CASES ON CHAPTER 1

G.R. No. 1051, U.S. v. Dorr et al., 2

Phil. 332
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
May 19, 1903
G.R. No. 1051
THE UNITED STATES, complainant-appellee,
vs.
FRED L. DORR, ET AL., defendants-appellants.
F. G. Waite for appellants.
Solicitor-General Araneta for appellee.
LADD, J .:
The defendants have been convicted upon a complaint charging them with the offense
of writing, publishing, and circulating a scurrilous libel against the Government of the
United States and the Insular Government of the Philippine Islands. The complaint is
based upon section 8 of Act No. 292 of the Commission, which is as follows:
Every person who shall utter seditious words or speeches, write, publish, or
circulate scurrilous libels against the Government of the United States or the
Insular Government of the Philippine Islands, or which tend to disturb or
obstruct any lawful officer in executing his office, or which tend to instigate
others to cabal or meet together for unlawful purposes, or which suggest or
incite rebellious conspiracies or riots, or which tend to stir up the people against
the lawful authorities, or to disturb the peace of the community, the safety and
order of the Government, or who shall knowingly conceal such evil practices,
shall be punished by a fine not exceeding two thousand dollars or by
imprisonment not exceeding two years, or both, in the discretion of the court.
The alleged libel was published as an editorial in the issue of the "Manila Freedom" of
April 6, 1902, under the caption of "A few hard facts."
The Attorney-General in his brief indicates the following passages of the article as
those upon which he relies to sustain the conviction:
Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say
of the action of the Civil Commission in appointing rascally natives to
important Government positions:
"It is a strong thing to say, but nevertheless true, that the Civil
Commission, through its ex-insurgent office holders, and by its continual
disregard for the records of natives obtained during the military rule of
the Islands, has, in its distribution of offices, constituted a protectorate
over a set of men who should be in jail or deported. . . . [Reference is
then made to the appointment of one Tecson as justice of the peace.]
This is the kind of foolish work that the Commission is doing all over the
Islands, reinstating insurgents and rogues and turning down the men who
have during the struggle, at the risk of their lives, aided the Americans."
xxx xxx xxx
There is no doubt but that the Filipino office holders of the Islands are in a
good many instances rascals.
xxx xxx xxx
The commission has exalted to the highest positions in the Islands Filipinos
who are alleged to be notoriously corrupt and rascally, and men of no personal
character.
xxx xxx xxx
Editor Valdez, of "Miau," made serious charges against two of the native
Commissioners charges against Trinidad H. Pardo de Tavera, which, if true, would
brand the man as a coward and a rascal, and with what result? . . . [Reference is then
made to the prosecution and conviction of Valdez for libel "under a law which
specifies that the greater the truth the greater the libel."] Is it the desire of the people
of the United States that the natives against whom these charges have been made
(which, if true, absolutely vilify their personal characters) be permitted to retain their
seats on the Civil Commission, the executive body of the Philippine Government,
without an investigation?
xxx xxx xxx
It is a notorious fact that many branches of the Government organized by the
Civil Commission are rotten and corrupt. The fiscal system, upon which life,
liberty, and justice depends, is admitted by the Attorney-General himself to be
most unsatisfactory. It is a fact that the Philippine judiciary is far from being
what it should. Neither fiscals nor judges can be persuaded to convict
insurgents when they wish to protect them.
xxx xxx xxx
Now we hear all sorts of reports as to rottenness existing in the province [of
Tayabas], and especially the northern end of it; it is said that it is impossible to
secure the conviction of lawbreakers and outlaws by the native justices, or a
prosecution by the native fiscals.
xxx xxx xxx
The long and short of it is that Americans will not stand for an arbitrary
government, especially when evidences of carpetbagging and rumors of graft
are too thick to be pleasant.
We do not understand that it is claimed that the defendants succeeded in establishing
at the trial the truth of any of the foregoing statements. The only question which we
have considered is whether their publication constitutes an offense under section 8
ofAct No. 292, above cited.
Several allied offenses or modes of committing the same offense are defined in that
section, viz: (1) The uttering of seditious words or speeches; (2) the writing,
publishing, or circulating of scurrilous libels against the Government of the United
States or the Insular Government of the Philippine Islands; (3) the writing, publishing,
or circulating of libels which tend to disturb or obstruct any lawful officer in
executing his office; (4) or which tend to instigate others to cabal or meet together for
unlawful purposes; (5) or which suggest or incite rebellious conspiracies or riots; (6)
or which tend to stir up the people against the lawful authorities or to disturb the peace
of the community, the safety and order of the Government; (7) knowingly concealing
such evil practices.
The complaint appears to be framed upon the theory that a writing, in order to be
punishable as a libel under this section, must be of a scurrilous nature and directed
against the Government of the United States or the Insular Government of the
Philippine Islands, and must, in addition, tend to some one of the results enumerated
in the section. The article in question is described in the complaint as "a scurrilous
libel against the Government of the United States and the Insular Government of the
Philippine Islands, which tends to obstruct the lawful officers of the United States and
the Insular Government of the Philippine Islands in the execution of their offices, and
which tends to instigate others to cabal and meet together for unlawful purposes, and
which suggests and incites rebellious conspiracies, and which tends to stir up the
people against the lawful authorities, and which disturbs the safety and order of the
Government of the United States and the Insular Government of the Philippine
Islands." But it is "a well-settled rule in considering indictments that where an offense
may be committed in any of several different modes, and the offense, in any particular
instance, is alleged to have been committed in two or more modes specified, it is
sufficient to prove the offense committed in any one of them, provided that it be such
as to constitute the substantive offense" (Com. vs. Kneeland, 20 Pick., Mass., 206,
215), and the defendants may, therefore, be convicted if any one of the substantive
charges into which the complaint may be separated has been made out.
We are all, however, agreed upon the proposition that the article in question has no
appreciable tendency to "disturb or obstruct any lawful officer in executing his
office," or to "instigate" any person or class of persons "to cabal or meet together for
unlawful purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir
up the people against the lawful authorities or to disturb the peace of the community,
the safety and order of the Government." All these various tendencies, which are
described in section 8 of Act No. 292, each one of which is made an element of a
certain form of libel, may be characterized in general terms as seditious tendencies.
This is recognized in the description of the offenses punished by this section, which is
found in the title of the act, where they are defined as the crimes of the "seditious
utterances, whether written or spoken."
Excluding from consideration the offense of publishing "scurrilous libels against the
Government of the United States or the Insular Government of the Philippine Islands,"
which may conceivably stand on a somewhat different footing, the offenses punished
by this section all consist in inciting, orally or in writing, to acts of disloyalty or
disobedience to the lawfully constituted authorities in these Islands. And while the
article in question, which is, in the main, a virulent attack against the policy of the
Civil Commission in appointing natives to office, may have had the effect of exciting
among certain classes dissatisfaction with the Commission and its measures, we are
unable to discover anything in it which can be regarded as having a tendency to
produce anything like what may be called disaffection, or, in other words, a state of
feeling incompatible with a disposition to remain loyal to the Government and
obedient to the laws. There can be no conviction, therefore, for any of the offenses
described in the section on which the complaint is based, unless it is for the offense of
publishing a scurrilous libel against the Government of the of the United States or the
Insular Government of the Philippine Islands.
Can the article be regarded as embraced within the description of "scurrilous libels
against the Government of the United States or the Insular Government of the
Philippine Islands?" In the determination of this question we have encountered great
difficulty, by reason of the almost entire lack of American precedents which might
serve as a guide in the construction of the law. There are, indeed, numerous English
decisions, most of them of the eighteenth century, on the subject of libelous attacks
upon the "Government, the constitution, or the law generally," attacks upon the
Houses of Parliament, the Cabinet, the Established Church, and other governmental
organisms, but these decisions are not now accessible to us, and, if they were, they
were made under such different conditions from those which prevail at the present
day, and are founded upon theories of government so foreign to those which have
inspired the legislation of which the enactment in question forms a part, that they
would probably afford but little light in the present inquiry. In England, in the latter
part of the eighteenth century, any "written censure upon public men for their conduct
as such," as well as any written censure "upon the laws or upon the institutions of the
country," would probably have been regarded as a libel upon the Government. (2
Stephen, History of the Criminal Law of England, 348.) This has ceased to be the law
in England, and it is doubtful whether it was ever the common law of any American
State. "It is true that there are ancient dicta to the effect that any publication tending to
"possess the people with an ill opinion of the Government" is a seditious libel ( per
Holt, C. J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in
R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine now.
Unless the words used directly tend to foment riot or rebellion or otherwise to disturb
the peace and tranquility of the Kingdom, the utmost latitude is allowed in the
discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley
says (Const. Lim., 528): "The English common law rule which made libels on the
constitution or the government indictable, as it was administered by the courts, seems
to us unsuited to the condition and circumstances of the people of America, and
therefore never to have been adopted in the several States."
We find no decisions construing the Tennessee statute (Code, sec. 6663), which is
apparently the only existing American statute of a similar character to that in question,
and from which much of the phraseology of then latter appears to have been taken,
though with some essential modifications.
The important question is to determine what is meant in section 8 of Act No. 292 by
the expression "the Insular Government of the Philippine Islands." Does it mean in a
general and abstract sense the existing laws and institutions of the Islands, or does it
mean the aggregate of the individuals by whom the government of the Islands is, for
the time being, administered? Either sense would doubtless be admissible.
We understand, in modern political science, . . . by the term government, that
institution or aggregate of institutions by which an independent society makes and
carries out those rules of action which are unnecessary to enable men to live in a
social state, or which are imposed upon the people forming that society by those who
possess the power or authority of prescribing them. Government is the aggregate of
authorities which rule a society. By "dministration, again, we understand in modern
times, and especially in more or less free countries, the aggregate of those persons in
whose hands the reins of government are for the time being (the chief ministers or
heads of departments)." (Bouvier, Law Dictionary, 891.) But the writer adds that the
terms "government" and "administration" are not always used in their strictness, and
that "government" is often used for "administration."
In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is
made an offense to "write, print, utter, or published," or to "knowingly and willingly
assist or aid in writing, printing, uttering, or publishing any false, scandalous, and
malicious writing or writings against the Government of the United States, or either
House of the Congress of the United States, or the President of the United States, with
intent to defame the said Government, or either House of the said Congress, or the
said President, or to bring them, or either of them, into contempt or disrepute, or to
excite against them or either or any of them the hatred of the good people of the
United States," etc. The term "government" would appear to be used here in the
abstract sense of the existing political system, as distinguished from the concrete
organisms of the Government the Houses of Congress and the Executive which
are also specially mentioned.
Upon the whole, we are of the opinion that this is the sense in which the term is used
in the enactment under consideration.
It may be said that there can be no such thing as a scurrilous libel, or any sort of a
libel, upon an abstraction like the Government in the sense of the laws and institutions
of a country, but we think an answer to this suggestion is that the expression
"scurrilous libel" is not used in section 8 of Act No. 292 in the sense in which it is
used in the general libel law (Act No. 277) that is, in the sense of written
defamation of individuals but in the wider sense, in which it is applied in the
common law to blasphemous, obscene, or seditious publications in which there may
be no element of defamation whatever. "The word 'libel' as popularly used, seems to
mean only defamatory words; but words written, if obscene, blasphemous, or
seditious, are technically called libels, and the publication of them is, by the law of
England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per
Bramwell L. J. See Com. vs. Kneeland, 20 Pick., 206, 211.)
While libels upon forms of government, unconnected with defamation of individuals,
must in the nature of things be of uncommon occurrence, the offense is by no means
an imaginary one. An instance of a prosecution for an offense essentially of this
nature is Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted
"as a factious and seditious person of a wicked mind and unquiet and turbulent
disposition and conversation, seditiously, maliciously, and willfully intending, as
much as in him lay, to bring into contempt and hatred the independence of the United
States, the constitution of this Commonwealth and of the United States, to excite
popular discontent and dissatisfaction against the scheme of polity instituted, and
upon trial in the said United States and in the said Commonwealth, to molest, disturb,
and destroy the peace and tranquility of the said United States and of the said
Commonwealth, to condemn the principles of the Revolution, and revile, depreciate,
and scandalize the characters of the Revolutionary patriots and statesmen, to
endanger, subvert, and totally destroy the republican constitutions and free
governments of the said United States and this Commonwealth, to involve the said
United States and this Commonwealth in civil war, desolation, and anarchy, and to
procure by art and force a radical change and alteration in the principles and forms of
the said constitutions and governments, without the free will, wish, and concurrence
of the people of the said United States and this Commonwealth, respectively," the
charge being that "to fulfill, perfect, and bring to effect his wicked, seditious, and
detestable intentions aforesaid he . . . falsely, maliciously, factiously, and seditiously
did make, compose, write, and publish the following libel, to wit; 'A democracy is
scarcely tolerable at any period of national history. Its omens are always sinister and
its powers are unpropitious. With all the lights or experience blazing before our eyes,
it is impossible not to discover the futility of this form of government. It was weak
and wicked at Athens, it was bad in Sparta, and worse in Rome. It has been tried in
France and terminated in despotism. it was tried in England and rejected with the
utmost loathing and abhorrence. It is on its trial here and its issue will be civil war,
desolation, and anarchy. No wise man but discerns its imperfections; no good man but
shudders at its miseries; no honest man but proclaims its fraud, and no brave man but
draws his sword against its force. The institution of a scheme of polity so radically
contemptible and vicious is a memorable example of what the villainy of some men
can devise, the folly of others receive, and both establish, in despite of reason,
reflection, and sensation.'"
An attack upon the lawfully established system of civil government in the Philippine
Islands, like that which Dennie was accused of making upon the republican form of
government lawfully established in the United States and in the State of Pennsylvania
would, we think, if couched in scandalous language, constitute the precise offense
described in section 8 of Act No. 292 as a scurrilous libel against the Insular
Government of the Philippine Islands.
Defamation of individuals, whether holding official positions or not, and whether
directed to their public conduct or to their private life, may always be adequately
punished under the general libel law. Defamation of the Civil Commission as an
aggregation, it being "a body of persons definite and small enough for its individual
members to be recognized as such" (Stephen, Digest of the Criminal Law, art. 277), as
well as defamation of any of the individual members of the Commission or of the
Civil Governor, either in his public capacity or as a private individual, may be so
punished. The general libel law enacted by the Commission was in force when Act
No. 292, was passed. There was no occasion for any further legislation on the subject
of libels against the individuals by whom the Insular Government is administered
against the Insular Government in the sense of the aggregate of such individuals.
There was occasion for stringent legislation against seditious words or libels, and that
is the main if not the sole purpose of the section under consideration. It is not
unreasonable to suppose that the Commission, in enacting this section, may have
conceived of attacks of a malignant or scurrilous nature upon the existing political
system of the United States, or the political system established in these Islands by the
authority of the United States, as necessarily of a seditious tendency, but it is not so
reasonable to suppose that they conceived of attacks upon the personnel of the
government as necessarily tending to sedition. Had this been their view it seems
probable that they would, like the framers of the Sedition Act of 1798, have expressly
and specifically mentioned the various public officials and collegiate governmental
bodies defamation of which they meant to punish as sedition.
The article in question contains no attack upon the governmental system of the United
States, and it is quite apparent that, though grossly abusive as respects both the
Commission as a body and some of its individual members, it contains no attack upon
the governmental system by which the authority of the United States is enforced in
these Islands. The form of government by a Civil Commission and a Civil Governor is
not assailed. It is the character of the men who are intrusted with the administration of
the government that the writer is seeking to bring into disrepute by impugning the
purity of their motives, their public integrity, and their private morals, and the wisdom
of their policy. The publication of the article, therefore, no seditious tendency being
apparent, constitutes no offense under Act No. 292, section 8.
The judgment of conviction is reversed and the defendants are acquitted, with costs de
oficio.
















EN BANC
[G.R. No. L-9657. November 29, 1956.]
LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT
CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF
LIQUIDATORS, Defendants-Appellants.

D E C I S I O N
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila.
During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut
Corporation, Assistant Corporate Counsel Federico Alikpala, counsel forDefendant, requested said
stenographers for copies of the transcript of the stenographic notes taken by them during the
hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the needed transcript
containing 714 pages and thereafter submitted to him their bills for the payment of their fees. The
National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A.
Matoto for said transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these
fees and sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required
the Plaintiffs to reimburse said amounts on the strength of a circular of the Department of Justice
wherein the opinion was expressed that the National Coconut Corporation, being a government entity,
was exempt from the payment of the fees in question. On February 6, 1954, the Auditor General issued
an order directing the Cashier of the Department of Justice to deduct from the salary of Leopoldo T.
Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10
every payday beginning March 30, 1954. To prevent deduction of these fees from their salaries and
secure a judicial ruling that the National Coconut Corporation is not a government entity within the
purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court of First
Instance of Manila.
Defendants set up as a defense that the National Coconut Corporation is a government entity within the
purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying
the stenographers fees under Rule 130 of the Rules of Court. After trial, the court found for
the Plaintiffs declaring (1) that Defendant National Coconut Corporation is not a government entity
within the purview of section 16, Rule 130 of the Rules of Court; chan roblesvirtualawlibrary(2) that the payments already made
by said Defendant to Plaintiffs herein and received by the latter from the former in the total amount of
P714, for copies of the stenographic transcripts in question, are valid, just and legal; chan roblesvirtualawlibraryand (3)
that Plaintiffs are under no obligation whatsoever to make a refund of these payments already received
by them. This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from
paying the legal fees provided for therein, and among these fees are those which stenographers may
charge for the transcript of notes taken by them that may be requested by any interested person
(section 8). The fees in question are for the transcript of notes taken during the hearing of a case in
which the National Coconut Corporation is interested, and the transcript was requested by its assistant
corporate counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope of the term
Government of the Republic of the Philippines as follows:chanroblesvirtuallawlibrary
The Government of the Philippine Islands is a term which refers to the corporate governmental entity
through which the functions of government are exercised throughout the Philippine Islands, including,
save as the contrary appears from the context, the various arms through which political authority is
made effective in said Islands, whether pertaining to the central Government or to the provincial or
municipal branches or other form of local government.
The question now to be determined is whether the National Coconut Corporation may be considered as
included in the term Government of the Republic of the Philippines for the purposes of the exemption
of the legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term Government of the Republic of the Philippines refers to a government
entity through which the functions of government are exercised, including the various arms through
which political authority is made effective in the Philippines, whether pertaining to the central
government or to the provincial or municipal branches or other form of local government. This requires
a little digression on the nature and functions of our government as instituted in our Constitution.
To begin with, we state that the term Government may be defined as that institution or aggregate of
institutions by which an independent society makes and carries out those rules of action which are
necessary to enable men to live in a social state, or which are imposed upon the people forming that
society by those who possess the power or authority of prescribing them (U.S. vs. Dorr, 2 Phil., 332).
This institution, when referring to the national government, has reference to what our Constitution has
established composed of three great departments, the legislative, executive, and the judicial, through
which the powers and functions of government are exercised. These functions are twofold:chanroblesvirtuallawlibrary constitute
and ministrant. The former are those which constitute the very bonds of society and are compulsory in
nature; chan roblesvirtualawlibrarythe latter are those that are undertaken only by way of advancing the general interests of
society, and are merely optional. President Wilson enumerates the constituent functions as follows:chanroblesvirtuallawlibrary
(1) The keeping of order and providing for the protection of persons and property from violence and
robbery.
(2) The fixing of the legal relations between man and wife and between parents and children.
(3) The regulation of the holding, transmission, and interchange of property, and the determination of
its liabilities for debt or for crime.
(4) The determination of contract rights between individuals.
(5) The definition and punishment of crime.
(6) The administration of justice in civil cases.
(7) The determination of the political duties, privileges, and relations of citizens.
(8) Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the preservation of the state from external danger or
encroachment and the advancement of its international interests. (Malcolm, The Government of the
Philippine Islands, p. 19.)
The most important of the ministrant functions are:chanrobl esvirtuallawlibrary public works, public education, public charity,
health and safety regulations, and regulations of trade and industry. The principles deter mining
whether or not a government shall exercise certain of these optional functions are:chanroblesvirtuallawlibrary (1) that a
government should do for the public welfare those things which private capital would not naturally
undertake and (2) that a government should do these things which by its very nature it is better
equipped to administer for the public welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our government is
required to exercise to promote its objectives as expressed in our Constitution and which are exercised
by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare,
progress and prosperity of the people. To this latter class belongs the organization of those corporations
owned or controlled by the government to promote certain aspects of the economic life of our people
such as the National Coconut Corporation. These are what we call government-owned or controlled
corporations which may take on the form of a private enterprise or one organized with powers and
formal characteristics of a private corporations under the Corporation Law.
The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these corporation perform certain functions of
government make them a part of the Government of the Philippines?
The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the simple reason that they do not come
under the classification of municipal or public corporation. Take for instance the National Coconut
Corporation. While it was organized with the purpose of adjusting the coconut industry to a position
independent of trade preferences in the United States and of providing Facilities for the better curing
of copra products and the proper utilization of coconut by-products, a function which our government
has chosen to exercise to promote the coconut industry, however, it was given a corporate power
separate and distinct from our government, for it was made subject to the provisions of our Corporation
Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2
and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private
corporations, and in this sense it is an entity different from our government. As this Court has aptly said,
The mere fact that the Government happens to be a majority stockholder does not make it a public
corporation (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). By becoming a
stockholder in the National Coal Company, the Government divested itself of its sovereign character so
far as respects the transactions of the corporation cralaw . Unlike the Government, the corporation may be
sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency
or instrumentality of government. (Government of the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term Government of the Republic of the Philippines used in
section 2 of the Revised Administrative Code refers only to that government entity through which the
functions of the government are exercised as an attribute of sovereignty, and in this are included those
arms through which political authority is made effective whether they be provincial, municipal or other
form of local government. These are what we call municipal corporations. They do not include
government entities which are given a corporate personality separate and distinct from the government
and which are governed by the Corporation Law. Their powers, duties and liabilities have to be
determined in the light of that law and of their corporate charters. They do not therefore come within
the exemption clause prescribed in section 16, Rule 130 of our Rules of Court.
Public corporations are those formed or organized for the government of a portion of the State.
(Section 3, Republic Act No. 1459, Corporation Law).
The generally accepted definition of a municipal corporation would only include organized cities and
towns, and like organizations, with political and legislative powers for the local, civil government and
police regulations of the inhabitants of the particular district included in the boundaries of the
corporation. Heller vs. Stremmel, 52 Mo. 309, 312.
In its more general sense the phrase municipal corporation may include both towns and counties, and
other public corporations created by government for political purposes. In its more common and limited
signification, it embraces only incorporated villages, towns and cities. Dunn vs. Court of County
Revenues, 85 Ala. 144, 146, 4 So. 661. (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
We may, therefore, define a municipal corporation in its historical and strict sense to be the
incorporation, by the authority of the government, of the inhabitants of a particular place or district,
and authorizing them in their corporate capacity to exercise subordinate specified powers of legislation
and regulation with respect to their local and internal concerns. This power of local government is the
distinctive purpose and the distinguishing feature of a municipal corporation proper. (Dillon, Municipal
Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of
transcript of not less than 200 words before the appeal is taken and P0.15 for each page after the filing
of the appeal, but in this case the National Coconut Corporation has agreed and in fact has paid P1.00
per page for the services rendered by the Plaintiffs and has not raised any objection to the amount paid
until its propriety was disputed by the Auditor General. The payment of the fees in question became
therefore contractual and as such is valid even if it goes beyond the limit prescribed in section 8, Rule
130 of the Rules of Court.
As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial,
considering that this case refers not to a money claim disapproved by the Auditor General but to an
action of prohibition the purpose of which is to restrain the officials concerned from deducting
from Plaintiffs salaries the amount paid to them as stenographers fees. This case does not come under
section 1, Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs













Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-33022 April 22, 1975
CENTRAL BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE
CORPORATION, respondents.
F.E. Evangelista for petitioner.
Cruz, Villarin & Laureta for private respondent.

