G.R. No.

L-49705-09 February 8, 1979

8. Sinsuat, Datu Blah (KBL) 182,457
TOMATIC ARATUC, SERGIO TOCAO, CISCOLARIO DIAZ, FRED TAMULA,
MANGONTAWAR GURO and BONIFACIO LEGASPI, petitioners, 9. Baga, Tomas (KBL) 171,656
vs.
The COMMISSION ON ELECTIONS, REGIONAL BOARD OF CANVASSERS for 10. Aratuc, Tomatic (KB) 165,795
Region XII (Central Mindanao), ABDULLAH DIMAPORO, JESUS AMPARO,
ANACLETO BADOY, et al., respondents.
11. Mandangan, Linang(KB) 165,032

BARREDO, J.:
12. Diaz, Ciscolario (KB) 159,977

Petition in G. R. Nos. L-49705-09 for certiorari with restraining order and preliminary
injunction filed by six (6) independent candidates for representatives to tile Interim
Batasang Pambansa who had joined together under the banner of the Kunsensiya ng
Bayan which, however, was not registered as a political party or group under the 1976
Election Code, P.D. No. 1296, namely Tomatic Aratuc, Sorgio Tocao, Ciscolario Diaz, Fred
Tamula, Mangontawar Guro and Bonifacio Legaspi her referred to as petitioners, to review
the decision of the respondent Commission on Election (Comelec) resolving their appeal
from the Of the respondent Regional Board of Canvasses for Region XII regarding the
canvass of the results of the election in said region for representatives to the I.B.P. held on
April 7, 1978. Similar petition in G.R. Nos. L49717-21, for certiorari with restraining order
and preliminary injunction filed by Linang Mandangan, abo a candidate for representative
in the same election in that region, to review the decision of the Comelec declaring
respondent Ernesto Roldan as entitled to be proclaimed as one of the eight winners in said
election.
The instant proceedings are sequels of Our decision in G.R. No. L- 48097, wherein
Tomatic Aratuc et al. sought the suspension of the canvass then being undertaken by
respondent dent Board in Cotabato city and in which canvass, the returns in 1966 out of a
total of 4,107 voting centers in the whole region had already been canvassed showing
partial results as follows:
NAMES OF CANDIDATES NO. OF
VOTES
1. Roldan, Ernesto (KB) 225,674
2. Valdez, Estanislao (KBL) 217,789
3. Dimporo, Abdullah (KBL) 199,244
4. Tocao, Sergio (KB) 199,062
5. Badoy, Anacleto (KBL) 198,966
13. Tamalu, Fred (KB) 153,734
14. Legaspi Bonifacio (KB) 148,200
15. Guro, Mangontawar (KB) 139,386
16. Loma, Nemesio (KB) 107,455
17. Macapeges, Malamama 101,350
(Independent)
(Votes Of the independent candidates who actually were not in contention omitted)" (Page
6, Record, L-49705-09.)
A supervening panel headed by Commissioner of Elections, Hon- Venancio S. Duque, had
conducted of the complaints of the petitioners therein of alleged irregularities in the election
records in all the voting centers in the whole province of Lanao del Sur, the whole City of
Marawi, eight (8) towns of Lanao del Norte, namely, Baloi, Karomatan, Matungao, Munai,
Nunungan, Pantao Ragat, Tagoloan and Tangcal, seven (7) towns in Maguindanao,
namely, Barrira, Datu Piang, Dinaig, Matanog Parang, South Upi and Upi, ten (10) towns in
North Cotabato, namely, Carmen, Kabacan, Kidapwan, Magpet, Matalam Midsayap,
Pigcawayan, Pikit, Pres. Roxas and Tulonan, and eleven (11) towns in Sultan Kudarat,
namely, Bagumbayan, Columbia Don Mariano Marcos, Esperanza, Isulan, Kalamansig,
Lebak, Lutayan, Palimbang, President Quirino and Tacurong, by reason for which,
petitioners had asked that the returns from said voting centers be excluded from the
canvass. Before the start of the hearings, the canvass was suspended but after the
supervisory panel presented its report, on May 15, 1978, the Comelec lifted its order of
suspension and directed the resumption of the canvass to be done in Manila. This order
was the one assailed in this Court. We issued a restraining order.
After hearing the parties, the Court allowed the resumption of the canvass but issued the
following guidelines to be observed thereat:

1. That the resumption of said canvass shall be held in the Comelec

6. Amparo, Jesus (KBL) 184,764
main office in Manila starting not later than June 1, 1978;

7. Pangandaman, Sambolayan (KBL) 183,646

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 2. That in preparation therefor, respondent Commission on Elections
shall see to it that all the material election paragraph corresponding to
all the voting center involved in Election Nos. 78-8, 78-9, 78-10, 78-11
and 78-12 are taken to its main office in Manila, more particularly, the
ballot boxes, with the contents, used during the said elections, the
books of voters or records of voting and the lists or records of
registered voters, on or before May 31, 1978;
3. That as soon as the corresponding records are available, petitioners
and their counsel shall be allowed to examine the same under such
security measures as the respondent Board may determine, except the
contents of the ballot boxes which shall be opened only upon orders of
either the respondent Board or respondent Commission, after the need
therefor has become evident, the purpose of such examination being to
enable petitioners, and their counsel to expeditiously determine which
of them they would wish to be scrutinized and passed upon by the
Board as supporting their charges of election frauds and anomalies,
petitioners and their counsel being admonished in this connection, that
no dilatory tactics should be in by them and that only such records
substantial objections should be offered by them for the scrutiny by the
Board;
4. That none of the election returns reffered to in the petition herein
shall be canvassed without first giving the herein petitioners ample
opportunity to make their specific objections thereto, if they have any,
and to show sufficient basis for the rejection of any of the returns, and,
in this connection, the respondent Regional Board of Canvassers
should give due consideration to the points raised in the memorandum
filed by said petitioners with the Commission on Election in the above
cases dated April 26, 1978;
5. That should it appear to the board upon summary scrutiny of the
records to be offered by petitioners indication that in the voting center
actually held and/or that election returns were prepared either before
the day of the election returns or at any other time, without regard
thereto or that there has been massive substitution of voters, or that
ballots and/or returns were prepared by the same groups of persons or
individuals or outside of the voting centers, the Board should exclude
the corresponding returns from the canvass;
6. That appeals to the commission on Election of the Board may be
made only after all the returns in question in all the above, the above
five cases shall have been passed upon by the Board and, accordingly,
no proclamation made until after the Commission shall have finally
resolved the appeal without prejudice to recourse to this court, if
warranted as provided by the Code and the Constitution, giving the
parties reasonable time therefor;
7. That the copies of the election returns found in the corresponding
ballot boxes shall be the one used in the canvass;
8. That the canvass shall be conducted with utmost dispatch, to the end
that a proclamation, if feasible, may be made not later than June 10,
1978; thus, the canvass may be terminated as soon as it is evident that
the possible number of votes in the still uncanvassed returns with no
longer affect the general results of the elections here in controversy;
9. That respondent Commission shall promulgate such other directive
not inconsistent with this resolution y necessary to expedite the
proceedings herein contemplated and to accomplish the purposes
herein intended. (Pp. 8-9, Record.
On June 1, 1978, upon proper motion, said guidelines were modified:
... in the sense that the ballot boxes for the voting centers just referred
to need not be taken to Manila, EXCEPT those of the particular voting
centers as to which the petitioners have the right to demand that the
corresponding ballot boxes be opened in order that the votes therein
may be counted because said ballots unlike the election returns, have
not been tampered with or substituted, which instances the results of
the counting shall be specified and made known by petitioners to the
Regional Board of Canvassers not later than June 3, 1978; it being
understood, that for the purposes of the canvass, the petitioners shall
not be allowed to invoke any objection not already alleged in or
comprehend within the allegations in their complaint in the election
cases above- mentioned. (Page 8, Id.)
Thus respondent Board proceeded with the canvass, with the herein petitioners presenting
objections, most of them supported by the report of handwriting and finger print experts
who had examined the voting records and lists of voters in 878 voting centers, out of 2,700
which they specified in their complaints or petitions in Election Cases 78-8, 78-9, 78-10,
78-11 and 7812 in the Comelec. In regard to 501 voting centers, the records cf. which,
consisting of the voters lists and voting records were not available- and could not be
brought to Manila, petitions asked that the results therein be completely excluded from the
canvass. On July 11, 1978, respondent Board terminated its canvass and declared the
result of the voting to be as follows:
NAME OF CANDIDATE VOTES
OBTAIN
VALDEZ, Estanislao 436,069
DIMAPORO, Abdullah 429,351
PANGANDAMAN, Sambolayan 406,106
SINSUAT, Blah 403,445
AMPARO, Jesus 399,997
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 uniformly in all the reports submitted by the Comelec-NBI experts that the registered voters
MANDANGAN, Linang 387,025 were not the ones who voted as shown by the fact that the thumbprints appearing in Form
1 were different from the thumbprints of the voters in Form 5. " But the Comelec denied a
BAGA, Tomas 386,393 motion of petitioners asking that the ballot boxes corresponding to the voting centers the
record of which are not available be opened and that a date be set when the statements of
witnesses referred to in the August 30, 1978 resolution would be taken, on the ground that
BADOY,Anacleto 374,933 in its opinion, it was no longer necessary to proceed with such opening of ballot boxes and
taking of statements.
ROLDAN, Ernesto 275,141
For his part, counsel for petitioner M in G.R. No. L-49717-21 filed with Comelec on
TOCAO, Sergio 239,914 December 19,1978 a Memorandum. To quote from the petition:

ARATUC, Tomatic 205,829 On December 19, 1978, the KBL, through counsel, filed a
Memorandum for the Kilusang Bagong Lipunan (KBL) Candidates on
the Comelec's Resolution of December 11, 1978, a xerox copy of which
GURO, Mangontawar 190,489
is attached hereto and made a part hereof as Annex 2, wherein they
discussed the following topics: (I) Brief History of the President Case;
DIAZ, Ciscolario 190,077 (II) Summary of Our Position and Submission Before the Honorable
commission; and (III) KBL's Appeal Ad Cautelam. And the fourth topic,
TAMULA, Fred 180,280 because of its relevance to the case now before this Honorable Court,
we hereby quote for ready reference:

LEGASPI, Bonifacio 174,396

IV

MACAPEGES, Malamana 160,271

OUR POSITION WITH RESPECT TO THE

(Pp. 11-12, Record.)

ESOLUTION OF THE HONORABLE

Without loss of time, the petitioners brought the resolution of respondent Board to the
Comelec. Hearing was held on April 25, 1978, after which , the case was declared
submitted for decision. However, on August 30,1978, the Comelec issued a resolution
stating inter alia that :
In order to enable the Commission to decide the appeal properly :
a. It will have to go deeper into the examination of the voting records
and registration records and in the case of voting centers whose voting
and registration records which have not yet been submitted for the
Commission to decide to open the ballot boxes; and
COMMISSION OF DECEMBER 11, 1978
We respectfully submit that the Resolution of this case by this
Honorable Commission should be limited to the precincts and
municipalities involved in the KB'S Petitions in Cases Nos. 78-8 to 78-
12, on which evidence had been submitted by the parties, and on which
the KB submitted the reports of their handwriting-print. Furthermore, it
should be limited by the appeal of the KB. For under the Supreme Court
Resolution of May 23, 1978, original jurisdiction was given to the Board,
with appeal to this Honorable Commission-Considerations of other
matters beyond these would be, in our humble opinion, without
jurisdiction.

b. To interview and get statements under oath of impartial and

disinterested persons from the area to determine whether actual voting
took place on April 7, 1978, as well as those of the military authorities in
the areas affects (Page 12). Record, L-49705-09 .)
On December 11, 1978, the Comelec required the parties "to file their respective written
comments on the reports they shall periodically receive from the NBI-Comelec team of
finger-print and signature experts within the inextendible period of seven (7) days from
their receipt thereof". According to counsel for Aratuc, et al., "Petitioners submitted their
various comments on the report 4, the principal gist of which was that it would appear
For the present, we beg to inform this Honorable Commission that we
stand by the reports and findings of the COMELEC/NBI experts as
submitted by them to the Regional Board of Canvassers and as
confirmed by the said Regional Board of Canvassers in its Resolution of
July 11, 1978, giving the 8 KBL candidates the majorities we have
already above mentioned. The Board did more than make a summary
scrutiny of the records' required by the Supreme Court Resolution,
Guideline No. 5, of May 23, 1978. Hence, if for lack of material time we
cannot file any Memorandum within the non-extendible period of seven
(7) days, we would just stand by said COMELEC/NBI experts' reports to

3

 the Regional Board, as confirmed by the Board (subject to our
appeal ad cautelam). GURO, Mangontawar 163,449

The COMELEC sent to the parties copies of the reports of the NBI- LOMA, Nemesio 129,450
COMELEC experts. For lack of material time due to the voluminous
reports and number of voting centers involved, the Christmas holidays, (Page 14, Record, L-
and our impression that the COMELEC will exercise only its appellate 49705-09.)
jurisdiction, specially as per resolution of this Honorable Court of May
23, 1978 (in G.R. No. L-48097), we, the KBL, did not comment any
more on said reports. (Pp. 5-6, Record, L-49717-21.) It is alleged in the Aratuc petition that:

On January 13, 1979, the Comelec rendered its resolution being assailed in these cases, The Comelec committee grave abuse of dicretion, amounting to lack of
declaring the final result of the canvass to be as follows: jurisdiction:

CANDIDATES VOTES 1. In not pursuing further the examination of the registration records and
voting records from the other voting centers questioned by petitioners
after it found proof of massive substitute voting in all of the voting
VALDEZ, Estanislao 319,514 records and registration records examined by Comelec and NBI
experts;
DIMAPORO, Abdullah 289.751
2. In including in the canvass returns from the voting centers whose
AMPARO, Jesus 286,180 book of voters and voting records could not be recovered by the
Commission in spite of its repeated efforts to retrieve said records;
BADOY, Anacleto 285,985
3. In not excluding from the canvass returns from voting centers
showing a very high percentage of voting and in not considering that
BAGA, Tomas 271,473 high percentage of voting, coupled with massive substitution of voters is
proof of manufacturing of election returns;
PANGANDAMAN, 271,393
Sambolayan 4. In denying petitioners' petition for the opening of the ballot boxes
from voting centers whose records are not available for examination to
SINSUAT, Blah 269,905 determine whether or not there had been voting in said voting centers;

ROLDAN, Ernesto 268,287 5. In not Identifying the ballot boxes that had no padlocks and
especially those that were found to be empty while they were shipped
to Manila pursuant to the directive of the Commission in compliance
MANDANGAN, Linang 251,226
with the guidelines of this Honorable Court;

TACAO, Sergio 229,124

6. In not excluding from the canvass returns where the results of
examination of the voting records and registration records show that the
DIAZ, Ciscolario 187,986 thumbprints of the voters in CE Form 5 did not correspond to those of
the registered voters as shown in CE Form 1;
ARATUC, Tomatic 183,316
7. In giving more credence to the affidavits of chairmen and members of
the voting centers, municipal treasurers and other election officials in
LEGASPI, Bonifacio 178,564
the voting centers where irregularities had been committed and not
giving credence to the affidavits of watchers of petitioners;
TAMULA, Fred 177,270
8. In not including among those questioned before the Board by
petitioners those included among the returns questioned by them in
4

 their Memorandum filed with the Commission on April 26, 1978, which
Memorandum was attached as Annex 'I' to their petition filed with this
Honorable Court G.R. No. L-48097 and which the Supreme Court said
in its Guidelines should be considered by the Board in the course of the
canvass (Guidelines No. 4). (Pp. 15-16, Record, Id.)
On the other hand, the Mandangan petition submits that the Comelec comitted the
following errors:
1. In erroneously applying the earlier case of Diaz vs. Commission on
Elections (November 29, 1971; 42 SCRA 426), and particularly the
highly restrictive criterion that when the votes obtained by the
candidates with the highest number of votes exceed the total number of
highest possible valid votes, the COMELEC ruled to exclude from the
canvass the election return reflecting such rests, under which the
COMELEC excluded 1,004 election returns, involving around 100,000
votes, 95 % of which are for KBL candidates, particularly the petitioner
Linang Mandangan, and which rule is so patently unfair, unjust and
oppressive.
2. In not holding that the real doctrine in the Diaz Case is not the total
exclusion of election returns simply because the total number of votes
exceed the total number of highest possible valid votes, but 'even if all
the votes cast by persons Identified as registered voters were added to
the votes cast by persons who can not be definitely ascertained as
registered or not, and granting, ad arguendo, that all of them voted for
respondent Daoas, still the resulting total is much below the number of
votes credited to the latter in returns for Sagada, 'and that 'of the 2,188
ballots cast in Sagada, nearly one-half (1,012) were cast by persons
definitely Identified as not registered therein or still more than 40 % of
substitute voting which was the rule followed in the later case of
Bashier/Basman (Diaz Case, November 19,1971,42 SCRA 426,432).
3. In not applying the rule and formula in the later case of Bashier and
Basman vs. Commission on Election (February 24, 1972, 43 SCRA
238) which was the one followed by the Regional Board of Canvassers,
to wit:
In Basman vs Comelec (L-33728, Feb. 24, 1972) the
Supreme Court upheld the Supreme Court upheld
the ruling of the Commission setting the standard of
40 % excess votes to justify the exclusion of election
returns. In line with the above ruling, the Board of
Canvassers may likewise set aside election returns
with 40 % substitute votes. Likewise, where excess
voting occured and the excess was such as to
destroy the presumption of innocent mistake, the
returns was excluded.
(COMELEC'S Resolution, Annex I hereof, p. 22), which this Honorable
Court must have meant when its Resolution of May 23, 1978 (G.R. No.
7), it referred to "massive substitution of voters.
4. In examining, through the NBI/COMELEC experts, the records in
more than 878 voting centers examined by the KB experts and passed
upon by the Regional Board of Canvassers which was all that was
within its appellate jurisdiction is examination of more election records
to make a total of 1,085 voting centers (COMELEC'S Resolution, Annex
1 hereof, p. 100), being beyond its jurisdiction and a denial of due
process as far as the KBL, particularly the petitioner Mandangan, were
concerned because they were informed of it only on December, 1978,
long after the case has been submitted for decision in September,
1978; and the statement that the KBL acquiesced to the same is
absolutely without foundation.
5. In excluding election returns from areas where the conditions of
peace and order were allegedly unsettled or where there was a military
operation going on immediately before and during election and where
the voter turn out was high (90 % to 100 %), and where the people had
been asked to evacuate, as a ruling without jurisdiction and in violation
of due process because no evidence was at all submitted by the parties
before the Regional Board of Canvasssers. (Pp. 23-25, Record, L-
47917-21.)
Now before discussing the merits of the foregoing contentions, it is necessary to clarify first
the nature and extent of the Supreme Court's power of review in the premises. The Aratuc
petition is expressly predicated on the ground that respondent Comelec "committed grave
abuse of discretion, amounting to lack of jurisdiction" in eight specifications. On the other
hand, the Mandangan petition raises pure questions of law and jurisdiction. In other words,
both petitions invoked the Court's certiorari jurisdiction, not its appellate authority of review.
This is as it should be. While under the Constitution of 1935, "the decisions, orders and
rulings of the Commission shall be subject to review by the Supreme Court" (Sec. 2, first
paragraph, Article X) and pursuant to the Rules of Court, the petition for "certiorari or
review" shall be on the ground that the Commission "has decided a question of substance
not theretofore determined by the Supreme Court, or has decided it in a way not in accord
with law or the applicable decisions of the Supreme Court" (Sec. 3. Rule 43), and such
provisions refer not only to election contests but even to pre-proclamation proceedings, the
1973 Constitution provides somewhat differently thus: "Any decision, order or ruling of the
Commission may be brought to the Supreme Court on certiorari by the aggrieved party
within thirty days from his receipt of a copy thereof" (Section 11, Article XII c), even as it
ordains that the Commission shall "be the sole judge of all contests relating to the
elections, returns and qualifications of all members of the National Assembly and elective
provincial and city official" (Section 2(2).)
Correspondingly, the ElectionCode of 1978, which is the first legislative constructionof the
pertinent constitutional provisions, makes the Commission also the "sole judge of all pre-
proclamation controversies" and further provides that "any of its decisions, orders or
rulings (in such contoversies) shall be final and executory", just as in election contests, "the
decision of the Commission shall be final, and executory and inappealable." (Section 193)
It is at once evident from these constitutional and statutory modifications that there is a
definite tendency to enhance and invigorate the role of the Commission on Elections as the
independent constitutinal body charged with the safeguarding of free, peaceful and honest
elections. The framers of the new Constitution must be presumed ot have definite
knowledge of what it means to make the decisions, orders and rulings of the Commission
5
"subject to review by the Supreme Court". And since instead of maintaining that provision
intact, it ordained that the Commission's actuations be instead "brought to the Supreme
Court on certiorari", We cannot insist that there was no intent to change the nature of the
remedy, considering that the limited scope of certiorari, compared to a review, is well
known in remedial law.
Withal, as already stated, the legislative construction of the modified peritinent
constitutional provision is to the effect that the actuations of the Commission are final,
executory and even inappealable. While such construction does not exclude the general
certiorari jurisdiction of the Supreme Court which inheres in it as the final guardian of the
Constitution, particularly, of its imperious due process mandate, it correspondingly narrows
down the scope and extent of the inquiry the Court is supposed to undertake to what is
strictly the office of certiorari as distinguished from review. We are of the considered
opinion that the statutory modifications are consistent with the apparent new constitional
intent. Indeed, it is obvious that to say that actuations of the Commission may be brought
to the Supreme Court on certiorari technically connotes something less than saying that
the same "shall be subject to review by the Supreme Court", when it comes to the measure
of the Court's reviewing authority or prerogative in the premises.
A review includes digging into the merits and unearthing errors of judgment, while certiorari
deals exclusively with grave abuse of discretion, which may not exist even when the
decision is otherwise erroneous. certiorari implies an indifferent disregard of the law,
arbitrariness and caprice, an omission to weight pertinent considerations, a decision
arrived at without rational deliberation. While the effecdts of an error of judgment may not
differ from that of an indiscretion, as a matter of policy, there are matters taht by their
nature ought to be left for final determination to the sound discretion of certain officers or
entities, reserving it to the Supreme Court to insure the faithful observance of due process
only in cases of patent arbitrariness.
Such, to Our mind, is the constitutional scheme relative to the Commission on Elections.
Conceived by the charter as the effective instrument to preserve the sanctity of popular
suffrage, endowed with independence and all the needed concommittant powers, it is but
proper that the Court should accord the greatest measure of presumption of regularity to its
course of action and choice of means in performing its duties, to the end that it may
achieve its designed place in the democratic fabric of our government. Ideally, its members
should be free from all suspicions of partisan inclinations, but the fact that actually some of
them have had stints in the arena of politics should not, unless the contrary is shown,
serve as basis for denying to its actuations the respect and consideration that the
Constitution contemplates should be accorded to it, in the same manner that the Supreme
Court itself which from time to time may have members drawn from the political ranks or
even from military is at all times deemed insulated from every degree or form of external
pressure and influence as well as improper internal motivations that could arise from such
background or orientation.
We hold, therefore that under the existing constitution and statutory provisions, the
certiorari jurisdiction of the Court over orders, and decisions of the Comelec is not as broad
as it used to be and should be confined to instances of grave abuse of discretion
amounting to patent and substantial denial of due process. Accordingly, it is in this light
that We the opposing contentions of the parties in this cases.
THE MANDANGAN CASE
Being more simple in Our view, We shall deal with the petition in G.R. No. L-49717-21 first.
The errors assigned in this petition boil down to two main propositions, namely, (1) that it
was an error of law on the part of respondent Comelec to have applied to the extant
circumstances hereof the ruling of this Court in Diaz vs. Comelec 42 SCRA 426 instead of
that of Bashier vs. Comelec 43 SCRA 238; and (2) that respondent Comelec exceeded its
jurisdiction and denied due process to petitioner Mandangan in extending its inquiry
beyond the election records of "the 878 voting centers examined by the KB experts and
passed upon by the Regional Board of Canvassers" and in excluding from the canvass the
returns showing 90 to 100 % voting, from voting centers where military operations were by
the Army to be going on, to the extent that said voting centers had to be transferred to the
poblaciones the same being by evidence.
Anent the first proposition, it must be made clear that the Diaz and Bashier rulings are not
mutually exclusive of each other, each being an outgrowth of the basic rationale of
statistical improbability laid down in Lagumbay vs. Comelec and , 16 SCRA 175. Whether
they be apply together or separately or which of them be applied depends on the situation
on hand. In the factual milieu of the instant case as found by the Comelec, We see no
cogent reason, and petitioner has not shown any, why returns in voting centers showing
that the votes of the candidate obtaining highest number of votes of the candidate
obtaining the highest number of votes exceeds the highest possible number of valid votes
cast therein should not be deemed as spurious and manufactured just because the total
number of excess votes in said voting centers were not more than 40 %. Surely, this is not
the occasion, consider the historical antecedents relative to the highly questionable
manner in which elections have been bad in the past in the provinces herein involved, of
which the Court has judicial notice as attested by its numerous decisions in cases involving
practically every such election, of the Court to move a whit back from the standards it has
enunciated in those decisions.
In regard to the jurisdictional and due process points raised by herein petitioner, it is of
decisive importance to bear in mind that under Section 168 of the Revised Election Code
of 1978, "the Commission (on Elections) shall have direct control and supervision on over
the board of canvassers" and that relatedly, Section 175 of the same Code provides that it
"shall be the sole judge of all pre-proclamation controversies." While nominally, the
procedure of bringing to the Commission objections to the actuations of boards of
canvassers has been quite loosely referred to in certain quarters, even by the Commission
and by this Court, such as in the guidelines of May 23,1978 quoted earlier in this opinion,
as an appeal, the fact of the matter is that the authority of the Commission in reviewing
such actuations does not spring from any appellate jurisdiction conferred by any specific
provision of law, for there is none such provision anywhere in the Election Code, but from
the plenary prerogative of direct control and supervision endowed to it by the above-quoted
provisions of Section 168. And in administrative law, it is a too well settled postulate to
need any supporting citation here, that a superior body or office having supervision and
control over another may do directly what the latter is supposed to do or ought to have
done.
Consequently, anything said in Lucman vs. Dimaporo, 33 SCRA 387, cited by petitioner, to
the contrary notwithstanding, We cannot fault respondent Comelec for its having extended
its inquiry beyond that undertaken by the Board of Canvass On the contrary, it must be
stated that Comelec correctly and commendably asserted its statutory authority born of its
envisaged constitutional duties vis-a-vis the preservation of the purity of elections and
electoral processes and p in doing what petitioner it should not have done. Incidentally, it
cannot be said that Comelec went further than even what Aratuc et al. have asked, since
6
said complaints had impugned from the outset not only the returns from the 878 voting
centers examined by their experts but all those mentioned in their complaints in the
election cases filed originally with the Comelec enumerated in the opening statements
hereof, hence respondent Comelec had that much field to work on.
The same principle should apply in respect to the ruling of the Commission regarding the
voting centers affected by military operations. It took cognizance of the fact, not considered
by the board of canvass, that said voting centers had been transferred to the poblaciones.
And, if only for purposes of pre-proclamation proceedings, We are persuaded it did not
constitute a denial of due process for the Commission to have taken into account, without
the need or presentation of evidence by the parties, a matter so publicly notorious as the
unsettled situation of peace and order in localities in the provinces herein involved that
their may perhaps be taken judicial notice of, the same being capable of unquestionable
demonstration. (See 1, Rule 129)
In this connection, We may as well perhaps, say here as later that regrettably We cannot,
however, go along with the view, expressed in the dissent of our respected Chief Justice,
that from the fact that some of the voting centers had been transferred to the poblaciones
there is already sufficient basis for Us to rule that the Commission should have also
subjected all the returns from the other voting centers of the some municipalities, if not
provinces, to the same degree of scrutiny as in the former. The majority of the Court feels
that had the Commission done so, it would have fallen into the error by petitioner
Mandangan about denial of due process, for it is relatively unsafe to draw adverse
conclusions as to the exact conditions of peace and order in those other voting centers
without at list some prima facie evidence to rely on considering that there is no allegation,
much less any showing at all that the voting centers in question are so close to those
excluded by the Comelec on as to warrant the inescapable conclusion that the relevant
circumstances by the Comelec as obtaining in the latter were Identical to those in the
former.
Premises considered the petition in G.R. Nos. L-49717-21 is hereby dismiss for lack of
merit.
THE ARATUC ET AL. PETITION
Of the eight errors assigned by herein petitioners earlier adverted to, the seventh and the
sight do not require any extended disquisition. As to the issue of whether the elections in
the voting centers concerned were held on April 7, 1978, the date designated by law, or
earlier, to which the seventh alleged error is addressed, We note that apparently
petitioners are not seriously pressing on it anymore, as evidenced by the complete
absence of any reference thereto during the oral argument of their counsel and the
practically cavalier discussion thereof in the petition. In any event, We are satisfied from a
careful review of the analysis by the Comelec in its resolution now before Us that it took
pains to consider as meticulously as the nature of the evidence presented by both parties
would permit all the contentions of petitioners relative to the weight that should be given to
such evidence. The detailed discussion of said evidence is contained in not less than
nineteen pages (pp. 70-89) of the resolution. In these premises, We are not prepared to
hold that Comelec acted wantonly and arbitrarily in drawing its conclusions adverse to
petitioners' position. If errors there are in any of those conclusions, they are errors of
judgment which are not reviewable in certiorari, so long as they are founded on substantial
PROVINCE
evidence.
As to eighth assigned error. the thrust of respondents, comment is that the results in the
voting centers mentioned in this assignment of error had already been canvassed at the
regional canvass center in Cotabato City. Again, We cannot say that in sustaining the
board of canvassers in this regard, Comelec gravely abused its discretion, if only because
in the guidelines set by this Court, what appears to have been referred to is, rightly or
wrongly, the resumption only of the canvass, which does not necessarily include the
setting aside and repetition of the canvass already made in Cotabato City.
The second and fourth assignments of error concern the voting centers the corresponding
voters' record (C.E. Form 1) and record of voting, (C.E. Form 5) of which have never been
brought to Manila because they, were not available The is not clear as to how many are
these voting centers. According to petitioners they are 501, but in the Comelec resolution
in question, the number mentioned is only 408, and this number is directly challenged in
the petition. Under the second assignment, it is contended that the Comelec gravely
abused its discretion in including in the canvass the election returns from these voting
centers and, somewhat alternatively, it is alleged as fourth assignment that the petitioners
motion for the opening of the ballot boxes pertaining to said voting centers was arbitraly
denied by respondent Comelec.
The resolution under scrutiny explains the situation that confronted the Commission in
regard to the 408 voting centers reffered to as follows :
The Commission had the option of excluding from the canvass the
election returns under category. By deciding to exclude, the
Commission would be summarily disenfranchising the voters registered
in the voting centers affected without any basis. The Commission could
also order the inclusion in the canvass of these elections returns under
the injunction of the Supreme Court that extremes caution must be
exercised in rejecting returns unless these are palpably irregular. The
Commission chose to give prima facie validity to the election returns
mentioned and uphold the votes cast by the voters in those areas. The
Commission held the view that the failure of some election officials to
comply with Commission orders(to submit the records) should not
parties to such official disobedience. In the case of Lino Luna vs.
Rodriguez, 39 Phil. 208, the Supreme Court ruled that when voters
have honestly cast their ballots, the same should not be nullified
because the officers appointed under the law to direct the election and
guard the purity of the ballot have not complied with their duty. (cited in
Laurel on Elections, p. 24)
On page 14 of the comment of the Solicitor General, however, it is stated that:
At all events, the returns corresponding to these voting centers were
examined by the Comelec and 141 of such returns were excluded, as
follows:
SUMMARY
TOTAL EXCLUDED INCLUDED
7

Lanao del Norte 30 — 30
Lanao del Sur 342 137 205
Maguindanao 21 1 20
North Cotabato 7 1 6 think of it, that the possible outcome of the opening of the ballot boxes would favor the
Sultan Kudarat 12 2 10
412 141 271
(Page 301, Record.)
This assertion has not been denied by petitioners.
Thus, it appears that precisely use of the absence or unavailability of the CE Forms 1 and
5 corresponding to the more than 400 voting centers concerned in our present discussion
the Comelec examined the returns from said voting centers to determine their
trustworthiness by scrutinizing the purported relevant data appearing on their faces,
believing that such was the next best thing that could be done to avoid total
disenfranchisement of the voters in all of them On the Other hand, Petitioners' insist that
the right thing to do was to order the opening of the ballot boxes involved.
In connection with such opposing contentions, Comelec's explanation in its resolution is:
... The commission had it seen fit to so order, could have directed the
opening of the ballot boxes. But the Commission did not see the
necessity of going to such length in a that was in nature and decided
that there was sufficient bases for the revolution of the appeal. That the
Commission has discretion to determine when the ballot boxes should
be opened is implicit in the guidelines set by the Supreme Court which
states that '. . . the ballot bones [which] shall be opened only upon
orders of either the respondent Board or respondent Commission, after
the need therefor has become evident ... ' (guideline No. 3;
emphasissupplied). Furthermore, the Court on June 1, 1978, amended
the guidelines that the "ballot boxes for the voting centers ... need not
be taken to Manila EXCEPT those of the centers as to which the
petitioners have the right to demand that the corresponding ballot boxes
be opened ... provided that the voting centers concerned shall be
specified and made known by petitioners to the Regional Board of
Canvassers not later than June 3,1978 ... ' (Emphasis supplied). The
KB, candidates did not take advantage of the option granted them
under these guidelines.( Pp 106-107, Record.)
Considering that Comelec, if it had wished to do so, had the facilities to Identify on its own
the voting centers without CE Forms I and 5, thereby precluding the need for the
petitioners having to specify them, and under the circumstances the need for opening the
ballot boxes in question should have appeared to it to be quite apparent, it may be
contended that Comelec would have done greater service to the public interest had it
proceeded to order such opening, as it had announced it had thoughts of doing in its
resolution of August 30, 1978. On the other hand, We cannot really blame the Commission
too much, since the exacting tenor of the guidelines issued by Us left it with very little
elbow room, so to speak, to use its own discretion independently of what We had ordered.
What could have saved matters altogether would have been a timely move on the part of
petitioners on or before June 3, 1978, as contemplated in Our resolution. After all come to
petitioners was not a certainty — the contents them could conceivably boomerang against
them, such as, for example, if the ballots therein had been found to be regular and
preponderantly for their opponents. Having in mind that significantly, petitioners filed their
motion for only on January 9, 1979, practically on the eve of the promulgation of the
resolution, We hold that by having adhered to Our guidelines of June 1, 1978, Comelec
certainly cannot be held to be guilty of having gravely abused its discretion, in examining
and passing on the returns from the voting centers reffered to in the second and fourth
assignments of error in the canvass or in denying petitioners' motion for the of the ballot
boxes concerned.
The first, third and sixth assignment of involve related matters and maybe discussed
together. They all deal with the inclusion in or exclusion from the canvass of returns on the
basis of the percentage of voting in specified voting centers and the corresponding findings
of the Comelec on the extent of substitute voting therein as indicated by the result of either
the technical examination by experts of the signatures and thumb-prints of the voters
threat.
To begin with, petitioners' complaint that the Comelec did not examine and study 1,694 of
the records in an the 2,775 voting centers questioned by them is hardly accurate. To be
more exact, the Commission excluded a total of 1,267 returns coming under four
categories namely: 1,001 under the Diaz, supra, ruling, 79 because of 90-100 % turnout of
voters despite military operations, 105 palpably manufactured owe and 82 returns
excluded by the board of canvass on other grounds. Thus, 45.45 % of the of the petitioners
were sustained by the Comelec. In contrast, in the board of canvassers, only 453 returns
were excluded. The board was reversed as to 6 of these, and 821 returns were excluded
by Comelec over and above those excluded by the board. In other words, the Comelec
almost doubled the exclusions by the board.
Petitioners would give the impression by their third assignment of error that Comelec
refused to consider high percentage of voting, coupled with mass substitute voting, as
proof that the pertinent returns had been manufactured. That such was not the case is
already shown in the above specifications. To add more, it can be gleaned from the
resolution that in t to the 1,065 voting centers in Lanao del Sur and Marawi City where a
high percentage of voting appeared, the returns from the 867 voting centers were excluded
by the Comelec and only 198 were included a ratio of roughly 78 % to 22 %. The following
tabulation drawn from the figures in the resolution shows how the Comelec went over
those returns center by center and acted on them individually:
90% — 100% VOTING
MARAWI CITY AND LANAO DEL SUR
8
 NO. OF V/C THAT V/C WITH 90% to 100%
MUNICIPALITIES FUNCTIONED VOTING Madamba 20 20 5

Maguing 57 55 53
No. Excluded Included
of Malabang 59 47 5
V/C

Marantao 79 63 41
wi City 151 112 107 5

Marugong 37 35 32
lod 28 28 27 1
de
Masiu 27 26 24
bagan 53 53 49 4
Pagayawan 15 13 9
dong 22 22 15 7
Piagapo 39 39 36
ng 29 20 13 7
Poona- 44 44 42
Bayabao
ayan 37 33 29 4

