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FROILAN T. GRUEZO, et al.

,
Complainants,

OMB-L-A-12-0332-G

- vs

Grave Misconduct

MAYOR TEOFILO GUERA,


et al.,
Respondents.
x-------------------------------------------x

POSITION PAPER
FOR COMPLAINANTS
COMPLAINANTS, by counsel, most respectfully state that:
I
PARTIES
Complainant FROILAN T. GRUEZO is of legal age, Filipino,
and with residence at A. Luna St., Brgy. San Francisco, Majayjay,
Laguna, while PILIPINAS PARA SA PINOY (PPP)1 a non-stock
non-profit organization duly organized and existing under Philippine
laws and with principal place of business at 640 Morales Avenue,
Brgy. Gen. Paulino Santos, Koronadal City and with members in the
Municipality of Majayjay, Laguna, hereto represented by its Secretary
General, Atty. Paterno L. Esmaquel, also of legal age and with office
1

The original and amended Articles of Incorporation of PPP and the necessary Secretary Certificate are
attached as Annexes A and B, respectively in the Affidavit-Complaint dated June 14, 2012.

address at Unit 1706 17th Floor, Prestige Tower, F. Ortigas Jr. Rd.,
Ortigas Center, Pasig City.
The complainant Froilan T. Gruezo is a concerned citizen and
resident of Majayjay, Laguna (Majayjay for short), while PPP has
members in Majayjay who will be directly affected by the manifestly
and grossly disadvantageous water contracts subject matter of the
instant criminal complaint. It is part of the advocacies of PPP to
promote good governance, transparency and accountability in our
Government as well as in our public officers/employees. The PPP is
duly represented hereto by its Secretary General, Atty. Paterno L.
Esmaquel, who is likewise from Majayjay, Laguna.
Respondent Teofilo B. Guera (respondent Guera for short) is the
incumbent Municipal Mayor of the Majayjay, while Ana Linda C.
Rosas (respondent Rosas for short) is the incumbent Municipal Vice
Mayor and the Presiding Officer of the Sangguniang Bayan (SB) of
Majayjay, while the other respondents, namely: Lauro C. Mentilla,
Mauro C. Aragon, Juancho M. Andaya, Antonio S. Zornosa, Jr., Mario
O. Mercolisa, Jr., Jovanie Ann G. Esquillo and Bernaldo I. de Villa are
incumbent Members of SB of Majayjay. Respondent Rosas and the
other respondents Members of SB are hereinafter collectively referred
to as respondent Members of SB.
II

NATURE OF THE CASE

The case at hand is an administrative case for grave misconduct


committed by respondents in connection with the discharged of their
functions and duties as elected and incumbent public officials of the
Municipality of Majayjay, Laguna (Majayjay for short).
III
SUMMARY STATEMENT OF
THE MATTERS INVOLVED
This administrative case arose from the allowance and
authorization made by respondents for Majayjay to enter into and
execute the three (3) Water Contracts subject matter of the instant case
in flagrant violation of the laws, which Water Contracts are all
manifestly and grossly disadvantageous to Majayjay. These three (3)
Water Contracts (hereinafter collectively referred to as subject Water
Contracts) are the following:
1. CONTRACT FOR THE SUPPLY OF BULK WATER
dated August 1, 20122 between Majayjay and Israel
Builder and Development Corporation (IBDC) (BULK
WATER CONTRACT for short);

Annex D of the Affidavit-Complaint dated June 14, 2012

2. WATER SUPPLY CONTRACT dated December 30,


20123 between Municipality of Lumban, Laguna and
Majayjay, Laguna (hereinafter referred to as Water
Contract-Lumban); and
3. WATER SUPPLY CONTRACT dated December 30,
20124 between Municipality of Sta. Cruz, Laguna and
Majayjay, Laguna (hereinafter referred to as Water
Contract-Sta. Cruz). The Water Contract-Lumban and
Water Contract-Sta. Cruz are hereinafter collectively
called to as subject two (2) WATER SUPPLY
CONTRACTS.
Respondent have deliberately and willfully allowed and
authorized Majayjay to enter into and execute the subject Water
Contracts in flagrant violation of the laws, and in particular in gross
violation of (i) Sec. 3 (g) of the R.A. 309, as amended, otherwise
known as the Anti-Graft and Corrupt Practices Act, and with
willful intent to disregard established rules, morals and public
policy, (ii) Republic Act No. 6957, as amended by Republic Act No.
7718, otherwise known as the Built-Operate and Transfer Law (BOT
Law for short), (iii) Republic Act No. 9184, otherwise known as the

3
4

Annex L of the Affidavit-Complaint dated June 14, 2012


Annex M of the Affidavit-Complaint dated June 14, 2012

Procurement Reform Act, (iv) and the Local Government Code of


1991.
Majayjay is situated at the foot of the mystical Mt. Banahaw. It
is blessed with abundant sources of fresh potable water coming from
various springs flowing to various rivers which naturally flow and
drain to Laguna Lake. To better appreciate the gravity of the offense
committed by the respondents, we deem it wise to give a brief back
ground on the history of Majayjay Water System.
As provided in the 1933 case decided by the Supreme Court
entitled The Municipality of Majayjay, plaintiff-appellee vs.
Tomas Dizon, et.al., defendants-appellants, GR No. L-3538,
February 9, 1933, the water system of Majayjay was
constructed in or before August 1920. The Majayjay
Waterworks System (MWS for short) was named Guevarra
Waterworks System in honor of the late stateman Hon.
Pedro Guevarra, the then Senator for the Fourth Senatorial
District and the author of Act No. 2773, the law which
authorized the issuance of the bonds that were used for the
construction of MWS.
From 1920s up to the present time, the main source of water
of MWS for distribution to the inhabitants/people of
Majayjay is the Sinabak Spring located at Brgy. Malinao,

Majayjay, Laguna. In other words, for almost 100 years now,


Majayjay has been extracting and drawing water from
Sinabak

Spring

which

is

being

distributed

to

its

inhabitants/people thru the MWS.


Through the years and due to old age, the MWS was already
repaired and rehabilitated for several times and the water
coming from Sinabak Spring was and is being augmented by
water coming from other water sources of Majayjay. But up
to this time, Majayjay still principally relies upon MWS for
the distribution of potable water to its inhabitants/ people.
For the households covered by the MWS, the present water
rate in Majayjay is P33.00 per house with supply of water for
three (3) hours a day, more or less, at the estimated volume of
1,000 liters or one (1) cubic meter per day or thirty (30) cubic
meters per month. Stated differently, for a price of P33.00 per
house, the inhabitants/people of Majayjay covered by MWS
are receiving/ drawing water from MWS at the rate of more
than 10 cubic meters and up to 30 cubic meters of water per
month, more or less.
It was under the foregoing background that respondents have
actively conspired and confederated with one another to
execute

and

implement

the

manifestly

and

grossly

disadvantageous and unlawful subject Water Contracts


subject matter of this administrative case under the pretext
that the purpose of the same is to rehabilitate and improve the
MWS to deliver better water service to the people of
Majayjay, when in truth and in fact is that the purpose of it is
to exploit the abundant water sources of Majayjay in favor of
a private contractor which does not have the required
financial capacity and technical expertise to construct and
operate a water work system/facility for a mind boggling
contracts term of 100 years, inclusive of the 50 years
automatic extension, at the revenue sharing agreement of
90% in favor of the private contractor and 10% in favor
of Majayjay.
Under the BULK WATER CONTRACT, respondents allowed
and granted authority to IBDC to build, construct, install, operate,
manage and maintain the infrastructure, facilities, machineries and
equipment for bulk water supply and water distribution of Majayjay
for a period of fifty (50) years with automatic renewal of another fifty
(50) years5 or for a total period of 100 years, at the sharing
arrangement of ninety percent (90%) in favor of IBDC and ten
percent (10%) in favor of Majayjay6.
5
6

Sec. 4 Article II of the Contract for the Supply of Bulk Water dated August 1, 2012.
Sec. 22Article XIV of the Contract for the Supply of Bulk Water dated August 1, 2012

Respondents have likewise allowed and granted authority to


IBDC under the BULK WATER CONTRACT to have control for the
same period of 100 years, inclusive of the automatic renewal of 50
years, on all water resources of Majayjay by undertaking to assign to
IBDC the right to extract water from all sources of Majayjay under the
term of right of first refusal7. However, the BULK WATER
CONTRACT does not have even a single provision on the PROJECT
COST or the amount of investment to be infused by IBDC for the
Project. The PROJECT COST is an essential and indispensable
requirement for contract on infrastructure project or in any contract,
for that matter, but respondents allowed to omit the PROJECT COST
in the BULK WATER CONTRACT with apparently no other evident
intention but to give undue favor to IBDC.
Not satisfied in entering into and executing the BULK WATER
CONTRACT which is manifestly and grossly disadvantageous to
Majayjay, the respondents have conspired and confederated with one
another to execute subject 2 WATER SUPPLY CONTRACTS with
the obvious purpose of realizing and consummating the sale of bulk
water contemplated under the BULK WATER CONTRACT. This
subject 2 WATER SUPPLY CONTRACTS will clearly show the
fraudulent schemes employed by respondents to unduly exploit the
7

Sec. 7 (g) of Article IV of the Contract for the Supply of Bulk Water dated August 1, 2012.

water resources of Majayjay in favor of IBDC and to the great


prejudice and disadvantage of Majayjay.
After the execution of the BULK WATER CONTRACT or on
December 30, 2011, respondent Guera for and in behalf of Majayjay
executed a Water Contract-Lumban with the Municipality of Lumban,
Laguna, where Majayjay is the WATER SUPPLIER and the
Municipality of Lumban is the WATER BUYER.
On the same date, December 30, 2011, respondent Guera for
and in behalf of Majayjay executed another Water Contract-Sta. Cruz
with the Municipality of Sta. Cruz, Laguna, where again Majayjay is
the WATER SUPPLIER and the Municipality of Sta. Cruz is the
WATER BUYER.
The Water Contract-Lumban and Water Contract-Sta. Cruz both
contained the same terms and conditions where Majayjay is the Water
Supplier. The only difference between the Water Contract-Lumban
and Water Contract-Sta. Cruz is on the volume of bulk water to be
supplied by Majayjay and the price of it. The volume of water to be
supplied to the Municipality of Lumban is at least 5,000 cubic meters
per day at the price of P11.00 per cubic meter, while the volume of
water to be supplied to the Municipality of Sta. Cruz is at least 14,000
cubic meters per day at the price of P10.00 per cubic meter.