BARREDO, J .:+.wph!1
Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in
CA-G.R. No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No.
Q-10919 sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation
damages for breach contract in that after having formally and officially awarded, pursuant to the
results of the usual bidding to Ablaza in December 1965 the "contract" for the construction of its San
Fernando, La Union branch building and allowed said contractor to commence the work up to about
May, 1966, albeit without any written formal contract having been executed, the Bank failed and
refused to proceed with the project, unless the plans were revised and a lower price were agreed to
by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced
by the then new President of the Philippines on December 30, 1965 and the Memorandum Circular
No. 1 dated December 31, 1965 of the same President.
The factual background of this case is related in the following portions of the decision of the trial
court, which the Court of Appeals affirmed without modification: t. hqw
Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to
Bid and Instructions to Bidders for the purpose of receiving sealed proposals for the
general construction of its various proposed regional offices, including the Central
Bank regional office building in San Fernando, La Union.
In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and
Finance Corporation, which was one of the qualified bidders, submitted a bid
proposal for the general construction of defendant's proposed regional office building
in San Fernando, La Union at the public bidding held on November 3, 1965. The said
proposal was, as required by the defendant accompanied by a cash bidder's bond in
the sum of P275,000.00.
On December 7, 1965, the Monetary Board of the defendant Central Bank of the
Philippines, after evaluating all the bid proposals submitted during the above-
mentioned bidding, unanimously voted and approved the award to the plaintiff of the
contract for the general construction of defendant's proposed regional office building
in San Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's Proposal
Item No. 2.
Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the
Governor and concurrently the Chairman of the Management Building Committee of
the defendant Central Bank of the Philippines, set a telegram to the plaintiff,
informing the latter that the contract for the general construction of defendant's
proposed regional office building in San Fernando, La Union, had been awarded to
the plaintiff. The said telegram was followed by a formal letter, also dated December
10, 1965, duly signed by said Mr. Rizalino L. Mendoza, confirming the approval of
the award of the above-stated contract under plaintiff's Proposal Item No. 2 in the
amount of P3,749,000.00.
Upon receipt of the aforementioned letter, plaintiff immediately accepted the said
award by means of a letter dated December 15, 1965, whereby plaintiff also
requested permission for its workmen to enter the site of the project, build a
temporary shelter and enclosure, and do some clearing job thereat. Accordingly, said
permission was granted by the defendant as embodied in its letter dated January 4,
1966, addressed to the plaintiff..
Within five (5) days from receipt by the plaintiff of the said notice of award, and
several times thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff
corporation, went personally to see Mr. Rizalino L. Mendoza at the latter's Central
Bank office to follow up the signing of the corresponding contract. A performance
bond in the total amount of P962,250.00 (P275,000.00 of which was in cash and
P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in
compliance with the above-stated Instructions to Bidders, which bond was duly
accepted by the defendant.
Pursuant to the permission granted by the defendant, as aforesaid, plaintiff
commenced actual construction work on the project about the middle of January,
1966. On February 8, 1966, by means of a formal letter, defendant requested the
plaintiff to submit a schedule of deliveries of materials which, according to plaintiff's
accepted proposal, shall be furnished by the defendant. In compliance therewith, on
February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries
requested for.
During the period when the actual construction work on the project was in progress,
Mr. Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the
latter's office in the Central Bank. During those meetings, they discussed the
progress of the construction work being then undertaken by the plaintiff of the
projects of the defendant in San Fernando, La Union, including the progress of the
excavation work.
Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the
construction site of the said project. While he was there, he admitted having seen
pile of soil in the premises. At that time, the excavation work being undertaken by the
plaintiff was about 20% complete. On March 22, 1966, defendant again wrote the
plaintiff, requesting the latter to submit the name of its representative authorized to
sign the building contract with the defendant. In compliance with the said request,
plaintiff submitted to the defendant the name of its duly authorized representative by
means of a letter dated March 24, 1966.
A meeting called by the defendant was held at the conference room of the Central
Bank on May 20, 1966. At the said meeting, the defendant, thru Finance Secretary
Eduardo Romualdez, announced, among other things, the reduction of the
appropriations for the construction of the defendant's various proposed regional
offices, including that of the proposed San Fernando, La Union regional office
building, the construction of which had already been started by the plaintiff. He also
stated that the Central Bank Associated Architects would be asked to prepare new
plans and designs based on such reduced appropriations. The defendant, during that
same meeting, also advised the plaintiff, thru Messrs. Nicomedes G. Ablaza and
Alfredo G. Ablaza (who represented the plaintiff corporation at the said meeting), to
stop its construction work on the Central Bank Regional office building in San
Fernando, La Union. This was immediately complied with by the plaintiff, although its
various construction equipment remained in the jobsite. The defendant likewise
presented certain offer and proposals to the plaintiff, among which were: (a) the
immediate return of plaintiff's cash bidder's bond of P275,000.00; (b) the payment of
interest on said bidder's bond at 12% per annum; (c) the reimbursement to the
plaintiff of the value of all the work accomplished at the site; (d) the entering into a
negotiated contract with the plaintiff on the basis of the reduced appropriation for the
project in question; and (e) the reimbursement of the premium on plaintiff's
performance bond. Not one of these offers and proposals of the defendant, however,
was accepted by the plaintiff during that meeting of May 20, 1966.
On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the
formal execution of the corresponding contract, without prejudice to its claim for
damages. The defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June
15, 1966, replied to the said letter of the plaintiff, whereby the defendant claimed that
an agreement was reached between the plaintiff and the defendant during the
meeting held on May 20, 1966. On the following day, however, in its letter dated
June 16, 1966, the plaintiff, thru counsel, vehemently denied that said parties
concluded any agreement during the meeting in question.
On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the
amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept
the return of the said cash bond, without prejudice, however, to its claims as
contained in its letters to the defendant dated June 3, June 10, and June 16, 1966,
and with further reservation regarding payment of the corresponding interest thereon.
On July 7, 1966, the said sum of P275,000.00 was returned by the defendant to the
plaintiff.
On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated
January 26, 1967, the construction equipment of the plaintiff were pulled out from the
construction site, for which the plaintiff incurred hauling expenses.
The negotiations of the parties for the settlement of plaintiff's claims out of court
proved to be futile; hence, the present action was instituted by plaintiff against the
defendant." (Pp. 249-256, Rec. on Appeal).
It may be added that the Instructions to Bidders on the basis of which the bid and award in question
were submitted and made contained, among others, the following provisions: t.hqw
IB 113.4 The acceptance of the Proposal shall be communicated in writing by the
Owner and no other act of the Owner shall constitute the acceptance of the Proposal.
The acceptance of a Proposal shall bind the successful bidder to execute the
Contract and to be responsible for liquidated damages as herein provided. The rights
and obligations provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
xxx xxx xxx
IB 114.1 The bidder whose proposal is accepted will be required to appear at the
Office of the Owner in person, or, if a firm or corporation, a duly authorized
representative shall so appear, and to execute that contract within five (5) days after
notice that the contract has been awarded to him. Failure or neglect to do so shall
constitute a breach of agreement effected by the acceptance of the Proposal.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10) calendar days from
the date he receives a copy of the fully executed Contract, and he shall complete the
work within the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)
In the light of these facts, petitioner has made the following assignment of errors: t. hqw
I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A
PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE
PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE
CORPORATION FOR THE GENERAL CONSTRUCTION WORK OF PETITIONER'S
REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS
COMMITTED A BREACH OF CONTRACT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD
GIVEN ITS APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA
CONSTRUCTION & FINANCE CORPORATION.
IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF
ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND
RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT
PETITIONER IS LIABLE FOR COSTS." (Pp. A & B, Petitioner-Appellant's Brief.)
Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its
proposition that there could be no perfected contract in this case, (contrary to the conclusion of the
courts below) because there is no showing of compliance, and in fact, there has been no compliance
with the requirement that there must be a certification of the availability of funds by the Auditor
General pursuant to Section 607 of the Revised Administrative Code which provides thus: t. hqw
Section 607. Certificate showing appropriation to meet contract. Except in the
case of a contract for personal service or for supplies to be carried in stock, no
contract involving an expenditure by the National Government of three thousand
pesos or more shall be entered into or authorized until the Auditor General shall have
certified to the officer entering into such obligation that funds have been duly
appropriated for such purpose and that the amount necessary to cover the proposed
contract is available for expenditure on account thereof. When application is made to
the Auditor General for the certificate herein required, a copy of the proposed
contract or agreement shall be submitted to him accompanied by a statement in
writing from the officer making the application showing all obligations not yet
presented for audit which have been incurred against the appropriation to which the
contract in question would be chargeable; and such certificate, when signed by the
Auditor, shall be attached to and become a part of the proposed contract, and the
sum so certified shall not thereafter be available for expenditure for any other
purposes until the Government is discharged from the contract in question.
Except in the case of a contract for supplies to be carried in stock, no contract
involving the expenditure by any province, municipality, chartered city, or municipal
district of two thousand pesos or more shall be entered into or authorized until the
treasurer of the political division concerned shall have certified to the officer entering
into such contract that funds have been duly appropriated for such purpose and that
the amount necessary to cover the proposed contract is available for expenditure on
account thereof. Such certificate, when signed by the said treasurer, shall be
attached to and become part of the proposed contract and the sum so certified shall
not thereafter be available for expenditure for any other purpose until the contract in
question is lawfully abrogated or discharged.
For the purpose of making the certificate hereinabove required ninety per centum of
the estimated revenues and receipts which should accrue during the current fiscal
year but which are yet uncollected, shall be deemed to be in the treasury of the
particular branch of the Government against which the obligation in question would
create a charge." (Pp. 23-25, Petitioner-Appellant's Brief.)
It is contended that in view of such omission and considering the provisions of Section 608 of the
same code to the effect that "a purported contract entered into contrary to the requirements of the
next preceding section hereof shall be wholly void", "no contract between the petitioner and
respondent Ablaza Construction and Finance Corporation for the general construction of the
proposed regional office building of the Central Bank in San Fernando, La Union, was ever perfected
because only the first stage, that is the award of the contract to the lowest responsible bidder,
respondent Ablaza Construction and Finance Corporation, was completed." (p. 29, Petitioner-
Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs.
Wrightthus: t.hqw
The aforesaid requirements of the Revised Administrative Code for the perfection of
government contracts have been upheld by this Honorable Court in the case of Tan
C. Tee Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the
contract to the lowest bidder does not amount to entering into the contract because
of the requirement of Section 607 of the Revised Administrative Code that a copy of
the proposed contract shall be submitted to the Auditor General together with a
request for the availability of funds to cover the proposed contract. Thus, this
Honorable Court held: t. hqw
'To award the contract to the lowest responsible bidder is not the
equivalent of entering into the contract. Section 607 of the
Administrative Code requires that a copy of the proposed contract
shall be submitted along with the request for the certificate of
availability of funds, but there could be no proposed contract to be
submitted until after the award was made.'
And to guide government authorities in the letting of government contracts, this
Honorable Court, in said case of Tan C. Tee vs. Wright, supra, laid down the
procedure which should be followed, as follows: t. hqw
`PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING
OF CONTRACTS FOR INSULAR WORKS. The procedure which
should be followed in the letting of contracts for Insular works is the
following: First, there is an award of the contract by the Director of
Public Works to the lowest responsible bidder. Second, there is a
certificate of availability of funds to be obtained from the Insular
Auditor, and in some cases from the Insular Treasurer, to cover the
proposed contract. And third, there is a contract to be executed on
behalf of the Government by the Director of Public Works with the
approval of the department head.'" (Pp. 27-28, Petitioner-Appellant's
Brief.)
The contention is without merit. To start with, the record reveals that it is more of an afterthought.
Respondent never raised this question whether in its pleadings or at the hearings in the trial court.
We have also read its brief in the appellate court and no mention is made therein of this point. Not
even in its memorandum submitted to that court in lieu of oral argument is there any discussion
thereof, even as it appears that emphasis was given therein to various portions of the Revised
Manual of Instructions to Treasurers regarding the perfection and constitution of public contracts. In
fact, reference was made therein to Administrative Order No. 290 of the President of the Philippines,
dated February 5, 1959, requiring "all contracts of whatever nature involving P10,000 or more to be
entered into by all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the
Auditor General for examination and review before the same are perfected and/or consummated,
etc.", without mentioning, however, that said administrative order was no longer in force, the same
having been revoked on January 17, 1964 by President Macapagal under Administrative Order No.
81, s. 1964.
Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the
answer may not be raised for the first time on appeal, petitioner's position cannot be sustained.
Indeed, in the Court of Appeals, petitioner could only bring up such questions as are related to the
issues made by the parties in their pleadings, particularly where factual matters may be involved,
because to permit a party to change his theory on appeal "would be unfair to the adverse party." (II,
Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate
court cannot consider any error of the lower court "unless stated in the assignment of errors and
properly argued in the brief."
Even prescinding from this consideration of belatedness, however, it is Our considered view that
contracts entered into by petitioner Central Bank are not within the contemplation of Sections 607
and 608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the
National Government" and that the term "National Government" may not be deemed to include the
Central Bank. Under the Administrative Code itself, the term "National Government" refers only to
the central government, consisting of the legislative, executive and judicial departments of the
government, as distinguished from local governments and other governmental entities and is not
synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or
"Philippine Government", which are the expressions broad enough to include not only the central
government but also the provincial and municipal governments, chartered cities and other
government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative
Code, p. 15.)
To be sure the Central Bank is a government instrumentality. But it was created as an autonomous
body corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the
monetary and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and
use a corporate seal which shall be judicially noticed; to make contracts; to lease or own real and
personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise
to do and perform any and all things that may be necessary or proper to carry out the purposes of
this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result
directly from operations authorized by the provisions of this Act, or as are essential to the proper
conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget prepared
by its own Monetary Board and otherwise appropriates money for its operations and other
expenditures independently of the national budget. It does not depend on the National Government
for the financing of its operations; it is the National Government that occasionally resorts to it for
needed budgetary accommodations. Under Section 14 of the Bank's charter, the Monetary Board
may authorize such expenditures by the Central Bank as are in the interest of the effective
administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is
not subject to any prerequisite found in any statute or regulation not expressly applicable to it.
Relevantly to the issues in this case, it is not subject, like the Social Security Commission, to Section
1901 and related provisions of the Revised Administrative Code which require national government
constructions to be done by or under the supervision of the Bureau of Public Works. (Op. of the Sec.
of Justice No. 92, Series of 1960) For these reasons, the provisions of the Revised Administrative
Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the Bank
ever considered itself subject thereto.
In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607
of the Administrative Code thus:
The second question to be considered has reference to the applicability of section 607 of the
Administrative Code to contracts made by the City of Manila. In the second paragraph of said
section it is declared that no contract involving the expenditure by any province, municipality,
township, or settlement of two thousand pesos or more shall be entered into or authorized until the
treasurer of the political division concerned shall have certified to the officer entering into such
contract that funds have been duly appropriated for such purpose and that the amount necessary to
cover the proposed contract is available for expenditure on account thereof. It is admitted that no
such certificate was made by the treasurer of Manila at the time the contract now in question was
made. We are of the opinion that the provision cited has no application to contracts of a chartered
city, such as the City of Manila. Upon examining said provision (sec. 607) it will be found that the
term chartered city, or other similar expression, such as would include the City of Manila, is not
used; and it is quite manifest from the careful use of terms in said section that chartered cities were
intended to be excluded. In this connection the definitions of "province," "municipality," and
"chartered city," given in section 2 of the Administrative Code are instructive. The circumstance that
for certain purposes the City of Manila has the status both of a province and a municipality (as is true
in the distribution of revenue) is not inconsistent with this conclusion."
1