Pualas 23 20 20
iposo 41 10 10 0
on
Saguiaran 36 32 21
ng 24 23 21 2
Sultan 35 31 31
Gumander
baran 21 (All
excluded)
Tamparan 24 21 15
35 33 32 1
Taraka 31 31 31
nogas 23 21 21 0
Tubaran 23 19 19
an- 42 39 38 1
ain TOTALS:
Marawi &
assi 39 38 23 15
Lanao del Sur 1,218 1,065 867
ba 64 63 47 16
bao
We are convinced, apart from presuming regularity in the performance of its duties, that
there is enough showing in the record that it did examine and study the returns and
batan 30 28 17 pertinent records11corresponding to all the 2775 voting centers subject of petitioners'
complaints below. In one part of its resolution the Comelec states:
bayanague 37 33 28 5
The Commission as earlier stated examined on its own the Books of
alum 14 13 6 7 Voters (Comelec Form No. 1) and the Voters Rewards Comelec Form
No. 5) to determine for itself which of these elections form needed

9

 further examination by the COMELEC-NBI experts. The Commission,
aware of the nature of this pre-proclamation controversy, believes that it
can decide, using common sense and perception, whether the election
forms in controversy needed further examination by the experts based
on the presence or absence of patent signs of irregularity. (Pp. 137-
138, Record.)
In the face of this categorical assertion of fact of the Commission, the bare charge of
petitioners that the records pertaining to the 1,694 voting centers assailed by them should
not create any ripple of serious doubt. As We view this point under discussion, what is
more factually accurate is that those records complained of were not examined with the aid
of experts and that Comelec passed upon the returns concerned "using common sense
and perception only." And there is nothing basically objectionable in this. The defunct
Presidential Senate and House Electoral Tribunals examine passed upon and voided
millions of votes in several national elections without the assistance of experts and "using"
only common sense and perception". No one ever raised any eyebrows about such
procedure. Withal, what we discern from the resolution is that Comelec preliminary
screened the records and whatever it could not properly pass upon by "using common
sense and perception" it left to the experts to work on. We might disagree with he Comelec
as to which voting center should be excluded or included, were We to go over the same
records Ourselves, but still a case of grave abuse of discretion would not come out,
considering that Comelec cannot be said to have acted whimsically or capriciously or
without any rational basis, particularly if it is considered that in many respects and from the
very nature of our respective functions, becoming candor would dictate to Us to concede
that the Commission is in a better position to appreciate and assess the vital
circumstances closely and accurately. By and large, therefore, the first, third and sixth
assignments of error of the petitioners are not well taken.
The fifth assignment of error is in Our view moot and academic. The Identification of the
ballot boxes in defective condition, in some instances open and allegedly empty, is at best
of secondary import because, as already discussed, the records related thereto were after
all examined, studied and passed upon. If at all, deeper inquiry into this point would be of
real value in an electoral protest.
CONCLUSION
Before closing, it may not be amiss to state here that the Court had initially agreed to
dispose of the cases in a minute resolution, without prejudice to an extended or reasoned
out opinion later, so that the Court's decision may be known earlier. Considering, however,
that no less than the Honorable Chief Justice has expressed misgivings as to the propriety
of yielding to the conclusions of respondent Commission because in his view there are
strong considerations warranting farther meticulous inquiry of what he deems to be
earmarks of seemingly traditional faults in the manner elections are held in the
municipalities and provinces herein involved, and he is joined in this pose by two other
distinguished colleagues of Ours, the majority opted to ask for more time to put down at
least some of the important considerations that impelled Us to see the matters in dispute
the other way, just as the minority bidded for the opportunity to record their points of view.
In this manner, all concerned will perhaps have ample basis to place their respective
reactions in proper perspective.
In this connection, the majority feels it is but meet to advert to the following portion of the
ratiocination of respondent Board of Canvassers adopted by respondent Commission with
approval in its resolution under question:
First of all this Board was guided by the legal doctrine that canvassing
boards must exercise "extreme caution" in rejecting returns and they
may do so only when the returns are palpably irregular. A conclusion
that an election return is obviously manufactured or false and
consequently should be disregarded in the canvass must be
approached with extreme caution, and only upon the most convincing
proof. Any plausible explanation one which is acceptable to a
reasonable man in the light of experience and of the probabilities of the
situation, should suffice to avoid outright nullification, with the resulting t
of those who exercised their right of suffrage. (Anni vs. Isquierdo et at
L-35918, Jude 28,1974; Villavon v. Comelec L-32008, August 31,1970;
Tagoranao v. Comelec 22 SCRA 978). In the absence of strong
evidence establishing the spuriousness of the return, the basis rule of
their being accorded prima facie status as bona fide reports of the
results of the count of the votes for canvassing and proclamation
purposes must be applied, without prejudice to the question being tried
on the merits with the presentation of evidence, testimonial and real in
the corresponding electoral protest. (Bashier vs. Comelec L-33692,
33699, 33728, 43 SCRA 238, February 24, 1972). The decisive factor is
that where it has been duly de ed after investigation and examination of
the voting and registration records hat actual voting and election by the
registered voters had taken place in the questioned voting centers, the
election returns cannot be disregarded and excluded with the resting
disenfranchisement of the voters, but must be accorded prima facie
status as bona fide reports of the results of the voting for canvassing
and registration purposes. Where the grievances relied upon is the
commission of irregularities and violation of the Election Law the proper
remedy is election protest. (Anni vs. Isquierdo et al. Supra). (P. 69,
Record, L-49705-09).
The writer of this opinion has taken care to personally check on the citations to be doubly
sure they were not taken out of context, considering that most, if not all of them arose from
similar situations in the very venues of the actual milieu of the instant cases, and We are
satisfied they do fit our chosen posture. More importantly, they actually came from the
pens of different members of the Court, already retired or still with Us, distinguished by
their perspicacity and their perceptive prowess. In the context of the constitutional and
legislative intent expounded at the outset of this opinion and evident in the modifications of
the duties and responsibilities of the Commission on Elections vis-a-vis the matters that
have concerned Us herein, particularly the elevation of the Commission as the "sole judge
of pre-proclamation controversies" as well as of all electoral contests, We find the afore-
quoted doctrines compelling as they reveal through the clouds of existing jurisprudence the
pole star by which the future should be guided in delineating and circumscribing separate
spheres of action of the Commission as it functions in its equally important dual role just
indicated bearing as they do on the purity and sanctity of elections in this country.
In conclusion, the Court finds insufficient merit in the petition to warrant its being given due
course. Petition dismissed, without pronouncement as to costs. Justices Fernando,
Antonio and Guerrero who are presently on official missions abroad voted for such
dismissal.
10
G.R. No. L-19337 September 30, 1969
ASTURIAS SUGAR CENTRAL, INC., petitioner,
vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.
CASTRO, J.:
This is a petition for review of the decision of the Court of Tax Appeals of November 20,
1961, which denied recovery of the sum of P28,629.42, paid by the petitioner, under
protest, in the concept of customs duties and special import tax, as well as the petitioner's
alternative remedy to recover the said amount minus one per cent thereof by way of a
drawback under sec. 106 (b) of the Tariff and Customs Code.
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of
centrifugal sugar for exert, the sugar so produced being placed in containers known as jute
bags. In 1957 it made two importations of jute bags. The first shipment consisting of
44,800 jute bags and declared under entry 48 on January 8, 1967, entered free of customs
duties and special import tax upon the petitioner's filing of Re-exportation and Special
Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned upon the
exportation of the jute bags within one year from the date of importation. The second
shipment consisting of 75,200 jute bags and declared under entry 243 on February 8,
1957, likewise entered free of customs duties and special import tax upon the petitioner's
filing of Re-exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and
P7,984.44, with the same conditions as stated in bond no. 1.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year
from the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags
declared under entry 243, only 25,000 were exported within the said period of one year. In
other words, of the total number of imported jute bags only 33,647 bags were exported
within one year after their importation. The remaining 86,353 bags were exported after the
expiration of the one-year period but within three years from their importation.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd.,
requested the Commissioner of Customs for a week's extension of Re-exportation and
Special Import Tax Bond no. 6 which was to expire the following day, giving the following
as the reasons for its failure to export the remaining jute bags within the period of one year:
(a) typhoons and severe floods; (b) picketing of the Central railroad line from November 6
to December 21, 1957 by certain union elements in the employ of the Philippine Railway
Company, which hampered normal operations; and (c) delay in the arrival of the vessel
aboard which the petitioner was to ship its sugar which was then ready for loading. This
request was denied by the Commissioner per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute
bags within one year from their importation, the Collector of Customs of Iloilo, on March 17,
1958, required it to pay the amount of P28,629.42 representing the customs duties and
special import tax due thereon, which amount the petitioner paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner
demanded the refund of the amount it had paid, on the ground that its request for
extension of the period of one year was filed on time, and that its failure to export the jute
bags within the required one-year period was due to delay in the arrival of the vessel on
which they were to be loaded and to the picketing of the Central railroad line. Alternatively,
the petitioner asked for refund of the same amount in the form of a drawback under section
106(b) in relation to section 105(x) of the Tariff and Customs Code.
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960
denying the claim for refund. From his action, appeal was taken to the Commissioner of
Customs who upheld the decision of the Collector. Upon a petition for review the Court of
Tax Appeals affirmed the decision of the Commissioner of Customs.
The petitioner imputes three errors to the Court of Tax Appeals, namely:
1. In not declaring that force majeure and/or fortuitous event is a sufficient
justification for the failure of the petitioner to export the jute bags in question
within the time required by the bonds.
2. In not declaring that it is within the power of the Collector of Customs and/or
the Commissioner of Customs to extend the period of one (1) year within which
the jute bags should be exported.
3. In not declaring that the petitioner is entitled to a refund by way of a drawback
under the provisions of section 106, par. (b), of the Tariff and Customs Code.
1. The basic issue tendered for resolution is whether the Commissioner of Customs is
vested, under the Philippine Tariff Act of 1909, the then applicable law, with discretion to
extend the period of one year provided for in section 23 of the Act. Section 23 reads:
SEC. 23. That containers, such as casks, large metal, glass, or other receptacles
which are, in the opinion of the collector of customs, of such a character as to be
readily identifiable may be delivered to the importer thereof upon identification
and the giving of a bond with sureties satisfactory to the collector of customs in
an amount equal to double the estimated duties thereon, conditioned for the
exportation thereof or payment of the corresponding duties thereon within one
year from the date of importation, under such rules and regulations as the Insular
Collector of Customs shall provide.1
To implement the said section 23, Customs Administrative Order 389 dated December 6,
1940 was promulgated, paragraph XXVIII of which provides that "bonds for the re-
exportation of cylinders and other containers are good for 12 months without extension,"
and paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and
those filed to guarantee the re-exportation of cylinders and other containers are not
extendible."
And insofar as jute bags as containers are concerned, Customs Administrative Order 66
dated August 25, 1948 was issued, prescribing rules and regulations governing the
importation, exportation and identification thereof under section 23 of the Philippine Tariff
Act of 1909. Said administrative order provides:
That importation of jute bags intended for use as containers of Philippine
products for exportation to foreign countries shall be declared in a regular import
11
 entry supported by a surety bond in an amount equal to double the estimated
duties, conditioned for the exportation or payment of the corresponding duties
thereon within one year from the date of importation.
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec.
105(x) of the Tariff and Customs Code, while fixing at one year the period within which the
containers therein mentioned must be exported, are silent as to whether the said period
may be extended. It was surely by reason of this silence that the Bureau of Customs
issued Administrative Orders 389 and 66, already adverted to, to eliminate confusion and
provide a guide as to how it shall apply the law, 2 and, more specifically, to make officially
known its policy to consider the one-year period mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of previous
judicial interpretation, then the application of the doctrine of "judicial respect for
administrative construction," 3 would, initially, be in order.
Only where the court of last resort has not previously interpreted the statute is the rule
applicable that courts will give consideration to construction by administrative or executive
departments of the state.41awphîl.nèt
The formal or informal interpretation or practical construction of an ambiguous or
uncertain statute or law by the executive department or other agency charged
with its administration or enforcement is entitled to consideration and the highest
respect from the courts, and must be accorded appropriate weight in determining
the meaning of the law, especially when the construction or interpretation is long
continued and uniform or is contemporaneous with the first workings of the
statute, or when the enactment of the statute was suggested by such agency.5
The administrative orders in question appear to be in consonance with the intention of the
legislature to limit the period within which to export imported containers to one year,
without extension, from the date of importation. Otherwise, in enacting the Tariff and
Customs Code to supersede the Philippine Tariff Act of 1909, Congress would have
amended section 23 of the latter law so as to overrule the long-standing view of the
Commissioner of Customs that the one-year period therein mentioned is not extendible.
Implied legislative approval by failure to change a long-standing administrative
construction is not essential to judicial respect for the construction but is an
element which greatly increases the weight given such construction.6
The correctness of the interpretation given a statute by the agency charged with
administering its provision is indicated where it appears that Congress, with full
knowledge of the agency's interpretation, has made significant additions to the
statute without amending it to depart from the agency's view.7
Considering that the Bureau of Customs is the office charged with implementing and
enforcing the provisions of our Tariff and Customs Code, the construction placed by it
thereon should be given controlling weight.1awphîl.nèt
In applying the doctrine or principle of respect for administrative or practical construction,
the courts often refer to several factors which may be regarded as bases of the principle,
as factors leading the courts to give the principle controlling weight in particular instances,
or as independent rules in themselves. These factors are the respect due the
governmental agencies charged with administration, their competence, expertness,
experience, and informed judgment and the fact that they frequently are the drafters of the
law they interpret; that the agency is the one on which the legislature must rely to advise it
as to the practical working out of the statute, and practical application of the statute
presents the agency with unique opportunity and experiences for discovering deficiencies,
inaccuracies, or improvements in the statute; ... 8
If it is further considered that exemptions from taxation are not favored, 9 and that tax
statutes are to be construed in strictissimi juris against the taxpayer and liberally in favor of
the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was
entitled to an extension of time within which to export the jute bags and, consequently, to a
refund of the amount it had paid as customs duties.
In the light of the foregoing, it is our considered view that the one-year period prescribed in
section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith
is mandatory.
The petitioner's argument that force majeure and/or fortuitous events prevented it from
exporting the jute bags within the one-year period cannot be accorded credit, for several
reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals
made absolutely no mention of or reference to this argument of the petitioner, which can
only be interpreted to mean that the court did not believe that the "typhoons, floods and
picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to
effectively prevent the exportation of the jute bags within the required one-year period. In
point of fact nowhere in the record does the petitioner convincingly show that the so-called
fortuitous events or force majeure referred to by it precluded the timely exportation of the
jute bags. In the second place, assuming, arguendo, that the one-year period is extendible,
the jute bags were not actually exported within the one-week extension the petitioner
sought. The record shows that although of the remaining 86,353 jute bags 21,944 were
exported within the period of one week after the request for extension was filed, the rest of
the bags, amounting to a total of 64,409, were actually exported only during the period
from February 16 to May 24, 1958, long after the expiration of the one-week extension
sought by the petitioner. Finally, it is clear from the record that the typhoons and floods
which, according to the petitioner, helped render impossible the fulfillment of its obligation
to export within the one-year period, assuming that they may be placed in the category of
fortuitous events or force majeure, all occurred prior to the execution of the bonds in
question, or prior to the commencement of the one-year period within which the petitioner
was in law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative Order
389 is valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and
other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act
of 1909 and the Tariff and Customs Code, which Administrative Order 389 seeks to
implement, speak of "containers" in general. The enumeration following the word
"containers" in the said statutes serves merely to give examples of containers and not to
specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states,
"containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the
Tariff and Customs Code mentions "large containers," giving as examples "demijohn
cylinders, drums, casks and other similar receptacles of metal, glass or other materials."
(emphasis supplied) There is, therefore, no reason to suppose that the customs authorities
had intended, in Customs Administrative Order 389 to circumscribe the scope of the word
"container," any more than the statures sought to be implemented actually intended to do.
12
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue
of section 106 (b) of the Tariff and Customs Code, 11 which reads:
SEC. 106. Drawbacks: ...
b. On Articles Made from Imported Materials or Similar Domestic Materials and
Wastes Thereof. — Upon the exportation of articles manufactured or produced in
the Philippines, including the packing, covering, putting up, marking or labeling
thereof, either in whole or in part of imported materials, or from similar domestic
materials of equal quantity and productive manufacturing quality and value, such
question to be determined by the Collector of Customs, there shall be allowed a
drawback equal in amount to the duties paid on the imported materials so used,
or where similar domestic materials are used, to the duties paid on the equivalent
imported similar materials, less one per cent thereof: Provided, That the
exportation shall be made within three years after the importation of the foreign
material used or constituting the basis for drawback ... .
The petitioner argues that not having availed itself of the full exemption granted by sec.
105(x) of the Tariff and Customs Code due to its failure to export the jute bags within one
year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99%
drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose
immediate payment of duties and taxes at the time of importation.
The contention is palpably devoid of merit.
The provisions invoked by the petitioner (to sustain his claim for refund) offer two options
to an importer. The first, under sec. 105 (x), gives him the privilege of importing, free from
import duties, the containers mentioned therein as long as he exports them within one year
from the date of acceptance of the import entry, which period as shown above, is not
extendible. The second, presented by sec. 106 (b), contemplates a case where import
duties are first paid, subject to refund to the extent of 99% of the amount paid, provided the
articles mentioned therein are exported within three years from importation.
It would seem then that the Government would forego collecting duties on the articles
mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the
filing of a bond, that the same shall be exported within the relatively short period of one
year from the date of acceptance of the import entry. Where an importer cannot provide
such assurance, then the Government, under sec. 106(b) of said Code, would require
payment of the corresponding duties first. The basic purpose of the two provisions is the
same, which is, to enable a local manufacturer to compete in foreign markets, by relieving
him of the disadvantages resulting from having to pay duties on imported merchandise,
thereby building up export trade and encouraging manufacture in the country. 12 But there
is a difference, and it is this: under section 105(x) full exemption is granted to an importer
who justifies the grant of exemption by exporting within one-year. The petitioner, having
opted to take advantage of the provisions of section 105(x), may not, after having failed to
comply with the conditions imposed thereby, avoid the consequences of such failure by
being allowed a drawback under section 106(b) of the same Act without having complied
with the conditions of the latter section.
For it is not to be supposed that the legislature had intended to defeat compliance with the
terms of section 105(x) thru a refuge under the provisions of section 106(b). A construction
should be avoided which affords an opportunity to defeat compliance with the terms of a
statute. 13 Rather courts should proceed on the theory that parts of a statute may be
harmonized and reconciled with each other.
A construction of a statute which creates an inconsistency should be avoided when a
reasonable interpretation can be adopted which will not do violence to the plain words of
the act and will carry out the intention of Congress.
In the construction of statutes, the courts start with the assumption that the
legislature intended to enact an effective law, and the legislature is not to be
presumed to have done a vain thing in the enactment of a statute. Hence, it is a
general principle, embodied in the maxim, "ut res magis valeat quam pereat," that
the courts should, if reasonably possible to do so without violence to the spirit
and language of an act, so interpret the statute to give it efficient operation and
effect as a whole. An interpretation should, if possible, be avoided under which a
statute or provision being construed is defeated, or as otherwise expressed,
nullified, destroyed, emasculated, repealed, explained away, or rendered
insignificant, meaningless, inoperative, or nugatory. 14
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is
affirmed, at petitioner's cost.
[G.R. No. L-9657. November 29, 1956.]
LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL
COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT
CORPORATION and BOARD OF LIQUIDATORS, Defendants-Appellants.
DECISION
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First
Instance of Manila. During the pendency of Civil Case No. 2293 of said court, entitled
Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico
Alikpala, counsel for Defendant, requested said stenographers for copies of the transcript
of the stenographic notes taken by them during the hearing. Plaintiffs complied with the
request by delivering to Counsel Alikpala the needed transcript containing 714 pages and
thereafter submitted to him their bills for the payment of their fees. The National Coconut
Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto
for said transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment
of these fees and sought the recovery of the amounts paid. On January 19, 1953, the
Auditor General required the Plaintiffs to reimburse said amounts on the strength of a
circular of the Department of Justice wherein the opinion was expressed that the National
Coconut Corporation, being a government entity, was exempt from the payment of the fees
in question. On February 6, 1954, the Auditor General issued an order directing the
Cashier of the Department of Justice to deduct from the salary of Leopoldo T. Bacani the
amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10
every payday beginning March 30, 1954. To prevent deduction of these fees from their
salaries and secure a judicial ruling that the National Coconut Corporation is not a
government entity within the purview of section 16, Rule 130 of the Rules of Court, this
action was instituted in the Court of First Instance of Manila.
13
Defendants set up as a defense that the National Coconut Corporation is a government
entity within the purview of section 2 of the Revised Administrative Code of 1917 and,
hence, it is exempt from paying the stenographers’ fees under Rule 130 of the Rules of
Court. After trial, the court found for the Plaintiffs declaring (1) “that Defendant National
Coconut Corporation is not a government entity within the purview of section 16, Rule 130
of the Rules of Court; chan roblesvirtualawlibrary(2) that the payments already made by
said Defendant to Plaintiffs herein and received by the latter from the former in the total
amount of P714, for copies of the stenographic transcripts in question, are valid, just and
legal; chan roblesvirtualawlibraryand (3) that Plaintiffs are under no obligation whatsoever
to make a refund of these payments already received by them.” This is an appeal from said
decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is
exempt from paying the legal fees provided for therein, and among these fees are those
which stenographers may charge for the transcript of notes taken by them that may be
requested by any interested person (section 8). The fees in question are for the transcript
of notes taken during the hearing of a case in which the National Coconut Corporation is
interested, and the transcript was requested by its assistant corporate counsel for the use
of said corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope of the
term “Government of the Republic of the Philippines” as follows:chanroblesvirtuallawlibrary
“‘The Government of the Philippine Islands’ is a term which refers to the corporate
governmental entity through which the functions of government are exercised throughout
the Philippine Islands, including, save as the contrary appears from the context, the
various arms through which political authority is made effective in said Islands, whether
pertaining to the central Government or to the provincial or municipal branches or other
form of local government.”
The question now to be determined is whether the National Coconut Corporation may be
considered as included in the term “Government of the Republic of the Philippines” for the
purposes of the exemption of the legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term “Government of the Republic of the Philippines” refers to a
government entity through which the functions of government are exercised, including the
various arms through which political authority is made effective in the Philippines, whether
pertaining to the central government or to the provincial or municipal branches or other
form of local government. This requires a little digression on the nature and functions of
our government as instituted in our Constitution.
To begin with, we state that the term “Government” may be defined as “that institution or
aggregate of institutions by which an independent society makes and carries out those
rules of action which are necessary to enable men to live in a social state, or which are
imposed upon the people forming that society by those who possess the power or authority
of prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the
national government, has reference to what our Constitution has established composed of
three great departments, the legislative, executive, and the judicial, through which the
powers and functions of government are exercised. These functions are
twofold:chanroblesvirtuallawlibrary constitute and ministrant. The former are those which
constitute the very bonds of society and are compulsory in nature; chan
roblesvirtualawlibrarythe latter are those that are undertaken only by way of advancing the
general interests of society, and are merely optional. President Wilson enumerates the
constituent functions as follows:chanroblesvirtuallawlibrary
“‘(1) The keeping of order and providing for the protection of persons and property from
violence and robbery.
‘(2) The fixing of the legal relations between man and wife and between parents and
children.
‘(3) The regulation of the holding, transmission, and interchange of property, and the
determination of its liabilities for debt or for crime.
‘(4) The determination of contract rights between individuals.
‘(5) The definition and punishment of crime.
‘(6) The administration of justice in civil cases.
‘(7) The determination of the political duties, privileges, and relations of citizens.
‘(8) Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the preservation
of the state from external danger or encroachment and the advancement of its international
interests.’“ (Malcolm, The Government of the Philippine Islands, p. 19.)
The most important of the ministrant functions are:chanroblesvirtuallawlibrary public works,
public education, public charity, health and safety regulations, and regulations of trade and
industry. The principles deter mining whether or not a government shall exercise certain of
these optional functions are:chanroblesvirtuallawlibrary (1) that a government should do for
the public welfare those things which private capital would not naturally undertake and (2)
that a government should do these things which by its very nature it is better equipped to
administer for the public welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty, and those which it
may exercise to promote merely the welfare, progress and prosperity of the people. To this
latter class belongs the organization of those corporations owned or controlled by the
government to promote certain aspects of the economic life of our people such as the
National Coconut Corporation. These are what we call government-owned or controlled
corporations which may take on the form of a private enterprise or one organized with
powers and formal characteristics of a private corporations under the Corporation Law.
The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these
corporation perform certain functions of government make them a part of the Government
of the Philippines?
The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the
simple reason that they do not come under the classification of municipal or public
corporation. Take for instance the National Coconut Corporation. While it was organized
with the purpose of “adjusting the coconut industry to a position independent of trade
preferences in the United States” and of providing “Facilities for the better curing of copra
products and the proper utilization of coconut by-products”, a function which our
government has chosen to exercise to promote the coconut industry, however, it was given
a corporate power separate and distinct from our government, for it was made subject to
the provisions of our Corporation Law in so far as its corporate existence and the powers
that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may
sue and be sued in the same manner as any other private corporations, and in this sense it
is an entity different from our government. As this Court has aptly said, “The mere fact that
the Government happens to be a majority stockholder does not make it a public
corporation” (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). “By
becoming a stockholder in the National Coal Company, the Government divested itself of
its sovereign character so far as respects the transactions of the corporation cralaw .
Unlike the Government, the corporation may be sued without its consent, and is subject to
14
taxation. Yet the National Coal Company remains an agency or instrumentality of
government.” (Government of the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term “Government of the Republic of the
Philippines” used in section 2 of the Revised Administrative Code refers only to that
government entity through which the functions of the government are exercised as an
attribute of sovereignty, and in this are included those arms through which political
authority is made effective whether they be provincial, municipal or other form of local
government. These are what we call municipal corporations. They do not include
government entities which are given a corporate personality separate and distinct from the
government and which are governed by the Corporation Law. Their powers, duties and
liabilities have to be determined in the light of that law and of their corporate charters. They
do not therefore come within the exemption clause prescribed in section 16, Rule 130 of
our Rules of Court.
“Public corporations are those formed or organized for the government of a portion of the
State.” (Section 3, Republic Act No. 1459, Corporation Law).
“‘The generally accepted definition of a municipal corporation would only include organized
cities and towns, and like organizations, with political and legislative powers for the local,
civil government and police regulations of the inhabitants of the particular district included
in the boundaries of the corporation.’ Heller vs. Stremmel, 52 Mo. 309, 312.”
“In its more general sense the phrase ‘municipal corporation’ may include both towns and
counties, and other public corporations created by government for political purposes. In its
more common and limited signification, it embraces only incorporated villages, towns and
cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661.” (McQuillin,
Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
“We may, therefore, define a municipal corporation in its historical and strict sense to be
the incorporation, by the authority of the government, of the inhabitants of a particular
place or district, and authorizing them in their corporate capacity to exercise subordinate
specified powers of legislation and regulation with respect to their local and internal
concerns. This power of local government is the distinctive purpose and the distinguishing
feature of a municipal corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I,
p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for
each page of transcript of not less than 200 words before the appeal is taken and P0.15 for
each page after the filing of the appeal, but in this case the National Coconut Corporation
has agreed and in fact has paid P1.00 per page for the services rendered by
the Plaintiffs and has not raised any objection to the amount paid until its propriety was
disputed by the Auditor General. The payment of the fees in question became therefore
contractual and as such is valid even if it goes beyond the limit prescribed in section 8,
Rule 130 of the Rules of Court.
As regards the question of procedure raised by Appellants, suffice it to say that the same is
insubstantial, considering that this case refers not to a money claim disapproved by the
Auditor General but to an action of prohibition the purpose of which is to restrain the
officials concerned from deducting from Plaintiffs’ salaries the amount paid to them as
stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of
Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.
G.R. No. L-27275 November 18, 1967
C & C COMMERCIAL CORPORATION, plaintiff-appellee,
vs.
NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellant.
ANGELES, J.:
The main issue in this appeal is, whether or not the call for bids for the supply of steel and
centrifugal cast iron pipes for the waterworks projects in Manila and suburbs, and in the
cities of Davao and Iloilo, the National Waterworks & Sewerage Authority (NAWASA)
violated the provisions of Republic Act 912, section 1 of which provides as follows:
Sec. 1. In construction or repair work undertaken by the Government, whether
done directly or through contract awards, Philippine made materials and
products, whenever available, practicable and usable, and will serve the purpose
as equally well as foreign made products or materials, shall be used in said
construction or repair work, upon the proper certification of the availability,
practicability, usability and durability of said materials or products by the Director
of the Bureau of Public Works and/or his assistants.
In the decision appealed from the Court of First Instance of Manila has permanently
enjoined the NAWASA from the procurement of the materials needed for the projects
involved which, according to the appellant, are designed to alleviate the sufferings of the
millions of inhabitants in said places where there is a crying need for more water — an
item so vital to human existence — and the delay occasioned by the injunctions
complained of, has in no little way, further aggravated the inconvenience of the consuming
public in said metropolitan areas where acute water crises have recurred through the
years. Nevertheless, it is vehemently contended by the appellee that the declaration of an
economic national policy as envisioned in the aforequoted provision of the law which, like
the original Flag Law1 is impressed with the clear nationalistic policy of giving preference to
locally produced materials and products, has been violated; and if this is so, no amount of
public clamor could justify the acts of the NAWASA complained of, for above all the
supremacy of the law must be upheld. We have, therefore, examined the record of this
case with these considerations foremost in Our minds.
It appears that the case, originally commenced in the Court of First Instance of Manila, on
July 7, 1965, as a petition for declaratory relief for the purpose of securing a judicial
pronouncement on the interpretation of the word "practicable" as used in Republic Act No.
912, i.e., whether it means that the cheapest materials among the locally produced or
manufactured products should be preferred and specified in construction and repair works
undertaken by the Government, was later converted into, an action for prohibition with
preliminary injunction through the process of supplemental pleadings.
THE SAN PABLO WATERWORKS SYSTEM —
The corresponding complaint was filed on 19 July 1965, alleging that the NAWASA had
started to negotiate: for direct purchase of centrifugally cast iron pipes (CCI) for the
improvement of the San Pablo Waterworks System in violation of the provisions of
Republic Act 912 and the law on public biddings, excluding the C & C Commercial
Company, the plaintiff, which can supply instead asbestos cement pressure pipes which
15
are available, practicableand usable, and will serve the purpose of the said project at a
much lower cost.
On 6 August 1965, the NAWASA filed its answer to the complaint. On 10 August 1965, the
Filipino Pipe and Foundry Corporation, with leave of court, also filed its answer in
intervention.
On 16 August 1965, as prayed for in the complaint, the court issued a writ of preliminary
injunction restraining the NAWASA from further negotiating the purchase of the CCI pipes
from the intervenor.
On 23 September 1965, the plaintiff and the NAWASA entered into a partial stipulation of
facts, on the basis of which and the additional evidence adduced at the hearing, the court
rendered a partial decision on 31 January 1966, dismissing the complaint insofar as the
San Pablo Waterworks System was concerned and dissolving the preliminary injunction
issued thereunder. This partial decision has become final.
THE DAVAO METROPOLITAN WATERWORKS —
On 22 January 1965, the NAWASA called for bids for the furnishing of labor and the supply
of materials for the construction of the proposed improvement of the Davao Metropolitan
Waterworks System. In the call for bids, the bidders were required to submit proposals for
the supply of 24-inch steel pipes, asbestos, cement pressure pipes, and cast iron pipes.
The bidding was held on 23 February 1965. On 15 March 1965, the committee on award of
the NAWASA recommended to the board of directors that the bid be awarded to the lowest
bidder, Tirso del Rosario, under his proposal to supply steel pipes.
On 10 August 1965, the plaintiff filed a (First) supplemental complaint seeking to restrain
the NAWASA from proceeding with the award of the project in Davao, alleging that in
specifying steel pipes for the project, which is admittedly imported material, without giving
preference to locally produced asbestos cement pressure pipes manufactured by the
plaintiff, violates the provisions of Republic Act 912. On 14 August 1965, the court admitted
the supplemental complaint; and as prayed for therein on, 17 September 1965, the Court
issued a writ of preliminary injunction.
THE ILOILO WATERWORKS SYSTEM —
As early as on 26 November 1962, the NAWASA called for bids for the supply of 18-inch
steel pipes for the improvement of the Iloilo Waterworks System. The bidding was
conducted on 27 December 1962. C & C Commercial Co. participated in the bidding
offering to supply the needed 18-inch steel pipes for the project, but lost in the bidding. The
lowest bidder for the supply of the specified 18-inch steel pipes was the Regal Trading
Corporation, and the bid was awarded to it.
On 8 September 1965, almost three (3) years after the date of the bidding, the C & C
Commercial Co. filed a (Second) supplemental complaint; seeking to restrain the NAWASA
from formalizing or implementing the award on the aforesaid Iloilo project for the supply of
18-inch steel pipes, alleging that in specifying steel pipes for the particular project, the
NAWASA has violated the provisions of Republic Act 912 which requires the purchase of
Philippine made materials and products which are available, practicable and usable locally,
like plaintiff's product — asbestos cement pressure pipes — in construction and repair
undertaken by the government. On 24 September 1965, over the objection of the
NAWASA, alleges second supplemental complaint was admitted by the court. The record
is not clear when the restraining order under the second supplemental complaint was
issued, although the NAWASA alleges that a restraining order was issued under date of 10
September 1965, which fact has not been traversed by the plaintiff.
THE MANILA AND SUBURBS WATERWORKS SYSTEM —
On 13 September 1965, the NAWASA advertised for bids for the supply of 30 to 42-inch
steel pipes for the use and improvement of the interim waterworks project in the City of
Manila and suburbs, the bidding to take place on 14 December 1955. On 10 November
1965, the C & C Commercial Co. filed a (Third) Supplemental complaint seeking to restrain
the NAWASA and its representatives from holding the balding under the aforementioned
notice to bid, averring identical facts as those alleged in the previous supplemental
complaints, that the call for bid for steel pipes for the Manila project and suburbs violates
the provisions of Republic Act 912. Over the objection of the defendant NAWASA, the
supplemental complaint was admitted; and as prayed for therein, on 20 November 1965, a
writ of preliminary injunction was issued restraining the NAWASA from holding the bidding
scheduled on 14 December 1965, or on any subsequent date, until further orders from the
court.
Pending the case in the court a quo, the NAWASA filed three separate motions praying for
the dissolution of the preliminary injunctive writs issued in connection with the Davao, Iloilo
and Manila projects, pleading to the court to consider the crying need for a more adequate
supply of water in those cities, particularly in the City of Manila and its suburbs, where the
lack of adequate supply of potable water has been a recurrent crisis which affected to a
dangerous extent, the health and the life of the inhabitants, and that the continuation of the
injunctive writs may bring about the cancellation of the $20,200,000.00 loan of the
NAWASA from the World Bank, which would result from the failure of the NAWASA to
comply with the formulated work schedule of the waterworks projects, which under the
agreement with the World Bank, has to be completed in the month of October 1967; but
the court failed to take any action on the motions. Parodying Shakespeare, "Set honor in
one eye, and death in the other, and I will look on both indifferently."
After a trial of the case, on 15 August 1966, the court rendered a decision finding and
concluding that the act of the NAWASA in specifying steel pipes for the project of the city
of Manila and its suburbs, and in awarding the contracts for the supply of steel pipes in the
cases of the Davao and Iloilo Waterworks System, constituted a violation of the provisions
of Republic Act 912; the dispositive portion of the decision reads as follows:
(a) On the supplemental complaint, making permanent the preliminary injunction
dated September 2, 1965, enjoining the defendant or its representatives and
agents from formalizing or implementing the award for the construction of the
Davao Waterworks Project in respect of the award of pipes to be used therein;
rescinding the award made in favor of Tirso del Rosario; and ordering the
reappraisal of the bids with a view to complying with the provisions of Republic
Act No 912;
(b) On the second supplemental complaint ordering the issuance of a permanent
injunction to enjoin the defendants or its agents and representatives from
formalizing the award of the contract for the furnishing of 18" steel pipes for the
Iloilo Waterworks System; ordering a new bidding for the said project so as to
16
 include in the call for bids for the supply and delivery of materials, asbestos
cement pipes, as well as CCI pipes; and rescinding the award of the contract in
favor of the Regal Trading Corporation;
(c) On the third supplemental complaint, making permanent the preliminary
injunction dated December 14, 1965, or any other subsequent date calling for
imported steel pipes from 30" to 42" diameter for the interim Development of
Waterworks System for Manila and suburbs; and ordering the defendant to
specify asbestos cement pressure pipes for the said project; and
(d) Ordering the defendants to pay the costs.
From the decision, NAWASA appealed to this Court.
Appellant contends that the provisions of Republic Act 912, are applicable only to
construction or repair works undertaken by the Government. It argues, that since the
NAWASA, though a public corporation, is not a municipal corporation or agency of the
State empowered to regulate or administer the local affairs of a town or city,2 nor one of the
various arms of the government through which political authority is made effective in the
Islands, consequently, the NAWASA should not be included within the meaning of the term
"Government" as used in the law.3 It is to be noted, however, that Section 2 of the Revised
Administrative Code defining the term "Government" which is heavily relied upon by the
appellant recognizes an exception: "when a different meaning for the word or phrase is
given a particular statute or is plainly to be collected from the context or connection where
the term is used." In this context of the law, the term "government" without any qualification
as used in Republic Act 912, should be construed in its implied sense and not in the strict
signification of the term "Government of the Philippines" as the political entity through
which political authority is exercised. A comparative analysis of Republic Act 912 and
Commonwealth Act 138, otherwise known as the "Flag Law" the latter "An Act to give
Native Products and Domestic Entities the Preference in the Purchase of Articles for the
Government", and the former "An Act to Require the Use, Under Certain Conditions, of
Philippine Made Materials or Products in Government Projects or Public Works
Construction, Whether Done Directly by the Government or Awarded thru Contracts",
discloses that both relate to the same subject matter and have the same nationalistic
purpose or object: to give preference to locally produced materials in purchases, works or
projects of the Government. The oberservation that Commonwealth Act 138 expressly
includespurchases by Government-owned companies, while Republic Act 912 merely
relates to construction or repair work done by the Government, is no argument for the
proposition that government-owned or controlled corporations have been excepted from
the operation of the latter law, for it is clear that Commonwealth Act 138 also ordains that
the Purchase and Equipment Division of government-owned companies authorized to
purchase or contract for materials and supplies for public use, buildings, or public works,
shall give preference to locally produced materials or products. Being statutes in pari
materia they should be construed together to attain the purpose of an expressed national
policy. Thus, it has been aptly stated:
On the presumption that whenever the legislature enacts a provision it has in
mind the previous statutes relating to the same subject matter, it is held that in
the absence of any express repeal or amendment therein, the new provision was
enacted in accord with the legislative policy embodied in those prior statutes, and
they all should be construed together. Provisions in an act which are omitted in
another act relating to the same subject matter will be applied in a proceeding
under the other act, when not inconsistent with its purpose. Prior statutes relating
to the same subject matter are to be compared with the new provisions; and if
possible by reasonable construction, both are to be construed that effect is given
to every provision of each. Statutes in pari materia although in apparent conflict,
are so far as reasonably possible construed to be in harmony with each other.4
The main objective of the Government is to develop our domestic industries so that the
country will be economically self-sufficient. And both Commonwealth Act 138 and Republic
Act 912 aim to contribute to the realization of the aforesaid nationalistic policy by requiring,
the use of Philippine made products or materials,
whenever available, practicable and usable in government construction work or repair
projects. The alleged conflict between the two laws is more apparent than real, and should
not be allowed to defeat the purpose of these laws. We have to declare, therefore, that the
NAWASA, like any other corporation exercising proprietary or governmental functions
should be deemed embraced within the term "Government" found in Republic Act 912, and
in the repair or construction of their works or projects or the purchase of materials therefor,
local materials should be given preference when available, practicable and usable.
The next issue for consideration is: Did the NAWASA violate the provisions of Republic Act
912?
Appellant vehemently denies the charge and decries the holding of the lower court
appealed from that in specifying steel pipes in the call for bids for the supply of materials
for the waterworks projects under consideration it had defied the mandate of the law.
Appellant insists that at the time it called for bids for the Davao project, followed by the call
for the supply of materials, for the Iloilo project, herein appellee's plant was only capable of
producing asbestos cement pressure pipes up to 12 inches diameter; while at the time the
call for bids for the supply of materials for the Interim Project of Manila and suburbs was
advertised, the largest size of asbestos cement pipes available were of 24 inches being
produced at the time by another local manufacturer, the Eternit Corporation, which never
protested against the bids in question.
We have reexamined the record of the case with painstaking solicitude and, instead, We
find the facts indubitable and conclusive that the C & C Commercial Corporation had not
therefore and even up to the present time ever produced pipes larger than 12 inches in
diameter. Said appellee corporation has implicitly admitted this as a fact; and although it
claims to have a complete plant that is equipped with the necessary machinery,
technicians and skilled laborers capable of producing pipes in the sizes called for in those
bids (18 to 42 inches in diameter) had the NAWASA specified them in asbestos cement,
the weakness of the argument is at once exposed by a mere examination of the pertinent
evidence adduced during the trial of the case on this particular point. The claim is belied by
Leopoldo del Rosario, a staff civil an engineer of the NAWASA, who testified as follows:
Q. Engineer Del Rosario, what is the limitation of the local asbestos
cement pressure pipes that are locally manufactured in the Philippines?
A. We based on NAWASA's experience, we have purchased only
sizes up to 12 inches, but on certification of the Bureau of Public Works,
a report has been submitted to us that asbestos cement pressure pipes
(is) being manufactured by one local manufacturing company in the
Philippines, the Eternit Corporation, which is a pipe manufacturer. and
we have recently purchased pipes for the Manila interim project of sizes
up to 24 inches non-pressure pipes.
17
 Q. Is there any other local manufacturer of asbestos cement
pressure pipes besides C & C Commercial Corporation?
A. None, sir, only the C & C Commercial Corporation.5
Q. Engineer del Rosario, as staff civil engineer and the specification
engineer, member-secretary of the Pre-Qualifications Committee and
the present chairman of all the bidding committees of the NAWASA, do
you know if C & C Commercial Corporation, the plaintiff herein, is
manufacturing asbestos cement pressure pipes from sizes thirty inches
and up in diameter?
A. The company does not manufacture size beyond twelve inches.
Q. Why do you say that the C & C Commercial Corporation is not
manufacturing asbestos cement pressure. pipes beyond twelve inches?
A. Because we had bi-yearly inspection of all local plants here as a
matter of policy of the committee to determine the capacity or capability
of the local manufacturers to supply and even to bid. So every six
months the pre-qualifications, committee in collaboration with the
procurement inspect all the facilities of the chemical producing plant,
this cast iron and asbestos plant, the galvanized iron pipe plant, these
are regularly inspected every six months and so the pre-qualifications
would know what is available.6
And the foregoing testimony relative to the "non-availability" of appellee's products in sizes
above 12 inches in diameter was corroborated by Mrs. Clara Reyes Pastor, herein
appellee corporation's President, who declared as follows:
Q. Is it not a fact Mrs. Reyes, that the sizes of asbestos cement
pressure pipes locally manufactured by you and which you furnish the
NAWASA is only 12 inches in diameter? Yes or No ?
A. Yes, sir, because that is the only pipe required at the time I
delivered it.
Q. And the asbestos cement pressure pipes from sizes 12 to 42
inches that you have supplied the NAWASA in the past, they were all
imported by you?
A. Yes, sir.
Q. I heard you testify Mrs. Reyes, that in case you win in this
particular bidding, you intend to import equipments from abroad, is that
correct?
A. Not equipments, only mandril.
Q. So that presently what is the biggest size of mandril that you
have?
A. I have a 16-inch mandril the biggest of them all.7
From the foregoing testimony of witnesses, and in the light of other evidence submitted by
the parties, the following may be deduced: that it is the practice of the NAWASA — which
we find both practical and logical — to send out its own men to the various local
manufacturing plants for the purpose of knowing the availability of materials needed for its
projects; that at the time it specified 18 and 24 inches diameter steel pipes for the Davao
and Iloilo waterworks projects, there were no locally produced materials in said sizes; and
that with respect to those sizes that were already available, the NAWASA has actually
specified and used them in various other construction and repair works even without the
certification of the Director of Public Works. We really do not see Our way clear how herein
appellee could have charged that the NAWASA had discriminated against its products
under the circumstances when its own president admits that it has supplied the NAWASA
before locally produced asbestos cement pressure pipes up to 12 inches diameter only
and all those with diameters above 12 inches were of foreign manufacture. The evidence,
therefore, is conclusive that locally produced asbestos pipes above 12 inches in diameter
were not available for purposes of claiming any preference under the provisions of
Republic Act 912. And this conclusion becomes even more cogent if We are to consider
the fact that C & C Commercial Corporation failed to produce the necessary certification
from the Director of Public Works to show that its products were already certified as
available, practicable and usable at the time that the call for bids for the supply of materials
for the Davao, Iloilo and Manila Interim projects were made to give some semblance of the
right it claims to have been violated.
Of course, appellee points out the fact that it has subsequently secured the necessary
certification from the Director of Public Works certifying to the availability, practicability and
durability of the asbestos cement pressure pipes produced from its plant. We agree, and
there should be no quarrel at all that with respect to pipes of 4 to 12 inches in diameter
which it is actually producing now, the preference claimed under the law may be allowed.
Be that as it may, however, the certification referred to did not in any way improve its
position; for the stubborn fact still remains that at the time said certification was issued on
July 6,1966, C & C Commercial Corporation was actually producing asbestos pipe up to 12