10

As mentioned above, the designated Water Supplier under the


subject 2 WATER SUPPLY CONTRACTS is Majayjay and not
IBDC. Under the BULK WATER CONTRACTS, IBDC is the
designated supplier of bulk water to the neighboring towers of
Majayjay. However, under the subject 2 WATER SUPPLY
CONTRACTS, IBDC is not a party to the same. In short, IBDC did
not assume any obligation under the subject 2 WATER SUPPLY
CONTRACTS. Simply put, IBDC is completely free of any
obligation to Lumban and Sta. Cruz. This indubitably shows that the
subject 2 WATER SUPPLY CONTRACTS are also manifestly and
grossly disadvantageous to Majayjay with the apparent intention of
giving undue favor to IBDC.
The complainants have sent, thru counsel, to respondent Guera a
letter dated April 25, 20128 informing him that the BULK WATER
CONTRACT is null and void for being contrary to laws, public policy
and morals and thus demanded from him to refrain and desist from
implementing the BULK WATER CONTRACT, which letter was
received by public respondent Guera on April 26, 2012.
The complainants have also sent, thru counsel, a letter dated
April 27, 20129 to respondent Members of Sangguniang Bayan
informing them that the BULK WATER CONTRACT is void and
8
9

Annex N of the Affidavit-Complaint dated June 14, 2012.


Annex O of the Affidavit-Complaint dated June 14, 2012.

11

inexistent from the beginning and thus demanded from them to pass a
resolution authorizing the stoppage of the implementation of the
BULK WATER CONTRACT, including the subject WATER
SUPPLY CONTRACTS. The complainants pointed out in the same
letter that any inaction/omission on the matter by respondent Members
of SB shall be construed as a tacit or implied approval by them of the
execution and implementation of the BULK WATER CONTRACT,
including the subject 2 WATER SUPPLY CONTRACTS.
By way of compliance to complainants letter dated April 27,
2012, Councilor Victorio Z. Ronabio (Coun. Ronabio for short), a
member of Sangguniang Bayan of Majayjay, filed a resolution in the
Sangguniang

Bayan

of

Majayjay

entitled

Resolusyon

Ng

Sangguniangg Bayan Para Ipatigil Ang Pagpapatupad Ng Contract


For The Supply Of Bulk Water Na May Petsa August 1, 201110, Sa
Pagitan Ng Bayan Majayjay, Laguna At Israel Builders Development
Corp. (IBDC). In this Resolution, Coun. Ronabio had advocated and
pushed for the stoppage not only of the BULK WATER CONTRACT
but also for the stoppage of the subject 2 WATER SUPPLY
CONTRACTS.
By way of support to the aforestated Resolution of Coun.
Ronabio, Councilor Godofredo A. Estupigan (Coun. Estupigan for
10

Annex P of the Affidavit-Complaint dated June 14, 2012.

12

short) and Sangguniang Kabataan (SK) President Victor M. GruezoIII,


both members of the Sangguniang Bayan of Majayjay, filed a separate
letters both dated June 4, 201211 addressed to the Vice Mayor
(Analinda C. Rosas) of Majayjay expressing their full support to the
said Resolution of Coun.

Ronabio for the stoppage of the

implementation of the BULK WATER CONTRACT and the subject 2


WATER SUPPLY CONTRACTS.
The Sangguniang Bayan of Majayjay held a session on June 4,
2012 and Coun. Ronabio and Coun. Estupigan and the SK Pres. Victor
Gruezo III strongly pushed for the immediate passage and approval of
the aforesaid Resolution for the stoppage of the implementation of the
BULK WATER CONTRACT but respondent Members of SB stalled
and prevented the passage of the said resolution by deferring its
submission for deliberation.
On June 8, 2012, Coun. Ronabio and Coun. Estupigan and the
SK Pres. Victor Gruezo III submitted a letter dated June 7, 2012 12 to
Coun. Lauro Mentilla, Acting Presiding Officer of Sangguniang
Bayan of Majayjay, with copy furnished to the other respondent
Members of SB, requesting to put into calendar of the SB for
immediate deliberation the aforestated Resolution for the stoppage of
the implementation of the BULK WATER CONTRACT and subject 2
11
12

Annexes Q and R, respectively of the Affidavit-Complaint dated June 14, 2012.


Annex S of the Affidavit-Complaint dated June 14, 2012.

13

WATER SUPPLY CONTRACTS but still respondent Members of


the Sangguniang Bayan did not take any action on the said Resolution.
In failing and refusing to act on the said Resolution for the
stoppage of the implementation of the BULK WATER CONTRACT
and the subject 2 WATER SUPPLY CONTRACTS, respondent
Members of SB have obviously authorized (explicitly or impliedly)
the execution and implementation of BULK WATER CONTRACT
and the subject 2 WATER SUPPLY CONTRACTS and that they
have conspired and confederated with respondent Guera for the
execution and implementation of the BULK WATER CONTRACT
and subject 2 WATER SUPPLY CONTRACTS. Had the
respondents did not conspire and confederate with one another to
authorize its execution, the BULK WATER CONTRACT and the
subject 2 WATER SUPPLY CONTRACTS cannot and shall not be
entered into and executed by Majayjay.
As mentioned above, despite receipt of said demand letters of
complainants, respondents did not stop the implementation of the
subject 2 WATER SUPPLY CONTRACTS. Worse, as they have
admitted in their separate Counter-Affidavits, respondents
instituted supposed remedial actions/measures to correct the legal
flaws in the BULK WATER CONTRACT in order to validate the
execution of it.

14

Respondents contend by way of defense in their separate


Counter-Affidavits that the subject BULK WATER CONTRACT is
not manifestly and grossly disadvantageous to Majayjay as it was
already revised and amended to make as contracting party to it a
certain AAA Water Corporation (AAA Water for short). Respondent
Guera attached to his Counter-Affidavit the Memorandum of
Agreement between IBDC and AAA Water in order to bolster his
claim that there will be a big funder for the subject BULK WATER
CONTRACT as AAA Water is supposedly a big company.
Respondent Members of SB, on the other hand, passed a
Resolution Blg. 114 T. 2012 dated June 25, 201213 to confirm and
ratify the Memorandum of Agreement between IBDC and AAA Water.
On the same date of June 25, 2012, respondent Members of SB
passed a Resolution Blg. 115 T. 2012 14 to authorize the revision and
amendment of the subject BULK WATER CONTRACT to make AAA
Water part of it.
Consequently, respondent Guera attached to his CounterAffidavit an alleged Addendum and Revision to the Contract for the
Supply of Bulk Water dated August 1, 201215 where supposed to be
IBDC, AAA Water and Majayjay agreed for the revision of the subject
BULK WATER CONTRACT. The name of AAA Water was
13

Annex T of the Counter-Affidavit of Respondent Guera..


Annex U of the Counter-Affidavit of Respondent Guera..
15
Annex W of the Counter-Affidavit of Respondent Guera.
14

15

indicated in the said Addendum and Revision but an examination


of the body of the same will show that AAA Water did not sign or
give its consent to the said Addendum and Revision. Thus, it is a
big lie for respondents to claim that there is now a funder for the
subject BULK WATER CONTRACT.
At best, the aforestated Resolutions16 of respondents SB
members and the said Addendum and Revision to the Contract for the
Supply of Bulk Water17 are the best evidence that respondents have
acted and are acting in conspiracy with one another to authorize the
implementation of an anomalous and unlawful contract which is
manifestly and grossly disadvantageous to Majayjay.
It is well worth to stress that complainants Affidavit-Complaint
dated June 14, 2012 was filed on June 15, 2012 and it was posted on
the Facebook of Gising Majayjay on the same date which makes the
same accessible to the general public.
Respondents were all duly furnished with copy of complainants
Affidavit-Complaint by registered mail as shown in our Ex-Parte
Motion

dated

June

26,

2012.

Respondents

received

copy

complainants Affidavit-Complaint on June 25, 2012, as shown in the


photocopies of the Registry return card attached to complainants ExParte Motion dated June 26, 2012.
16
17

Annexes T and U of the Counter-Affidavit of Respondent Guera.


Annex W of the Counter-Affidavit of Respondent Guera

16

The Resolution Blg. 114 T-2012 and Resolution Blg. 115 T-2012
were both passed and approved on June 25, 2012 by respondent
Members of SB while the aforestated Addendum and Revision to the
Contract for the Supply of Bulk Water was executed and signed by
IBDC and respondent Guera on August 1, 2012.
From the foregoing, it is quite clear that at the time of the
passage by respondents Members of SB of said Resolution Blg. 114 T2012 and Resolution Blg. 115 T-2012 as well as at the time of the
execution by respondent Guera of the said Addendum and Revision,
the respondents have already an actual notice and knowledge of
complainants Affidavit-Complaint dated June 14, 2012.
In other words, respondents have already an actual notice
and knowledge of the defects and legal flaws of the BULK
WATER CONTRACT at the time of the passage of said
Resolution Blg. 114 T-2012 and Resolution Blg. 115 T-2012 and the
execution of the aforestated Addendum and Revision to the
Contract for the Supply of Bulk Water. Such actual notice to
respondents is the best, clear and substantial evidence that
respondents have deliberately and willfully committed grave
misconduct and gross negligence in the discharge of their
functions in flagrant violation of the laws and with the evident

17

willful intention to disregard established rules, morals and public


policy.
Clearly then, the passage by respondent Members of SB of the
Resolution Blg. 114 T-2012 and Resolution Blg. 115 T-2012 and the
execution by respondent Guera of the Addendum and Revision to the
Contract for the Supply of Bulk Water are clear and substantial
evidence that respondents have conspired and confederated with one
another to deliberately and willfully violate the laws in allowing and
authorizing the execution of the BULK WATER CONTRACT and the
subject 2 WATER SUPPLY CONTRACTS which are manifestly and
grossly disadvantageous to Majayjay.
IV
SUBMISSION
The complainants respectfully submit that respondents are guilty
of grave misconduct and gross negligence in the discharge of their
official functions when they have deliberately and willfully allowed
and authorized the execution of the BULK WATER CONTRACT and
the subject 2 WATER SUPPLY CONTRACTS in flagrant violation
of:
A. The Anti-Graft and Corrupt Practices Act;
B. The BOT Law;
C. Procurement Reform Act;

18

D. Local Government Code;


E. Established Rules Morals and Public Policy and
The complainants further submit that:
F. The respondents allowed and authorized the execution of the
subject 2 Water Contracts in violation of Procurement Act
and the Anti-Graft and Corrupt Practices Act.
G. There exists clear legal grounds to place respondents under
preventive suspension pending adjudication of this case.
H. There exists clear and substantial evidence showing that
respondents are guilty of grave misconduct and gross
negligence in the discharge of their official functions when
they have deliberately and willfully allowed and authorized
the execution of the BULK WATER CONTRACT and the
subject 2 Water Contracts in flagrant violation of abovequoted laws.