We perceive no valid reason why the Court should not follow the same view now in respect to the
first paragraph of the section by confirming its application only to the offices comprised within the
term National Government as above defined, particularly insofar as government-owned or created
corporations or entities having powers to make expenditures and to incur liabilities by virtue of their
own corporate authority independently of the national or local legislative bodies, as in the case of the
petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other corporate
board, makes all required appropriations directly from the funds of the Bank and does not need any
official statement of availability from its treasurer or auditor and without submitting any papers to,
much less securing the approval of the Auditor General or any outside authority before doing so.
Indeed, this is readily to be inferred from the repeal already mentioned earlier of Administrative
Order No. 290, s. 1959, which petitioner tried to invoke, overlooking perhaps such repeal. In other
words, by that repeal, the requirement that the Central Bank should submit to the Auditor General for
examination and review before contracts involving P10,000 or more to be entered into by it "before
the same are perfected and/or consummated" had already been eliminated at the time the
transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly at
that, by petitioner has no leg to stand on.
The other main contention of petitioner is that the purported or alleged contract being relied upon by
respondent never reached the stage of perfection which would make it binding upon the parties and
entitle either of them to sue for specific performance in case of breach thereof. In this connection,
since the transaction herein involved arose from the award of a construction contract
2
by a
government corporation and the attempt on its part to discontinue with the construction several months
after such award had been accepted by the contractor and after the latter had already commenced the
work without any objection on the part of the corporation, so much so that entry into the site for the
purpose was upon express permission from it, but before any written contract has been executed, it is
preferable that certain pertinent points be clarified for the proper resolution of the issue between the
parties here and the general guidance of all who might be similarly situated.
Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion
of the Instruction to Bidders: t. hqw
IB 113.4 The acceptance of the Proposal shall be communicated in writing by the
Owner and no other act of the Owner shall constitute the acceptance of the Proposal.
The acceptance of a Proposal shall bind the successful bidder to execute the
Contract and to be responsible for liquidated damages as herein provided. The rights
and obligations provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10) calendar days from
the date he receives a copy of the fully executed Contract, and he shall complete the
work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.)
Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could
become effective and binding only upon the execution of the formal contract, and since admittedly
no formal contract has yet been signed by the parties herein, there is yet no perfected contract to
speak of and respondent has, therefore, no cause of action against the Bank. And in refutation of
respondent's argument that it had already started the work with some clearing job and foundation
excavations, which has never been stopped by petitioner who had previously given express
permission to respondent to enter the jobsite, build a temporary shelter and enclosures thereon,
petitioner counters that under the above instructions, respondent is supposed to commence the work
"within ten (10) calendar days from the date he receives a copy of the fully executed Contract," and
for said respondent to have started actual construction work before any contract has been signed
was unauthorized and was consequently undertaken at his own risk, all the above circumstances
indicative of estoppel notwithstanding.
We are not persuaded that petitioner's posture conforms with law and equity. According to
Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the
Owner (the Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof),
and to execute the contract within five (5) days after notice that the contract has been awarded to
him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of
the Proposal." There can be no other meaning of this provision than that the Bank's acceptance of
the bid of respondent Ablaza effected an actionable agreement between them. We cannot read it in
the unilateral sense suggested by petitioner that it bound only the contractor, without any
corresponding responsibility or obligation at all on the part of the Bank. An agreement presupposes
a meeting of minds and when that point is reached in the negotiations between two parties intending
to enter into a contract, the purported contract is deemed perfected and none of them may thereafter
disengage himself therefrom without being liable to the other in an action for specific performance.
The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by
petitioner have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the
relation between the parties. This invoked paragraph stipulates that "the acceptance of
(respondent's) Proposal shall bind said respondent to execute the Contract and to be responsible for
liquidated damages as herein provided." And yet, even if the contractor is ready and willing to
execute the formal contract within the five (5) day period given to him, petitioner now claims that
under the invoked provision, it could refuse to execute such contract and still be absolutely free from
any liability to the contractor who, in the meantime, has to make necessary arrangements and incur
expenditures in order to be able to commence work "within ten (10) days from the date he receives a
copy of the fully executed Contract," or be responsible for damages for delay. The unfairness of such
a view is too evident to be justified by the invocation of the principle that every party to a contract
who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable
provisions may not subsequently complain about them when they are being enforced, if only
because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly,
We cannot sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to
execute the contract and thereby avoid it entirely. Even a government owned corporation may not
under the guise of protecting the public interest unceremoniously disregard contractual commitments
to the prejudice of the other party. Otherwise, the door would be wide open to abuses and anomalies
more detrimental to public interest. If there could be instances wherein a government corporation
may justifiably withdraw from a commitment as a consequence of more paramount considerations,
the case at bar is not, for the reasons already given, one of them.
As We see it then, contrary to the contention of the Bank, the provision it is citing may not be
considered as determinative of the perfection of the contract here in question. Said provision only
means that as regards the violation of any particular term or condition to be contained in the formal
contract, the corresponding action therefor cannot arise until after the writing has been fully
executed. Thus, after the Proposal of respondent was accepted by the Bank thru its telegram and
letter both dated December 10, 1965 and respondent in turn accepted the award by its letter of
December 15, 1965, both parties became bound to proceed with the subsequent steps needed to
formalize and consummate their agreement. Failure on the part of either of them to do so, entities
the other to compensation for the resulting damages. To such effect was the ruling of this Court in
Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract to a bidder constitutes
an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a
contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that the
bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation arising from
the unqualified acceptance of his offer. Much less did it affect the existence of a contract between
him and respondent". (at p. 452)
It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided
view of the perfection of contracts in the sense that the acceptance of a bid by a duly authorized
official of a government-owned corporation, financially and otherwise autonomous both from the
National Government and the Bureau of Public Works, insofar as its construction contracts are
concerned, binds only the bidder and not the corporation until the formal execution of the
corresponding written contract.
Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold
petitioner's pose. Pertinently to the point under consideration, the trial court found as follows:
To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual
damages in the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs.
Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and
"15"), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account.
There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation
of the jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters;
that the value of the excavation work accomplished by the plaintiff at the site was P113,800.00; that
the rental of the various construction equipment of the plaintiff from the stoppage of work until the
removal thereof from the jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on
the cash bond of P275,000.00 from November 3, 1965 to July 7, 1966 at 12% per annum would be
P22,000.00; that for removing said construction equipment from the jobsite to Manila, plaintiff paid a
hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as
required under its contract with the defendant, the former was obliged to pay a premium of
P2,216.55; and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the
3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these expenditures, totalling
P298,433.35 is attached to the records of this case (Annex "B", Complaint) and forms part of the
evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified
said document and affirmed the contents thereof when he testified during the hearing. The same
witness likewise explained in detail the various figures contained therein, and identified the
corresponding supporting papers.
It is noteworthy, in this connection, that there is nothing in the records that would show that the
defendant assailed the accuracy and/or reasonableness of the figures presented by the plaintiff;
neither does it appear that the defendant offered any evidence to refute said figures.
While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00
according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr.
Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To cite only an instance, in
estimating, the value of the excavation work, the defendant merely measured the depth, length and
width of the excavated, area which was submerged in water, without ascertaining the volume of rock
and the volume of earth actually excavated as was done by the plaintiff who prepared a detailed plan
showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the unit
measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also the unit
price used by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic
yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly indicated
in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The Court, therefore, can
not give credence to defendant's, aforementioned estimates in view of their evident inaccuracies.
The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of
P298,433.35 is meritorious.
The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of
the contract in question by the defendant. As previously stated, the plaintiff seeks to recover the
amount of P814,190.00 by way of unrealized expected profit. This figure represents 18% of
P4,523,275.00 which is the estimated direct cost of the subject project.
As it has been established by the evidence that the defendant in fact was guilty of breach of contract
and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is
entitled to recover from the defendant unrealized expected profit as part of the actual or
compensatory damages. Indemnification for damages shall comprehend not only the value of the
loss suffered, but also that of the profits which the obligee failed to obtain (Art. 2200, New Civil
Code).
Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the
latter would have been able to make had the contract been performed (Paz P. Arrieta, et al.,
plaintiffs-appellees, vs. National Rice Corporation defendant-appellant, G.R. No. L-15645,
promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-
appellant, 38 Phil. 392).
Regarding the expected profit, a number of questions will have to be answered: Is the 18%
unrealized expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to
the whole amount of said expected profit although there was only partial performance of the
contract? Would the 18% expected profit be based on the estimated direct cost of the subject in the
amount of P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00?
On the question of reasonableness of the 18% expected profit, the Court noted that according to
defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar
in magnitude as the one involved in the present case would be ample and reasonable. Plaintiff's
witness, Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in
the construction business, testified that 15% to 20% contractor's profit would be in accordance with
the standard engineering practice. Considering the type of the project involved in this case, he
stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this
percentage of profit is even lower than what defendant's witness considered to be ample and
reasonable, the Court believes that the reasonable percentage should be 18% inasmuch as the
actual work was not done completely and the plaintiff has not invested the whole amount of money
called for by the project." (Pp. 263-268, Record on Appeal.)
These findings have not been shown to Us to be erroneous. And additional and clarificatory details,
which We find to be adequately supported by the record, are stated in Respondents' brief thus: t. hqw
23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr.
Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial
Stipulation of Facts, R.A., p. 146).
24. Acting upon this written permission, respondent Ablaza immediately brought its
men and equipment from Manila to the construction site in San Fernando, La Union,
and promptly commenced construction work thereat. This work, consisted of the
setting up of an enclosure around the site, the building of temporary shelter for its
workmen, and the making of the necessary excavation works. (Commissioner's
Report, R.A., p. 181).
25. Following the commencement of such construction work, petitioner Central Bank,
through a letter dated February 8, 1966, formally requested respondent Ablaza to
submit to petitioner the following:t.hqw
(a) A schedule of deliveries of material which, under the terms of
respondent Ablaza's approved proposal, were to be furnished by
petitioner.
(b) A time-table for the accomplishment of the construction work.
In short, as early as February 8, 1966, or more than three months
prior to petitioner's repudiation of the contract in question the latter
(petitioner) already took the above positive steps it compliance with
its own obligations under the contract.
26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966,
respondent Ablaza submitted the schedule of deliveries requested by petitioner.
(Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs. "D" to "D-7",
inclusive.)
27. During the period of actual construction, respondent Ablaza, on several
occasions, actually discussed the progress of the work with Mr. Mendoza. In
addition, in March 1966, the latter (Mr. Mendoza) personally visited the construction
site. There he saw the work which respondent had by that time already accomplished
which consisted of the completion of approximately 20% of the necessary excavation
works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252).
28. Following Mr. Mendoza's visit at the construction site, or more specifically on
March 22, 1966, the latter (Mendoza) wrote to respondent Ablaza, instructing the
latter to formally designate the person to represent the corporation at the signing of
the formal construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18,
1967).
29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the
above request. (Exh. "I"; also t.s.n., pp 121-123, December 18, 1967).
30. Subsequently, respondent Ablaza posted the required performance guaranty
bond in the total amount of P962,250.00, consisting of (a) a cash bond in the amount
of P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19,
1966, in the amount of P687,250.00. In this connection, it is important to note that the
specific purpose of this bond was to guarantee "the faithful Performance of the
Contract" by respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p.
141). This performance guaranty bond was duly accepted by petitioner.(Id.)
31. However, on May 20, 1966, petitioner Central Bank called for a meeting with
representatives of respondent Ablaza and another contractor. This meeting was held
at the Conference Room of the Central Bank Building. At this meeting, then Finance
Secretary Eduardo Romualdez, who acted as the representative of petitioner,
announced that the Monetary Board had decided to reduce the appropriations for the
various proposed Central Bank regional office buildings, including the one for San
Fernando, La Union.
32. In view of this decision, Secretary Romualdez informed respondent Ablaza that
new plans and designs for the proposed regional office building in San Fernando
would have to be drawn up to take account of the reduction in appropriation.
Secretary Romualdez then advised respondent to suspendwork at the construction
site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-254).
33. After making the above announcements, Secretary Romualdez proposed that all
existing contracts previously entered into between petitioner Central Bank and the
several winning contractors (among them being respondent Ablaza) be considered
set aside.
34. Obviously to induce acceptance of the above proposal, Secretary Romualdez
offered the following concessions to respondent Ablaza: t .hqw
(a) That its cash bond in the amount of P275,000.00 be released
immediately, and that interest be paid thereon at the rate of 12% per
annum.
(b) That respondent Ablaza be reimbursed for expenses incurred for
the premiums on the performance bond which it posted, and which
petitioner had already accepted. (Decision, R.A., pp. 253-254).
35. In addition, Secretary Romualdez also proposed the conclusion of a new contract
with respondent Ablaza for the construction of a more modest regional office building
at San Fernando, La Union, on anegotiated basis. However, the sincerity and
feasibility of this proposal was rendered dubious by a caveat attached to it, as
follows: t. hqw
'4. Where auditing regulations would permit, the Central Bank would
enter into a negotiated contract with the said corporation (Ablaza) for
the construction work on the building on the basis of the revised
estimates.' (Annex "8" to Answer, R.A., p. 95).
36. The revised cost fixed for this proposed alternative regional office building was
fixed at a maximum of P3,000,000.00 (compared to P3,749,000.00 under the
contract originally awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87).
37. Needless perhaps to state, respondent Ablaza rejected the above proposals
(pars. 34 and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner
demanding the formal execution of the contract previously awarded to it, or in the
alternative, to pay "all damages and expenses suffered by (it) in the total amount of
P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-91; Decision, id., p. 254).
38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy
Governor Amado R. Brinas, replied to respondent Ablaza's demand denying any
liability on the basis of the following claim:t. hqw
`(That, allegedly) in line with the agreement ... reached between the
Central Bank and Ablaza Construction and Finance Corporation at a
meeting held ... on May 20, 1966,' "whatever agreements might have
been previously agreed upon between (petitioner and respondent)
would be considered set aside." (Decision, R.A., p. 255; Annex "8" to
Answer, id., pp. 93-96.)
39. The above claim was, however, promptly and peremptorily denied by respondent
Ablaza, through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts,
par. 9, R.A., p. 142, also Annex "G" thereof; Commissioner's Report, R.A., p.
185; Decision, id., p. 255.)" (Appellee's Brief, pars. 23 to 39, pp. 14-19.)
None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.
Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for
the execution of the formal contract comes a little too late to be believable. Even
assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable to the
Central Bank, which is doubtful, considering that under the provisions of its charter already referred
to earlier, disbursements and expenditures of the Bank are supposed to be governed by rules and
regulations promulgated by the Monetary Board, in this particular case, the attitude and actuations
then of the Bank in relation to the work being done by Ablaza prior to May 20, 1966 clearly indicate
that both parties assumed that the actual execution of the written contract is a mere formality which
could not materially affect their respective contractual rights and obligations. In legal effect,
therefore, the Bank must be considered as having waived such requirement.
To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in
question, both parties were supposed to have seen to it that the formal contract were duly signed.
Under the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days
from notice of the award, and so, he called on the Bank at various times for that purpose. The Bank
never indicated until May, 1966 that it would not comply. On the contrary, on February 8, 1966,
Ablaza was requested to submit a "schedule of deliveries of materials" which under the terms of the
bid were to be furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank
inquiring as to who would be Ablaza's representative to sign the formal contract. In the meanwhile,
no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the
Central Bank who had been signing for the Bank all the communications regarding the project at
issue, had visited the construction site in March, 1966, just before he wrote the request
abovementioned of the 22nd of that month for the nomination of the representative to sign the formal
contract, and actually saw the progress of the work and that it was being continued, but he never
protested or had it stopped. All these despite the fact that the Memorandum Circular being invoked
by the Bank was issued way back on December 31, 1965 yet. And when finally on May 20, 1966 the
Bank met with the representatives of Ablaza regarding the idea of changing the plans to more
economical ones, there was no mention of the non-execution of the contract as entitling the Bank to
back out of it unconditionally. Rather, the talk, according to the findings of the lower courts, was
about the possibility of setting aside whatever agreement there was already. Under these
circumstances, it appears that respondent has been made to believe up to the time the Bank
decided definitely not to honor any agreement at all that its execution was not indispensable to a
contract to be considered as already operating and respondent could therefore proceed with the
work, while the contract could be formalized later.
Petitioner contends next that its withdrawal from the contract is justified by the policy of economic
restraint ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the
contract here in question was perfected before the issuance of said Memorandum Circular, it is
elementary that the same may not be enforced in such a manner as to result in the impairment of the
obligations of the contract, for that is not constitutionally permissible. Not even by means of a
statute, which is much more weighty than a mere declaration of policy, may the government issue
any regulation relieving itself or any person from the binding effects of a contract. (Section 1 (10),
Article III, Philippine Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the
Philippines.) Specially in the case of the Central Bank, perhaps, it might not have been really
imperative that it should have revised its plans, considering that it has its own resources
independent of those of the national government and that the funds of the Central Bank are derived
from its own operations, not from taxes. In any event, if the memorandum circular had to be
implemented, the corresponding action in that direction should have been taken without loss of time
and before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing
to honor its contract with respondent, petitioner has to suffer the consequences of its action.
The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by
the trial court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of
the record, We do not find sufficient ground to disturb the appealed judgment even in this respect,
except as to attorney's fees.
There are three principal items of damages awarded by the courts below, namely: (1) compensation
for actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the
contract price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in
addition to the P5,000 already paid as retaining fee. All of these items were the subject of evidence
presented by the parties. According to the Court of Appeals: t.hqw
As regard the accuracy and reasonableness of the award for damages, both actual
and compensatory, it is to be noted that the trial court subjected the Commissioner's
report and the evidence adduced therein to a careful scrutiny. Thus, when the
appellant called the trial court's attention to the fact that the P814,190.00 unrealized
expected profit being claimed by appellee represented 18% of P4,523,275.00 which
was the estimated cost of the project, while the contract awarded to appellee was
only in the amount of P3,749,000.00 as per its bid proposal, the Court made the
necessary modification. It is further to be noted that the amount of 18% of the
estimated cost considered in the said award is much less than that given by
appellant's own expert witness, Ambrosio R. Flores. He testified that 25% as
contractor's profit "would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)" (p.
17 A, Appellant's brief.)
Basically, these are factual conclusions which We are not generally at liberty to disregard. And We
have not been shown that they are devoid of reasonable basis.
There can be no dispute as to the legal obligation of petitioner to pay respondent the actual
expenses it has incurred in performing its part of the contract.
Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits
presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court
sustained as a matter of law the award of damages n the amount of U.S. $286,000, payable in
Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was
incurred (August, 1952), comprising of unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case
where a government-owned corporation, the Naric failed to proceed with the purchase of imported
rice after having accepted and approved the bid of Arrieta and after she had already closed her
contract with her foreign sellers.
Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil
Code thus: t. hqw
ART. 2200. Identification for damages shall comprehend not only the value of the
loss suffered, but also that of the profits, which the obligee failed to obtain..
ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have forseen or
could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
for all damages which may be reasonably attributed to the non- performance of the
obligation.
Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil.
392: t. hqw
.... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective
profits may be recovered as damages, while article 1107 (now 2201) of the same
Code provides that the damages recoverable for the breach of obligations not
originating in fraud (dolo) are those which were or might have been foreseen at the
time the contract was entered into. Applying these principles to the facts in this case,
we think that it is unquestionable that defendant must be deemed to have foreseen at
the time he made the contract that in the event of his failure to perform it, the plaintiff
would be damaged by the loss of the profit he might reasonably have expected to
derive from its use.
When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has
absolutely failed to perform is of necessity to some extent, a matter of speculation,
but the injured party is not to be denied all remedy for that reason alone. He must
produce the best evidence of which his case is susceptible and if that evidence
warrants the inference that he has been damaged by the loss of profits which he
might with reasonable certainty have anticipated but for the defendant's wrongful act,
he is entitled to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177):
The general rule is, then, that a plaintiff may recover compensation for any gain
which he can make it appear with reasonable certainty the defendant's wrongful act
prevented him from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284,
289; Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325.) (At pp. 398-399.)
Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of
the Civil Code was again applied as follows: t. hqw
Regarding the actual damages awarded to appellee, appellant contends that they are
unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate
them even assuming arguendo that appellant has failed to supply the additional
monthly 2,000,000 board feet for the remainder of the period agreed upon in the
contract Exhibit A. Appellant maintains that for appellee to be entitled to demand
payment of sales that were not effected it should have proved (1) that there are
actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained
the best price for such sales, (3) that there are buyers ready to buy at such price
stating the volume they are ready to buy, and (4) appellee could not cover the sales
from the logs of other suppliers. Since these facts were not proven, appellee's right to
unearned commissions must fail.
This argument must be overruled in the light of the law and evidence on the matter.
Under Article 2200 of the Civil Code, indemnification for damages comprehends not
only the value of the loss suffered but also that of the profits which the creditor fails to
obtain. In other words, lucrum cessans is also a basis for indemnification. The
question then that arises is: Has appellee failed to make profits because of
appellant's breach of contract, and in the affirmative, is there here basis for
determining with reasonable certainty such unearned profits?
Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the
contract in question the following board feet of logs, Breareton Scale: t. hqw
Months Board Feet
From June to August 1959 3,007,435
September, 1959 none
October, 1959 2,299,805
November, 1959 801,021
December, 1959 1,297,510

Total 7,405,861
The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims
that in less than six months' time appellee received by way of commission the
amount of P117,859.54, while in its memorandum, appellant makes the following
statement:
`11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but
the agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is
P117,859.54. But, as there were always two prices Invoice F.O.B price and F.O.B.
price as per contract, because of the sales difference amounting to P31,920.18, and
the same was deducted from the commission, actually paid to plaintiff General is only
P79,580.82.' " It appears, therefore, that during the period of June to December,
1959, in spite of the short delivery incurred by appellant, appellee had been earning
its commission whenever logs were delivered to it. But from January, 1960, appellee
had ceased to earn any commission because appellant failed to deliver any log in
violation of their agreement. Had appellant continued to deliver the logs as it was
bound to pursuant to the agreement it is reasonable to expect that it would have
continued earning its commission in much the same manner as it used to in
connection with the previous shipments of logs, which clearly indicates that it failed to
earn the commissions it should earn during this period of time. And this commission
is not difficult to estimate. Thus, during the seventeen remaining months of the
contract, at the rate of at least 2,000,000 board feet, appellant should have delivered
thirty-four million board feet. If we take the number of board feet delivered during the
months prior to the interruption, namely, 7,405,861 board feet, and the commission
received by appellee thereon, which amounts to P79,580.82, we would have that
appellee received a commission of P.0107456 per board feet. Multiplying 34 million
board feet by P.0107456, the product is P365,350.40, which represents the lucrum
cessans that should accrue to appellee. The award therefore, made by the court a
quo of the amount of P400,000.00 as compensatory damages is not speculative, but
based on reasonable estimate.
In the light of these considerations, We cannot say that the Court of Appeals erred in making the
aforementioned award of damages for unrealized profits to respondent Ablaza.
With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga,
supra., an award of ten per centum (10%) of the amount of the total recovery should be enough.
PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the
modification that the award for attorney's fees made therein is hereby reduced to ten per centum
(10%) of the total recovery of respondent Ablaza.
Costs against petitioner.


