inches only, which its existing equipment or machinery, when inspected by a
representative of the Office that issued the certification, was found capable of producing.
Hence, We cannot subscribe to the holding of the court below that locally produced
asbestos cement pipes above 12 inches in diameter may be considered "'available" within
the meaning of Republic Act 912 simply because the President of herein appellee
corporation n had manifested or promised that it can procure bigger mandrels worth
$25,000.00 fom abroad and will be able to produce pipes in the larger sizes called for in
the questioned bids shortly after their installation, for that would be giving the term
"available" a very strained meaning. It would really be unfair to require in order to be
"available" within the meaning of the law that herein appellee should have in stock the
sizes of pipes called for in the bids in the quantity needed by the appellant; but We cannot
also believe, by any stretch of the imagination, that the Director of Public Works would
certify to the availability, practicability, usability and durability of certain products even
before the machinery, equipment or tools needed to produce said products are actually
bought from abroad and installed in its plant by the manufacturer.
Statutes granting advantages to private persons have in many instances created special
privileges or monopolies for the grantees and thus have been viewed with suspicion and
18
strictly construed. This is altogether appropriate in the majority of situations, for if public
advantage is gained by the grant,it normally appears to be of secondary significance
compared with the advantage gained by the grantee.8 And rights which exist only by virtue
of such statutes come into being only after strict compliance with all the conditions found in
those statutes.9 These rules should apply to the case at bar where the law invoked grants
a preference to locally produced products or materials. Since Republic Act 912 grants
preference only upon the certification of availability, practicability and usability of locally
produced materials by the Director of Public Works, that certification must be existing and
effective before any right arising therefrom may be claimed to have been violated.
Notwithstanding the clear nationalistic policy of the law aforementioned, We cannot, by any
mistaken sympathy towards herein appellee, recognize the existence of its right under the
law alleged to have been violated, which C & C Commercial Corporation has miserably
failed to prove in this case.
With respect to the Interim Project for the City of Manila and its suburbs, it would seem that
the decision appealed from had virtually become moot and academic by reason of the
passage of Republic Act 4858 which authorizes the President to allow the procurement of
supplies necessary for the rehabilitation of the project as an exception to the restrictions
and preferences provided for in Republic Act 912, and the President appears to have
authorized the General Manager of the NAWASA under the said statutory power to
purchase all the pipes and materials necessary for the project by negotiated sales.
For all the foregoing, We find it unnecessary to discuss further the other errors assigned by
the appellant.
WHEREFORE, the decision appealed from is hereby set aside, with costs against the
appellee. The writs of preliminary injunctions issued by the lower court are set, aside, and
declared null and void.
G.R. No. L-33022 April 22, 1975
CENTRAL BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE
CORPORATION, respondents.
BARREDO, J.:ñé+.£ªwph!1
Petition of the Central Bank of the Philippines for review of the decision of the Court of
Appeals in CA-G.R. No. 43638-R affirming the judgment of the Court of First Instance of
Rizal in Civil Case No. Q-10919 sentenced petitioner to pay respondent Ablaza
Construction and Finance Corporation damages for breach contract in that after having
formally and officially awarded, pursuant to the results of the usual bidding to Ablaza in
December 1965 the "contract" for the construction of its San Fernando, La Union branch
building and allowed said contractor to commence the work up to about May, 1966, albeit
without any written formal contract having been executed, the Bank failed and refused to
proceed with the project, unless the plans were revised and a lower price were agreed to
by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint
announced by the then new President of the Philippines on December 30, 1965 and the
Memorandum Circular No. 1 dated December 31, 1965 of the same President.
The factual background of this case is related in the following portions of the decision of
the trial court, which the Court of Appeals affirmed without modification: têñ.£îhqwâ£
Sometime in 1965, defendant Central Bank of the Philippines issued
Invitations to Bid and Instructions to Bidders for the purpose of
receiving sealed proposals for the general construction of its various
proposed regional offices, including the Central Bank regional office
building in San Fernando, La Union.
In response to the aforesaid Invitations to Bid, the plaintiff Ablaza
Construction and Finance Corporation, which was one of the qualified
bidders, submitted a bid proposal for the general construction of
defendant's proposed regional office building in San Fernando, La
Union at the public bidding held on November 3, 1965. The said
proposal was, as required by the defendant accompanied by a cash
bidder's bond in the sum of P275,000.00.
On December 7, 1965, the Monetary Board of the defendant Central
Bank of the Philippines, after evaluating all the bid proposals submitted
during the above-mentioned bidding, unanimously voted and approved
the award to the plaintiff of the contract for the general construction of
defendant's proposed regional office building in San Fernando, La
Union, for the sum of P3,749,000.00 under plaintiff's Proposal Item No.
2.
Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza,
Assistant to the Governor and concurrently the Chairman of the
Management Building Committee of the defendant Central Bank of the
Philippines, set a telegram to the plaintiff, informing the latter that the
contract for the general construction of defendant's proposed regional
office building in San Fernando, La Union, had been awarded to the
plaintiff. The said telegram was followed by a formal letter, also dated
December 10, 1965, duly signed by said Mr. Rizalino L. Mendoza,
confirming the approval of the award of the above-stated contract under
plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00.
Upon receipt of the aforementioned letter, plaintiff immediately
accepted the said award by means of a letter dated December 15,
1965, whereby plaintiff also requested permission for its workmen to
enter the site of the project, build a temporary shelter and enclosure,
and do some clearing job thereat. Accordingly, said permission was
granted by the defendant as embodied in its letter dated January 4,
1966, addressed to the plaintiff..
Within five (5) days from receipt by the plaintiff of the said notice of
award, and several times thereafter Mr. Nicomedes C. Ablaza, an
officer of the plaintiff corporation, went personally to see Mr. Rizalino L.
Mendoza at the latter's Central Bank office to follow up the signing of
the corresponding contract. A performance bond in the total amount of
P962,250.00 (P275,000.00 of which was in cash and P687,250.00 in
the form of a surety bond) was subsequently posted by the plaintiff in
19
 compliance with the above-stated Instructions to Bidders, which bond
was duly accepted by the defendant.
Pursuant to the permission granted by the defendant, as aforesaid,
plaintiff commenced actual construction work on the project about the
middle of January, 1966. On February 8, 1966, by means of a formal
letter, defendant requested the plaintiff to submit a schedule of
deliveries of materials which, according to plaintiff's accepted proposal,
shall be furnished by the defendant. In compliance therewith, on
February 16, 1966, plaintiff submitted to the defendant the schedule of
deliveries requested for.
During the period when the actual construction work on the project was
in progress, Mr. Nicomedes G. Ablaza had several meetings with Mr.
Rizalino L. Mendoza at the latter's office in the Central Bank. During
those meetings, they discussed the progress of the construction work
being then undertaken by the plaintiff of the projects of the defendant in
San Fernando, La Union, including the progress of the excavation work.
Sometime during the early part of March, 1966, Mr. Rizalino L.
Mendoza was at the construction site of the said project. While he was
there, he admitted having seen pile of soil in the premises. At that time,
the excavation work being undertaken by the plaintiff was about 20%
complete. On March 22, 1966, defendant again wrote the plaintiff,
requesting the latter to submit the name of its representative authorized
to sign the building contract with the defendant. In compliance with the
said request, plaintiff submitted to the defendant the name of its duly
authorized representative by means of a letter dated March 24, 1966.
A meeting called by the defendant was held at the conference room of
the Central Bank on May 20, 1966. At the said meeting, the defendant,
thru Finance Secretary Eduardo Romualdez, announced, among other
things, the reduction of the appropriations for the construction of the
defendant's various proposed regional offices, including that of the
proposed San Fernando, La Union regional office building, the
construction of which had already been started by the plaintiff. He also
stated that the Central Bank Associated Architects would be asked to
prepare new plans and designs based on such reduced appropriations.
The defendant, during that same meeting, also advised the plaintiff, thru
Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented
the plaintiff corporation at the said meeting), to stop its construction
work on the Central Bank Regional office building in San Fernando, La
Union. This was immediately complied with by the plaintiff, although its
various construction equipment remained in the jobsite. The defendant
likewise presented certain offer and proposals to the plaintiff, among
which were: (a) the immediate return of plaintiff's cash bidder's bond of
P275,000.00; (b) the payment of interest on said bidder's bond at 12%
per annum; (c) the reimbursement to the plaintiff of the value of all the
work accomplished at the site; (d) the entering into a negotiated
contract with the plaintiff on the basis of the reduced appropriation for
the project in question; and (e) the reimbursement of the premium on
plaintiff's performance bond. Not one of these offers and proposals of
the defendant, however, was accepted by the plaintiff during that
meeting of May 20, 1966.
On June 3, 1966, plaintiff, thru counsel, wrote the defendant,
demanding for the formal execution of the corresponding contract,
without prejudice to its claim for damages. The defendant, thru its
Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to
the said letter of the plaintiff, whereby the defendant claimed that an
agreement was reached between the plaintiff and the defendant during
the meeting held on May 20, 1966. On the following day, however, in its
letter dated June 16, 1966, the plaintiff, thru counsel, vehemently
denied that said parties concluded any agreement during the meeting in
question.
On July 5, 1966, defendant again offered to return plaintiff's cash
bidder's bond in the amount of P275,000.00. The plaintiff, thru counsel,
on July 6, 1966, agreed to accept the return of the said cash bond,
without prejudice, however, to its claims as contained in its letters to the
defendant dated June 3, June 10, and June 16, 1966, and with further
reservation regarding payment of the corresponding interest thereon.
On July 7, 1966, the said sum of P275,000.00 was returned by the
defendant to the plaintiff.
On January 30, 1967, in accordance with the letter of the plaintiff, thru
counsel, dated January 26, 1967, the construction equipment of the
plaintiff were pulled out from the construction site, for which the plaintiff
incurred hauling expenses.
The negotiations of the parties for the settlement of plaintiff's claims out
of court proved to be futile; hence, the present action was instituted by
plaintiff against the defendant." (Pp. 249-256, Rec. on Appeal).
It may be added that the Instructions to Bidders on the basis of which the bid and award in
question were submitted and made contained, among others, the following
provisions: têñ.£îhqwâ£
IB 113.4 The acceptance of the Proposal shall be communicated in
writing by the Owner and no other act of the Owner shall constitute the
acceptance of the Proposal. The acceptance of a Proposal shall bind
the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations
provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
xxx xxx xxx
IB 114.1 The bidder whose proposal is accepted will be required to
appear at the Office of the Owner in person, or, if a firm or corporation,
a duly authorized representative shall so appear, and to execute that
contract within five (5) days after notice that the contract has been
20
 awarded to him. Failure or neglect to do so shall constitute a breach of
agreement effected by the acceptance of the Proposal.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10)
calendar days from the date he receives a copy of the fully executed
Contract, and he shall complete the work within the time specified." (Pp.
18-19 & 58-59, Petitioner-Appellant's Brief.)
In the light of these facts, petitioner has made the following assignment of
errors: têñ.£îhqwâ£
I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE
WAS A PERFECTED CONTRACT BETWEEN PETITIONER
CENTRAL BANK OF THE PHILIPPINES AND RESPONDENT ABLAZA
CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL
CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE
BUILDING AT SAN FERNANDO, LA UNION.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER HAS COMMITTED A BREACH OF CONTRACT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER HAD GIVEN ITS APPROVAL TO THE WORK DONE BY
RESPONDENT ABLAZA CONSTRUCTION & FINANCE
CORPORATION.
IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE
AWARD OF ACTUAL AND COMPENSATORY DAMAGES,
ATTORNEY'S FEES AND RETAINING FEE IS FAIR AND
REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE
FOR COSTS." (Pp. A & B, Petitioner-Appellant's Brief.)
Under the first assigned error, petitioner denotes the major part of its effort to the
discussion of its proposition that there could be no perfected contract in this case, (contrary
to the conclusion of the courts below) because there is no showing of compliance, and in
fact, there has been no compliance with the requirement that there must be a certification
of the availability of funds by the Auditor General pursuant to Section 607 of the Revised
Administrative Code which provides thus: têñ.£îhqwâ£
Section 607. Certificate showing appropriation to meet contract. —
Except in the case of a contract for personal service or for supplies to
be carried in stock, no contract involving an expenditure by the National
Government of three thousand pesos or more shall be entered into or
authorized until the Auditor General shall have certified to the officer
entering into such obligation that funds have been duly appropriated for
such purpose and that the amount necessary to cover the proposed
contract is available for expenditure on account thereof. When
application is made to the Auditor General for the certificate herein
required, a copy of the proposed contract or agreement shall be
submitted to him accompanied by a statement in writing from the officer
making the application showing all obligations not yet presented for
audit which have been incurred against the appropriation to which the
contract in question would be chargeable; and such certificate, when
signed by the Auditor, shall be attached to and become a part of the
proposed contract, and the sum so certified shall not thereafter be
available for expenditure for any other purposes until the Government is
discharged from the contract in question.
Except in the case of a contract for supplies to be carried in stock, no
contract involving the expenditure by any province, municipality,
chartered city, or municipal district of two thousand pesos or more shall
be entered into or authorized until the treasurer of the political division
concerned shall have certified to the officer entering into such contract
that funds have been duly appropriated for such purpose and that the
amount necessary to cover the proposed contract is available for
expenditure on account thereof. Such certificate, when signed by the
said treasurer, shall be attached to and become part of the proposed
contract and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the contract in question is
lawfully abrogated or discharged.
For the purpose of making the certificate hereinabove required ninety
per centum of the estimated revenues and receipts which should
accrue during the current fiscal year but which are yet uncollected, shall
be deemed to be in the treasury of the particular branch of the
Government against which the obligation in question would create a
charge." (Pp. 23-25, Petitioner-Appellant's Brief.)
It is contended that in view of such omission and considering the provisions of Section 608
of the same code to the effect that "a purported contract entered into contrary to the
requirements of the next preceding section hereof shall be wholly void", "no contract
between the petitioner and respondent Ablaza Construction and Finance Corporation for
the general construction of the proposed regional office building of the Central Bank in San
Fernando, La Union, was ever perfected because only the first stage, that is the award of
the contract to the lowest responsible bidder, respondent Ablaza Construction and Finance
Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And in support of this
pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wright thus: têñ.£îhqwâ£
The aforesaid requirements of the Revised Administrative Code for the
perfection of government contracts have been upheld by this Honorable
Court in the case of Tan C. Tee Co. vs. Wright, 53 Phil. 172, in which
case it was held that the award of the contract to the lowest bidder does
not amount to entering into the contract because of the requirement of
Section 607 of the Revised Administrative Code that a copy of the
proposed contract shall be submitted to the Auditor General together
with a request for the availability of funds to cover the proposed
contract. Thus, this Honorable Court held: têñ.£îhqwâ£
'To award the contract to the lowest responsible
bidder is not the equivalent of entering into the
contract. Section 607 of the Administrative Code
requires that a copy of the proposed contract shall
21
 be submitted along with the request for the
certificate of availability of funds, but there could be
no proposed contract to be submitted until after the
award was made.'
And to guide government authorities in the letting of government
contracts, this Honorable Court, in said case of Tan C. Tee vs. Wright,
supra, laid down the procedure which should be followed, as
follows: têñ.£îhqwâ£
`PROCEDURE WHICH SHOULD BE FOLLOWED
IN THE LETTING OF CONTRACTS FOR INSULAR
WORKS. — The procedure which should be
followed in the letting of contracts for Insular works
is the following: First, there is an award of the
contract by the Director of Public Works to the
lowest responsible bidder. Second, there is a
certificate of availability of funds to be obtained from
the Insular Auditor, and in some cases from the
Insular Treasurer, to cover the proposed contract.
And third, there is a contract to be executed on
behalf of the Government by the Director of Public
Works with the approval of the department head.'"
(Pp. 27-28, Petitioner-Appellant's Brief.)
The contention is without merit. To start with, the record reveals that it is more of an
afterthought. Respondent never raised this question whether in its pleadings or at the
hearings in the trial court. We have also read its brief in the appellate court and no mention
is made therein of this point. Not even in its memorandum submitted to that court in lieu of
oral argument is there any discussion thereof, even as it appears that emphasis was given
therein to various portions of the Revised Manual of Instructions to Treasurers regarding
the perfection and constitution of public contracts. In fact, reference was made therein to
Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959,
requiring "all contracts of whatever nature involving P10,000 or more to be entered into by
all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the Auditor
General for examination and review before the same are perfected and/or consummated,
etc.", without mentioning, however, that said administrative order was no longer in force,
the same having been revoked on January 17, 1964 by President Macapagal under
Administrative Order No. 81, s. 1964.
Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded
in the answer may not be raised for the first time on appeal, petitioner's position cannot be
sustained. Indeed, in the Court of Appeals, petitioner could only bring up such questions as
are related to the issues made by the parties in their pleadings, particularly where factual
matters may be involved, because to permit a party to change his theory on appeal "would
be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore,
under Section 7 of Rule 51, the appellate court cannot consider any error of the lower court
"unless stated in the assignment of errors and properly argued in the brief."
Even prescinding from this consideration of belatedness, however, it is Our considered
view that contracts entered into by petitioner Central Bank are not within the contemplation
of Sections 607 and 608 cited by it. Immediately to be noted, Section 607 specifically
refers to "expenditure(s) of the National Government" and that the term "National
Government" may not be deemed to include the Central Bank. Under the Administrative
Code itself, the term "National Government" refers only to the central government,
consisting of the legislative, executive and judicial departments of the government, as
distinguished from local governments and other governmental entities and is not
synonymous, therefore, with the terms "The Government of the Republic of the
Philippines" or "Philippine Government", which are the expressions broad enough to
include not only the central government but also the provincial and municipal governments,
chartered cities and other government-controlled corporations or agencies, like the Central
Bank. (I, Martin, Administrative Code, p. 15.)
To be sure the Central Bank is a government instrumentality. But it was created as an
autonomous body corporate to be governed by the provisions of its charter, Republic Act
265, "to administer the monetary and banking system of the Republic." (Sec. 1) As such, it
is authorized "to adopt, alter and use a corporate seal which shall be judicially noticed; to
make contracts; to lease or own real and personal property, and to sell or otherwise
dispose of the same; to sue and be sued; and otherwise to do and perform any and all
things that may be necessary or proper to carry out the purposes of this Act. The Central
Bank may acquire and hold such assets and incur such liabilities as result directly from
operations authorized by the provisions of this Act, or as are essential to the proper
conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget
prepared by its own Monetary Board and otherwise appropriates money for its operations
and other expenditures independently of the national budget. It does not depend on the
National Government for the financing of its operations; it is the National Government that
occasionally resorts to it for needed budgetary accommodations. Under Section 14 of the
Bank's charter, the Monetary Board may authorize such expenditures by the Central Bank
as are in the interest of the effective administration and operation of the Bank." Its
prerogative to incur such liabilities and expenditures is not subject to any prerequisite
found in any statute or regulation not expressly applicable to it. Relevantly to the issues in
this case, it is not subject, like the Social Security Commission, to Section 1901 and
related provisions of the Revised Administrative Code which require national government
constructions to be done by or under the supervision of the Bureau of Public Works. (Op.
of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the
Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in
no other instance has the Bank ever considered itself subject thereto.
In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of
Section 607 of the Administrative Code thus:
The second question to be considered has reference to the applicability of section 607 of
the Administrative Code to contracts made by the City of Manila. In the second paragraph
of said section it is declared that no contract involving the expenditure by any province,
municipality, township, or settlement of two thousand pesos or more shall be entered into
or authorized until the treasurer of the political division concerned shall have certified to the
officer entering into such contract that funds have been duly appropriated for such purpose
and that the amount necessary to cover the proposed contract is available for expenditure
on account thereof. It is admitted that no such certificate was made by the treasurer of
Manila at the time the contract now in question was made. We are of the opinion that the
provision cited has no application to contracts of a chartered city, such as the City of
Manila. Upon examining said provision (sec. 607) it will be found that the term chartered
city, or other similar expression, such as would include the City of Manila, is not used; and
it is quite manifest from the careful use of terms in said section that chartered cities were
intended to be excluded. In this connection the definitions of "province," "municipality," and
"chartered city," given in section 2 of the Administrative Code are instructive. The
22
circumstance that for certain purposes the City of Manila has the status both of a province
and a municipality (as is true in the distribution of revenue) is not inconsistent with this
conclusion."1
We perceive no valid reason why the Court should not follow the same view now in respect
to the first paragraph of the section by confirming its application only to the offices
comprised within the term National Government as above defined, particularly insofar as
government-owned or created corporations or entities having powers to make
expenditures and to incur liabilities by virtue of their own corporate authority independently
of the national or local legislative bodies, as in the case of the petitioner herein, are
concerned. Whenever necessary, the Monetary Board, like any other corporate board,
makes all required appropriations directly from the funds of the Bank and does not need
any official statement of availability from its treasurer or auditor and without submitting any
papers to, much less securing the approval of the Auditor General or any outside authority
before doing so. Indeed, this is readily to be inferred from the repeal already mentioned
earlier of Administrative Order No. 290, s. 1959, which petitioner tried to invoke,
overlooking perhaps such repeal. In other words, by that repeal, the requirement that the
Central Bank should submit to the Auditor General for examination and review before
contracts involving P10,000 or more to be entered into by it "before the same are perfected
and/or consummated" had already been eliminated at the time the transaction herein
involved took place. Consequently, the point of invalidity pressed, belatedly at that, by
petitioner has no leg to stand on.
The other main contention of petitioner is that the purported or alleged contract being relied
upon by respondent never reached the stage of perfection which would make it binding
upon the parties and entitle either of them to sue for specific performance in case of
breach thereof. In this connection, since the transaction herein involved arose from the
award of a construction contract2 by a government corporation and the attempt on its part
to discontinue with the construction several months after such award had been accepted
by the contractor and after the latter had already commenced the work without any
objection on the part of the corporation, so much so that entry into the site for the purpose
was upon express permission from it, but before any written contract has been executed, it
is preferable that certain pertinent points be clarified for the proper resolution of the issue
between the parties here and the general guidance of all who might be similarly situated.
Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in
this opinion of the Instruction to Bidders: têñ.£îhqwâ£
IB 113.4 The acceptance of the Proposal shall be communicated in
writing by the Owner and no other act of the Owner shall constitute the
acceptance of the Proposal. The acceptance of a Proposal shall bind
the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations
provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10)
calendar days from the date he receives a copy of the fully executed
Contract, and he shall complete the work within the time specified." (Pp.
18-19, Petitioner-Appellant's Brief.)
Petitioner insists that under these provisions, the rights and obligations of the Bank and
Ablaza could become effective and binding only upon the execution of the formal contract,
and since admittedly no formal contract has yet been signed by the parties herein, there is
yet no perfected contract to speak of and respondent has, therefore, no cause of action
against the Bank. And in refutation of respondent's argument that it had already started the
work with some clearing job and foundation excavations, which has never been stopped by
petitioner who had previously given express permission to respondent to enter the jobsite,
build a temporary shelter and enclosures thereon, petitioner counters that under the above
instructions, respondent is supposed to commence the work "within ten (10) calendar days
from the date he receives a copy of the fully executed Contract," and for said respondent to
have started actual construction work before any contract has been signed was
unauthorized and was consequently undertaken at his own risk, all the above
circumstances indicative of estoppel notwithstanding.
We are not persuaded that petitioner's posture conforms with law and equity. According to
Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the
office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized
representative (thereof), and to execute the contract within five (5) days after notice that
the contract has been awarded to him. Failure or neglect to do so shall constitute a breach
of agreement effected by the acceptance of the Proposal." There can be no other meaning
of this provision than that the Bank's acceptance of the bid of respondent Ablaza effected
an actionable agreement between them. We cannot read it in the unilateral sense
suggested by petitioner that it bound only the contractor, without any corresponding
responsibility or obligation at all on the part of the Bank. An agreement presupposes a
meeting of minds and when that point is reached in the negotiations between two parties
intending to enter into a contract, the purported contract is deemed perfected and none of
them may thereafter disengage himself therefrom without being liable to the other in an
action for specific performance.
The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied
upon by petitioner have to be reconciled with the other paragraphs thereof to avoid lack of
mutuality in the relation between the parties. This invoked paragraph stipulates that "the
acceptance of (respondent's) Proposal shall bind said respondent to execute the Contract
and to be responsible for liquidated damages as herein provided." And yet, even if the
contractor is ready and willing to execute the formal contract within the five (5) day period
given to him, petitioner now claims that under the invoked provision, it could refuse to
execute such contract and still be absolutely free from any liability to the contractor who, in
the meantime, has to make necessary arrangements and incur expenditures in order to be
able to commence work "within ten (10) days from the date he receives a copy of the fully
executed Contract," or be responsible for damages for delay. The unfairness of such a
view is too evident to be justified by the invocation of the principle that every party to a
contract who is sui juris and who has entered into it voluntarily and with full knowledge of
its unfavorable provisions may not subsequently complain about them when they are being
enforced, if only because there are other portions of the Instruction to Bidders which
indicate the contrary. Certainly, We cannot sanction that in the absence of unavoidable just
reasons, the Bank could simply refuse to execute the contract and thereby avoid it entirely.
Even a government owned corporation may not under the guise of protecting the public
interest unceremoniously disregard contractual commitments to the prejudice of the other
party. Otherwise, the door would be wide open to abuses and anomalies more detrimental
to public interest. If there could be instances wherein a government corporation may
justifiably withdraw from a commitment as a consequence of more paramount
considerations, the case at bar is not, for the reasons already given, one of them.
23
As We see it then, contrary to the contention of the Bank, the provision it is citing may not
be considered as determinative of the perfection of the contract here in question. Said
provision only means that as regards the violation of any particular term or condition to be
contained in the formal contract, the corresponding action therefor cannot arise until after
the writing has been fully executed. Thus, after the Proposal of respondent was accepted
by the Bank thru its telegram and letter both dated December 10, 1965 and respondent in
turn accepted the award by its letter of December 15, 1965, both parties became bound to
proceed with the subsequent steps needed to formalize and consummate their agreement.
Failure on the part of either of them to do so, entities the other to compensation for the
resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103
Phil. 444. We held therein that the award of a contract to a bidder constitutes an
acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect
a contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that
the bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation
arising from the unqualified acceptance of his offer. Much less did it affect the existence of
a contract between him and respondent". (at p. 452)
It is neither just nor equitable that Valencia should be construed to have sanctioned a one-
sided view of the perfection of contracts in the sense that the acceptance of a bid by a duly
authorized official of a government-owned corporation, financially and otherwise
autonomous both from the National Government and the Bureau of Public Works, insofar
as its construction contracts are concerned, binds only the bidder and not the corporation
until the formal execution of the corresponding written contract.
Such unfairness and inequity would even be more evident in the case at bar, if We were to
uphold petitioner's pose. Pertinently to the point under consideration, the trial court found
as follows:
To determine the amount of damages recoverable from the defendant, plaintiff's claim for
actual damages in the sum of P298,433.35, as hereinabove stated, and the
recommendation of Messrs. Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in
their separate reports (Exhs. "13" and "15"), in the amounts of P154,075.00 and
P147,500.00, respectively, should be taken into account.
There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the
preparation of the jobsite, construction of bodegas, fences field offices, working sheds, and
workmen's quarters; that the value of the excavation work accomplished by the plaintiff at
the site was P113,800.00; that the rental of the various construction equipment of the
plaintiff from the stoppage of work until the removal thereof from the jobsite would amount
to P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00 from
November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for
removing said construction equipment from the jobsite to Manila, plaintiff paid a hauling fee
of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as
required under its contract with the defendant, the former was obliged to pay a premium of
P2,216.55; and that the plaintiff was likewise made to incur the sum of P32,406.50,
representing the 3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these
expenditures, totalling P298,433.35 is attached to the records of this case (Annex "B",
Complaint) and forms part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the
witness for the plaintiff, properly identified said document and affirmed the contents thereof
when he testified during the hearing. The same witness likewise explained in detail the
various figures contained therein, and identified the corresponding supporting papers.
It is noteworthy, in this connection, that there is nothing in the records that would show that
the defendant assailed the accuracy and/or reasonableness of the figures presented by the
plaintiff; neither does it appear that the defendant offered any evidence to refute said
figures.
While it is claimed by the defendant that the plaintiff incurred a total expense of only
P154,075.00 according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according
to the report of Mr. Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To
cite only an instance, in estimating, the value of the excavation work, the defendant merely
measured the depth, length and width of the excavated, area which was submerged in
water, without ascertaining the volume of rock and the volume of earth actually excavated
as was done by the plaintiff who prepared a detailed plan showing the profile of the
excavation work performed in the site (Exh. "B"). Likewise, the unit measure adopted by
the defendant was in cubic meter while it should be in cubic yard. Also the unit price used
by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic
yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly
indicated in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The
Court, therefore, can not give credence to defendant's, aforementioned estimates in view
of their evident inaccuracies.
The Court finds from the evidence adduced that Plaintiff claim for actual damages in the
sum of P298,433.35 is meritorious.
The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the
breach of the contract in question by the defendant. As previously stated, the plaintiff
seeks to recover the amount of P814,190.00 by way of unrealized expected profit. This
figure represents 18% of P4,523,275.00 which is the estimated direct cost of the subject
project.
As it has been established by the evidence that the defendant in fact was guilty of breach
of contract and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds
that the plaintiff is entitled to recover from the defendant unrealized expected profit as part
of the actual or compensatory damages. Indemnification for damages shall comprehend
not only the value of the loss suffered, but also that of the profits which the obligee failed to
obtain (Art. 2200, New Civil Code).
Where a party is guilty of breach of contract, the other party is entitled to recover the profit
which the latter would have been able to make had the contract been performed (Paz P.
Arrieta, et al., plaintiffs-appellees, vs. National Rice Corporation defendant-appellant, G.R.
No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs.
Tan Chuco, defendant-appellant, 38 Phil. 392).
Regarding the expected profit, a number of questions will have to be answered: Is the 18%
unrealized expected profit being claimed by the plaintiff reasonable? Would the plaintiff be
entitled to the whole amount of said expected profit although there was only partial
performance of the contract? Would the 18% expected profit be based on the estimated
direct cost of the subject in the amount of P4,523,275.00, or on plaintiff's bid proposal of
P3,749,000.00?
On the question of reasonableness of the 18% expected profit, the Court noted that
according to defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's
profit for a project similar in magnitude as the one involved in the present case would be
24
ample and reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced civil
engineer who has been actively engaged in the construction business, testified that 15% to
20% contractor's profit would be in accordance with the standard engineering practice.
Considering the type of the project involved in this case, he stated, the contractor's profit
was placed at 18%. Taking into consideration the fact that this percentage of profit is even
lower than what defendant's witness considered to be ample and reasonable, the Court
believes that the reasonable percentage should be 18% inasmuch as the actual work was
not done completely and the plaintiff has not invested the whole amount of money called
for by the project." (Pp. 263-268, Record on Appeal.)
These findings have not been shown to Us to be erroneous. And additional and
clarificatory details, which We find to be adequately supported by the record, are stated in
Respondents' brief thus: têñ.£îhqwâ£
23. In a letter dated January 4, 1966, petitioner Central Bank, through
the same Mr. Mendoza, to this request of respondent Ablaza. (Annex
"D-1" to the Partial Stipulation of Facts, R.A., p. 146).
24. Acting upon this written permission, respondent Ablaza immediately
brought its men and equipment from Manila to the construction site in
San Fernando, La Union, and promptly commenced construction work
thereat. This work, consisted of the setting up of an enclosure around
the site, the building of temporary shelter for its workmen, and the
making of the necessary excavation works. (Commissioner's Report,
R.A., p. 181).
25. Following the commencement of such construction work, petitioner
Central Bank, through a letter dated February 8, 1966, formally
requested respondent Ablaza to submit to petitioner the
following:têñ.£îhqwâ£
(a) A schedule of deliveries of material which, under
the terms of respondent Ablaza's approved
proposal, were to be furnished by petitioner.
(b) A time-table for the accomplishment of the
construction work.
In short, as early as February 8, 1966, or more than
three months prior to petitioner's repudiation of the
contract in question the latter (petitioner) already
took the above positive steps it compliance with its
own obligations under the contract.
26. Acting upon petitioner's above letter of February 8, 1966, on
February 16, 1966, respondent Ablaza submitted the schedule of
deliveries requested by petitioner. (Commissioner's Report, R.A., p.
182; Decision id., 252; also Exhs. "D" to "D-7", inclusive.)
27. During the period of actual construction, respondent Ablaza, on
several occasions, actually discussed the progress of the work with Mr.
Mendoza. In addition, in March 1966, the latter (Mr. Mendoza)
personally visited the construction site. There he saw the work which
respondent had by that time already accomplished which consisted of
the completion of approximately 20% of the necessary excavation
works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252).
28. Following Mr. Mendoza's visit at the construction site, or more
specifically on March 22, 1966, the latter (Mendoza) wrote to
respondent Ablaza, instructing the latter to formally designate the
person to represent the corporation at the signing of the formal
construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18,
1967).
29. By a letter dated March 24, 1966, respondent Ablaza promptly
complied with the above request. (Exh. "I"; also t.s.n., pp 121-123,
December 18, 1967).
30. Subsequently, respondent Ablaza posted the required performance
guaranty bond in the total amount of P962,250.00, consisting of (a) a
cash bond in the amount of P275,000.00, and (b) a surety bond, PSIC
Bond No. B-252-ML, dated May 19, 1966, in the amount of
P687,250.00. In this connection, it is important to note that the specific
purpose of this bond was to guarantee "the faithful Performance of the
Contract" by respondent Ablaza. (Partial Stipulation of Facts, par. 6,
R.A., p. 141). This performance guaranty bond was duly accepted by
petitioner.(Id.)
31. However, on May 20, 1966, petitioner Central Bank called for a
meeting with representatives of respondent Ablaza and another
contractor. This meeting was held at the Conference Room of the
Central Bank Building. At this meeting, then Finance Secretary Eduardo
Romualdez, who acted as the representative of petitioner, announced
that the Monetary Board had decided to reduce the appropriations for
the various proposed Central Bank regional office buildings, including
the one for San Fernando, La Union.
32. In view of this decision, Secretary Romualdez informed respondent
Ablaza that new plans and designs for the proposed regional office
building in San Fernando would have to be drawn up to take account of
the reduction in appropriation. Secretary Romualdez then advised
respondent to suspendwork at the construction site in San Fernando in
the meanwhile. (Decision, R.A., pp. 253-254).
33. After making the above announcements, Secretary Romualdez
proposed that all existing contracts previously entered into between
petitioner Central Bank and the several winning contractors (among
them being respondent Ablaza) be considered set aside.
34. Obviously to induce acceptance of the above proposal, Secretary
Romualdez offered the following concessions to respondent
Ablaza: têñ.£îhqwâ£
25
 (a) That its cash bond in the amount of P275,000.00
be released immediately, and that interest be paid
thereon at the rate of 12% per annum.
(b) That respondent Ablaza be reimbursed for
expenses incurred for the premiums on the
performance bond which it posted, and which
petitioner had already accepted. (Decision, R.A., pp.
253-254).
35. In addition, Secretary Romualdez also proposed the conclusion of a
new contract with respondent Ablaza for the construction of a more
modest regional office building at San Fernando, La Union, on
a negotiated basis. However, the sincerity and feasibility of this
proposal was rendered dubious by a caveat attached to it, as
follows: têñ.£îhqwâ£
'4. Where auditing regulations would permit, the
Central Bank would enter into a negotiated contract
with the said corporation (Ablaza) for the
construction work on the building on the basis of the
revised estimates.' (Annex "8" to Answer, R.A., p.
95).
36. The revised cost fixed for this proposed alternative regional office
building was fixed at a maximum of P3,000,000.00 (compared to
P3,749,000.00 under the contract originally awarded to respondent).
(Annex "6-A" to Answer, R.A., p. 87).
37. Needless perhaps to state, respondent Ablaza rejected the above
proposals (pars. 34 and 35, supra.), and on June 3, 1966, through
counsel, wrote to petitioner demanding the formal execution of the
contract previously awarded to it, or in the alternative, to pay "all
damages and expenses suffered by (it) in the total amount of
P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-91; Decision, id.,
p. 254).
38. In a letter dated June 15, 1966, petitioner Central Bank, through
Deputy Governor Amado R. Brinas, replied to respondent Ablaza's
demand denying any liability on the basis of the following
claim: têñ.£îhqwâ£
`(That, allegedly) in line with the agreement ...
reached between the Central Bank and Ablaza
Construction and Finance Corporation at a meeting
held ... on May 20, 1966,' "whatever agreements
might have been previously agreed upon between
(petitioner and respondent) would be considered set
aside." (Decision, R.A., p. 255; Annex "8" to Answer,
id., pp. 93-96.)
39. The above claim was, however, promptly and peremptorily denied
by respondent Ablaza, through counsel, in a letter dated June 16, 1966.
(Partial Stipulation of Facts, par. 9, R.A., p. 142, also Annex "G"
thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)"
(Appellee's Brief, pars. 23 to 39, pp. 14-19.)
None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.
Considering all these facts, it is quite obvious that the Bank's insistence now regarding the
need for the execution of the formal contract comes a little too late to be believable. Even
assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable
to the Central Bank, which is doubtful, considering that under the provisions of its charter
already referred to earlier, disbursements and expenditures of the Bank are supposed to
be governed by rules and regulations promulgated by the Monetary Board, in this particular
case, the attitude and actuations then of the Bank in relation to the work being done by
Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual
execution of the written contract is a mere formality which could not materially affect their
respective contractual rights and obligations. In legal effect, therefore, the Bank must be
considered as having waived such requirement.
To be more concrete, from December 15, 1965, when Ablaza accepted the award of the
contract in question, both parties were supposed to have seen to it that the formal contract
were duly signed. Under the Instructions to Bidders, Ablaza was under obligation to sign
the same within five (5) days from notice of the award, and so, he called on the Bank at
various times for that purpose. The Bank never indicated until May, 1966 that it would not
comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a
"schedule of deliveries of materials" which under the terms of the bid were to be furnished
by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to
who would be Ablaza's representative to sign the formal contract. In the meanwhile, no
less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of
the Central Bank who had been signing for the Bank all the communications regarding the
project at issue, had visited the construction site in March, 1966, just before he wrote the
request abovementioned of the 22nd of that month for the nomination of the representative
to sign the formal contract, and actually saw the progress of the work and that it was being
continued, but he never protested or had it stopped. All these despite the fact that the
Memorandum Circular being invoked by the Bank was issued way back on December 31,
1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of
Ablaza regarding the idea of changing the plans to more economical ones, there was no
mention of the non-execution of the contract as entitling the Bank to back out of it
unconditionally. Rather, the talk, according to the findings of the lower courts, was about
the possibility of setting aside whatever agreement there was already. Under these
circumstances, it appears that respondent has been made to believe up to the time the
Bank decided definitely not to honor any agreement at all that its execution was not
indispensable to a contract to be considered as already operating and respondent could
therefore proceed with the work, while the contract could be formalized later.
Petitioner contends next that its withdrawal from the contract is justified by the policy of
economic restraint ordained by Memorandum Circular No. 1. We do not see it that way.
Inasmuch as the contract here in question was perfected before the issuance of said
Memorandum Circular, it is elementary that the same may not be enforced in such a
manner as to result in the impairment of the obligations of the contract, for that is not
constitutionally permissible. Not even by means of a statute, which is much more weighty
than a mere declaration of policy, may the government issue any regulation relieving itself
26
or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine
Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.)
Specially in the case of the Central Bank, perhaps, it might not have been really imperative
that it should have revised its plans, considering that it has its own resources independent
of those of the national government and that the funds of the Central Bank are derived
from its own operations, not from taxes. In any event, if the memorandum circular had to
be implemented, the corresponding action in that direction should have been taken without
loss of time and before the contract in question had taken deeper roots. It is thus clear that
in unjustifiably failing to honor its contract with respondent, petitioner has to suffer the
consequences of its action.
The last issue submitted for Our resolution refers to the amount of damages awarded to
Ablaza by the trial court and found by the Court of Appeals to be "fair and reasonable."
Again, after a review of the record, We do not find sufficient ground to disturb the appealed
judgment even in this respect, except as to attorney's fees.
There are three principal items of damages awarded by the courts below, namely: (1)
compensation for actual work done in the amount of P298,433.35, (2) unrealized profits
equivalent to 18% of the contract price of P3,749,000 or P674,820.00 and (3) 15% of the
total recovery as attorney's fees in addition to the P5,000 already paid as retaining fee. All
of these items were the subject of evidence presented by the parties. According to the
Court of Appeals: têñ.£îhqwâ£
As regard the accuracy and reasonableness of the award for damages,
both actual and compensatory, it is to be noted that the trial court
subjected the Commissioner's report and the evidence adduced therein
to a careful scrutiny. Thus, when the appellant called the trial court's
attention to the fact that the P814,190.00 unrealized expected profit
being claimed by appellee represented 18% of P4,523,275.00 which
was the estimated cost of the project, while the contract awarded to
appellee was only in the amount of P3,749,000.00 as per its bid
proposal, the Court made the necessary modification. It is further to be
noted that the amount of 18% of the estimated cost considered in the
said award is much less than that given by appellant's own expert
witness, Ambrosio R. Flores. He testified that 25% as contractor's profit
"would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)" (p. 17
A, Appellant's brief.)
Basically, these are factual conclusions which We are not generally at liberty to disregard.
And We have not been shown that they are devoid of reasonable basis.
There can be no dispute as to the legal obligation of petitioner to pay respondent the actual
expenses it has incurred in performing its part of the contract.
Upon the other hand, the legal question of whether or not the Bank is liable for unrealized
profits presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10
SCRA 79, this Court sustained as a matter of law the award of damages n the amount of
U.S. $286,000, payable in Philippine Currency, measured in the rate of exchange
prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized
profits of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation,
the Naric failed to proceed with the purchase of imported rice after having accepted and
approved the bid of Arrieta and after she had already closed her contract with her foreign
sellers.
Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the
Civil Code thus: têñ.£îhqwâ£
ART. 2200. Identification for damages shall comprehend not only the
value of the loss suffered, but also that of the profits, which the obligee
failed to obtain..
ART. 2201. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the
natural and probable consequences of the breach of the obligation, and
which the parties have forseen or could have reasonably foreseen at
the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall
be responsible for all damages which may be reasonably attributed to
the non- performance of the obligation.
Construing these provisions, the following is what this Court held in Cerrano vs. Tan
Chuco, 38 Phil. 392: têñ.£îhqwâ£
.... Article 1106 (now 2200) of the Civil Code establishes the rule that
prospective profits may be recovered as damages, while article 1107
(now 2201) of the same Code provides that the damages recoverable
for the breach of obligations not originating in fraud (dolo) are those
which were or might have been foreseen at the time the contract was
entered into. Applying these principles to the facts in this case, we think
that it is unquestionable that defendant must be deemed to have
foreseen at the time he made the contract that in the event of his failure
to perform it, the plaintiff would be damaged by the loss of the profit he
might reasonably have expected to derive from its use.
When the existence of a loss is established, absolute certainty as to its
amount is not required. The benefit to be derived from a contract which
one of the parties has absolutely failed to perform is of necessity to
some extent, a matter of speculation, but the injured party is not to be
denied all remedy for that reason alone. He must produce the best
evidence of which his case is susceptible and if that evidence warrants
the inference that he has been damaged by the loss of profits which he
might with reasonable certainty have anticipated but for the defendant's
wrongful act, he is entitled to recover. As stated in Sedgwick on
Damages (Ninth Ed., par. 177):
The general rule is, then, that a plaintiff may recover compensation for
any gain which he can make it appear with reasonable certainty the
defendant's wrongful act prevented him from acquiring, ...'. (See also
Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila Hotel
Co., 28 Phil. Rep., 325.) (At pp. 398-399.)
27
Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article period of June to December, 1959, in spite of the short delivery incurred
2200 of the Civil Code was again applied as follows: têñ.£îhqw⣠by appellant, appellee had been earning its commission whenever logs
were delivered to it. But from January, 1960, appellee had ceased to
earn any commission because appellant failed to deliver any log in
Regarding the actual damages awarded to appellee, appellant
violation of their agreement. Had appellant continued to deliver the logs
contends that they are unwarranted inasmuch as appellee has failed to
adduce any evidence to substantiate them even assuming arguendo as it was bound to pursuant to the agreement it is reasonable to expect
that it would have continued earning its commission in much the same
that appellant has failed to supply the additional monthly 2,000,000
manner as it used to in connection with the previous shipments of logs,
board feet for the remainder of the period agreed upon in the contract
Exhibit A. Appellant maintains that for appellee to be entitled to demand which clearly indicates that it failed to earn the commissions it should
payment of sales that were not effected it should have proved (1) that earn during this period of time. And this commission is not difficult to
estimate. Thus, during the seventeen remaining months of the contract,
there are actual sales made of appellee's logs which were not fulfilled,
at the rate of at least 2,000,000 board feet, appellant should have
(2) that it had obtained the best price for such sales, (3) that there are
buyers ready to buy at such price stating the volume they are ready to delivered thirty-four million board feet. If we take the number of board
feet delivered during the months prior to the interruption, namely,
buy, and (4) appellee could not cover the sales from the logs of other
7,405,861 board feet, and the commission received by appellee
suppliers. Since these facts were not proven, appellee's right to
thereon, which amounts to P79,580.82, we would have that appellee
unearned commissions must fail.
received a commission of P.0107456 per board feet. Multiplying 34
million board feet by P.0107456, the product is P365,350.40, which
This argument must be overruled in the light of the law and evidence on represents the lucrum cessans that should accrue to appellee. The
the matter. Under Article 2200 of the Civil Code, indemnification for award therefore, made by the court a quo of the amount of P400,000.00
damages comprehends not only the value of the loss suffered but also as compensatory damages is not speculative, but based on reasonable
that of the profits which the creditor fails to obtain. In other estimate.
words, lucrum cessans is also a basis for indemnification. The question
then that arises is: Has appellee failed to make profits because of
In the light of these considerations, We cannot say that the Court of Appeals erred in
appellant's breach of contract, and in the affirmative, is there here basis
making the aforementioned award of damages for unrealized profits to respondent Ablaza.
for determining with reasonable certainty such unearned profits?

