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MMDA V JANCOM GR NO 147465

Overview: After bidding for a waste management project with the MMDA, Jancom won a contract
for the MMDA’s San Mateo waste management project. A BOT Build-Operate-Transfer) contract for
the waste to energy project was signed on Dec 19, 1997, between Jancom and the Philippine
Government, represented by the Presidential Task Force on Solid Waste Management through
DENR Secretary Victor Ramos, CORD-NCR chair Dionisio dela Serna, and MMDA chair Prospero
Oreta.
The contract, however, was never signed by President Ramos as it was too close to the end of his
term. He endorsed it to President Estrada, but Estrada refused to sign it, for two reasons: the
passage of RA 8749, or the Clean Air Act of 1999 and the clamor of San Mateo residents for the
closure of the dumpsite.
When the MMDA published another call for proposals for solid waste management projects for
Metro Manila, Jancom filed a petition with the Pasig RTC asking the court to declare as void the
resolution of the Greater Metropolitan Manila Solid Waste Management Committee disregarding the
BOT contract with Jancom, and the call for bids for a new waste management contract.

The lower court decided in favor of Jancom. Instead of appealing, the MMDA filed with the Court of
Appeals a petition for certiorari and a TRO.

When the CA dismissed the petition, the MMDA went to the Supreme Court, arguing that the
contract with Jancom was not binding because it was not signed by the President, the conditions
precedent to the contract were not complied with, and there was no valid notice of award.

The Supreme Court ruled that MMDA should have filed a motion for appeal instead of for
certiorari, because a certiorari would only apply in cases where there was grave abuse of
jurisdiction, something which the petition did not allege. Correction may be obtained only by an
appeal from the final decision. Since the decision was not appeal, the Court said it has become final
and “gone beyond the reach of any court to modify in any substantive aspect.”

Though saying it was unnecessary to discuss the substantive issues, the court took it up just the
same, “if only to put the petitioner’s mind to rest.”
The contract with Jancom is valid: citing Article 1305, 1315 and 1319 of the Civil Code.
In asserting that there was no valid and binding contract, MMDA can only allege that there was no
valid notice of award; the contract does not bear the signature of the President; the conditions
precedent specified in the contract were not complied with.
But the Court said that the lack of notice was the government’s fault; though the President did not
sign, his alter-ego did; and anyway his signature was only necessary for the effectivity of the
contract, not its perfection; and that the two-month period within which Jancom should comply
with the conditions had not yet started to run because the contract had not yet taken effect,
precisely because of the absence of the President’s signature.