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-27275 November 18, 1967
C & C COMMERCIAL CORPORATION, plaintiff-appellee,
vs.
NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellant.
The Government Corporate Counsel for defendant-appellant.
Cesar R. Canonizado and E. Ignacio for plaintiff-appellee.
ANGELES, J .:
The main issue in this appeal is, whether or not the call for bids for the supply of steel and centrifugal
cast iron pipes for the waterworks projects in Manila and suburbs, and in the cities of Davao and
Iloilo, the National Waterworks & Sewerage Authority (NAWASA) violated the provisions of Republic
Act 912, section 1 of which provides as follows:
Sec. 1. In construction or repair work undertaken by the Government, whether done directly
or through contract awards, Philippine made materials and products, whenever available,
practicable and usable, and will serve the purpose as equally well as foreign made products
or materials, shall be used in said construction or repair work, upon the proper certification of
the availability, practicability, usability and durability of said materials or products by the
Director of the Bureau of Public Works and/or his assistants.
In the decision appealed from the Court of First Instance of Manila has permanently enjoined the
NAWASA from the procurement of the materials needed for the projects involved which, according
to the appellant, are designed to alleviate the sufferings of the millions of inhabitants in said places
where there is a crying need for more water an item so vital to human existence and the delay
occasioned by the injunctions complained of, has in no little way, further aggravated the
inconvenience of the consuming public in said metropolitan areas where acute water crises have
recurred through the years. Nevertheless, it is vehemently contended by the appellee that the
declaration of an economic national policy as envisioned in the aforequoted provision of the law
which, like the original Flag Law
1
is impressed with the clear nationalistic policy of giving preference
to locally produced materials and products, has been violated; and if this is so, no amount of public
clamor could justify the acts of the NAWASA complained of, for above all the supremacy of the law
must be upheld. We have, therefore, examined the record of this case with these considerations
foremost in Our minds.
It appears that the case, originally commenced in the Court of First Instance of Manila, on July 7,
1965, as a petition for declaratory relief for the purpose of securing a judicial pronouncement on the
interpretation of the word "practicable" as used in Republic Act No. 912, i.e., whether it means that
the cheapest materials among the locally produced or manufactured products should be preferred
and specified in construction and repair works undertaken by the Government, was later converted
into, an action for prohibition with preliminary injunction through the process of supplemental
pleadings.
THE SAN PABLO WATERWORKS SYSTEM
The corresponding complaint was filed on 19 July 1965, alleging that the NAWASA had started to
negotiate: for direct purchase of centrifugally cast iron pipes (CCI) for the improvement of the San
Pablo Waterworks System in violation of the provisions of Republic Act 912 and the law on public
biddings, excluding the C & C Commercial Company, the plaintiff, which can supply instead
asbestos cement pressure pipes which are available, practicableand usable, and will serve the
purpose of the said project at a much lower cost.
On 6 August 1965, the NAWASA filed its answer to the complaint. On 10 August 1965, the Filipino
Pipe and Foundry Corporation, with leave of court, also filed its answer in intervention.
On 16 August 1965, as prayed for in the complaint, the court issued a writ of preliminary injunction
restraining the NAWASA from further negotiating the purchase of the CCI pipes from the intervenor.
On 23 September 1965, the plaintiff and the NAWASA entered into a partial stipulation of facts, on
the basis of which and the additional evidence adduced at the hearing, the court rendered a partial
decision on 31 January 1966, dismissing the complaint insofar as the San Pablo Waterworks
System was concerned and dissolving the preliminary injunction issued thereunder. This partial
decision has become final.
THE DAVAO METROPOLITAN WATERWORKS
On 22 January 1965, the NAWASA called for bids for the furnishing of labor and the supply of
materials for the construction of the proposed improvement of the Davao Metropolitan Waterworks
System. In the call for bids, the bidders were required to submit proposals for the supply of 24-inch
steel pipes, asbestos, cement pressure pipes, and cast iron pipes. The bidding was held on 23
February 1965. On 15 March 1965, the committee on award of the NAWASA recommended to the
board of directors that the bid be awarded to the lowest bidder, Tirso del Rosario, under his proposal
to supply steel pipes.
On 10 August 1965, the plaintiff filed a (First) supplemental complaint seeking to restrain the
NAWASA from proceeding with the award of the project in Davao, alleging that in specifying steel
pipes for the project, which is admittedly imported material, without giving preference to locally
produced asbestos cement pressure pipes manufactured by the plaintiff, violates the provisions of
Republic Act 912. On 14 August 1965, the court admitted the supplemental complaint; and as
prayed for therein on, 17 September 1965, the Court issued a writ of preliminary injunction.
THE ILOILO WATERWORKS SYSTEM
As early as on 26 November 1962, the NAWASA called for bids for the supply of 18-inch steel
pipes for the improvement of the Iloilo Waterworks System. The bidding was conducted on 27
December 1962. C & C Commercial Co. participated in the bidding offering to supply the needed 18-
inch steel pipes for the project, but lost in the bidding. The lowest bidder for the supply of the
specified 18-inch steel pipes was the Regal Trading Corporation, and the bid was awarded to it.
On 8 September 1965, almost three (3) years after the date of the bidding, the C & C Commercial
Co. filed a (Second) supplemental complaint; seeking to restrain the NAWASA from formalizing or
implementing the award on the aforesaid Iloilo project for the supply of 18-inch steel pipes, alleging
that in specifying steel pipes for the particular project, the NAWASA has violated the provisions of
Republic Act 912 which requires the purchase of Philippine made materials and products which
are available, practicable and usable locally, like plaintiff's product asbestos cement pressure
pipes in construction and repair undertaken by the government. On 24 September 1965, over the
objection of the NAWASA, alleges second supplemental complaint was admitted by the court. The
record is not clear when the restraining order under the second supplemental complaint was issued,
although the NAWASA alleges that a restraining order was issued under date of 10 September
1965, which fact has not been traversed by the plaintiff.
THE MANILA AND SUBURBS WATERWORKS SYSTEM
On 13 September 1965, the NAWASA advertised for bids for the supply of 30 to 42-inch steel
pipes for the use and improvement of the interim waterworks project in the City of Manila and
suburbs, the bidding to take place on 14 December 1955. On 10 November 1965, the C & C
Commercial Co. filed a (Third) Supplemental complaintseeking to restrain the NAWASA and its
representatives from holding the balding under the aforementioned notice to bid, averring identical
facts as those alleged in the previous supplemental complaints, that the call for bid for steel pipes for
the Manila project and suburbs violates the provisions of Republic Act 912. Over the objection of the
defendant NAWASA, the supplemental complaint was admitted; and as prayed for therein, on 20
November 1965, a writ of preliminary injunction was issued restraining the NAWASA from holding
the bidding scheduled on 14 December 1965, or on any subsequent date, until further orders from
the court.
Pending the case in the court a quo, the NAWASA filed three separate motions praying for the
dissolution of the preliminary injunctive writs issued in connection with the Davao, Iloilo and Manila
projects, pleading to the court to consider the crying need for a more adequate supply of water in
those cities, particularly in the City of Manila and its suburbs, where the lack of adequate supply of
potable water has been a recurrent crisis which affected to a dangerous extent, the health and the
life of the inhabitants, and that the continuation of the injunctive writs may bring about the
cancellation of the $20,200,000.00 loan of the NAWASA from the World Bank, which would result
from the failure of the NAWASA to comply with the formulated work schedule of the waterworks
projects, which under the agreement with the World Bank, has to be completed in the month of
October 1967; but the court failed to take any action on the motions. Parodying Shakespeare, "Set
honor in one eye, and death in the other, and I will look on both indifferently."
After a trial of the case, on 15 August 1966, the court rendered a decision finding and concluding
that the act of the NAWASA in specifying steel pipes for the project of the city of Manila and its
suburbs, and in awarding the contracts for the supply of steel pipes in the cases of the Davao and
Iloilo Waterworks System, constituted a violation of the provisions of Republic Act 912; the
dispositive portion of the decision reads as follows:
(a) On the supplemental complaint, making permanent the preliminary injunction dated
September 2, 1965, enjoining the defendant or its representatives and agents from
formalizing or implementing the award for the construction of the Davao Waterworks Project
in respect of the award of pipes to be used therein; rescinding the award made in favor of
Tirso del Rosario; and ordering the reappraisal of the bids with a view to complying with the
provisions of Republic Act No 912;
(b) On the second supplemental complaint ordering the issuance of a permanent injunction
to enjoin the defendants or its agents and representatives from formalizing the award of the
contract for the furnishing of 18" steel pipes for the Iloilo Waterworks System; ordering a new
bidding for the said project so as to include in the call for bids for the supply and delivery of
materials, asbestos cement pipes, as well as CCI pipes; and rescinding the award of the
contract in favor of the Regal Trading Corporation;
(c) On the third supplemental complaint, making permanent the preliminary injunction dated
December 14, 1965, or any other subsequent date calling for imported steel pipes from 30"
to 42" diameter for the interim Development of Waterworks System for Manila and suburbs;
and ordering the defendant to specify asbestos cement pressure pipes for the said project;
and
(d) Ordering the defendants to pay the costs.
From the decision, NAWASA appealed to this Court.
Appellant contends that the provisions of Republic Act 912, are applicable only to construction or
repair works undertaken by the Government. It argues, that since the NAWASA, though a public
corporation, is not a municipal corporation or agency of the State empowered to regulate or
administer the local affairs of a town or city,
2
nor one of the various arms of the government through
which political authority is made effective in the Islands, consequently, the NAWASA should not be
included within the meaning of the term "Government" as used in the law.
3
It is to be noted, however,
that Section 2 of the Revised Administrative Code defining the term "Government" which is heavily
relied upon by the appellant recognizes an exception: "when a different meaning for the word or
phrase is given a particular statute or is plainly to be collected from the context or connection where
the term is used." In this context of the law, the term "government" without any qualification as used
in Republic Act 912, should be construed in its implied sense and not in the strict signification of the
term "Government of the Philippines" as the political entity through which political authority is
exercised. A comparative analysis of Republic Act 912 and Commonwealth Act 138, otherwise
known as the "Flag Law" the latter "An Act to give Native Products and Domestic Entities the
Preference in the Purchase of Articles for the Government", and the former "An Act to Require the
Use, Under Certain Conditions, of Philippine Made Materials or Products in Government Projects or
Public Works Construction, Whether Done Directly by the Government or Awarded thru Contracts",
discloses that both relate to the same subject matter and have the same nationalistic purpose or
object: to give preference to locally produced materials in purchases, works or projects of the
Government. The oberservation that Commonwealth Act 138 expressly includes purchases by
Government-owned companies, while Republic Act 912 merely relates to construction or repair work
done by the Government, is no argument for the proposition that government-owned or controlled
corporations have been excepted from the operation of the latter law, for it is clear that
Commonwealth Act 138 also ordains that the Purchase and Equipment Division of government-
owned companies authorized to purchase or contract for materials and supplies for public use,
buildings, or public works, shall give preference to locally produced materials or products. Being
statutes in pari materia they should be construed together to attain the purpose of an expressed
national policy. Thus, it has been aptly stated:
On the presumption that whenever the legislature enacts a provision it has in mind the
previous statutes relating to the same subject matter, it is held that in the absence of any
express repeal or amendment therein, the new provision was enacted in accord with the
legislative policy embodied in those prior statutes, and they all should be construed together.
Provisions in an act which are omitted in another act relating to the same subject matter will
be applied in a proceeding under the other act, when not inconsistent with its purpose. Prior
statutes relating to the same subject matter are to be compared with the new provisions; and
if possible by reasonable construction, both are to be construed that effect is given to every
provision of each. Statutes in pari materia although in apparent conflict, are so far as
reasonably possible construed to be in harmony with each other.
4

The main objective of the Government is to develop our domestic industries so that the country will
be economically self-sufficient. And both Commonwealth Act 138 and Republic Act 912 aim to
contribute to the realization of the aforesaid nationalistic policy by requiring, the use of Philippine
made products or materials, whenever available, practicable and usable in government construction
work or repair projects. The alleged conflict between the two laws is more apparent than real, and
should not be allowed to defeat the purpose of these laws. We have to declare, therefore, that the
NAWASA, like any other corporation exercising proprietary or governmental functions should be
deemed embraced within the term "Government" found in Republic Act 912, and in the repair or
construction of their works or projects or the purchase of materials therefor, local materials should be
given preference when available, practicable and usable.
The next issue for consideration is: Did the NAWASA violate the provisions of Republic Act 912?
Appellant vehemently denies the charge and decries the holding of the lower court appealed from
that in specifying steel pipes in the call for bids for the supply of materials for the waterworks projects
under consideration it had defied the mandate of the law. Appellant insists that at the time it called
for bids for the Davao project, followed by the call for the supply of materials, for the Iloilo project,
herein appellee's plant was only capable of producing asbestos cement pressure pipes up to 12
inches diameter; while at the time the call for bids for the supply of materials for the Interim Project of
Manila and suburbs was advertised, the largest size of asbestos cement pipes available were of 24
inches being produced at the time by another local manufacturer, the Eternit Corporation, which
never protested against the bids in question.
We have reexamined the record of the case with painstaking solicitude and, instead, We find the
facts indubitable and conclusive that the C & C Commercial Corporation had not therefore and even
up to the present time ever produced pipes larger than 12 inches in diameter. Said appellee
corporation has implicitly admitted this as a fact; and although it claims to have a complete plant that
is equipped with the necessary machinery, technicians and skilled laborers capable of producing
pipes in the sizes called for in those bids (18 to 42 inches in diameter) had the NAWASA specified
them in asbestos cement, the weakness of the argument is at once exposed by a mere examination
of the pertinent evidence adduced during the trial of the case on this particular point. The claim is
belied by Leopoldo del Rosario, a staff civil an engineer of the NAWASA, who testified as follows:
Q. Engineer Del Rosario, what is the limitation of the local asbestos cement
pressure pipes that are locally manufactured in the Philippines?
A. We based on NAWASA's experience, we have purchased only sizes up to 12
inches, but on certification of the Bureau of Public Works, a report has been
submitted to us that asbestos cement pressure pipes (is) being manufactured by one
local manufacturing company in the Philippines, the Eternit Corporation, which is a
pipe manufacturer. and we have recently purchased pipes for the Manila interim
project of sizes up to 24 inches non-pressure pipes.
Q. Is there any other local manufacturer of asbestos cement pressure pipes
besides C & C Commercial Corporation?
A. None, sir, only the C & C Commercial Corporation.
5

Q. Engineer del Rosario, as staff civil engineer and the specification engineer,
member-secretary of the Pre-Qualifications Committee and the present chairman of
all the bidding committees of the NAWASA, do you know if C & C Commercial
Corporation, the plaintiff herein, is manufacturing asbestos cement pressure pipes
from sizes thirty inches and up in diameter?
A. The company does not manufacture size beyond twelve inches.
Q. Why do you say that the C & C Commercial Corporation is not manufacturing
asbestos cement pressure. pipes beyond twelve inches?
A. Because we had bi-yearly inspection of all local plants here as a matter of
policy of the committee to determine the capacity or capability of the local
manufacturers to supply and even to bid. So every six months the pre-qualifications,
committee in collaboration with the procurement inspect all the facilities of the
chemical producing plant, this cast iron and asbestos plant, the galvanized iron pipe
plant, these are regularly inspected every six months and so the pre-qualifications
would know what is available.
6

And the foregoing testimony relative to the "non-availability" of appellee's products in sizes above 12
inches in diameter was corroborated by Mrs. Clara Reyes Pastor, herein appellee corporation's
President, who declared as follows:
Q. Is it not a fact Mrs. Reyes, that the sizes of asbestos cement pressure pipes
locally manufactured by you and which you furnish the NAWASA is only 12 inches in
diameter? Yes or No ?
A. Yes, sir, because that is the only pipe required at the time I delivered it.
Q. And the asbestos cement pressure pipes from sizes 12 to 42 inches that you
have supplied the NAWASA in the past, they were all imported by you?
A. Yes, sir.
Q. I heard you testify Mrs. Reyes, that in case you win in this particular bidding,
you intend to import equipments from abroad, is that correct?
A. Not equipments, only mandril.
Q. So that presently what is the biggest size of mandril that you have?
A. I have a 16-inch mandril the biggest of them all.
7

From the foregoing testimony of witnesses, and in the light of other evidence submitted by the
parties, the following may be deduced: that it is the practice of the NAWASA which we find both
practical and logical to send out its own men to the various local manufacturing plants for the
purpose of knowing the availability of materials needed for its projects; that at the time it specified 18
and 24 inches diameter steel pipes for the Davao and Iloilo waterworks projects, there were no
locally produced materials in said sizes; and that with respect to those sizes that were already
available, the NAWASA has actually specified and used them in various other construction and
repair works even without the certification of the Director of Public Works. We really do not see Our
way clear how herein appellee could have charged that the NAWASA had discriminated against its
products under the circumstances when its own president admits that it has supplied the NAWASA
before locally produced asbestos cement pressure pipes up to 12 inches diameter only and all those
with diameters above 12 inches were of foreign manufacture. The evidence, therefore, is conclusive
that locally produced asbestos pipes above 12 inches in diameter were not available for purposes of
claiming any preference under the provisions of Republic Act 912. And this conclusion becomes
even more cogent if We are to consider the fact that C & C Commercial Corporation failed to
produce the necessary certification from the Director of Public Works to show that its products were
already certified as available, practicable and usable at the time that the call for bids for the supply of
materials for the Davao, Iloilo and Manila Interim projects were made to give some semblance of the
right it claims to have been violated.
Of course, appellee points out the fact that it has subsequently secured the necessary certification
from the Director of Public Works certifying to the availability, practicability and durability of the
asbestos cement pressure pipes produced from its plant. We agree, and there should be no quarrel
at all that with respect to pipes of 4 to 12 inches in diameter which it is actually producing now, the
preference claimed under the law may be allowed. Be that as it may, however, the certification
referred to did not in any way improve its position; for the stubborn fact still remains that at the time
said certification was issued on July 6,1966, C & C Commercial Corporation was actually producing
asbestos pipe up to 12 inches only, which its existing equipment or machinery, when inspected by a
representative of the Office that issued the certification, was found capable of producing. Hence, We
cannot subscribe to the holding of the court below that locally produced asbestos cement pipes
above 12 inches in diameter may be considered "'available" within the meaning of Republic Act 912
simply because the President of herein appellee corporation n had manifested or promised that it
can procure bigger mandrels worth $25,000.00 fom abroad and will be able to produce pipes in the
larger sizes called for in the questioned bids shortly after their installation, for that would be giving
the term "available" a very strained meaning. It would really be unfair to require in order to be
"available" within the meaning of the law that herein appellee should have in stock the sizes of pipes
called for in the bids in the quantity needed by the appellant; but We cannot also believe, by any
stretch of the imagination, that the Director of Public Works would certify to the availability,
practicability, usability and durability of certain products even before the machinery, equipment or
tools needed to produce said products are actually bought from abroad and installed in its plant by
the manufacturer.
Statutes granting advantages to private persons have in many instances created special privileges
or monopolies for the grantees and thus have been viewed with suspicion and strictly construed.
This is altogether appropriate in the majority of situations, for if public advantage is gained by the
grant,it normally appears to be of secondary significance compared with the advantage gained by
the grantee.
8
And rights which exist only by virtue of such statutes come into being only after strict
compliance with all the conditions found in those statutes.
9
These rules should apply to the case at
bar where the law invoked grants a preference to locally produced products or materials. Since
Republic Act 912 grants preference only upon the certification of availability, practicability and
usability of locally produced materials by the Director of Public Works, that certification must be
existing and effective before any right arising therefrom may be claimed to have been violated.
Notwithstanding the clear nationalistic policy of the law aforementioned, We cannot, by any mistaken
sympathy towards herein appellee, recognize the existence of its right under the law alleged to have
been violated, which C & C Commercial Corporation has miserably failed to prove in this case.
With respect to the Interim Project for the City of Manila and its suburbs, it would seem that the
decision appealed from had virtually become moot and academic by reason of the passage of
Republic Act 4858 which authorizes the President to allow the procurement of supplies necessary
for the rehabilitation of the project as an exception to the restrictions and preferences provided for in
Republic Act 912, and the President appears to have authorized the General Manager of the
NAWASA under the said statutory power to purchase all the pipes and materials necessary for the
project by negotiated sales.
For all the foregoing, We find it unnecessary to discuss further the other errors assigned by the
appellant.
WHEREFORE, the decision appealed from is hereby set aside, with costs against the appellee. The
writs of preliminary injunctions issued by the lower court are set, aside, and declared null and void.
Concepcion, C.J., Reyes J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.
Fernando, J., took no part.






















ersy with the Regional Board of Canvassers was, therefore, one of which petitioners cannot be
heard, nor have any reason, one of which petitioners cannot be heard, nor have any reason, to
complain, for it even resulted in one KB candidate getting into the winners column. If the COMELEC
stopped at a certain point in its examination, instead of going through all those questioned by the
petitioners, evidently due to time constraint as fixed in the guidelines, set by this Court, and the
character of pre-proclamation proceedings , it cannot be charged with abuse of discretion, much less
a grave one. it did not have to conduct the additional examination, in the first place. The controversy
which was heard and decided in the first instance, by the Regional Board of Canvassers, with
guidelines set by this Court, was appealed to the COMELEC. The latter's appellate authority was
thus limited to a review of the decision of the Board on the basis of the evidence presented before it,
rendering its own decision on the basis of the evidence, and no more. It incorporated the result of its
own examination of additional election returns, and found one KB as one of the candidate, a fact
clearly showing that COMELEC did examine the said documents, otherwise , the result as previously
declared by the Board of Canvassers with a clean sweep of the KBL candidate would have remained
unaltered.
Expounding more on the one circumstance inclining me to the theory that with the enlarged power
and broadened authority of the COMELEC which to and cover virtually the entire electoral process,
as exclusively as the power of legislation is constitutionally lodged in the law-making body, what is
given to the Supreme Court as its reviewing authority over acts of the COMELEC is no more than
what it could exercise under its power of judicial inquiry with to acts of the legislative body, which is
the transfer to the COMELEC of the powers pertaining to the Electoral Tribunals and the courts
under the old Constitution over election contests, it must not be hard to concede that with the
composition of the electoral tribunals in which six of the justices of the Supreme Court sit in said
bodies, the Supreme Court crowd no longer exercise any reviewing authority over the acts of the
said electoral tribunals except possibly when violation of the Constitution or constitution rights are
involved. With this limited concept of this Court's authority over the defunct electoral tribunals now
applied to an equally constitutional body that the COMELEC is that took over the function of the
Election Tribunal would hesitate to hold that Supreme Court may grant the relief as in prayed for in
the present petition.
If this is so under the law and the Constitution, it should also be upon consideration of public policy.
The last elections were called by the President as a test or t as to how the vital reforms and changes
of political and social discipline and moral values he has instituted to evolve a new order have
affected the thinking and the attitudes of our Tribunal should be extreme caution, if not restraint, in
any act on our part that might reflect on the success or failure of that experiment intended, at the
time as a big stride in the way back to normalization. This is specially true in the field of politics
where the ills of the Old Society has been most grave, because our elections then as a democratic
process, have tarnished the image of our country as a representative democracy. Except on very
compelling reasons then, which I believe do not exist in the case before Us, should we make any
pronouncement that would detract on how successful the last political exercise had been, as the first
election held under the new Constitution. We must refrain from imputing to the COMELEC which has
been enlarged with fresh mandate and a bigger trust by the Constitution failure in the performance of
its functions either by willfull neglect, official incompetence, much less by deliberate partiality, in the
first real test of its capability.
In the light of the foregoing, I vote, in concurrence with the majority, to dismiss the petition, first, as to
the matter allegedly involving a violation of the petitioners' right of due process on the ground that
there was no denial thereof, and second, as to the other matters involving no violation of
constitutional rights, on the ground they are purely political questions, and that in any case, no grave
abuse of discretion has been committed by, much leas is there lack or excess of jurisdiction on the
part of, the Commission on Elections.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19337 September 30, 1969
ASTURIAS SUGAR CENTRAL, INC., petitioner,
vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.
Laurea, Laurea and Associates for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and
Solicitor Sumilang V. Bernardo for respondents.