V
DISCUSSION
A
THE RESPONDENTS ALLOWED AND
AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE BULK

19

WATER CONTRACT IN FLAGRANT


VIOLATION OF THE ANTI-GRAFT AND
CORRUPT PRACTICES ACT.
One of the punishable offenses for corrupt practices of any
public officer under the Anti-Graft and Corrupt Practices is entering in
behalf of the Government, into any contract or transaction manifestly
and grossly disadvantageous to the same, whether or the public officer
profited or will profit thereby.18
Respondents have been charged in this administrative case for
the offense of grave misconduct committed in connection with the
discharge of their functions when they have allowed and authorized
Majayjay to enter into and execute the subject three (3) Water
Contracts in flagrant of the laws, which water contracts are all
manifestly and grossly disadvantageous to Majayjay.
From an examination alone of the body of the BULK WATER
CONTRACT, it will show that the same is manifestly and grossly
disadvantageous to Majayjay. In other words, the BULK WATER
CONTRACT in itself is the best evidence that the same is manifestly
and grossly disadvantageous to Majayjay as indubitably shown from
the undisputable facts that:
The 100 years term of the BULK
WATER
CONTRACT
is
contrary to law, morals and
public policy.
18

Section 3 (g) of the Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices
Act.

20

1.

The term of the BULK WATER CONTRACT is


fifty (50) years plus an automatic extension of fifty
(50) years or for a total period of 100 years.19 This
term of the contract virtually lock up for 100 years in
favor of IBDC the right to extract and enjoy the water
resources of Majayjay to the great disadvantage and
prejudice of Majayjay and its inhabitants.

2.

The fifty (50) years automatic extension of the


contract is not subject to any condition. It is
automatically effective as the wording of the contract
connotes. The words provided under Section 4 of the
subject BULK WATER CONTRACT that - unless
terminated pursuant to the provisions provided
herein is not a condition for the effectivity of the 50
years automatic extension of the contract but the same
merely provided for a ground for the termination of
the 50 years automatic extension of the contract.

3.

However, the subject BULK WATER CONTRACT


does not have a TERMINATION CLAUSE. Section
29 of the subject BULK WATER CONTRACT has
nothing to do with the TERMINATION CLAUSE as

19

Section 4, Article II, Contract for the Supply of Bulk Water dated August 1, 2011.

21

it does not provide for a ground for the termination of


the contract. Thus, the 50 years automatic
extension

of

the

contract

is

absolute

and

unconditional which makes the term of the


contract effective for 100 years.
4.

The subject BULK WATER CONTRACTs term of


100 years, inclusive of the 50 years automatic
extension, is not only illegal but it is also
unconscionable and contrary to morals and public
policy especially considering the subject BULK
WATER CONTRACT does not provide for the
PROJECT COST or the amount of investments to
infused by IBDC for the project.

5.

It

is

obviously

grossly

and

manifestly

disadvantageous to Majayjay to give IBDC a term of


100 years under the subject BULK WATER
CONTRACT as the same virtually lock up for 100
years in favor of IBDC the right to extract and enjoy
the abundant water resources of Majayjay to the great
disadvantage and prejudice of Majayjay and its
inhabitants.

22

The revenue sharing of 90% in


favor of IBDC and 10% in favor of
Majayjay is manifestly and grossly
disadvantageous to Majayjay.
6.

The sharing arrangement in the revenue to be


generated from the sale of bulk water is in the
proportion of ninety percent (90%) in favor of
IBDC and ten percent (10%) in favor of
Majayjay20. This revenue sharing arrangement is not
only disadvantageous to Majayjay but the same is
unconscionable

especially

considering

the

respondents have likewise agreed for the allowable


25%21 rate of return in favor of IBDC. These 10%
share of Majayjay and the agreed 25% allowable
rate of return to IBDC are obviously greatly
disadvantageous to Majayjay.
7.

The agreed 25% allowable rate of return is


unreasonable and unconscionable. It is also contrary
to the long established ruling of the Supreme
Court that the reasonable rate of return for
company engaged in public utility business is only
12%.22

20

Section 22, Article XIV of the Contract for the Supply of Bulk Water dated August 1, 2011.
Section 16 paragraph 5, Article XI of the Contract for the Supply of Bulk Water dated August 1, 2011.
22
Meralco vs. Public Service Commission, 18 SCRA 651; and Republic vs. Meralco, 391 SCRA 700, 709
21

23

8.

The said 10% share of Majayjay is disadvantageous


and unconscionable because this ten percent (10%)
share of Majayjay is still subject to deduction 23 on the
difference between the P30.00 charged for every
household of concessionaire of Majayjay and the total
of actual production, distribution and other operating
and maintenance costs plus the 25% agreed rate in
return.

9.

In other words, the 10% share of Majayjay from the


proceeds of the sale of bulk water is subject to various
deductions but the ninety percent (90%) share of
IBDC is not subject to any deduction, except for the
2% intended for tree planting which shall equally be
borne by IBDC and Majayjay. Stated otherwise, after
charging the said deductions from the 10% share of
Majayjay, it is most likely that nothing would be left
to Majayjay. Better yet, Majayjay will be holding
nothing but empty bag.

10. The BULK WATER CONTRACT does not


specifically provide for the COST of the project. In
fact, the respondents did not deny that there is NO
23

Section 7 (b), Article IV of the Contract for the Supply of Bulk Water dated August 1, 2011.

24

PROJECT COST indicated in the BULK WATER


CONTRACT. The obligation of IBDC under the
BULK WATER CONTRACT is explicitly provided
under Section 6 of Article IV but there is not even a
single provision [or even words] under said Section 6
or in any other provisions of the BULK WATER
CONTRACT on the amount of capital/investment to
be infused and spent by IBDC for the project.
11. Stated differently, the lion share [if not almost all the
proceeds] of the sale of bulk water shall go to IBDC
but the BULK WATER CONTRACT is completely
silent on the amount of capital/investment to be
infused and spent by IBDC for the project. The
BULK WATER CONTRACT explicitly provides that
IBDC shall get ninety percent (90%) of the proceeds
of the sale of bulk water but it does not have even a
single provision on how much capital/investment that
IBDC will infuse and spend for the project. Simply
put, IBDC does not have any specific undertaking
under the BULK WATER CONTRACT for the
amount of capital/investment that it will infuse and
spend for the completion of the project.

25

The absence of PROJECT COST


in
the
BULK
WATER
CONTRACT
is
greatly
prejudicial and disadvantageous
to Majayjay.
12. The PROJECT COST is very important and essential
to determine the reasonableness of the terms of the
BULK WATER CONTRACT and to also determine
the amount of performance security that should be
posted by IBDC as required under Section 37 of the
Procurement Reform Act.
13. Without the PROJECT COST, the posting of the
required performance security will depend on the
whims and caprices of IBDC.
14. Without the correct performance security, there is no
assurance that IBDC will complete the project.
15. Without the correct performance security, there is no
assurance that Majayjay would be compensated for
damages in the event of default or delay by IBDC in
the performance of its contractual obligations under
the subject BULK WATER CONTRACT.
16. Without the PROJECT COST, the subject BULK
WATER CONTRACT will be an open-ended

26

contract where the cost of the project will solely


depend upon the whims and caprices of IBDC.
17. Without the PROJECT COST, the subject BULK
WATER CONTRACT will be an open-ended
contract where the determination of the Recovery Of
Investment (ROI) will solely depend upon the whims
and caprices of IBDC.
18. Without the PROJECT COST, the return of
investment cannot be determined. The determination
of return of investment to IBDC is necessary to avoid
excessive and unreasonable return of investment. It is
worth noting that the subject BULK WATER
CONTRACT does not provide for a formula for the
return of investment. Thus, Majayjay will have no
way of finding whether IBDC has already recovered
its investments.

Moreso, the 25% ROI provided

under the subject BULK WATER CONTRACT is


unconscionable. Jurisprudence dictates that 12% is
the just amount of return of investment.
19. Without the PROJECT COST, it cannot be determined
if the term of the subject BULK WATER CONTRACT
for 50 years or 100 years is reasonable.

27

20. Without the PROJECT COST, there is unnecessary risk


exposure to Majayjay as there is no clear provision in
the subject BULK WATER CONTRACT on the
adjustment of the water rate.

Respondents public

officers have, in a way, given full authority and


discretion to IBDC to compute and determine any

adjustments on water rate.

In other words, any

adjustments on water rate will solely depend upon the


whims and caprices of IBDC which is greatly
prejudicial and disadvantageous not only to Majayjay
but, more importantly, to the people of Majayjay.
21. The subject BULK WATER CONTRACT exposes
Majayjay to unnecessary risks as there is no provision
in the subject BULK WATER CONTRACT on the
amount to be shouldered as subsidy by Majayjay. In
the Bulk Water Contract, respondents agreed that the
difference between the P30.00 charged for every
household of concessionaire of Majayjay and the total
of actual production, distribution and other operating
and maintenance cost plus the agreed rate of return
shall be subsidized by the Majayjay.24 The subject

24

Section 7 (b), Article IV of the Contract for the Supply of Bulk Water dated August 1, 2011.

28

Bulk Water Contract did not even provide for the


ceiling amount that can be subsidized by Majayjay.
22. More importantly, the subject Bulk Water Contract
does not specify who or what entity is the regulator.
It is not an acceptable practice that one and the same
entity operates and regulates the supply of basic
utilities such as water in this case. In the instant case,
it appears that IBDC has the sole authority to operate
and even regulate the supply of water. There will be
no checks and balances to ensure that the operator
does not over-charge and perform its obligation to its
clients. Respondents allowed IBDC to exercise such
sole authority at the expense of and to the great
disadvantage of Majayjay.

IBDC does not have financial and


technical capacity to undertake the
project.
23. IBDC does not have financial capacity to
undertake and complete the project contemplated
under the BULK WATER CONTRACT.
24. The fact that IBDC does not have the financial
capacity to undertake and complete the project is

29

indisputably shown from Section 5 of Article III of


the BULK WATER CONTRACT, where it is
expressly provided that the required funding for the
costs of the bulk water arrangement shall be arranged
or sourced by IBDC and its joint venture partners.
IBDC shall submit to Majayjay a Memorandum of
Agreement between IBDC and its joint venture
partners authorizing IBDC to invest funds in the
Majayjay Water project. By virtue of this provision, it
cannot be denied that IBDC does not have the
financial capacity to undertake and complete the
project.
25. It is not legally sufficient for IBDC to have joint
venture partners that will authorize IBDC to invest
funds for the project. IBDC on its own must have
the necessary financial capacity to undertake and
complete the project. It is undeniably manifestly and
grossly disadvantageous to Majayjay for respondents
to enter into or authorize the execution of the BULK
WATER CONTRACT with IBDC which does not
have the required financial capacity to undertake and
complete the project.