With respect to the award for attorney's fees, We believe that in line with the amount fixed
Appellant's memorandum (p. 9) shows that appellee has sold to Korea
under the contract in question the following board feet of logs, in Lianga, supra., an award of ten per centum (10%) of the amount of the total recovery
Breareton Scale: têñ.£îhqw⣠should be enough.

PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed,
Months Board Feet
with the modification that the award for attorney's fees made therein is hereby reduced to
ten per centum (10%) of the total recovery of respondent Ablaza.
From June to August 1959 3,007,435
September, 1959 none
October, 1959 2,299,805 Costs against petitioner.
November, 1959 801,021
December, 1959 1,297,510 G.R. No. 96754 June 22, 1995

Total 7,405,861 CHIONGBIAN VS. ORBOS

The above figures tally with those of Exhibit N. In its brief (p. 141)
MENDOZA, J.:
appellant claims that in less than six months' time appellee received by
way of commission the amount of P117,859.54, while in its
memorandum, appellant makes the following statement: These suits challenge the validity of a provision of the Organic Act for the Autonomous
Region in Muslim Mindanao (R.A. No. 6734), authorizing the President of the Philippines to
"merge" by administrative determination the regions remaining after the establishment of
`11. The invoice F.O.B. price of the sale through plaintiff General is
the Autonomous Region, and the Executive Order issued by the President pursuant to
P767,798.82 but the agreed F.O.B. price was P799,319.00, the such authority, "Providing for the Reorganization of Administrative Regions in Mindanao."
commission at 13% (F.O.B.) is P117,859.54. But, as there were always
A temporary restraining order prayed for by the petitioners was issued by this Court on
two prices — Invoice F.O.B price and F.O.B. price as per contract,
January 29, 1991, enjoining the respondents from enforcing the Executive Order and
because of the sales difference amounting to P31,920.18, and the
statute in question.
same was deducted from the commission, actually paid to plaintiff
General is only P79,580.82.' " It appears, therefore, that during the
28

