused Apostol, after withdrawing the Information for viol. of Sec. 3(e) R.A. 3019. 9
On the other hand, new Ombudsman Simeon V. Marcelo crossed out both actions (APPROVED/DISAPPROVED), and wrote the following marginal note dated 16 February 2004: The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA 3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or preference. OSP should study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer. Kindly submit your recommendation soonest. 10
In an 8 March 2004 Supplemental Memorandum, Assistant Special Prosecutor III Warlito F. Galisanao recommended an amendment of the Information, instead of a withdrawal thereof, to wit: This is a Supplemental Memorandum to an earlier Memorandum dated October 23, 2003 to the Honorable Tanodbayan, Simeon V. Marcelo who directed the deferment of action on undersigned's recommendation for the withdrawal of the Information. As earlier found, the acquisition of the unbranded computer set was questionable on the following grounds: 1. There was no public bidding and the mode of procurement was by canvass. 2. Under Sec. 367 of the Local Government Code, procurement through Personal Canvass requires approval of the Committee on Awards. There was no committee approval to speak of in this case because none has been constituted. This committee is supposed to be composed of: A. Local General Services Officer or the Municipal Treasurer; b. Local Accountant; c. The head of office of department for whose use the supplies are being procured. 3. Purchases under this section allows municipalities outside Metro Manila with the following limits: Second and Third Class - Forty Thousand Pesos (P40,000.00) Fourth Class and Below - Twenty Thousand Pesos (P20,000.00) These limits are applicable for all items procured by any one (1) month period only. The local government of San Manuel, Pangasinan, incidentally, is a fourth class municipality. It must be noted that the canvass made on all the stores/suppliers were done by accused Treasurer Juanita Apostol and attested by Mayor, Salvador Perez. To attest means to affirm to be correct, true or genuine (Blacks Law Dictionary, Fifth Edition)[.] In the earlier memorandum, there is no unanimity of conclusion as far as the reasonableness of the purchase price of the computer set is concern[ed]. However, the circumstances of its acquisition clearly indicate that the public officials involved gave the supplier, Mobil Link Enterprises/Starlet Sales Center, a private party, unwarranted benefits, advantage or preference through manifest partiality, evident bad faith or gross inexcusable negligence by paying much more than the prevailing price for a comparable computer set in the market. This conclusion is derived from accused's deliberate disregard of the rules on procurement discussed above. The Information must, therefore, be amended to reflect the manner of the commission of the offense. In regard to Prosecutor Elvira Chua's recommendation which is endorsed by the Special Prosecutor, the issue of overpricing must be referred to the appropriate office for further fact-finding and probable administrative investigation for violation of COA rules and RA 7160 otherwise, known as the Local Government Code of 1991. In light of the foregoing, it is recommended that the Information be amended instead of withdrawing the same. Further, the case of overpricing be referred for fact-finding and possible administrative investigation for violation of Secs. 362 and 367 of RA 7160, otherwise known as the Local Government Code of 1991. 11
This time around, Special Prosecutor Villa-Ignacio approved the Supplemental Memorandum and, pursuant thereto, Assistant Special Prosecutor Galisanao filed a Motion for Leave to File Amended Information dated 12 March 2004. The Amended Information, which again charges petitioners Perez and Apostol for violation of Sec. 3(e) of Republic Act No. 3019, provides: That on or about January 21, 1998, or sometime prior or subsequent thereto, in the Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, SALVADOR PEREZ, being then the Municipal Mayor and JUANITA A. APOSTOL, Municipal Treasurer of said municipality, conspiring and confederating with one another, committing the crime herein charged in relation to and taking advantage of their official functions, through manifest partiality, evident bad faith or gross inexcusable negligence, did then and there, willfully, unlawfully and criminally, give unwarranted benefits, advantage or preference in the discharge of official functions to Mobil Link Enterprises/Starlet Sales Center causing the purchase of one (1) computer unit costing P120,000.00, an acquisition by personal canvass which is in violation of Sections 362 and 367 of RA 7160, thereby causing damage and prejudice to the Municipality of San Manuel, Pangasinan. 12
The Sandiganbayan granted the motion in the first assailed resolution, thus: There having been no arraignment yet and the pre-maturity of the amendment is of the prosecution's risk, the motion to Amend the Information is GRANTED. Accordingly, the Amended Information submitted by the prosecution is admitted. 13
Petitioners filed a motion for reconsideration, but the same was denied in the second assailed resolution: The Court resolves to deny the Motion for Reconsideration filed by the accused. Indeed, the power of a prosecuting prosecutor to amend or cause the amendment of the information does not need the approving authority of the Ombudsman. The Information was maintained only with some amendments made which the Court feels do not violate any law since there was no arraignment yet. Accordingly, accused Motion for Reconsideration dated June 4, 2004 is denied for lack of merit. 14
Petitioners assail the foregoing Resolutions before this Court, presenting the following issues for resolution: 1. Whether or not there is a denial of procedural due process on the part of the petitioners when the Special Prosecutor filed the Amended Information without authority from or the approval of the Honorable Ombudsman, and against the latter's specific instruction; 2. Whether or not the Amended Information is valid in the absence of such authority or approval of the Ombudsman under the circumstances; andcralawlibrary 3. Whether or not respondent Sandiganbayan acted with grave abuse of discretion amounting to lack or excess of jurisdiction, when it admitted the Amended Information which bears no approval of the Honorable Ombudsman, and against the latter's written instruction to submit to him for approval the result of the re-study before the filing of said Amended Information. 15
This is not the first time the respective powers of the Ombudsman and the Special Prosecutor were pitted at loggerheads against each other since these positions were reinvented in the 1987 Constitution. The Offices of the Ombudsman (now also called the Tanodbayan) and the Special Prosecutor (then called the Tanodbayan) were reintroduced, with modified powers and designation, in the following provisions of Article XI of the Constitution: Sec. 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be known as Tanodbayan, one overall Deputy, and at least one Deputy each for Luzon, Visayas and Mindanao. A separate Deputy for the military establishment may likewise be appointed. x x x Sec. 7. The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution. A judicial examination of the prosecutorial powers of these two Constitutional positions came barely a year after the effectivity of the 1987 Constitution, when then Special Prosecutor Raul Gonzalez filed criminal cases against Antique Governor Enrique Zaldivar. Zaldivar claimed that said cases were filed without legal and constitutional authority since, under the 1987 Constitution, it is only the Ombudsman (not the incumbent Tanodbayan who should now be called the Special Prosecutor) who has the authority to file the cases with the Sandiganbayan. In granting the petitions and nullifying the criminal informations filed against Zaldivar, this Court held: Under the 1987 Constitution, the Ombudsman (as distinguished from the incumbent Tanodbayan) is charged with the duty to: "Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient." (Sec. 13, par. 1) The Constitution likewise provides that: "The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution." (Art. XI, Section 7) (Italics ours). Now then, inasmuch as the aforementioned duty is given to the Ombudsman, the incumbent Tanodbayan (called Special Prosecutor under the 1987 constitution and who is supposed to retain powers and duties NOT GIVEN to the Ombudsman) is clearly without authority to conduct preliminary investigations and to direct the filing of criminal cases with the Sandiganbayan, except upon orders of the Ombudsman. This right to do so was lost effective February 2, 1987. From that time, he has been divested of such authority. Under the present constitution, the Special Prosecutor (Raul Gonzalez) is a mere subordinate of the Tanodbayan (Ombudsman) and can investigate and prosecute cases only upon the latter's authority or orders. The Special Prosecutor cannot initiate the prosecution of cases but can only conduct the same if instructed to do so by the Ombudsman. Even his original power to issue subpoena, which he still claims under Section 10(d) of PD 1630, is now deemed transferred to the Ombudsman, who may, however, retain it in the Special Prosecutor in connection with the cases he is ordered to investigate. 16 (Emphasis supplied.) The following year, Republic Act No. 6770, 17 otherwise known as The Ombudsman Act of 1989, was passed into law. Among other things, said law: 1) expressly included the Special Prosecutor under the Office of the Ombudsman; 18
2) gave the Special Prosecutor the power, under the supervision and control and upon the authority of the Ombudsman, to conduct preliminary investigation and prosecute criminal cases within the jurisdiction of the Sandiganbayan, and to perform such other duties assigned to it by the Ombudsman; 19 and, most importantly, 3) granted the Ombudsman the powers to: Investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory agency of the Government, the investigation of such cases. 20
A few years later, several persons charged in a complaint filed with the Office of the Ombudsman (in connection with the alleged summary execution of Kuratong Baleleng gang members) instituted petitions for certiorari with this Court, claiming that it is the Special Prosecutor which has jurisdiction to conduct the preliminary investigation and file the proper information against them. In the oral arguments, the parties agreed to limit the issues, with petitioners praying for the re-examination of the Zaldivar ruling on the argument that the Constitution did not give the Ombudsman prosecutorial functions, and contending that the inclusion of the Office of the Special Prosecutor as among the offices under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is unconstitutional. In upholding Zaldivar, we held that while there was indeed an intention to withhold prosecutorial functions from the Ombudsman, the legislature nevertheless recommended that the Legislature could, through statute, prescribe such other powers, functions and duties to the Ombudsman. 21 Thus, paragraph 8, Section 13, Article XI of the Constitution, provides that the Ombudsman may exercise other functions and duties as may be provided by law. 22 Pursuant to this authority, the Legislature enacted Republic Act No. 6770, which granted prosecutorial powers to the Ombudsman. On the claim that the inclusion of the Office of the Special Prosecutor as among the offices under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is unconstitutional, we ratiocinated that: The contention is not impressed with merit. Firstly, the petitioners misconstrue Commissioner Romulo's statement as authority to advocate that the intent of the framers of the 1987 Constitution was to place the Office of the Special Prosecutor under the Office of the President. The said statement obviously referred to the Tanodbayan under P.D. No. 1630 - note how specific the erstwhile Commissioner was in stating; ". . . as the decree now reads . . ." Further, in complete contrast to the petitioner's stand, one of the principal reasons for the proposal to withhold prosecutorial powers from the Ombudsman was precisely to remove the office from presidential control. x x x x x x In the second place, Section 7 of Article XI expressly provides that the then existing Tanodbayan, to be henceforth known as the Office of the Special Prosecutor, "shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution." The underscored phrase evidently refers to the Tanodbayan's powers under P.D. No. 1630 or subsequent amendatory legislation. It follows then that Congress may remove any of the Tanodbayan's/Special Prosecutor's powers under P.D. No. 1630 or grant it other powers, except those powers conferred by the Constitution on the Office of the Ombudsman. Pursuing the present line of reasoning, when one considers that by express mandate of paragraph 8, Section 13, Article XI of the Constitution, the Ombudsman may "exercise such other powers or perform functions or duties as may be provided by law," it is indubitable then that Congress has the power to place the Office of the Special Prosecutor under the Office of the Ombudsman. In the same vein, Congress may remove some of the powers granted to the Tanodbayan by P.D. No. 1630 and transfer them to the Ombudsman; or grant the Office of the Special Prosecutor such other powers and functions and duties as Congress may deem fit and wise. This Congress did through the passage of R.A No. 6770. 23
While it is clear that Acop v. Office of the Ombudsman upheld Zaldivar v. Sandiganbayan insofar as the power of the Ombudsman to prosecute cases is concerned, there has been a shift in its ratio decidendi. Hence, it was pronounced that the authority of the Ombudsman to prosecute was based on Republic Act No. 6770, as authorized by paragraph 8, Section 13, Article XI of the Constitution. This being the case, and considering that Republic Act No. 6770 also gives the Special Prosecutor the power to prosecute criminal cases (albeit under the supervision and control and under the authority of the Ombudsman), was there likewise a modification of our ruling in Zaldivar prohibiting the then Special Prosecutor to initiate criminal cases unless authorized by the Ombudsman? Or should there now be a presumed authority, pursuant to Republic Act No. 6770, to prosecute cases unless prohibited by the Ombudsman?cralaw library The determination of this question is necessary in the case at bar, where it is the petitioners' central contention that the Sandiganbayan committed grave abuse of discretion amounting to lack or excess in jurisdiction when it admitted the Amended Information which, according to petitioners, bears no approval of the Ombudsman, thus, constituting denial of procedural due process. 24
Particularly, petitioners allege that the amendment of the Information and the admission of the Amended Information is premature, since the Ombudsman has not yet acted with finality on the 23 October 2003 Memorandum. 25 The Ombudsman, by stating in the marginal notes of the 23 October 2003 Memorandum that "(t)he resolution of this case is deferred," and "(k)indly submit your recommendation soonest," allegedly decreed that the reinvestigation stage would not be completed until his final determination. 26
Respondent People's defense is that compliance with the specific instructions of the Ombudsman is merely an internal matter and the alleged failure to heed the specific instructions of the Ombudsman is speculative. 27
The marginal notes of Ombudsmen to the recommendations of investigating prosecutors are hardly internal matters. In Cruz, Jr. v. People, 28 Olivarez v. Sandiganbayan, 29 and Gallardo v. People, 30 the marginal notes, even one-liners as in the case of Gallardo, were judicially considered sufficient dispositions by the Ombudsmen and Special Prosecutors concerned. We held in Olivarez that: The mere fact that the order to file the information against petitioner was contained in a marginal note is not sufficient to impute arbitrariness or caprice on the part of respondent special prosecutors, absent a clear showing that they gravely abused their discretion in disapproving the recommendation of the investigating prosecutors to dismiss or withdraw the case against petitioner. x x x. 31
Was there, as petitioners assert, a violation of the orders of the Ombudsman as stated in his marginal note?cralaw library For reference, we reiterate the marginal note of Ombudsman Marcelo dated 16 February 2004: The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA 3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or preference. OSP should study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer. Kindly submit your recommendation soonest. 32
Assistant Special Prosecutor Galisanao's Special Memorandum, quoted in full in the narration of facts, show complete compliance with Ombudsman Marcelo's order to "study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer." Assistant Special Prosecutor Galisanao answered the query in the affirmative, stating that unwarranted benefits, advantage or preference were given to Mobil Link Enterprises/Starlet Sales Center through the "deliberate disregard of the rules on procurement discussed above." Ombudsman Marcelo's order, however, to "(k)indly submit your recommendation soonest," is another matter. The marginal note did not indicate to whom the recommendation should be submitted. As the recommendation was prepared by a subordinate in the Office of the Special Prosecutor, would a submission to the Special Prosecutor be sufficient compliance with the order of the Ombudsman? What is imperative is that the recommendation be submitted to someone who has the authority to implement such recommendation, by authorizing the filing of the proper information. Republic Act No. 6770, by conferring upon the Ombudsman the power to prosecute, likewise grants to the Ombudsman the power to authorize the filing of informations. As to the Special Prosecutor, respondent People invokes the aforesaid authority of the Ombudsman in Section 15(10) to delegate his powers, and claim that there was a general delegation of the authority to approve the filing of informations in Office Order No. 03-97, series of 2003 (dated 15 September 2003), and Office Order No. 40-05, series of 2005 (dated 4 April 2005). Office Order No. 40-05 is a consolidation of several office orders, including the aforementioned Office Order No. 03-97, which is thus superceded by the former. 33 Office Order No. 40-05 provides: In the exigency of the service, except when otherwise ordered by the Ombudsman, the disposition of administrative and criminal cases involving any of the following, viz: 1) City and Municipal mayors; x x x as the highest ranking respondent, where the offense charged involves injury or damage amounting to, or valued at Two Million Pesos (P2,000,000.00) or less, or where the maximum imposable penalty for any of the offense charged does not exceed twenty (20) years imprisonment, shall be subject to the final approval of the Deputy Ombudsman concerned; provided, that, where the offense charged involves injury or damage amounting to, or valued at, more than Two Million Pesos (P2,000,000.00), or where the maximum imposable penalty for any of the offense charged is more than twenty (20) years imprisonment, the disposition shall be subject to the final approval of the Ombudsman. In the foregoing dispositions that are subject to the final approval of the Deputy Ombudsman concerned, the undersigned hereby delegates to the latter further authority to approve and sign any corresponding criminal information, whether to be filed with the regular courts or the Sandiganbayan; provided, however, that, preparatory to the filing of the information with the Sandiganbayan, the Office of the Special Prosecutor may review and modify the same, subject to the approval of the Special Prosecutor, without departing from, or varying in any way, the contents of the basic Resolution, Order or Decision. 34
Contrary to the contention of respondent People, the delegation of the power to authorize the filing of informations under Office Order No. 40-05 was only made to Deputy Ombudsmen, and not to the Special Prosecutor. All that was delegated to the Special Prosecutor was the discretional 35 authority to review and modify the Deputy Ombudsmen-authorized information, but even this is subject to the condition that such modification must be "without departing from, or varying in any way, the contents of the basic Resolution, Order or Decision." Even the title of Office Order No. 40-05 betray the contention of delegation to the Special Prosecutor: "DELEGATION OF FINAL APPROVING AUTHORITY TO THE DEPUTY OMBUDSMAN FOR LUZON, DEPUTY OMBUDSMAN FOR VISAYAS AND DEPUTY OMBUDSMAN FOR MINDANAO." Neither does it help that, under Section 11(4) of Republic Act No. 6770, the Special Prosecutor was given the rank and salary of Deputy Ombudsman. In Office of the Ombudsman v. Valera, 36 this Court held: The petitioner's contention that since the Special Prosecutor is of the same rank as that of a Deputy Ombudsman, then the former can rightfully perform all the functions of the latter, including the power to preventively suspend, is not persuasive. Under civil service laws, rank classification determines the salary and status of government officials and employees. Although there is substantial equality in the level of their respective functions, those occupying the same rank do not necessarily have the same powers nor perform the same functions. 37
There being no express delegation of the power to prosecute, we are constrained to go back to our main query: Is there an implied delegation of the power to prosecute under Republic Act No. 6770, such that Special Prosecutors are presumed to have been delegated such power, in the absence of a prohibition from the Ombudsman?cralaw library Republic Act No. 6770 provides: (4) The Office of the Special Prosecutor shall, under the supervision and control and upon the authority of the Ombudsman, have the following powers: (a) To conduct preliminary investigation and prosecute criminal cases within the jurisdiction of the Sandiganbayan; (b) To enter into plea-bargaining agreements; andcralawlibrary (c) To perform such other duties assigned to it by the Ombudsman. 38
This Court has defined the power of control as "the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter." 39 The power of supervision, on the other hand, means "overseeing, or the power or authority of an officer to see that subordinate officers perform their duties." 40 Under the Administrative Code of 1987 41 : Supervision and control shall include authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the execution of plans and programs; and prescribe standards, guidelines, plans and programs. x x x Springing from the power of control is the doctrine of qualified political agency, wherein the acts of a subordinate bears the implied approval of his superior, unless actually disapproved by the latter. 42 Thus, taken with the powers of control and supervision, the acts of Department Secretaries in the performance of their duties are presumed to be the act of the President, unless and until the President alters, modifies, or nullifies the same. By arguing that "[w]hat is important is that the amended Information has not been withdrawn, and or recalled by the Honorable Ombudsman, [a] clear showing that the latter acknowledged/upheld the act of the Special Prosecutor in signing the Amended Information," 43 respondent People claims that the doctrine of qualified political agency should be applied as well to the relationship between the Ombudsman and the Special Prosecutor. Petitioners counter that the doctrine of qualified political agency does not apply to the Office of the Ombudsman, since the latter is an apolitical agency, and is far different from the bureaucracy to which said doctrine applies. 44
Petitioners are correct. The doctrine of qualified political agency was adopted in our system of government on the following pronouncement of this Court in Villena v. The Secretary of the Interior 45 : After serious reflection, we have decided to sustain the contention of the government in this case on the broad proposition, albeit not suggested, that under the presidential type of government which we have adopted and considering the departmental organization established and continued in force by paragraph 1, section 12, Article VII, of our Constitution, all executive and administrative organizations are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the Chief Executive, and, except in cases where the Chief Executive is required by the Constitution or the law to act in person or the exigencies of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief Executive are performed by and through the executive departments, and the acts of the secretaries of such departments, performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief Executive. (Runkle v. United States [1887]. 122 U.S., 543; 30 Law. ed., 1167; 7 Sup. Ct. Rep., 1141; see also U. S. v. Eliason [1839], 16 Pet., 291; 10 Law. ed., 968; Jones v. U. S. [1890], 137 U.S., 202; 34 Law. ed., 691; 11 Sup. Ct., Rep., 80; Wolsey v. Chapman [1880], 101 U.S., 755; 25 Law. ed., 915; Wilcox v. Jackson [1836], 13 Pet., 498; 10 Law. ed., 264.) 46