30

26. The fact that IBDC does not have financial capacity
and technical expertise to undertake and complete the
project contemplated under the BULK WATER
CONTRACT is further shown from the Articles of
Incorporation and the Balance Sheet of the
Financial Statement of IBDC for the years 2009 and
2010 submitted by IBDC to the Securities and
Exchange Commission (SEC). [A copy each of the
original and amended Articles of Incorporation and its
Financial Statement for the year 2009-2010 submitted
to SEC are attached to the Affidavit-Complaint dated
June 14, 2012 as Annexes E, F and G,
respectively.]
27. As provided in its original and amended Articles of
Incorporation, IBDC is not a water utility company
or company engaged in water business but a
company engaged in realty business. The primary
and

secondary

purposes

of

the

Articles

of

Incorporation of IBDC do not show and indicate of


any authority for IBDC to engage in waterworks
and/or in the operation, management, maintenance
and rehabilitation of waterworks and water facilities.

31

However, notwithstanding the absence of authority


and power of IBDC to enter into the business of
waterworks and/or in the construction, installation,
operation and management of water facilities, still
respondents entered into and/or authorize the
execution of the BULK WATER CONTRACT,
thereby indubitably showing that respondents have
confederated and conspired with one another to enter
into contract and transaction manifestly and grossly
disadvantageous to Majayjay.
28. The undisputed fact that IBDC does not have
financial capacity to undertake and complete the
project is likewise specifically shown from its
Balance Sheet (Annex F of the Affidavit-Complaint
dated June 14, 2012) attached to IBDCs Financial
Statement for the years 2009 to 2010, where it is
explicitly provided that the authorize capitalization of
IBDC is only P10,000,000.00 but the Cash on Hand
and in Bank for 2009 was only P445,567.89, while for
2010 its Cash on Hand and in Bank was only
P450,721.35. This clearly shows that, at the time
material to the execution of the Water Contract, IBDC

32

does not have the financial capacity to undertake the


PROJECT.
29. More importantly, it is undisputably shown from
the Contractors License of IBDC that IBDC does
not have the financial capacity, legal qualification
and technical requirements to undertake and
complete the project contemplated under the
BULK WATER CONTRACT.
30. One of the documents submitted by IBDC to show its
supposed qualification to undertake the project was
its Contractors License25 which has validity up to
June 30, 2011 where it is clearly provided that IBDC
as alleged contractor for Water Supply falls within the
category of SMALL B.
31. In the Certification dated May 17, 201226 issued by
Philippine Constructors Accreditation Board (PCAB),
IBDCs category as alleged contractor for Water
Supply remains in the category of SMALL B. In
other words, from the time material to the execution
of BULK WATER CONTRACT and up to this date,

25
26

Annex H of the Affidavit-Complaint dated June 14, 2012.


Annex I of the Affidavit-Complaint dated June 14, 2012.

33

the category of IBDC as alleged contractor for Water


Supply falls under the category of SMALL B.
32. Under Circular No. 001, Series of 2009 27, issued by
PCAB, it is specifically provided therein that the
allowable range of contract cost for contractor falling
under the category of SMALL B is only from
P10,000,000.00 to P15,000,000.00. By virtue of this
Circular No. 001, Series of 2009 of PCAB, it is quite
clear that IBDC does not have the required financial
capacity and technical requirements to undertake the
project which has a reported/alleged cost of
P430,000,000.00 to P600,000,000.00.
33. Despite the fact that IBDC does not have the financial
capacity and technical requirements to undertake the
project,

still

respondents

entered

into

and/or

authorized the execution of the BULK WATER


CONTRACT

which

is

clear

evidence

that

respondents have conspired and confederated with


one another to enter into a contract or transaction
manifestly and grossly disadvantageous to Majayjay.

27

Annex J of the Affidavit-Complaint dated June 14, 2012.

34

34. Again, as provided under Section 16, Article XI of the


BULK

WATER

CONTRACT,

the

stipulated

allowable rate of return to investment of IBDC is


25%. This agreed rate of return of 25% is outrageous
and unconscionable because the standard rate return
for utility company is not more than 12%. What
makes this agreed return of 25% revolting and
unconscionable is the fact that, as repeatedly
mentioned above, the BULK WATER CONTRACT
does not have even a single provision on how much
capital or investment that IBDC will infuse and spend
for the project. It is obviously manifestly and grossly
disadvantageous to Majayjay for public respondents
to agree for the allowable 25% rate of return for
IBDC when the contract does not specifically provide
for the amount of capital and investment to be infused
and spent for the project by IBDC.
The BULK WATER CONTRACT
grants total control and monopoly
to IBDC over the enormous water
resources of Majayjay for a period
of 100 years without public bidding
and
without
payment
of
consideration to Majayjay.

35

35. The BULK WATER CONTRACT grants sole and


exclusive authority to IBDC to extract water from
Mangulila, Patak-Patak, Sinabak Spring, Gundala
Springs and the surface water of Dalitiwan River 28.
On top of it, the Water Contract granted IBDC the
right to extract water from all water sources of
Majayjay under the principle of right of first
refusal29. In other words, by virtue of the Water
Contract, IBDC has the sole and absolute control over
all water resources of Majayjay, Laguna for the next
100 years or until 2111.
36. Stated differently, on account of the Water Contract,
Majayjay and its residents/inhabitants would be
deprived of the rights to use and enjoy all water
sources of Majayjay for the next 100 years or until
2111 in favor of IBDC without need of public
bidding.
37. IBDC was granted the right to extract water from all
water sources of Majayjay without payment of any
compensation/consideration for the grant of such

28
29

Section 6 (f), Article IV of the Contract for the Supply of Bulk Water dated August 1, 2011.
Section 7 (g), Article IV of the Contract for the Supply of Bulk Water dated August 1, 2011.

36

water right. This is obviously manifestly and grossly


prejudicial to Majayjay.
38.

At this point, it is significant to take note that


Majayjay has abundant sources of water as it is
situated

at

the

foot

of

Mt.

Banahaw. As

complainants have pointed out in their AffidavitComplaint dated June 14, 2012, the real purpose of
the subject BULK WATER CONTRACT is not to
rehabilitate the water system of Majayjay but to
exploit the abundant water resources in favor of
IBDC with practically no cost for IBDC for a period
of 100 years at the sharing arrangement of 90% in
favor IBDC and only 10% in favor of Majayjay.
39.

To illustrate the enormous water resources of


Majayjay, pursuant to BULK WATER CONTRACT,
IBDC filed an application for issuance of water
permit before the Laguna Lake Development
Authority (LLDA) over the Mangulila Spring
located at Brgy. Piit, Majayjay, Laguna. [A copy of
the application for water permit filed by IBDC
before the LLDA is attached to the complainants
Consolidated Reply-Affidavit as Annex A.]

37

40.

Under the subject BULK WATER CONTRACT, the


right to apply for water permit for the various water
resources of Majayjay was granted to Majayjay but
respondent public officials allowed IBDC to apply
water permit on Mangulila Spring as well as on two
(2) other springs in Majayjay, to wit: (i) Sinabak
Spring and (ii) Patak-Patak Spring. [Copies of the
applications for water permit by IBDC over Sinabak
Spring and Patak-Patak Spring are attached to
complainants Consolidated Reply-Affidavit

as

Annexes B and C, respectively.]


41.

In the application for water permit alone of IBDC


over Mangulila Spring, IBDC has applied to extract
water from Magulila Spring for diversion to the
Municipalities of Magdalena, Sta. Cruz and Lumban
at the rate of 900 Liters Per Second (LPS)

or

54,000 Liters Per Min. or 3,240,000 Liters Per Hour


or 77,760,000 Liters Per Day. In other words, from
Mangulila Spring alone, IBDC will extract water for
sale as bulk water at the rate of 77,760,000 Liters
Per Day. Thus, from Mangulila Spring alone, IBDC
will get and be able to sell bulk wate

r to the

38

neighboring towns at the rate of 77,760,000 Liters


Per Day.
42.

It

is

obviously

manifestly

and

grossly

disadvantageous to Majayjay and its people for


respondent public officials to authorize IBDC to
extract water from Mangulila Spring and sell the
same as bulk water to neighboring towns at the rate
of 77,760,000 Liters Per Day.
43.

Worse, while IBDC was allowed by respondent


public officials to extract water from Mangulila
Spring and divert it for sale as bulk water to
neighboring towns at the rate of 77,760,000 Liters
Per Day, the water to be diverted to Majayjay for
distribution to its people is only 5,184,000 Liters
Per Day, as shown in IBDCs applications for water
permit for Sinabak Spring and Patak-Patak Spring.
In these two (2) applications for water permits,
IBDC will extract water from Sinabak Spring for
diversion to Majayjay at the rate of 30 Liters Per
Second (LPS) or 1, 800 Liters Per Minute or
108,000 Liters Per Hour or 2,592,000 Liters Per
Day, while the water to be extracted from Patak-

39

Patak Spring for diversion to Majayjay will also be


at the same rate as the water coming from Sinabak
Spring or the combined volume of water coming
from Sinabak Spring and Patak-Patak Spring for
diversion to Majayjay will be 5,184,000 Liters Per
Day.
44.

So, the combined volume of water that will come


from Sinabak Spring and Patak-Patak Spring for
diversion to Majayjay is only 5,184,000 Liters Per
Day, while the volume of water that will come from
Mangulila Spring for diversion to the neighboring
towns will be 77,760,000 Liters Per Day.

45.

In other words, the volume of water that will be


diverted for distribution to the people of Majayjay is
much smaller than the volume of water to be
diverted for sale as bulk water to neighboring towns.
This goes to show that the real purpose of subject
BULK

WATER

CONTRACT

is

not

the

rehabilitation of the water system of Majayjay but to


exploit the abundant water resources of Majayjay
for sale as bulk water to neighboring towns.

40

46.

Simply put, the supposed rehabilitation of the water


system of Majayjay is merely a devious scheme
employed by respondents to be able to exploit [at
practically no cost on the part of IBDC] the
abundant water resources of Majayjay for sale as
bulk water to neighboring towns. In employing such
devious scheme, the respondents have obviously
acted in concert to the great prejudice and
disadvantage of Majayjay and its people.

47.

Aside from Mangulila Spring, Sinabak Spring and


Patak-Patak Spring, there are other equally abundant
water sources in Majayjay which have been placed
under the control of IBDC for the next 100 years
due to the provision in the subject BULK WATER
CONTRACT which provides that IBDC has been
granted the right to extract water from all water
sources of Majayjay. This provision in the subject
BULK WATER CONTRACT is not only grossly
disadvantageous to Majayjay but it is immoral,
unconscionable and contrary to public policy.

