SM LND, INC v.

BASES CONVERSION AND DEVELOPEMENT AUTHORITY

G.R. No. 203655, August 13, 2014
CIVIL LAW; OBLIGATIONS AND CONTRACTS
FACTS:
Pursuant to RA 7227 (Bases Conversion and Development Act of 1992), the
BCDA opened for disposition and development its Bonifacio South Property. Jumping
on the opportunity, SM Land, Inc. (SMLI) submitted to the BCDA an unsolicited
proposal for the development of the lot through a Public-Private Joint Venture
Agreement which was accepted by the BCDA. However, the BCDA clarified that its
act should not be construed to bind the agency to enter into a joint venture
agreement with SMLI but only constitutes an authorization to conduct detailed
negotiations with SMLI and iron out the terms and conditions of the agreement.
Upon arriving at mutually acceptable terms and conditions, a Certification of
Successful Negotiations (Certification) was issued by the BCDA and signed by both
parties with the provisions that the BCDA undertook to subject SMLIs Original
Proposal to Competitive Challenge and committed itself to commence the
activities for the solicitation for comparative proposals. Then, instead of proceeding
with the Competitive Challenge, the BCDA corresponded with SMLI stating that it
will welcome any voluntary and unconditional proposal to improve the original
offer, with the assurance that the BCDA will nonetheless respect any right which
may have accrued in favor of SMLI. In turn, SMLI increased the total secured
payments with an upfront payment.
Without responding to SMLIs new proposal, the BCDA sent a memorandum to
the Office of the President (OP) categorically recommending the termination of the
Competitive Challenge. Alarmed by this development, SMLI urged the BCDA to
proceed with the Competitive Challenge as agreed upon. However, the BCDA, via
the assailed Supplemental Notice No. 5, terminated the Competitive Challenge
altogether. In the meantime, the BCDA issued in favor of SMLI a check without
explanation attached to it but its value corresponds to the proposal security posted
by SMLI, with interest. SMLI attempted to return the check but to no avail. The BCDA
caused the publication of an Invitation to Bid for the development of the subject
property. This impelled SMLI to file an Urgent Manifestation with Reiterative Motion
to Resolve SMLIs Application for Temporary Restraining (TRO) and Preliminary
Injunction.
The Court issued the TRO prayed for by SMLI and enjoined BCDA from
proceeding with the new selection process for the development of the property. For
its part, SMLI alleged in its petition that the Certification issued by the BCDA and
signed by the parties constituted a contract and that under the said contract, BCDA
cannot renege on its obligation to conduct and complete the Competitive Challenge.
The BCDA relies chiefly on the reservation clause in the Terms of Reference (TOR),
which mapped out the procedure to be followed in the Competitive Challenge, which
allegedly authorized the agency to unilaterally cancel the Competitive Challenge.
BCDA add that the terms and conditions agreed upon are disadvantageous to the
government, and that it cannot legally be barred by estoppel in correcting a mistake
committed by its agents.

ISSUES:
Whether or not BCDA correct in issuing Supplemental Notice No. 5, which
unilaterally aborted the Competitive Challenge, and in subjecting the
development of the project to public bidding?
RULING:
NO. SMLI has the right to a completed Competitive Challenge pursuant to the
Detailed Guidelines for Competitive Challenge Procedure for Public-Private Joint
Ventures (NEDA JV Guidelines) and the Certification issued by the BCDA. The
reservation clause adverted to by the BCDA cannot, in any way, prejudice said right.
NEDA promulgated the NEDA Joint Venture Guidelines, which detailed two (2) modes
of selecting a private sector Joint Venture partner: by competitive selection or
through negotiated agreements. Competitive selection involves a selection process
based on transparent criteria, which should not constrain or limit competition, and is
open to participation, by any interested and qualified private entity. Furthermore, it
is well to point out that after BCDA accepted the unsolicited proposal of SMLI and
after both parties successfully concluded the detailed negotiations on the terms and
conditions of the project, SMLI acquired the status of an Original Proponent.
An Original Proponent, per the TOR, pertains to the party whose unsolicited
proposal for the development and privatization of the subject property through Joint
Venture with BCDA has been accepted by the latter, subject to certain conditions,
and is now being subjected to a Competitive Challenge. In this regard, SMLI insists
that as an Original Proponent, it obtained the right to a completed Competitive
Challenge. A scrutiny of the NEDA JV Guidelines reveals that certain rights are
conferred to an Original Proponent. As correctly pointed out by SMLI, these rights
include the right to the conduct and completion of a competitive challenge. By their
mutual consent and in signing the Certification, both parties, in effect, entered into
a binding agreement to subject the unsolicited proposal to the Competitive
Challenge. Evidently, the Certification partakes of a contract wherein BCDA
committed itself to proceed with the Third Stage of the process and simultaneously
grants SMLI the right to expect that the BCDA will fulfill its obligations under the
same. The preconditions to the conduct of the Competitive Challenge having been
met, what is left, therefore, is to subject the terms agreed upon to a Competitive
Challenge