While we do not underestimate the quantity of work in the hands of the Office of the Ombudsman, the same simply does not measure up to the workload of the Office of the President as to necessitate having the Special Prosecutor as an alter ego of the Ombudsman. In any case, the Office of the Ombudsman could very well make a general delegation of powers to the Special Prosecutor, if it is so desired. An examination of the office orders issued by the Ombudsman, however, reveal that there had been no such intention to make a general delegation. Indeed, a statute granting powers to an agency created by the Constitution should be liberally construed for the advancement of the purposes and objectives for which it was created. 47 Yet, the Ombudsman would be severely hampered from exercising his power of control if we are to allow the Special Prosecutor to authorize the filing of informations in the first instance. This is because while the Ombudsman has full discretion to determine whether or not a criminal case should be filed in the Sandiganbayan, once the case has been filed with said court, it is the Sandiganbayan, and no longer the Ombudsman, which has full control of the case so much so that the informations may not be dismissed, without the approval of the said court. 48
We, therefore, resolve to grant the Petition. We realize that, once transmitted to the new Ombudsman, she can so easily approve the 8 March 2004 Supplemental Memorandum of Assistant Special Prosecutor Galisanao, and the same Amended Information can be filed in no time. However, when the law entails a specific procedure to be followed, unwarranted shortcuts lead to the violation of the sacred right to due process, which we cannot countenance. Finally, as regards other informations authorized by the Special Prosecutor to be filed without the approval of the Ombudsman, we also recognize that the former prevailing interpretation of the law may shield these informations from illegality. Such reliance upon the operative fact, however, would cease upon the finality of this Decision. WHEREFORE, the instant Petition for Certiorari is GRANTED. The assailed Resolutions of the Sandiganbayan admitting the Amended Information is SET ASIDE. Let the 8 March 2004 Supplemental Memorandum of Assistant Special Prosecutor III Warlito F. Galisanao be TRANSMITTED to the Office of the Ombudsman for approval or disapproval. SO ORDERED.
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 141309 June 19, 2007 LIWAYWAY VINZONS-CHATO, petitioner, vs. FORTUNE TOBACCO CORPORATION, respondent. D E C I S I O N YNARES-SANTIAGO, J .: Petitioner assails the May 7, 1999 Decision 1 of the Court of Appeals in CA-G.R. SP No. 47167, which affirmed the September 29, 1997 Order 2 of the Regional Trial Court (RTC) of Marikina, Branch 272, in Civil Case No. 97-341-MK, denying petitioners motion to dismiss. The complaint filed by respondent sought to recover damages for the alleged violation of its constitutional rights arising from petitioners issuance of Revenue Memorandum Circular No. 37-93 (RMC 37-93), which the Court declared invalid in Commissioner of Internal Revenue v. Court of Appeals. 3
Petitioner Liwayway Vinzons-Chato was then the Commissioner of Internal Revenue while respondent Fortune Tobacco Corporation is an entity engaged in the manufacture of different brands of cigarettes, among which are "Champion," "Hope," and "More" cigarettes. On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA 7654), which took effect on July 3, 1993. Prior to its effectivity, cigarette brands Champion," "Hope," and "More" were considered local brands subjected to an ad valorem tax at the rate of 20-45%. However, on July 1, 1993, or two days before RA 7654 took effect, petitioner issued RMC 37-93 reclassifying "Champion," "Hope," and "More" as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax. 4 RMC 37-93 in effect subjected "Hope," "More," and"Champion" cigarettes to the provisions of RA 7654, specifically, to Sec. 142, 5 (c)(1) on locally manufactured cigarettes which are currently classified and taxed at 55%, and which imposes an ad valorem tax of "55% provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack." 6
On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor A. Deoferio, Jr. sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On July 15, 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. On July 20, 1993, respondent filed a motion for reconsideration requesting the recall of RMC 37-93, but was denied in a letter dated July 30, 1993. 7 The same letter assessed respondent for ad valorem tax deficiency amounting to P9,598,334.00 (computed on the basis of RMC 37-93) and demanded payment within 10 days from receipt thereof. 8 On August 3, 1993, respondent filed a petition for review with the Court of Tax Appeals (CTA), which on September 30, 1993, issued an injunction enjoining the implementation of RMC 37-93. 9 In its decision dated August 10, 1994, the CTA ruled that RMC 37-93 is defective, invalid, and unenforceable and further enjoined petitioner from collecting the deficiency tax assessment issued pursuant to RMC No. 37-93. This ruling was affirmed by the Court of Appeals, and finally by this Court in Commissioner of Internal Revenue v. Court of Appeals. 10 It was held, among others, that RMC 37-93, has fallen short of the requirements for a valid administrative issuance. On April 10, 1997, respondent filed before the RTC a complaint 11 for damages against petitioner in her private capacity. Respondent contended that the latter should be held liable for damages under Article 32 of the Civil Code considering that the issuance of RMC 37-93 violated its constitutional right against deprivation of property without due process of law and the right to equal protection of the laws. Petitioner filed a motion to dismiss 12 contending that: (1) respondent has no cause of action against her because she issued RMC 37-93 in the performance of her official function and within the scope of her authority. She claimed that she acted merely as an agent of the Republic and therefore the latter is the one responsible for her acts; (2) the complaint states no cause of action for lack of allegation of malice or bad faith; and (3) the certification against forum shopping was signed by respondents counsel in violation of the rule that it is the plaintiff or the principal party who should sign the same. On September 29, 1997, the RTC denied petitioners motion to dismiss holding that to rule on the allegations of petitioner would be to prematurely decide the merits of the case without allowing the parties to present evidence. It further held that the defect in the certification against forum shopping was cured by respondents submission of the corporate secretarys certificate authorizing its counsel to execute the certification against forum shopping. The dispositive portion thereof, states: WHEREFORE, foregoing premises considered, the motion to dismiss filed by the defendant Liwayway Vinzons-Chato and the motion to strike out and expunge from the record the said motion to dismiss filed by plaintiff Fortune Tobacco Corporation are both denied on the grounds aforecited. The defendant is ordered to file her answer to the complaint within ten (10) days from receipt of this Order. SO ORDERED. 13
The case was elevated to the Court of Appeals via a petition for certiorari under Rule 65. However, same was dismissed on the ground that under Article 32 of the Civil Code, liability may arise even if the defendant did not act with malice or bad faith. The appellate court ratiocinated that Section 38, Book I of the Administrative Code is the general law on the civil liability of public officers while Article 32 of the Civil Code is the special law that governs the instant case. Consequently, malice or bad faith need not be alleged in the complaint for damages. It also sustained the ruling of the RTC that the defect of the certification against forum shopping was cured by the submission of the corporate secretarys certificate giving authority to its counsel to execute the same. Undaunted, petitioner filed the instant recourse contending that the suit is grounded on her acts done in the performance of her functions as a public officer, hence, it is Section 38, Book I of the Administrative Code which should be applied. Under this provision, liability will attach only when there is a clear showing of bad faith, malice, or gross negligence. She further averred that the Civil Code, specifically, Article 32 which allows recovery of damages for violation of constitutional rights, is a general law on the liability of public officers; while Section 38, Book I of the Administrative Code is a special law on the superior public officers liability, such that, if the complaint, as in the instant case, does not allege bad faith, malice, or gross negligence, the same is dismissible for failure to state a cause of action. As to the defect of the certification against forum shopping, she urged the Court to strictly construe the rules and to dismiss the complaint. Conversely, respondent argued that Section 38 which treats in general the public officers "acts" from which civil liability may arise, is a general law; while Article 32 which deals specifically with the public officers violation of constitutional rights, is a special provision which should determine whether the complaint states a cause of action or not. Citing the case of Lim v. Ponce de Leon, 14 respondent alleged that under Article 32 of the Civil Code, it is enough that there was a violation of the constitutional rights of the plaintiff and it is not required that said public officer should have acted with malice or in bad faith. Hence, it concluded that even granting that the complaint failed to allege bad faith or malice, the motion to dismiss for failure to state a cause of action should be denied inasmuch as bad faith or malice are not necessary to hold petitioner liable. The issues for resolution are as follows: (1) May a public officer be validly sued in his/her private capacity for acts done in connection with the discharge of the functions of his/her office? (2) Which as between Article 32 of the Civil Code and Section 38, Book I of the Administrative Code should govern in determining whether the instant complaint states a cause of action? (3) Should the complaint be dismissed for failure to comply with the rule on certification against forum shopping? (4) May petitioner be held liable for damages? On the first issue, the general rule is that a public officer is not liable for damages which a person may suffer arising from the just performance of his official duties and within the scope of his assigned tasks. 15 An officer who acts within his authority to administer the affairs of the office which he/she heads is not liable for damages that may have been caused to another, as it would virtually be a charge against the Republic, which is not amenable to judgment for monetary claims without its consent. 16 However, a public officer is by law not immune from damages in his/her personal capacity for acts done in bad faith which, being outside the scope of his authority, are no longer protected by the mantle of immunity for official actions. 17
Specifically, under Section 38, Book I of the Administrative Code, civil liability may arise where there is bad faith, malice, or gross negligence on the part of a superior public officer. And, under Section 39 of the same Book, civil liability may arise where the subordinate public officers act is characterized by willfulness or negligence. Thus Sec. 38. Liability of Superior Officers. (1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross negligence. x x x x Section 39. Liability of Subordinate Officers. No subordinate officer or employee shall be civilly liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or negligent acts done by him which are contrary to law, morals, public policy and good customs even if he acts under orders or instructions of his superior. In addition, the Court held in Cojuangco, Jr. v. Court of Appeals, 18 that a public officer who directly or indirectly violates the constitutional rights of another, may be validly sued for damages under Article 32 of the Civil Code even if his acts were not so tainted with malice or bad faith. Thus, the rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity for acts done in the course of the performance of the functions of the office, where said public officer: (1) acted with malice, bad faith, or negligence; or (2) where the public officer violated a constitutional right of the plaintiff. Anent the second issue, we hold that the complaint filed by respondent stated a cause of action and that the decisive provision thereon is Article 32 of the Civil Code. A general statute is one which embraces a class of subjects or places and does not omit any subject or place naturally belonging to such class. A special statute, as the term is generally understood, is one which relates to particular persons or things of a class or to a particular portion or section of the state only. 19
A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not be taken as intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning at all. 20
The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. 21
Thus, in City of Manila v. Teotico, 22 the Court held that Article 2189 of the Civil Code which holds provinces, cities, and municipalities civilly liable for death or injuries by reason of defective conditions of roads and other public works, is a special provision and should prevail over Section 4 of Republic Act No. 409, the Charter of Manila, in determining the liability for defective street conditions. Under said Charter, the city shall not be held for damages or injuries arising from the failure of the local officials to enforce the provision of the charter, law, or ordinance, or from negligence while enforcing or attempting to enforce the same. As explained by the Court: Manila maintains that the former provision should prevail over the latter, because Republic Act 409 is a special law, intended exclusively for the City of Manila, whereas the Civil Code is a general law, applicable to the entire Philippines. The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true that, insofar as its territorial application is concerned, Republic Act No. 409 is a special law and the Civil Code a general legislation; but, as regards the subject matter of the provisions above quoted, Section 4 of Republic Act 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of" city officers "to enforce the provisions of" said Act "or any other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code constitutes a particular prescription making "provinces, cities and municipalities . . . liable for damages for the death of, or injury suffered by, any person by reason" specifically "of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision." In other words, said section 4 refers to liability arising from negligence, in general, regardless of the object thereof, whereas Article 2189 governs liability due to "defective streets," in particular. Since the present action is based upon the alleged defective condition of a road, said Article 2189 is decisive thereon. 23
In the case of Bagatsing v. Ramirez, 24 the issue was which law should govern the publication of a tax ordinance, the City Charter of Manila, a special act which treats ordinances in general and which requires their publication before enactment and after approval, or the Tax Code, a general law, which deals in particular with "ordinances levying or imposing taxes, fees or other charges," and which demands publication only after approval. In holding that it is the Tax Code which should prevail, the Court elucidated that: There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire community and special law as one relating to particular persons or things of a class. And the rule commonly said is that a prior special law is not ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. Th[is] exactly is the circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. Special provision governs. Let us examine the provisions involved in the case at bar. Article 32 of the Civil Code provides: ART. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates, or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: x x x x (6) The right against deprivation of property without due process of law; x x x x (8) The right to the equal protection of the laws; x x x x The rationale for its enactment was explained by Dean Bocobo of the Code Commission, as follows: "DEAN BOCOBO. Article 32, regarding individual rights, Attorney Cirilo Paredes proposes that Article 32 be so amended as to make a public official liable for violation of another persons constitutional rights only if the public official acted maliciously or in bad faith. The Code Commission opposes this suggestion for these reasons: "The very nature of Article 32 is that the wrong may be civil or criminal. It is not necessary therefore that there should be malice or bad faith. To make such a requisite would defeat the main purpose of Article 32 which is the effective protection of individual rights. Public officials in the past have abused their powers on the pretext of justifiable motives or good faith in the performance of their duties. Precisely, the object of the Article is to put an end to official abuse by the plea of good faith. In the United States this remedy is in the nature of a tort. "Mr. Chairman, this article is firmly one of the fundamental articles introduced in the New Civil Code to implement democracy. There is no real democracy if a public official is abusing and we made the article so strong and so comprehensive that it concludes an abuse of individual rights even if done in good faith, that official is liable. As a matter of fact, we know that there are very few public officials who openly and definitely abuse the individual rights of the citizens. In most cases, the abuse is justified on a plea of desire to enforce the law to comply with ones duty. And so, if we should limit the scope of this article, that would practically nullify the object of the article. Precisely, the opening object of the article is to put an end to abuses which are justified by a plea of good faith, which is in most cases the plea of officials abusing individual rights." 25
The Code Commission deemed it necessary to hold not only public officers but also private individuals civilly liable for violation of the rights enumerated in Article 32 of the Civil Code. It is not necessary that the defendant under this Article should have acted with malice or bad faith, otherwise, it would defeat its main purpose, which is the effective protection of individual rights. It suffices that there is a violation of the constitutional right of the plaintiff. 26
Article 32 was patterned after the "tort" in American law. 27 A tort is a wrong, a tortious act which has been defined as the commission or omission of an act by one, without right, whereby another receives some injury, directly or indirectly, in person, property, or reputation. 28 There are cases in which it has been stated that civil liability in tort is determined by the conduct and not by the mental state of the tortfeasor, and there are circumstances under which the motive of the defendant has been rendered immaterial. The reason sometimes given for the rule is that otherwise, the mental attitude of the alleged wrongdoer, and not the act itself, would determine whether the act was wrongful. 29 Presence of good motive, or rather, the absence of an evil motive, does not render lawful an act which is otherwise an invasion of anothers legal right; that is, liability in tort is not precluded by the fact that defendant acted without evil intent. 30
The clear intention therefore of the legislature was to create a distinct cause of action in the nature of tort for violation of constitutional rights, irrespective of the motive or intent of the defendant. 31 This is a fundamental innovation in the Civil Code, and in enacting the Administrative Code pursuant to the exercise of legislative powers, then President Corazon C. Aquino, could not have intended to obliterate this constitutional protection on civil liberties. In Aberca v. Ver, 32 it was held that with the enactment of Article 32, the principle of accountability of public officials under the Constitution acquires added meaning and assumes a larger dimension. No longer may a superior official relax his vigilance or abdicate his duty to supervise his subordinates, secure in the thought that he does not have to answer for the transgressions committed by the latter against the constitutionally protected rights and liberties of the citizen. Part of the factors that propelled people power in February 1986 was the widely held perception that the government was callous or indifferent to, if not actually responsible for, the rampant violations of human rights. While it would certainly be too naive to expect that violators of human rights would easily be deterred by the prospect of facing damage suits, it should nonetheless be made clear in no uncertain terms that Article 32 of the Civil Code makes the persons who are directly, as well as indirectly, responsible for the transgression, joint tortfeasors. On the other hand, Sections 38 and 39, Book I of the Administrative Code, laid down the rule on the civil liability of superior and subordinate public officers for acts done in the performance of their duties. For both superior and subordinate public officers, the presence of bad faith, malice, and negligence are vital elements that will make them liable for damages. Note that while said provisions deal in particular with the liability of government officials, the subject thereof is general, i.e., "acts" done in the performance of official duties, without specifying the action or omission that may give rise to a civil suit against the official concerned. Contrarily, Article 32 of the Civil Code specifies in clear and unequivocal terms a particular specie of an "act" that may give rise to an action for damages against a public officer, and that is, a tort for impairment of rights and liberties. Indeed, Article 32 is the special provision that deals specifically with violation of constitutional rights by public officers. All other actionable acts of public officers are governed by Sections 38 and 39 of the Administrative Code. While the Civil Code, specifically, the Chapter on Human Relations is a general law, Article 32 of the same Chapter is a special and specific provision that holds a public officer liable for and allows redress from a particular class of wrongful acts that may be committed by public officers. Compared thus with Section 38 of the Administrative Code, which broadly deals with civil liability arising from errors in the performance of duties, Article 32 of the Civil Code is the specific provision which must be applied in the instant case precisely filed to seek damages for violation of constitutional rights. The complaint in the instant case was brought under Article 32 of the Civil Code. Considering that bad faith and malice are not necessary in an action based on Article 32 of the Civil Code, the failure to specifically allege the same will not amount to failure to state a cause of action. The courts below therefore correctly denied the motion to dismiss on the ground of failure to state a cause of action, since it is enough that the complaint avers a violation of a constitutional right of the plaintiff. Anent the issue on non-compliance with the rule against forum shopping, the subsequent submission of the secretarys certificate authorizing the counsel to sign and execute the certification against forum shopping cured the defect of respondents complaint. Besides, the merits of the instant case justify the liberal application of the rules. 33
WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals dated May 7, 1999 which affirmed the Order of the Regional Trial Court of Marikina, Branch 272, denying petitioners motion to dismiss, is AFFIRMED. The Presiding Judge, Regional Trial Court of Marikina, Branch 272, is hereby DIRECTEDto continue with the proceedings in Civil Case No. 97-341-MK with dispatch. With costs. SO ORDERED.