The facts are as follows:
Pursuant to Art. X, §18 of the 1987 Constitution, Congress passed R.A. No. 6734, the
Organic Act for the Autonomous Region in Muslim Mindanao, calling for a plebiscite to be
held in the provinces of Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur,
Maguindanao, Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zamboanga
del Norte, and Zamboanga del Sur, and the cities of Cotabato, Dapitan, Dipolog, General
Santos, Iligan, Marawi, Pagadian, Puerto Princesa and Zamboanga. In the ensuing
plebiscite held on November 16, 1989, four provinces voted in favor of creating an
autonomous region. These are the provinces of Lanao del Sur, Maguindanao, Sulu and
Tawi-Tawi. In accordance with the constitutional provision, these provinces became the
Autonomous Region in Muslim Mindanao.
On the other hand, with respect to provinces and cities not voting in favor of the
Autonomous Region, Art. XIX, § 13 of R.A. No. 6734 provides,
That only the provinces and cities voting favorably in such plebiscites
shall be included in the Autonomous Region in Muslim Mindanao. The
provinces and cities which in the plebiscite do not vote for inclusion in
the Autonomous Region shall remain in the existing administrative
regions. Provided, however, that the President may, by administrative
determination, merge the existing regions.
Pursuant to the authority granted by this provision, then President Corazon C. Aquino
issued on October 12, 1990 Executive Order No. 429, "providing for the Reorganization of
the Administrative Regions in Mindanao." Under this Order, as amended by E.O. No. 439
—
(1) Misamis Occidental, at present part of Region X, will become part of
Region IX.
(2) Oroquieta City, Tangub City and Ozamiz City, at present parts of
Region X will become parts of Region IX.
(3) South Cotobato, at present a part of Region XI, will become part of
Region XII.
(4) General Santos City, at present part of Region XI, will become part
of Region XII.
(5) Lanao del Norte, at present part of Region XII, will become part of
Region IX.
(6) Iligan City and Marawi City, at present part of Region XII, will
become part of Region IX.
Petitioners in G.R. No. 96754 are, or at least at the time of the filing of their petition,
members of Congress representing various legislative districts in South Cotobato,
Zamboanga del Norte, Basilan, Lanao del Norte and Zamboanga City. On November 12,
1990, they wrote then President Aquino protesting E.O. No. 429. They contended that
There is no law which authorizes the President to pick certain provinces
and cities within the existing regions — some of which did not even take
part in the plebiscite as in the case of the province of Misamis
Occidental and the cities of Oroquieta, Tangub and Ozamiz — and
restructure them to new administrative regions. On the other hand, the
law (Sec. 13, Art. XIX, R.A. 6734) is specific to the point, that is, that
"the provinces and cities which in the plebiscite do not vote for inclusion
in the Autonomous Region shall remain in the existing administrative
regions."
The transfer of the provinces of Misamis Occidental from Region X to
Region IX; Lanao del Norte from Region XII to Region IX, and South
Cotobato from Region XI to Region XII are alterations of the existing
structures of governmental units, in other words, reorganization. This
can be gleaned from Executive Order No. 429, thus
Whereas, there is an urgent need to reorganize the
administrative regions in Mindanao to guarantee the
effective delivery of field services of government
agencies taking into consideration the formation of
the Autonomous Region in Muslim Mindanao.
With due respect to Her Excellency, we submit that while the authority
necessarily includes the authority to merge, the authority to merge does
not include the authority to reorganize. Therefore, the President's
authority under RA 6734 to "merge existing regions" cannot be
construed to include the authority to reorganize them. To do so will
violate the rules of statutory construction.
The transfer of regional centers under Executive Order 429 is actually a
restructuring (reorganization) of administrative regions. While this
reorganization, as in Executive Order 429, does not affect the
apportionment of congressional representatives, the same is not valid
under the penultimate paragraph of Sec. 13, Art. XIX of R.A. 6734 and
Ordinance appended to the 1986 Constitution apportioning the seats of
the House of Representatives of Congress of the Philippines to the
different legislative districts in provinces and cities.1
As their protest went unheeded, while Inauguration Ceremonies of the New Administrative
Region IX were scheduled on January 26, 1991, petitioners brought this suit
for certiorari and prohibition.
On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, is a resident of
Zamboanga City, who is suing in the capacity of taxpayer and citizen of the Republic of the
Philippines.
Petitioners in both cases contend that Art. XIX, §13 of R.A. No. 6734 is unconstitutional
because (1) it unduly delegates legislative power to the President by authorizing him to
"merge [by administrative determination] the existing regions" or at any rate provides no
standard for the exercise of the power delegated and (2) the power granted is not
expressed in the title of the law.
29
In addition, petitioner in G.R. No. 96673 challenges the validity of E.O. No. 429 on the
ground that the power granted by Art. XIX, §13 to the President is only to "merge regions
IX and XII" but not to reorganize the entire administrative regions in Mindanao and
certainly not to transfer the regional center of Region IX from Zamboanga City to Pagadian
City.
The Solicitor General defends the reorganization of regions in Mindanao by E.O. No. 429
as merely the exercise of a power "traditionally lodged in the President," as held in Abbas
v. Comelec,2 and as a mere incident of his power of general supervision over local
governments and control of executive departments, bureaus and offices under Art. X, §16
and Art. VII, §17, respectively, of the Constitution.
He contends that there is no undue delegation of legislative power but only a grant of the
power to "fill up" or provide the details of legislation because Congress did not have the
facility to provide for them. He cites by analogy the case of Municipality of Cardona
v. Municipality of Binangonan,3 in which the power of the Governor-General to fix municipal
boundaries was sustained on the ground that —
[such power] is simply a transference of certain details with respect to
provinces, municipalities, and townships, many of them newly created,
and all of them subject to a more or less rapid change both in
development and centers of population, the proper regulation of which
might require not only prompt action but action of such a detailed
character as not to permit the legislative body, as such, to take it
efficiently.
The Solicitor General justifies the grant to the President of the power "to merge the existing
regions" as something fairly embraced in the title of R.A. No. 6734, to wit, "An Act
Providing for an Organic Act for the Autonomous Region in Muslim Mindanao," because it
is germane to it.
He argues that the power is not limited to the merger of those regions in which the
provinces and cities which took part in the plebiscite are located but that it extends to all
regions in Mindanao as necessitated by the establishment of the autonomous region.
Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772 which provides:
1. The President of the Philippines shall have the continuing authority to
reorganize the National Government. In exercising this authority, the
President shall be guided by generally acceptable principles of good
government and responsive national government, including but not
limited to the following guidelines for a more efficient, effective,
economical and development-oriented governmental framework:
(a) More effective planning implementation, and
review functions;
(b) Greater decentralization and responsiveness in
decision-making process;
(c) Further minimization, if not, elimination, of
duplication or overlapping of purposes, functions,
activities, and programs;
(d) Further development of as standardized as
possible ministerial, sub-ministerial and corporate
organizational structures;
(e) Further development of the regionalization
process; and
(f) Further rationalization of the functions of and
administrative relationships among government
entities.
For purposes of this Decree, the coverage of the
continuing authority of the President to reorganize
shall be interpreted to encompass all agencies,
entities, instrumentalities, and units of the National
Government, including all government owned or
controlled corporations as well as the entire range of
the powers, functions, authorities, administrative
relationships, acid related aspects pertaining to
these agencies, entities, instrumentalities, and units.
2. [T]he President may, at his discretion, take the following actions:
xxx xxx xxx
f. Create, abolish, group, consolidate, merge, or
integrate entities, agencies, instrumentalities, and
units of the National Government, as well as
expand, amend, change, or otherwise modify their
powers, functions and authorities, including, with
respect to government-owned or controlled
corporations, their corporate life, capitalization, and
other relevant aspects of their charters.
g. Take such other related actions as may be
necessary to carry out the purposes and objectives
of this Decree.
Considering the arguments of the parties, the issues are:
(1) whether the power to "merge" administrative regions is legislative in character, as
petitioners contend, or whether it is executive in character, as respondents claim it is, and,
in any event, whether Art. XIX, §13 is invalid because it contains no standard to guide the
President's discretion;
(2) whether the power given is fairly expressed in the title of the statute; and
30
(3) whether the power granted authorizes the reorganization even of regions the provinces
and cities in which either did not take part in the plebiscite on the creation of the
Autonomous Region or did not vote in favor of it; and
(4) whether the power granted to the President includes the power to transfer the regional
center of Region IX from Zamboanga City to Pagadian City.
It will be useful to recall first the nature of administrative regions and the basis and purpose
for their creation. On September 9, 1968, R.A. No. 5435 was passed "authorizing the
President of the Philippines, with the help of a Commission on Reorganization, to
reorganize the different executive departments, bureaus, offices, agencies and
instrumentalities of the government, including banking or financial institutions and
corporations owned or controlled by it." The purpose was to promote "simplicity, economy
and efficiency in the government."4 The Commission on Reorganization created under the
law was required to submit an integrated reorganization plan not later than December 31,
1969 to the President who was in turn required to submit the plan to Congress within forty
days after the opening of its next regular session. The law provided that any reorganization
plan submitted would become effective only upon the approval of Congress.5
Accordingly, the Reorganization Commission prepared an Integrated Reorganization Plan
which divided the country into eleven administrative regions. 6 By P.D. No. 1, the Plan was
approved and made part of the law of the land on September 24, 1972. P.D. No. 1 was
twice amended in 1975, first by P.D. No. 742 which "restructur[ed] the regional
organization of Mindanao, Basilan, Sulu and Tawi-Tawi" and later by P.D. No. 773 which
further "restructur[ed] the regional organization of Mindanao and divid[ed] Region IX into
two sub-regions." In 1978, P.D. No. 1555 transferred the regional center of Region IX from
Jolo to Zamboanga City.
Thus the creation and subsequent reorganization of administrative regions have been by
the President pursuant to authority granted to him by law. In conferring on the President
the power "to merge [by administrative determination] the existing regions" following the
establishment of the Autonomous Region in Muslim Mindanao, Congress merely followed
the pattern set in previous legislation dating back to the initial organization of administrative
regions in 1972. The choice of the President as delegate is logical because the division of
the country into regions is intended to facilitate not only the administration of local
governments but also the direction of executive departments which the law requires should
have regional offices. As this Court observed in Abbas, "while the power to merge
administrative regions is not expressly provided for in the Constitution, it is a power which
has traditionally been lodged with the President to facilitate the exercise of the power of
general supervision over local governments [seeArt. X, §4 of the Constitution]." The
regions themselves are not territorial and political divisions like provinces, cities,
municipalities and barangays but are "mere groupings of contiguous provinces for
administrative purposes."7 The power conferred on the President is similar to the power to
adjust municipal boundaries8 which has been described in Pelaez v. Auditor General9 or as
"administrative in nature."
There is, therefore, no abdication by Congress of its legislative power in conferring on the
President the power to merge administrative regions. The question is whether Congress
has provided a sufficient standard by which the President is to be guided in the exercise of
the power granted and whether in any event the grant of power to him is included in the
subject expressed in the title of the law.
First, the question of standard. A legislative standard need not be expressed. It may simply
be gathered or implied. 10 Nor need it be found in the law challenged because it may be
embodied in other statutes on the same subject as that of the challenged legislation. 11
With respect to the power to merge existing administrative regions, the standard is to be
found in the same policy underlying the grant to the President in R.A. No. 5435 of the
power to reorganize the Executive Department, to wit: "to promote simplicity, economy and
efficiency in the government to enable it to pursue programs consistent with national goals
for accelerated social and economic development and to improve the service in the
transaction of the public business."12 Indeed, as the original eleven administrative regions
were established in accordance with this policy, it is logical to suppose that in authorizing
the President to "merge [by administrative determination] the existing regions" in view of
the withdrawal from some of those regions of the provinces now constituting the
Autonomous Region, the purpose of Congress was to reconstitute the original basis for the
organization of administrative regions.
Nor is Art. XIX, §13 susceptible to charge that its subject is not embraced in the title of R.A.
No. 6734. The constitutional requirement that "every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title thereof" 13 has always been
given a practical rather than a technical construction. The title is not required to be an
index of the content of the bill. It is a sufficient compliance with the constitutional
requirement if the title expresses the general subject and all provisions of the statute are
germane to that subject. 14 Certainly the reorganization of the remaining administrative
regions is germane to the general subject of R.A. No. 6734, which is the establishment of
the Autonomous Region in Muslim Mindanao.
Finally, it is contended that the power granted to the President is limited to the
reorganization of administrative regions in which some of the provinces and cities which
voted in favor of regional autonomy are found, because Art. XIX, §13 provides that those
which did not vote for autonomy "shall remain in the existing administrative regions." More
specifically, petitioner in G.R. No. 96673 claims:
The questioned Executive Order No. 429 distorted and, in fact,
contravened the clear intent of this provision by moving out or
transferring certain political subdivisions (provinces/cities) out of their
legally designated regions. Aggravating this unacceptable or untenable
situation is EO No. 429's effecting certain movements on areas which
did not even participate in the November 19, 1989 plebiscite. The
unauthorized action of the President, as effected by and under the
questioned EO No. 429, is shown by the following dispositions: (1)
Misamis Occidental, formerly of Region X and which did not even
participate in the plebiscite, was moved from said Region X to Region
IX; (2) the cities of Ozamis, Oroquieta, and Tangub, all formerly
belonging to Region X, which likewise did not participate in the said
plebiscite, were transferred to Region IX; (3) South Cotobato, from
Region XI to Region XII; (4) General Santos City: from Region XI to
Region XII; (5) Lanao del Norte, from Region XII to Region IX; and (6)
the cities of Marawi and Iligan from Region XII to Region IX. All of the
said provinces and cities voted "NO", and thereby rejected their entry
into the Autonomous Region in Muslim Mindanao, as provided under
RA No. 6734. 15
31
The contention has no merit. While Art. XIX, §13 provides that "The provinces and cities
which do not vote for inclusion in the Autonomous Region shall remain in the existing
administrative regions," this provision is subject to the qualification that "the President may
by administrative determination merge the existing regions." This means that while non-
assenting provinces and cities are to remain in the regions as designated upon the
creation of the Autonomous Region, they may nevertheless be regrouped with contiguous
provinces forming other regions as the exigency of administration may require.
The regrouping is done only on paper. It involves no more than are definition or redrawing
of the lines separating administrative regions for the purpose of facilitating the
administrative supervision of local government units by the President and insuring the
efficient delivery of essential services. There will be no "transfer" of local governments from
one region to another except as they may thus be regrouped so that a province like Lanao
del Norte, which is at present part of Region XII, will become part of Region IX.
The regrouping of contiguous provinces is not even analogous to a redistricting or to the
division or merger of local governments, which all have political consequences on the right
of people residing in those political units to vote and to be voted for. It cannot be
overemphasized that administrative regions are mere groupings of contiguous provinces
for administrative purposes, not for political representation.
Petitioners nonetheless insist that only those regions, in which the provinces and cities
which voted for inclusion in the Autonomous Region are located, can be "merged" by the
President.
To be fundamental reason Art. XIX, §13 is not so limited. But the more fundamental reason
is that the President's power cannot be so limited without neglecting the necessities of
administration. It is noteworthy that the petitioners do not claim that the reorganization of
the regions in E.O. No. 429 is irrational. The fact is that, as they themselves admit, the
reorganization of administrative regions in E.O. No. 429 is based on relevant criteria, to wit:
(1) contiguity and geographical features; (2) transportation and communication facilities;
(3) cultural and language groupings; (4) land area and population; (5) existing regional
centers adopted by several agencies; (6) socio-economic development programs in the
regions and (7) number of provinces and cities.
What has been said above applies to the change of the regional center from Zamboanga
City to Pagadian City. Petitioners contend that the determination of provincial capitals has
always been by act of Congress. But as, this Court said in Abbas, 16 administrative regions
are mere "groupings of contiguous provinces for administrative purposes, . . . [They] are
not territorial and political subdivisions like provinces, cities, municipalities and barangays."
There is, therefore, no basis for contending that only Congress can change or determine
regional centers. To the contrary, the examples of P.D. Nos. 1, 742, 773 and 1555 suggest
that the power to reorganize administrative regions carries with it the power to determine
the regional center.
It may be that the transfer of the regional center in Region IX from Zamboanga City to
Pagadian City may entail the expenditure of large sums of money for the construction of
buildings and other infrastructure to house regional offices. That contention is addressed to
the wisdom of the transfer rather than to its legality and it is settled that courts are not the
arbiters of the wisdom or expediency of legislation. In any event this is a question that we
will consider only if fully briefed and upon a more adequate record than that presented by
petitioners.
WHEREFORE, the petitions for certiorari and prohibition are DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 159139 January 13, 2004
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, vs.
COMMISSION ON ELECTIONS
DECISION
PANGANIBAN, J.:
There is grave abuse of discretion (1) when an act is done contrary to the Constitution, the
law or jurisprudence;1 or (2) when it is executed whimsically, capriciously or arbitrarily out
of malice, ill will or personal bias.2 In the present case, the Commission on Elections
approved the assailed Resolution and awarded the subject Contract not only in clear
violation of law and jurisprudence, but also in reckless disregard of its own bidding rules
and procedure. For the automation of the counting and canvassing of the ballots in the
2004 elections, Comelec awarded the Contract to "Mega Pacific Consortium" an entity that
had not participated in the bidding. Despite this grant, the poll body signed the actual
automation Contract with "Mega Pacific eSolutions, Inc.," a company that joined the
bidding but had not met the eligibility requirements.
Comelec awarded this billion-peso undertaking with inexplicable haste, without adequately
checking and observing mandatory financial, technical and legal requirements. It also
accepted the proferred computer hardware and software even if, at the time of the award,
they had undeniably failed to pass eight critical requirements designed to safeguard the
integrity of elections, especially the following three items:
· They failed to achieve the accuracy rating criteria of 99.9995 percent set-up by
the Comelec itself
· They were not able to detect previously downloaded results at various
canvassing or consolidation levels and to prevent these from being inputted
again
· They were unable to print the statutorily required audit trails of the
count/canvass at different levels without any loss of data
Because of the foregoing violations of law and the glaring grave abuse of discretion
committed by Comelec, the Court has no choice but to exercise its solemn "constitutional
duty"3 to void the assailed Resolution and the subject Contract. The illegal, imprudent and
hasty actions of the Commission have not only desecrated legal and jurisprudential norms,
but have also cast serious doubts upon the poll body’s ability and capacity to conduct
automated elections. Truly, the pith and soul of democracy -- credible, orderly, and
peaceful elections -- has been put in jeopardy by the illegal and gravely abusive acts of
Comelec.
32
 The Case
Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and
void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded
"Phase II of the Modernization Project of the Commission to Mega Pacific Consortium
(MPC);" (2) to enjoin the implementation of any further contract that may have been
entered into by Comelec "either with Mega Pacific Consortium and/or Mega Pacific
eSolutions, Inc. (MPEI);" and (3) to compel Comelec to conduct a re-bidding of the project.
The Facts
The following facts are not disputed. They were culled from official documents, the parties’
pleadings, as well as from admissions during the Oral Argument on October 7, 2003.
On June 7, 1995, Congress passed Republic Act 8046,5 which authorized Comelec to
conduct a nationwide demonstration of a computerized election system and allowed the
poll body to pilot-test the system in the March 1996 elections in the Autonomous Region in
Muslim Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use
an automated election system (AES) for the process of voting, counting votes and
canvassing/consolidating the results of the national and local elections. It also mandated
the poll body to acquire automated counting machines (ACMs), computer equipment,
devices and materials; and to adopt new electoral forms and printing materials.
Initially intending to implement the automation during the May 11, 1998 presidential
elections, Comelec -- in its Resolution No. 2985 dated February 9, 19987 -- eventually
decided against full national implementation and limited the automation to the Autonomous
Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read
correctly some automated ballots in one town, the poll body later ordered their manual
count for the entire Province of Sulu.8
In the May 2001 elections, the counting and canvassing of votes for both national and local
positions were also done manually, as no additional ACMs had been acquired for that
electoral exercise allegedly because of time constraints.
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization
program for the 2004 elections. It resolved to conduct biddings for the three (3) phases of
its Automated Election System; namely, Phase I - Voter Registration and Validation
System; Phase II - Automated Counting and Canvassing System; and Phase III -
Electronic Transmission.
On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172,
which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004 elections.
Upon the request of Comelec, she authorized the release of an additional P500 million.
On January 28, 2003, the Commission issued an "Invitation to Apply for Eligibility and to
Bid," which we quote as follows:
"INVITATION TO APPLY FOR ELIGIBILITY AND TO BID
The Commission on Elections (COMELEC), pursuant to the mandate of Republic
Act Nos. 8189 and 8436, invites interested offerors, vendors, suppliers or lessors
to apply for eligibility and to bid for the procurement by purchase, lease, lease
with option to purchase, or otherwise, supplies, equipment, materials and
services needed for a comprehensive Automated Election System, consisting of
three (3) phases: (a) registration/verification of voters, (b) automated counting
and consolidation of votes, and (c) electronic transmission of election results,
with an approved budget of TWO BILLION FIVE HUNDRED MILLION
(Php2,500,000,000) Pesos.
Only bids from the following entities shall be entertained:
a. Duly licensed Filipino citizens/proprietorships;
b. Partnerships duly organized under the laws of the Philippines and of
which at least sixty percent (60%) of the interest belongs to citizens of
the Philippines;
c. Corporations duly organized under the laws of the Philippines, and of
which at least sixty percent (60%) of the outstanding capital stock
belongs to citizens of the Philippines;
d. Manufacturers, suppliers and/or distributors forming themselves into
a joint venture, i.e., a group of two (2) or more manufacturers, suppliers
and/or distributors that intend to be jointly and severally responsible or
liable for a particular contract, provided that Filipino ownership thereof
shall be at least sixty percent (60%); and
e. Cooperatives duly registered with the Cooperatives Development
Authority.
Bid documents for the three (3) phases may be obtained starting 10 February
2003, during office hours from the Bids and Awards Committee (BAC)
Secretariat/Office of Commissioner Resurreccion Z. Borra, 7th Floor, Palacio del
Governador, Intramuros, Manila, upon payment at the Cash Division,
Commission on Elections, in cash or cashier’s check, payable to the Commission
on Elections, of a non-refundable amount of FIFTEEN THOUSAND PESOS
(Php15,000.00) for each phase. For this purpose, interested offerors, vendors,
suppliers or lessors have the option to participate in any or all of the three (3)
phases of the comprehensive Automated Election System.
A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the
Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila.
Should there be questions on the bid documents, bidders are required to submit
their queries in writing to the BAC Secretariat prior to the scheduled Pre-Bid
Conference.
Deadline for submission to the BAC of applications for eligibility and bid
envelopes for the supply of the comprehensive Automated Election System shall
be at the Session Hall, Commission on Elections, Postigo Street, Intramuros,
Manila on 28 February 2003 at 9:00 a.m.
33
 The COMELEC reserves the right to review the qualifications of the bidders after
the bidding and before the contract is executed. Should such review uncover any
misrepresentation made in the eligibility statements, or any changes in the
situation of the bidder to materially downgrade the substance of such statements,
the COMELEC shall disqualify the bidder upon due notice without any obligation
whatsoever for any expenses or losses that may be incurred by it in the
preparation of its bid."9
On February 11, 2003, Comelec issued Resolution No. 5929 clarifying certain eligibility
criteria for bidders and the schedule of activities for the project bidding, as follows:
"1.) Open to Filipino and foreign corporation duly registered and licensed to do
business and is actually doing business in the Philippines, subject to Sec. 43 of
RA 9184 (An Act providing In the Modernization Standardization and Regulation
of the Procurement Activities of the Government and for other purposes etc.)
2.) Track Record:
a) For counting machines – should have been used in at least one (1)
political exercise with no less than Twenty Million Voters;
b) For verification of voters – the reference site of an existing data base
installation using Automated Fingerprint Identification System (AFIS)
with at least Twenty Million.
3.) Ten percent (10%) equity requirement shall be based on the total project cost;
and
4.) Performance bond shall be twenty percent (20%) of the bid offer.
RESOLVED moreover, that:
1) A. Due to the decision that the eligibility requirements and the rest of
the Bid documents shall be released at the same time, and the
memorandum of Comm. Resurreccion Z. Borra dated February 7, 2003,
the documents to be released on Friday, February 14, 2003 at 2:00
o’clock p.m. shall be the eligibility criteria, Terms of Reference (TOR)
and other pertinent documents;
B. Pre-Bid conference shall be on February 18, 2003; and
C. Deadline for the submission and receipt of the Bids shall
be on March 5, 2003.
2) The aforementioned documents will be available at the following
offices:
a) Voters Validation: Office of Comm. Javier
b) Automated Counting Machines: Office of Comm. Borra
c) Electronic Transmission: Office of Comm. Tancangco"10
On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure
the election automation machines. The Bids and Awards Committee (BAC) of Comelec
convened a pre-bid conference on February 18, 2003 and gave prospective bidders until
March 10, 2003 to submit their respective bids.
Among others, the RFP provided that bids from manufacturers, suppliers and/or
distributors forming themselves into a joint venture may be entertained, provided that the
Philippine ownership thereof shall be at least 60 percent. Joint venture is defined in the
RFP as "a group of two or more manufacturers, suppliers and/or distributors that intend to
be jointly and severally responsible or liable for a particular contract."11
Basically, the public bidding was to be conducted under a two-envelope/two stage system.
The bidder’s first envelope or the Eligibility Envelope should establish the bidder’s eligibility
to bid and its qualifications to perform the acts if accepted. On the other hand, the second
envelope would be the Bid Envelope itself. The RFP outlines the bidding procedures as
follows:
"25. Determination of Eligibility of Prospective Bidders
"25.1 The eligibility envelopes of prospective Bidders shall be opened
first to determine their eligibility. In case any of the requirements
specified in Clause 20 is missing from the first bid envelope, the BAC
shall declare said prospective Bidder as ineligible to bid. Bid envelopes
of ineligible Bidders shall be immediately returned unopened.
"25.2 The eligibility of prospective Bidders shall be determined using
simple ‘pass/fail’ criteria and shall be determined as either eligible or
ineligible. If the prospective Bidder is rated ‘passed’ for all the legal,
technical and financial requirements, he shall be considered eligible. If
the prospective Bidder is rated ‘failed’ in any of the requirements, he
shall be considered ineligible.
"26. Bid Examination/Evaluation
"26.1 The BAC will examine the Bids to determine whether they are
complete, whether any computational errors have been made, whether
required securities have been furnished, whether the documents have
been properly signed, and whether the Bids are generally in order.
"26.2 The BAC shall check the submitted documents of each Bidder
against the required documents enumerated under Clause 20, to
ascertain if they are all present in the Second bid envelope (Technical
Envelope). In case one (1) or more of the required documents is
missing, the BAC shall rate the Bid concerned as ‘failed’ and
immediately return to the Bidder its Third bid envelope (Financial
34
 Envelope) unopened. Otherwise, the BAC shall rate the first bid
envelope as ‘passed’.
"26.3 The BAC shall immediately open the Financial Envelopes of the
Bidders whose Technical Envelopes were passed or rated on or above
the passing score. Only Bids that are determined to contain all the bid
requirements for both components shall be rated ‘passed’ and shall
immediately be considered for evaluation and comparison.
"26.4 In the opening and examination of the Financial Envelope, the
BAC shall announce and tabulate the Total Bid Price as calculated.
Arithmetical errors will be rectified on the following basis: If there is a
discrepancy between words and figures, the amount in words will
prevail. If there is a discrepancy between the unit price and the total
price that is obtained by multiplying the unit price and the quantity, the
unit price shall prevail and the total price shall be corrected accordingly.
If there is a discrepancy between the Total Bid Price and the sum of the
total prices, the sum of the total prices prevail and the Total Bid Price
shall be corrected accordingly.
"26.5 Financial Proposals which do not clearly state the Total Bid Price
shall be rejected. Also, Total Bid Price as calculated that exceeds the
approved budget for the contract shall also be rejected.
27. Comparison of Bids
27.1 The bid price shall be deemed to embrace all costs, charges and
fees associated with carrying out all the elements of the proposed
Contract, including but not limited to, license fees, freight charges and
taxes.
27.2 The BAC shall establish the calculated prices of all Bids rated
‘passed’ and rank the same in ascending order.
xxxxxxxxx
"29. Postqualification
"29.1 The BAC will determine to its satisfaction whether the Bidder
selected as having submitted the lowest calculated bid is qualified to
satisfactorily perform the Contract.
"29.2 The determination will take into account the Bidder’s financial,
technical and production capabilities/resources. It will be based upon an
examination of the documentary evidence of the Bidder’s qualification
submitted by the Bidder as well as such other information as the BAC
deems necessary and appropriate.
"29.3 A bid determined as not substantially responsive will be rejected
by the BAC and may not subsequently be made responsive by the
Bidder by correction of the non-conformity.
"29.4 The BAC may waive any informality or non-conformity or
irregularity in a bid which does not constitute a material deviation,
provided such waiver does not prejudice or affect the relative ranking of
any Bidder.
"29.5 Should the BAC find that the Bidder complies with the legal,
financial and technical requirements, it shall make an affirmative
determination which shall be a prerequisite for award of the Contract to
the Bidder. Otherwise, it will make a negative determination which will
result in rejection of the Bidder’s bid, in which event the BAC will
proceed to the next lowest calculated bid to make a similar
determination of that Bidder’s capabilities to perform satisfactorily."12
Out of the 57 bidders,13 the BAC found MPC and the Total Information Management
Corporation (TIMC) eligible. For technical evaluation, they were referred to the BAC’s
Technical Working Group (TWG) and the Department of Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that
both MPC and TIMC had obtained a number of failed marks in the technical evaluation.
Notwithstanding these failures, Comelec en banc, on April 15, 2003, promulgated
Resolution No. 6074 awarding the project to MPC. The Commission publicized this
Resolution and the award of the project to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein Petitioners Information
Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres;
and Ma. Corazon Akol) wrote a letter14 to Comelec Chairman Benjamin Abalos Sr. They
protested the award of the Contract to Respondent MPC "due to glaring irregularities in the
manner in which the bidding process had been conducted." Citing therein the
noncompliance with eligibility as well as technical and procedural requirements (many of
which have been discussed at length in the Petition), they sought a re-bidding.
In a letter-reply dated June 6, 2003,15 the Comelec chairman -- speaking through Atty.
Jaime Paz, his head executive assistant -- rejected the protest and declared that the award
"would stand up to the strictest scrutiny."
Hence, the present Petition.16
The Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"1. The COMELEC awarded and contracted with a non-eligible entity; x x x
"2. Private respondents failed to pass the Technical Test as required in the RFP.
Notwithstanding, such failure was ignored. In effect, the COMELEC changed the
rules after the bidding in effect changing the nature of the contract bidded upon.
35
 "3. Petitioners have locus standi.
"4. Instant Petition is not premature. Direct resort to the Supreme Court is
justified."17
In the main, the substantive issue is whether the Commission on Elections, the agency
vested with the exclusive constitutional mandate to oversee elections, gravely abused its
discretion when, in the exercise of its administrative functions, it awarded to MPC the
contract for the second phase of the comprehensive Automated Election System.
Before discussing the validity of the award to MPC, however, we deem it proper to first
pass upon the procedural issues: the legal standing of petitioners and the alleged
prematurity of the Petition.
This Court’s Ruling
The Petition is meritorious.
First Procedural Issue:
Locus Standi of Petitioners
Respondents chorus that petitioners do not possess locus standi, inasmuch as they are
not challenging the validity or constitutionality of RA 8436. Moreover, petitioners
supposedly admitted during the Oral Argument that no law had been violated by the award
of the Contract. Furthermore, they allegedly have no actual and material interest in the
Contract and, hence, do not stand to be injured or prejudiced on account of the award.
On the other hand, petitioners -- suing in their capacities as taxpayers, registered voters
and concerned citizens -- respond that the issues central to this case are "of
transcendental importance and of national interest." Allegedly, Comelec’s flawed bidding
and questionable award of the Contract to an unqualified entity would impact directly on
the success or the failure of the electoral process. Thus, any taint on the sanctity of the
ballot as the expression of the will of the people would inevitably affect their faith in the
democratic system of government. Petitioners further argue that the award of any contract
for automation involves disbursement of public funds in gargantuan amounts; therefore,
public interest requires that the laws governing the transaction must be followed strictly.
We agree with petitioners. Our nation’s political and economic future virtually hangs in the
balance, pending the outcome of the 2004 elections. Hence, there can be no serious doubt
that the subject matter of this case is "a matter of public concern and imbued with public
interest";18 in other words, it is of "paramount public interest"19 and "transcendental
importance."20 This fact alone would justify relaxing the rule on legal standing, following the
liberal policy of this Court whenever a case involves "an issue of overarching significance
to our society."21 Petitioners’ legal standing should therefore be recognized and upheld.
Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of
"illegal disbursement of public funds,"22 or if public money is being "deflected to any
improper purpose";23 or when petitioners seek to restrain respondent from "wasting public
funds through the enforcement of an invalid or unconstitutional law."24 In the instant case,
individual petitioners, suing as taxpayers, assert a material interest in seeing to it that
public funds are properly and lawfully used. In the Petition, they claim that the bidding was
defective, the winning bidder not a qualified entity, and the award of the Contract contrary
to law and regulation. Accordingly, they seek to restrain respondents from implementing
the Contract and, necessarily, from making any unwarranted expenditure of public funds
pursuant thereto. Thus, we hold that petitioners possess locus standi.
Second Procedural Issue:
Alleged Prematurity Due to Non-Exhaustion of Administrative Remedies
Respondents claim that petitioners acted prematurely, since they had not first utilized the
protest mechanism available to them under RA 9184, the Government Procurement
Reform Act, for the settlement of disputes pertaining to procurement contracts.
Section 55 of RA 9184 states that protests against decisions of the Bidding and Awards
Committee in all stages of procurement may be lodged with the head of the procuring
entity by filing a verified position paper and paying a protest fee. Section 57 of the same
law mandates that in no case shall any such protest stay or delay the bidding process, but
it must first be resolved before any award is made.
On the other hand, Section 58 provides that court action may be resorted to only after the
protests contemplated by the statute shall have been completed. Cases filed in violation of
this process are to be dismissed for lack of jurisdiction. Regional trial courts shall have
jurisdiction over final decisions of the head of the procuring entity, and court actions shall
be instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure.
Respondents assert that throughout the bidding process, petitioners never questioned the
BAC Report finding MPC eligible to bid and recommending the award of the Contract to it
(MPC). According to respondents, the Report should have been appealed to the Comelc
en banc, pursuant to the aforementioned sections of RA 9184. In the absence of such
appeal, the determination and recommendation of the BAC had become final.
The Court is not persuaded.
Respondent Comelec came out with its en banc Resolution No. 6074 dated April 15, 2003,
awarding the project to Respondent MPC even before the BAC managed to issue its
written report and recommendation on April 21, 2003. Thus, how could petitioners have
appealed the BAC’s recommendation or report to the head of the procuring entity (the
chairman of Comelec), when the Comelec en banc had already approved the award of the
contract to MPC even before petitioners learned of the BAC recommendation?
It is claimed25 by Comelec that during its April 15, 2003 session, it received and approved
the verbal report and recommendation of the BAC for the award of the Contract to MPC,
and that the BAC subsequently re-affirmed its verbal report and recommendation by
submitting it in writing on April 21, 2003. Respondents insist that the law does not require
that the BAC Report be in writing before Comelec can act thereon; therefore, there is
allegedly nothing irregular about the Report as well as the en banc Resolution.
36
However, it is obvious that petitioners could have appealed the BAC’s report and
recommendation to the head of the procuring entity (the Comelec chair) only upon their
discovery thereof, which at the very earliest would have been on April 21, 2003, when the
BAC actually put its report in writing and finally released it. Even then, what would have
been the use of protesting/appealing the report to the Comelec chair, when by that time the
Commission en banc (including the chairman himself) had already approved the BAC
Report and awarded the Contract to MPC?
And even assuming arguendo that petitioners had somehow gotten wind of the verbal BAC
report on April 15, 2003 (immediately after the en banc session), at that point the
Commission en banc had already given its approval to the BAC Report along with the
award to MPC. To put it bluntly, the Comelec en banc itself made it legally impossible for
petitioners to avail themselves of the administrative remedy that the Commission is so
impiously harping on. There is no doubt that they had not been accorded the opportunity to
avail themselves of the process provided under Section 55 of RA 9184, according to which
a protest against a decision of the BAC may be filed with the head of the procuring entity.
Nemo tenetur ad impossible,26 to borrow private respondents’ favorite Latin excuse.27
Some Observations on the BAC Report to the Comelec
We shall return to this issue of alleged prematurity shortly, but at this interstice, we would
just want to put forward a few observations regarding the BAC Report and the Comelec en
banc’s approval thereof.
First, Comelec contends that there was nothing unusual about the fact that the Report
submitted by the BAC came only after the former had already awarded the Contract,
because the latter had been asked to render its report and recommendation orally during
the Commission’s en banc session on April 15, 2003. Accordingly, Comelec supposedly
acted upon such oral recommendation and approved the award to MPC on the same day,
following which the recommendation was subsequently reduced into writing on April 21,
2003. While not entirely outside the realm of the possible, this interesting and unique spiel
does not speak well of the process that Comelec supposedly went through in making a
critical decision with respect to a multi-billion-peso contract.
We can imagine that anyone else standing in the shoes of the Honorable Commissioners
would have been extremely conscious of the overarching need for utter transparency. They
would have scrupulously avoided the slightest hint of impropriety, preferring to maintain an
exacting regularity in the performance of their duties, instead of trying to break a speed
record in the award of multi-billion-peso contracts. After all, between April 15 and April 21
were a mere six (6) days. Could Comelec not have waited out six more days for the written
report of the BAC, instead of rushing pell-mell into the arms of MPC? Certainly,
respondents never cared to explain the nature of the Commission’s dire need to act
immediately without awaiting the formal, written BAC Report.
In short, the Court finds it difficult to reconcile the uncommon dispatch with which Comelec
acted to approve the multi-billion-peso deal, with its claim of having been impelled by only
the purest and most noble of motives.
At any rate, as will be discussed later on, several other factors combine to lend negative
credence to Comelec’s tale.
Second, without necessarily ascribing any premature malice or premeditation on the part of
the Comelec officials involved, it should nevertheless be conceded that this cart-before-
the-horse maneuver (awarding of the Contract ahead of the BAC’s written report) would
definitely serve as a clever and effective way of averting and frustrating any impending
protest under Section 55.
Having made the foregoing observations, we now go back to the question of exhausting
administrative remedies. Respondents may not have realized it, but the letter addressed to
Chairman Benjamin Abalos Sr. dated May 29, 200328 serves to eliminate the prematurity
issue as it was an actual written protest against the decision of the poll body to award the
Contract. The letter was signed by/for, inter alia, two of herein petitioners: the Information
Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres;
and Ma. Corazon Akol.
Such letter-protest is sufficient compliance with the requirement to exhaust administrative
remedies particularly because it hews closely to the procedure outlined in Section 55 of RA
9184.
And even without that May 29, 2003 letter-protest, the Court still holds that petitioners need
not exhaust administrative remedies in the light of Paat v. Court of Appeals.29 Paat
enumerates the instances when the rule on exhaustion of administrative remedies may be
disregarded, as follows:
"(1) when there is a violation of due process,
(2) when the issue involved is purely a legal question,
(3) when the administrative action is patently illegal amounting to lack or excess
of jurisdiction,
(4) when there is estoppel on the part of the administrative agency concerned,
(5) when there is irreparable injury,
(6) when the respondent is a department secretary whose acts as an alter ego of
the President bears the implied and assumed approval of the latter,
(7) when to require exhaustion of administrative remedies would be
unreasonable,
(8) when it would amount to a nullification of a claim,
(9) when the subject matter is a private land in land case proceedings,
(10) when the rule does not provide a plain, speedy and adequate remedy, and
(11) when there are circumstances indicating the urgency of judicial
intervention."30
37
The present controversy precisely falls within the exceptions listed as Nos. 7, 10 and 11:
"(7) when to require exhaustion of administrative remedies would be unreasonable; (10)
when the rule does not provide a plain, speedy and adequate remedy, and (11) when there
are circumstances indicating the urgency of judicial intervention." As already stated,
Comelec itself made the exhaustion of administrative remedies legally impossible or, at the
very least, "unreasonable."
In any event, the peculiar circumstances surrounding the unconventional rendition of the
BAC Report and the precipitate awarding of the Contract by the Comelec en banc -- plus
the fact that it was racing to have its Contract with MPC implemented in time for the
elections in May 2004 (barely four months away) -- have combined to bring about the
urgent need for judicial intervention, thus prompting this Court to dispense with the
procedural exhaustion of administrative remedies in this case.
Main Substantive Issue:
Validity of the Award to MPC
We come now to the meat of the controversy. Petitioners contend that the award is invalid,
since Comelec gravely abused its discretion when it did the following:
1. Awarded the Contract to MPC though it did not even participate in the bidding
2. Allowed MPEI to participate in the bidding despite its failure to meet the
mandatory eligibility requirements
3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC despite
the issuance by the BAC of its Report, which formed the basis of the assailed
Resolution, only on April 21, 200331
4. Awarded the Contract, notwithstanding the fact that during the bidding
process, there were violations of the mandatory requirements of RA 8436 as well
as those set forth in Comelec’s own Request for Proposal on the automated
election system
5. Refused to declare a failed bidding and to conduct a re-bidding despite the
failure of the bidders to pass the technical tests conducted by the Department of
Science and Technology
6. Failed to follow strictly the provisions of RA 8436 in the conduct of the bidding
for the automated counting machines
After reviewing the slew of pleadings as well as the matters raised during the Oral
Argument, the Court deems it sufficient to focus discussion on the following major areas of
concern that impinge on the issue of grave abuse of discretion:
A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder
B. Failure of the automated counting machines (ACMs) to pass the DOST
technical tests
C. Remedial measures and re-testings undertaken by Comelec and DOST after
the award, and their effect on the present controversy
A.
Failure to Establish the Identity, Existence and Eligibility of the Alleged Consortium as a
Bidder
On the question of the identity and the existence of the real bidder, respondents insist that,
contrary to petitioners’ allegations, the bidder was not Mega Pacific eSolutions, Inc.
(MPEI), which was incorporated only on February 27, 2003, or 11 days prior to the bidding
itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a
part. As proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the
president of MPEI allegedly for and on behalf of MPC. They also call attention to the official
receipt issued to MPC, acknowledging payment for the bidding documents, as proof that it
was the "consortium" that participated in the bidding process.
We do not agree. The March 7, 2003 letter, signed by only one signatory -- "Willy U. Yu,
President, Mega Pacific eSolutions, Inc., (Lead Company/ Proponent) For: Mega Pacific
Consortium" -- and without any further proof, does not by itself prove the existence of the
consortium. It does not show that MPEI or its president have been duly pre-authorized by
the other members of the putative consortium to represent them, to bid on their collective
behalf and, more important, to commit them jointly and severally to the bid undertakings.
The letter is purely self-serving and uncorroborated.
Neither does an official receipt issued to MPC, acknowledging payment for the bidding
documents, constitute proof that it was the purported consortium that participated in the
bidding. Such receipts are issued by cashiers without any legally sufficient inquiry as to the
real identity orexistence of the supposed payor.
To assure itself properly of the due existence (as well as eligibility and qualification) of the
putative consortium, Comelec’s BAC should have examined the bidding documents
submitted on behalf of MPC. They would have easily discovered the following fatal flaws.
Two-Envelope,
Two-Stage System
As stated earlier in our factual presentation, the public bidding system designed by
Comelec under its RFP (Request for Proposal for the Automation of the 2004 Election)
mandated the use of a two-envelope, two-stage system. A bidder’s first envelope (Eligibility
Envelope) was meant to establish its eligibility to bid and its qualifications and capacity to
perform the contract if its bid was accepted, while the second envelope would be the Bid
Envelope itself.
The Eligibility Envelope was to contain legal documents such as articles of incorporation,
business registrations, licenses and permits, mayor’s permit, VAT certification, and so
38
forth; technical documents containing documentary evidence to establish the track record
of the bidder and its technical and production capabilities to perform the contract; and
financial documents, including audited financial statements for the last three years, to
establish the bidder’s financial capacity.
In the case of a consortium or joint venture desirous of participating in the bidding, it goes
without saying that the Eligibility Envelope would necessarily have to include a copy of the
joint venture agreement, the consortium agreement or memorandum of agreement -- or a
business plan or some other instrument of similar import -- establishing the due existence,
composition and scope of such aggrupation. Otherwise, how would Comelec know who it
was dealing with, and whether these parties are qualified and capable of delivering the
products and services being offered for bidding?32
In the instant case, no such instrument was submitted to Comelec during the bidding
process. This fact can be conclusively ascertained by scrutinizing the two-inch thick
"Eligibility Requirements" file submitted by Comelec last October 9, 2003, in partial
compliance with this Court’s instructions given during the Oral Argument. This file purports
to replicate the eligibility documents originally submitted to Comelec by MPEI allegedly on
behalf of MPC, in connection with the bidding conducted in March 2003. Included in the file
are the incorporation papers and financial statements of the members of the supposed
consortium and certain certificates, licenses and permits issued to them.
However, there is no sign whatsoever of any joint venture agreement, consortium
agreement, memorandum of agreement, or business plan executed among the members
of the purported consortium.
The only logical conclusion is that no such agreement was ever submitted to the Comelec
for its consideration, as part of the bidding process.
It thus follows that, prior the award of the Contract, there was no documentary or other
basis for Comelec to conclude that a consortium had actually been formed amongst MPEI,
SK C&C and WeSolv, along with Election.com and ePLDT.33 Neither was there anything to
indicate the exact relationships between and among these firms; their diverse roles,
undertakings and prestations, if any, relative to the prosecution of the project, the extent of
their respective investments (if any) in the supposed consortium or in the project; and the
precise nature and extent of their respective liabilities with respect to the contract being
offered for bidding. And apart from the self-serving letter of March 7, 2003, there was not
even any indication that MPEI was the lead company duly authorized to act on behalf of
the others.
So, it necessarily follows that, during the bidding process, Comelec had no basis at all for
determining that the alleged consortium really existed and was eligible and qualified; and
that the arrangements among the members were satisfactory and sufficient to ensure
delivery on the Contract and to protect the government’s interest.
Notwithstanding such deficiencies, Comelec still deemed the "consortium" eligible to
participate in the bidding, proceeded to open its Second Envelope, and eventually awarded
the bid to it, even though -- per the Comelec’s own RFP -- the BAC should have declared
the MPC ineligible to bid and returned the Second (Bid) Envelope unopened.
Inasmuch as Comelec should not have considered MPEI et al. as comprising a consortium
or joint venture, it should not have allowed them to avail themselves of the provision in
Section 5.4 (b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer Law), as amended
by RA 7718. This provision states in part that a joint venture/consortium proponent shall be
evaluated based on the individual or collective experience of the member-firms of the joint
venture or consortium and of the contractor(s) that it has engaged for the project.
Parenthetically, respondents have uniformly argued that the said IRR of RA 6957, as
amended, have suppletory application to the instant case.
Hence, had the proponent MPEI been evaluated based solely on its own experience,
financial and operational track record or lack thereof, it would surely not have qualified and
would have been immediately considered ineligible to bid, as respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to
observe its own rules, policies and guidelines with respect to the bidding process, thereby
negating a fair, honest and competitive bidding.
Commissioners Not Aware of Consortium
In this regard, the Court is beguiled by the statements of Commissioner Florentino Tuason
Jr., given in open court during the Oral Argument last October 7, 2003. The good
commissioner affirmed that he was aware, of his own personal knowledge, that there had
indeed been a written agreement among the "consortium" members,34 although it was an
internal matter among them,35 and of the fact that it would be presented by counsel for
private respondent.36
However, under questioning by Chief Justice Hilario G. Davide Jr. and Justice Jose C.
Vitug, Commissioner Tuason in effect admitted that, while he was the commissioner-in-
charge of Comelec’s Legal Department, he had never seen, even up to that late date, the
agreement he spoke of.37 Under further questioning, he was likewise unable to provide any
information regarding the amounts invested into the project by several members of the
claimed consortium.38 A short while later, he admitted that the Commission had not taken a
look at the agreement (if any).39
He tried to justify his position by claiming that he was not a member of the BAC. Neither
was he the commissioner-in-charge of the Phase II Modernization project (the automated
election system); but that, in any case, the BAC and the Phase II Modernization Project
Team did look into the aspect of the composition of the consortium.
It seems to the Court, though, that even if the BAC or the Phase II Team had taken charge
of evaluating the eligibility, qualifications and credentials of the consortium-bidder, still, in
all probability, the former would have referred the task to Commissioner Tuason, head of
Comelec’s Legal Department. That task was the appreciation and evaluation of the legal
effects and consequences of the terms, conditions, stipulations and covenants contained in
any joint venture agreement, consortium agreement or a similar document -- assuming of
course that any of these was available at the time. The fact that Commissioner Tuason
was barely aware of the situation bespeaks the complete absence of such document, or
the utter failure or neglect of the Comelec to examine it -- assuming it was available at all --
at the time the award was made on April 15, 2003.
39
In any event, the Court notes for the record that Commissioner Tuason basically
contradicted his statements in open court about there being one written agreement among
all the consortium members, when he subsequently referred40 to the four (4) Memoranda
of Agreement (MOAs) executed by them.41
At this juncture, one might ask: What, then, if there are four MOAs instead of one or none
at all? Isn’t it enough that there are these corporations coming together to carry out the
automation project? Isn’t it true, as respondent aver, that nowhere in the RFP issued by
Comelec is it required that the members of the joint venture execute a single written
agreement to prove the existence of a joint venture. Indeed, the intention to be jointly and
severally liable may be evidenced not only by a single joint venture agreement, but also by
supplementary documents executed by the parties signifying such intention. What then is
the big deal?
The problem is not that there are four agreements instead of only one. The problem is that
Comelec never bothered to check. It never based its decision on documents or other proof
that would concretely establish the existence of the claimed consortium or joint venture or
agglomeration. It relied merely on the self-serving representation in an uncorroborated
letter signed by only one individual, claiming that his company represented a "consortium"
of several different corporations. It concluded forthwith that a consortium indeed existed,
composed of such and such members, and thereafter declared that the entity was eligible
to bid.
True, copies of financial statements and incorporation papers of the alleged "consortium"
members were submitted. But these papers did not establish the existence of a
consortium, as they could have been provided by the companies concerned for purposes
other than to prove that they were part of a consortium or joint venture. For instance, the
papers may have been intended to show that those companies were each qualified to be a
sub-contractor (and nothing more) in a major project. Those documents did not by
themselves support the assumption that a consortium or joint venture existed among the
companies.
In brief, despite the absence of competent proof as to the existence and eligibility of the
alleged consortium (MPC), its capacity to deliver on the Contract, and the members’ joint
and several liability therefor, Comelec nevertheless assumed that such consortium existed
and was eligible. It then went ahead and considered the bid of MPC, to which the Contract
was eventually awarded, in gross violation of the former’s own bidding rules and
procedures contained in its RFP. Therein lies Comelec’s grave abuse of discretion.
Sufficiency of the Four Agreements
Instead of one multilateral agreement executed by, and effective and binding on, all the
five "consortium members" -- as earlier claimed by Commissioner Tuason in open court --
it turns out that what was actually executed were four (4) separate and distinct bilateral
Agreements.42 Obviously, Comelec was furnished copies of these Agreements only after
the bidding process had been terminated, as these were not included in the Eligibility
Documents. These Agreements are as follows:
· A Memorandum of Agreement between MPEI and SK C&C
· A Memorandum of Agreement between MPEI and WeSolv
· A "Teaming Agreement" between MPEI and Election.com Ltd.
· A "Teaming Agreement" between MPEI and ePLDT
In sum, each of the four different and separate bilateral Agreements is valid and binding
only between MPEI and the other contracting party, leaving the other "consortium"
members total strangers thereto. Under this setup, MPEI dealt separately with each of the
"members," and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had
nothing to do with one another, each dealing only with MPEI.
Respondents assert that these four Agreements were sufficient for the purpose of enabling
the corporations to still qualify (even at that late stage) as a consortium or joint venture,
since the first two Agreements had allegedly set forth the joint and several undertakings
among the parties, whereas the latter two clarified the parties’ respective roles with regard
to the Project, with MPEI being the independent contractor and Election.com and ePLDT
the subcontractors.
Additionally, the use of the phrase "particular contract" in the Comelec’s Request for
Proposal (RFP), in connection with the joint and several liabilities of companies in a joint
venture, is taken by them to mean that all the members of the joint venture need not be
solidarily liable for the entire project or joint venture, because it is sufficient that the lead
company and the member in charge of a particular contract or aspect of the joint venture
agree to be solidarily liable.
At this point, it must be stressed most vigorously that the submission of the four bilateral
Agreements to Comelec after the end of the bidding process did nothing to eliminate the
grave abuse of discretion it had already committed on April 15, 2003.
Deficiencies Have Not Been "Cured"
In any event, it is also claimed that the automation Contract awarded by Comelec
incorporates all documents executed by the "consortium" members, even if these
documents are not referred to therein. The basis of this assertion appears to be the
passages from Section 1.4 of the Contract, which is reproduced as follows:
"All Contract Documents shall form part of the Contract even if they or any one of
them is not referred to or mentioned in the Contract as forming a part thereof.
Each of the Contract Documents shall be mutually complementary and
explanatory of each other such that what is noted in one although not shown in
the other shall be considered contained in all, and what is required by any one
shall be as binding as if required by all, unless one item is a correction of the
other.
"The intent of the Contract Documents is the proper, satisfactory and timely
execution and completion of the Project, in accordance with the Contract
Documents. Consequently, all items necessary for the proper and timely
execution and completion of the Project shall be deemed included in the
Contract."
40
Thus, it is argued that whatever perceived deficiencies there were in the supplementary
contracts -- those entered into by MPEI and the other members of the "consortium" as
regards their joint and several undertakings -- have been cured. Better still, such
deficiencies have supposedly been prevented from arising as a result of the above-quoted
provisions, from which it can be immediately established that each of the members of MPC
assumes the same joint and several liability as the other members.
The foregoing argument is unpersuasive. First, the contract being referred to, entitled "The
Automated Counting and Canvassing Project Contract," is between Comelec and MPEI,
not the alleged consortium, MPC. To repeat, it is MPEI -- not MPC -- that is a party to the
Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of
members thereof, much less of joint and several liability. Supposedly executed sometime
in May 2003,43 the Contract bears a notarization date of June 30, 2003, and contains the
signature of Willy U. Yu signing as president of MPEI (not for and on behalf of MPC), along
with that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply
the Equipment and perform the Services under the Contract, in accordance with the
appendices thereof; nothing whatsoever is said about any consortium or joint venture or
partnership.
Second, the portions of Section 1.4 of the Contract reproduced above do not have the
effect of curing (much less preventing) deficiencies in the bilateral agreements entered into
by MPEI with the other members of the "consortium," with respect to their joint and several
liabilities. The term "Contract Documents," as used in the quoted passages of Section 1.4,
has a well-defined meaning and actually refers only to the following documents:
· The Contract itself along with its appendices
· The Request for Proposal (also known as "Terms of Reference") issued by the
Comelec, including the Tender Inquiries and Bid Bulletins
· The Tender Proposal submitted by MPEI
In other words, the term "Contract Documents" cannot be understood as referring to or
including the MOAs and the Teaming Agreements entered into by MPEI with SK C&C,
WeSolv, Election.com and ePLDT. This much is very clear and admits of no debate. The
attempt to use the provisions of Section 1.4 to shore up the MOAs and the Teaming
Agreements is simply unwarranted.
Third and last, we fail to see how respondents can arrive at the conclusion that, from the
above-quoted provisions, it can be immediately established that each of the members of
MPC assumes the same joint and several liability as the other members. Earlier,
respondents claimed exactly the opposite -- that the two MOAs (between MPEI and SK
C&C, and between MPEI and WeSolv) had set forth the joint and several undertakings
among the parties; whereas the two Teaming Agreements clarified the parties’ respective
roles with regard to the Project, with MPEI being the independent contractor and
Election.com and ePLDT the subcontractors.
Obviously, given the differences in their relationships, their respective liabilities cannot be
the same. Precisely, the very clear terms and stipulations contained in the MOAs and the
Teaming Agreements -- entered into by MPEI with SK C&C, WeSolv, Election.com and
ePLDT -- negate the idea that these "members" are on a par with one another and are, as
such, assuming the same joint and several liability.
Moreover, respondents have earlier seized upon the use of the term "particular contract" in
the Comelec’s Request for Proposal (RFP), in order to argue that all the members of the
joint venture did not need to be solidarily liable for the entire project or joint venture. It was
sufficient that the lead company and the member in charge of a particular contract or
aspect of the joint venture would agree to be solidarily liable. The glaring lack of
consistency leaves us at a loss. Are respondents trying to establish the same joint and
solidary liability among all the "members" or not?
Enforcement of Liabilities Problematic
Next, it is also maintained that the automation Contract between Comelec and the MPEI
confirms the solidary undertaking of the lead company and the consortium member
concerned for each particular Contract, inasmuch as the position of MPEI and anyone else
performing the services contemplated under the Contract is described therein as that of an
independent contractor.
The Court does not see, however, how this conclusion was arrived at. In the first place, the
contractual provision being relied upon by respondents is Article 14, "Independent
Contractors," which states: "Nothing contained herein shall be construed as establishing or
creating between the COMELEC and MEGA the relationship of employee and employer or
principal and agent, it being understood that the position of MEGA and of anyone
performing the Services contemplated under this Contract, is that of an independent
contractor."
Obviously, the intent behind the provision was simply to avoid the creation of an employer-
employee or a principal-agent relationship and the complications that it would produce.
Hence, the Article states that the role or position of MPEI, or anyone else performing on its
behalf, is that of an independent contractor. It is obvious to the Court that respondents are
stretching matters too far when they claim that, because of this provision, the Contract in
effect confirms the solidary undertaking of the lead company and the consortium member
concerned for the particular phase of the project. This assertion is an absolute non
sequitur.
Enforcement of Liabilities Under the Civil Code Not Possible
In any event, it is claimed that Comelec may still enforce the liability of the "consortium"
members under the Civil Code provisions on partnership, reasoning that MPEI et al.
represented themselves as partners and members of MPC for purposes of bidding for the
Project. They are, therefore, liable to the Comelec to the extent that the latter relied upon
such representation. Their liability as partners is solidary with respect to everything
chargeable to the partnership under certain conditions.
The Court has two points to make with respect to this argument. First, it must be recalled
that SK C&C, WeSolv, Election.com and ePLDT never represented themselves as
partners and members of MPC, whether for purposes of bidding or for something else. It
was MPEI alone that represented them to be members of a "consortium" it supposedly
headed. Thus, its acts may not necessarily be held against the other "members."
41
Second, this argument of the OSG in its Memorandum44 might possibly apply in the
absence of a joint venture agreement or some other writing that discloses the relationship
of the "members" with one another. But precisely, this case does not deal with a situation
in which there is nothing in writing to serve as reference, leaving Comelec to rely on mere
representations and therefore justifying a falling back on the rules on partnership. For,
again, the terms and stipulations of the MOAs entered into by MPEI with SK C&C and
WeSolv, as well as the Teaming Agreements of MPEI with Election.com and ePLDT
(copies of which have been furnished the Comelec) are very clear with respect to the
extent and the limitations of the firms’ respective liabilities.
In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint and
several with MPEI, are limited only to the particular areas of work wherein their services
are engaged or their products utilized. As for Election.com and ePLDT, their separate
"Teaming Agreements" specifically ascribe to them the role of subcontractor vis-à-vis MPEI
as contractor and, based on the terms of their particular agreements, neither Election.com
nor ePLDT is, with MPEI, jointly and severally liable to Comelec.45 It follows then that in the
instant case, there is no justification for anyone, much less Comelec, to resort to the rules
on partnership and partners’ liabilities.
Eligibility of a Consortium Based on the Collective Qualifications of Its Members
Respondents declare that, for purposes of assessing the eligibility of the bidder, the
members of MPC should be evaluated on a collective basis. Therefore, they contend, the
failure of MPEI to submit financial statements (on account of its recent incorporation)
should not by itself disqualify MPC, since the other members of the "consortium" could
meet the criteria set out in the RFP.
Thus, according to respondents, the collective nature of the undertaking of the members of
MPC, their contribution of assets and sharing of risks, and the community of their interest
in the performance of the Contract lead to these reasonable conclusions: (1) that their
collective qualifications should be the basis for evaluating their eligibility; (2) that the sheer
enormity of the project renders it improbable to expect any single entity to be able to
comply with all the eligibility requirements and undertake the project by itself; and (3) that,
as argued by the OSG, the RFP allows bids from manufacturers, suppliers and/or
distributors that have formed themselves into a joint venture, in recognition of the virtual
impossibility of a single entity’s ability to respond to the Invitation to Bid.
Additionally, argues the Comelec, the Implementing Rules and Regulations of RA 6957
(the Build-Operate-Transfer Law) as amended by RA 7718 would be applicable, as
proponents of BOT projects usually form joint ventures or consortiums. Under the IRR, a
joint venture/consortium proponent shall be evaluated based on the individual or the
collective experience of the member-firms of the joint venture/consortium and of the
contractors the proponent has engaged for the project.
Unfortunately, this argument seems to assume that the "collective" nature of the
undertaking of the members of MPC, their contribution of assets and sharing of risks, and
the "community" of their interest in the performance of the Contract entitle MPC to be
treated as a joint venture or consortium; and to be evaluated accordingly on the basis of
the members’ collective qualifications when, in fact, the evidence before the Court suggest
otherwise.
This Court in Kilosbayan v. Guingona46 defined joint venture as "an association of persons
or companies jointly undertaking some commercial enterprise; generally, all contribute
assets and share risks. It requires a community of interest in the performance of the
subject matter, a right to direct and govern the policy in connection therewith, and [a] duty,
which may be altered by agreement to share both in profit and losses."
Going back to the instant case, it should be recalled that the automation Contract with
Comelec was not executed by the "consortium" MPC -- or by MPEI for and on behalf of
MPC -- but by MPEI, period. The said Contract contains no mention whatsoever of any
consortium or members thereof. This fact alone seems to contradict all the suppositions
about a joint undertaking that would normally apply to a joint venture or consortium: that it
is a commercial enterprise involving a community of interest, a sharing of risks, profits and
losses, and so on.
Now let us consider the four bilateral Agreements, starting with the Memorandum of
Agreement between MPEI and WeSolv Open Computing, Inc., dated March 5, 2003. The
body of the MOA consists of just seven (7) short paragraphs that would easily fit in one
page! It reads as follows:
"1. The parties agree to cooperate in successfully implementing the Project in the
substance and form as may be most beneficial to both parties and other
subcontractors involved in the Project.
"2. Mega Pacific shall be responsible for any contract negotiations and signing
with the COMELEC and, subject to the latter’s approval, agrees to give WeSolv
an opportunity to be present at meetings with the COMELEC concerning
WeSolv’s portion of the Project.
"3. WeSolv shall be jointly and severally liable with Mega Pacific only for the
particular products and/or services supplied by the former for the Project.
"4. Each party shall bear its own costs and expenses relative to this agreement
unless otherwise agreed upon by the parties.
"5. The parties undertake to do all acts and such other things incidental to,
necessary or desirable or the attainment of the objectives and purposes of this
Agreement.
"6. In the event that the parties fail to agree on the terms and conditions of the
supply of the products and services including but not limited to the scope of the
products and services to be supplied and payment terms, WeSolv shall cease to
be bound by its obligations stated in the aforementioned paragraphs.
"7. Any dispute arising from this Agreement shall be settled amicably by the
parties whenever possible. Should the parties be unable to do so, the parties
hereby agree to settle their dispute through arbitration in accordance with the
existing laws of the Republic of the Philippines." (Underscoring supplied.)
42
Even shorter is the Memorandum of Agreement between MPEI and SK C&C Co. Ltd.,
dated March 9, 2003, the body of which consists of only six (6) paragraphs, which we
quote:
"1. All parties agree to cooperate in achieving the Consortium’s objective of
successfully implementing the Project in the substance and form as may be most
beneficial to the Consortium members and in accordance w/ the demand of the
RFP.
"2. Mega Pacific shall have full powers and authority to represent the Consortium
with the Comelec, and to enter and sign, for and in behalf of its members any and
all agreement/s which maybe required in the implementation of the Project.
"3. Each of the individual members of the Consortium shall be jointly and
severally liable with the Lead Firm for the particular products and/or services
supplied by such individual member for the project, in accordance with their
respective undertaking or sphere of responsibility.
"4. Each party shall bear its own costs and expenses relative to this agreement
unless otherwise agreed upon by the parties.
"5. The parties undertake to do all acts and such other things incidental to,
necessary or desirable for the attainment of the objectives and purposes of this
Agreement.
"6. Any dispute arising from this Agreement shall be settled amicably by the
parties whenever possible. Should the parties be unable to do so, the parties
hereby agree to settle their dispute through arbitration in accordance with the
existing laws of the Republic of the Philippines." (Underscoring supplied.)
It will be noted that the two Agreements quoted above are very similar in wording. Neither
of them contains any specifics or details as to the exact nature and scope of the parties’
respective undertakings, performances and deliverables under the Agreement with respect
to the automation project. Likewise, the two Agreements are quite bereft of pesos-and-
centavos data as to the amount of investments each party contributes, its respective share
in the revenues and/or profit from the Contract with Comelec, and so forth -- all of which
are normal for agreements of this nature. Yet, according to public and private respondents,
the participation of MPEI, WeSolv and SK C&C comprises fully 90 percent of the entire
undertaking with respect to the election automation project, which is worth about P1.3
billion.
As for Election.com and ePLDT, the separate "Teaming Agreements" they entered into
with MPEI for the remaining 10 percent of the entire project undertaking are ironically much
longer and more detailed than the MOAs discussed earlier. Although specifically ascribing
to them the role of subcontractor vis-à-vis MPEI as contractor, these Agreements are,
however, completely devoid of any pricing data or payment terms. Even the appended
Schedules supposedly containing prices of goods and services are shorn of any price data.
Again, as mentioned earlier, based on the terms of their particular Agreements, neither
Election.com nor ePLDT -- with MPEI -- is jointly and severally liable to Comelec.
It is difficult to imagine how these bare Agreements -- especially the first two -- could be
implemented in practice; and how a dispute between the parties or a claim by Comelec
against them, for instance, could be resolved without lengthy and debilitating litigations.
Absent any clear-cut statement as to the exact nature and scope of the parties’ respective
undertakings, commitments, deliverables and covenants, one party or another can easily
dodge its obligation and deny or contest its liability under the Agreement; or claim that it is
the other party that should have delivered but failed to.
Likewise, in the absence of definite indicators as to the amount of investments to be
contributed by each party, disbursements for expenses, the parties’ respective shares in
the profits and the like, it seems to the Court that this situation could readily give rise to all
kinds of misunderstandings and disagreements over money matters.
Under such a scenario, it will be extremely difficult for Comelec to enforce the supposed
joint and several liabilities of the members of the "consortium." The Court is not even
mentioning the possibility of a situation arising from a failure of WeSolv and MPEI to agree
on the scope, the terms and the conditions for the supply of the products and services
under the Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv would
perforce cease to be bound by its obligations -- including its joint and solidary liability with
MPEI under the MOA -- and could forthwith disengage from the project. Effectively,
WeSolv could at any time unilaterally exit from its MOA with MPEI by simply failing to
agree. Where would that outcome leave MPEI and Comelec?
To the Court, this strange and beguiling arrangement of MPEI with the other companies
does not qualify them to be treated as a consortium or joint venture, at least of the type
that government agencies like the Comelec should be dealing with. With more reason is it
unable to agree to the proposal to evaluate the members of MPC on a collective basis.
In any event, the MPC members claim to be a joint venture/consortium; and respondents
have consistently been arguing that the IRR for RA 6957, as amended, should be applied
to the instant case in order to allow a collective evaluation of consortium members.
Surprisingly, considering these facts, respondents have not deemed it necessary for MPC
members to comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as amended.
According to the aforementioned provision, if the project proponent is a joint venture or
consortium, the members or participants thereof are required to submit a sworn statement
that, if awarded the contract, they shall bind themselves to be jointly, severally and
solidarily liable for the project proponent’s obligations thereunder. This provision was
supposed to mirror Section 5 of RA 6957, as amended, which states: "In all cases, a
consortium that participates in a bid must present proof that the members of the
consortium have bound themselves jointly and severally to assume responsibility for any
project. The withdrawal of any member of the consortium prior to the implementation of the
project could be a ground for the cancellation of the contract." The Court has certainly not
seen any joint and several undertaking by the MPC members that even approximates the
tenor of that which is described above. We fail to see why respondents should invoke the
IRR if it is for their benefit, but refuse to comply with it otherwise.
B.
DOST Technical Tests Flunked by the Automated Counting Machines
43
Let us now move to the second subtopic, which deals with the substantive issue: the
ACM’s failure to pass the tests of the Department of Science and Technology (DOST).
After respondent "consortium" and the other bidder, TIM, had submitted their respective
bids on March 10, 2003, the Comelec’s BAC -- through its Technical Working Group
(TWG) and the DOST -- evaluated their technical proposals. Requirements that were
highly technical in nature and that required the use of certain equipment in the evaluation
process were referred to the DOST for testing. The Department reported thus:
TEST RESULTS MATRIX
(This was a big table that took up almost three pages. I deleted it – you can check
online to see it.)
According to respondents, it was only after the TWG and the DOST had conducted their
separate tests and submitted their respective reports that the BAC, on the basis of these
reports formulated its comments/recommendations on the bids of the consortium and TIM.
The BAC, in its Report dated April 21, 2003, recommended that the Phase II project
involving the acquisition of automated counting machines be awarded to MPEI. It said:
"After incisive analysis of the technical reports of the DOST and the Technical
Working Group for Phase II – Automated Counting Machine, the BAC considers
adaptability to advances in modern technology to ensure an effective and
efficient method, as well as the security and integrity of the system.
"The results of the evaluation conducted by the TWG and that of the DOST (14
April 2003 report), would show the apparent advantage of Mega-Pacific over the
other competitor, TIM.
"The BAC further noted that both Mega-Pacific and TIM obtained some ‘failed
marks’ in the technical evaluation. In general, the ‘failed marks’ of Total
Information Management as enumerated above affect the counting machine itself
which are material in nature, constituting non-compliance to the RFP. On the
other hand, the ‘failed marks’ of Mega-Pacific are mere formalities on certain
documentary requirements which the BAC may waive as clearly indicated in the
Invitation to Bid.
"In the DOST test, TIM obtained 12 failed marks and mostly attributed to the
counting machine itself as stated earlier. These are requirements of the RFP and
therefore the BAC cannot disregard the same.
"Mega-Pacific failed in 8 items however these are mostly on the software which
can be corrected by reprogramming the software and therefore can be readily
corrected.
"The BAC verbally inquired from DOST on the status of the retest of the counting
machines of the TIM and was informed that the report will be forthcoming after
the holy week. The BAC was informed that the retest is on a different parameters
they’re being two different machines being tested. One purposely to test if
previously read ballots will be read again and the other for the other features
such as two sided ballots.
"The said machine and the software therefore may not be considered the same
machine and program as submitted in the Technical proposal and therefore may
be considered an enhancement of the original proposal.
"Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by
Executive Director Ronaldo T. Viloria of DOST is that the result of the test in the
two counting machines of TIM contains substantial errors that may lead to the
failure of these machines based on the specific items of the RFP that DOST has
to certify.
OPENING OF FINANCIAL BIDS
"The BAC on 15 April 2003, after notifying the concerned bidders opened the
financial bids in their presence and the results were as follows:
Mega-Pacific:
Option 1 – Outright purchase: Bid Price if Php1,248,949,088.00
Option 2 – Lease option:
70% Down payment of cost of hardware or Php642,755,757.07
Remainder payable over 50 months or a total of Php642,755,757.07
Discount rate of 15% p.a. or 1.2532% per month.
Total Number of Automated Counting Machine – 1,769 ACMs (Nationwide)
TIM:
Total Bid Price – Php1,297,860,560.00
Total Number of Automated Counting Machine – 2,272 ACMs (Mindanao and
NCR only)
"Premises considered, it appears that the bid of Mega Pacific is the lowest
calculated responsive bid, and therefore, the Bids and Awards Committee (BAC)
recommends that the Phase II project re Automated Counting Machine be
awarded to Mega Pacific eSolutions, Inc."48
The BAC, however, also stated on page 4 of its Report: "Based on the 14 April 2003 report
(Table 6) of the DOST, it appears that both Mega-Pacific and TIM (Total Information
Management Corporation) failed to meet some of the requirements. Below is a
comparative presentation of the requirements wherein Mega-Pacific or TIM or both of them
44
failed: x x x." What followed was a list of "key requirements," referring to technical
requirements, and an indication of which of the two bidders had failed to meet them.
Failure to Meet the Required Accuracy Rating
The first of the key requirements was that the counting machines were to have
an accuracy rating of at least 99.9995 percent. The BAC Report indicates that both
Mega Pacific and TIM failed to meet this standard.
The key requirement of accuracy rating happens to be part and parcel of the Comelec’s
Request for Proposal (RFP). The RFP, on page 26, even states that the ballot counting
machines and ballot counting software "must have an accuracy rating of 99.9995% (not
merely 99.995%) or better as certified by a reliable independent testing agency."
When questioned on this matter during the Oral Argument, Commissioner Borra tried to
wash his hands by claiming that the required accuracy rating of 99.9995 percent had been
set by a private sector group in tandem with Comelec. He added that the Commission had
merely adopted the accuracy rating as part of the group’s recommended bid requirements,
which it had not bothered to amend even after being advised by DOST that such standard
was unachievable. This excuse, however, does not in any way lessen Comelec’s
responsibility to adhere to its own published bidding rules, as well as to see to it that the
consortium indeed meets the accuracy standard. Whichever accuracy rating is the right
standard -- whether 99.995 or 99.9995 percent -- the fact remains that the machines of the
so-called "consortium" failed to even reach the lesser of the two. On this basis alone, it
ought to have been disqualified and its bid rejected outright.
At this point, the Court stresses that the essence of public bidding is violated by the
practice of requiring very high standards or unrealistic specifications that cannot be met --
like the 99.9995 percent accuracy rating in this case -- only to water them down after the
bid has been award. Such scheme, which discourages the entry of prospective bona fide
bidders, is in fact a sure indication of fraud in the bidding, designed to eliminate fair
competition. Certainly, if no bidder meets the mandatory requirements, standards or
specifications, then no award should be made and a failed bidding declared.
Failure of Software to Detect Previously Downloaded Data
Furthermore, on page 6 of the BAC Report, it appears that the "consortium" as well as TIM
failed to meet another key requirement -- for the counting machine’s software program to
be able to detect previously downloaded precinct results and to prevent these from
being entered again into the counting machine. This same deficiency on the part of
both bidders reappears on page 7 of the BAC Report, as a result of the recurrence of their
failure to meet the said key requirement.
That the ability to detect previously downloaded data at different canvassing or
consolidation levels is deemed of utmost importance can be seen from the fact that it is
repeated three times in the RFP. On page 30 thereof, we find the requirement that
the city/municipal canvassing system software must be able to detect previously
downloaded precinct results and prevent these from being "inputted" again into the system.
Again, on page 32 of the RFP, we read that the provincial/district canvassing system
software must be able to detect previously downloaded city/municipal results and prevent
these from being "inputted" again into the system. And once more, on page 35 of the RFP,
we find the requirement that the national canvassing system software must be able to
detect previously downloaded provincial/district results and prevent these from being
"inputted" again into the system.
Once again, though, Comelec chose to ignore this crucial deficiency, which should have
been a cause for the gravest concern. Come May 2004, unscrupulous persons may take
advantage of and exploit such deficiency by repeatedly downloading and feeding into the
computers results favorable to a particular candidate or candidates. We are thus
confronted with the grim prospect of election fraud on a massive scale by means of
just a few key strokes. The marvels and woes of the electronic age!
Inability to Print the Audit Trail
But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the
ACMs of both bidders were unable to print the audit trail without any loss of data. In the
case of MPC, the audit trail system was "not yet incorporated" into its ACMs.
This particular deficiency is significant, not only to this bidding but to the cause of free and
credible elections. The purpose of requiring audit trails is to enable Comelec to trace and
verify the identities of the ACM operators responsible for data entry and downloading, as
well as the times when the various data were downloaded into the canvassing system, in
order to forestall fraud and to identify the perpetrators.
Thus, the RFP on page 27 states that the ballot counting machines and ballot counting
software must print an audit trail of all machine operations for documentation and
verification purposes. Furthermore, the audit trail must be stored on the internal storage
device and be available on demand for future printing and verifying. On pages 30-31, the
RFP also requires that the city/municipal canvassing system software be able to print an
audit trail of the canvassing operations, including therein such data as the date and time
the canvassing program was started, the log-in of the authorized users (the identity of the
machine operators), the date and time the canvass data were downloaded into the
canvassing system, and so on and so forth. On page 33 of the RFP, we find the same
audit trail requirement with respect to the provincial/district canvassing system software;
and again on pages 35-36 thereof, the same audit trail requirement with respect to
the national canvassing system software.
That this requirement for printing audit trails is not to be lightly brushed aside by the BAC
or Comelec itself as a mere formality or technicality can be readily gleaned from the
provisions of Section 7 of RA 8436, which authorizes the Commission to use an automated
system for elections.
The said provision which respondents have quoted several times, provides that ACMs are
to possess certain features divided into two classes: those that the statute itself considers
mandatory and other features or capabilities that the law deems optional. Among those
considered mandatory are "provisions for audit trails"! Section 7 reads as follows: "The
System shall contain the following features: (a) use of appropriate ballots; (b) stand-alone
machine which can count votes and an automated system which can consolidate the
results immediately; (c) with provisions for audit trails; (d) minimum human intervention;
and (e) adequate safeguard/security measures." (Italics and emphases supplied.)
45
In brief, respondents cannot deny that the provision requiring audit trails is indeed
mandatory, considering the wording of Section 7 of RA 8436. Neither can Respondent
Comelec deny that it has relied on the BAC Report, which indicates that the machines or
the software was deficient in that respect. And yet, the Commission simply disregarded this
shortcoming and awarded the Contract to private respondent, thereby violating the very
law it was supposed to implement.
C.
Inadequacy of Post Facto Remedial Measures
Respondents argue that the deficiencies relating to the detection of previously downloaded
data, as well as provisions for audit trails, are mere shortcomings or minor deficiencies in
software or programming, which can be rectified. Perhaps Comelec simply relied upon the
BAC Report, which states on page 8 thereof that "Mega Pacific failed in 8 items[;] however
these are mostly on the software which can be corrected by re-programming x x x and
therefore can be readily corrected."
The undersigned ponente’s questions, some of which were addressed to Commissioner
Borra during the Oral Argument, remain unanswered to this day. First of all, who made the
determination that the eight "fail" marks of Mega Pacific were on account of the software --
was it DOST or TWG? How can we be sure these failures were not the results of machine
defects? How was it determined that the software could actually be re-programmed and
thereby rectified? Did a qualified technical expert read and analyze the source code49 for
the programs and conclude that these could be saved and remedied? (Such determination
cannot be done by any other means save by the examination and analysis of the source
code.)
Who was this qualified technical expert? When did he carry out the study? Did he prepare
a written report on his findings? Or did the Comelec just make a wild guess? It does not
follow that all defects in software programs can be rectified, and the programs saved. In
the information technology sector, it is common knowledge that there are many badly
written programs, with significant programming errors written into them; hence it does not
make economic sense to try to correct the programs; instead, programmers simply
abandon them and just start from scratch. There’s no telling if any of these programs is
unrectifiable, unless a qualified programmer reads the source code.
And if indeed a qualified expert reviewed the source code, did he also determine how
much work would be needed to rectify the programs? And how much time and money
would be spent for that effort? Who would carry out the work? After the rectification
process, who would ascertain and how would it be ascertained that the programs have
indeed been properly rectified, and that they would work properly thereafter? And of
course, the most important question to ask: could the rectification be done in time for the
elections in 2004?
Clearly, none of the respondents bothered to think the matter through. Comelec simply
took the word of the BAC as gospel truth, without even bothering to inquire from DOST
whether it was true that the deficiencies noted could possibly be remedied by re-
programming the software. Apparently, Comelec did not care about the software, but
focused only on purchasing the machines.
What really adds to the Court’s dismay is the admission made by Commissioner Borra
during the Oral Argument that the software currently being used by Comelec was merely
the "demo" version, inasmuch as the final version that would actually be used in the
elections was still being developed and had not yet been finalized.
It is not clear when the final version of the software would be ready for testing and
deployment. It seems to the Court that Comelec is just keeping its fingers crossed and
hoping the final product would work. Is there a "Plan B" in case it does not? Who knows?
But all these software programs are part and parcel of the bidding and the Contract
awarded to the Consortium. Why is it that the machines are already being brought in and
paid for, when there is as yet no way of knowing if the final version of the software would
be able to run them properly, as well as canvass and consolidate the results in the manner
required?
The counting machines, as well as the canvassing system, will never work properly without
the correct software programs. There is an old adage that is still valid to this day: "Garbage
in, garbage out." No matter how powerful, advanced and sophisticated the computers and
the servers are, if the software being utilized is defective or has been compromised, the
results will be no better than garbage. And to think that what is at stake here is the 2004
national elections -- the very basis of our democratic life.
Correction of Defects?
To their Memorandum, public respondents proudly appended 19 Certifications issued by
DOST declaring that some 285 counting machines had been tested and had passed the
acceptance testing conducted by the Department on October 8-18, 2003. Among those
tested were some machines that had failed previous tests, but had undergone adjustments
and thus passed re-testing.
Unfortunately, the Certifications from DOST fail to divulge in what manner and by what
standards or criteria the condition, performance and/or readiness of the machines were re-
evaluated and re-appraised and thereafter given the passing mark. Apart from that fact, the
remedial efforts of respondents were, not surprisingly, apparently focused again on the
machines -- the hardware. Nothing was said or done about the software -- the deficiencies
as to detection and prevention of downloading and entering previously downloaded data,
as well as the capability to print an audit trail. No matter how many times the machines
were tested and re-tested, if nothing was done about the programming defects and
deficiencies, the same danger of massive electoral fraud remains. As anyone who has a
modicum of knowledge of computers would say, "That’s elementary!"
And only last December 5, 2003, an Inq7.net news report quoted the Comelec chair as
saying that the new automated poll system would be used nationwide in May 2004, even
as the software for the system remained unfinished. It also reported that a certain Titus
Manuel of the Philippine Computer Society, which was helping Comelec test the hardware
and software, said that the software for the counting still had to be submitted on December
15, while the software for the canvassing was due in early January.
Even as Comelec continues making payments for the ACMs, we keep asking ourselves:
who is going to ensure that the software would be tested and would work properly?
46
At any rate, the re-testing of the machines and/or the 100 percent testing of all machines
(testing of every single unit) would not serve to eradicate the grave abuse of discretion
already committed by Comelec when it awarded the Contract on April 15, 2003, despite
the obvious and admitted flaws in the bidding process, the failure of the "winning bidder" to
qualify, and the inability of the ACMs and the intended software to meet the bid
requirements and rules.
Comelec’s Latest "Assurances" Are Unpersuasive
Even the latest pleadings filed by Comelec do not serve to allay our apprehensions. They
merely affirm and compound the serious violations of law and gravely abusive acts it has
committed. Let us examine them.
The Resolution issued by this Court on December 9, 2003 required respondents to inform
it as to the number of ACMs delivered and paid for, as well as the total payment made to
date for the purchase thereof. They were likewise instructed to submit a certification from
the DOST attesting to the number of ACMs tested, the number found to be defective; and
"whether the reprogrammed software has been tested and found to have complied with the
requirements under Republic Act No. 8436."50
In its "Partial Compliance and Manifestation" dated December 29, 2003, Comelec informed
the Court that 1,991 ACMs had already been delivered to the Commission as of that date.
It further certified that it had already paid the supplier the sum of P849,167,697.41, which
corresponded to 1,973 ACM units that had passed the acceptance testing procedures
conducted by the MIRDC-DOST51 and which had therefore been accepted by the poll
body.
In the same submission, for the very first time, Comelec also disclosed to the Court the
following:
"The Automated Counting and Canvassing Project involves not only the
manufacturing of the ACM hardware but also the development of three (3) types
of software, which are intended for use in the following:
1. Evaluation of Technical Bids
2. Testing and Acceptance Procedures
3. Election Day Use."
Purchase of the First Type of Software Without Evaluation
In other words, the first type of software was to be developed solely for the purpose of
enabling the evaluation of the bidder’s technical bid. Comelec explained thus: "In addition
to the presentation of the ACM hardware, the bidders were required to develop a ‘base’
software program that will enable the ACM to function properly. Since the software
program utilized during the evaluation of bids is not the actual software program to be
employed on election day, there being two (2) other types of software program that will still
have to be developed and thoroughly tested prior to actual election day use, defects in the
‘base’ software that can be readily corrected by reprogramming are considered minor in
nature, and may therefore be waived."
In short, Comelec claims that it evaluated the bids and made the decision to award the
Contract to the "winning" bidder partly on the basis of the operation of the ACMs running a
"base" software. That software was therefore nothing but a sample or "demo" software,
which would not be the actual one that would be used on election day. Keeping in mind
that the Contract involves the acquisition of not just the ACMs or the hardware, but also the
software that would run them, it is now even clearer that the Contract was awarded without
Comelec having seen, much less evaluated, the final product -- the software that would
finally be utilized come election day. (Not even the "near-final" product, for that matter).
What then was the point of conducting the bidding, when the software that was the subject
of the Contract was still to be created and could conceivably undergo innumerable
changes before being considered as being in final form? And that is not all!
No Explanation for Lapses in the Second Type of Software
The second phase, allegedly involving the second type of software, is simply denominated
"Testing and Acceptance Procedures." As best as we can construe, Comelec is claiming
that this second type of software is also to be developed and delivered by the supplier in
connection with the "testing and acceptance" phase of the acquisition process. The
previous pleadings, though -- including the DOST reports submitted to this Court -- have
not heretofore mentioned any statement, allegation or representation to the effect that a
particular set of software was to be developed and/or delivered by the supplier in
connection with the testing and acceptance of delivered ACMs.
What the records do show is that the imported ACMs were subjected to the testing and
acceptance process conducted by the DOST. Since the initial batch delivered included a
high percentage of machines that had failed the tests, Comelec asked the DOST to
conduct a 100 percent testing; that is, to test every single one of the ACMs delivered.
Among the machines tested on October 8 to 18, 2003, were some units that had failed
previous tests but had subsequently been re-tested and had passed. To repeat, however,
until now, there has never been any mention of a second set or type of software pertaining
to the testing and acceptance process.
In any event, apart from making that misplaced and uncorroborated claim, Comelec in the
same submission also professes (in response to the concerns expressed by this Court)
that the reprogrammed software has been tested and found to have complied with
the requirements of RA 8436. It reasoned thus: "Since the software program is an
inherent element in the automated counting system, the certification issued by the MIRDC-
DOST that one thousand nine hundred seventy-three (1,973) units passed the acceptance
test procedures is an official recognition by the MIRDC-DOST that the software component
of the automated election system, which has been reprogrammed to comply with the
provisions of Republic Act No. 8436 as prescribed in the Ad Hoc Technical Evaluation
Committee’s ACM Testing and Acceptance Manual, has passed the MIRDC-DOST tests."
The facts do not support this sweeping statement of Comelec. A scrutiny of the MIRDC-
DOST letter dated December 15, 2003,52 which it relied upon, does not justify its grand
conclusion. For clarity’s sake, we quote in full the letter-certification, as follows:
47
 "15 December 2003 automated election system x x x has been reprogrammed to comply with" RA 8436, and
"has passed the MIRDC-DOST tests." There is no mention at all of any software
reprogramming. If the MIRDC-DOST had indeed undertaken the supposed reprogramming
"HON. RESURRECCION Z. BORRA
and the process turned out to be successful, that agency would have proudly trumpeted its
singular achievement.
Commissioner-in-Charge
How Comelec came to believe that such reprogramming had been undertaken is unclear.
Phase II, Modernization Project In any event, the Commission is not forthright and candid with the factual details. If
reprogramming has been done, who performed it and when? What exactly did the process
Commission on Elections involve? How can we be assured that it was properly performed? Since the facts attendant
to the alleged reprogramming are still shrouded in mystery, the Court cannot give any
weight to Comelec’s bare allegations.
Intramuros, Manila
The fact that a total of 1,973 of the machines has ultimately passed the MIRDC-DOST
Attention: Atty. Jose M. Tolentino, Jr. tests does not by itself serve as an endorsement of the soundness of the software
program, much less as a proof that it has been reprogrammed. In the first place, nothing
Project Director on record shows that the tests and re-tests conducted on the machines were intended to
address the serious deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter
does not even indicate what kinds of tests or re-tests were conducted, their exact nature
"Dear Commissioner Borra: and scope, and the specific objectives thereof.53The absence of relevant supporting
documents, combined with the utter vagueness of the letter, certainly fails to inspire belief
"We are pleased to submit 11 DOST Test Certifications representing 11 lots and or to justify the expansive confidence displayed by Comelec. In any event, it goes without
covering 158 units of automated counting machines (ACMs) that we have tested saying that remedial measures such as the alleged reprogramming cannot in any way
from 02-12 December 2003. mitigate the grave abuse of discretion already committed as early as April 15, 2003.