CASTRO, J .:
This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which
denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of
customs duties and special import tax, as well as the petitioner's alternative remedy to recover the
said amount minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and
Customs Code.
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal
sugar for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it
made two importations of jute bags. The first shipment consisting of 44,800 jute bags and declared
under entry 48 on January 8, 1967, entered free of customs duties and special import tax upon the
petitioner's filing of Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088
and P2,464.50, conditioned upon the exportation of the jute bags within one year from the date of
importation. The second shipment consisting of 75,200 jute bags and declared under entry 243 on
February 8, 1957, likewise entered free of customs duties and special import tax upon the
petitioner's filing of Re-exportation and Special Import Tax Bond no. 6 in the amounts of P42,112
and P7,984.44, with the same conditions as stated in bond no. 1.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the
date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry
243, only 25,000 were exported within the said period of one year. In other words, of the total
number of imported jute bags only 33,647 bags were exported within one year after their importation.
The remaining 86,353 bags were exported after the expiration of the one-year period but within three
years from their importation.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested
the Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax
Bond no. 6 which was to expire the following day, giving the following as the reasons for its failure to
export the remaining jute bags within the period of one year: (a) typhoons and severe floods; (b)
picketing of the Central railroad line from November 6 to December 21, 1957 by certain union
elements in the employ of the Philippine Railway Company, which hampered normal operations; and
(c) delay in the arrival of the vessel aboard which the petitioner was to ship its sugar which was then
ready for loading. This request was denied by the Commissioner per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags
within one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required
it to pay the amount of P28,629.42 representing the customs duties and special import tax due
thereon, which amount the petitioner paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded
the refund of the amount it had paid, on the ground that its request for extension of the period of one
year was filed on time, and that its failure to export the jute bags within the required one-year period
was due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of
the Central railroad line. Alternatively, the petitioner asked for refund of the same amount in the form
of a drawback under section 106(b) in relation to section 105(x) of the Tariff and Customs Code.
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the
claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the
decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of
the Commissioner of Customs.
The petitioner imputes three errors to the Court of Tax Appeals, namely:
1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the
failure of the petitioner to export the jute bags in question within the time required by the
bonds.
2. In not declaring that it is within the power of the Collector of Customs and/or the
Commissioner of Customs to extend the period of one (1) year within which the jute bags
should be exported.
3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the
provisions of section 106, par. (b), of the Tariff and Customs Code.
1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under
the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one
year provided for in section 23 of the Act. Section 23 reads:
SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are,
in the opinion of the collector of customs, of such a character as to be readily identifiable
may be delivered to the importer thereof upon identification and the giving of a bond with
sureties satisfactory to the collector of customs in an amount equal to double the estimated
duties thereon, conditioned for the exportation thereof or payment of the corresponding
duties thereon within one year from the date of importation, under such rules and regulations
as the Insular Collector of Customs shall provide.
1

To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was
promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and
other containers are good for 12 months without extension," and paragraph XXXI, that "bonds for
customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of
cylinders and other containers are not extendible."
And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated
August 25, 1948 was issued, prescribing rules and regulations governing the importation,
exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said
administrative order provides:
That importation of jute bags intended for use as containers of Philippine products for
exportation to foreign countries shall be declared in a regular import entry supported by a
surety bond in an amount equal to double the estimated duties, conditioned for the
exportation or payment of the corresponding duties thereon within one year from the date of
importation.
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of
the Tariff and Customs Code, while fixing at one year the period within which the containers therein
mentioned must be exported, are silent as to whether the said period may be extended. It was surely
by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66,
already adverted to, to eliminate confusion and provide a guide as to how it shall apply the
law,
2
and, more specifically, to make officially known its policy to consider the one-year period
mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of previous judicial
interpretation, then the application of the doctrine of "judicial respect for administrative
construction,"
3
would, initially, be in order.
Only where the court of last resort has not previously interpreted the statute is the rule applicable
that courts will give consideration to construction by administrative or executive departments of the
state.
4
1awphl. nt
The formal or informal interpretation or practical construction of an ambiguous or uncertain
statute or law by the executive department or other agency charged with its administration or
enforcement is entitled to consideration and the highest respect from the courts, and must be
accorded appropriate weight in determining the meaning of the law, especially when the
construction or interpretation is long continued and uniform or is contemporaneous with the
first workings of the statute, or when the enactment of the statute was suggested by such
agency.
5

The administrative orders in question appear to be in consonance with the intention of the legislature
to limit the period within which to export imported containers to one year, without extension, from the
date of importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine
Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the
long-standing view of the Commissioner of Customs that the one-year period therein mentioned is
not extendible.
Implied legislative approval by failure to change a long-standing administrative construction
is not essential to judicial respect for the construction but is an element which greatly
increases the weight given such construction.
6

The correctness of the interpretation given a statute by the agency charged with
administering its provision is indicated where it appears that Congress, with full knowledge of
the agency's interpretation, has made significant additions to the statute without amending it
to depart from the agency's view.
7

Considering that the Bureau of Customs is the office charged with implementing and enforcing the
provisions of our Tariff and Customs Code, the construction placed by it thereon should be given
controlling weight.1awphl. nt
In applying the doctrine or principle of respect for administrative or practical construction, the courts
often refer to several factors which may be regarded as bases of the principle, as factors leading the
courts to give the principle controlling weight in particular instances, or as independent rules in
themselves. These factors are the respect due the governmental agencies charged with
administration, their competence, expertness, experience, and informed judgment and the fact that
they frequently are the drafters of the law they interpret; that the agency is the one on which the
legislature must rely to advise it as to the practical working out of the statute, and practical
application of the statute presents the agency with unique opportunity and experiences for
discovering deficiencies, inaccuracies, or improvements in the statute; ...
8

If it is further considered that exemptions from taxation are not favored,
9
and that tax statutes are to
be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority,
10
then we are hard put to sustain the petitioner's stand that it was entitled to an extension
of time within which to export the jute bags and, consequently, to a refund of the amount it had paid
as customs duties.
In the light of the foregoing, it is our considered view that the one-year period prescribed in section
23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.
The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the
jute bags within the one-year period cannot be accorded credit, for several reasons. In the first
place, in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention
of or reference to this argument of the petitioner, which can only be interpreted to mean that the
court did not believe that the "typhoons, floods and picketing" adverted to by the petitioner in its brief
were of such magnitude or nature as to effectively prevent the exportation of the jute bags within the
required one-year period. In point of fact nowhere in the record does the petitioner convincingly
show that the so-called fortuitous events or force majeure referred to by it precluded the timely
exportation of the jute bags. In the second place, assuming, arguendo, that the one-year period is
extendible, the jute bags were not actually exported within the one-week extension the petitioner
sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported
within the period of one week after the request for extension was filed, the rest of the bags,
amounting to a total of 64,409, were actually exported only during the period from February 16 to
May 24, 1958, long after the expiration of the one-week extension sought by the petitioner. Finally, it
is clear from the record that the typhoons and floods which, according to the petitioner, helped
render impossible the fulfillment of its obligation to export within the one-year period, assuming that
they may be placed in the category of fortuitous events or force majeure, all occurred prior to the
execution of the bonds in question, or prior to the commencement of the one-year period within
which the petitioner was in law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid
and binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers"
mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and
Customs Code, which Administrative Order 389 seeks to implement, speak of "containers" in
general. The enumeration following the word "containers" in the said statutes serves merely to give
examples of containers and not to specify the particular kinds thereof. Thus, sec. 23 of the Philippine
Tariff Act states, "containers such as casks large metals, glass or other receptacles," and sec. 105
(x) of the Tariff and Customs Code mentions "large containers," giving as examples "demijohn
cylinders, drums, casks and other similar receptacles of metal, glass or other materials." (emphasis
supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in
Customs Administrative Order 389 to circumscribe the scope of the word "container," any more than
the statures sought to be implemented actually intended to do.
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of
section 106 (b) of the Tariff and Customs Code,
11
which reads:
SEC. 106. Drawbacks: ...
b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes
Thereof. Upon the exportation of articles manufactured or produced in the Philippines,
including the packing, covering, putting up, marking or labeling thereof, either in whole or in
part of imported materials, or from similar domestic materials of equal quantity and
productive manufacturing quality and value, such question to be determined by the Collector
of Customs, there shall be allowed a drawback equal in amount to the duties paid on the
imported materials so used, or where similar domestic materials are used, to the duties paid
on the equivalent imported similar materials, less one per cent thereof: Provided, That the
exportation shall be made within three years after the importation of the foreign material used
or constituting the basis for drawback ... .
The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the
Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless,
by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid,
averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the
time of importation.
The contention is palpably devoid of merit.
The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an
importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties,
the containers mentioned therein as long as he exports them within one year from the date of
acceptance of the import entry, which period as shown above, is not extendible. The second,
presented by sec. 106 (b), contemplates a case where import duties are first paid, subject to refund
to the extent of 99% of the amount paid, provided the articles mentioned therein are exported within
three years from importation.
It would seem then that the Government would forego collecting duties on the articles mentioned in
section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the
same shall be exported within the relatively short period of one year from the date of acceptance of
the import entry. Where an importer cannot provide such assurance, then the Government, under
sec. 106(b) of said Code, would require payment of the corresponding duties first. The basic
purpose of the two provisions is the same, which is, to enable a local manufacturer to compete in
foreign markets, by relieving him of the disadvantages resulting from having to pay duties on
imported merchandise, thereby building up export trade and encouraging manufacture in the
country.
12
But there is a difference, and it is this: under section 105(x) full exemption is granted to an
importer who justifies the grant of exemption by exporting within one-year. The petitioner, having
opted to take advantage of the provisions of section 105(x), may not, after having failed to comply
with the conditions imposed thereby, avoid the consequences of such failure by being allowed a
drawback under section 106(b) of the same Act without having complied with the conditions of the
latter section.
For it is not to be supposed that the legislature had intended to defeat compliance with the terms of
section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided
which affords an opportunity to defeat compliance with the terms of a statute.
13
Rather courts should
proceed on the theory that parts of a statute may be harmonized and reconciled with each other.
A construction of a statute which creates an inconsistency should be avoided when a reasonable
interpretation can be adopted which will not do violence to the plain words of the act and will carry
out the intention of Congress.
In the construction of statutes, the courts start with the assumption that the legislature
intended to enact an effective law, and the legislature is not to be presumed to have done a
vain thing in the enactment of a statute. Hence, it is a general principle, embodied in the
maxim, "ut res magis valeat quam pereat," that the courts should, if reasonably possible to
do so without violence to the spirit and language of an act, so interpret the statute to give it
efficient operation and effect as a whole. An interpretation should, if possible, be avoided
under which a statute or provision being construed is defeated, or as otherwise expressed,
nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant,
meaningless, inoperative, or nugatory.
14

ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at
petitioner's cost.
Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Makalintal and Sanchez, JJ., took no part.
Reyes, J.B.L., J., is on leave.

















Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 96754 June 22, 1995
CONGRESSMAN JAMES L. CHIONGBIAN (Third District, South Cotobato) ADELBERT W.
ANTONINO (First District, South Cotobato), WILFREDO G. CAINGLET (Third District,
Zamboanga del Norte), HILARION RAMIRO, JR. (Second Division, Misamis Occidental),
ERNESTO S. AMATONG (Second District, Zamboanga del Norte), ALVIN G. DANS (Lone
District, Basilan), ABDULLAH M. DIMAPORO (Second District, Lanao del Norte), and
CONGRESSWOMAN MARIA CLARA A. LOBREGAT (Lone District, Zamboanga
City) petitioners,
vs.
HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE CHAIRMAN SEC. FIDEL V.
RAMOS, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS X AND XII,
CHAIRMAN OF THE REGIONAL DEVELOPMENT COUNCIL FOR REGION X, CHAIRMAN
JESUS V. AYALA, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS XI
and XII, DEPARTMENT OF LOCAL GOVERNMENT, NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY SECRETARIAT, PRESIDENTIAL MANAGEMENT STAFF, HON.
GUILLERMO CARAGUE, Secretary of the DEPARTMENT OF BUDGET and MANAGEMENT;
and HON. ROSALINA S. CAJUCUM, OIC National Treasurer, respondents.
IMMANUEL JALDON, petitioner,
vs.
HON. EXECUTIVE SECRETARY OSCAR M. ORBOS, HON. FIDEL RAMOS, HON. SECRETARY
LUIS SANTOS, AND HON. NATIONAL TREASURER ROSALINA CAJUCOM, respondents.

MENDOZA, J .:
These suits challenge the validity of a provision of the Organic Act for the Autonomous Region in
Muslim Mindanao (R.A. No. 6734), authorizing the President of the Philippines to "merge" by
administrative determination the regions remaining after the establishment of the Autonomous
Region, and the Executive Order issued by the President pursuant to such authority, "Providing for
the Reorganization of Administrative Regions in Mindanao." A temporary restraining order prayed for
by the petitioners was issued by this Court on January 29, 1991, enjoining the respondents from
enforcing the Executive Order and statute in question.
The facts are as follows:
Pursuant to Art. X, 18 of the 1987 Constitution, Congress passed R.A. No. 6734, the Organic Act
for the Autonomous Region in Muslim Mindanao, calling for a plebiscite to be held in the provinces of
Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur, Maguindanao, Palawan, South
Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the
cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian, Puerto Princesa and
Zamboanga. In the ensuing plebiscite held on November 16, 1989, four provinces voted in favor of
creating an autonomous region. These are the provinces of Lanao del Sur, Maguindanao, Sulu and
Tawi-Tawi. In accordance with the constitutional provision, these provinces became the Autonomous
Region in Muslim Mindanao.
On the other hand, with respect to provinces and cities not voting in favor of the Autonomous
Region, Art. XIX, 13 of R.A. No. 6734 provides,
That only the provinces and cities voting favorably in such plebiscites shall be
included in the Autonomous Region in Muslim Mindanao. The provinces and cities
which in the plebiscite do not vote for inclusion in the Autonomous Region shall
remain in the existing administrative regions. Provided, however, that the President
may, by administrative determination, merge the existing regions.
Pursuant to the authority granted by this provision, then President Corazon C. Aquino issued on
October 12, 1990 Executive Order No. 429, "providing for the Reorganization of the Administrative
Regions in Mindanao." Under this Order, as amended by E.O. No. 439
(1) Misamis Occidental, at present part of Region X, will become part of Region IX.
(2) Oroquieta City, Tangub City and Ozamiz City, at present parts of Region X will
become parts of Region IX.
(3) South Cotobato, at present a part of Region XI, will become part of Region XII.
(4) General Santos City, at present part of Region XI, will become part of Region XII.
(5) Lanao del Norte, at present part of Region XII, will become part of Region IX.
(6) Iligan City and Marawi City, at present part of Region XII, will become part of
Region IX.
Petitioners in G.R. No. 96754 are, or at least at the time of the filing of their petition, members of
Congress representing various legislative districts in South Cotobato, Zamboanga del Norte,
Basilan, Lanao del Norte and Zamboanga City. On November 12, 1990, they wrote then President
Aquino protesting E.O. No. 429. They contended that
There is no law which authorizes the President to pick certain provinces and cities
within the existing regions some of which did not even take part in the plebiscite
as in the case of the province of Misamis Occidental and the cities of Oroquieta,
Tangub and Ozamiz and restructure them to new administrative regions. On the
other hand, the law (Sec. 13, Art. XIX, R.A. 6734) is specific to the point, that is, that
"the provinces and cities which in the plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the existing administrative regions."
The transfer of the provinces of Misamis Occidental from Region X to Region IX;
Lanao del Norte from Region XII to Region IX, and South Cotobato from Region XI to
Region XII are alterations of the existing structures of governmental units, in other
words, reorganization. This can be gleaned from Executive Order No. 429, thus
Whereas, there is an urgent need to reorganize the administrative
regions in Mindanao to guarantee the effective delivery of field
services of government agencies taking into consideration the
formation of the Autonomous Region in Muslim Mindanao.
With due respect to Her Excellency, we submit that while the authority necessarily
includes the authority to merge, the authority to merge does not include the authority
to reorganize. Therefore, the President's authority under RA 6734 to "merge existing
regions" cannot be construed to include the authority to reorganize them. To do so
will violate the rules of statutory construction.
The transfer of regional centers under Executive Order 429 is actually a restructuring
(reorganization) of administrative regions. While this reorganization, as in Executive
Order 429, does not affect the apportionment of congressional representatives, the
same is not valid under the penultimate paragraph of Sec. 13, Art. XIX of R.A. 6734
and Ordinance appended to the 1986 Constitution apportioning the seats of the
House of Representatives of Congress of the Philippines to the different legislative
districts in provinces and cities.
1