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 158253 March 2, 2007 REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner, vs. CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent. D E C I S I O N AUSTRIA-MARTINEZ, J .: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision 1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed with modification the Decision 2 of the Regional Trial Court, Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner). The factual background of the case is as follows: The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January 27, 1992. Respondent, doing business under the name and style Carwin Construction and Construction Supply (Carwin Construction), was pre-qualified together with two other contractors. Since respondent submitted the lowest bid, he was awarded the contract for the concreting of Sitio 5 Bahay Pare. 3 On November 4, 1992, a Contract Agreement was executed by respondent and petitioner. 4 On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting of Sitio 5 Bahay Pare. 5 Accordingly, respondent undertook the works, made advances for the purchase of the materials and payment for labor costs. 6
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga conducted a final inspection of the project and found it 100% completed in accordance with the approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates of Final Inspection and Final Acceptance. 7
Thereafter, respondent sought to collect payment for the completed project. 8 The DPWH prepared the Disbursement Voucher in favor of petitioner. 9 However, the DPWH withheld payment from respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release of funds on the ground that the contractors license of respondent had expired at the time of the execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects were valid and effective although its contractors license had already expired when the projects were contracted. 10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the Contractors License Law, does not provide that a contract entered into after the license has expired is void and there is no law which expressly prohibits or declares void such contract, the contract is enforceable and payment may be paid, without prejudice to any appropriate administrative liability action that may be imposed on the contractor and the government officials or employees concerned. 11
In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal Department on whether Carwin Construction should be paid for works accomplished despite an expired contractors license at the time the contracts were executed. 12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department, recommended that payment should be made to Carwin Construction, reiterating his earlier legal opinion. 13 Despite such recommendation for payment, no payment was made to respondent. Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages against petitioner before the RTC. 14
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion to Dismiss the complaint on the grounds that the complaint states no cause of action and that the RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the decision of the District Auditor to disapprove the claim. 15
Following the submission of respondents Opposition to Motion to Dismiss, 16 the RTC issued an Order dated March 11, 1996 denying the Motion to Dismiss. 17 The OSG filed a Motion for Reconsideration 18 but it was likewise denied by the RTC in its Order dated May 23, 1996. 19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of administrative remedies and the doctrine of non-suability of the State. 20
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which reads as follows: WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San Fernando, Pampanga, to pay the following: a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus interest at 12% from demand until fully paid; and b) The costs of suit. SO ORDERED. 21
The RTC held that petitioner must be required to pay the contract price since it has accepted the completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long standing and consistent pronouncement against enriching oneself at the expense of another. 22
Dissatisfied, petitioner filed an appeal with the CA. 23 On April 28, 2003, the CA rendered its Decision sustaining the Decision of the RTC. It held that since the case involves the application of the principle of estoppel against the government which is a purely legal question, then the principle of exhaustion of administrative remedies does not apply; that by its actions the government is estopped from questioning the validity and binding effect of the Contract Agreement with the respondent; that denial of payment to respondent on purely technical grounds after successful completion of the project is not countenanced either by justice or equity. The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which reads: WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the interest shall be six percent (6%) per annum computed from June 21, 1995. SO ORDERED. 24
Hence, the present petition on the following ground: THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF ACTION AGAINST PETITIONER, CONSIDERING THAT: (a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND (b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT. 25
Petitioner contends that respondents recourse to judicial action was premature since the proper remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section 48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim against the government under Section 2(1), 26 Article IX of the 1987 Constitution and Section 26 27 of P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the principle of primary jurisdiction results in a lack of cause of action. Respondent, on the other hand, in his Memorandum 28 limited his discussion to Civil Code provisions relating to human relations. He submits that equity demands that he be paid for the work performed; otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its inhabitants. The present petition is bereft of merit. The general rule is that before a party may seek the intervention of the court, he should first avail of all the means afforded him by administrative processes. 29 The issues which administrative agencies are authorized to decide should not be summarily taken from them and submitted to a court without first giving such administrative agency the opportunity to dispose of the same after due deliberation. 30
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact. 31
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of primary jurisdiction, which are based on sound public policy and practical considerations, are not inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; 32 (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been rendered moot; 33 (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings. 34 Exceptions (c) and (e) are applicable to the present case. Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that payment to a contractor with an expired contractors license is proper, respondent remained unpaid for the completed work despite repeated demands. Clearly, there was unreasonable delay and official inaction to the great prejudice of respondent. Furthermore, whether a contractor with an expired license at the time of the execution of its contract is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. 35 Said question at best could be resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative nature is to be or can be done. 36 The issue does not require technical knowledge and experience but one that would involve the interpretation and application of law. Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim against the Government, and, under Section 48 37 of P.D. No. 1445, the administrative remedy available to respondent is an appeal of the denial of his claim by the District Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for specific performance and damages was not prematurely filed and within the jurisdiction of the RTC to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in Rocamora v. RTC-Cebu (Branch VIII): 38
The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by the government. The road had been completed; the Pope had come and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given this official indifference, which apparently would continue indefinitely, the private respondents had to act to assert and protect their interests. 39
On the question of whether a contractor with an expired license is entitled to be paid for completed projects, Section 35 of R.A. No. 4566 explicitly provides: SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied) The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation. 40 This rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. 41 Verba legis non est recedendum, or from the words of a statute there should be no departure. 42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void contracts entered into by a contractor whose license had already expired. Nonetheless, such contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for the projects he completed. Such payment, however, is without prejudice to the payment of the fine prescribed under the law. Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of anothers injury) states: Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as "basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice." 43 The rules thereon apply equally well to the Government. 44 Since respondent had rendered services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust enrichment is not allowed by law. WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to costs.
EN BANC
LORNA A. MEDINA, G.R. No. 176478 Petitioner,
Present:
PUNO, C.J., QUISUMBING, - versus - YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO MORALES, COMMISSION ON AUDIT AZCUNA, (COA), represented by the TINGA, Audit Team of EUFROCINIA CHICO-NAZARIO, *
MAWAK, SUSAN PALLERNA, VELASCO, JR., and MA. DOLORES TEPORA, NACHURA, Respondents. REYES, and LEONARDO DE CASTRO, JJ. Promu lgated:
February 4, 2008
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DECISION
TINGA, J.:
While highlighting the interplay between the powers of two constitutional offices, one mandated as the government monitor of public fund expenditures and the other as the sentinel against graft and corruption in government, this case resolves some questions about the extent of their powers.
This is a petition for review on certiorari [1] under Rule 45 of the 1997 Rules of Civil Procedure seeking the reversal of the Decision [2] and Resolution [3] of the Court of Appeals in CA-G.R. SP No. 89539. The Court of Appeals decision affirmed the two joint orders issued by the Office of the Deputy Ombudsman for Luzon finding herein petitioner Lorna A. Medina guilty of grave misconduct and dishonesty. The Resolution of the same court denied petitioners motion for reconsideration of the said decision.
The instant petition originated from the audit conducted by respondent Commission on Audit (COA) on the cash and accounts handled by petitioner in her official capacity as Municipal Treasurer of General Mariano Alvarez, Cavite. In the Joint Affidavit [4] executed by herein respondents Eufrocinia M. Mawak, head of the audit team, and Susana L. Pallerna, Ma. Dolores C. Tepora and a certain Nelson T. Alvarez, who were all state auditors of the Provincial Auditors Office of Cavite, they all stated that they had examined petitioners financial records covering 19 August 1999 to 26 September 2000 and discovered a total cash shortage in the aggregate amount of P4,080,631.36. They thus directed petitioner to immediately restitute the shortage within 72 hours from receipt of the demand letter but petitioner allegedly failed to comply. The state auditors submitted a report to the Provincial Auditors Office and recommended the relief of petitioner from her post as municipal treasurer and the filing of criminal charges against her.
COA, represented by the aforementioned state auditors, filed an administrative case docketed as OMB-L-A-04-0361-F before the Office of the Deputy Ombudsman for Luzon, charging petitioner with grave misconduct and dishonesty. As directed, petitioner filed a Counter-Affidavit [5] and a Position Paper [6] mainly raising the following defenses: (1) the audit team was not independent and competent; (2) the computation of her accountabilities was overstated and erroneous; (3) the audit team failed to verify documents such as bank reconciliation statements, general ledgers and cashbooks presented during the cash count; (4) the documents in support of the audit report were not signed, hence, were self-serving; (5) the cash shortage in the amount of P379,646.51 under the SEF and Trust Fund as well as the disallowed amount of P585,803.37 had no basis as the same pertained to a previous audit and, thus, should have been excluded from the computation of the total shortage; (6) the cash items amounting to P883,952.91 in the form of reimbursement expense receipts should not have been disallowed because they were actually received by individual payees; (7) petitioners cash on hand accountability was overstated because a collection was not immediately recorded; and (8) the audit team erroneously credited petitioners accounts to another cashier.
In a Decision [7] dated 8 November 2004, Deputy Ombudsman Victor C. Fernandez approved the recommendation of the Graft Investigation and Prosecution Officer to dismiss petitioner from service based on the existence of substantial evidence of a discrepancy in petitioners account totaling P4,080,631.36. The said decision noted petitioners supposed failure to file a counter-affidavit and position paper despite due notice.
On 29 November 2004, petitioner filed an urgent motion [8] stating that she complied with the directive to file a counter-affidavit and position paper and praying that the defenses therein be considered in reversing the8 November 2004 decision. The motion was treated as a motion for reconsideration of the said decision.
On 31 January 2005, Deputy Ombudsman Fernandez issued the first assailed Joint Order [9] denying petitioners urgent motion. Although the order acknowledged the erroneous statement in the 8 November 2004Decision stating that petitioner failed to submit a counter-affidavit, nevertheless, it affirmed the Resolution and Decision both dated 8 November 2004. Deputy Ombudsman Fernandez ruled that petitioners Counter-Affidavit and Position Paper did not present exculpatory arguments that would negate the allegation of discrepancy on petitioners accounts. He also held that petitioners concerns relating to the conduct of the audit should have been raised at the time of the audit or immediately thereafter, and that petitioners failure to produce the amount of cash shortage despite demand created a presumption that she appropriated public funds under her custody for her own personal use. [10]
Petitioner sought reconsideration [11] on grounds of newly discovered and material evidence and grave errors of fact and/or law prejudicial to her own interest. The purported newly discovered evidence consisted of petitioners request for reconsideration of the audit report filed and still pending before the office of the audit team head, herein respondent Mawak, and letters sent by petitioners counsel to the provincial auditor of Cavite questioning the audit and requesting a re-audit of petitioners accounts.
In the second assailed Joint Order dated 22 March 2005, [12] Deputy Ombudsman Fernandez denied petitioners motion for reconsideration. He reiterated that petitioners allegations as regards the incompetence of the audit team and the errors in the audit report were matters which may be properly ventilated during trial. He explained that petitioner failed to produce the missing funds despite notice thereof creating a presumption that the same were appropriated for personal use and for the purpose of preliminary investigation, such findings warranted the filing of criminal charges against petitioner. The deputy ombudsman held that petitioners belated request for re-audit could not be considered newly discovered evidence and denied the request for a formal investigation on the ground that petitioner was afforded due process when she filed her counter-affidavit and position paper. [13]
Petitioner elevated the matter to the Court of Appeals via a Petition for Review [14] questioning the denial of her request for a formal investigation, the penalty of dismissal, and the sufficiency of the evidence against her.
The Court of Appeals dismissed the petition in the assailed Decision dated 23 October 2006. [15] It held that petitioner was not entitled to a formal investigation and it affirmed the deputy ombudsmans factual finding that petitioner was guilty of grave misconduct and dishonesty. The appellate court also denied petitioners motion for reconsideration in a Resolution dated 30 January 2007.
Hence, the instant petition [16] seeking the reversal of the Court of Appeals decision on the following grounds: (1) the Court of Appeals failed to order a formal reinvestigation, to reopen and review the records of the administrative case, to consider newly discovered evidence attached to petitioners motion for reconsideration of the deputy ombudsmans Decision and to consider material allegations in the motion for reconsideration of the assailed decision; (2) petitioner was able to overcome the presumption that she appropriated the missing funds for personal use; (3) the filing of the administrative case was baseless; and (4) the penalty of dismissal was unwarranted.
The instant petition reiterates the issues brought up before the Court of Appeals, namely: whether petitioner was deprived of her right to due process, whether the penalty of dismissal is proper and whether petitioners guilt for grave misconduct and dishonesty is supported by substantial evidence.
Invoking her right to due process, petitioner, on one hand, insists that she is entitled to a formal investigation, citing the Administrative Code of 1987, Book V, Title I, Subtitle A, Section 48 (2) [17] and (3). [18] On the other hand, in support of its argument that the propriety of conducting a formal investigation rests on the sound discretion of the hearing officer, respondent COA, through the Office of the Solicitor General (OSG), relies on Administrative Order No. 07, as amended by Administrative Order No. 17, Rule III, Section 5, [19] governing the procedure in administrative cases filed before the Office of the Ombudsman.