"To date, we have tested all the 1,991 units of ACMs, broken down as follow:
(sic)
1st batch - 30 units 4th batch - 438 units
2nd batch - 288 units 5th batch - 438 units
3rd batch - 414 units 6th batch - 383 units
"It should be noted that a total of 18 units have failed the test. Out of these 18
units, only one (1) unit has failed the retest.
"Thank you and we hope you will find everything in order.
"Very truly yours,
"ROLANDO T. VILORIA, CESO III
Executive Director cum
Chairman, DOST-Technical Evaluation Committee"
Even a cursory glance at the foregoing letter shows that it is completely bereft of anything
that would remotely support Comelec’s contention that the "software component of the
Rationale of Public Bidding Negated
by the Third Type of Software
Respondent Comelec tries to assuage this Court’s anxiety in these words: "The
reprogrammed software that has already passed the requirements of Republic Act No.
8436 during the MIRDC-DOST testing and acceptance procedures will require further
customization since the following additional elements, among other things, will have to be
considered before the final software can be used on election day: 1. Final Certified List of
Candidates x x x 2. Project of Precincts x x x 3. Official Ballot Design and Security
Features x x x 4. Encryption, digital certificates and digital signatures x x x. The certified list
of candidates for national elective positions will be finalized on or before 23 January 2004
while the final list of projects of precincts will be prepared also on the same date. Once all
the above elements are incorporated in the software program, the Test Certification Group
created by the Ad Hoc Technical Evaluation Committee will conduct meticulous testing of
the final software before the same can be used on election day. In addition to the testing to
be conducted by said Test Certification Group, the Comelec will conduct mock elections in
selected areas nationwide not only for purposes of public information but also to further
test the final election day program. Public respondent Comelec, therefore, requests that it
be given up to 16 February 2004 to comply with this requirement."
The foregoing passage shows the imprudent approach adopted by Comelec in the bidding
and acquisition process. The Commission says that before the software can be utilized on
election day, it will require "customization" through addition of data -- like the list of
candidates, project of precincts, and so on. And inasmuch as such data will become
available only in January 2004 anyway, there is therefore no perceived need on Comelec’s
part to rush the supplier into producing the final (or near-final) version of the software
48
before that time. In any case, Comelec argues that the software needed for the electoral
exercise can be continuously developed, tested, adjusted and perfected, practically all the
way up to election day, at the same time that the Commission is undertaking all the other
distinct and diverse activities pertinent to the elections.
Given such a frame of mind, it is no wonder that Comelec paid little attention to the
counting and canvassing software during the entire bidding process, which took place in
February-March 2003. Granted that the software was defective, could not detect and
prevent the re-use of previously downloaded data or produce the audit trail -- aside from its
other shortcomings -- nevertheless, all those deficiencies could still be corrected down the
road. At any rate, the software used for bidding purposes would not be the same one that
will be used on election day, so why pay any attention to its defects? Or to the Comelec’s
own bidding rules for that matter?
Clearly, such jumbled ratiocinations completely negate the rationale underlying the bidding
process mandated by law.
At the very outset, the Court has explained that Comelec flagrantly violated the public
policy on public biddings (1) by allowing MPC/MPEI to participate in the bidding even
though it was not qualified to do so; and (2) by eventually awarding the Contract to
MPC/MPEI. Now, with the latest explanation given by Comelec, it is clear that the
Commission further desecrated the law on public bidding by permitting the winning bidder
to change and alter the subject of the Contract (the software), in effect allowing a
substantive amendment without public bidding.
This stance is contrary to settled jurisprudence requiring the strict application of pertinent
rules, regulations and guidelines for public bidding for the purpose of placing each bidder,
actual or potential, on the same footing. The essence of public bidding is, after all, an
opportunity for fair competition, and a fair basis for the precise comparison of bids. In
common parlance, public bidding aims to "level the playing field." That means each bidder
must bid under the same conditions; and be subject to the same guidelines, requirements
and limitations, so that the best offer or lowest bid may be determined, all other things
being equal.
Thus, it is contrary to the very concept of public bidding to permit a variance between the
conditions under which bids are invited and those under which proposals are submitted
and approved; or, as in this case, the conditions under which the bid is won and those
under which the awarded Contract will be complied with. The substantive amendment of
the contract bidded out, without any public bidding -- after the bidding process had been
concluded -- is violative of the public policy on public biddings, as well as the spirit and
intent of RA 8436. The whole point in going through the public bidding exercise was
completely lost. The very rationale of public bidding was totally subverted by the
Commission.
From another perspective, the Comelec approach also fails to make sense. Granted that,
before election day, the software would still have to be customized to each precinct,
municipality, city, district, and so on, there still was nothing at all to prevent Comelec from
requiring prospective suppliers/bidders to produce, at the very start of the bidding process,
the "next-to-final" versions of the software (the best software the suppliers had) -- pre-
tested and ready to be customized to the final list of candidates and project of precincts,
among others, and ready to be deployed thereafter. The satisfaction of such requirement
would probably have provided far better bases for evaluation and selection, as between
suppliers, than the so-called demo software.Respondents contend that the bidding
suppliers’ counting machines were previously used in at least one political exercise with no
less than 20 million voters. If so, it stands to reason that the software used in that past
electoral exercise would probably still be available and, in all likelihood, could have been
adopted for use in this instance. Paying for machines and software of that category
(already tried and proven in actual elections and ready to be adopted for use) would
definitely make more sense than paying the same hundreds of millions of pesos for demo
software and empty promises of usable programs in the future.
But there is still another gut-level reason why the approach taken by Comelec is
reprehensible. It rides on the perilous assumption that nothing would go wrong; and that,
come election day, the Commission and the supplier would have developed, adjusted and
"re-programmed" the software to the point where the automated system could function as
envisioned. But what if such optimistic projection does not materialize? What if, despite all
their herculean efforts, the software now being hurriedly developed and tested for the
automated system performs dismally and inaccurately or, worse, is hacked and/or
manipulated?54 What then will we do with all the machines and defective software already
paid for in the amount of P849 million of our tax money? Even more important, what will
happen to our country in case of failure of the automation?
The Court cannot grant the plea of Comelec that it be given until February 16, 2004 to be
able to submit a "certification relative to the additional elements of the software that will be
customized," because for us to do so would unnecessarily delay the resolution of this case
and would just give the poll body an unwarranted excuse to postpone the 2004 elections.
On the other hand, because such certification will not cure the gravely abusive actions
complained of by petitioners, it will be utterly useless.
Is this Court being overly pessimistic and perhaps even engaging in speculation? Hardly.
Rather, the Court holds that Comelec should not have gambled on the unrealistic optimism
that the supplier’s software development efforts would turn out well. The Commission
should have adopted a much more prudent and judicious approach to ensure the delivery
of tried and tested software, and readied alternative courses of action in case of failure.
Considering that the nation’s future is at stake here, it should have done no less.
Epilogue
Once again, the Court finds itself at the crossroads of our nation’s history. At stake in this
controversy is not just the business of a computer supplier, or a questionable proclamation
by Comelec of one or more public officials. Neither is it about whether this country should
switch from the manual to the automated system of counting and canvassing votes. At its
core is the ability and capacity of the Commission on Elections to perform properly, legally
and prudently its legal mandate to implement the transition from manual to automated
elections.
Unfortunately, Comelec has failed to measure up to this historic task. As stated at the start
of this Decision, Comelec has not merely gravely abused its discretion in awarding the
Contract for the automation of the counting and canvassing of the ballots. It has also put at
grave risk the holding of credible and peaceful elections by shoddily accepting electronic
hardware and software that admittedly failed to pass legally mandated technical
requirements. Inadequate as they are, the remedies it proffers post facto do not cure the
grave abuse of discretion it already committed (1) on April 15, 2003, when it illegally made
49
the award; and (2) "sometime" in May 2003 when it executed the Contract for the purchase
of defective machines and non-existent software from a non-eligible bidder.
For these reasons, the Court finds it totally unacceptable and unconscionable to place its
imprimatur on this void and illegal transaction that seriously endangers the breakdown of
our electoral system. For this Court to cop-out and to close its eyes to these illegal
transactions, while convenient, would be to abandon its constitutional duty of safeguarding
public interest.
As a necessary consequence of such nullity and illegality, the purchase of the machines
and all appurtenances thereto including the still-to-be-produced (or in Comelec’s words, to
be "reprogrammed") software, as well as all the payments made therefor, have no basis
whatsoever in law. The public funds expended pursuant to the void Resolution and
Contract must therefore be recovered from the payees and/or from the persons who made
possible the illegal disbursements, without prejudice to possible criminal prosecutions
against them.
Furthermore, Comelec and its officials concerned must bear full responsibility for the failed
bidding and award, and held accountable for the electoral mess wrought by their grave
abuse of discretion in the performance of their functions. The State, of course, is not bound
by the mistakes and illegalities of its agents and servants.
True, our country needs to transcend our slow, manual and archaic electoral process. But
before it can do so, it must first have a diligent and competent electoral agency that can
properly and prudently implement a well-conceived automated election system.
At bottom, before the country can hope to have a speedy and fraud-free automated
election, it must first be able to procure the proper computerized hardware and software
legally, based on a transparent and valid system of public bidding. As in any democratic
system, the ultimate goal of automating elections must be achieved by a legal, valid and
above-board process of acquiring the necessary tools and skills therefor. Though the
Philippines needs an automated electoral process, it cannot accept just any system
shoved into its bosom through improper and illegal methods. As the saying goes, the end
never justifies the means. Penumbral contracting will not produce enlightened results.
WHEREFORE, the Petition is GRANTED. The Court hereby
declares NULL and VOID Comelec Resolution No. 6074 awarding the contract for Phase II
of the AES to Mega Pacific Consortium (MPC). Also declared null and void is the subject
Contract executed between Comelec and Mega Pacific eSolutions (MPEI).55 Comelec is
further ORDERED to refrain from implementing any other contract or agreement entered
into with regard to this project.
Let a copy of this Decision be furnished the Office of the Ombudsman which shall
determine the criminal liability, if any, of the public officials (and conspiring private
individuals, if any) involved in the subject Resolution and Contract. Let the Office of the
Solicitor General also take measures to protect the government and vindicate public
interest from the ill effects of the illegal disbursements of public funds made by reason of
the void Resolution and Contract.
SO ORDERED.
G.R. No. 96266 July 18, 1991
ERNESTO M. MACEDA, petitioner,
vs.
ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL
PETROLEUM CORPORATION AND PETRON CORPORATION, respondents.
RESOLUTION
MEDIALDEA, J.:
In G.R. No. 96266, petitioner Maceda seeks nullification of the Energy Regulatory Board
(ERB) Orders dated December 5 and 6, 1990 on the ground that the hearings conducted
on the second provisional increase in oil prices did not allow him substantial cross-
examination, in effect, allegedly, a denial of due process.
The facts of the case are as follows:
Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil
companies filed with the ERB their respective applications on oil price increases (docketed
as ERB Case Nos. 90-106, 90-382 and 90-384, respectively).
On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42
per liter. Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E.
Maceda v. ERB, et al., G.R. No. 95203), seeking to nullify the provisional increase. We
dismissed the petition on December 18, 1990, reaffirming ERB's authority to grant
provisional increase even without prior hearing, pursuant to Sec. 8 of E.O. No. 172,
clarifying as follows:
What must be stressed is that while under Executive Order No. 172, a hearing is
indispensable, it does not preclude the Board from ordering, ex-parte, a
provisional increase, as it did here, subject to its final disposition of whether or
not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny
the application. Section 3, paragraph (e) is akin to a temporary restraining order
or a writ of preliminary attachment issued by the courts, which are given ex-
parte and which are subject to the resolution of the main case.
Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise,
operate exclusively of the other, in that the Board may resort to one but not to
both at the same time. Section 3(e) outlines the jurisdiction of the Board and the
grounds for which it may decree a price adjustment, subject to the requirements
of notice and hearing. Pending that, however, it may order, under Section 8, an
authority to increase provisionally, without need of a hearing, subject to the final
outcome of the proceeding. The Board, of course, is not prevented from
conducting a hearing on the grant of provisional authority-which is of course, the
better procedure — however, it cannot be stigmatized later if it failed to conduct
one. (pp. 129-130, Rollo) (Emphasis supplied)
50
In the same order of September 21, 1990, authorizing provisional increase, the ERB set
the applications for hearing with due notice to all interested parties on October 16, 1990.
Petitioner Maceda failed to appear at said hearing as well as on the second hearing on
October 17, 1990.
To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB
set the continuation of the hearing to October 24, 1990. This was postponed to November
5, 1990, on written notice of petitioner Maceda.
On November 5, 1990, the three oil companies filed their respective motions for leave to
file or admit amended/supplemental applications to further increase the prices of petroleum
products.
The ERB admitted the respective supplemental/amended petitions on November 6, 1990
at the same time requiring applicants to publish the corresponding Notices of Public
Hearing in two newspapers of general circulation (p. 4, Rollo and Annexes "F" and "G," pp.
60 and 62, Rollo).
Hearing for the presentation of the evidence-in-chief commenced on November 21, 1990
with ERB ruling that testimonies of witnesses were to be in the form of Affidavits (p.
6, Rollo). ERB subsequently outlined the procedure to be observed in the reception of
evidence, as follows:
CHAIRMAN FERNANDO:
Well, at the last hearing, applicant Caltex presented its evidence-in-chief and
there is an understanding or it is the Board's wish that for purposes of good order
in the presentation of the evidence considering that these are being heard
together, we will defer the cross-examination of applicant Caltex's witness and
ask the other applicants to present their evidence-in-chief so that the oppositors
win have a better Idea of what an of these will lead to because as I mentioned
earlier, it has been traditional and it is the intention of the Board to act on these
applications on an industry-wide basis, whether to accept, reject, modify or
whatever, the Board win do it on an industry wide basis, so, the best way to have
(sic) the oppositors and the Board a clear picture of what the applicants are
asking for is to have all the evidence-in-chief to be placed on record first and then
the examination will come later, the cross-examination will come later. . . . (pp. 5-
6, tsn., November 23, 1990, ERB Cases Nos. 90-106, 90382 and 90-384). (p.
162, Rollo)
Petitioner Maceda maintains that this order of proof deprived him of his right to finish his
cross-examination of Petron's witnesses and denied him his right to cross-examine each of
the witnesses of Caltex and Shell. He points out that this relaxed procedure resulted in the
denial of due process.
We disagree. The Solicitor General has pointed out:
. . . The order of testimony both with respect to the examination of the particular
witness and to the general course of the trial is within the discretion of the court
and the exercise of this discretion in permitting to be introduced out of the order
prescribed by the rules is not improper (88 C.J.S. 206-207).
Such a relaxed procedure is especially true in administrative bodies, such as the
ERB which in matters of rate or price fixing is considered as exercising a quasi-
legislative, not quasi-judicial, function As such administrative agency, it is not
bound by the strict or technical rules of evidence governing court proceedings
(Sec. 29, Public Service Act; Dickenson v. United States, 346, U.S. 389, 98 L. ed.
132, 74 S. St. 152). (Emphasis supplied)
In fact, Section 2, Rule I of the Rules of Practice and Procedure Governing
Hearings Before the ERB provides that —
These Rules shall govern pleadings, practice and procedure before the Energy
Regulatory Board in all matters of inquiry, study, hearing, investigation and/or any
other proceedings within the jurisdiction of the Board. However, in the broader
interest of justice, the Board may, in any particular matter, except itself from
these rules and apply such suitable procedure as shall promote the objectives of
the Order.
(pp. 163-164, Rollo)
Petitioner Maceda also claims that there is no substantial evidence on record to support
the provisional relief.
We have, in G.R. Nos. 95203-05, previously taken judicial notice of matters and events
related to the oil industry, as follows:
. . . (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2)
the exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of
payments is expected to reach $1 Billion; (4) our trade deficit is at P2.855 Billion
as of the first nine months of the year.
. . . (p. 150, Rollo)
The Solicitor General likewise commented:
Among the pieces of evidence considered by ERB in the grant of the contested
provisional relief were: (1) certified copies of bins of lading issued by crude oil
suppliers to the private respondents; (2) reports of the Bankers Association of the
Philippines on the peso-dollar exchange rate at the BAP oil pit; and (3) OPSF
status reports of the Office of Energy Affairs. The ERB was likewise guided in the
determination of international crude oil prices by traditional authoritative sources
of information on crude oil and petroleum products, such as Platt's Oilgram and
Petroleum Intelligence Weekly. (p. 158, Rollo)
Thus, We concede ERB's authority to grant the provisional increase in oil price, as We
note that the Order of December 5, 1990 explicitly stated:
in the light, therefore, of the rise in crude oil importation costs, which as earlier
mentioned, reached an average of $30.3318 per barrel at $25.551/US $ in
September-October 1990; the huge OPSF deficit which, as reported by the Office
of Energy Affairs, has amounted to P5.7 Billion (based on filed claims only and
51
 net of the P5 Billion OPSF) as of September 30, 1990, and is estimated to further Applied for P59.3713 P5.1216 P4.4717 P4.9954
increase to over P10 Billion by end December 1990; the decision of the
government to discontinue subsidizing oil prices in view of inflationary pressures;
Less: September 21 Price
the apparent inadequacy of the proposed additional P5.1 Billion government
appropriation for the OPSF and the sharp drop in the value of the peso in relation
to the US dollar to P28/US $, this Board is left with no other recourse but to grant Relief
applicants oil companies further relief by increasing the prices of petroleum
products sold by them. (p. 161, Rollo) Actual Price Increase P1.42