As their protest went unheeded, while Inauguration Ceremonies of the New Administrative Region IX
were scheduled on January 26, 1991, petitioners brought this suit for certiorari and prohibition.
On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, is a resident of Zamboanga
City, who is suing in the capacity of taxpayer and citizen of the Republic of the Philippines.
Petitioners in both cases contend that Art. XIX, 13 of R.A. No. 6734 is unconstitutional because (1)
it unduly delegates legislative power to the President by authorizing him to "merge [by administrative
determination] the existing regions" or at any rate provides no standard for the exercise of the power
delegated and (2) the power granted is not expressed in the title of the law.
In addition, petitioner in G.R. No. 96673 challenges the validity of E.O. No. 429 on the ground that
the power granted by Art. XIX, 13 to the President is only to "merge regions IX and XII" but not to
reorganize the entire administrative regions in Mindanao and certainly not to transfer the regional
center of Region IX from Zamboanga City to Pagadian City.
The Solicitor General defends the reorganization of regions in Mindanao by E.O. No. 429 as merely
the exercise of a power "traditionally lodged in the President," as held in Abbas v. Comelec,
2
and as
a mere incident of his power of general supervision over local governments and control of executive
departments, bureaus and offices under Art. X, 16 and Art. VII, 17, respectively, of the Constitution.
He contends that there is no undue delegation of legislative power but only a grant of the power to
"fill up" or provide the details of legislation because Congress did not have the facility to provide for
them. He cites by analogy the case of Municipality of Cardona v. Municipality of Binangonan,
3
in
which the power of the Governor-General to fix municipal boundaries was sustained on the ground that
[such power] is simply a transference of certain details with respect to provinces,
municipalities, and townships, many of them newly created, and all of them subject to
a more or less rapid change both in development and centers of population, the
proper regulation of which might require not only prompt action but action of such a
detailed character as not to permit the legislative body, as such, to take it efficiently.
The Solicitor General justifies the grant to the President of the power "to merge the existing regions"
as something fairly embraced in the title of R.A. No. 6734, to wit, "An Act Providing for an Organic
Act for the Autonomous Region in Muslim Mindanao," because it is germane to it.
He argues that the power is not limited to the merger of those regions in which the provinces and
cities which took part in the plebiscite are located but that it extends to all regions in Mindanao as
necessitated by the establishment of the autonomous region.
Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772 which provides:
1. The President of the Philippines shall have the continuing authority to reorganize
the National Government. In exercising this authority, the President shall be guided
by generally acceptable principles of good government and responsive national
government, including but not limited to the following guidelines for a more efficient,
effective, economical and development-oriented governmental framework:
(a) More effective planning implementation, and review functions;
(b) Greater decentralization and responsiveness in decision-making
process;
(c) Further minimization, if not, elimination, of duplication or
overlapping of purposes, functions, activities, and programs;
(d) Further development of as standardized as possible ministerial,
sub-ministerial and corporate organizational structures;
(e) Further development of the regionalization process; and
(f) Further rationalization of the functions of and administrative
relationships among government entities.
For purposes of this Decree, the coverage of the continuing authority
of the President to reorganize shall be interpreted to encompass all
agencies, entities, instrumentalities, and units of the National
Government, including all government owned or controlled
corporations as well as the entire range of the powers, functions,
authorities, administrative relationships, acid related aspects
pertaining to these agencies, entities, instrumentalities, and units.
2. [T]he President may, at his discretion, take the following actions:
xxx xxx xxx
f. Create, abolish, group, consolidate, merge, or integrate entities,
agencies, instrumentalities, and units of the National Government, as
well as expand, amend, change, or otherwise modify their powers,
functions and authorities, including, with respect to government-
owned or controlled corporations, their corporate life, capitalization,
and other relevant aspects of their charters.
g. Take such other related actions as may be necessary to carry out
the purposes and objectives of this Decree.
Considering the arguments of the parties, the issues are:
(1) whether the power to "merge" administrative regions is legislative in character, as petitioners
contend, or whether it is executive in character, as respondents claim it is, and, in any event,
whether Art. XIX, 13 is invalid because it contains no standard to guide the President's discretion;
(2) whether the power given is fairly expressed in the title of the statute; and
(3) whether the power granted authorizes the reorganization even of regions the provinces and cities
in which either did not take part in the plebiscite on the creation of the Autonomous Region or did not
vote in favor of it; and
(4) whether the power granted to the President includes the power to transfer the regional center of
Region IX from Zamboanga City to Pagadian City.
It will be useful to recall first the nature of administrative regions and the basis and purpose for their
creation. On September 9, 1968, R.A. No. 5435 was passed "authorizing the President of the
Philippines, with the help of a Commission on Reorganization, to reorganize the different executive
departments, bureaus, offices, agencies and instrumentalities of the government, including banking
or financial institutions and corporations owned or controlled by it." The purpose was to promote
"simplicity, economy and efficiency in the government."
4
The Commission on Reorganization created
under the law was required to submit an integrated reorganization plan not later than December 31, 1969
to the President who was in turn required to submit the plan to Congress within forty days after the
opening of its next regular session. The law provided that any reorganization plan submitted would
become effective only upon the approval of Congress.
5

Accordingly, the Reorganization Commission prepared an Integrated Reorganization Plan which
divided the country into eleven administrative regions.
6
By P.D. No. 1, the Plan was approved and
made part of the law of the land on September 24, 1972. P.D. No. 1 was twice amended in 1975, first by
P.D. No. 742 which "restructur[ed] the regional organization of Mindanao, Basilan, Sulu and Tawi-Tawi"
and later by P.D. No. 773 which further "restructur[ed] the regional organization of Mindanao and divid[ed]
Region IX into two sub-regions." In 1978, P.D. No. 1555 transferred the regional center of Region IX from
Jolo to Zamboanga City.
Thus the creation and subsequent reorganization of administrative regions have been by the
President pursuant to authority granted to him by law. In conferring on the President the power "to
merge [by administrative determination] the existing regions" following the establishment of the
Autonomous Region in Muslim Mindanao, Congress merely followed the pattern set in previous
legislation dating back to the initial organization of administrative regions in 1972. The choice of the
President as delegate is logical because the division of the country into regions is intended to
facilitate not only the administration of local governments but also the direction of executive
departments which the law requires should have regional offices. As this Court observed in Abbas,
"while the power to merge administrative regions is not expressly provided for in the Constitution, it
is a power which has traditionally been lodged with the President to facilitate the exercise of the
power of general supervision over local governments [see Art. X, 4 of the Constitution]." The
regions themselves are not territorial and political divisions like provinces, cities, municipalities and
barangays but are "mere groupings of contiguous provinces for administrative purposes."
7
The
power conferred on the President is similar to the power to adjust municipal boundaries
8
which has been
described in Pelaez v. Auditor General
9
or as "administrative in nature."
There is, therefore, no abdication by Congress of its legislative power in conferring on the President
the power to merge administrative regions. The question is whether Congress has provided a
sufficient standard by which the President is to be guided in the exercise of the power granted and
whether in any event the grant of power to him is included in the subject expressed in the title of the
law.
First, the question of standard. A legislative standard need not be expressed. It may simply be
gathered or implied.
10
Nor need it be found in the law challenged because it may be embodied in other
statutes on the same subject as that of the challenged legislation.
11

With respect to the power to merge existing administrative regions, the standard is to be found in the
same policy underlying the grant to the President in R.A. No. 5435 of the power to reorganize the
Executive Department, to wit: "to promote simplicity, economy and efficiency in the government to
enable it to pursue programs consistent with national goals for accelerated social and economic
development and to improve the service in the transaction of the public business."
12
Indeed, as the
original eleven administrative regions were established in accordance with this policy, it is logical to
suppose that in authorizing the President to "merge [by administrative determination] the existing regions"
in view of the withdrawal from some of those regions of the provinces now constituting the Autonomous
Region, the purpose of Congress was to reconstitute the original basis for the organization of
administrative regions.
Nor is Art. XIX, 13 susceptible to charge that its subject is not embraced in the title of R.A. No.
6734. The constitutional requirement that "every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof"
13
has always been given a practical rather than a
technical construction. The title is not required to be an index of the content of the bill. It is a sufficient
compliance with the constitutional requirement if the title expresses the general subject and all provisions
of the statute are germane to that subject.
14
Certainly the reorganization of the remaining administrative
regions is germane to the general subject of R.A. No. 6734, which is the establishment of the
Autonomous Region in Muslim Mindanao.
Finally, it is contended that the power granted to the President is limited to the reorganization of
administrative regions in which some of the provinces and cities which voted in favor of regional
autonomy are found, because Art. XIX, 13 provides that those which did not vote for autonomy
"shall remain in the existing administrative regions." More specifically, petitioner in G.R. No. 96673
claims:
The questioned Executive Order No. 429 distorted and, in fact, contravened the clear
intent of this provision by moving out or transferring certain political subdivisions
(provinces/cities) out of their legally designated regions. Aggravating this
unacceptable or untenable situation is EO No. 429's effecting certain movements on
areas which did not even participate in the November 19, 1989 plebiscite. The
unauthorized action of the President, as effected by and under the questioned EO
No. 429, is shown by the following dispositions: (1) Misamis Occidental, formerly of
Region X and which did not even participate in the plebiscite, was moved from said
Region X to Region IX; (2) the cities of Ozamis, Oroquieta, and Tangub, all formerly
belonging to Region X, which likewise did not participate in the said plebiscite, were
transferred to Region IX; (3) South Cotobato, from Region XI to Region XII; (4)
General Santos City: from Region XI to Region XII; (5) Lanao del Norte, from Region
XII to Region IX; and (6) the cities of Marawi and Iligan from Region XII to Region IX.
All of the said provinces and cities voted "NO", and thereby rejected their entry into
the Autonomous Region in Muslim Mindanao, as provided under RA No. 6734.
15

The contention has no merit. While Art. XIX, 13 provides that "The provinces and cities which do
not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions,"
this provision is subject to the qualification that "the President may by administrative determination
merge the existing regions." This means that while non-assenting provinces and cities are to remain
in the regions as designated upon the creation of the Autonomous Region, they may nevertheless
be regrouped with contiguous provinces forming other regions as the exigency of administration may
require.
The regrouping is done only on paper. It involves no more than are definition or redrawing of the
lines separating administrative regions for the purpose of facilitating the administrative supervision of
local government units by the President and insuring the efficient delivery of essential services.
There will be no "transfer" of local governments from one region to another except as they may thus
be regrouped so that a province like Lanao del Norte, which is at present part of Region XII, will
become part of Region IX.
The regrouping of contiguous provinces is not even analogous to a redistricting or to the division or
merger of local governments, which all have political consequences on the right of people residing in
those political units to vote and to be voted for. It cannot be overemphasized that administrative
regions are mere groupings of contiguous provinces for administrative purposes, not for political
representation.
Petitioners nonetheless insist that only those regions, in which the provinces and cities which voted
for inclusion in the Autonomous Region are located, can be "merged" by the President.
To be fundamental reason Art. XIX, 13 is not so limited. But the more fundamental reason is that
the President's power cannot be so limited without neglecting the necessities of administration. It is
noteworthy that the petitioners do not claim that the reorganization of the regions in E.O. No. 429 is
irrational. The fact is that, as they themselves admit, the reorganization of administrative regions in
E.O. No. 429 is based on relevant criteria, to wit: (1) contiguity and geographical features; (2)
transportation and communication facilities; (3) cultural and language groupings; (4) land area and
population; (5) existing regional centers adopted by several agencies; (6) socio-economic
development programs in the regions and (7) number of provinces and cities.
What has been said above applies to the change of the regional center from Zamboanga City to
Pagadian City. Petitioners contend that the determination of provincial capitals has always been by
act of Congress. But as, this Court said in Abbas,
16
administrative regions are mere "groupings of
contiguous provinces for administrative purposes, . . . [They] are not territorial and political subdivisions
like provinces, cities, municipalities and barangays." There is, therefore, no basis for contending that only
Congress can change or determine regional centers. To the contrary, the examples of P.D. Nos. 1, 742,
773 and 1555 suggest that the power to reorganize administrative regions carries with it the power to
determine the regional center.
It may be that the transfer of the regional center in Region IX from Zamboanga City to Pagadian City
may entail the expenditure of large sums of money for the construction of buildings and other
infrastructure to house regional offices. That contention is addressed to the wisdom of the transfer
rather than to its legality and it is settled that courts are not the arbiters of the wisdom or expediency
of legislation. In any event this is a question that we will consider only if fully briefed and upon a
more adequate record than that presented by petitioners.
WHEREFORE, the petitions for certiorari and prohibition are DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Vitug, Kapunan and Francisco, JJ., concur.


Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 96266 July 18, 1991
ERNESTO M. MACEDA, petitioner,
vs.
ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL PETROLEUM
CORPORATION AND PETRON CORPORATION, respondents.
G.R. No. 96349 July 18, 1991
EUGENIO O. ORIGINAL, IRENEO N. AARON, JR., RENE LEDESMA, ROLANDO VALLE,
ORLANDO MONTANO, STEVE ABITANG, NERI JINON, WILFREDO DELEONIO, RENATO
BORRO, RODRIGO DE VERA, ALVIN BAYUANG, JESUS MELENDEZ, NUMERIANO CAJILIG
JR., RUFINO DE LA CRUZ AND JOVELINO G. TIPON,petitioners,
vs.
ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL PETROLEUM
CORPORATION AND PETRON CORPORATION, respondents.
G.R. No. 96284 July 18,1991
CEFERINO S. PAREDES, JR., petitioner,
vs.
ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL, INC. AND
PETROPHIL CORPORATION, respondents.
R E S O L U T I O N

MEDIALDEA, J .:p
In G.R. No. 96266, petitioner Maceda seeks nullification of the Energy Regulatory Board (ERB)
Orders dated December 5 and 6, 1990 on the ground that the hearings conducted on the second
provisional increase in oil prices did not allow him substantial cross-examination, in effect, allegedly,
a denial of due process.
The facts of the case are as follows:
Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil companies
filed with the ERB their respective applications on oil price increases (docketed as ERB Case Nos.
90-106, 90-382 and 90-384, respectively).
On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42 per liter.
Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E. Maceda v. ERB, et al.,
G.R. No. 95203), seeking to nullify the provisional increase. We dismissed the petition on December
18, 1990, reaffirming ERB's authority to grant provisional increase even without prior hearing,
pursuant to Sec. 8 of E.O. No. 172, clarifying as follows:
What must be stressed is that while under Executive Order No. 172, a hearing is
indispensable, it does not preclude the Board from ordering, ex-parte, a provisional
increase, as it did here, subject to its final disposition of whether or not: (1) to make it
permanent; (2) to reduce or increase it further; or (3) to deny the application. Section
3, paragraph (e) is akin to a temporary restraining order or a writ of preliminary
attachment issued by the courts, which are given ex-parte and which are subject to
the resolution of the main case.
Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise,
operate exclusively of the other, in that the Board may resort to one but not to both at
the same time. Section 3(e) outlines the jurisdiction of the Board and the grounds for
which it may decree a price adjustment, subject to the requirements of notice and
hearing. Pending that, however, it may order, under Section 8, an authority to
increase provisionally, without need of a hearing, subject to the final outcome of the
proceeding. The Board, of course, is not prevented from conducting a hearing on the
grant of provisional authority-which is of course, the better procedure however, it
cannot be stigmatized later if it failed to conduct one. (pp. 129-130, Rollo) (Emphasis
supplied)
In the same order of September 21, 1990, authorizing provisional increase, the ERB set the
applications for hearing with due notice to all interested parties on October 16, 1990. Petitioner
Maceda failed to appear at said hearing as well as on the second hearing on October 17, 1990.
To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB set the
continuation of the hearing to October 24, 1990. This was postponed to November 5, 1990, on
written notice of petitioner Maceda.
On November 5, 1990, the three oil companies filed their respective motions for leave to file or admit
amended/supplemental applications to further increase the prices of petroleum products.
The ERB admitted the respective supplemental/amended petitions on November 6, 1990 at the
same time requiring applicants to publish the corresponding Notices of Public Hearing in two
newspapers of general circulation (p. 4, Rollo and Annexes "F" and "G," pp. 60 and 62, Rollo).
Hearing for the presentation of the evidence-in-chief commenced on November 21, 1990 with ERB
ruling that testimonies of witnesses were to be in the form of Affidavits (p. 6, Rollo). ERB
subsequently outlined the procedure to be observed in the reception of evidence, as follows:
CHAIRMAN FERNANDO:
Well, at the last hearing, applicant Caltex presented its evidence-in-chief and there is
an understanding or it is the Board's wish that for purposes of good order in the
presentation of the evidence considering that these are being heard together, we will
defer the cross-examination of applicant Caltex's witness and ask the other
applicants to present their evidence-in-chief so that the oppositors win have a better
Idea of what an of these will lead to because as I mentioned earlier, it has been
traditional and it is the intention of the Board to act on these applications on an
industry-wide basis, whether to accept, reject, modify or whatever, the Board win do
it on an industry wide basis, so, the best way to have (sic) the oppositors and the
Board a clear picture of what the applicants are asking for is to have all the evidence-
in-chief to be placed on record first and then the examination will come later, the
cross-examination will come later. . . . (pp. 5-6, tsn., November 23, 1990, ERB Cases
Nos. 90-106, 90382 and 90-384). (p. 162, Rollo)
Petitioner Maceda maintains that this order of proof deprived him of his right to finish his
cross-examination of Petron's witnesses and denied him his right to cross-examine each of
the witnesses of Caltex and Shell. He points out that this relaxed procedure resulted in the
denial of due process.
We disagree. The Solicitor General has pointed out:
. . . The order of testimony both with respect to the examination of the particular
witness and to the general course of the trial is within the discretion of the court and
the exercise of this discretion in permitting to be introduced out of the order
prescribed by the rules is not improper (88 C.J.S. 206-207).
Such a relaxed procedure is especially true in administrative bodies, such as the
ERB which in matters of rate or price fixing is considered as exercising a quasi-
legislative, not quasi-judicial, function As such administrative agency, it is not bound
by the strict or technical rules of evidence governing court proceedings (Sec. 29,
Public Service Act; Dickenson v. United States, 346, U.S. 389, 98 L. ed. 132, 74 S.
St. 152). (Emphasis supplied)
In fact, Section 2, Rule I of the Rules of Practice and Procedure Governing Hearings
Before the ERB provides that
These Rules shall govern pleadings, practice and procedure before the Energy
Regulatory Board in all matters of inquiry, study, hearing, investigation and/or any
other proceedings within the jurisdiction of the Board. However, in the broader
interest of justice, the Board may, in any particular matter, except itself from these
rules and apply such suitable procedure as shall promote the objectives of the Order.
(pp. 163-164, Rollo)
Petitioner Maceda also claims that there is no substantial evidence on record to support the
provisional relief.
We have, in G.R. Nos. 95203-05, previously taken judicial notice of matters and events related to the
oil industry, as follows:
. . . (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the
exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of payments is
expected to reach $1 Billion; (4) our trade deficit is at P2.855 Billion as of the first
nine months of the year.
. . . (p. 150, Rollo)
The Solicitor General likewise commented:
Among the pieces of evidence considered by ERB in the grant of the contested
provisional relief were: (1) certified copies of bins of lading issued by crude oil
suppliers to the private respondents; (2) reports of the Bankers Association of the
Philippines on the peso-dollar exchange rate at the BAP oil pit; and (3) OPSF status
reports of the Office of Energy Affairs. The ERB was likewise guided in the
determination of international crude oil prices by traditional authoritative sources of
information on crude oil and petroleum products, such as Platt's Oilgram and
Petroleum Intelligence Weekly. (p. 158,Rollo)
Thus, We concede ERB's authority to grant the provisional increase in oil price, as We note that the
Order of December 5, 1990 explicitly stated:
in the light, therefore, of the rise in crude oil importation costs, which as earlier
mentioned, reached an average of $30.3318 per barrel at $25.551/US $ in
September-October 1990; the huge OPSF deficit which, as reported by the Office of
Energy Affairs, has amounted to P5.7 Billion (based on filed claims only and net of
the P5 Billion OPSF) as of September 30, 1990, and is estimated to further increase
to over P10 Billion by end December 1990; the decision of the government to
discontinue subsidizing oil prices in view of inflationary pressures; the apparent
inadequacy of the proposed additional P5.1 Billion government appropriation for the
OPSF and the sharp drop in the value of the peso in relation to the US dollar to
P28/US $, this Board is left with no other recourse but to grant applicants oil
companies further relief by increasing the prices of petroleum products sold by them.
(p. 161, Rollo)
Petitioner Maceda together with petitioner Original (G.R. No. 96349) also claim that the provisional
increase involved amounts over and above that sought by the petitioning oil companies.
The Solicitor General has pointed out that aside from the increase in crude oil prices, all the
applications of the respondent oil companies filed with the ERB covered claims from the OPSF.
We shall thus respect the ERB's Order of December 5, 1990 granting a provisional price increase on
petroleum products premised on the oil companies' OPSF claims, crude cost peso differentials, forex
risk for a subsidy on sale to NPC (p. 167, Rollo), since the oil companies are "entitled to as much
relief as the fact alleged constituting the course of action may warrant," (Javellana v. D.O. Plaza
Enterprises, Inc., G.R. No. L-28297, March 30, 1970, 32 SCRA 261 citing Rosales v. Reyes, 25 Phil.
495; Aguilar v. Rubiato, 40 Phil. 470) as follows:
Per Liter
Weighted
Petron Shell Caltex Average
Crude Cost P3.11 P3.6047 P2.9248 P3.1523
Peso Cost
Diffn'l 2.1747 1.5203 1.5669 1.8123
Forex Risk
Fee -0.1089 -0,0719 -0.0790 -0.0896
Subsidy on
Sales to NPC 0.1955 0.0685 0.0590 0.1203
Total Price
Increase
Applied for P59.3713 P5.1216 P4.4717 P4.9954
Less: September 21 Price
Relief
Actual Price Increase P1.42
Actual Tax Reduction:
Ad Valorem Tax
(per Sept. 1, 1990
price build-up) P1.3333
Specific Tax (per
Oct. 5, 1990 price
build-up) .6264 .7069 2.1269
Net Price Increase
Applied for 2.8685
Nonetheless, it is relevant to point out that on December 10, 1990, the ERB, in response to the
President's appeal, brought back the increases in Premium and Regular gasoline to the levels
mandated by the December 5, 1990 Order (P6.9600 and P6.3900, respectively), as follows:
Product In Pesos Per Liter
OPSF
Premium Gasoline 6.9600
Regular Gasoline 6.3900
Avturbo 4.9950
Kerosene 1.4100
Diesel Oil 1.4100
Fuel Oil/Feedstock 0.2405
LPG 1.2200
Asphalt 2.5000
Thinner 2.5000
In G.R. No. 96349, petitioner Original additionally claims that if the price increase will be used to
augment the OPSF this will constitute illegal taxation. In the Maceda case, (G.R. Nos. 95203-
05, supra) this Court has already ruled that "the Board Order authorizing the proceeds generated by
the increase to be deposited to the OPSF is not an act of taxation but is authorized by Presidential
Decree No. 1956, as amended by Executive Order No. 137.
The petitions of E.O. Original et al. (G.R. No. 96349) and C.S. Povedas, Jr. (G.R. No. 96284),
insofar as they question the ERB's authority under Sec. 8 of E.O. 172, have become moot and
academic.
We lament Our helplessness over this second provisional increase in oil price. We have stated that
this "is a question best judged by the political leadership" (G.R. Nos. 95203-05, G.R. Nos. 95119-
21, supra). We wish to reiterate Our previous pronouncements therein that while the government is
able to justify a provisional increase, these findings "are not final, and it is up to petitioners to
demonstrate that the present economic picture does not warrant a permanent increase."
In this regard, We also note the Solicitor General's comments that "the ERB is not averse to the idea
of a presidential review of its decision," except that there is no law at present authorizing the same.
Perhaps, as pointed out by Justice Padilla, our lawmakers may see the wisdom of allowing
presidential review of the decisions of the ERB since, despite its being a quasi-judicial body, it is still
"an administrative body under the Office of the President whose decisions should be appealed to the
President under the established principle of exhaustion of administrative remedies," especially on a
matter as transcendental as oil price increases which affect the lives of almost an Filipinos.
ACCORDINGLY, the petitions are hereby DISMISSED.
SO ORDERED.
Narvasa, Melencio-Herrera, Feliciano, Gancayco, Bidin, Grio-Aquino and Regalado, JJ., concur.
Davide, J., concurs in the result.
Fernan, C.J., took no part.