Issue:
1. Whether or not Sec 20 of the Clean Air Act bans incineration as a mode of waste disposal.
2. Whether or not there exists a valid and perfected contract between the Republic of the
Philippines and Jancom.
Held:
1. Not Absolutely. Section 20 does not absolutely prohibit incineration as a mode of waste
disposal; rather only those burning processes which emit poisonous and toxic fumes are
banned. Sec. 20 of the Clean Air Act pertinently reads:
SECTION 20. Ban on Incineration. Incineration, hereby defined as the burning of municipal, bio-
chemical and hazardous wastes, which process emits poisonous and toxic fumes, is hereby
prohibited: x x x.
2. Yes. The Court of Appeals did not err when it declared the existence of a valid and perfected
contract between the Republic of the Philippines and JANCOM. There being a perfected
contract, MMDA cannot revoke or renounce the same without the consent of the other. From
the moment of perfection, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their nature, may
be in keeping with good faith, usage, and law (Article 1315, Civil Code). The contract has the
force of law between the parties and they are expected to abide in good faith by their
respective contractual commitments, not weasel out of them. Just as nobody can be forced to
enter into a contract, in the same manner, once a contract is entered into, no party can
renounce it unilaterally or without the consent of the other. It is a general principle of law
that no one may be permitted to change his mind or disavow and go back upon his own acts,
or to proceed contrary thereto, to the prejudice of the other party. Nonetheless, it has to be
repeated that although the contract is a perfected one, it is still ineffective or
unimplementable until and unless it is approved by the President.
Moreover, if after a perfected and binding contract has been executed between the parties, it
occurs to one of them to allege some defect therein as reason for annulling it, the alleged defect
must be conclusively proven, since the validity and the fulfillment of contracts cannot be left to the
will of one of the contracting parties. In the case at bar, the reasons cited by MMDA for not pushing
through with the subject contract were: 1) the passage of the Clean Air Act, which allegedly bans
incineration; 2) the closure of the San Mateo landfill site; and 3) the costly tipping fee. These
reasons are bereft of merit.
Note: Anent lack of signature:
Firstly, it is pointed out that Memorandum Order No. 202 creating the Executive Committee to
oversee the BOT implementation of solid waste management projects only charged the officials
thereof with the duty of recommending to the President the specific project to be implemented
under the BOT scheme for both San Mateo and Carmona sites. Hence, it is concluded that the
signatories, CORD-NCR Chairman Dionisio dela Serna and MMDA Chairman Prospero Oreta, had
no authority to enter into any waste management project for and in behalf of the Government.
Secondly, Section 59 of Executive Order No. 292 is relied upon as authority for the proposition that
presidential approval is necessary for the validity of the contract.
The first argument conveniently overlooks the fact that then Secretary of Environment and
Natural Resources Victor Ramos was likewise a signatory to the contract. While dela Serna and
Oreta may not have had any authority to sign, the Secretary of Environment and Natural Resources
has such an authority. In fact, the authority of the signatories to the contract was not denied by the
Solicitor General. Moreover, as observed by the Court of Appeals, [i]t was not alleged, much less
shown, that those who signed in behalf of the Republic had acted beyond the scope of their
authority.
In truth, the argument raised by MMDA does not focus on the lack of authority of the
signatories, but on the amount involved as placing the contract beyond the authority of the
signatories to approve. Section 59 of Executive Order No. 292 reads:
Section 59. Contracts for Approval by the President. Contracts for infrastructure projects, including
contracts for the supply of materials and equipment to be used in said projects, which involve
amounts above the ceilings provided in the preceding section shall be approved by the
President: Provided, That the President may, when conditions so warrant, and upon
recommendation of the National Economic and Development Authority, revise the aforesaid ceilings
of approving authority.
However, the Court of Appeals trenchantly observed in this connection:
As regards the Presidents approval of infrastructure projects required under Section 59 of
Executive Order No. 292, said section does not apply to the BOT contract in question. Sec.
59 should be correlated with Sec. 58 of Exec. Order No. 292. Said sections read:
SECTION 58. Ceiling for Infrastructure Contracts. The following shall be the ceilings for all civil
works, construction and other contracts for infrastructure projects, including supply contracts for
said projects, awarded through public bidding or through negotiation, which may be approved by
the Secretaries of Public Works and Highways, Transportation and Communications, Local
Government with respect to Rural Road improvement Project and governing boards of government-
owned or controlled corporations:
xxx xxx xxx
Save as provided for above, the approval ceilings assigned to the departments/agencies involved in
national infrastructure and construction projects shall remain at the levels provided in existing
laws, rules and regulations.
Contrary to petitioners claim that all infrastructure contracts require the Presidents approval
(Petition, p. 16), Sec. 59 provides that such approval is required only in infrastructure contracts
involving amounts exceeding the ceilings set in Sec. 58. Significantly, the infrastructure contracts
treated in Sec. 58 pertain only to those which may be approved by the Secretaries of Public Works
and Highways, Transportation and Communications, Local Government (with respect to Rural Road
Improvement Project) and the governing boards of certain government-owned or controlled
corporations. Consequently, the BOT contract in question, which was approved by the DENR
Secretary and the EXCOM Chairman and Co-Chairman, is not covered by Exec. Order No. 292.
(Rollo, p. 51-52.)
The provision pertinent to the authority of the Secretary of Environment and Natural Resources
would actually be Section 1 of Executive Order No. 380, Series of 1989 which provides that The
Secretaries of all Departments and Governing Boards of government-owned or controlled
corporations [except the Secretaries of Public Works and Highways, Transportation and
Communication, and Local Government with respect to Rural Road Improvement projects] can
enter into publicly bidded contracts regardless of amount (See also Section 515,Government
Accounting and Auditing Manual Volume I). Consequently, MMDA may not claim that the BOT
contract is not valid and binding due to the lack of presidential approval.
Significantly, the contract itself provides that the signature of the President is necessary only for
its effectivity (not perfection), pursuant to Article 19 of the contract, which reads:
This contract shall become effective upon approval by the President of the Republic of
the Philippines pursuant to existing laws subject to the condition, precedent in Article 18. This
contract shall remain in full force and effect for twenty-five (25) years subject to renewal for
another twenty-five (25) years from the date of Effectivity. Such renewal will be subject to mutual
agreement of the parties and approval of the President of the Republic of the Philippines.
(Rollo, p. 94.)
Stated differently, while the twenty-five-year effectivity period of the contract has not yet started
to run because of the absence of the Presidents signature, the contract has, nonetheless, already
been perfected.
Script:

Respondent (Jancom): I won a contract for the MMDA’s San Mateo waste management project. We
have signed A Build – Operate - Transfer (BOT) contract with the Republic of the Philippines
represented by the Presidential Task Force on Solid Waste Management through DENR Secretary
Victor Ramos, CORD-NCR chair Dionisio dela Serna, and MMDA chair Prospero Oreta.

Petitioner (MMDA): The contract was not signed by President Ramos as it was too close to the end of
his term. He endorsed it to President Estrada, but Estrada refused to sign it, for two reasons: the
passage of RA 8749, or the Clean Air Act of 1999 and the clamor of San Mateo residents for the
closure of the dumpsite.
When the MMDA published another call for proposals for solid waste management projects for
Metro Manila.

Narrator: Jancom filed a petition with the Pasig RTC asking the court to declare as void the
resolution of the Greater Metropolitan Manila Solid Waste Management Committee disregarding the
BOT contract with Jancom, and the call for bids for a new waste management contract.

RTC (Jan): The lower court decided in favor of Jancom. Instead of appealing, the MMDA filed with
the Court of Appeals a petition for certiorari and a TRO.

CA (Ceft): When the CA dismissed the petition, the MMDA went to the Supreme Court, arguing that
the contract with Jancom was not binding because it was not signed by the President, the
conditions precedent to the contract were not complied with, and there was no valid notice of
award.

SC (Gyrl): . The Court of Appeals did not err when it declared the existence of a valid and perfected
contract between the Republic of the Philippines and JANCOM. There being a perfected contract,
MMDA cannot revoke or renounce the same without the consent of the other. From the moment of
perfection, the parties are bound not only to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be in keeping with good
faith, usage, and law (Article 1315, Civil Code). The contract has the force of law between the
parties and they are expected to abide in good faith by their respective contractual commitments,
not weasel out of them. Just as nobody can be forced to enter into a contract, in the same manner,
once a contract is entered into, no party can renounce it unilaterally or without the consent of the
other. It is a general principle of law that no one may be permitted to change his mind or disavow
and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other
party. Nonetheless, it has to be repeated that although the contract is a perfected one, it is still
ineffective or unimplementable until and unless it is approved by the President.
Moreover, if after a perfected and binding contract has been executed between the parties, it occurs
to one of them to allege some defect therein as reason for annulling it, the alleged defect must be
conclusively proven, since the validity and the fulfillment of contracts cannot be left to the will of
one of the contracting parties. In the case at bar, the reasons cited by MMDA for not pushing
through with the subject contract were: 1) the passage of the Clean Air Act, which allegedly bans
incineration; 2) the closure of the San Mateo landfill site; and 3) the costly tipping fee. These
reasons are bereft of merit.

As to whether Sec 20 of the Clean Air Act bans incineration as a mode of waste disposal:
Section 20 does not absolutely prohibit incineration as a mode of waste disposal; rather only those
burning processes which emit poisonous and toxic fumes are banned. Sec. 20 of the Clean Air Act
pertinently reads:
SECTION 20. Ban on Incineration. Incineration, hereby defined as the burning of municipal, bio-
chemical and hazardous wastes, which process emits poisonous and toxic fumes, is hereby
prohibited: x x x.