Petitioner Maceda together with petitioner Original (G.R. No. 96349) also claim that the Actual Tax Reduction:
provisional increase involved amounts over and above that sought by the petitioning oil
companies.
Ad Valorem Tax
The Solicitor General has pointed out that aside from the increase in crude oil prices, all
the applications of the respondent oil companies filed with the ERB covered claims from (per Sept. 1, 1990
the OPSF.
price build-up) P1.3333
We shall thus respect the ERB's Order of December 5, 1990 granting a provisional price
increase on petroleum products premised on the oil companies' OPSF claims, crude cost Specific Tax (per
peso differentials, forex risk for a subsidy on sale to NPC (p. 167, Rollo), since the oil
companies are "entitled to as much relief as the fact alleged constituting the course of
action may warrant," (Javellana v. D.O. Plaza Enterprises, Inc., G.R. No. L-28297, March Oct. 5, 1990 price
30, 1970, 32 SCRA 261 citing Rosales v. Reyes, 25 Phil. 495; Aguilar v. Rubiato, 40 Phil.
470) as follows: build-up) .6264 .7069 2.1269

Per Liter Net Price Increase

Weighted Applied for 2.8685

Petron Shell Caltex Average Nonetheless, it is relevant to point out that on December 10, 1990, the ERB, in response to
the President's appeal, brought back the increases in Premium and Regular gasoline to the
levels mandated by the December 5, 1990 Order (P6.9600 and P6.3900, respectively), as
Crude Cost P3.11 P3.6047 P2.9248 P3.1523
follows:

Peso Cost
Product In Pesos Per Liter

Diffn'l 2.1747 1.5203 1.5669 1.8123

OPSF

Forex Risk
Premium Gasoline 6.9600

Fee -0.1089 -0,0719 -0.0790 -0.0896

Regular Gasoline 6.3900

Subsidy on
Avturbo 4.9950

Sales to NPC 0.1955 0.0685 0.0590 0.1203

Kerosene 1.4100

Total Price
Diesel Oil 1.4100

Increase
Fuel Oil/Feedstock 0.2405
52

 LPG 1.2200
Asphalt 2.5000
Thinner 2.5000
In G.R. No. 96349, petitioner Original additionally claims that if the price increase will be
used to augment the OPSF this will constitute illegal taxation. In the Maceda case, (G.R.
Nos. 95203-05, supra) this Court has already ruled that "the Board Order authorizing the
proceeds generated by the increase to be deposited to the OPSF is not an act of taxation
but is authorized by Presidential Decree No. 1956, as amended by Executive Order No.
137.
The petitions of E.O. Original et al. (G.R. No. 96349) and C.S. Povedas, Jr. (G.R. No.
96284), insofar as they question the ERB's authority under Sec. 8 of E.O. 172, have
become moot and academic.
We lament Our helplessness over this second provisional increase in oil price. We have
stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-05,
G.R. Nos. 95119-21, supra). We wish to reiterate Our previous pronouncements therein
that while the government is able to justify a provisional increase, these findings "are not
final, and it is up to petitioners to demonstrate that the present economic picture does not
warrant a permanent increase."
In this regard, We also note the Solicitor General's comments that "the ERB is not averse
to the idea of a presidential review of its decision," except that there is no law at present
authorizing the same. Perhaps, as pointed out by Justice Padilla, our lawmakers may see
the wisdom of allowing presidential review of the decisions of the ERB since, despite its
being a quasi-judicial body, it is still "an administrative body under the Office of the
President whose decisions should be appealed to the President under the established
principle of exhaustion of administrative remedies," especially on a matter as
transcendental as oil price increases which affect the lives of almost an Filipinos.
ACCORDINGLY, the petitions are hereby DISMISSED.
SO ORDERED.
G.R. No. 166062 September 26, 2006
SALVADOR M. PEREZ and JUANITA A. APOSTOL, petitioners,
vs.
HON. SANDIGANBAYAN (2nd Division) and PEOPLE OF THE PHILIPPINES
represented by the Special Prosecutor of the Office of the Ombudsman, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court, questioning the twin
Resolutions1 of the Sandiganbayan dated 7 May 2004 (promulgated 18 May 2004),2 and
27 September 2004 (promulgated 1 October 2004).3
The following facts were culled from the records of the case:
In a resolution dated 24 April 2001, the Office of the Deputy Ombudsman for Luzon
resolved to file charges of violation of Section 3(e)4 of Republic Act No. 30195 against
petitioners, San Manuel, Pangasinan Mayor Salvador M. Perez, and Municipal Treasurer
Juanita Apostol. The Information alleges a crime committed as follows:
That on or about September of 1998, or sometime prior or subsequent thereto, in the
Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, SALVADOR PEREZ, being then the
Municipal Mayor and JUANITA APOSTOL, ZAPANTA, Municipal Treasurer of said
municipality, conspiring and confederating with one another, committing the crime herein
charged in relation to and taking advantage of their official functions, and through manifest
partiality, evident bad faith or gross inexcusable negligence, did then and there, wilfully,
unlawfully and criminally cause the purchase of one (1) computer unit costing P120,000.00
acquisition by personal canvass which is in violation of Secs. 362 and 367 of R.A. 7160,
thereby causing undue injury to the Municipality of San Manuel, Pangasinan.6
On 16 January 2002, prior to the scheduled arraignment, petitioners filed with the
Sandiganbayan a Motion for Leave of Court to File Motion for
Reconsideration/Reinvestigation alleging the discovery of new evidence which will change
the outcome of the case if presented and appreciated. The alleged newly discovered
evidence consists in the reassessment by the auditors of the Commission on Audit (COA)
that, though the prices between the subject computer and that canvassed by the COA are
different, such difference is "not really that material."7
The Sandiganbayan denied the Motion for Leave of Court to File Motion for
Reconsideration/Reinvestigation in an Order dated 4 April 2002. On a subsequent Motion
for Reconsideration, however, the Sandiganbayan reconsidered the 4 April 2002 Order,
and granted petitioners ten days from receipt of the current 6 September 2002 Resolution
within which to formalize their Motion for Reconsideration in the Office of the Ombudsman.
Complying with the 6 September 2002 Resolution, petitioners formalized their Motion for
Reconsideration in the Office of the Ombudsman.
Accordingly, the Office of the Special Prosecutor conducted a reinvestigation. Assistant
Special Prosecutor Warlito F. Galisanao prepared a Memorandum dated 23 October 2003,
recommending the withdrawal of the Information.8However, in the portion of the
Memorandum earmarked for the Special Prosecutor’s action, Special Prosecutor Dennis
M. Villa-Ignacio chose the action "DO NOT CONCUR" by drawing two lines on the action "I
CONCUR," and wrote the following marginal note:
I am, instead adopting the enclosed memorandum of Pros. Chua dated Jan. 22, 2004
recommending that in the meantime, further fact-finding be conducted, and an
administrative case be filed against accused Apostol, after withdrawing the Information for
viol. of Sec. 3(e) R.A. 3019.9
53
On the other hand, new Ombudsman Simeon V. Marcelo crossed out both actions
(APPROVED/DISAPPROVED), and wrote the following marginal note dated 16 February
2004:
The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA
3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or
preference. OSP should study whether the accused, assuming arguendo that there was no
overprice, gave unwarranted benefits, advantage or preference to the seller of the subject
computer. Kindly submit your recommendation soonest. 10
In an 8 March 2004 Supplemental Memorandum, Assistant Special Prosecutor III Warlito
F. Galisanao recommended an amendment of the Information, instead of a withdrawal
thereof, to wit:
This is a Supplemental Memorandum to an earlier Memorandum dated October 23, 2003
to the Honorable Tanodbayan, Simeon V. Marcelo who directed the deferment of action on
undersigned’s recommendation for the withdrawal of the Information.
As earlier found, the acquisition of the unbranded computer set was questionable on the
following grounds:
1. There was no public bidding and the mode of procurement was by canvass.
2. Under Sec. 367 of the Local Government Code, procurement through Personal Canvass
requires approval of the Committee on Awards. There was no committee approval to
speak of in this case because none has been constituted. This committee is supposed to
be composed of:
a. Local General Services Officer or the Municipal Treasurer;
b. Local Accountant;
c. The head of office of department for whose use the supplies are being procured.
3. Purchases under this section allows municipalities outside Metro Manila with the
following limits:
Second and Third Class – Forty Thousand Pesos
(P40,000.00)
Fourth Class and Below – Twenty Thousand Pesos
(P20,000.00)
These limits are applicable for all items procured by any one (1) month period only. The
local government of San Manuel, Pangasinan, incidentally, is a fourth class municipality.
It must be noted that the canvass made on all the stores/suppliers were done by accused
Treasurer Juanita Apostol and attested by Mayor, Salvador Perez. To attest means to
affirm to be correct, true or genuine (Blacks Law Dictionary, Fifth Edition)[.]
In the earlier memorandum, there is no unanimity of conclusion as far as the
reasonableness of the purchase price of the computer set is concern[ed]. However, the
circumstances of its acquisition clearly indicate that the public officials involved gave the
supplier, Mobil Link Enterprises/Starlet Sales Center, a private party, unwarranted benefits,
advantage or preference through manifest partiality, evident bad faith or gross inexcusable
negligence by paying much more than the prevailing price for a comparable computer set
in the market.
This conclusion is derived from accused’s deliberate disregard of the rules on procurement
discussed above. The Information must, therefore, be amended to reflect the manner of
the commission of the offense. In regard to Prosecutor Elvira Chua’s recommendation
which is endorsed by the Special Prosecutor, the issue of overpricing must be referred to
the appropriate office for further fact-finding and probable administrative investigation for
violation of COA rules and RA 7160 otherwise, known as the Local Government Code of
1991.
In light of the foregoing, it is recommended that the Information be amended instead of
withdrawing the same. Further, the case of overpricing be referred for fact-finding and
possible administrative investigation for violation of Secs. 362 and 367 of RA 7160,
otherwise known as the Local Government Code of 1991.11
This time around, Special Prosecutor Villa-Ignacio approved the Supplemental
Memorandum and, pursuant thereto, Assistant Special Prosecutor Galisanao filed a Motion
for Leave to File Amended Information dated 12 March 2004. The Amended Information,
which again charges petitioners Perez and Apostol for violation of Sec. 3(e) of Republic
Act No. 3019, provides:
That on or about January 21, 1998, or sometime prior or subsequent thereto, in the
Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, SALVADOR PEREZ, being then the
Municipal Mayor and JUANITA A. APOSTOL, Municipal Treasurer of said municipality,
conspiring and confederating with one another, committing the crime herein charged in
relation to and taking advantage of their official functions, through manifest partiality,
evident bad faith or gross inexcusable negligence, did then and there, willfully, unlawfully
and criminally, give unwarranted benefits, advantage or preference in the discharge of
official functions to Mobil Link Enterprises/Starlet Sales Center causing the purchase of
one (1) computer unit costing P120,000.00, an acquisition by personal canvass which is in
violation of Sections 362 and 367 of RA 7160, thereby causing damage and prejudice to
the Municipality of San Manuel, Pangasinan.12
The Sandiganbayan granted the motion in the first assailed resolution, thus:
There having been no arraignment yet and the pre-maturity of the amendment is of the
prosecution’s risk, the motion to Amend the Information is GRANTED.
Accordingly, the Amended Information submitted by the prosecution is admitted.13
54
Petitioners filed a motion for reconsideration, but the same was denied in the second
assailed resolution:
The Court resolves to deny the Motion for Reconsideration filed by the accused. Indeed,
the power of a prosecuting prosecutor to amend or cause the amendment of the
information does not need the approving authority of the Ombudsman. The Information
was maintained only with some amendments made which the Court feels do not violate
any law since there was no arraignment yet.
Accordingly, accused Motion for Reconsideration dated June 4, 2004 is denied for lack of
merit.14
Petitioners assail the foregoing Resolutions before this Court, presenting the following
issues for resolution:
1. Whether or not there is a denial of procedural due process on the part of the petitioners
when the Special Prosecutor filed the Amended Information without authority from or the
approval of the Honorable Ombudsman, and against the latter’s specific instruction;
2. Whether or not the Amended Information is valid in the absence of such authority or
approval of the Ombudsman under the circumstances; and
3. Whether or not respondent Sandiganbayan acted with grave abuse of discretion
amounting to lack or excess of jurisdiction, when it admitted the Amended Information
which bears no approval of the Honorable Ombudsman, and against the latter’s written
instruction to submit to him for approval the result of the re-study before the filing of said
Amended Information.15
This is not the first time the respective powers of the Ombudsman and the Special
Prosecutor were pitted at loggerheads against each other since these positions were
reinvented in the 1987 Constitution. The Offices of the Ombudsman (now also called the
Tanodbayan) and the Special Prosecutor (then called the Tanodbayan) were reintroduced,
with modified powers and designation, in the following provisions of Article XI of the
Constitution:
Sec. 5. There is hereby created the independent Office of the Ombudsman, composed of
the Ombudsman to be known as Tanodbayan, one overall Deputy, and at least one Deputy
each for Luzon, Visayas and Mindanao. A separate Deputy for the military establishment
may likewise be appointed.
xxxx
Sec. 7. The existing Tanodbayan shall hereafter be known as the Office of the Special
Prosecutor. It shall continue to function and exercise its powers as now or hereafter may
be provided by law, except those conferred on the Office of the Ombudsman created under
this Constitution.
A judicial examination of the prosecutorial powers of these two Constitutional positions
came barely a year after the effectivity of the 1987 Constitution, when then Special
Prosecutor Raul Gonzalez filed criminal cases against Antique Governor Enrique Zaldivar.
Zaldivar claimed that said cases were filed without legal and constitutional authority since,
under the 1987 Constitution, it is only the Ombudsman (not the incumbent Tanodbayan
who should now be called the Special Prosecutor) who has the authority to file the cases
with the Sandiganbayan. In granting the petitions and nullifying the criminal informations
filed against Zaldivar, this Court held:
Under the 1987 Constitution, the Ombudsman (as distinguished from the incumbent
Tanodbayan) is charged with the duty to:
"Investigate on its own, or on complaint by any person, any act or omission of any public
official, employee, office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient." (Sec. 13, par. 1)
The Constitution likewise provides that:
"The existing Tanodbayan shall hereafter be known as the Office of the Special
Prosecutor. It shall continue to function and exercise its powers as now or hereafter may
be provided by law, except those conferred on the Office of the Ombudsman created under
this Constitution." (Art. XI, Section 7) (Italics ours).
Now then, inasmuch as the aforementioned duty is given to the Ombudsman, the
incumbent Tanodbayan (called Special Prosecutor under the 1987 constitution and who is
supposed to retain powers and duties NOT GIVEN to the Ombudsman) is clearly without
authority to conduct preliminary investigations and to direct the filing of criminal cases with
the Sandiganbayan, except upon orders of the Ombudsman. This right to do so was lost
effective February 2, 1987. From that time, he has been divested of such authority.
Under the present constitution, the Special Prosecutor (Raul Gonzalez) is a mere
subordinate of the Tanodbayan (Ombudsman) and can investigate and prosecute cases
only upon the latter’s authority or orders. The Special Prosecutor cannot initiate the
prosecution of cases but can only conduct the same if instructed to do so by the
Ombudsman. Even his original power to issue subpoena, which he still claims under
Section 10(d) of PD 1630, is now deemed transferred to the Ombudsman, who may,
however, retain it in the Special Prosecutor in connection with the cases he is ordered to
investigate.16 (Emphasis supplied.)
The following year, Republic Act No. 6770,17 otherwise known as The Ombudsman Act of
1989, was passed into law. Among other things, said law:
1) expressly included the Special Prosecutor under the Office of the Ombudsman;18
2) gave the Special Prosecutor the power, under the supervision and control and upon the
authority of the Ombudsman, to conduct preliminary investigation and prosecute criminal
cases within the jurisdiction of the Sandiganbayan, and to perform such other duties
assigned to it by the Ombudsman;19 and, most importantly,
3) granted the Ombudsman the powers to:
Investigate and prosecute on its own or on complaint by any person, any act or omission of
any public officer or employee, office or agency, when such act or omission appears to be
55
illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by
the Sandiganbayan and, in the exercise of its primary jurisdiction, it may take over, at any
stage, from any investigatory agency of the Government, the investigation of such cases.20
A few years later, several persons charged in a complaint filed with the Office of the
Ombudsman (in connection with the alleged summary execution of Kuratong Baleleng
gang members) instituted petitions for certiorari with this Court, claiming that it is the
Special Prosecutor which has jurisdiction to conduct the preliminary investigation and file
the proper information against them. In the oral arguments, the parties agreed to limit the
issues, with petitioners praying for the re-examination of the Zaldivar ruling on the
argument that the Constitution did not give the Ombudsman prosecutorial functions, and
contending that the inclusion of the Office of the Special Prosecutor as among the offices
under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is
unconstitutional.
In upholding Zaldivar, we held that while there was indeed an intention to withhold
prosecutorial functions from the Ombudsman, the legislature nevertheless recommended
that the Legislature could, through statute, prescribe such other powers, functions and
duties to the Ombudsman.21 Thus, paragraph 8, Section 13, Article XI of the Constitution,
provides that the Ombudsman may exercise other functions and duties as may be
provided by law.22Pursuant to this authority, the Legislature enacted Republic Act No.
6770, which granted prosecutorial powers to the Ombudsman.
On the claim that the inclusion of the Office of the Special Prosecutor as among the offices
under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is
unconstitutional, we ratiocinated that:
The contention is not impressed with merit. Firstly, the petitioners misconstrue
Commissioner Romulo’s statement as authority to advocate that the intent of the framers
of the 1987 Constitution was to place the Office of the Special Prosecutor under the Office
of the President. The said statement obviously referred to the Tanodbayan under P.D. No.
1630 – note how specific the erstwhile Commissioner was in stating; ". . . as the decree
now reads . . ." Further, in complete contrast to the petitioner’s stand, one of the principal
reasons for the proposal to withhold prosecutorial powers from the Ombudsman was
precisely to remove the office from presidential control. x x x
xxxx
In the second place, Section 7 of Article XI expressly provides that the then existing
Tanodbayan, to be henceforth known as the Office of the Special Prosecutor, "shall
continue to function and exercise its powers as now or hereafter may be provided by law,
except those conferred on the Office of the Ombudsman created under this Constitution."
The underscored phrase evidently refers to the Tanodbayan’s powers under P.D. No. 1630
or subsequent amendatory legislation. It follows then that Congress may remove any of the
Tanodbayan’s/Special Prosecutor’s powers under P.D. No. 1630 or grant it other powers,
except those powers conferred by the Constitution on the Office of the Ombudsman.
Pursuing the present line of reasoning, when one considers that by express mandate of
paragraph 8, Section 13, Article XI of the Constitution, the Ombudsman may "exercise
such other powers or perform functions or duties as may be provided by law," it is
indubitable then that Congress has the power to place the Office of the Special Prosecutor
under the Office of the Ombudsman. In the same vein, Congress may remove some of the
powers granted to the Tanodbayan by P.D. No. 1630 and transfer them to the
Ombudsman; or grant the Office of the Special Prosecutor such other powers and
functions and duties as Congress may deem fit and wise. This Congress did through the
passage of R.A No. 6770.23
While it is clear that Acop v. Office of the Ombudsman upheld Zaldivar v. Sandiganbayan
insofar as the power of the Ombudsman to prosecute cases is concerned, there has been
a shift in its ratio decidendi. Hence, it was pronounced that the authority of the
Ombudsman to prosecute was based on Republic Act No. 6770, as authorized by
paragraph 8, Section 13, Article XI of the Constitution. This being the case, and
considering that Republic Act No. 6770 also gives the Special Prosecutor the power to
prosecute criminal cases (albeit under the supervision and control and under the authority
of the Ombudsman), was there likewise a modification of our ruling in Zaldivar prohibiting
the then Special Prosecutor to initiate criminal cases unless authorized by the
Ombudsman? Or should there now be a presumed authority, pursuant to Republic Act No.
6770, to prosecute cases unless prohibited by the Ombudsman?
The determination of this question is necessary in the case at bar, where it is the
petitioners’ central contention that the Sandiganbayan committed grave abuse of discretion
amounting to lack or excess in jurisdiction when it admitted the Amended Information
which, according to petitioners, bears no approval of the Ombudsman, thus, constituting
denial of procedural due process.24
Particularly, petitioners allege that the amendment of the Information and the admission of
the Amended Information is premature, since the Ombudsman has not yet acted with
finality on the 23 October 2003 Memorandum.25 The Ombudsman, by stating in the
marginal notes of the 23 October 2003 Memorandum that "(t)he resolution of this case is
deferred," and "(k)indly submit your recommendation soonest," allegedly decreed that the
reinvestigation stage would not be completed until his final determination.26
Respondent People’s defense is that compliance with the specific instructions of the
Ombudsman is merely an internal matter and the alleged failure to heed the specific
instructions of the Ombudsman is speculative.27
The marginal notes of Ombudsmen to the recommendations of investigating prosecutors
are hardly internal matters. In Cruz, Jr. v. People,28 Olivarez v. Sandiganbayan,29 and
Gallardo v. People,30 the marginal notes, even one-liners as in the case of Gallardo, were
judicially considered sufficient dispositions by the Ombudsmen and Special Prosecutors
concerned. We held in Olivarez that:
The mere fact that the order to file the information against petitioner was contained in a
marginal note is not sufficient to impute arbitrariness or caprice on the part of respondent
special prosecutors, absent a clear showing that they gravely abused their discretion in
disapproving the recommendation of the investigating prosecutors to dismiss or withdraw
the case against petitioner. x x x.31
Was there, as petitioners assert, a violation of the orders of the Ombudsman as stated in
his marginal note?
For reference, we reiterate the marginal note of Ombudsman Marcelo dated 16 February
2004:
56
The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA
3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or
preference. OSP should study whether the accused, assuming arguendo that there was no
overprice, gave unwarranted benefits, advantage or preference to the seller of the subject
computer. Kindly submit your recommendation soonest. 32
Assistant Special Prosecutor Galisanao’s Special Memorandum, quoted in full in the
narration of facts, show complete compliance with Ombudsman Marcelo’s order to "study
whether the accused, assuming arguendo that there was no overprice, gave unwarranted
benefits, advantage or preference to the seller of the subject computer." Assistant Special
Prosecutor Galisanao answered the query in the affirmative, stating that unwarranted
benefits, advantage or preference were given to Mobil Link Enterprises/Starlet Sales
Center through the "deliberate disregard of the rules on procurement discussed above."
Ombudsman Marcelo’s order, however, to "(k)indly submit your recommendation soonest,"
is another matter. The marginal note did not indicate to whom the recommendation should
be submitted. As the recommendation was prepared by a subordinate in the Office of the
Special Prosecutor, would a submission to the Special Prosecutor be sufficient compliance
with the order of the Ombudsman? What is imperative is that the recommendation be
submitted to someone who has the authority to implement such recommendation, by
authorizing the filing of the proper information.
Republic Act No. 6770, by conferring upon the Ombudsman the power to prosecute,
likewise grants to the Ombudsman the power to authorize the filing of informations. As to
the Special Prosecutor, respondent People invokes the aforesaid authority of the
Ombudsman in Section 15(10) to delegate his powers, and claim that there was a general
delegation of the authority to approve the filing of informations in Office Order No. 03-97,
series of 2003 (dated 15 September 2003), and Office Order No. 40-05, series of 2005
(dated 4 April 2005).
Office Order No. 40-05 is a consolidation of several office orders, including the
aforementioned Office Order No. 03-97, which is thus superceded by the former.33 Office
Order No. 40-05 provides:
In the exigency of the service, except when otherwise ordered by the Ombudsman, the
disposition of administrative and criminal cases involving any of the following, viz:
1) City and Municipal mayors;
xxxx
as the highest ranking respondent, where the offense charged involves injury or damage
amounting to, or valued at Two Million Pesos (P2,000,000.00) or less, or where the
maximum imposable penalty for any of the offense charged does not exceed twenty (20)
years imprisonment, shall be subject to the final approval of the Deputy Ombudsman
concerned; provided, that, where the offense charged involves injury or damage amounting
to, or valued at, more than Two Million Pesos (P2,000,000.00), or where the maximum
imposable penalty for any of the offense charged is more than twenty (20) years
imprisonment, the disposition shall be subject to the final approval of the Ombudsman.
In the foregoing dispositions that are subject to the final approval of the Deputy
Ombudsman concerned, the undersigned hereby delegates to the latter further authority to
approve and sign any corresponding criminal information, whether to be filed with the
regular courts or the Sandiganbayan; provided, however, that, preparatory to the filing of
the information with the Sandiganbayan, the Office of the Special Prosecutor may review
and modify the same, subject to the approval of the Special Prosecutor, without departing
from, or varying in any way, the contents of the basic Resolution, Order or Decision.34
Contrary to the contention of respondent People, the delegation of the power to authorize
the filing of informations under Office Order No. 40-05 was only made to Deputy
Ombudsmen, and not to the Special Prosecutor. All that was delegated to the Special
Prosecutor was the discretional35 authority to review and modify the Deputy Ombudsmen-
authorized information, but even this is subject to the condition that such modification must
be "without departing from, or varying in any way, the contents of the basic Resolution,
Order or Decision." Even the title of Office Order No. 40-05 betray the contention of
delegation to the Special Prosecutor: "DELEGATION OF FINAL APPROVING
AUTHORITY TO THE DEPUTY OMBUDSMAN FOR LUZON, DEPUTY OMBUDSMAN
FOR VISAYAS AND DEPUTY OMBUDSMAN FOR MINDANAO."
Neither does it help that, under Section 11(4) of Republic Act No. 6770, the Special
Prosecutor was given the rank and salary of Deputy Ombudsman. In Office of the
Ombudsman v. Valera,36 this Court held:
The petitioner’s contention that since the Special Prosecutor is of the same rank as that of
a Deputy Ombudsman, then the former can rightfully perform all the functions of the latter,
including the power to preventively suspend, is not persuasive. Under civil service laws,
rank classification determines the salary and status of government officials and employees.
Although there is substantial equality in the level of their respective functions, those
occupying the same rank do not necessarily have the same powers nor perform the same
functions.37
There being no express delegation of the power to prosecute, we are constrained to go
back to our main query: Is there an implied delegation of the power to prosecute under
Republic Act No. 6770, such that Special Prosecutors are presumed to have been
delegated such power, in the absence of a prohibition from the Ombudsman?
Republic Act No. 6770 provides:
(4) The Office of the Special Prosecutor shall, under the supervision and control and upon
the authority of the Ombudsman, have the following powers:
(a) To conduct preliminary investigation and prosecute criminal cases within the jurisdiction
of the Sandiganbayan;
(b) To enter into plea-bargaining agreements; and
(c) To perform such other duties assigned to it by the Ombudsman.38
This Court has defined the power of control as "the power of an officer to alter or modify or
nullify or set aside what a subordinate officer had done in the performance of his duties
57
and to substitute the judgment of the former for that of the latter."39 The power of
supervision, on the other hand, means "overseeing, or the power or authority of an officer
to see that subordinate officers perform their duties."40 Under the Administrative Code of
198741:
Supervision and control shall include authority to act directly whenever a specific function
is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain
the commission of acts; review, approve, reverse or modify acts and decisions of
subordinate officials or units; determine priorities in the execution of plans and programs;
and prescribe standards, guidelines, plans and programs. x x x
Springing from the power of control is the doctrine of qualified political agency, wherein the
acts of a subordinate bears the implied approval of his superior, unless actually
disapproved by the latter.42 Thus, taken with the powers of control and supervision, the
acts of Department Secretaries in the performance of their duties are presumed to be the
act of the President, unless and until the President alters, modifies, or nullifies the same.
By arguing that "[w]hat is important is that the amended Information has not been
withdrawn, and or recalled by the Honorable Ombudsman, [a] clear showing that the latter
acknowledged/upheld the act of the Special Prosecutor in signing the Amended
Information,"43 respondent People claims that the doctrine of qualified political agency
should be applied as well to the relationship between the Ombudsman and the Special
Prosecutor.
Petitioners counter that the doctrine of qualified political agency does not apply to the
Office of the Ombudsman, since the latter is an apolitical agency, and is far different from
the bureaucracy to which said doctrine applies.44
Petitioners are correct.
The doctrine of qualified political agency was adopted in our system of government on the
following pronouncement of this Court in Villena v. The Secretary of the Interior45:
After serious reflection, we have decided to sustain the contention of the government in
this case on the broad proposition, albeit not suggested, that under the presidential type of
government which we have adopted and considering the departmental organization
established and continued in force by paragraph 1, section 12, Article VII, of our
Constitution, all executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants and agents of
the Chief Executive, and, except in cases where the Chief Executive is required by the
Constitution or the law to act in person or the exigencies of the situation demand that he
act personally, the multifarious executive and administrative functions of the Chief
Executive are performed by and through the executive departments, and the acts of the
secretaries of such departments, performed and promulgated in the regular course of
business, are, unless disapproved or reprobated by the Chief Executive, presumptively the
acts of the Chief Executive. (Runkle vs. United States [1887]. 122 U.S., 543; 30 Law. ed.,
1167; 7 Sup. Ct. Rep., 1141; see also U. S. vs. Eliason [1839], 16 Pet., 291; 10 Law. ed.,
968; Jones vs. U. S. [1890], 137 U.S., 202; 34 Law. ed., 691; 11 Sup. Ct., Rep., 80;
Wolsey v. Chapman [1880], 101 U.S., 755; 25 Law. ed., 915; Wilcox vs. Jackson [1836],
13 Pet., 498; 10 Law. ed., 264.) 46
While we do not underestimate the quantity of work in the hands of the Office of the
Ombudsman, the same simply does not measure up to the workload of the Office of the
President as to necessitate having the Special Prosecutor as an alter ego of the
Ombudsman. In any case, the Office of the Ombudsman could very well make a general
delegation of powers to the Special Prosecutor, if it is so desired. An examination of the
office orders issued by the Ombudsman, however, reveal that there had been no such
intention to make a general delegation.
Indeed, a statute granting powers to an agency created by the Constitution should be
liberally construed for the advancement of the purposes and objectives for which it was
created.47 Yet, the Ombudsman would be severely hampered from exercising his power of
control if we are to allow the Special Prosecutor to authorize the filing of informations in the
first instance. This is because while the Ombudsman has full discretion to determine
whether or not a criminal case should be filed in the Sandiganbayan, once the case has
been filed with said court, it is the Sandiganbayan, and no longer the Ombudsman, which
has full control of the case so much so that the informations may not be dismissed, without
the approval of the said court.48
We, therefore, resolve to grant the Petition. We realize that, once transmitted to the new
Ombudsman, she can so easily approve the 8 March 2004 Supplemental Memorandum of
Assistant Special Prosecutor Galisanao, and the same Amended Information can be filed
in no time. However, when the law entails a specific procedure to be followed, unwarranted
shortcuts lead to the violation of the sacred right to due process, which we cannot
countenance.
Finally, as regards other informations authorized by the Special Prosecutor to be filed
without the approval of the Ombudsman, we also recognize that the former prevailing
interpretation of the law may shield these informations from illegality. Such reliance upon
the operative fact, however, would cease upon the finality of this Decision.
WHEREFORE, the instant Petition for Certiorari is GRANTED. The assailed Resolutions of
the Sandiganbayan admitting the Amended Information is SET ASIDE. Let the 8 March
2004 Supplemental Memorandum of Assistant Special Prosecutor III Warlito F. Galisanao
be TRANSMITTED to the Office of the Ombudsman for approval or disapproval.
SO ORDERED.
G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL
TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style CARWIN
CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court assailing the Decision1 dated April 28, 2003 of the Court of Appeals (CA) in CA-
58
G.R. CV No. 56345 which affirmed with modification the Decision2 of the Regional Trial
Court, Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the
complaint for Specific Performance and Damages filed by Carlito Lacap (respondent)
against the Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated
January 27, 1992. Respondent, doing business under the name and style Carwin
Construction and Construction Supply (Carwin Construction), was pre-qualified together
with two other contractors. Since respondent submitted the lowest bid, he was awarded the
contract for the concreting of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract
Agreement was executed by respondent and petitioner.4 On September 25, 1992, District
Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting
of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works, made advances for
the purchase of the materials and payment for labor costs.6
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando,
Pampanga conducted a final inspection of the project and found it 100% completed in
accordance with the approved plans and specifications. Accordingly, the Office of the
District Engineer issued Certificates of Final Inspection and Final Acceptance.7
8 Pare, Candaba, Pampanga plus interest at 12% from demand until fully paid; and
Thereafter, respondent sought to collect payment for the completed project. The DPWH
prepared the Disbursement Voucher in favor of petitioner.9 However, the DPWH withheld
payment from respondent after the District Auditor of the Commission on Audit (COA)
disapproved the final release of funds on the ground that the contractor’s license of
respondent had expired at the time of the execution of the contract. The District Engineer
sought the opinion of the DPWH Legal Department on whether the contracts of Carwin
Construction for various Mount Pinatubo rehabilitation projects were valid and effective
although its contractor’s license had already expired when the projects were contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal
Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as
the Contractor’s License Law, does not provide that a contract entered into after the
license has expired is void and there is no law which expressly prohibits or declares void
such contract, the contract is enforceable and payment may be paid, without prejudice to
any appropriate administrative liability action that may be imposed on the contractor and
the government officials or employees concerned.11
In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH
Legal Department on whether Carwin Construction should be paid for works accomplished
despite an expired contractor’s license at the time the contracts were executed.12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal
Department, recommended that payment should be made to Carwin Construction,
reiterating his earlier legal opinion.13 Despite such recommendation for payment, no
payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and
Damages against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed
a Motion to Dismiss the complaint on the grounds that the complaint states no cause of
action and that the RTC had no jurisdiction over the nature of the action since respondent
did not appeal to the COA the decision of the District Auditor to disapprove the claim.15
Following the submission of respondent’s Opposition to Motion to Dismiss,16 the RTC
issued an Order dated March 11, 1996 denying the Motion to Dismiss.17 The OSG filed a
Motion for Reconsideration18 but it was likewise denied by the RTC in its Order dated May
23, 1996.19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of
administrative remedies and the doctrine of non-suability of the State.20
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion
of which reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in
favor of the plaintiff and against the defendant, ordering the latter, thru its District Engineer
at Sindalan, San Fernando, Pampanga, to pay the following:
a) ₱457,000.00 – representing the contract for the concreting project of Sitio 5 road, Bahay
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price since it has
accepted the completed project and enjoyed the benefits thereof; to hold otherwise would
be to overrun the long standing and consistent pronouncement against enriching oneself at
the expense of another.22
Dissatisfied, petitioner filed an appeal with the CA.23 On April 28, 2003, the CA rendered its
Decision sustaining the Decision of the RTC. It held that since the case involves the
application of the principle of estoppel against the government which is a purely legal
question, then the principle of exhaustion of administrative remedies does not apply; that
by its actions the government is estopped from questioning the validity and binding effect
of the Contract Agreement with the respondent; that denial of payment to respondent on
purely technical grounds after successful completion of the project is not countenanced
either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion
of which reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in
that the interest shall be six percent (6%) per annum computed from June 21, 1995.
SO ORDERED.24
59
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO
CAUSE OF ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO
RESOLVE RESPONDENT’S MONEY CLAIM AGAINST THE GOVERNMENT.25
Petitioner contends that respondent’s recourse to judicial action was premature since the
proper remedy was to appeal the District Auditor’s disapproval of payment to the COA,
pursuant to Section 48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as
the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to
resolve respondent’s money claim against the government under Section 2(1),26 Article IX
of the 1987 Constitution and Section 2627 of P.D. No. 1445; that non-observance of the
doctrine of exhaustion of administrative remedies and the principle of primary jurisdiction
results in a lack of cause of action.
Respondent, on the other hand, in his Memorandum28 limited his discussion to Civil Code
provisions relating to human relations. He submits that equity demands that he be paid for
the work performed; otherwise, the mandate of the Civil Code provisions relating to human
relations would be rendered nugatory if the State itself is allowed to ignore and circumvent
the standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the court, he should
first avail of all the means afforded him by administrative processes.29 The issues which
administrative agencies are authorized to decide should not be summarily taken from them
and submitted to a court without first giving such administrative agency the opportunity to
dispose of the same after due deliberation.30
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary
jurisdiction; that is, courts cannot or will not determine a controversy involving a question
which is within the jurisdiction of the administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary
doctrine of primary jurisdiction, which are based on sound public policy and practical
considerations, are not inflexible rules. There are many accepted exceptions, such as: (a)
where there is estoppel on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where
there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice;32 (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of non-exhaustion of
administrative remedies has been rendered moot;33 (j) when there is no other plain, speedy
and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto
proceedings.34Exceptions (c) and (e) are applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and
1994 that payment to a contractor with an expired contractor’s license is proper,
respondent remained unpaid for the completed work despite repeated demands. Clearly,
there was unreasonable delay and official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of its
contract is entitled to be paid for completed projects, clearly is a pure question of law. It
does not involve an examination of the probative value of the evidence presented by the
parties. There is a question of law when the doubt or difference arises as to what the law is
on a certain state of facts, and not as to the truth or the falsehood of alleged facts.35 Said
question at best could be resolved only tentatively by the administrative authorities. The
final decision on the matter rests not with them but with the courts of justice. Exhaustion of
administrative remedies does not apply, because nothing of an administrative nature is to
be or can be done.36 The issue does not require technical knowledge and experience but
one that would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA disapproved respondent’s
claim against the Government, and, under Section 4837 of P.D. No. 1445, the
administrative remedy available to respondent is an appeal of the denial of his claim by the
District Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e)
narrated above, the complaint for specific performance and damages was not prematurely
filed and within the jurisdiction of the RTC to resolve, despite the failure to exhaust
administrative remedies. As the Court aptly stated in Rocamora v. RTC-Cebu (Branch
VIII):38
The plaintiffs were not supposed to hold their breath and wait until the Commission on
Audit and the Ministry of Public Highways had acted on the claims for compensation for the
lands appropriated by the government. The road had been completed; the Pope had come
and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given
this official indifference, which apparently would continue indefinitely, the private
respondents had to act to assert and protect their interests.39
On the question of whether a contractor with an expired license is entitled to be paid for
completed projects, Section 35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or
attempts to submit a bid to construct, or contracts to or undertakes to construct, or
assumes charge in a supervisory capacity of a construction work within the purview of this
Act, without first securing a license to engage in the business of contracting in this country;
or who shall present or file the license certificate of another, give false evidence of any kind
to the Board, or any member thereof in obtaining a certificate or license, impersonate
another, or use an expired or revoked certificate or license, shall be deemed guilty of
misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five
hundred pesos but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if the statute is
clear, plain and free from ambiguity, it must be given its literal meaning and applied without
interpretation.40 This rule derived from the maxim Index animi sermo est (speech is the
60
index of intention) rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intention or will and preclude the court from
construing it differently. The legislature is presumed to know the meaning of the words, to
have used words advisedly, and to have expressed its intent by use of such words as are
found in the statute.41 Verba legis non est recedendum, or from the words of a statute
there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as
void contracts entered into by a contractor whose license had already expired.
Nonetheless, such contractor is liable for payment of the fine prescribed therein. Thus,
respondent should be paid for the projects he completed. Such payment, however, is
without prejudice to the payment of the fine prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius
incommode debet lecupletari (no man ought to be made rich out of another’s injury) states:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of
which were formulated as "basic principles to be observed for the rightful relationship
between human beings and for the stability of the social order, x x x designed to indicate
certain norms that spring from the fountain of good conscience, x x x guides human
conduct [that] should run as golden threads through society to the end that law may
approach its supreme ideal which is the sway and dominance of justice."43 The rules
thereon apply equally well to the Government.44 Since respondent had rendered services
to the full satisfaction and acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the finished project at no cost would
undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent.
Such unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of
the Court of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-31152 March 27, 1974
UNIVERSITY OF NUEVA CACERES, JAIME HERNANDEZ, SR., and JAIME
HERNANDEZ, JR., petitioners,
vs.
HON. ARSENIO I. MARTINEZ, as Presiding Judge of the Court of Industrial
Relations, and the UNIVERSITY OF NUEVA CACERES GUARDIANS
UNION, respondents.
BARREDO, J.:p
Petition for certiorari, prohibition and mandamus, with preliminary injunction, relative to the
orders of respondent Presiding Judge of the Court of Industrial Relations dated July 30,
1969 and October 6, 1969, which in effect held that the determination of whether or not a
charge of unfair labor practice, investigated by the Prosecution Division of said court,
should be dismissed outright because of any fatal defect of form or substance is the
exclusive prerogative of said Presiding Judge, to the exclusion of the court en banc, on the
theory that the function involved in such determination is not judicial but purely
administrative and hence entrusted to his exclusive administrative authority as head of said
court.
On June 17, 1969, respondent University of Nueva Caceres Guardians Union filed with the
Bicol branch of respondent Court of Industrial Relations (CIR) an unfair labor practice
charge against petitioners accompanied by the joint affidavit of Benito de la Paz and
George Offemaria. At the hearing of said charge before the prosecutor of the CIR,
petitioners moved to dismiss the same on the grounds: (1) it is not verified; (2) it does not
specify the particular provisions of Section 4 (a) of the Industrial Peace Act, RA 875, as
amended, supposed to have been violated, and (3) the supporting joint affidavit contains
"falsities, misstatements and improbabilities on points otherwise material to the charge."
Instead of dismissing the charge, the prosecutor, although finding the grounds of the
dismissal motion to be more or less plausible, granted respondent Union five (5) days "to
file an amended charge and amended affidavit," which said Union did on July 8, 1969. On
July 14, 1969, petitioners moved to reconsider the ruling of the prosecutor, but on July 30,
1969, respondent Presiding Judge denied the same, admitted the amended charge and
directed the Court Prosecutor to set the said amended charge for preliminary investigation.
On August 16, 1969, petitioners moved again for reconsideration of the order of July 30,
1969. Apparently, petitioners assumed their motion for reconsideration would be acted
upon by the court en banc, for when on October 6, 1969, respondent Judge issued an
order, signed by him alone, denying it, the present petition was filed charging said
respondent with having acted in excess of jurisdiction in acting on a matter addressed to
and within the jurisdiction of the CIR en banc and of grave abuse of discretion in not
ordering the dismissal of the charge upon the grounds invoked by them.
The assertion by respondent Judge, implicit in his order of October 6, 1969, of jurisdiction,
to the exclusion of the court en banc, over the matter herein involved cannot be sustained.
It is Our considered view that unlike the preliminary investigation of criminal cases by
fiscals which are under the supervision and control of the Secretary of Justice,1 the
peculiar procedure prescribed by law in unfair labor practices partakes of the nature of
judicial investigations, since they are conducted, to quote the language of the law, by "the
Court or any agency or agent designated by the Court", (Section 5 (b), Rep. Act 875)
similarly to the preliminary investigations undertaken by courts of first instance in election
cases2 and charges of violation of the Anti-Subversion Act.3 Surely, no one can pretend
that in such preliminary investigations, the courts of first instance are performing
administrative or non-judicial functions. In such cases, the courts act in the same judicial
capacity as they do in trying the cases on the merits and cannot, in any respect or
measure, be controlled by the Secretary of Justice. The fact that the law authorizes the
CIR to delegate the investigation to "any agency or agent designated by the Court" does
not alter the nature of the court's function in the premises, just as the appointment of
commissioners by the courts under Rule 34 does not make the procedure administrative or
less judicial. Indeed, under the provision aforementioned, the investigation could very well
be assigned to one of the judges of the CIR, and in that event, how can it be maintained
that the function is administrative? Withal, it is implicit in this procedure that the work of the
"agency or agent designated by Court" is as much the responsibility of the court as if it
were the court itself that were acting directly.
61
The contention of respondent Judge that the function of overseering the Prosecution
Division of the CIR in its work of filing and dismissing charges of unfair labor practice is
purely administrative in nature and falls within his exclusive competence is without merit. It
is true that reference to the court in the law must be construed to mean the Presiding
Judge and not the court en banc when the action contemplated is purely administrative in
character, but, precisely, the point missed is that, as already explained, the Industrial
Peace Act does not consider the investigation by the CIR, either by itself or thru an agent,
as an administrative matter but a judicial one like the preliminary investigations in election
and anti-subversion cases.
Maybe the development in the United States recounted by respondent Judge whereby the
Taft-Hartley Law transferred from the National Labor Relations Board to its General
Counsel the exclusive function and power to determine with finality whether or not an
unfair labor practice charge should be filed with the Board is good, in the sense of avoiding
that the Board be the accuser, investigator and judge all rolled into one, but there is
nothing in either Commonwealth Act 103 or the Industrial Peace Act indicating that the
American experience has influenced the enactment and phraseology of the pertinent
provisions of our laws. Quite on the contrary, as already pointed out, Section 5(b) of RA
875 very explicitly confers the function of investigating unfair labor charges upon the CIR
itself, albeit it allows the court to designate any other agency or agent for the purpose.
As regards the other impugned order of July 30, 1969, the result of the foregoing
discussion and ruling is that the same should first be submitted to the CIR en banc for
appropriate action. Much as the writer of this opinion feels that the objections thereto
raised by petitioners are rather strained and are not very consistent with the interests of
justice, which would not permit the throwing out of an unfair labor practice charge merely
because of non-jurisdictional defects which can anyway be corrected, the Court would not
pre-empt the power of the CIR en banc to make the corresponding ruling relative thereto in
the first instance.
Before closing, it might be stated that, to be sure, the creation of the National Labor
Relations Commission, may have altered the procedure in cases involving alleged unfair
labor practices, but that point is not and cannot be raised anymore in this proceeding and
We do not consider it necessary to pass on it now.
WHEREFORE, the petition for certiorari and prohibition insofar as the assailed order of
July 30, 1969 is concerned is denied, without prejudice to the appropriate action on
petitioners' motion for reconsideration thereof by the CIR en banc, but the petition for
certiorari and mandamus relative to the impugned order of respondent Presiding Judge of
October 6, 1969 is granted, the said order is hereby declared null and void and set aside,
as in excess of jurisdiction, and respondent Presiding Judge or whoever is acting in his
stead is ordered to refer the motion for reconsideration of petitioners dated August 16,
1969 to the CIR en banc for appropriate action. The writ of preliminary injunction issued by
the Court on November 24, 1969 is made permanent, without prejudice to the resolution by
the CIR of petitioners' motion for reconsideration just referred to. The manifestation of
Acting Presiding Judge Ansberto Paredes to the effect that he has desisted and continues
to desist from following the practice of former Presiding Judge Martinez declared illegal in
this decision is noted. Costs against private respondents.
Zaldivar (Chairman), Fernandez and Aquino, JJ., concur.
G.R. No. 1051 May 19, 1903
THE UNITED STATES, complainant-appellee,
vs.
FRED L. DORR, ET AL., defendants-appellants.
F. G. Waite for appellants.
Solicitor-General Araneta for appellee.
LADD, J.:
The defendants have been convicted upon a complaint charging them with the offense of
writing, publishing, and circulating a scurrilous libel against the Government of the United
States and the Insular Government of the Philippine Islands. The complaint is based upon
section 8 of Act No. 292 of the Commission, which is as follows:
Every person who shall utter seditious words or speeches, write, publish, or
circulate scurrilous libels against the Government of the United States or the
Insular Government of the Philippine Islands, or which tend to disturb or obstruct
any lawful officer in executing his office, or which tend to instigate others to cabal
or meet together for unlawful purposes, or which suggest or incite rebellious
conspiracies or riots, or which tend to stir up the people against the lawful
authorities, or to disturb the peace of the community, the safety and order of the
Government, or who shall knowingly conceal such evil practices, shall be
punished by a fine not exceeding two thousand dollars or by imprisonment not
exceeding two years, or both, in the discretion of the court.
The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April
6, 1902, under the caption of "A few hard facts."
The Attorney-General in his brief indicates the following passages of the article as those
upon which he relies to sustain the conviction:
Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say of
the action of the Civil Commission in appointing rascally natives to important
Government positions:
"It is a strong thing to say, but nevertheless true, that the Civil
Commission, through its ex-insurgent office holders, and by its
continual disregard for the records of natives obtained during the
military rule of the Islands, has, in its distribution of offices, constituted a
protectorate over a set of men who should be in jail or deported. . . .
[Reference is then made to the appointment of one Tecson as justice of
the peace.] This is the kind of foolish work that the Commission is doing
all over the Islands, reinstating insurgents and rogues and turning down
the men who have during the struggle, at the risk of their lives, aided
the Americans."
xxx xxx xxx
There is no doubt but that the Filipino office holders of the Islands are in a good
many instances rascals.
62
 xxx xxx xxx
The commission has exalted to the highest positions in the Islands Filipinos who
are alleged to be notoriously corrupt and rascally, and men of no personal
character.
xxx xxx xxx
Editor Valdez, of "Miau," made serious charges against two of the native Commissioners
— charges against Trinidad H. Pardo de Tavera, which, if true, would brand the man as a
coward and a rascal, and with what result? . . . [Reference is then made to the prosecution
and conviction of Valdez for libel "under a law which specifies that the greater the truth the
greater the libel."] Is it the desire of the people of the United States that the natives against
whom these charges have been made (which, if true, absolutely vilify their personal
characters) be permitted to retain their seats on the Civil Commission, the executive body
of the Philippine Government, without an investigation?
xxx xxx xxx
It is a notorious fact that many branches of the Government organized by the
Civil Commission are rotten and corrupt. The fiscal system, upon which life,
liberty, and justice depends, is admitted by the Attorney-General himself to be
most unsatisfactory. It is a fact that the Philippine judiciary is far from being what
it should. Neither fiscals nor judges can be persuaded to convict insurgents when
they wish to protect them.
xxx xxx xxx
Now we hear all sorts of reports as to rottenness existing in the province [of
Tayabas], and especially the northern end of it; it is said that it is impossible to
secure the conviction of lawbreakers and outlaws by the native justices, or a
prosecution by the native fiscals.
xxx xxx xxx
The long and short of it is that Americans will not stand for an arbitrary
government, especially when evidences of carpetbagging and rumors of graft are
too thick to be pleasant.
We do not understand that it is claimed that the defendants succeeded in establishing at
the trial the truth of any of the foregoing statements. The only question which we have
considered is whether their publication constitutes an offense under section 8 of Act No.
292, above cited.
Several allied offenses or modes of committing the same offense are defined in that
section, viz: (1) The uttering of seditious words or speeches; (2) the writing, publishing, or
circulating of scurrilous libels against the Government of the United States or the Insular
Government of the Philippine Islands; (3) the writing, publishing, or circulating of libels
which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend
to instigate others to cabal or meet together for unlawful purposes; (5) or which suggest or
incite rebellious conspiracies or riots; (6) or which tend to stir up the people against the
lawful authorities or to disturb the peace of the community, the safety and order of the
Government; (7) knowingly concealing such evil practices.
The complaint appears to be framed upon the theory that a writing, in order to be
punishable as a libel under this section, must be of a scurrilous nature and directed against
the Government of the United States or the Insular Government of the Philippine Islands,
and must, in addition, tend to some one of the results enumerated in the section. The
article in question is described in the complaint as "a scurrilous libel against the
Government of the United States and the Insular Government of the Philippine Islands,
which tends to obstruct the lawful officers of the United States and the Insular Government
of the Philippine Islands in the execution of their offices, and which tends to instigate
others to cabal and meet together for unlawful purposes, and which suggests and incites
rebellious conspiracies, and which tends to stir up the people against the lawful authorities,
and which disturbs the safety and order of the Government of the United States and the
Insular Government of the Philippine Islands." But it is "a well-settled rule in considering
indictments that where an offense may be committed in any of several different modes,
and the offense, in any particular instance, is alleged to have been committed in two or
more modes specified, it is sufficient to prove the offense committed in any one of them,
provided that it be such as to constitute the substantive offense" (Com. vs. Kneeland, 20
Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the
substantive charges into which the complaint may be separated has been made out.
We are all, however, agreed upon the proposition that the article in question has no
appreciable tendency to "disturb or obstruct any lawful officer in executing his office," or to
"instigate" any person or class of persons "to cabal or meet together for unlawful
purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir up the people
against the lawful authorities or to disturb the peace of the community, the safety and order
of the Government." All these various tendencies, which are described in section 8 of Act
No. 292, each one of which is made an element of a certain form of libel, may be
characterized in general terms as seditious tendencies. This is recognized in the
description of the offenses punished by this section, which is found in the title of the act,
where they are defined as the crimes of the "seditious utterances, whether written or
spoken."
Excluding from consideration the offense of publishing "scurrilous libels against the
Government of the United States or the Insular Government of the Philippine Islands,"
which may conceivably stand on a somewhat different footing, the offenses punished by
this section all consist in inciting, orally or in writing, to acts of disloyalty or disobedience to
the lawfully constituted authorities in these Islands. And while the article in question, which
is, in the main, a virulent attack against the policy of the Civil Commission in appointing
natives to office, may have had the effect of exciting among certain classes dissatisfaction
with the Commission and its measures, we are unable to discover anything in it which can
be regarded as having a tendency to produce anything like what may be called
disaffection, or, in other words, a state of feeling incompatible with a disposition to remain
loyal to the Government and obedient to the laws. There can be no conviction, therefore,
for any of the offenses described in the section on which the complaint is based, unless it
is for the offense of publishing a scurrilous libel against the Government of the of the
United States or the Insular Government of the Philippine Islands.
Can the article be regarded as embraced within the description of "scurrilous libels against
the Government of the United States or the Insular Government of the Philippine Islands?"
In the determination of this question we have encountered great difficulty, by reason of the
63
almost entire lack of American precedents which might serve as a guide in the construction
of the law. There are, indeed, numerous English decisions, most of them of the eighteenth
century, on the subject of libelous attacks upon the "Government, the constitution, or the
law generally," attacks upon the Houses of Parliament, the Cabinet, the Established
Church, and other governmental organisms, but these decisions are not now accessible to
us, and, if they were, they were made under such different conditions from those which
prevail at the present day, and are founded upon theories of government so foreign to
those which have inspired the legislation of which the enactment in question forms a part,
that they would probably afford but little light in the present inquiry. In England, in the latter
part of the eighteenth century, any "written censure upon public men for their conduct as
such," as well as any written censure "upon the laws or upon the institutions of the
country," would probably have been regarded as a libel upon the Government. (2 Stephen,
History of the Criminal Law of England, 348.) This has ceased to be the law in England,
and it is doubtful whether it was ever the common law of any American State. "It is true that
there are ancient dicta to the effect that any publication tending to "possess the people with
an ill opinion of the Government" is a seditious libel ( per Holt, C. J., in R. vs. Tuchin, 1704,
5 St. Tr., 532, and Ellenborough, C. J., in R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no
one would accept that doctrine now. Unless the words used directly tend to foment riot or
rebellion or otherwise to disturb the peace and tranquility of the Kingdom, the utmost
latitude is allowed in the discussion of all public affairs." (11 Enc. of the Laws of England,
450.) Judge Cooley says (Const. Lim., 528): "The English common law rule which made
libels on the constitution or the government indictable, as it was administered by the
courts, seems to us unsuited to the condition and circumstances of the people of America,
and therefore never to have been adopted in the several States."
We find no decisions construing the Tennessee statute (Code, sec. 6663), which is
apparently the only existing American statute of a similar character to that in question, and
from which much of the phraseology of then latter appears to have been taken, though with
some essential modifications.
The important question is to determine what is meant in section 8 of Act No. 292 by the
expression "the Insular Government of the Philippine Islands." Does it mean in a general
and abstract sense the existing laws and institutions of the Islands, or does it mean the
aggregate of the individuals by whom the government of the Islands is, for the time being,
administered? Either sense would doubtless be admissible.
We understand, in modern political science, . . . by the term government, that institution or
aggregate of institutions by which an independent society makes and carries out those
rules of action which are unnecessary to enable men to live in a social state, or which are
imposed upon the people forming that society by those who possess the power or authority
of prescribing them. Government is the aggregate of authorities which rule a society. By
"dministration, again, we understand in modern times, and especially in more or less free
countries, the aggregate of those persons in whose hands the reins of government are for
the time being (the chief ministers or heads of departments)." (Bouvier, Law Dictionary,
891.) But the writer adds that the terms "government" and "administration" are not always
used in their strictness, and that "government" is often used for "administration."
In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made
an offense to "write, print, utter, or published," or to "knowingly and willingly assist or aid in
writing, printing, uttering, or publishing any false, scandalous, and malicious writing or
writings against the Government of the United States, or either House of the Congress of
the United States, or the President of the United States, with intent to defame the said
Government, or either House of the said Congress, or the said President, or to bring them,
or either of them, into contempt or disrepute, or to excite against them or either or any of
them the hatred of the good people of the United States," etc. The term "government"
would appear to be used here in the abstract sense of the existing political system, as
distinguished from the concrete organisms of the Government — the Houses of Congress
and the Executive — which are also specially mentioned.
Upon the whole, we are of the opinion that this is the sense in which the term is used in the
enactment under consideration.
It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel,
upon an abstraction like the Government in the sense of the laws and institutions of a
country, but we think an answer to this suggestion is that the expression "scurrilous libel" is
not used in section 8 of Act No. 292 in the sense in which it is used in the general libel law
(Act No. 277) — that is, in the sense of written defamation of individuals — but in the wider
sense, in which it is applied in the common law to blasphemous, obscene, or seditious
publications in which there may be no element of defamation whatever. "The word 'libel' as
popularly used, seems to mean only defamatory words; but words written, if obscene,
blasphemous, or seditious, are technically called libels, and the publication of them is, by
the law of England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627,
per Bramwell L. J. See Com. vs. Kneeland, 20 Pick., 206, 211.)
While libels upon forms of government, unconnected with defamation of individuals, must
in the nature of things be of uncommon occurrence, the offense is by no means an
imaginary one. An instance of a prosecution for an offense essentially of this nature is
Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted "as a
factious and seditious person of a wicked mind and unquiet and turbulent disposition and
conversation, seditiously, maliciously, and willfully intending, as much as in him lay, to
bring into contempt and hatred the independence of the United States, the constitution of
this Commonwealth and of the United States, to excite popular discontent and
dissatisfaction against the scheme of polity instituted, and upon trial in the said United
States and in the said Commonwealth, to molest, disturb, and destroy the peace and
tranquility of the said United States and of the said Commonwealth, to condemn the
principles of the Revolution, and revile, depreciate, and scandalize the characters of the
Revolutionary patriots and statesmen, to endanger, subvert, and totally destroy the
republican constitutions and free governments of the said United States and this
Commonwealth, to involve the said United States and this Commonwealth in civil war,
desolation, and anarchy, and to procure by art and force a radical change and alteration in
the principles and forms of the said constitutions and governments, without the free will,
wish, and concurrence of the people of the said United States and this Commonwealth,
respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked,
seditious, and detestable intentions aforesaid he . . . falsely, maliciously, factiously, and
seditiously did make, compose, write, and publish the following libel, to wit; 'A democracy
is scarcely tolerable at any period of national history. Its omens are always sinister and its
powers are unpropitious. With all the lights or experience blazing before our eyes, it is
impossible not to discover the futility of this form of government. It was weak and wicked at
Athens, it was bad in Sparta, and worse in Rome. It has been tried in France and
terminated in despotism. it was tried in England and rejected with the utmost loathing and
abhorrence. It is on its trial here and its issue will be civil war, desolation, and anarchy. No
wise man but discerns its imperfections; no good man but shudders at its miseries; no
honest man but proclaims its fraud, and no brave man but draws his sword against its
force. The institution of a scheme of polity so radically contemptible and vicious is a
memorable example of what the villainy of some men can devise, the folly of others
receive, and both establish, in despite of reason, reflection, and sensation.'"
64
An attack upon the lawfully established system of civil government in the Philippine
Islands, like that which Dennie was accused of making upon the republican form of
government lawfully established in the United States and in the State of Pennsylvania
would, we think, if couched in scandalous language, constitute the precise offense
described in section 8 of Act No. 292 as a scurrilous libel against the Insular Government
of the Philippine Islands.

Defamation of individuals, whether holding official positions or not, and whether directed to
their public conduct or to their private life, may always be adequately punished under the
general libel law. Defamation of the Civil Commission as an aggregation, it being "a body
of persons definite and small enough for its individual members to be recognized as such"
(Stephen, Digest of the Criminal Law, art. 277), as well as defamation of any of the
individual members of the Commission or of the Civil Governor, either in his public capacity
or as a private individual, may be so punished. The general libel law enacted by the
Commission was in force when Act No. 292, was passed. There was no occasion for any
further legislation on the subject of libels against the individuals by whom the Insular
Government is administered — against the Insular Government in the sense of the
aggregate of such individuals. There was occasion for stringent legislation against
seditious words or libels, and that is the main if not the sole purpose of the section under
consideration. It is not unreasonable to suppose that the Commission, in enacting this
section, may have conceived of attacks of a malignant or scurrilous nature upon the
existing political system of the United States, or the political system established in these
Islands by the authority of the United States, as necessarily of a seditious tendency, but it
is not so reasonable to suppose that they conceived of attacks upon the personnel of the
government as necessarily tending to sedition. Had this been their view it seems probable
that they would, like the framers of the Sedition Act of 1798, have expressly and
specifically mentioned the various public officials and collegiate governmental bodies
defamation of which they meant to punish as sedition.

The article in question contains no attack upon the governmental system of the United
States, and it is quite apparent that, though grossly abusive as respects both the
Commission as a body and some of its individual members, it contains no attack upon the
governmental system by which the authority of the United States is enforced in these
Islands. The form of government by a Civil Commission and a Civil Governor is not
assailed. It is the character of the men who are intrusted with the administration of the
government that the writer is seeking to bring into disrepute by impugning the purity of their
motives, their public integrity, and their private morals, and the wisdom of their policy. The
publication of the article, therefore, no seditious tendency being apparent, constitutes no
offense under Act No. 292, section 8.

The judgment of conviction is reversed and the defendants are acquitted, with costs de
oficio.

Arellano, C.J. Torres, Willard and Mapa, JJ., concur.

65