The validity of Administrative Order No. 07, Rule III, Section 5 is not in dispute. However, petitioner argues that said provision is inferior to the provision in the Administrative Code which entitles the respondent to a formal investigation if he so desires.
Petitioners theory is erroneous.
Administrative Order No. 07, as amended by Administrative Order No. 17, particularly governs the procedure in administrative proceedings before the Office of the Ombudsman. The Rules of Procedure of the Office of the Ombudsman was issued pursuant to the authority vested in the Office of the Ombudsman under Republic Act No. 6770, otherwise known as The Ombudsman Act of 1989. When an administrative agency promulgates rules and regulations, it makes a new law with the force and effect of a valid law. Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute. [20]
On the other hand, the provisions in the Administrative Code cited by petitioner in support of her theory that she is entitled to a formal investigation apply only to administrative cases filed before the Civil Service Commission (CSC). In particular, Section 48(2) and Section 48(3) are subsumed under Subtitle A of Title I, which pertains to the CSC and to the procedure of administrative cases filed before the CSC. The administrative complaint against petitioner was filed before the Office of the Ombudsman, suggesting that a different set of procedural rules govern. And rightly so, the Deputy Ombudsman applied the provisions of Rules of Procedure of the Office of the Ombudsman in ruling that the prerogative to elect a formal investigation pertains to the hearing officer and not to petitioner.
On various occasions, [21] the Court has ruled on the primacy of special laws and of their implementing regulations over the Administrative Code of 1987 in settling controversies specifically subject of these special laws. For instance, in Hon. Joson v. Exec. Sec. Torres, [22] the Court held that the Local Government Code of 1991, the Rules and Regulations Implementing the Local Government Code of 1991, and Administrative Order No. 23 (A.O. No. 23) [23] govern administrative disciplinary proceedings against elective local officials, whereas the Rules of Court and the Administrative Code of 1987 apply in a suppletory character to all matters not provided in A.O. No. 23. [24] The aforesaid ruling is based on the principle of statutory construction that where there are two statutes applicable to a particular case, that which is specially intended for the said case must prevail. [25]
More significantly, in Lapid v. Court of Appeals, [26] the Court expressly upheld the applicability of The Ombudsman Act of 1989 and the implementing rules and regulations thereof to the exclusion of the Local Government Code and the Administrative Code of 1989 on the issue of the execution of the Ombudsmans decision pending appeal. The Court noted that petitioner therein was charged before the Office of the Ombudsman and accordingly, The Ombudsman Act of 1989 should apply exclusively. The Court explained, thus:
There is no basis in law for the proposition that the provisions of the Administrative Code of 1987 and the Local Government Code on execution pending review should be applied suppletorily to the provisions of the Ombudsman Act as there is nothing in the Ombudsman Act which provides for such suppletory application. xxx xxx xxx
And while in one respect, the Ombudsman Law, the Administrative Code of 1987 and the Local Government Code are in pari materia insofar as the three laws relate or deal with public officers, the similarity ends there. It is a principle in statutory construction that where there are two statutes that apply to a particular case, that which was specially designed for the said case must prevail over the other. In the instant case, the acts attributed to petitioner could have been the subject of administrative disciplinary proceedings before the Office of the President under the Local Government Code or before the Office of the Ombudsman under the Ombudsman Act. Considering however, that petitioner was charged under the Ombudsman Act, it is this law alone which should govern his case. [27]
Thus, as between the Administrative Code of 1987 and Administrative Order No. 07, as amended, issued by the Office of the Ombudsman, the latter governs in this case which involves an administrative complaint filed with the Office of the Ombudsman and which raises the question of whether petitioner is entitled to a formal investigation as a matter of right.
Even assuming the Administrative Code is applicable, still there is a formidable hindrance to petitioners prayer for a formal investigation. The records show that petitioner sought a reinvestigation only as an afterthought, that is, after the deputy ombudsman had already rendered a decision on the administrative complaint. The reinvestigation should have been requested at the first opportunity but definitely before the rendition of a decision.
As correctly pointed out by the OSG, the denial of petitioners request for a formal investigation is not tantamount to a denial of her right to due process. Petitioner was required to file a counter-affidavit and position paper and later on, was given a chance to file two motions for reconsideration of the decision of the deputy ombudsman. The essence of due process in administrative proceedings is the opportunity to explain ones side or seek a reconsideration of the action or ruling complained of. As long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met. [28]
Petitioners assertion that the Court of Appeals refused to reopen and review the case and ignored material issues and arguments in her motion for reconsideration of the 23 October 2006 Decision in violation of her right to due process, is quite hollow.
The appellate court disposed of petitioners contention that she was able to controvert the accusations against her in this wise:
Regarding the second, third and fourth assigned errors, We judiciously believe that the issues raised therein are essentially factual in nature. The rule is that the findings of fact in administrative decisions must be respected as long as they are supported by substantial evidence, even if not overwhelming or preponderant. It is not for the reviewing court to weight the conflicting evidence, determine the credibility of the witnesses or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of evidence. It has been consistently held that substantial evidence is all that is needed to support an administrative finding of fact which means such relevant evidence as a reasonable mind might accept to support a conclusion. [29]
Nothing prevents the Court of Appeals from adopting the factual findings and conclusion of the deputy ombudsman on the ground that the findings and conclusions were based on substantial evidence. Well-settled is the rule that the findings of fact of administrative bodies, if based on substantial evidence, are controlling on the reviewing authority. It is settled that it is not for the appellate court to substitute its own judgment for that of the administrative agency on the sufficiency of the evidence and the credibility of the witnesses. Administrative decisions on matters within their jurisdiction are entitled to respect and can only be set aside on proof of grave abuse of discretion, fraud or error of law. [30] Guided by this principle, the appellate court correctly affirmed the finding of guilt for grave misconduct and dishonesty.
Unfazed, petitioner now asks this Court to once again review the factual findings and conclusions of the Deputy Ombudsman which had already been affirmed by the Court of Appeals. Whether the finding of petitioners guilt for grave misconduct and dishonesty is supported by substantial evidence, suffice it to say these are factual issues calling for a review of the records of the case. Clear and unmistakable is the rule that the Supreme Court is not a trier of facts. Just as well entrenched is the doctrine that pure issues of fact may not be the proper subject of appeal by certiorari under Rule 45 of the Revised Rules of Court as this mode of appeal is generally confined to questions of law. Only questions of law, not questions of fact, may be raised before the Supreme Court in a petition for review under Rule 45. This Court cannot be tasked to go over the proofs presented by the petitioners in the lower courts and analyze, assess and weigh them to ascertain if the court a quo and the appellate court were correct in their appreciation of the evidence. [31]
Anyhow, the Court adopts the following findings of the Court of Appeals which are borne out by the records of the case:
x x x It is a fact that an examination was conducted on the cash and accounts of respondent and that a shortage was found. While the latter argues that the auditors did not observe the proper procedure in conducting an examination and as a consequence of which, she was not able to justify the alleged shortage, we take note that the latter was given the opportunity to make such explanation when the auditors sent her a demand letter. [32]
On the penalty of dismissal which petitioner claims is too harsh, petitioner argues that the mitigating circumstances of this being her first offense and of the unreasonable length of time in filing the administrative case should be considered in her favor.
Jurisprudence is replete with cases declaring that a grave offense cannot be mitigated by the fact that the accused is a first time offender or by the length of service of the accused. In Civil Service Commission v. Cortez, [33] the Court held as follows:
The gravity of the offense committed is also the reason why we cannot consider the first offense circumstance invoked by respondent. In several cases, we imposed the heavier penalty of dismissal or a fine of more than P20,000.00, considering the gravity of the offense committed, even if the offense charged was respondents first offense. Thus, in the present case, even though the offense respondent was found guilty of was her first offense, the gravity thereof outweighs the fact that it was her first offense. [34]
Also, in Concerned Employees v. Nuestro, [35] a court employee charged with and found guilty of dishonesty for falsification was meted the penalty of dismissal notwithstanding the length of her service in view of the gravity of the offense charged.
To end, it must be stressed that dishonesty and grave misconduct have always been and should remain anathema in the civil service. They inevitably reflect on the fitness of a civil servant to continue in office. When an officer or employee is disciplined, the object sought is not the punishment of such officer or employee but the improvement of the public service and the preservation of the publics faith and confidence in the government. [36]
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 89539 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
EN BANC [G.R. No. 159139. January 13, 2004] INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, MA. CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ, AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY SALCEDO, and MANUEL ALCUAZ JR., petitioners, vs. COMMISSION ON ELECTIONS; COMELEC CHAIRMAN BENJAMIN ABALOS SR.; COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F. BALBUENA, LAMBERTO P. LLAMAS, and BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA PACIFIC CONSORTIUM, respondents. D E C I S I O N PANGANIBAN, J .: There is grave abuse of discretion (1) when an act is done contrary to the Constitution, the law or jurisprudence; [1] or (2) when it is executed whimsically, capriciously or arbitrarily out of malice, ill will or personal bias. [2] In the present case, the Commission on Elections approved the assailed Resolution and awarded the subject Contract not only in clear violation of law and jurisprudence, but also in reckless disregard of its own bidding rules and procedure. For the automation of the counting and canvassing of the ballots in the 2004 elections, Comelec awarded the Contract to Mega Pacific Consortium an entity that had not participated in the bidding. Despite this grant, the poll body signed the actual automation Contract with Mega Pacific eSolutions, Inc., a company that joined the bidding but had not met the eligibility requirements. Comelec awarded this billion-peso undertaking with inexplicable haste, without adequately checking and observing mandatory financial, technical and legal requirements. It also accepted the proferred computer hardware and software even if, at the time of the award, they had undeniably failed to pass eight critical requirements designed to safeguard the integrity of elections, especially the following three items: They failed to achieve the accuracy rating criteria of 99.9995 percent set-up by the Comelec itself They were not able to detect previously downloaded results at various canvassing or consolidation levels and to prevent these from being inputted again They were unable to print the statutorily required audit trails of the count/canvass at different levels without any loss of data Because of the foregoing violations of law and the glaring grave abuse of discretion committed by Comelec, the Court has no choice but to exercise its solemn constitutional duty [3] to void the assailed Resolution and the subject Contract. The illegal, imprudent and hasty actions of the Commission have not only desecrated legal and jurisprudential norms, but have also cast serious doubts upon the poll bodys ability and capacity to conduct automated elections. Truly, the pith and soul of democracy -- credible, orderly, and peaceful elections -- has been put in jeopardy by the illegal and gravely abusive acts of Comelec. The Case Before us is a Petition [4] under Rule 65 of the Rules of Court, seeking (1) to declare null and void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded Phase II of the Modernization Project of the Commission to Mega Pacific Consortium (MPC); (2) to enjoin the implementation of any further contract that may have been entered into by Comelec either with Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI); and (3) to compel Comelec to conduct a re-bidding of the project. The Facts The following facts are not disputed. They were culled from official documents, the parties pleadings, as well as from admissions during the Oral Argument on October 7, 2003. On June 7, 1995, Congress passed Republic Act 8046, [5] which authorized Comelec to conduct a nationwide demonstration of a computerized election system and allowed the poll body to pilot-test the system in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM). On December 22, 1997, Congress enacted Republic Act 8436 [6] authorizing Comelec to use an automated election system (AES) for the process of voting, counting votes and canvassing/consolidating the results of the national and local elections. It also mandated the poll body to acquire automated counting machines (ACMs), computer equipment, devices and materials; and to adopt new electoral forms and printing materials. Initially intending to implement the automation during the May 11, 1998 presidential elections, Comelec -- in its Resolution No. 2985 dated February 9, 1998 [7] -- eventually decided against full national implementation and limited the automation to the Autonomous Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly some automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu. [8]
In the May 2001 elections, the counting and canvassing of votes for both national and local positions were also done manually, as no additional ACMs had been acquired for that electoral exercise allegedly because of time constraints. On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization program for the 2004 elections. It resolved to conduct biddings for the three (3) phases of its Automated Election System; namely, Phase I - Voter Registration and Validation System; Phase II - Automated Counting and Canvassing System; and Phase III - Electronic Transmission. On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172, which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004 elections. Upon the request of Comelec, she authorized the release of an additional P500 million. On January 28, 2003, the Commission issued an Invitation to Apply for Eligibility and to Bid, which we quote as follows: INVITATION TO APPLY FOR ELIGIBILITY AND TO BID The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act Nos. 8189 and 8436, invites interested offerors, vendors, suppliers or lessors to apply for eligibility and to bid for the procurement by purchase, lease, lease with option to purchase, or otherwise, supplies, equipment, materials and services needed for a comprehensive Automated Election System, consisting of three (3) phases: (a) registration/verification of voters, (b) automated counting and consolidation of votes, and (c) electronic transmission of election results, with an approved budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos. Only bids from the following entities shall be entertained: a. Duly licensed Filipino citizens/proprietorships; b. Partnerships duly organized under the laws of the Philippines and of which at least sixty percent (60%) of the interest belongs to citizens of the Philippines; c. Corporations duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the outstanding capital stock belongs to citizens of the Philippines; d. Manufacturers, suppliers and/or distributors forming themselves into a joint venture, i.e., a group of two (2) or more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a particular contract, provided that Filipino ownership thereof shall be at least sixty percent (60%); and e. Cooperatives duly registered with the Cooperatives Development Authority. Bid documents for the three (3) phases may be obtained starting 10 February 2003, during office hours from the Bids and Awards Committee (BAC) Secretariat/Office of Commissioner Resurreccion Z. Borra, 7 th Floor, Palacio del Governador, Intramuros, Manila, upon payment at the Cash Division, Commission on Elections, in cash or cashiers check, payable to the Commission on Elections, of a non-refundable amount of FIFTEEN THOUSAND PESOS (Php15,000.00) for each phase. For this purpose, interested offerors, vendors, suppliers or lessors have the option to participate in any or all of the three (3) phases of the comprehensive Automated Election System. A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila. Should there be questions on the bid documents, bidders are required to submit their queries in writing to the BAC Secretariat prior to the scheduled Pre-Bid Conference. Deadline for submission to the BAC of applications for eligibility and bid envelopes for the supply of the comprehensive Automated Election System shall be at the Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila on 28 February 2003 at 9:00 a.m. The COMELEC reserves the right to review the qualifications of the bidders after the bidding and before the contract is executed. Should such review uncover any misrepresentation made in the eligibility statements, or any changes in the situation of the bidder to materially downgrade the substance of such statements, the COMELEC shall disqualify the bidder upon due notice without any obligation whatsoever for any expenses or losses that may be incurred by it in the preparation of its bid. [9]
On February 11, 2003, Comelec issued Resolution No. 5929 clarifying certain eligibility criteria for bidders and the schedule of activities for the project bidding, as follows: 1.) Open to Filipino and foreign corporation duly registered and licensed to do business and is actually doing business in the Philippines, subject to Sec. 43 of RA 9184 (An Act providing In the Modernization Standardization and Regulation of the Procurement Activities of the Government and for other purposes etc.) 2.) Track Record: a) For counting machines should have been used in at least one (1) political exercise with no less than Twenty Million Voters; b) For verification of voters the reference site of an existing data base installation using Automated Fingerprint Identification System (AFIS) with at least Twenty Million. 3.) Ten percent (10%) equity requirement shall be based on the total project cost; and 4.) Performance bond shall be twenty percent (20%) of the bid offer. RESOLVED moreover, that: 1) A. Due to the decision that the eligibility requirements and the rest of the Bid documents shall be released at the same time, and the memorandum of Comm. Resurreccion Z. Borra dated February 7, 2003, the documents to be released on Friday, February 14, 2003 at 2:00 oclock p.m. shall be the eligibility criteria, Terms of Reference (TOR) and other pertinent documents; B. Pre-Bid conference shall be on February 18, 2003; and C. Deadline for the submission and receipt of the Bids shall be on March 5, 2003. 2) The aforementioned documents will be available at the following offices: a) Voters Validation: Office of Comm. Javier b) Automated Counting Machines: Office of Comm. Borra c) Electronic Transmission: Office of Comm. Tancangco [10]
On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure the election automation machines. The Bids and Awards Committee (BAC) of Comelec convened a pre-bid conference on February 18, 2003 and gave prospective bidders until March 10, 2003 to submit their respective bids. Among others, the RFP provided that bids from manufacturers, suppliers and/or distributors forming themselves into a joint venture may be entertained, provided that the Philippine ownership thereof shall be at least 60 percent. Joint venture is defined in the RFP as a group of two or more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a particular contract. [11]