48. Under the BULK WATER CONTRACT, IBDC was


granted the exclusive right to extract water from all

41

water sources of Majayjay for 100 years or beyond


its corporate life. A corporation has a corporate life
of fifty (50) years only. IBDC was incorporated and
registered

with

the

Securities

and

Exchange

Commission (SEC) on May 20, 1993 or its corporate


life is only until 2043. So, when it was granted by the
Municipality of Majayjay, Laguna of such water
rights, the remaining corporate life of IBDC was
only thirty two (32) years but the term given to
IBDC to exercise such water right was for 100
years, inclusive of the 50 years automatic extension,
or until 2111. In other words, for the next 100 years
or until 2111, or long after the expiration of its
corporate life, IBDC shall and will continue to enjoy
the exclusive right to extract all water sources of
Majayjay. This situation is undeniably manifestly and
grossly disadvantageous to Majayjay.
49. The BULK WATER CONTRACT will deprive the
inhabitants/people of Majayjay of affordable
water service/benefits that they have been enjoying
for several years now. As mentioned above, the
households covered by MWS are paying a water rate

42

of P33.00 per house at the estimated volume of


supply of water of 30 cubic meters per month.
50. Under the BULK WATER CONTRACT, every
household will pay a water rate of P30.00 per 10
cubic meters of water per month. The excess in 10
cubic meters per month shall now be chargeable,
albeit the contract provides that water concessionaires
of Majayjay shall be provided subsidy from the 10%
share of Majayjay from the sale of bulk water. But as
would be pointed out below, the said 10% share of
Majayjay is a public fund and thus the same cannot
be used for private purposes or for payment of the
water bills of private individuals.
51. Accordingly, the people of Majayjay will ultimately
bear the burden of paying the water rates in excess of
10 cubic meters per month. In other words, the BULK
WATER CONTRACT will deprive the people of
Majayjay of the existing water right that they are
enjoying for several years now which is to pay P33.00
per household per month at the estimated volume of
water of 30 cubic meters per month.

43

The BULK WATER CONTRACT


does not have a provision on the
posting by IBDC of the required
performance security.
52. Most

importantly,

the

BULK

WATER

CONTRACT does not have a provision on the


posting by IBDC of the performance security
required under the Procurement Reform Act to
guarantee the faithful performance by IBDC of its
obligation under the BULK WATER CONTRACT.
As provided in Republic Act No. 9184, the
performance security should be posted prior to the
signing of the contract.30 A close examination of the
BULK WATER CONTRACT will show that the same
is completely bereft and silent on the posting by
IBDC of the performance security required under
Section 39 of Republic Act No. 9184. The
performance security shall be in an amount equal
to percentage of the contract price in accordance
with the following schedule:
a. Cash, cashier's/manager's clerk, bank
draft/guarantee confirmed by a
Universal or Commercial bank Goods and Consulting Services (5%
30

Section 39, Republic Act No. 9184

44

of the ABC), Infrastructure Projects


(10%).
b.

Irrevocable Letter of Credit issued


by a Universal or Commercial
Bank; Provided, however, that it shall
be confirmed or authenticated by
Universal or Commercial Bank if
issued by foreign bank - Goods and
Consulting
Services
(5%),
Infrastructure Projects (10%).

c.

Surety bond callable upon demand


issued by surety or insurance
company duly certified by the
Insurance Commission as authorized
to issue such security (30% of the
ABC).

d.

Any combination of the foregoing.


(Proportionate to share of form with
respect to total amount of security.31

53. Without the performance security, there is no


guarantee that IBDC shall faithfully comply with
its obligations under BULK WATER CONTRACT
which is manifestly and grossly disadvantageous
to Majayjay especially considering that IBDC has
lock up for 100 years the right to extract all the
water sources of Majayjay at the revenue sharing
arrangement of 90% in favor of IBDC and 10% in
favor of Majayjay.
31

Section 39.2, Republic Act No. 9184

45

54. IBDC is claiming that it posted surety bond in the


sum of P10,000,000.00 for the BULK WATER
CONTRACT but [as will be discuss below] such
surety bond is not valid and legally effective for
failure to comply with the Non Policy Matter
(NPM) No. 017-2012 issued by Government
Procurement Policy Board (GPPB). Thus, for all
legal intents and purposes, IBDC has never posted
the performance security required under the
Procurement Reform Act.
B
THE RESPONDENTS ALLOWED AND
AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE BULK
WATER CONTRACT IN FLAGRANT
VIOLATION OF THE BOT LAW.
As provided in its body, the BULK WATER CONTRACT was
supposedly entered into and executed pursuant to the Public-Private
Partnership program of the President of the Republic of the
Philippines, His Excellency President Benigno Simeon C. Aquino III.
Sad to say, however, this Public-Private Partnership program of
the national government was merely used by respondents as
convenient excuse to do away with the strict requirements of the law

46

on the bidding and award of infrastructure projects such as the project


contemplated under the BULK WATER CONTRACT.
The BULK WATER CONTRACT is supposed to be undertaken
and entered into by Majayjay pursuant to the Public-Private
Partnership program of the national government but upon verification
from the Public-Private Partnership Center of the Philippines (PPP
Center for short), complainants discovered that the PPP Center has no
involvement in the processing of the project; that it has not
participated in the preparation of bid documents, drafting of the
contract and in the selection of IBDC as the winning private
proponent; and that is has not received any copy of the contract with
IBDC and other project related documents, as shown in the copy of
the letter dated May 16, 2012 of PPP Center attached to the AffidavitComplaint dated June 14, 2012 as Annex K.
The Counter-Affidavit of the respondents will show that they
did not dispute and disprove the allegations and proof presented in the
Affidavit-Complaint dated June 14, 2012 that the BULK WATER
CONTRACT has grossly violated the BOT Law. The respondents
merely made the lame excuse that the BOT Law is not applicable to
the subject BULK WATER CONTRACT. This lame excuse of
respondents cannot prevail over the undisputed fact that the subject

47

BULK WATER CONTRACT involved an unsolicited proposal from


IBDC involving important and priority project of Majayjay.
The BULK WATER CONTRACT states that Majayjay treated
the Formal Proposal of IBDC as unsolicited proposal in accordance
with the issued GUIDELINES on Joint Venture (JVs) pursuant to
Section 8 (Joint Venture Agreements) of Executive Order (EO) No.
423 dated April 30, 2005. But a closer look of the BULK WATER
CONTRACT will show that the same was entered into pursuant to
BOT Law as it involved an unsolicited proposal from IBDC
involving important and priority project of Majayjay.
The provisions of the BOT Law were never complied with in
the execution of the BULK WATER CONTRACT. It appears from
the BULK WATER CONTRACT that the project contemplated
therein is an important and priority project of Majayjay but there was
no publication and approval of the same as required under Section 4
of the R.A. No. 7718.
The project contemplated under the BULK WATER
CONTRACT did not undergo the required publication of the project
in national newspaper of general circulation once every six (6)
months. Neither is there any record showing that the project was
submitted for confirmation to the Municipal Development Council or
to the Provincial Development Council or the Regional Development

48

Council, as the case may be, or the project was submitted to the
National Economic Development Authority (NEDA) for its approval.
In the first place, the project could not have been submitted for
confirmation by Municipal Development Council or by the Provincial
Development Council or by the Regional Development Council or the
approval by NEDA because the BULK WATER CONTRACT does
not state the COST of the PROJECT. There is a complete absence
of PROJECT COST in the BULK WATER CONTRACT. Thus, it
is quite clear that the BULK WATER CONTRACT was made in gross
violation of Section 4 of R. A. No. 7718 which renders it manifestly
and grossly disadvantageous to Majayjay.
Moreover, the public bidding of unsolicited proposal is
provided under Sections 5 and 6 of R.A. No. 7718 which further
require for the publication of the unsolicited proposal for three (3)
consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is
received for a period of sixty (60) working days. Thereafter and upon
approval of the projects, the head of the infrastructure agency or local
government unit concerned shall forthwith cause to be published,
once every week for three (3) consecutive weeks, in at least two (2)
newspapers of general circulation and in at least one (1) local
newspaper which is circulated in the region, province, city or

49

municipality in which the project is to be constructed, a notice


inviting all prospective infrastructure or development project
proponents to participate in a competitive public bidding for the
projects so approved.
It does not appear from the BULK WATER CONTRACT that
the supposed unsolicited proposal of IBDC was published for three
(3) consecutive weeks in a newspaper of general circulation. Neither
does it appear from the BULK WATER CONTRACT that there is a
publication of the notice of public bidding of the project for three (3)
consecutive weeks in at least two (2) newspapers of general
circulation and one (1) local newspaper which is circulated in the
regions, province, city or municipality in which the project is to be
constructed.
As provided in the BULK WATER CONTRACT, what has been
published on June 22, 2011 in Remate is merely the Invitation to
Apply for Eligibility and to Submit Comparative Proposal. This
Invitation to Apply for Eligibility and to Submit Comparative
Proposal is not the required public bidding of the alleged unsolicited
proposal of IBDC. Even then, the said publication in Remate would
not constitute as sufficient compliance with Section 5 of R.A. No.
7718 because what is required therein is publication for three (3)
consecutive weeks in newspaper of general circulation.

50

Worse, the period of time provided under Section 5 of R.A.


7718 for the submission of the comparative proposal is for a period of
sixty (60) working days but even before the expiration of these
sixty (60) working days, respondent Guera had already executed
the BULK WATER CONTRACT with IBDC. The invitation to
submit comparative proposal was supposedly published on June 22,
2011 in Remate. Counting the said required period of sixty (60)
working days from June 22, 2011, the said sixty (60) working days
will expire on September 15, 2011 but the BULK WATER
CONTRACT was executed on August 1, 2011 or twenty eight (28)
working days before the expiration of the said 60 days period. On
this score alone, the BULK WATER CONTRACT has openly and
grossly violated the BOT Law.
Further, the alleged publication made on June 22, 2011 in
Remate of the questioned unsolicited proposal would also not be a
sufficient compliance with the required publication under Section 6 of
R.A. No. 7718 because what is required therein is publication of the
unsolicited proposal once every week for three (3) consecutive
weeks, in at least two (2) newspaper of general circulation and in
at least one (1) local newspaper which is circulated in the region,
province, city or municipality in which the project is to be
constructed. Clearly then, the BULK WATER CONTRACT was

51

executed in flagrant violation of the required publication and public


bidding as provided under R. A. No. 7718 which makes the BULK
WATER CONTRACT manifestly and grossly disadvantageous to
Majayjay.
Furthermore, not only did the BULK WATER CONTRACT
violate Sections 5 and 6 of R.A. No. 7718 but the same has likewise
violated Section 8 thereof which provides that the repayment
scheme for the project by authorizing the imposition and collection
of tolls, fees, rentals, and charges shall be for a fixed term as proposed
in the bid and incorporated in the contract but in no case shall this
term exceed fifty (50) years.
Section 8 of R.A. No. 7718 clearly provides that the maximum
term of a BOT contract shall not exceed fifty (50) years. But the
BULK WATER CONTRACT provides for a mind boggling term of
100 years, inclusive of the 50 years automatic extension. Not only
that. The BULK WATER CONTRACT provides for the revenue
sharing scheme of ninety percent (90%) in favor of IBDC and ten
percent (10%) only in favor of Majayjay but the BULK WATER
CONTRACT does not specifically stipulate the COST of
PROJECT. Such terms of the contract are obviously grossly
disadvantageous and prejudicial to Majayjay.