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-31152 March 27, 1974
UNIVERSITY OF NUEVA CACERES, JAIME HERNANDEZ, SR., and JAIME HERNANDEZ,
JR., petitioners,
vs.
HON. ARSENIO I. MARTINEZ, as Presiding Judge of the Court of Industrial Relations, and the
UNIVERSITY OF NUEVA CACERES GUARDIANS UNION, respondents.
Sycip Salazar, Luna, Manalo and Feliciano for petitioners. Mariano B. Tuason and Francisco M. de
los Reyes for respondent Judge, CIR.
Augusto A. Pardalis and Mariano M. Abes for respondent Union.

BARREDO, J .:p
Petition for certiorari, prohibition and mandamus, with preliminary injunction, relative to the orders of
respondent Presiding Judge of the Court of Industrial Relations dated July 30, 1969 and October 6,
1969, which in effect held that the determination of whether or not a charge of unfair labor practice,
investigated by the Prosecution Division of said court, should be dismissed outright because of any
fatal defect of form or substance is the exclusive prerogative of said Presiding Judge, to the
exclusion of the court en banc, on the theory that the function involved in such determination is not
judicial but purely administrative and hence entrusted to his exclusive administrative authority as
head of said court.
On June 17, 1969, respondent University of Nueva Caceres Guardians Union filed with the Bicol
branch of respondent Court of Industrial Relations (CIR) an unfair labor practice charge against
petitioners accompanied by the joint affidavit of Benito de la Paz and George Offemaria. At the
hearing of said charge before the prosecutor of the CIR, petitioners moved to dismiss the same on
the grounds: (1) it is not verified; (2) it does not specify the particular provisions of Section 4 (a) of
the Industrial Peace Act, RA 875, as amended, supposed to have been violated, and (3) the
supporting joint affidavit contains "falsities, misstatements and improbabilities on points otherwise
material to the charge." Instead of dismissing the charge, the prosecutor, although finding the
grounds of the dismissal motion to be more or less plausible, granted respondent Union five (5) days
"to file an amended charge and amended affidavit," which said Union did on July 8, 1969. On July
14, 1969, petitioners moved to reconsider the ruling of the prosecutor, but on July 30, 1969,
respondent Presiding Judge denied the same, admitted the amended charge and directed the Court
Prosecutor to set the said amended charge for preliminary investigation. On August 16, 1969,
petitioners moved again for reconsideration of the order of July 30, 1969. Apparently, petitioners
assumed their motion for reconsideration would be acted upon by the court en banc, for when on
October 6, 1969, respondent Judge issued an order, signed by him alone, denying it, the present
petition was filed charging said respondent with having acted in excess of jurisdiction in acting on a
matter addressed to and within the jurisdiction of the CIR en banc and of grave abuse of discretion in
not ordering the dismissal of the charge upon the grounds invoked by them.
The assertion by respondent Judge, implicit in his order of October 6, 1969, of jurisdiction, to the
exclusion of the court en banc, over the matter herein involved cannot be sustained. It is Our
considered view that unlike the preliminary investigation of criminal cases by fiscals which are under
the supervision and control of the Secretary of Justice,
1
the peculiar procedure prescribed by law in
unfair labor practices partakes of the nature of judicial investigations, since they are conducted, to quote
the language of the law, by "the Court or any agency or agent designated by the Court", (Section 5 (b),
Rep. Act 875) similarly to the preliminary investigations undertaken by courts of first instance in election
cases
2
and charges of violation of the Anti-Subversion Act.
3
Surely, no one can pretend that in such
preliminary investigations, the courts of first instance are performing administrative or non-judicial
functions. In such cases, the courts act in the same judicial capacity as they do in trying the cases on the
merits and cannot, in any respect or measure, be controlled by the Secretary of Justice. The fact that the
law authorizes the CIR to delegate the investigation to "any agency or agent designated by the Court"
does not alter the nature of the court's function in the premises, just as the appointment of commissioners
by the courts under Rule 34 does not make the procedure administrative or less judicial. Indeed, under
the provision aforementioned, the investigation could very well be assigned to one of the judges of the
CIR, and in that event, how can it be maintained that the function is administrative? Withal, it is implicit in
this procedure that the work of the "agency or agent designated by Court" is as much the responsibility of
the court as if it were the court itself that were acting directly.
The contention of respondent Judge that the function of overseering the Prosecution Division of the
CIR in its work of filing and dismissing charges of unfair labor practice is purely administrative in
nature and falls within his exclusive competence is without merit. It is true that reference to the court
in the law must be construed to mean the Presiding Judge and not the court en banc when the
action contemplated is purely administrative in character, but, precisely, the point missed is that, as
already explained, the Industrial Peace Act does not consider the investigation by the CIR, either by
itself or thru an agent, as an administrative matter but a judicial one like the preliminary
investigations in election and anti-subversion cases.
Maybe the development in the United States recounted by respondent Judge whereby the Taft-
Hartley Law transferred from the National Labor Relations Board to its General Counsel the
exclusive function and power to determine with finality whether or not an unfair labor practice charge
should be filed with the Board is good, in the sense of avoiding that the Board be the accuser,
investigator and judge all rolled into one, but there is nothing in either Commonwealth Act 103 or the
Industrial Peace Act indicating that the American experience has influenced the enactment and
phraseology of the pertinent provisions of our laws. Quite on the contrary, as already pointed out,
Section 5(b) of RA 875 very explicitly confers the function of investigating unfair labor charges upon
the CIR itself, albeit it allows the court to designate any other agency or agent for the purpose.
As regards the other impugned order of July 30, 1969, the result of the foregoing discussion and
ruling is that the same should first be submitted to the CIR en banc for appropriate action. Much as
the writer of this opinion feels that the objections thereto raised by petitioners are rather strained and
are not very consistent with the interests of justice, which would not permit the throwing out of an
unfair labor practice charge merely because of non-jurisdictional defects which can anyway be
corrected, the Court would not pre-empt the power of the CIR en bancto make the corresponding
ruling relative thereto in the first instance.
Before closing, it might be stated that, to be sure, the creation of the National Labor Relations
Commission, may have altered the procedure in cases involving alleged unfair labor practices, but
that point is not and cannot be raised anymore in this proceeding and We do not consider it
necessary to pass on it now.
WHEREFORE, the petition for certiorari and prohibition insofar as the assailed order of July 30,
1969 is concerned is denied, without prejudice to the appropriate action on petitioners' motion for
reconsideration thereof by the CIRen banc, but the petition for certiorari and mandamus relative to
the impugned order of respondent Presiding Judge of October 6, 1969 is granted, the said order is
hereby declared null and void and set aside, as in excess of jurisdiction, and respondent Presiding
Judge or whoever is acting in his stead is ordered to refer the motion for reconsideration of
petitioners dated August 16, 1969 to the CIR en banc for appropriate action. The writ of preliminary
injunction issued by the Court on November 24, 1969 is made permanent, without prejudice to the
resolution by the CIR of petitioners' motion for reconsideration just referred to. The manifestation of
Acting Presiding Judge Ansberto Paredes to the effect that he has desisted and continues to desist
from following the practice of former Presiding Judge Martinez declared illegal in this decision is
noted. Costs against private respondents.
Zaldivar (Chairman), Fernandez and Aquino, JJ., concur.


















FIRST DIVISION
[G.R. NO. 166062 : September 26, 2006]
SALVADOR M. PEREZ and JUANITA A.
APOSTOL, Petitioners, v. HON. SANDIGANBAYAN (2nd
Division) and PEOPLE OF THE PHILIPPINES represented by
the Special Prosecutor of the Office of the
Ombudsman, Respondents.
D E C I S I O N
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court,
questioning the twin Resolutions
1
of the Sandiganbayan dated 7
May 2004 (promulgated 18 May 2004),
2
and 27 September 2004
(promulgated 1 October 2004).
3

The following facts were culled from the records of the case:
In a resolution dated 24 April 2001, the Office of the Deputy
Ombudsman for Luzon resolved to file charges of violation of
Section 3(e)
4
of Republic Act No. 3019
5
against petitioners, San
Manuel, Pangasinan Mayor Salvador M. Perez, and Municipal
Treasurer Juanita Apostol. The Information alleges a crime
committed as follows:
That on or about September of 1998, or sometime prior or
subsequent thereto, in the Municipality of San Manuel, Pangasinan,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, SALVADOR PEREZ, being then the Municipal
Mayor and JUANITA APOSTOL, ZAPANTA, Municipal Treasurer of
said municipality, conspiring and confederating with one another,
committing the crime herein charged in relation to and taking
advantage of their official functions, and through manifest partiality,
evident bad faith or gross inexcusable negligence, did then and
there, wilfully, unlawfully and criminally cause the purchase of one
(1) computer unit costing P120,000.00 acquisition by personal
canvass which is in violation of Secs. 362 and 367 of R.A. 7160,
thereby causing undue injury to the Municipality of San Manuel,
Pangasinan.
6

On 16 January 2002, prior to the scheduled arraignment, petitioners
filed with the Sandiganbayan a Motion for Leave of Court to File
Motion for Reconsideration/Reinvestigation alleging the discovery of
new evidence which will change the outcome of the case if
presented and appreciated. The alleged newly discovered evidence
consists in the reassessment by the auditors of the Commission on
Audit (COA) that, though the prices between the subject computer
and that canvassed by the COA are different, such difference is "not
really that material."
7

The Sandiganbayan denied the Motion for Leave of Court to File
Motion for Reconsideration/Reinvestigation in an Order dated 4 April
2002. On a subsequent Motion for Reconsideration, however, the
Sandiganbayan reconsidered the 4 April 2002 Order, and granted
petitioners ten days from receipt of the current 6 September 2002
Resolution within which to formalize their Motion for Reconsideration
in the Office of the Ombudsman.
Complying with the 6 September 2002 Resolution, petitioners
formalized their Motion for Reconsideration in the Office of the
Ombudsman.
Accordingly, the Office of the Special Prosecutor conducted a
reinvestigation. Assistant Special Prosecutor Warlito F. Galisanao
prepared a Memorandum dated 23 October 2003, recommending
the withdrawal of the Information.
8
However, in the portion of the
Memorandum earmarked for the Special Prosecutor's action, Special
Prosecutor Dennis M. Villa-Ignacio chose the action "DO NOT
CONCUR" by drawing two lines on the action "I CONCUR," and
wrote the following marginal note:
I am, instead adopting the enclosed memorandum of Pros. Chua
dated Jan. 22, 2004 recommending that in the meantime, further
fact-finding be conducted, and an administrative case be filed
against accused Apostol, after withdrawing the Information for viol.
of Sec. 3(e) R.A. 3019.
9

On the other hand, new Ombudsman Simeon V. Marcelo crossed out
both actions (APPROVED/DISAPPROVED), and wrote the following
marginal note dated 16 February 2004:
The resolution of this case is deferred. There are two modes of
violating Section 3(e) of RA 3019, to wit: a) causing undue injury or
b) giving unwarranted benefits, advantage or preference. OSP
should study whether the accused, assuming arguendo that there
was no overprice, gave unwarranted benefits, advantage or
preference to the seller of the subject computer. Kindly submit your
recommendation soonest.
10

In an 8 March 2004 Supplemental Memorandum, Assistant Special
Prosecutor III Warlito F. Galisanao recommended an amendment of
the Information, instead of a withdrawal thereof, to wit:
This is a Supplemental Memorandum to an earlier Memorandum
dated October 23, 2003 to the Honorable Tanodbayan, Simeon V.
Marcelo who directed the deferment of action on undersigned's
recommendation for the withdrawal of the Information.
As earlier found, the acquisition of the unbranded computer set was
questionable on the following grounds:
1. There was no public bidding and the mode of procurement was
by canvass.
2. Under Sec. 367 of the Local Government Code, procurement
through Personal Canvass requires approval of the Committee on
Awards. There was no committee approval to speak of in this case
because none has been constituted. This committee is supposed to
be composed of:
A. Local General Services Officer or the Municipal Treasurer;
b. Local Accountant;
c. The head of office of department for whose use the supplies are
being procured.
3. Purchases under this section allows municipalities outside Metro
Manila with the following limits:
Second and Third Class - Forty Thousand Pesos
(P40,000.00)
Fourth Class and Below - Twenty Thousand Pesos
(P20,000.00)
These limits are applicable for all items procured by any one (1)
month period only. The local government of San Manuel,
Pangasinan, incidentally, is a fourth class municipality.
It must be noted that the canvass made on all the stores/suppliers
were done by accused Treasurer Juanita Apostol and attested by
Mayor, Salvador Perez. To attest means to affirm to be correct, true
or genuine (Blacks Law Dictionary, Fifth Edition)[.]
In the earlier memorandum, there is no unanimity of conclusion as
far as the reasonableness of the purchase price of the computer set
is concern[ed]. However, the circumstances of its acquisition clearly
indicate that the public officials involved gave the supplier, Mobil
Link Enterprises/Starlet Sales Center, a private party, unwarranted
benefits, advantage or preference through manifest partiality,
evident bad faith or gross inexcusable negligence by paying much
more than the prevailing price for a comparable computer set in the
market.
This conclusion is derived from accused's deliberate disregard of the
rules on procurement discussed above. The Information must,
therefore, be amended to reflect the manner of the commission of
the offense. In regard to Prosecutor Elvira Chua's recommendation
which is endorsed by the Special Prosecutor, the issue of overpricing
must be referred to the appropriate office for further fact-finding
and probable administrative investigation for violation of COA rules
and RA 7160 otherwise, known as the Local Government Code of
1991.
In light of the foregoing, it is recommended that the Information be
amended instead of withdrawing the same. Further, the case of
overpricing be referred for fact-finding and possible administrative
investigation for violation of Secs. 362 and 367 of RA 7160,
otherwise known as the Local Government Code of 1991.
11

This time around, Special Prosecutor Villa-Ignacio approved the
Supplemental Memorandum and, pursuant thereto, Assistant
Special Prosecutor Galisanao filed a Motion for Leave to File
Amended Information dated 12 March 2004. The Amended
Information, which again charges petitioners Perez and Apostol for
violation of Sec. 3(e) of Republic Act No. 3019, provides:
That on or about January 21, 1998, or sometime prior or
subsequent thereto, in the Municipality of San Manuel, Pangasinan,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, SALVADOR PEREZ, being then the Municipal
Mayor and JUANITA A. APOSTOL, Municipal Treasurer of said
municipality, conspiring and confederating with one another,
committing the crime herein charged in relation to and taking
advantage of their official functions, through manifest partiality,
evident bad faith or gross inexcusable negligence, did then and
there, willfully, unlawfully and criminally, give unwarranted benefits,
advantage or preference in the discharge of official functions to
Mobil Link Enterprises/Starlet Sales Center causing the purchase of
one (1) computer unit costing P120,000.00, an acquisition by
personal canvass which is in violation of Sections 362 and 367 of RA
7160, thereby causing damage and prejudice to the Municipality of
San Manuel, Pangasinan.
12

The Sandiganbayan granted the motion in the first assailed
resolution, thus:
There having been no arraignment yet and the pre-maturity of the
amendment is of the prosecution's risk, the motion to Amend the
Information is GRANTED.
Accordingly, the Amended Information submitted by the prosecution
is admitted.
13

Petitioners filed a motion for reconsideration, but the same was
denied in the second assailed resolution:
The Court resolves to deny the Motion for Reconsideration filed by
the accused. Indeed, the power of a prosecuting prosecutor to
amend or cause the amendment of the information does not need
the approving authority of the Ombudsman. The Information was
maintained only with some amendments made which the Court feels
do not violate any law since there was no arraignment yet.
Accordingly, accused Motion for Reconsideration dated June 4, 2004
is denied for lack of merit.
14

Petitioners assail the foregoing Resolutions before this Court,
presenting the following issues for resolution:
1. Whether or not there is a denial of procedural due process on the
part of the petitioners when the Special Prosecutor filed the
Amended Information without authority from or the approval of the
Honorable Ombudsman, and against the latter's specific instruction;
2. Whether or not the Amended Information is valid in the absence
of such authority or approval of the Ombudsman under the
circumstances; andcralawlibrary
3. Whether or not respondent Sandiganbayan acted with grave
abuse of discretion amounting to lack or excess of jurisdiction, when
it admitted the Amended Information which bears no approval of
the Honorable Ombudsman, and against the latter's written
instruction to submit to him for approval the result of the re-study
before the filing of said Amended Information.
15

This is not the first time the respective powers of the Ombudsman
and the Special Prosecutor were pitted at loggerheads against each
other since these positions were reinvented in the 1987
Constitution. The Offices of the Ombudsman (now also called the
Tanodbayan) and the Special Prosecutor (then called the
Tanodbayan) were reintroduced, with modified powers and
designation, in the following provisions of Article XI of the
Constitution:
Sec. 5. There is hereby created the independent Office of the
Ombudsman, composed of the Ombudsman to be known as
Tanodbayan, one overall Deputy, and at least one Deputy each for
Luzon, Visayas and Mindanao. A separate Deputy for the military
establishment may likewise be appointed.
x x x
Sec. 7. The existing Tanodbayan shall hereafter be known as the
Office of the Special Prosecutor. It shall continue to function and
exercise its powers as now or hereafter may be provided by law,
except those conferred on the Office of the Ombudsman created
under this Constitution.
A judicial examination of the prosecutorial powers of these two
Constitutional positions came barely a year after the effectivity of
the 1987 Constitution, when then Special Prosecutor Raul Gonzalez
filed criminal cases against Antique Governor Enrique Zaldivar.
Zaldivar claimed that said cases were filed without legal and
constitutional authority since, under the 1987 Constitution, it is only
the Ombudsman (not the incumbent Tanodbayan who should now
be called the Special Prosecutor) who has the authority to file the
cases with the Sandiganbayan. In granting the petitions and
nullifying the criminal informations filed against Zaldivar, this Court
held:
Under the 1987 Constitution, the Ombudsman (as distinguished
from the incumbent Tanodbayan) is charged with the duty to:
"Investigate on its own, or on complaint by any person, any act or
omission of any public official, employee, office or agency, when
such act or omission appears to be illegal, unjust, improper or
inefficient." (Sec. 13, par. 1)
The Constitution likewise provides that:
"The existing Tanodbayan shall hereafter be known as the Office of
the Special Prosecutor. It shall continue to function and exercise its
powers as now or hereafter may be provided by law, except those
conferred on the Office of the Ombudsman created under this
Constitution." (Art. XI, Section 7) (Italics ours).
Now then, inasmuch as the aforementioned duty is given to the
Ombudsman, the incumbent Tanodbayan (called Special Prosecutor
under the 1987 constitution and who is supposed to retain powers
and duties NOT GIVEN to the Ombudsman) is clearly without
authority to conduct preliminary investigations and to direct the
filing of criminal cases with the Sandiganbayan, except upon orders
of the Ombudsman. This right to do so was lost effective February
2, 1987. From that time, he has been divested of such authority.
Under the present constitution, the Special Prosecutor (Raul
Gonzalez) is a mere subordinate of the Tanodbayan (Ombudsman)
and can investigate and prosecute cases only upon the latter's
authority or orders. The Special Prosecutor cannot initiate the
prosecution of cases but can only conduct the same if instructed to
do so by the Ombudsman. Even his original power to issue
subpoena, which he still claims under Section 10(d) of PD 1630, is
now deemed transferred to the Ombudsman, who may, however,
retain it in the Special Prosecutor in connection with the cases he is
ordered to investigate.
16
(Emphasis supplied.)
The following year, Republic Act No. 6770,
17
otherwise known as
The Ombudsman Act of 1989, was passed into law. Among other
things, said law:
1) expressly included the Special Prosecutor under the Office of the
Ombudsman;
18