Basically, the public bidding was to be conducted under a two- envelope/two stage system. The bidders first envelope or the Eligibility Envelope should establish the bidders eligibility to bid and its qualifications to perform the acts if accepted. On the other hand, the second envelope would be the Bid Envelope itself. The RFP outlines the bidding procedures as follows: 25. Determination of Eligibility of Prospective Bidders 25.1 The eligibility envelopes of prospective Bidders shall be opened first to determine their eligibility. In case any of the requirements specified in Clause 20 is missing from the first bid envelope, the BAC shall declare said prospective Bidder as ineligible to bid. Bid envelopes of ineligible Bidders shall be immediately returned unopened. 25.2 The eligibility of prospective Bidders shall be determined using simple pass/fail criteria and shall be determined as either eligible or ineligible. If the prospective Bidder is rated passed for all the legal, technical and financial requirements, he shall be considered eligible. If the prospective Bidder is rated failed in any of the requirements, he shall be considered ineligible. 26. Bid Examination/Evaluation 26.1 The BAC will examine the Bids to determine whether they are complete, whether any computational errors have been made, whether required securities have been furnished, whether the documents have been properly signed, and whether the Bids are generally in order. 26.2 The BAC shall check the submitted documents of each Bidder against the required documents enumerated under Clause 20, to ascertain if they are all present in the Second bid envelope (Technical Envelope). In case one (1) or more of the required documents is missing, the BAC shall rate the Bid concerned as failed and immediately return to the Bidder its Third bid envelope (Financial Envelope) unopened. Otherwise, the BAC shall rate the first bid envelope as passed. 26.3 The BAC shall immediately open the Financial Envelopes of the Bidders whose Technical Envelopes were passed or rated on or above the passing score. Only Bids that are determined to contain all the bid requirements for both components shall be rated passed and shall immediately be considered for evaluation and comparison. 26.4 In the opening and examination of the Financial Envelope, the BAC shall announce and tabulate the Total Bid Price as calculated. Arithmetical errors will be rectified on the following basis: If there is a discrepancy between words and figures, the amount in words will prevail. If there is a discrepancy between the unit price and the total price that is obtained by multiplying the unit price and the quantity, the unit price shall prevail and the total price shall be corrected accordingly. If there is a discrepancy between the Total Bid Price and the sum of the total prices, the sum of the total prices prevail and the Total Bid Price shall be corrected accordingly. 26.5 Financial Proposals which do not clearly state the Total Bid Price shall be rejected. Also, Total Bid Price as calculated that exceeds the approved budget for the contract shall also be rejected. 27. Comparison of Bids 27.1 The bid price shall be deemed to embrace all costs, charges and fees associated with carrying out all the elements of the proposed Contract, including but not limited to, license fees, freight charges and taxes. 27.2 The BAC shall establish the calculated prices of all Bids rated passed and rank the same in ascending order. x x x x x x x x x 29. Postqualification 29.1 The BAC will determine to its satisfaction whether the Bidder selected as having submitted the lowest calculated bid is qualified to satisfactorily perform the Contract. 29.2 The determination will take into account the Bidders financial, technical and production capabilities/resources. It will be based upon an examination of the documentary evidence of the Bidders qualification submitted by the Bidder as well as such other information as the BAC deems necessary and appropriate. 29.3 A bid determined as not substantially responsive will be rejected by the BAC and may not subsequently be made responsive by the Bidder by correction of the non-conformity. 29.4 The BAC may waive any informality or non-conformity or irregularity in a bid which does not constitute a material deviation, provided such waiver does not prejudice or affect the relative ranking of any Bidder. 29.5 Should the BAC find that the Bidder complies with the legal, financial and technical requirements, it shall make an affirmative determination which shall be a prerequisite for award of the Contract to the Bidder. Otherwise, it will make a negative determination which will result in rejection of the Bidders bid, in which event the BAC will proceed to the next lowest calculated bid to make a similar determination of that Bidders capabilities to perform satisfactorily. [12]
Out of the 57 bidders, [13] the BAC found MPC and the Total Information Management Corporation (TIMC) eligible. For technical evaluation, they were referred to the BACs Technical Working Group (TWG) and the Department of Science and Technology (DOST). In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had obtained a number of failed marks in the technical evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003, promulgated Resolution No. 6074 awarding the project to MPC. The Commission publicized this Resolution and the award of the project to MPC on May 16, 2003. On May 29, 2003, five individuals and entities (including the herein Petitioners Information Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter [14] to Comelec Chairman Benjamin Abalos Sr. They protested the award of the Contract to Respondent MPC due to glaring irregularities in the manner in which the bidding process had been conducted. Citing therein the noncompliance with eligibility as well as technical and procedural requirements (many of which have been discussed at length in the Petition), they sought a re-bidding. In a letter-reply dated June 6, 2003, [15] the Comelec chairman -- speaking through Atty. Jaime Paz, his head executive assistant -- rejected the protest and declared that the award would stand up to the strictest scrutiny. Hence, the present Petition. [16]
The Issues In their Memorandum, petitioners raise the following issues for our consideration: 1. The COMELEC awarded and contracted with a non-eligible entity; x x x 2. Private respondents failed to pass the Technical Test as required in the RFP. Notwithstanding, such failure was ignored. In effect, the COMELEC changed the rules after the bidding in effect changing the nature of the contract bidded upon. 3. Petitioners have locus standi. 4. Instant Petition is not premature. Direct resort to the Supreme Court is justified. [17]
In the main, the substantive issue is whether the Commission on Elections, the agency vested with the exclusive constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of its administrative functions, it awarded to MPC the contract for the second phase of the comprehensive Automated Election System. Before discussing the validity of the award to MPC, however, we deem it proper to first pass upon the procedural issues: the legal standing of petitioners and the alleged prematurity of the Petition. This Courts Ruling The Petition is meritorious. First Procedural Issue: Locus Standi of Petitioners Respondents chorus that petitioners do not possess locus standi, inasmuch as they are not challenging the validity or constitutionality of RA 8436. Moreover, petitioners supposedly admitted during the Oral Argument that no law had been violated by the award of the Contract. Furthermore, they allegedly have no actual and material interest in the Contract and, hence, do not stand to be injured or prejudiced on account of the award. On the other hand, petitioners -- suing in their capacities as taxpayers, registered voters and concerned citizens -- respond that the issues central to this case are of transcendental importance and of national interest. Allegedly, Comelecs flawed bidding and questionable award of the Contract to an unqualified entity would impact directly on the success or the failure of the electoral process. Thus, any taint on the sanctity of the ballot as the expression of the will of the people would inevitably affect their faith in the democratic system of government. Petitioners further argue that the award of any contract for automation involves disbursement of public funds in gargantuan amounts; therefore, public interest requires that the laws governing the transaction must be followed strictly. We agree with petitioners. Our nations political and economic future virtually hangs in the balance, pending the outcome of the 2004 elections. Hence, there can be no serious doubt that the subject matter of this case is a matter of public concern and imbued with public interest; [18] in other words, it is of paramount public interest [19] and transcendental importance. [20] This fact alone would justify relaxing the rule on legal standing, following the liberal policy of this Court whenever a case involves an issue of overarching significance to our society. [21] Petitioners legal standing should therefore be recognized and upheld. Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of illegal disbursement of public funds, [22] or if public money is being deflected to any improper purpose; [23] or when petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law. [24] In the instant case, individual petitioners, suing as taxpayers, assert a material interest in seeing to it that public funds are properly and lawfully used. In the Petition, they claim that the bidding was defective, the winning bidder not a qualified entity, and the award of the Contract contrary to law and regulation. Accordingly, they seek to restrain respondents from implementing the Contract and, necessarily, from making any unwarranted expenditure of public funds pursuant thereto. Thus, we hold that petitioners possess locus standi. Second Procedural Issue: Alleged Prematurity Due to Non-Exhaustion of Administrative Remedies Respondents claim that petitioners acted prematurely, since they had not first utilized the protest mechanism available to them under RA 9184, the Government Procurement Reform Act, for the settlement of disputes pertaining to procurement contracts. Section 55 of RA 9184 states that protests against decisions of the Bidding and Awards Committee in all stages of procurement may be lodged with the head of the procuring entity by filing a verified position paper and paying a protest fee. Section 57 of the same law mandates that in no case shall any such protest stay or delay the bidding process, but it must first be resolved before any award is made. On the other hand, Section 58 provides that court action may be resorted to only after the protests contemplated by the statute shall have been completed. Cases filed in violation of this process are to be dismissed for lack of jurisdiction. Regional trial courts shall have jurisdiction over final decisions of the head of the procuring entity, and court actions shall be instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure. Respondents assert that throughout the bidding process, petitioners never questioned the BAC Report finding MPC eligible to bid and recommending the award of the Contract to it (MPC). According to respondents, the Report should have been appealed to the Comelec en banc, pursuant to the aforementioned sections of RA 9184. In the absence of such appeal, the determination and recommendation of the BAC had become final. The Court is not persuaded. Respondent Comelec came out with its en banc Resolution No. 6074 dated April 15, 2003, awarding the project to Respondent MPC even before the BAC managed to issue its written report and recommendation on April 21, 2003. Thus, how could petitioners have appealed the BACs recommendation or report to the head of the procuring entity (the chairman of Comelec), when the Comelec en banc had already approved the award of the contract to MPC even before petitioners learned of the BAC recommendation? It is claimed [25] by Comelec that during its April 15, 2003 session, it received and approved the verbal report and recommendation of the BAC for the award of the Contract to MPC, and that the BAC subsequently re-affirmed its verbal report and recommendation by submitting it in writing on April 21, 2003. Respondents insist that the law does not require that the BAC Report be in writing before Comelec can act thereon; therefore, there is allegedly nothing irregular about the Report as well as the en banc Resolution. However, it is obvious that petitioners could have appealed the BACs report and recommendation to the head of the procuring entity (the Comelec chair) only upon their discovery thereof, which at the very earliest would have been on April 21, 2003, when the BAC actually put its report in writing and finally released it. Even then, what would have been the use of protesting/appealing the report to the Comelec chair, when by that time the Commission en banc (including the chairman himself) had already approved the BAC Report and awarded the Contract to MPC? And even assuming arguendo that petitioners had somehow gotten wind of the verbal BAC report on April 15, 2003 (immediately after the en banc session), at that point the Commission en banc had already given its approval to the BAC Report along with the award to MPC. To put it bluntly, the Comelec en banc itself made it legally impossible for petitioners to avail themselves of the administrative remedy that the Commission is so impiously harping on. There is no doubt that they had not been accorded the opportunity to avail themselves of the process provided under Section 55 of RA 9184, according to which a protest against a decision of the BAC may be filed with the head of the procuring entity. Nemo tenetur ad impossible, [26] to borrow private respondents favorite Latin excuse. [27]
Some Observations on the BAC Report to the Comelec We shall return to this issue of alleged prematurity shortly, but at this interstice, we would just want to put forward a few observations regarding the BAC Report and the Comelec en bancs approval thereof. First, Comelec contends that there was nothing unusual about the fact that the Report submitted by the BAC came only after the former had already awarded the Contract, because the latter had been asked to render its report and recommendation orally during the Commissions en banc session on April 15, 2003. Accordingly, Comelec supposedly acted upon such oral recommendation and approved the award to MPC on the same day, following which the recommendation was subsequently reduced into writing on April 21, 2003. While not entirely outside the realm of the possible, this interesting and unique spiel does not speak well of the process that Comelec supposedly went through in making a critical decision with respect to a multi-billion-peso contract. We can imagine that anyone else standing in the shoes of the Honorable Commissioners would have been extremely conscious of the overarching need for utter transparency. They would have scrupulously avoided the slightest hint of impropriety, preferring to maintain an exacting regularity in the performance of their duties, instead of trying to break a speed record in the award of multi-billion-peso contracts. After all, between April 15 and April 21 were a mere six (6) days. Could Comelec not have waited out six more days for the written report of the BAC, instead of rushing pell-mell into the arms of MPC? Certainly, respondents never cared to explain the nature of the Commissions dire need to act immediately without awaiting the formal, written BAC Report. In short, the Court finds it difficult to reconcile the uncommon dispatch with which Comelec acted to approve the multi-billion-peso deal, with its claim of having been impelled by only the purest and most noble of motives. At any rate, as will be discussed later on, several other factors combine to lend negative credence to Comelecs tale. Second, without necessarily ascribing any premature malice or premeditation on the part of the Comelec officials involved, it should nevertheless be conceded that this cart-before-the-horse maneuver (awarding of the Contract ahead of the BACs written report) would definitely serve as a clever and effective way of averting and frustrating any impending protest under Section 55. Having made the foregoing observations, we now go back to the question of exhausting administrative remedies. Respondents may not have realized it, but the letter addressed to Chairman Benjamin Abalos Sr. dated May 29, 2003 [28] serves to eliminate the prematurity issue as it was an actual written protest against the decision of the poll body to award the Contract. The letter was signed by/for, inter alia, two of herein petitioners: the Information Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol. Such letter-protest is sufficient compliance with the requirement to exhaust administrative remedies particularly because it hews closely to the procedure outlined in Section 55 of RA 9184. And even without that May 29, 2003 letter-protest, the Court still holds that petitioners need not exhaust administrative remedies in the light of Paat v. Court of Appeals. [29] Paat enumerates the instances when the rule on exhaustion of administrative remedies may be disregarded, as follows: (1) when there is a violation of due process, (2) when the issue involved is purely a legal question, (3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction, (4) when there is estoppel on the part of the administrative agency concerned, (5) when there is irreparable injury, (6) when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter, (7) when to require exhaustion of administrative remedies would be unreasonable, (8) when it would amount to a nullification of a claim, (9) when the subject matter is a private land in land case proceedings, (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention. [30]
The present controversy precisely falls within the exceptions listed as Nos. 7, 10 and 11: (7) when to require exhaustion of administrative remedies would be unreasonable; (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention. As already stated, Comelec itself made the exhaustion of administrative remedies legally impossible or, at the very least, unreasonable. In any event, the peculiar circumstances surrounding the unconventional rendition of the BAC Report and the precipitate awarding of the Contract by the Comelec en banc -- plus the fact that it was racing to have its Contract with MPC implemented in time for the elections in May 2004 (barely four months away) -- have combined to bring about the urgent need for judicial intervention, thus prompting this Court to dispense with the procedural exhaustion of administrative remedies in this case. Main Substantive Issue: Validity of the Award to MPC We come now to the meat of the controversy. Petitioners contend that the award is invalid, since Comelec gravely abused its discretion when it did the following: 1. Awarded the Contract to MPC though it did not even participate in the bidding 2. Allowed MPEI to participate in the bidding despite its failure to meet the mandatory eligibility requirements 3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC despite the issuance by the BAC of its Report, which formed the basis of the assailed Resolution, only on April 21, 2003 [31]
4. Awarded the Contract, notwithstanding the fact that during the bidding process, there were violations of the mandatory requirements of RA 8436 as well as those set forth in Comelecs own Request for Proposal on the automated election system 5. Refused to declare a failed bidding and to conduct a re-bidding despite the failure of the bidders to pass the technical tests conducted by the Department of Science and Technology 6. Failed to follow strictly the provisions of RA 8436 in the conduct of the bidding for the automated counting machines After reviewing the slew of pleadings as well as the matters raised during the Oral Argument, the Court deems it sufficient to focus discussion on the following major areas of concern that impinge on the issue of grave abuse of discretion: A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder B. Failure of the automated counting machines (ACMs) to pass the DOST technical tests C. Remedial measures and re-testings undertaken by Comelec and DOST after the award, and their effect on the present controversy A. Failure to Establish the Identity, Existence and Eligibility of the Alleged Consortium as a Bidder On the question of the identity and the existence of the real bidder, respondents insist that, contrary to petitioners allegations, the bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was incorporated only on February 27, 2003, or 11 days prior to the bidding itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a part. As proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the president of MPEI allegedly for and on behalf of MPC. They also call attention to the official receipt issued to MPC, acknowledging payment for the bidding documents, as proof that it was the consortium that participated in the bidding process. We do not agree. The March 7, 2003 letter, signed by only one signatory - - Willy U. Yu, President, Mega Pacific eSolutions, Inc., (Lead Company/ Proponent) For: Mega Pacific Consortium -- and without any further proof, does not by itself prove the existence of the consortium. It does not show that MPEI or its president have been duly pre-authorized by the other members of the putative consortium to represent them, to bid on their collective behalf and, more important, to commit them jointly and severally to the bid undertakings. The letter is purely self-serving and uncorroborated. Neither does an official receipt issued to MPC, acknowledging payment for the bidding documents, constitute proof that it was the purported consortium that participated in the bidding. Such receipts are issued by cashiers without any legally sufficient inquiry as to the real identity or existence of the supposed payor. To assure itself properly of the due existence (as well as eligibility and qualification) of the putative consortium, Comelecs BAC should have examined the bidding documents submitted on behalf of MPC. They would have easily discovered the following fatal flaws. Two-Envelope, Two-Stage System As stated earlier in our factual presentation, the public bidding system designed by Comelec under its RFP (Request for Proposal for the Automation of the 2004 Election) mandated the use of a two-envelope, two-stage system. A bidders first envelope (Eligibility Envelope) was meant to establish its eligibility to bid and its qualifications and capacity to perform the contract if its bid was accepted, while the second envelope would be the Bid Envelope itself. The Eligibility Envelope was to contain legal documents such as articles of incorporation, business registrations, licenses and permits, mayors permit, VAT certification, and so forth; technical documents containing documentary evidence to establish the track record of the bidder and its technical and production capabilities to perform the contract; and financial documents, including audited financial statements for the last three years, to establish the bidders financial capacity. In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that the Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement or memorandum of agreement -- or a business plan or some other instrument of similar import -- establishing the due existence, composition and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with, and whether these parties are qualified and capable of delivering the products and services being offered for bidding? [32]