52

The BULK WATER CONTRACT is completely silent on the


project cost which is material and essential not only for the approval
of the project as mentioned-above but also to determine repayment
scheme provided under Section 8 of R.A. No. 7718. Without the
project cost, the repayment scheme for the project cannot be
determined. Thus, this is another clear violation of the BOT Law
which makes the contract grossly disadvantageous and prejudicial to
Majayjay.
C
THE RESPONDENTS ALLOWED AND
AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE BULK
WATER CONTRACT IN FLAGRANT
VIOLATION OF THE PROCUREMENT
REFORM ACT.
It may be argued by the respondents that the BULK WATER
CONTRACT is not based upon the BOT Law because the BULK
WATER CONTRACT provides that the formal proposal of IBDC was
treated as an unsolicited proposal in accordance with the aforestated
GUIDELINES. However, the said GUIDELINES for JV pursuant to
Section 8 of E.O. No. 423 dated April 30, 2005 will find no
application to the BULK WATER CONTRACT because Section 4.0
of E.O. No. 423, sub-paragraph 4.1, explicitly provides that Local
Government Units (LGUs) are not covered by these Guidelines.

53

On the other hand, Section 12 of E.O. No. 423 dated April 30,
2005 explicitly provides that Procurement contracts of local
government units, regardless of the source of funds, shall be
subject to the provisions of Republic Act No. 9184 and its
Implementing Rules and Regulations.
The BULK WATER CONTRACT is, without a doubt, in
violation of Republic Act No. 9184 because the said law requires
certain procedures on competitive bidding. Republic Act No. 9184
requires preparation of bidding documents following the standard
forms and manuals prescribed by the GPPB,32 pre-procurement
conference,33 advertising of invitation to bid,34 pre-bid conference,35
eligibility requirements of a prospective bidder shall be made under
oath,36 submission of Bids shall have technical and financial
components,37 all Bids shall be accompanied by Bid security,38
opening of all the Bids publicly at a specified date, time and place, 39
Bid evaluation,40 post qualification,41 notice of Award,42 and
performing security.43

32

Section 17, Republic Act No. 9184.


Section 20, Republic Act No. 9184.
34
Section 21, Republic Act No. 9184.
35
Section 22, Republic Act No. 9184.
36
Section 23, Republic Act No. 9184.
37
Section 25, Republic Act No. 9184.
38
Section 27, Republic Act No. 9184.
39
Section 28, Republic Act No. 9184.
40
Article IX, Republic Act No. 9184.
41
Article X, Republic Act No. 9184.
42
Section 37, Republic Act No. 9184.
43
Section 39, Republic Act No. 9184.
33

54

In awarding the BULK WATER CONTRACT to IBDC, it


appears that there is no record of compliance with the foregoing
requirements of Republic Act No. 9184.

The BULK WATER

CONTRACT is neither a negotiated procurement as it does not fall to


any of the thirteen (13) types of a negotiated procurement applicable
in specific and distinct situation enumerated under the Revised
Implementing Rules and Regulation of Republic Act No. 9184. Thus,
for having been awarded to IBDC in gross violation of Republic Act
No. 9184, the BULK WATER CONTRACT is obviously manifestly
and grossly disadvantageous to Majayjay.
Most importantly, as mentioned-above, the BULK WATER
CONTRACT does not contain any provision providing that IBDC
shall post prior to the execution of the contract performance security
to assure compliance with its contractual obligation. In the subject (2)
Water Supply Contracts, it is expressly provided therein that Majayjay
shall post performance security consisting of 5% cash bond, 10%
bank guarantee and 30% surety bond in favor of the Municipality of
Sta. Cruz, Laguna and the Municipality of Lumban, Laguna,
respectively. But such important provision on the posting of
performance security was eliminated in the BULK WATER
CONTRACT which renders the same grossly disadvantageous to
Majayjay.

55

Indeed, it is manifestly and grossly disadvantageous to Majayjay


for respondents to have allowed the elimination of the provision in the
BULK WATER CONTRACT on the posting of performance security
by IBDC but at the same time allowed and authorized Majayjay under
the subject 2 Water Supply Contracts to post performance security
consisting of 5% cash bond, 10% bank guarantee and 30% surety
bond in favor of the Municipality of Sta. Cruz, Laguna and
Municipality of Lumban, Laguna. This contrasting conducts of
respondents on the posting of the required performance security is
clear and substantial evidence that they have committed grave
misconduct

in

the

discharge

of

their official

functions.

Respondents conduct is not only prejudicial to Majayjay but the


same is obviously a flagrant violation of the Procurement Reform
Act.
IBDC is claiming that it posted surety bond in the sum of
P10,000,000.00 for the subject BULK WATER CONTRACT.
However, aside from being obviously insufficient, an examination of
the surety bond posted by IBDC will show that the same is not
accompanied by the required Certification from Insurance
Commissioner with the contents that (i) the bond is for the stated
project; (ii) the amount of the bond and (iii) the bond is callable on
demand. This Certification is necessary for the validity and effectivity

56

of the surety bond, as shown in the Non Policy Matter (NPM) No.
017-2012 issued by Government Procurement Policy Board (GPPB)
attached to the complainants Consolidated Reply-Affidavit as Annex
D.
Accordingly, since the alleged surety bond posted by IBDC is
not accompanied by the aforesaid required Certification from the
Insurance Commissioner, then the said bond is not valid and effective.
Necessarily, the BULK WATER CONTRACT is without the required
performance security which renders it manifestly and grossly
disadvantageous to Majayjay. Thus, respondents should not have
allowed and authorized Majayjay to enter into and execute the BULK
WATER CONTRACT. In acting otherwise, respondents are obviously
guilty of grave misconduct.
D
THE RESPONDENTS ALLOWED AND
AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE BULK
WATER CONTRACT IN FLAGRANT
VIOLATION
OF
THE
LOCAL
GOVERNMENT CODE.
The provision of the BULK WATER CONTRACT is
contrary to Local Government Code of 1991 and/or the BULK
WATER CONTRACT authorizes or abets the commission of the
crime of malversation of public funds.

57

The BULK WATER CONTRACT provides in Section 7 (b) of


its Article IV that the price of water for the first ten (10) cubic meters
charged against the concessionaires of Majayjay shall not exceed
P30.00 and that the difference between P30.00 and the total of the
actual production, distribution and the other operating and
maintenance costs plus the agreed rate of return shall be subsidized
by the 10% share of Majayjay from the bulk water sales. From
this provision of the BULK WATER CONTRACT, it is quite clear
that the said 10% share of Majayjay shall be used to subsidize the
water concessionaires of Majayjay or to pay the obligations of
private individuals.
There is no denial from respondents that said 10% share of
Majayjay is a public fund which shall be used to subsidize the
water concessionaires of Majayjay or the same shall be used to
pay for the obligation of private individuals.
Since the 10% share of Majayjay from the proceeds of the sale
of bulk water is a public fund, then the same cannot be used without
appropriations ordinance or law. Section 305 (a and b), Chapter I,
Title Five of the Local Government Code provides that No money
shall be paid out of the local treasury except in pursuance of an
appropriations ordinance or law and that Local government
funds and monies shall be spent solely for public purposes.

58

The Local Government Code further mandates that No public


money or property shall be appropriated or applied for religious
or private purposes.44 Thus, the said 10% share of Majayjay cannot
be used to subsidize the water concessionaires of Majayjay or to pay
the water bills of private individuals. If only the respondents have any
intention to protect the interest of Majayjay, respondents should have
stipulated in the BULK WATER CONTRACT that the subsidy to
water concessionaires of Majayjay should be chargeable against the
90% share of IBDC from the proceeds of the sale of bulk water. But it
appears that respondents have no concern at all for the interest of
Majayjay as they have conspired and confederated with one another
to charge the said subsidy to the meager 10% share of Majayjay.
By allowing and authorizing the stipulation in the BULK
WATER CONTRACT that the 10% share of Majayjay shall be used to
subsidize the water concessionaires of Majayjay, respondents have in
effect allowed and authorized the use of public funds without
appropriations ordinance or law and for private purposes and the same
constitutes plain and simple crime of malversation of public funds.
Simply put, by authorizing the use of public funds without
appropriations ordinance or law and for private purposes, respondents

44

Section 335, Chapter 4, Title Five of the Local Government Code.

59

have in effect authorized or abetted the commission of the crime of


malversation of public funds.
It is manifestly and grossly disadvantageous and prejudicial
to Majayjay for respondents to allow and authorize under the
BULK WATER CONTRACT the use of public funds [10% share
of Majayjay] without appropriations ordinance or law and for
private purposes.
E
THE RESPONDENTS ALLOWED AND
AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE BULK
WATER CONTRACT IN FLAGRANT
VIOLATION OF THE ESTABLISHED
RULES, MORALS AND PUBLIC POLICY.
As mentioned above, the long established ruling of the Supreme
Court is that 12% is the allowable reasonable rate of return for
public utility.45 On the other hand, in the BULK WATER CONTRACT,
on top of IBDCs 90% share in the proceeds of the sale of bulk water,
the respondents have allowed and authorized the IBDC to have an
allowable 25% rate of return of investment.46
Under the BOT Law, the maximum allowable term of the
contract is fifty (50) years but in the BULK WATER CONTRACT, the

45

Meralco vs. Public Service Commission, ibid and republic vs. Meralco,ibid.
Section 16, par. 5, Article XI of the Contract for the Supply of Bulk Water dated August 1, 2011.