In the instant case, no such instrument was submitted to Comelec during the bidding process. This fact can be conclusively ascertained by scrutinizing the two-inch thick Eligibility Requirements file submitted by Comelec last October 9, 2003, in partial compliance with this Courts instructions given during the Oral Argument. This file purports to replicate the eligibility documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection with the bidding conducted in March 2003. Included in the file are the incorporation papers and financial statements of the members of the supposed consortium and certain certificates, licenses and permits issued to them. However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of agreement, or business plan executed among the members of the purported consortium. The only logical conclusion is that no such agreement was ever submitted to the Comelec for its consideration, as part of the bidding process. It thus follows that, prior the award of the Contract, there was no documentary or other basis for Comelec to conclude that a consortium had actually been formed amongst MPEI, SK C&C and WeSolv, along with Election.com and ePLDT. [33] Neither was there anything to indicate the exact relationships between and among these firms; their diverse roles, undertakings and prestations, if any, relative to the prosecution of the project, the extent of their respective investments (if any) in the supposed consortium or in the project; and the precise nature and extent of their respective liabilities with respect to the contract being offered for bidding. And apart from the self- serving letter of March 7, 2003, there was not even any indication that MPEI was the lead company duly authorized to act on behalf of the others. So, it necessarily follows that, during the bidding process, Comelec had no basis at all for determining that the alleged consortium really existed and was eligible and qualified; and that the arrangements among the members were satisfactory and sufficient to ensure delivery on the Contract and to protect the governments interest. Notwithstanding such deficiencies, Comelec still deemed the consortium eligible to participate in the bidding, proceeded to open its Second Envelope, and eventually awarded the bid to it, even though -- per the Comelecs own RFP -- the BAC should have declared the MPC ineligible to bid and returned the Second (Bid) Envelope unopened. Inasmuch as Comelec should not have considered MPEI et al. as comprising a consortium or joint venture, it should not have allowed them to avail themselves of the provision in Section 5.4 (b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer Law), as amended by RA 7718. This provision states in part that a joint venture/consortium proponent shall be evaluated based on the individual or collective experience of the member-firms of the joint venture or consortium and of the contractor(s) that it has engaged for the project. Parenthetically, respondents have uniformly argued that the said IRR of RA 6957, as amended, have suppletory application to the instant case. Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and operational track record or lack thereof, it would surely not have qualified and would have been immediately considered ineligible to bid, as respondents readily admit. At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe its own rules, policies and guidelines with respect to the bidding process, thereby negating a fair, honest and competitive bidding. Commissioners Not Aware of Consortium In this regard, the Court is beguiled by the statements of Commissioner Florentino Tuason Jr., given in open court during the Oral Argument last October 7, 2003. The good commissioner affirmed that he was aware, of his own personal knowledge, that there had indeed been a written agreement among the consortium members, [34] although it was an internal matter among them, [35] and of the fact that it would be presented by counsel for private respondent. [36]
However, under questioning by Chief Justice Hilario G. Davide Jr. and Justice Jose C. Vitug, Commissioner Tuason in effect admitted that, while he was the commissioner-in-charge of Comelecs Legal Department, he had never seen, even up to that late date, the agreement he spoke of. [37] Under further questioning, he was likewise unable to provide any information regarding the amounts invested into the project by several members of the claimed consortium. [38] A short while later, he admitted that the Commission had not taken a look at the agreement (if any). [39]
He tried to justify his position by claiming that he was not a member of the BAC. Neither was he the commissioner-in-charge of the Phase II Modernization project (the automated election system); but that, in any case, the BAC and the Phase II Modernization Project Team did look into the aspect of the composition of the consortium. It seems to the Court, though, that even if the BAC or the Phase II Team had taken charge of evaluating the eligibility, qualifications and credentials of the consortium-bidder, still, in all probability, the former would have referred the task to Commissioner Tuason, head of Comelecs Legal Department. That task was the appreciation and evaluation of the legal effects and consequences of the terms, conditions, stipulations and covenants contained in any joint venture agreement, consortium agreement or a similar document -- assuming of course that any of these was available at the time. The fact that Commissioner Tuason was barely aware of the situation bespeaks the complete absence of such document, or the utter failure or neglect of the Comelec to examine it -- assuming it was available at all -- at the time the award was made on April 15, 2003. In any event, the Court notes for the record that Commissioner Tuason basically contradicted his statements in open court about there being one written agreement among all the consortium members, when he subsequently referred [40] to the four (4) Memoranda of Agreement (MOAs) executed by them. [41]
At this juncture, one might ask: What, then, if there are four MOAs instead of one or none at all? Isnt it enough that there are these corporations coming together to carry out the automation project? Isnt it true, as respondent aver, that nowhere in the RFP issued by Comelec is it required that the members of the joint venture execute a single written agreement to prove the existence of a joint venture. Indeed, the intention to be jointly and severally liable may be evidenced not only by a single joint venture agreement, but also by supplementary documents executed by the parties signifying such intention. What then is the big deal? The problem is not that there are four agreements instead of only one. The problem is that Comelec never bothered to check. It never based its decision on documents or other proof that would concretely establish the existence of the claimed consortium or joint venture or agglomeration. It relied merely on the self-serving representation in an uncorroborated letter signed by only one individual, claiming that his company represented a consortium of several different corporations. It concluded forthwith that a consortium indeed existed, composed of such and such members, and thereafter declared that the entity was eligible to bid. True, copies of financial statements and incorporation papers of the alleged consortium members were submitted. But these papers did not establish the existence of a consortium, as they could have been provided by the companies concerned for purposes other than to prove that they were part of a consortium or joint venture. For instance, the papers may have been intended to show that those companies were each qualified to be a sub- contractor (and nothing more) in a major project. Those documents did not by themselves support the assumption that a consortium or joint venture existed among the companies. In brief, despite the absence of competent proof as to the existence and eligibility of the alleged consortium (MPC), its capacity to deliver on the Contract, and the members joint and several liability therefor, Comelec nevertheless assumed that such consortium existed and was eligible. It then went ahead and considered the bid of MPC, to which the Contract was eventually awarded, in gross violation of the formers own bidding rules and procedures contained in its RFP. Therein lies Comelecs grave abuse of discretion. Sufficiency of the Four Agreements Instead of one multilateral agreement executed by, and effective and binding on, all the five consortium members -- as earlier claimed by Commissioner Tuason in open court -- it turns out that what was actually executed were four (4) separate and distinct bilateral Agreements. [42] Obviously, Comelec was furnished copies of these Agreements only after the bidding process had been terminated, as these were not included in the Eligibility Documents. These Agreements are as follows: A Memorandum of Agreement between MPEI and SK C&C A Memorandum of Agreement between MPEI and WeSolv A Teaming Agreement between MPEI and Election.com Ltd. A Teaming Agreement between MPEI and ePLDT. In sum, each of the four different and separate bilateral Agreements is valid and binding only between MPEI and the other contracting party, leaving the other consortium members total strangers thereto. Under this setup, MPEI dealt separately with each of the members, and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had nothing to do with one another, each dealing only with MPEI. Respondents assert that these four Agreements were sufficient for the purpose of enabling the corporations to still qualify (even at that late stage) as a consortium or joint venture, since the first two Agreements had allegedlyset forth the joint and several undertakings among the parties, whereas the latter two clarified the parties respective roles with regard to the Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors. Additionally, the use of the phrase particular contract in the Comelecs Request for Proposal (RFP), in connection with the joint and several liabilities of companies in a joint venture, is taken by them to mean that all the members of the joint venture need not be solidarily liable for the entire project or joint venture, because it is sufficient that the lead company and the member in charge of a particular contract or aspect of the joint venture agree to be solidarily liable. At this point, it must be stressed most vigorously that the submission of the four bilateral Agreements to Comelec after the end of the bidding process did nothing to eliminate the grave abuse of discretion it had alreadycommitted on April 15, 2003. Deficiencies Have Not Been Cured In any event, it is also claimed that the automation Contract awarded by Comelec incorporates all documents executed by the consortium members, even if these documents are not referred to therein. The basis of this assertion appears to be the passages from Section 1.4 of the Contract, which is reproduced as follows: All Contract Documents shall form part of the Contract even if they or any one of them is not referred to or mentioned in the Contract as forming a part thereof. Each of the Contract Documents shall be mutually complementary and explanatory of each other such that what is noted in one although not shown in the other shall be considered contained in all, and what is required by any one shall be as binding as if required by all, unless one item is a correction of the other. The intent of the Contract Documents is the proper, satisfactory and timely execution and completion of the Project, in accordance with the Contract Documents. Consequently, all items necessary for the proper and timely execution and completion of the Project shall be deemed included in the Contract. Thus, it is argued that whatever perceived deficiencies there were in the supplementary contracts -- those entered into by MPEI and the other members of the consortium as regards their joint and several undertakings -- have been cured. Better still, such deficiencies have supposedly been prevented from arising as a result of the above-quoted provisions, from which it can be immediately established that each of the members of MPC assumes the same joint and several liability as the other members. The foregoing argument is unpersuasive. First, the contract being referred to, entitled The Automated Counting and Canvassing Project Contract, is between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it is MPEI -- not MPC -- that is a party to the Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of members thereof, much less of joint and several liability. Supposedly executed sometime in May 2003, [43] the Contract bears a notarization date of June 30, 2003, and contains the signature of Willy U. Yu signing as president of MPEI (not for and on behalf of MPC), along with that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply the Equipment and perform the Services under the Contract, in accordance with the appendices thereof; nothing whatsoever is said about any consortium or joint venture or partnership. Second, the portions of Section 1.4 of the Contract reproduced above do not have the effect of curing (much less preventing) deficiencies in the bilateral agreements entered into by MPEI with the other members of the consortium, with respect to their joint and several liabilities. The term Contract Documents, as used in the quoted passages of Section 1.4, has a well-defined meaning and actually refers only to the following documents: The Contract itself along with its appendices The Request for Proposal (also known as Terms of Reference) issued by the Comelec, including the Tender Inquiries and Bid Bulletins The Tender Proposal submitted by MPEI In other words, the term Contract Documents cannot be understood as referring to or including the MOAs and the Teaming Agreements entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT. This much is very clear and admits of no debate. The attempt to use the provisions of Section 1.4 to shore up the MOAs and the Teaming Agreements is simply unwarranted. Third and last, we fail to see how respondents can arrive at the conclusion that, from the above-quoted provisions, it can be immediately established that each of the members of MPC assumes the same joint and several liability as the other members. Earlier, respondents claimed exactly the opposite -- that the two MOAs (between MPEI and SK C&C, and between MPEI and WeSolv) had set forth the joint and several undertakings among the parties;whereas the two Teaming Agreements clarified the parties respective roles with regard to the Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors. Obviously, given the differences in their relationships, their respective liabilities cannot be the same. Precisely, the very clear terms and stipulations contained in the MOAs and the Teaming Agreements -- entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT -- negate the idea that these members are on a par with one another and are, as such, assuming the same joint and several liability. Moreover, respondents have earlier seized upon the use of the term particular contract in the Comelecs Request for Proposal (RFP), in order to argue that all the members of the joint venture did not need to be solidarily liable for the entire project or joint venture. It was sufficient that the lead company and the member in charge of a particular contract or aspect of the joint venture would agree to be solidarily liable. The glaring lack of consistency leaves us at a loss. Are respondents trying to establish the same joint and solidary liability among all the members or not? Enforcement of Liabilities Problematic Next, it is also maintained that the automation Contract between Comelec and the MPEI confirms the solidary undertaking of the lead company and the consortium member concerned for each particular Contract, inasmuch as the position of MPEI and anyone else performing the services contemplated under the Contract is described therein as that of an independent contractor. The Court does not see, however, how this conclusion was arrived at. In the first place, the contractual provision being relied upon by respondents is Article 14, Independent Contractors, which states: Nothing contained herein shall be construed as establishing or creating between the COMELEC and MEGA the relationship of employee and employer or principal and agent, it being understood that the position of MEGA and of anyone performing the Services contemplated under this Contract, is that of an independent contractor. Obviously, the intent behind the provision was simply to avoid the creation of an employer-employee or a principal-agent relationship and the complications that it would produce. Hence, the Article states that the role or position of MPEI, or anyone else performing on its behalf, is that of an independent contractor. It is obvious to the Court that respondents are stretching matters too far when they claim that, because of this provision, the Contract in effect confirms the solidary undertaking of the lead company and the consortium member concerned for the particular phase of the project. This assertion is an absolute non sequitur. Enforcement of Liabilities Under the Civil Code Not Possible In any event, it is claimed that Comelec may still enforce the liability of the consortium members under the Civil Code provisions on partnership, reasoning that MPEI et al. represented themselves as partners and members of MPC for purposes of bidding for the Project. They are, therefore, liable to the Comelec to the extent that the latter relied upon such representation. Their liability as partners is solidary with respect to everything chargeable to the partnership under certain conditions. The Court has two points to make with respect to this argument. First, it must be recalled that SK C&C, WeSolv, Election.com and ePLDT never represented themselves as partners and members of MPC, whether for purposes of bidding or for something else. It was MPEI alone that represented them to be members of a consortium it supposedly headed. Thus, its acts may not necessarily be held against the other members. Second, this argument of the OSG in its Memorandum [44] might possibly apply in the absence of a joint venture agreement or some other writing that discloses the relationship of the members with one another. But precisely, this case does not deal with a situation in which there is nothing in writing to serve as reference, leaving Comelec to rely on mere representations and therefore justifying a falling back on the rules on partnership. For, again, the terms and stipulations of the MOAs entered into by MPEI with SK C&C and WeSolv, as well as the Teaming Agreements of MPEI with Election.com and ePLDT (copies of which have been furnished the Comelec) are very clear with respect to the extent and the limitations of the firms respective liabilities. In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint and several with MPEI, are limited only to the particular areas of work wherein their services are engaged or their products utilized. As for Election.com and ePLDT, their separate Teaming Agreements specifically ascribe to them the role of subcontractor vis--vis MPEI as contractor and, based on the terms of their particular agreements, neither Election.com nor ePLDT is, with MPEI, jointly and severally liable to Comelec. [45] It follows then that in the instant case, there is no justification for anyone, much less Comelec, to resort to the rules on partnership and partners liabilities. Eligibility of a Consortium Based on the Collective Qualifications of Its Members Respondents declare that, for purposes of assessing the eligibility of the bidder, the members of MPC should be evaluated on a collective basis. Therefore, they contend, the failure of MPEI to submit financial statements (on account of its recent incorporation) should not by itself disqualify MPC, since the other members of the consortium could meet the criteria set out in the RFP. Thus, according to respondents, the collective nature of the undertaking of the members of MPC, their contribution of assets and sharing of risks, and the community of their interest in the performance of the Contract lead to these reasonable conclusions: (1) that their collective qualifications should be the basis for evaluating their eligibility; (2) that the sheer enormity of the project renders it improbable to expect any single entity to be able to comply with all the eligibility requirements and undertake the project by itself; and (3) that, as argued by the OSG, the RFP allows bids from manufacturers, suppliers and/or distributors that have formed themselves into a joint venture, in recognition of the virtual impossibility of a single entitys ability to respond to the Invitation to Bid. Additionally, argues the Comelec, the Implementing Rules and Regulations of RA 6957 (the Build-Operate-Transfer Law) as amended by RA 7718 would be applicable, as proponents of BOT projects usually form joint ventures or consortiums. Under the IRR, a joint venture/consortium proponent shall be evaluated based on the individual or the collective experience of the member-firms of the joint venture/consortium and of the contractors the proponent has engaged for the project. Unfortunately, this argument seems to assume that the collective nature of the undertaking of the members of MPC, their contribution of assets and sharing of risks, and the community of their interest in the performance of the Contract entitle MPC to be treated as a joint venture or consortium; and to be evaluated accordingly on the basis of the members collective qualifications when, in fact, the evidence before the Court suggest otherwise. This Court in Kilosbayan v. Guingona [46] defined joint venture as an association of persons or companies jointly undertaking some commercial enterprise; generally, all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and [a] duty, which may be altered by agreement to share both in profit and losses. Going back to the instant case, it should be recalled that the automation Contract with Comelec was not executed by the consortium MPC -- or by MPEI for and on behalf of MPC -- but by MPEI, period. The said Contract contains no mention whatsoever of any consortium or members thereof. This fact alone seems to contradict all the suppositions about a joint undertaking that would normally apply to a joint venture or consortium: that it is a commercial enterprise involving a community of interest, a sharing of risks, profits and losses, and so on. Now let us consider the four bilateral Agreements, starting with the Memorandum of Agreement between MPEI and WeSolv Open Computing, Inc., dated March 5, 2003. The body of the MOA consists of just seven (7) short paragraphs that would easily fit in one page. It reads as follows: 1. The parties agree to cooperate in successfully implementing the Project in the substance and form as may be most beneficial to both parties and other subcontractors involved in the Project. 2. Mega Pacific shall be responsible for any contract negotiations and signing with the COMELEC and, subject to the latters approval, agrees to give WeSolv an opportunity to be present at meetings with the COMELEC concerning WeSolvs portion of the Project. 3. WeSolv shall be jointly and severally liable with Mega Pacific only for the particular products and/or services supplied by the former for the Project. 4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the parties. 5. The parties undertake to do all acts and such other things incidental to, necessary or desirable or the attainment of the objectives and purposes of this Agreement. 6. In the event that the parties fail to agree on the terms and conditions of the supply of the products and services including but not limited to the scope of the products and services to be supplied and payment terms, WeSolv shall cease to be bound by its obligations stated in the aforementioned paragraphs. 7. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the existing laws of the Republic of the Philippines. (Underscoring supplied.) Even shorter is the Memorandum of Agreement between MPEI and SK C&C Co. Ltd., dated March 9, 2003, the body of which consists of only six (6) paragraphs, which we quote: 1. All parties agree to cooperate in achieving the Consortiums objective of successfully implementing the Project in the substance and form as may be most beneficial to the Consortium members and in accordance w/ the demand of the RFP. 2. Mega Pacific shall have full powers and authority to represent the Consortium with the Comelec, and to enter and sign, for and in behalf of its members any and all agreement/s which maybe required in the implementation of the Project. 3. Each of the individual members of the Consortium shall be jointly and severally liable with the Lead Firm for the particular products and/or services supplied by such individual member for the project, in accordance with their respective undertaking or sphere of responsibility. 4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the parties. 5. The parties undertake to do all acts and such other things incidental to, necessary or desirable for the attainment of the objectives and purposes of this Agreement. 6. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the existing laws of the Republic of the Philippines. (Underscoring supplied.) It will be noted that the two Agreements quoted above are very similar in wording. Neither of them contains any specifics or details as to the exact nature and scope of the parties respective undertakings, performances and deliverables under the Agreement with respect to the automation project. Likewise, the two Agreements are quite bereft of pesos-and-centavos data as to the amount of investments each party contributes, its respective share in the revenues and/or profit from the Contract with Comelec, and so forth -- all of which are normal for agreements of this nature. Yet, according to public and private respondents, the participation of MPEI, WeSolv and SK C&C comprises fully 90 percent of the entire undertaking with respect to the election automation project, which is worth about P1.3 billion. As for Election.com and ePLDT, the separate Teaming Agreements they entered into with MPEI for the remaining 10 percent of the entire project undertaking are ironically much longer and more detailed than the MOAs discussed earlier. Although specifically ascribing to them the role of subcontractor vis--vis MPEI as contractor, these Agreements are, however, completely devoid of any pricing data or payment terms. Even the appended Schedules supposedly containing prices of goods and services are shorn of any price data. Again, as mentioned earlier, based on the terms of their particular Agreements, neither Election.com nor ePLDT -- with MPEI -- is jointly and severally liable to Comelec. It is difficult to imagine how these bare Agreements -- especially the first two -- could be implemented in practice; and how a dispute between the parties or a claim by Comelec against them, for instance, could be resolved without lengthy and debilitating litigations. Absent any clear-cut statement as to the exact nature and scope of the parties respective undertakings, commitments, deliverables and covenants, one party or another can easily dodge its obligation and deny or contest its liability under the Agreement; or claim that it is the other party that should have delivered but failed to. Likewise, in the absence of definite indicators as to the amount of investments to be contributed by each party, disbursements for expenses, the parties respective shares in the profits and the like, it seems to the Court that this situation could readily give rise to all kinds of misunderstandings and disagreements over money matters. Under such a scenario, it will be extremely difficult for Comelec to enforce the supposed joint and several liabilities of the members of the consortium. The Court is not even mentioning the possibility of a situation arising from a failure of WeSolv and MPEI to agree on the scope, the terms and the conditions for the supply of the products and services under the Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv would perforce cease to be bound by its obligations -- including its joint and solidary liability with MPEI under the MOA -- and could forthwith disengage from the project. Effectively, WeSolv could at any time unilaterally exit from its MOA with MPEI by simply failing to agree. Where would that outcome leave MPEI and Comelec? To the Court, this strange and beguiling arrangement of MPEI with the other companies does not qualify them to be treated as a consortium or joint venture, at least of the type that government agencies like the Comelec should be dealing with. With more reason is it unable to agree to the proposal to evaluate the members of MPC on a collective basis. In any event, the MPC members claim to be a joint venture/consortium; and respondents have consistently been arguing that the IRR for RA 6957, as amended, should be applied to the instant case in order to allow a collective evaluation of consortium members. Surprisingly, considering these facts, respondents have not deemed it necessary for MPC members to comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as amended. According to the aforementioned provision, if the project proponent is a joint venture or consortium, the members or participants thereof are required to submit a sworn statement that, if awarded the contract, they shall bind themselves to be jointly, severally and solidarily liable for the project proponents obligations thereunder. This provision was supposed to mirror Section 5 of RA 6957, as amended, which states: In all cases, a consortium that participates in a bid must present proof that the members of the consortium have bound themselves jointly and severally to assume responsibility for any project. The withdrawal of any member of the consortium prior to the implementation of the project could be a ground for the cancellation of the contract. The Court has certainly not seen any joint and several undertaking by the MPC members that even approximates the tenor of that which is described above. We fail to see why respondents should invoke the IRR if it is for their benefit, but refuse to comply with it otherwise. B. DOST Technical Tests Flunked by the Automated Counting Machines Let us now move to the second subtopic, which deals with the substantive issue: the ACMs failure to pass the tests of the Department of Science and Technology (DOST). After respondent consortium and the other bidder, TIM, had submitted their respective bids on March 10, 2003, the Comelecs BAC -- through its Technical Working Group (TWG) and the DOST -- evaluated their technical proposals. Requirements that were highly technical in nature and that required the use of certain equipment in the evaluation process were referred to the DOST for testing. The Department reported thus: TEST RESULTS MATRIX [47]
[Technical Evaluation of Automated Counting Machine] KEY REQUIREMENTS [QUESTIONS] MEGA-PACIFIC CONSORTIUM TOTAL INFORMATION MANAGEMENT YES NO YES NO 1. Does the machine have an accuracy rating of at least 99.995 percent At COLD environmental condition At NORMAL environmental conditions At HARSH environmental conditions
2. Accurately records and reports the date and time of the start and end of counting of ballots per precinct?
3. Prints election returns without any loss of date during generation of such reports?
4. Uninterruptible back-up power system, that will engage immediately to allow operation of at least
10 minutes after outage, power surge or abnormal electrical occurrences? 5. Machine reads two-sided ballots in one pass?
Note: This particular requirement needs further verification 6. Machine can detect previously counted ballots and prevent previously counted ballots from being counted more than once?
7. Stores results of counted votes by precinct in external (removable) storage device?
Note: This particular requirement needs further verification 8. Data stored in external media is encrypted?
Note: This particular requirement needs further verification 9. Physical key or similar device allows, limits, or restricts operation of the machine?
10. CPU speed is at least 400mHz?
Note: This particular requirement needs further verification 11. Port to allow use of dot- matrix printers?
12. Generates printouts of the election returns in a format specified by the
COMELEC? Generates printouts In format specified by COMELEC
13. Prints election returns without any loss of data during generation of such report?
14. Generates an audit trail of the counting machine, both hard copy and soft copy?
Hard copy
Soft copy
Note: This particular requirement needs further verification 15. Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of the data generated by the counting machine and stored on the removable data storage device?
Note: This particular requirement needs further verification 16. Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of
Note: This particular requirement
Note: This particular requirement the data generated by the counting machine and transmitted through an electronic transmission media? needs further verification needs further verification 17. Does the system output a Zero City/Municipal Canvass Report, which is printed on election day prior to the conduct of the actual canvass operation, that shows that all totals for all the votes for all the candidates and other information, are indeed zero or null?
Note: This particular requirement needs further verification 18. Does the system consolidate results from all precincts in the city/municipality using the data storage device coming from the counting machine?
Note: This particular requirement needs further verification 19. Is the machine 100% accurate?
Note: This particular requirement needs further verification 20. Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System?
Note: This particular requirement needs further verification 21. The System is able to print the specified reports and the audit trail without any loss of data during generation of the above- mentioned reports? Prints specified reports
Audit Trail
Note: This particular requirement needs further verification 22. Can the result of the city/municipal consolidation be stored in a data storage device?
Note: This particular requirement needs further verification 23. Does the system consolidate results from all precincts in the provincial/district/ national using the data storage device from different levels of consolidation?
Note: This particular requirement needs further verification 24. Is the system 100% accurate?
Note: This particular requirement needs further verification 25. Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System?
Note: This particular requirement needs further verification 26. The System is able to print the specified reports and
the audit trail without any loss of data during generation of the abovementioned reports? Prints specified reports Audit Trail
Note: This particular requirement needs further verification
27. Can the results of the provincial/district/national consolidation be stored in a data storage device?
Note: This particular requirement needs further verification According to respondents, it was only after the TWG and the DOST had conducted their separate tests and submitted their respective reports that the BAC, on the basis of these reports formulated its comments/recommendations on the bids of the consortium and TIM. The BAC, in its Report dated April 21, 2003, recommended that the Phase II project involving the acquisition of automated counting machines be awarded to MPEI. It said: After incisive analysis of the technical reports of the DOST and the Technical Working Group for Phase II Automated Counting Machine, the BAC considers adaptability to advances in modern technology to ensure an effective and efficient method, as well as the security and integrity of the system. The results of the evaluation conducted by the TWG and that of the DOST (14 April 2003 report), would show the apparent advantage of Mega-Pacific over the other competitor, TIM. The BAC further noted that both Mega-Pacific and TIM obtained some failed marks in the technical evaluation. In general, the failed marks of Total Information Management as enumerated above affect the counting machine itself which are material in nature, constituting non-compliance to the RFP. On the other hand, the failed marks of Mega-Pacific are mere formalities on certain documentary requirements which the BAC may waive as clearly indicated in the Invitation to Bid. In the DOST test, TIM obtained 12 failed marks and mostly attributed to the counting machine itself as stated earlier. These are requirements of the RFP and therefore the BAC cannot disregard the same. Mega-Pacific failed in 8 items however these are mostly on the software which can be corrected by reprogramming the software and therefore can be readily corrected. The BAC verbally inquired from DOST on the status of the retest of the counting machines of the TIM and was informed that the report will be forthcoming after the holy week. The BAC was informed that the retest is on a different parameters theyre being two different machines being tested. One purposely to test if previously read ballots will be read again and the other for the other features such as two sided ballots. The said machine and the software therefore may not be considered the same machine and program as submitted in the Technical proposal and therefore may be considered an enhancement of the original proposal. Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by Executive Director Ronaldo T. Viloria of DOST is that the result of the test in the two counting machines of TIM contains substantial errors that may lead to the failure of these machines based on the specific items of the RFP that DOST has to certify. OPENING OF FINANCIAL BIDS The BAC on 15 April 2003, after notifying the concerned bidders opened the financial bids in their presence and the results were as follows: Mega-Pacific: Option 1 Outright purchase: Bid Price of Php1,248,949,088.00 Option 2 Lease option: 70% Down payment of cost of hardware or Php642,755,757.07 Remainder payable over 50 months or a total of Php642,755,757.07 Discount rate of 15% p.a. or 1.2532% per month. Total Number of Automated Counting Machine 1,769 ACMs (Nationwide) TIM: Total Bid Price Php1,297,860,560.00 Total Number of Automated Counting Machine 2,272 ACMs (Mindanao and NCR only) Premises considered, it appears that the bid of Mega Pacific is the lowest calculated responsive bid, and therefore, the Bids and Awards Committee (BAC) recommends that the Phase II project re Automated Counting Machine be awarded to Mega Pacific eSolutions, Inc. [48]
The BAC, however, also stated on page 4 of its Report: Based on the 14 April 2003 report (Table 6) of the DOST, it appears that both Mega-Pacific and TIM (Total Information Management Corporation) failed to meet some of the requirements. Below is a comparative presentation of the requirements wherein Mega-Pacific or TIM or both of them failed: x x x. What followed was a list of key requirements, referring to technical requirements, and an indication of which of the two bidders had failed to meet them. Failure to Meet the Required Accuracy Rating The first of the key requirements was that the counting machines were to have an accuracy rating of at least 99.9995 percent. The BAC Report indicates that both Mega Pacific and TIM failed to meet this standard. The key requirement of accuracy rating happens to be part and parcel of the Comelecs Request for Proposal (RFP). The RFP, on page 26, even states that the ballot counting machines and ballot counting software must have an accuracy rating of 99.9995% (not merely 99.995%) or better as certified by a reliable independent testing agency. When questioned on this matter during the Oral Argument, Commissioner Borra tried to wash his hands by claiming that the required accuracy rating of 99.9995 percent had been set by a private sector group in tandem with Comelec. He added that the Commission had merely adopted the accuracy rating as part of the groups recommended bid requirements, which it had not bothered to amend even after being advised by DOST that such standard was unachievable. This excuse, however, does not in any way lessen Comelecs responsibility to adhere to its own published bidding rules, as well as to see to it that the consortium indeed meets the accuracy standard. Whichever accuracy rating is the right standard -- whether 99.995 or 99.9995 percent -- the fact remains that the machines of the so-called consortium failed to even reach the lesser of the two. On this basis alone, it ought to have been disqualified and its bid rejected outright. At this point, the Court stresses that the essence of public bidding is violated by the practice of requiring very high standards or unrealistic specifications that cannot be met -- like the 99.9995 percent accuracy rating in this case -- only to water them down after the bid has been award. Such scheme, which discourages the entry of prospective bona fide bidders, is in fact a sure indication of fraud in the bidding, designed to eliminate fair competition. Certainly, if no bidder meets the mandatory requirements, standards or specifications, then no award should be made and a failed bidding declared. Failure of Software to Detect Previously Downloaded Data Furthermore, on page 6 of the BAC Report, it appears that the consortium as well as TIM failed to meet another key requirement -- for the counting machines software program to be able to detect previously downloaded precinct results and to prevent these from being entered again into the counting machine. This same deficiency on the part of both bidders reappears on page 7 of the BAC Report, as a result of the recurrence of their failure to meet the said key requirement. That the ability to detect previously downloaded data at different canvassing or consolidation levels is deemed of utmost importance can be seen from the fact that it is repeated three times in the RFP. On page 30 thereof, we find the requirement that the city/municipal canvassing system software must be able to detect previously downloaded precinct results and prevent these from being inputted again into the system. Again, on page 32 of the RFP, we read that the provincial/district canvassing system software must be able to detect previously downloaded city/municipal results and prevent these from being inputted again into the system. And once more, on page 35 of the RFP, we find the requirement that the national canvassing system software must be able to detect previously downloaded provincial/district results and prevent these from being inputted again into the system. Once again, though, Comelec chose to ignore this crucial deficiency, which should have been a cause for the gravest concern. Come May 2004, unscrupulous persons may take advantage of and exploit such deficiency by repeatedly downloading and feeding into the computers results favorable to a particular candidate or candidates. We are thus confronted with the grim prospect of election fraud on a massive scale by means of just a few key strokes. The marvels and woes of the electronic age! Inability to Print the Audit Trail But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the ACMs of both bidders were unable to print the audit trail without any loss of data. In the case of MPC, the audit trail system was not yet incorporated into its ACMs. This particular deficiency is significant, not only to this bidding but to the cause of free and credible elections. The purpose of requiring audit trails is to enable Comelec to trace and verify the identities of the ACM operators responsible for data entry and downloading, as well as the times when the various data were downloaded into the canvassing system, in order to forestall fraud and to identify the perpetrators. Thus, the RFP on page 27 states that the ballot counting machines and ballot counting software must print an audit trail of all machine operations for documentation and verification purposes. Furthermore, the audit trail must be stored on the internal storage device and be available on demand for future printing and verifying. On pages 30-31, the RFP also requires that the city/municipal canvassing system software be able to print an audit trail of the canvassing operations, including therein such data as the date and time the canvassing program was started, the log-in of the authorized users (the identity of the machine operators), the date and time the canvass data were downloaded into the canvassing system, and so on and so forth. On page 33 of the RFP, we find the same audit trail requirement with respect to the provincial/district canvassing system software; and again on pages 35-36 thereof, the same audit trail requirement with respect to the national canvassing system software. That this requirement for printing audit trails is not to be lightly brushed aside by the BAC or Comelec itself as a mere formality or technicality can be readily gleaned from the provisions of Section 7 of RA 8436, which authorizes the Commission to use an automated system for elections. The said provision which respondents have quoted several times, provides that ACMs are to possess certain features divided into two classes: those that the statute itself considers mandatory and other features or capabilities that the law deems optional. Among those considered mandatory are provisions for audit trails! Section 7 reads as follows: The System shall contain the following features: (a) use of appropriate ballots; (b) stand-alone machine which can count votes and an automated system which can consolidate the results immediately; (c) with provisions for audit trails; (d) minimum human intervention; and (e) adequate safeguard/security measures. (Italics and emphases supplied.) In brief, respondents cannot deny that the provision requiring audit trails is indeed mandatory, considering the wording of Section 7 of RA 8436. Neither can Respondent Comelec deny that it has relied on the BAC Report, which indicates that the machines or the software was deficient in that respect. And yet, the Commission simply disregarded this shortcoming and awarded the Contract to private respondent, thereby violating the very law it was supposed to implement. C. Inadequacy of Post Facto Remedial Measures Respondents argue that the deficiencies relating to the detection of previously downloaded data, as well as provisions for audit trails, are mere shortcomings or minor deficiencies in software or programming, which can be rectified. Perhaps Comelec simply relied upon the BAC Report, which states on page 8 thereof that Mega Pacific failed in 8 items[;] however these are mostly on the software which can be corrected by re-programming x x x and therefore can be readily corrected. The undersigned ponentes questions, some of which were addressed to Commissioner Borra during the Oral Argument, remain unanswered to this day. First of all, who made the determination that the eight fail marks of Mega Pacific were on account of the software -- was it DOST or TWG? How can we be sure