46

60

term of the contract is 100 years, inclusive of the 50 years automatic


extension.
Under the Procurement Reform Act, the required performance
security must be fixed in accordance with the cost of the contract or
the project cost but the BULK WATER CONTRACT does not
stipulate or provide for the PROJECT COST. Thus, the correct
performance security cannot be determined and fixed in the absence of
the PROJECT COST in the BULK WATER CONTRACT.
IBDC is claiming that it posted surety bond in the sum of
P10,000,000.00 for the subject BULK WATER CONTRACT but the
same is not accompanied by the required Certification from
Insurance Commissioner with the contents that (i) the bond is for the
stated project; (ii) the amount of the bond and (iii) the bond is callable
on demand. The said Certification is necessary for the validity and
effectivity of the surety bond posted by IBDC. Under Non Policy
Matter (NPM) No. 017-2012 issued by Government Procurement
Policy Board (GPPB)47.
The BULK WATER CONTRACTs term of 100 years, inclusive
of the 50 years automatic extension, at the sharing arrangement of
10% in favor of Majayjay and 90% in favor of IBDC plus 25%
allowable rate of return is obviously unconscionable and immoral
47

Annex D of the Consolidated Reply-Affidavit dated October 19, 2012.

61

especially if we have to consider that IBDC was also granted the


exclusive right to extract water from all water sources of Majayjay
under the term of right of first refusal for the same period of 100
years. What makes it more unconscionable and immoral is that the
BULK WATER CONTRACT does not stipulate or provide for the
PROJECT COST or the amount of investment to be infused or spent
for the project by IBDC. Stated difficulty, the respondents have
allowed and authorized IBDC to have monopoly over all water
resources of Majayjay for a period of 100 years which is obviously
contrary to public policy. It is against public policy to grant or abet
monopoly.
From the foregoing, it is quite clear that the cause, object or
purpose of BULK WATER CONTRACT is not only contrary to the
laws described-above but the same is also contrary to established
rules, morals and public policy. This being so, then the BULK
WATER CONTRACT is null and void from the beginning. Article
1409 of the Civil Code mandates that:
Art. 1409. The following contracts are
inexistent and void from the beginning:
1. Those whose cause, object or purpose is
contrary to law, morals, good customs, public
order or public policy;
2. Those which are absolutely simulated or
fictitious;
xxx
xxx
xxx

62

4. Those whose object is outside the


commerce
of men.
xxx
xxx
xxx
These contracts cannot be ratified. Neither
can the right to set up the defense of
illegality be waived.

Being null and void, the subject contract confers no


rights nor does not impose any duty.

It neither binds nor

bars any one.48


A void or inexistent contract is equivalent to nothing; it
is absolutely wanting in civil effects.49
The action or defense for the declaration of the
inexistent of a contract does not prescribe. 50 Mere lapse of
time cannot give effect to contracts that are null and void.51
However, notwithstanding that the BULK WATER
CONTRACT is null and void from the beginning, the
respondents have amended, revised and added addendum to the
same [as will be discuss below] for the obvious purpose of
correcting its legal defects or flaws in order to validate the same.
Such action of respondents is clear and substantial evidence that
they have deliberately and willfully allowed and authorized the
execution of the BULK WATER CONTRACT.
F
48

Caro v. CA, 158 SCRA 270


Civil Code of the Philippines annotated by Arturo M. Tolentino, Vol. IV, Page 629, 1991 edition
50
Article 1410, Civil Code of the Philippines
51
Civil Code of the Philippines Annotated by Edgardo M. Paras Vol IV, Page 809, 1994+ Edition.
49

63

THE RESPONDENTS ALLOWED AND


AUTHORIZED MAJAYJAY TO ENTER
INTO AND EXECUTE THE SUBJECT 2
WATER SUPPLY CONTRACTS IN
VIOLATION OF ANTI-GRAFT AND
CORRUPT PRACTICES ACT AND THE
PROCUREMENT REFORM ACT
Under the BULK WATER CONTRACT, it is expressly
provided that IBDC shall have the sole right and authority to supply
bulk water to Majayjay and the neighboring towns 52, including but not
limited to Lumban and Sta. Cruz. Since the right and authority to
supply bulk water under the BULK WATER CONTRACT belongs to
IBDC, then it is only proper that IBDC should be the one to act as the
Water Supplier to Lumban and Sta. Cruz but obviously it was not
done so as to enable IBDC to evade any and all obligations arising
under the subject two (2) Water Supply Contracts. Respondents
have acted in concert to make Majayjay as the Water Supplier
under the subject 2 Water Supply Contracts and not IBDC.
As such Water Supplier, Majayjay assumed all the obligations
and responsibilities for the supply of bulk water to Lumban and Sta.
Cruz, including but not limited to the payment of penalties in the
event of default or delay and the posting of the required performance
security such as the (i) cash bond equivalent to 5% of the total
contract price, (ii) bank guarantee equivalent to 10% of the total
52

Section 7 (a), Article IV of the Contract for the Supply of Bulk Water dated August 1, 2012.

64

annual contract price and (iii) surety bond equivalent to 30% total
annual contract price. The purpose of this cash bond, bank guarantee
and surety bond is to guarantee the faithful performance by Majayjay
of its obligations under the Water Contracts.
As provided in Section 2 of Article V of the Water ContractLumban53, Majayjay will post for Lumban the performance security
equal to the annual contract price. Under the contract, Majayjay shall
supply potable water to Lumban at the volume of at least 5,000 cubic
meters per day or 150,000 cubic meters per month or 1,825,000 cubic
meters for 365 days or one (1) year at the price of P11.00 per cubic
meter.
At the price of P11.00 per cubic meter, the total annual contract
price of 1,825,000 cubic meters of water per year is P20,075,000.00.
Thus, Majayjay will have to post performance security in favor of
Lumban as follows: (i) cash bond of 5% equivalent to the sum of
P1,003,750.00, (ii) bank guarantee of 10% equivalent to the sum of
P2,007,500.00 and (iii) surety bond of 30% equivalent to the sum of
P6,022,500.00. Simply put, Majayjay will have to post performance
security in favor of Lumban in the total sum of P9,033,750.00.
On the other hand, for Sta. Cruz, Majayjay will have to post
performance security equal to the annual contract price of P5,110,000
53

Annex L of the Affidavit-Complaint dated June 14, 2012.

65

cubic meters of water per annum at the price of P10.00 per cubic
meter. Under the Water Contract-Sta. Cruz 54, Majayjay is obligated to
supply potable water to Sta. Cruz at the price of P10.00 per cubic
meter and at the rate of at least 14,000 cubic meters per day or
420,000 cubic meters per month or 5,110,000 cubic meters per 365
days or per annum.
At the volume of 5,110,000 cubic meters per annum at the price
of P10.00 per cubic meter, the total annual contract price of the
contract of Majayjay with Sta. Cruz for the supply of potable water is
P51,100,000.00. Thus, Majayjay will have to post performance
security in favor of Sta. Cruz consisting of (i) cash bond 5%
equivalent to the sum of P2,555,000.00, (ii) bank guarantee of 10%
equivalent to the sum of P5,110,000.00 and (iii) surety bond of 30%
equivalent to the sum of P15,330,000.00. Simply put, Majayjay will
have to post performance security in favor of Sta. Cruz in the total
sum of P22,995,000.00.
In resume, Majayjay will have to post performance security in
favor of Lumban equivalent to the total sum of P9,033,750.00, while
for Sta. Cruz, Majayjay will post performance security equivalent to
the total sum of P22,995,000.00 or Majayjay will post performance

54

Annex M of the Affidavit-Complaint dated June 14, 2012.

66

security in favor of Lumban and Sta. Cruz in the amount equivalent to


the grand total of P32,028,750.00.
Considering IBDC is not the Water Supplier under the subject
two (2) Water Supply Contracts but Majayjay, then IBDC was
effectively relieved and released from the obligation to post
performance security in favor or Lumban and Sta. Cruz in the amount
equivalent to the total sum of P9,033,750.00 and the total sum of
P22,995,000.00, respectively.
Respondent Guera claims that the right and obligations of
Majayjay under the subject two (2) Water Supply Contracts will be
eventually assigned to IBDC. But the fact remains that to this date
Majayjay is the contractual obligor under the subject two (2) Water
Supply Contracts.
In any event, this claim of respondent Guera that the rights and
obligations of Majayjay will be eventually assigned to IBDC is a
confirmation of the fact that the subject two (2) Water Supply
Contracts were purposely entered into by Majayjay with Sta. Cruz
and Lumban so as to do away with the required public bidding if
IBDC will be the one to act as water supplier.
In other words, its purpose is to circumvent the requirements on
public bidding as provided under the Procurement Reform Act. Since
the two (2) Water Supply Contracts are Negotiated Agency to

67

Agency-Procurement, then the same does not need public bidding.


This is the precise contention of the President Arcadio Gapangada, of
IBDC in his Counter-Affidavit to the criminal case accompanying this
administrative case. Plainly, respondents have made it appear that
the subject two (2) Water Supply Contracts is a Negotiated
Agency to Agency-Procurement so as to enable IBDC to evade the
requirement for public bidding as well as to evade the obligation
of posting the required performance security. This kind of
irregular and anomalous transaction has placed Majayjay at a
grossly disadvantageous situation.
G
THERE
EXISTS
CLEAR
LEGAL
GROUNDS TO PLACE RESPONDENTS
UNDER PREVENTIVE SUSPENSION
PENDING ADJUDICATION OF THE
INSTANT CASE.
The respondents are incumbent elected public officials of
Majayjay. In adding addendum to and amending and revising the
BULK WATER CONTRACT in order to correct its legal defects or
flaws for the purpose of legalizing and validating the same, the
respondents have obviously used and are using their offices and
powers to legalize and validate an unlawful and void contract. Unless
place under preventive suspension, the respondents shall and will
continue to use their offices and powers to legalize and validate the

68

BULK WATER CONTRACT and/or to implement the same to the


great prejudice of Majayjay and its inhabitants.
In fact, respondents have abused and continue to abuse their
powers as they have now allowed and authorized the implementation
of the BULK WATER CONTRACT by forcing the people to apply for
water connection to the supposed new water system installed by IBDC
by cutting off the old water system in Majayjay over the objection of
the people of Majayjay, as shown in the Affidavit dated October 18,
2012 Mrs. Simplicia V. Rosel55. For this reason and as shown in the
Sinumpaang Salaysay of Henry Gruezo, Roberto Urcia and Gaudencio
Clado dated October 17, 201256, there are more than 2,000 residents of
Majayjay who signed a manifesto57 to place the respondents under
preventive suspension pending adjudication of this case. In other
words, there is a clear and present danger that respondents will
intimidate or influence the witness or witnesses against them or
tamper the records of the case to correct and validate their unlawful
acts unless they are placed under preventive suspension pending
adjudication of this case.
Preventive suspension pending investigation is not a
penalty. It is a measure intended to enable the disciplining
55

Annex G of the Consolidated Reply-Affidavit dated October 19, 2012.


Annex H of the Consolidated Reply-Affidavit dated October 19, 2012.
57
Attached to the Sinumpaang Salaysay of Henry Gruezo, Roberto Urcia and Gaudencio Clado (Annex
H hereof.)
56

69

authority to investigate charges against respondent by preventing


the latter from intimidating or in any way influencing witnesses
against him.58 Imposed during the pendency of an administrative
investigation, preventive suspension is not a penalty in itself. It is
merely a measure of precaution so that the employee who is charged
may be separated, for obvious reasons, from the scene of his alleged
misfeasance while the same is being investigated.59
The Supreme Court has on many occasions declared that an
order for preventive suspension need be immediately executory
considering that it is a preliminary step in an administrative
investigation, and considering further its purpose, which is to prevent
the respondent from using the position or office to influence
prospective witnesses or tamper with the records which may be
vital in the prosecution of the case against him.60

H
THERE
EXISTS
CLEAR
AND
SUBSTANTIAL EVIDENCE SHOWING
THAT RESPONDENTS ARE GUILTY OF
GRAVE MISCONDUCT AND GROSS
NEGLIGENCE IN THE DISCHARGE OF
THEIR OFFICIAL FUNCTIONS WHEN
THEY HAVE DELIBERATELY AND
WILLFULLY
ALLOWED
AND
58

306 SCRA 287 [1999]. (emphasis supplied)


Beja, Sr. vs. Court of Appeals, 207 SCRA 689 [1992].
60
Yasay, Jr. vs. Desierto, 300 SCRA 494 [1998]; citing Pimentel vs. Gartichorena, 208 SCRA 122 [1992];
Lacson vs. Roque, 92 Phil. 450 [1953]. (emphasis supplied)
59

70

AUTHORIZED THE EXECUTION OF


THE BULK WATER CONTRACT AND
THE SUBJECT 2 WATER SUPPLY
CONTRACTS
IN
FLAGRANT
VIOLATION OF ABOVE QUOTED LAWS.
As clearly shown above, the flagrant violations by respondents
of the Anti-Graft and Corrupt Practices Act, BOT Law, Procurement
Reform Act and the Local Government Code as well as the violation
of the established rules, morals and public policy are clear and
substantial evidence of the fact that respondents committed grave
misconduct in the discharge of their official functions when they have
deliberately and willfully allowed and authorized the execution of the
BULK WATER CONTRACT and the subject 2 WATER SUPPLY
CONTRACTS.
Respondents flagrant violations of the aforestated laws,
established rules, morals and public policy are clearly shown from the
admissions they have made in their separate Counter-Affidavits to the
effect that they have added addendum to and/or amended and revised
the BULK WATER CONTRACT. As mentioned above, respondents
received copy of the complainants instant Affidavit-Complaint on
June 25, 2012. Before the filing of the instant Affidavit-Complaint,
respondents also received the demand letters of complainants
demanding from them to stop the implementation of BULK WATER
CONTRACT and the subject 2 WATER SUPPLY CONTRACTS on

71

the ground that these contracts are null and void for being violative of
the aforestated laws.
After receiving the instant Affidavit-Complaint and the said
demand letters of complainants, and after apparently knowing and
realizing the legal flaws and defects of the BULK WATER and the
subject 2 WATER SUPPLY CONTRACTS, respondent Members of
SB passed and approved the Resolution Blg. 114 T-2012 and
Resolution Blg. 115 T-2012 on June 25, 2012. On the other hand,
respondent Guera executed and signed the addendum and revision to
the BULK WATER CONTRACT with IBDC on August 1, 2012.
In other words, respondents have already an actual notice
and knowledge of the defects and legal flaws of the BULK
WATER CONTRACT at the time of the passage of said
Resolution Blg. 114 T-2012 and Resolution Blg. 115 T-2012 and the
execution of the aforestated Addendum and Revision BULK
WATER CONTRACT. Such actual notice to respondents is the
best, clear and substantial evidence that respondents have
deliberately and willfully committed grave misconduct and gross
negligence in the discharge of their functions in flagrant violation
of the laws and with the evident willful intention to disregard
established rules, morals and public policy.

72

Respondents cannot set up the defense of good faith and


presumption of regularity in the performance of duty because they
have actively conspired and confederated with one another to revise
and amend the BULK WATER CONTRACT despite prior notice to
them that the same is unlawful and void from the beginning for the
obvious purpose of correcting its legal flaws/defects and to validate
the same. Respondents did not heed complainants reminder in their
said demand letters that the BULK WATER CONTRACT cannot be
amended and ratified because it is inexistent and void from the
beginning for being contrary to laws, morals and public policy.
The fact that respondents have deliberately and willfully
authorized the execution of the BULK WATER CONTRACT is
further shown from the admission made by respondents Guera in his
Counter-Affidavit where he claimed that he allegedly coordinated
with the Public-Private Partnership (PPP) Center and the National
Economic Development Authority (NEDA) for the preparation and
execution of the BULK WATER CONTRACT, so as to apparently
show that the contract was executed in accordance with law. This
claim of private respondent Guerra is a big lie, as shown in the
Certification dated May 16, 2012 issued by the PPP Center.61

61

Annex K of Complainants Affidavit Complaint dated June 14, 2012.

73

The Certification dated March 16, 2012 of the Public-Private


Partnership (PPP) Center explicitly provides that the PPP Center has
no further involvement in the processing of the said project. It has not
participated in the preparation of bid documents, drafting of the
contract and in the selection of Israel Builders and Development
Corporation (IBDC) as the winning private proponent. Further, it
has not received any copy of the contract with IBDC and other
project-related documents.
Also, the National Economic Development Authority has issued
two (2) Certifications, both dated July 11, 2012, to the effect NEDA
had no prior information nor participation on the proposed Bulk
Water Supply Project of the Municipality of Majayjay, Laguna.
This further attests that no project contract and other documents have
been submitted to this Office for review and evaluation by the
proponent or project contractor. [A copy each of the said Certifications
of NEDA are attached to complainants Consolidated Reply-Affidavit
as Annexes E and F, respectively.]
The admissions made the respondents in their CounterAffidavits regarding the addition of addendum to and amendment and
revision to the BULK WATER CONTRACT as well as the alleged
coordination with PPP Center and NEDA are admissions in the
pleadings. An admission, verbal or written, made by a party in the

74

course of proceeding in the same case, does not require proof. 62 A


judicial admission is conclusive and no evidence need be presented to
prove an agreement that has been admitted. 63 The allegations,
statements or admissions contained in a pleading are conclusive as
against the pleader. A party cannot subsequently take a position
contradictory or inconsistent with his pleading. 64 By these admissions,
it is by now beyond dispute that respondents have not only flagrantly
violated the aforestated laws but they have likewise acted in bad faith
and with malicious intention when they have deliberately and willfully
executed the BULK WATER CONTRACT.
Clearly then, the passage by respondent Members of SB of the
Resolution Blg. 114 T-2012 and Resolution Blg. 115 T-2012 and the
execution by respondent Guera of the Addendum and Revision to the
Contract for the Supply of Bulk Water are clear and substantial
evidence that respondents have conspired and confederated with one
another to deliberately and willfully violate the above-described laws
for the purpose of allowing and authorizing the execution of the
BULK WATER CONTRACT and the subject 2 WATER SUPPLY
CONTRACTS which are all manifestly and grossly disadvantageous
to Majayjay.

62

Section 4, Rule 129, Revised Rules of Court of the Philippines.


Salivio vs. CA, 182 SCRA 119 (1990).
64
McDaniel vs. Apacible, 44 Phil. 248; Cunanan vs. Amparo, 80 Phil. 227
63

75

The misconduct is grave if it involves any of the additional


elements of corruption, willful intent to violate the law, or to
disregard established rules, which must be established by
substantial evidence. As distinguished from simple misconduct, the
elements of corruption, clear intent to violate the law, or flagrant
disregard of established rule, must be manifest in a charge of grave
misconduct. Corruption, as an element of grave misconduct, consists
in the act of an official or fiduciary person who unlawfully and
wrongfully uses his station or character to procure some benefit for
himself or for another person, contrary to duty and the rights of others.
An act need not be tantamount to a crime for it to be considered as
grave misconduct as in fact, crimes involving moral turpitude are
treated as a separate ground for dismissal under the Administrative
Code.65
In Japson vs. Civil Service Commission, 66 petitioner was
declared to have committed acts of Dishonesty, Grave Misconduct,
and Conduct Prejudicial to the Best Interest of the Service as he failed
to stop the illegal trade, constituting willful disregard of the laws and
rules. In the said case, there is no strong evidence showing that
petitioner received, collected, or took a share of the benefits awarded
to the claimants of SSS but he was made liable for the charges
65
66

Office of the Court Administrator vs. Lopez, A.M. No. P-10-2788, January 18, 2011.
G.R. No. 189479, April 12, 2011.

76

against him because his irregular conduct and indiscriminate


judgment relative to the handling of the claims caused a serious
breach in the integrity of the system observed by the SSS, as well as
his having endangered the welfare of the public at large.
The Supreme Court makes clear that when an officer or
employee is disciplined, the object sought is not the punishment of
that officer or employee, but the improvement of the public service
and the preservation of the publics faith and confidence in the
government.67

It reiterated that the Constitution stresses that a

public office is a public trust and public officers must at all times be
accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency, act with patriotism and justice, and
lead modest lives. These constitutionally-enshrined principles, oftrepeated in our case law, are not mere rhetorical flourishes or idealistic
sentiments. They should be taken as working standards by all in the
public service.68
WHEREFORE, complainants most respectfully pray to this
Honorable Office to issue an order placing the respondents under
preventive suspension pending final adjudication of this case and that,
thereafter, to render judgment holding respondents guilty of grave
misconduct and ordering the permanent dismissal of respondents from
67

Civil Service Commission v. Cortez, G.R. No. 155732, June 3, 2004, 430 SCRA 593, citing Bautista v.
Negado, etc., and NWSA, 108 Phil. 283, 289 [1960]. (emphasis ours)
68
Id.

77

the service, forfeiture of the benefits due to them and their perpetual
disqualification from holding any public office.
Other reliefs just and equitable in the premises are likewise
prayed for.

Pasig City for Quezon City.


December 7, 2012
FLORENTINO & ESMAQUEL
LAW OFFICE
Counsel for the Complainants
Unit 1706, 17th Floor
Prestige Tower Condominium
F. Ortigas, Jr. Road (Emerald Avenue)
Ortigas Center, Pasig City
Tel. Nos. 683-0237 to 38, 40 to 41
Fax No. 638-7492
E-mail address: felaw@globelines.com.ph
by:

78

79

EXPLANATION FOR SERVICE


BY REGISTERED MAIL
[Pursuant to Section 11, Rule 13 of the
1997 Rules of Civil Procedure]
COMPLAINANTS, by counsel, submit that the foregoing
Position Paper is being served to the adverse parties by registered mail
due to lack of time and distance of the office of respondents from the
office of the undersigned counsel.