these failures were not the results of machine defects? How was it determined that the software could actually be re-programmed and thereby rectified? Did a quali fi ed technical expert read and anal yze the source code [ 49] for the programs and conclude that these could be saved and remedied? (Such determination cannot be done by any other means save by the examination and analysis of the source code.) Who was this qualified technical expert? When did he carry out the study? Did he prepare a written report on his findings? Or did the Comelec just make a wild guess? It does not follow that all defects in software programs can be rectified, and the programs saved. In the information technology sector, it is common knowledge that there are many badly written programs, with significant programming errors written into them; hence it does not make economic sense to try to correct the programs; instead, programmers simply abandon them and just start from scratch. Theres no telling if any of these programs is unrectifiable, unless a qualified programmer reads the source code. And if indeed a qualified expert reviewed the source code, did he also determine how much work would be needed to rectify the programs? And how much time and money would be spent for that effort? Who would carry out the work? After the rectification process, who would ascertain and how would it be ascertained that the programs have indeed been properly rectified, and that they would work properly thereafter? And of course, the most important question to ask: could the rectification be done in time for the elections in 2004? Clearly, none of the respondents bothered to think the matter through. Comelec simply took the word of the BAC as gospel truth, without even bothering to inquire from DOST whether it was true that the deficiencies noted could possibly be remedied by re-programming the software. Apparently, Comelec did not care about the software, but focused only on purchasing the machines. What really adds to the Courts dismay is the admission made by Commissioner Borra during the Oral Argument that the software currently being used by Comelec was merely the demo version, inasmuch as the final version that would actually be used in the elections was still being developed and had not yet been finalized. It is not clear when the final version of the software would be ready for testing and deployment. It seems to the Court that Comelec is just keeping its fingers crossed and hoping the final product would work. Is there a Plan B in case it does not? Who knows? But all these software programs are part and parcel of the bidding and the Contract awarded to the Consortium. Why is it that the machines are already being brought in and paid for, when there is as yet no way of knowing if the final version of the software would be able to run them properly, as well as canvass and consolidate the results in the manner required? The counting machines, as well as the canvassing system, will never work properly without the correct software programs. There is an old adage that is still valid to this day: Garbage in, garbage out. No matter how powerful, advanced and sophisticated the computers and the servers are, if the software being utilized is defective or has been compromised, the results will be no better than garbage. And to think that what is at stake here is the 2004 national elections -- the very basis of our democratic life. Correction of Defects? To their Memorandum, public respondents proudly appended 19 Certifications issued by DOST declaring that some 285 counting machines had been tested and had passed the acceptance testing conducted by the Department on October 8-18, 2003. Among those tested were some machines that had failed previous tests, but had undergone adjustments and thus passed re-testing. Unfortunately, the Certifications from DOST fail to divulge in what manner and by what standards or criteria the condition, performance and/or readiness of the machines were re-evaluated and re-appraised and thereafter given the passing mark. Apart from that fact, the remedial efforts of respondents were, not surprisingly, apparently focused again on the machines -- the hardware. Nothing was said or done about the software -- the deficiencies as to detection and prevention of downloading and entering previously downloaded data, as well as the capability to print an audit trail. No matter how many times the machines were tested and re-tested, if nothing was done about the programming defects and deficiencies, the same danger of massive electoral fraud remains. As anyone who has a modicum of knowledge of computers would say, Thats elementary! And only last December 5, 2003, an Inq7.net news report quoted the Comelec chair as saying that the new automated poll system would be used nationwide in May 2004, even as the software for the system remained unfinished. It also reported that a certain Titus Manuel of the Philippine Computer Society, which was helping Comelec test the hardware and software, said that the software for the counting still had to be submitted on December 15, while the software for the canvassing was due in early January. Even as Comelec continues making payments for the ACMs, we keep asking ourselves: who is going to ensure that the software would be tested and would work properly? At any rate, the re-testing of the machines and/or the 100 percent testing of all machines (testing of every single unit) would not serve to eradicate the grave abuse of discretion already committed by Comelec when it awarded the Contract on April 15, 2003, despite the obvious and admitted flaws in the bidding process, the failure of the winning bidder to qualify, and the inability of the ACMs and the intended software to meet the bid requirements and rules. Comelecs Latest Assurances Are Unpersuasive Even the latest pleadings filed by Comelec do not serve to allay our apprehensions. They merely affirm and compound the serious violations of law and gravely abusive acts it has committed. Let us examine them. The Resolution issued by this Court on December 9, 2003 required respondents to inform it as to the number of ACMs delivered and paid for, as well as the total payment made to date for the purchase thereof. They were likewise instructed to submit a certification from the DOST attesting to the number of ACMs tested, the number found to be defective; and whether the reprogrammed software has been tested and found to have complied with the requirements under Republic Act No. 8436. [50]
In its Partial Compliance and Manifestation dated December 29, 2003, Comelec informed the Court that 1,991 ACMs had already been delivered to the Commission as of that date. It further certified that it had already paid the supplier the sum of P849,167,697.41, which corresponded to 1,973 ACM units that had passed the acceptance testing procedures conducted by the MIRDC- DOST [51] and which had therefore been accepted by the poll body. In the same submission, for the very first time, Comelec also disclosed to the Court the following: The Automated Counting and Canvassing Project involves not only the manufacturing of the ACM hardware but also the development of three (3) types of software, which are intended for use in the following: 1. Evaluation of Technical Bids 2. Testing and Acceptance Procedures 3. Election Day Use. Purchase of the First Type of Software Without Evaluation In other words, the first type of software was to be developed solely for the purpose of enabling the evaluation of the bidders technical bid. Comelec explained thus: In addition to the presentation of the ACM hardware, the bidders were required to develop a base software program that will enable the ACM to function properly. Since the software program utilized during the evaluation of bids is not the actual software program to be employed on election day, there being two (2) other types of software program that will still have to be developed and thoroughly tested prior to actual election day use, defects in the base software that can be readily corrected by reprogramming are considered minor in nature, and may therefore be waived. In short, Comelec claims that it evaluated the bids and made the decision to award the Contract to the winning bidder partly on the basis of the operation of the ACMs running a base software. That software was therefore nothing but a sample or demo software, which would not be the actual one that would be used on election day. Keeping in mind that the Contract involves the acquisition of not just the ACMs or the hardware, but also the software that would run them, it is now even clearer that the Contract was awarded without Comelec having seen, much less evaluated, the final product -- the software that would finally be utilized come election day. (Not even the near-final product, for that matter). What then was the point of conducting the bidding, when the software that was the subject of the Contract was still to be created and could conceivably undergo innumerable changes before being considered as being in final form? And that is not all! No Explanation for Lapses in the Second Type of Software The second phase, allegedly involving the second type of software, is simply denominated Testing and Acceptance Procedures. As best as we can construe, Comelec is claiming that this second type of software is also to be developed and delivered by the supplier in connection with the testing and acceptance phase of the acquisition process. The previous pleadings, though -- including the DOST reports submitted to this Court -- have not heretofore mentioned any statement, allegation or representation to the effect that a particular set of software was to be developed and/or delivered by the supplier in connection with the testing and acceptance of delivered ACMs. What the records do show is that the imported ACMs were subjected to the testing and acceptance process conducted by the DOST. Since the initial batch delivered included a high percentage of machines that had failed the tests, Comelec asked the DOST to conduct a 100 percent testing; that is, to test every single one of the ACMs delivered. Among the machines tested on October 8 to 18, 2003, were some units that had failed previous tests but had subsequently been re-tested and had passed. To repeat, however, until now, there has never been any mention of a second set or type of software pertaining to the testing and acceptance process. In any event, apart from making that misplaced and uncorroborated claim, Comelec in the same submission also professes (in response to the concerns expressed by this Court) that the reprogrammed software has been tested and found to have complied with the requirements of RA 8436. It reasoned thus: Since the software program is an inherent element in the automated counting system, the certification issued by the MIRDC-DOST that one thousand nine hundred seventy-three (1,973) units passed the acceptance test procedures is an official recognition by the MIRDC-DOST that the software component of the automated election system, which has been reprogrammed to comply with the provisions of Republic Act No. 8436 as prescribed in the Ad Hoc Technical Evaluation Committees ACM Testing and Acceptance Manual, has passed the MIRDC-DOST tests. The facts do not support this sweeping statement of Comelec. A scrutiny of the MIRDC-DOST letter dated December 15, 2003, [52] which it relied upon, does not justify its grand conclusion. For claritys sake, we quote in full the letter-certification, as follows: 15 December 2003 HON. RESURRECCION Z. BORRA Commissioner-in-Charge Phase II, Modernization Project Commission on Elections Intramuros, Manila Attention: Atty. Jose M. Tolentino, Jr. Project Director Dear Commissioner Borra: We are pleased to submit 11 DOST Test Certifications representing 11 lots and covering 158 units of automated counting machines (ACMs) that we have tested from 02-12 December 2003. To date, we have tested all the 1,991 units of ACMs, broken down as follow: (sic) 1 st batch - 30 units 4 th batch - 438 units 2 nd batch - 288 units 5 th batch - 438 units 3 rd batch - 414 units 6 th batch - 383 units It should be noted that a total of 18 units have failed the test. Out of these 18 units, only one (1) unit has failed the retest. Thank you and we hope you will find everything in order. Very truly yours, ROLANDO T. VILORIA, CESO III Executive Director cum Chairman, DOST-Technical Evaluation Committee Even a cursory glance at the foregoing letter shows that it is completely bereft of anything that would remotely support Comelecs contention that the software component of the automated election system x x x has been reprogrammed to comply with RA 8436, and has passed the MIRDC-DOST tests. There is no mention at all of any software reprogramming. If the MIRDC-DOST had indeed undertaken the supposed reprogramming and the process turned out to be successful, that agency would have proudly trumpeted its singular achievement. How Comelec came to believe that such reprogramming had been undertaken is unclear. In any event, the Commission is not forthright and candid with the factual details. If reprogramming has been done, who performed it and when? What exactly did the process involve? How can we be assured that it was properly performed? Since the facts attendant to the alleged reprogramming are still shrouded in mystery, the Court cannot give any weight to Comelecs bare allegations. The fact that a total of 1,973 of the machines has ultimately passed the MIRDC-DOST tests does not by itself serve as an endorsement of the soundness of the software program, much less as a proof that it has been reprogrammed. In the first place, nothing on record shows that the tests and re-tests conducted on the machines were intended to address the serious deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter does not even indicate what kinds of tests or re-tests were conducted, their exact nature and scope, and the specific objectives thereof. [53] The absence of relevant supporting documents, combined with the utter vagueness of the letter, certainly fails to inspire belief or to justify the expansive confidence displayed by Comelec. In any event, it goes without saying that remedial measures such as the alleged reprogramming cannot in any way mitigate the grave abuse of discretion already committed as early as April 15, 2003. Rationale of Public Bidding Negated by the Third Type of Software Respondent Comelec tries to assuage this Courts anxiety in these words: The reprogrammed software that has already passed the requirements of Republic Act No. 8436 during the MIRDC-DOST testing and acceptance procedures will require further customization since the following additional elements, among other things, will have to be considered before the final software can be used on election day: 1. Final Certified List of Candidates x x x 2. Project of Precincts x x x 3. Official Ballot Design and Security Features x x x 4. Encryption, digital certificates and digital signatures x x x. The certified list of candidates for national elective positions will be finalized on or before 23 January 2004 while the final list of projects of precincts will be prepared also on the same date. Once all the above elements are incorporated in the software program, the Test Certification Group created by the Ad Hoc Technical Evaluation Committee will conduct meticulous testing of the final software before the same can be used on election day. In addition to the testing to be conducted by said Test Certification Group, the Comelec will conduct mock elections in selected areas nationwide not only for purposes of public information but also to further test the final election day program. Public respondent Comelec, therefore, requests that it be given up to 16 February 2004 to comply with this requirement. The foregoing passage shows the imprudent approach adopted by Comelec in the bidding and acquisition process. The Commission says that before the software can be utilized on election day, it will require customization through addition of data -- like the list of candidates, project of precincts, and so on. And inasmuch as such data will become available only in January 2004 anyway, there is therefore no perceived need on Comelecs part to rush the supplier into producing the final (or near-final) version of the software before that time. In any case, Comelec argues that the software needed for the electoral exercise can be continuously developed, tested, adjusted and perfected, practically all the way up to election day, at the same time that the Commission is undertaking all the other distinct and diverse activities pertinent to the elections. Given such a frame of mind, it is no wonder that Comelec paid little attention to the counting and canvassing software during the entire bidding process, which took place in February-March 2003. Granted that the software was defective, could not detect and prevent the re-use of previously downloaded data or produce the audit trail -- aside from its other shortcomings -- nevertheless, all those deficiencies could still be corrected down the road. At any rate, the software used for bidding purposes would not be the same one that will be used on election day, so why pay any attention to its defects? Or to the Comelecs own bidding rules for that matter? Clearly, such jumbled ratiocinations completely negate the rationale underlying the bidding process mandated by law. At the very outset, the Court has explained that Comelec flagrantly violated the public policy on public biddings (1) by allowing MPC/MPEI to participate in the bidding even though it was not qualified to do so; and (2) by eventually awarding the Contract to MPC/MPEI. Now, with the latest explanation given by Comelec, it is clear that the Commission further desecrated the law on public bidding by permitting the winning bidder to change and alter the subject of the Contract (the software), in effect allowing a substantive amendment without public bidding. This stance is contrary to settled jurisprudence requiring the strict application of pertinent rules, regulations and guidelines for public bidding for the purpose of placing each bidder, actual or potential, on the same footing. The essence of public bidding is, after all, an opportunity for fair competition, and a fair basis for the precise comparison of bids. In common parlance, public bidding aims to level the playing field. That means each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations, so that the best offer or lowest bid may be determined, all other things being equal. Thus, it is contrary to the very concept of public bidding to permit a variance between the conditions under which bids are invited and those under which proposals are submitted and approved; or, as in this case, the conditions under which the bid is won and those under which the awarded Contract will be complied with. The substantive amendment of the contract bidded out, without any public bidding -- after the bidding process had been concluded -- is violative of the public policy on public biddings, as well as the spirit and intent of RA 8436. The whole point in going through the public bidding exercise was completely lost. The very rationale of public bidding was totally subverted by the Commission. From another perspective, the Comelec approach also fails to make sense. Granted that, before election day, the software would still have to be customized to each precinct, municipality, city, district, and so on, there still was nothing at all to prevent Comelec from requiring prospective suppliers/bidders to produce, at the very start of the bidding process, the next-to-final versions of the software (the best software the suppliers had) -- pre-tested and ready to be customized to the final list of candidates and project of precincts, among others, and ready to be deployed thereafter. The satisfaction of such requirement would probably have provided far better bases for evaluation and selection, as between suppliers, than the so-called demo software. Respondents contend that the bidding suppliers counting machines were previously used in at least one political exercise with no less than 20 million voters. If so, it stands to reason that the software used in that past electoral exercise would probably still be available and, in all likelihood, could have been adopted for use in this instance. Paying for machines and software of that category (already tried and proven in actual elections and ready to be adopted for use) would definitely make more sense than paying the same hundreds of millions of pesos for demo software and empty promises of usable programs in the future. But there is still another gut-level reason why the approach taken by Comelec is reprehensible. It rides on the perilous assumption that nothing would go wrong; and that, come election day, the Commission and the supplier would have developed, adjusted and re-programmed the software to the point where the automated system could function as envisioned. But what if such optimistic projection does not materialize? What if, despite all their herculean efforts, the software now being hurriedly developed and tested for the automated system performs dismally and inaccurately or, worse, is hacked and/or manipulated? [54] What then will we do with all the machines and defective software already paid for in the amount of P849 million of our tax money? Even more important, what will happen to our country in case of failure of the automation? The Court cannot grant the plea of Comelec that it be given until February 16, 2004 to be able to submit a certification relative to the additional elements of the software that will be customized, because for us to do so would unnecessarily delay the resolution of this case and would just give the poll body an unwarranted excuse to postpone the 2004 elections. On the other hand, because such certification will not cure the gravely abusive actions complained of by petitioners, it will be utterly useless. Is this Court being overly pessimistic and perhaps even engaging in speculation? Hardly. Rather, the Court holds that Comelec should not have gambled on the unrealistic optimism that the suppliers software development efforts would turn out well. The Commission should have adopted a much more prudent and judicious approach to ensure the delivery of tried and tested software, and readied alternative courses of action in case of failure. Considering that the nations future is at stake here, it should have done no less.
Duties of Attorney: Fundamental Rules of Ethics-Common Honesty - California Compendium on Professional Responsibility State Bar Association -Moral Turpitude Defined and Applied - California Attorney Misconduct Legal Reference - Business & Professions Code § 6106 Commission of Any Act Involving Moral Turpitude, Dishonesty or Corruption - California Supreme Court Justice Leondra R. Kruger, Justice Mariano-Florentino Cuellar, Justice Goodwin H. Liu, Justice Carol A. Corrigan, Justice Ming W. Chin, Justice Kathryn M. Werdegar, Justice Tani G. Cantil-Sakauye - California Business and Professions Code § 6100 Supreme Court Summary Disbarment
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