2) gave the Special Prosecutor the power, under the supervision
and control and upon the authority of the Ombudsman, to conduct
preliminary investigation and prosecute criminal cases within the
jurisdiction of the Sandiganbayan, and to perform such other duties
assigned to it by the Ombudsman;
19
and, most importantly,
3) granted the Ombudsman the powers to:
Investigate and prosecute on its own or on complaint by any
person, any act or omission of any public officer or employee, office
or agency, when such act or omission appears to be illegal, unjust,
improper or inefficient. It has primary jurisdiction over cases
cognizable by the Sandiganbayan and, in the exercise of its primary
jurisdiction, it may take over, at any stage, from any investigatory
agency of the Government, the investigation of such cases.
20

A few years later, several persons charged in a complaint filed with
the Office of the Ombudsman (in connection with the alleged
summary execution of Kuratong Baleleng gang members) instituted
petitions for certiorari with this Court, claiming that it is the Special
Prosecutor which has jurisdiction to conduct the preliminary
investigation and file the proper information against them. In the
oral arguments, the parties agreed to limit the issues, with
petitioners praying for the re-examination of the Zaldivar ruling on
the argument that the Constitution did not give the Ombudsman
prosecutorial functions, and contending that the inclusion of the
Office of the Special Prosecutor as among the offices under the
Office of the Ombudsman in Section 3 of Republic Act No. 6770 is
unconstitutional.
In upholding Zaldivar, we held that while there was indeed an
intention to withhold prosecutorial functions from the Ombudsman,
the legislature nevertheless recommended that the Legislature
could, through statute, prescribe such other powers, functions and
duties to the Ombudsman.
21
Thus, paragraph 8, Section 13, Article
XI of the Constitution, provides that the Ombudsman may exercise
other functions and duties as may be provided by law.
22
Pursuant to
this authority, the Legislature enacted Republic Act No. 6770, which
granted prosecutorial powers to the Ombudsman.
On the claim that the inclusion of the Office of the Special
Prosecutor as among the offices under the Office of the Ombudsman
in Section 3 of Republic Act No. 6770 is unconstitutional, we
ratiocinated that:
The contention is not impressed with merit. Firstly, the petitioners
misconstrue Commissioner Romulo's statement as authority to
advocate that the intent of the framers of the 1987 Constitution was
to place the Office of the Special Prosecutor under the Office of the
President. The said statement obviously referred to the Tanodbayan
under P.D. No. 1630 - note how specific the erstwhile Commissioner
was in stating; ". . . as the decree now reads . . ." Further, in
complete contrast to the petitioner's stand, one of the principal
reasons for the proposal to withhold prosecutorial powers from the
Ombudsman was precisely to remove the office from presidential
control. x x x
x x x
In the second place, Section 7 of Article XI expressly provides that
the then existing Tanodbayan, to be henceforth known as the Office
of the Special Prosecutor, "shall continue to function and exercise its
powers as now or hereafter may be provided by law, except those
conferred on the Office of the Ombudsman created under this
Constitution." The underscored phrase evidently refers to the
Tanodbayan's powers under P.D. No. 1630 or subsequent
amendatory legislation. It follows then that Congress may remove
any of the Tanodbayan's/Special Prosecutor's powers under P.D. No.
1630 or grant it other powers, except those powers conferred by
the Constitution on the Office of the Ombudsman.
Pursuing the present line of reasoning, when one considers that by
express mandate of paragraph 8, Section 13, Article XI of the
Constitution, the Ombudsman may "exercise such other powers or
perform functions or duties as may be provided by law," it is
indubitable then that Congress has the power to place the Office of
the Special Prosecutor under the Office of the Ombudsman. In the
same vein, Congress may remove some of the powers granted to
the Tanodbayan by P.D. No. 1630 and transfer them to the
Ombudsman; or grant the Office of the Special Prosecutor such
other powers and functions and duties as Congress may deem fit
and wise. This Congress did through the passage of R.A No. 6770.
23

While it is clear that Acop v. Office of the Ombudsman upheld
Zaldivar v. Sandiganbayan insofar as the power of the Ombudsman
to prosecute cases is concerned, there has been a shift in its ratio
decidendi. Hence, it was pronounced that the authority of the
Ombudsman to prosecute was based on Republic Act No. 6770, as
authorized by paragraph 8, Section 13, Article XI of the
Constitution. This being the case, and considering that Republic Act
No. 6770 also gives the Special Prosecutor the power to prosecute
criminal cases (albeit under the supervision and control and under
the authority of the Ombudsman), was there likewise a modification
of our ruling in Zaldivar prohibiting the then Special Prosecutor to
initiate criminal cases unless authorized by the Ombudsman? Or
should there now be a presumed authority, pursuant to Republic Act
No. 6770, to prosecute cases unless prohibited by the
Ombudsman?cralaw library
The determination of this question is necessary in the case at bar,
where it is the petitioners' central contention that the
Sandiganbayan committed grave abuse of discretion amounting to
lack or excess in jurisdiction when it admitted the Amended
Information which, according to petitioners, bears no approval of
the Ombudsman, thus, constituting denial of procedural due
process.
24

Particularly, petitioners allege that the amendment of the
Information and the admission of the Amended Information is
premature, since the Ombudsman has not yet acted with finality on
the 23 October 2003 Memorandum.
25
The Ombudsman, by stating
in the marginal notes of the 23 October 2003 Memorandum that
"(t)he resolution of this case is deferred," and "(k)indly submit your
recommendation soonest," allegedly decreed that the
reinvestigation stage would not be completed until his final
determination.
26

Respondent People's defense is that compliance with the specific
instructions of the Ombudsman is merely an internal matter and the
alleged failure to heed the specific instructions of the Ombudsman is
speculative.
27

The marginal notes of Ombudsmen to the recommendations of
investigating prosecutors are hardly internal matters. In Cruz, Jr. v.
People,
28
Olivarez v. Sandiganbayan,
29
and Gallardo v. People,
30
the
marginal notes, even one-liners as in the case of Gallardo, were
judicially considered sufficient dispositions by the Ombudsmen and
Special Prosecutors concerned. We held in Olivarez that:
The mere fact that the order to file the information against
petitioner was contained in a marginal note is not sufficient to
impute arbitrariness or caprice on the part of respondent special
prosecutors, absent a clear showing that they gravely abused their
discretion in disapproving the recommendation of the investigating
prosecutors to dismiss or withdraw the case against petitioner. x x
x.
31

Was there, as petitioners assert, a violation of the orders of the
Ombudsman as stated in his marginal note?cralaw library
For reference, we reiterate the marginal note of Ombudsman
Marcelo dated 16 February 2004:
The resolution of this case is deferred. There are two modes of
violating Section 3(e) of RA 3019, to wit: a) causing undue injury or
b) giving unwarranted benefits, advantage or preference. OSP
should study whether the accused, assuming arguendo that there
was no overprice, gave unwarranted benefits, advantage or
preference to the seller of the subject computer. Kindly submit your
recommendation soonest.
32

Assistant Special Prosecutor Galisanao's Special Memorandum,
quoted in full in the narration of facts, show complete compliance
with Ombudsman Marcelo's order to "study whether the accused,
assuming arguendo that there was no overprice, gave unwarranted
benefits, advantage or preference to the seller of the subject
computer." Assistant Special Prosecutor Galisanao answered the
query in the affirmative, stating that unwarranted benefits,
advantage or preference were given to Mobil Link
Enterprises/Starlet Sales Center through the "deliberate disregard of
the rules on procurement discussed above."
Ombudsman Marcelo's order, however, to "(k)indly submit your
recommendation soonest," is another matter. The marginal note did
not indicate to whom the recommendation should be submitted. As
the recommendation was prepared by a subordinate in the Office of
the Special Prosecutor, would a submission to the Special
Prosecutor be sufficient compliance with the order of the
Ombudsman? What is imperative is that the recommendation be
submitted to someone who has the authority to implement such
recommendation, by authorizing the filing of the proper information.
Republic Act No. 6770, by conferring upon the Ombudsman the
power to prosecute, likewise grants to the Ombudsman the power
to authorize the filing of informations. As to the Special Prosecutor,
respondent People invokes the aforesaid authority of the
Ombudsman in Section 15(10) to delegate his powers, and claim
that there was a general delegation of the authority to approve the
filing of informations in Office Order No. 03-97, series of 2003
(dated 15 September 2003), and Office Order No. 40-05, series of
2005 (dated 4 April 2005).
Office Order No. 40-05 is a consolidation of several office orders,
including the aforementioned Office Order No. 03-97, which is thus
superceded by the former.
33
Office Order No. 40-05 provides:
In the exigency of the service, except when otherwise ordered by
the Ombudsman, the disposition of administrative and criminal
cases involving any of the following, viz:
1) City and Municipal mayors;
x x x
as the highest ranking respondent, where the offense charged
involves injury or damage amounting to, or valued at Two Million
Pesos (P2,000,000.00) or less, or where the maximum imposable
penalty for any of the offense charged does not exceed twenty (20)
years imprisonment, shall be subject to the final approval of the
Deputy Ombudsman concerned; provided, that, where the offense
charged involves injury or damage amounting to, or valued at, more
than Two Million Pesos (P2,000,000.00), or where the maximum
imposable penalty for any of the offense charged is more than
twenty (20) years imprisonment, the disposition shall be subject to
the final approval of the Ombudsman.
In the foregoing dispositions that are subject to the final approval of
the Deputy Ombudsman concerned, the undersigned hereby
delegates to the latter further authority to approve and sign any
corresponding criminal information, whether to be filed with the
regular courts or the Sandiganbayan; provided, however, that,
preparatory to the filing of the information with the Sandiganbayan,
the Office of the Special Prosecutor may review and modify the
same, subject to the approval of the Special Prosecutor, without
departing from, or varying in any way, the contents of the basic
Resolution, Order or Decision.
34

Contrary to the contention of respondent People, the delegation of
the power to authorize the filing of informations under Office Order
No. 40-05 was only made to Deputy Ombudsmen, and not to the
Special Prosecutor. All that was delegated to the Special Prosecutor
was the discretional
35
authority to review and modify the Deputy
Ombudsmen-authorized information, but even this is subject to the
condition that such modification must be "without departing from,
or varying in any way, the contents of the basic Resolution, Order or
Decision." Even the title of Office Order No. 40-05 betray the
contention of delegation to the Special Prosecutor: "DELEGATION
OF FINAL APPROVING AUTHORITY TO THE DEPUTY OMBUDSMAN
FOR LUZON, DEPUTY OMBUDSMAN FOR VISAYAS AND DEPUTY
OMBUDSMAN FOR MINDANAO."
Neither does it help that, under Section 11(4) of Republic Act No.
6770, the Special Prosecutor was given the rank and salary of
Deputy Ombudsman. In Office of the Ombudsman v. Valera,
36
this
Court held:
The petitioner's contention that since the Special Prosecutor is of
the same rank as that of a Deputy Ombudsman, then the former
can rightfully perform all the functions of the latter, including the
power to preventively suspend, is not persuasive. Under civil service
laws, rank classification determines the salary and status of
government officials and employees. Although there is substantial
equality in the level of their respective functions, those occupying
the same rank do not necessarily have the same powers nor
perform the same functions.
37

There being no express delegation of the power to prosecute, we
are constrained to go back to our main query: Is there an implied
delegation of the power to prosecute under Republic Act No. 6770,
such that Special Prosecutors are presumed to have been delegated
such power, in the absence of a prohibition from the Ombudsman?cralaw library
Republic Act No. 6770 provides:
(4) The Office of the Special Prosecutor shall, under the supervision
and control and upon the authority of the Ombudsman, have the
following powers:
(a) To conduct preliminary investigation and prosecute criminal
cases within the jurisdiction of the Sandiganbayan;
(b) To enter into plea-bargaining agreements; andcralawlibrary
(c) To perform such other duties assigned to it by the
Ombudsman.
38

This Court has defined the power of control as "the power of an
officer to alter or modify or nullify or set aside what a subordinate
officer had done in the performance of his duties and to substitute
the judgment of the former for that of the latter."
39
The power of
supervision, on the other hand, means "overseeing, or the power or
authority of an officer to see that subordinate officers perform their
duties."
40
Under the Administrative Code of 1987
41
:
Supervision and control shall include authority to act directly
whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify acts and
decisions of subordinate officials or units; determine priorities in the
execution of plans and programs; and prescribe standards,
guidelines, plans and programs. x x x
Springing from the power of control is the doctrine of qualified
political agency, wherein the acts of a subordinate bears the implied
approval of his superior, unless actually disapproved by the
latter.
42
Thus, taken with the powers of control and supervision, the
acts of Department Secretaries in the performance of their duties
are presumed to be the act of the President, unless and until the
President alters, modifies, or nullifies the same. By arguing that
"[w]hat is important is that the amended Information has not been
withdrawn, and or recalled by the Honorable Ombudsman, [a] clear
showing that the latter acknowledged/upheld the act of the Special
Prosecutor in signing the Amended Information,"
43
respondent
People claims that the doctrine of qualified political agency should
be applied as well to the relationship between the Ombudsman and
the Special Prosecutor.
Petitioners counter that the doctrine of qualified political agency
does not apply to the Office of the Ombudsman, since the latter is
an apolitical agency, and is far different from the bureaucracy to
which said doctrine applies.
44

Petitioners are correct.
The doctrine of qualified political agency was adopted in our system
of government on the following pronouncement of this Court in
Villena v. The Secretary of the Interior
45
:
After serious reflection, we have decided to sustain the contention
of the government in this case on the broad proposition, albeit not
suggested, that under the presidential type of government which we
have adopted and considering the departmental organization
established and continued in force by paragraph 1, section 12,
Article VII, of our Constitution, all executive and administrative
organizations are adjuncts of the Executive Department, the heads
of the various executive departments are assistants and agents of
the Chief Executive, and, except in cases where the Chief Executive
is required by the Constitution or the law to act in person or the
exigencies of the situation demand that he act personally, the
multifarious executive and administrative functions of the Chief
Executive are performed by and through the executive departments,
and the acts of the secretaries of such departments, performed and
promulgated in the regular course of business, are, unless
disapproved or reprobated by the Chief Executive, presumptively
the acts of the Chief Executive. (Runkle v. United States [1887].
122 U.S., 543; 30 Law. ed., 1167; 7 Sup. Ct. Rep., 1141; see also
U. S. v. Eliason [1839], 16 Pet., 291; 10 Law. ed., 968; Jones v. U.
S. [1890], 137 U.S., 202; 34 Law. ed., 691; 11 Sup. Ct., Rep., 80;
Wolsey v. Chapman [1880], 101 U.S., 755; 25 Law. ed., 915;
Wilcox v. Jackson [1836], 13 Pet., 498; 10 Law. ed., 264.)
46

While we do not underestimate the quantity of work in the hands of
the Office of the Ombudsman, the same simply does not measure
up to the workload of the Office of the President as to necessitate
having the Special Prosecutor as an alter ego of the Ombudsman. In
any case, the Office of the Ombudsman could very well make a
general delegation of powers to the Special Prosecutor, if it is so
desired. An examination of the office orders issued by the
Ombudsman, however, reveal that there had been no such intention
to make a general delegation.
Indeed, a statute granting powers to an agency created by the
Constitution should be liberally construed for the advancement of
the purposes and objectives for which it was created.
47
Yet, the
Ombudsman would be severely hampered from exercising his power
of control if we are to allow the Special Prosecutor to authorize the
filing of informations in the first instance. This is because while the
Ombudsman has full discretion to determine whether or not a
criminal case should be filed in the Sandiganbayan, once the case
has been filed with said court, it is the Sandiganbayan, and no
longer the Ombudsman, which has full control of the case so much
so that the informations may not be dismissed, without the approval
of the said court.
48

We, therefore, resolve to grant the Petition. We realize that, once
transmitted to the new Ombudsman, she can so easily approve the
8 March 2004 Supplemental Memorandum of Assistant Special
Prosecutor Galisanao, and the same Amended Information can be
filed in no time. However, when the law entails a specific procedure
to be followed, unwarranted shortcuts lead to the violation of the
sacred right to due process, which we cannot countenance.
Finally, as regards other informations authorized by the Special
Prosecutor to be filed without the approval of the Ombudsman, we
also recognize that the former prevailing interpretation of the law
may shield these informations from illegality. Such reliance upon
the operative fact, however, would cease upon the finality of this
Decision.
WHEREFORE, the instant Petition for Certiorari is GRANTED. The
assailed Resolutions of the Sandiganbayan admitting the Amended
Information is SET ASIDE. Let the 8 March 2004 Supplemental
Memorandum of Assistant Special Prosecutor III Warlito F.
Galisanao be TRANSMITTED to the Office of the Ombudsman for
approval or disapproval.
SO ORDERED.

















Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 141309 June 19, 2007
LIWAYWAY VINZONS-CHATO, petitioner,
vs.
FORTUNE TOBACCO CORPORATION, respondent.
D E C I S I O N
YNARES-SANTIAGO, J .:
Petitioner assails the May 7, 1999 Decision
1
of the Court of Appeals in CA-G.R. SP No. 47167,
which affirmed the September 29, 1997 Order
2
of the Regional Trial Court (RTC) of Marikina, Branch
272, in Civil Case No. 97-341-MK, denying petitioners motion to dismiss. The complaint filed by
respondent sought to recover damages for the alleged violation of its constitutional rights arising
from petitioners issuance of Revenue Memorandum Circular No. 37-93 (RMC 37-93), which the
Court declared invalid in Commissioner of Internal Revenue v. Court of Appeals.
3

Petitioner Liwayway Vinzons-Chato was then the Commissioner of Internal Revenue while
respondent Fortune Tobacco Corporation is an entity engaged in the manufacture of different brands
of cigarettes, among which are "Champion," "Hope," and "More" cigarettes.
On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA 7654), which took effect on
July 3, 1993. Prior to its effectivity, cigarette brands Champion," "Hope," and "More" were
considered local brands subjected to an ad valorem tax at the rate of 20-45%. However, on July 1,
1993, or two days before RA 7654 took effect, petitioner issued RMC 37-93 reclassifying
"Champion," "Hope," and "More" as locally manufactured cigarettes bearing a foreign
brand subject to the 55% ad valorem tax.
4
RMC 37-93 in effect subjected "Hope," "More,"
and"Champion" cigarettes to the provisions of RA 7654, specifically, to Sec. 142,
5
(c)(1) on locally
manufactured cigarettes which are currently classified and taxed at 55%, and which imposes
an ad valorem tax of "55% provided that the minimum tax shall not be less than Five Pesos (P5.00)
per pack."
6

On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor A. Deoferio, Jr.
sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in
particular. On July 15, 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of
RMC 37-93. On July 20, 1993, respondent filed a motion for reconsideration requesting the recall of
RMC 37-93, but was denied in a letter dated July 30, 1993.
7
The same letter assessed respondent
for ad valorem tax deficiency amounting to P9,598,334.00 (computed on the basis of RMC 37-93)
and demanded payment within 10 days from receipt thereof.
8
On August 3, 1993, respondent filed a
petition for review with the Court of Tax Appeals (CTA), which on September 30, 1993, issued an
injunction enjoining the implementation of RMC 37-93.
9
In its decision dated August 10, 1994, the
CTA ruled that RMC 37-93 is defective, invalid, and unenforceable and further enjoined petitioner
from collecting the deficiency tax assessment issued pursuant to RMC No. 37-93. This ruling was
affirmed by the Court of Appeals, and finally by this Court in Commissioner of Internal Revenue v.
Court of Appeals.
10
It was held, among others, that RMC 37-93, has fallen short of the requirements
for a valid administrative issuance.
On April 10, 1997, respondent filed before the RTC a complaint
11
for damages against petitioner in
her private capacity. Respondent contended that the latter should be held liable for damages under
Article 32 of the Civil Code considering that the issuance of RMC 37-93 violated its constitutional
right against deprivation of property without due process of law and the right to equal protection of
the laws.
Petitioner filed a motion to dismiss
12
contending that: (1) respondent has no cause of action against
her because she issued RMC 37-93 in the performance of her official function and within the scope
of her authority. She claimed that she acted merely as an agent of the Republic and therefore the
latter is the one responsible for her acts; (2) the complaint states no cause of action for lack of
allegation of malice or bad faith; and (3) the certification against forum shopping was signed by
respondents counsel in violation of the rule that it is the plaintiff or the principal party who should
sign the same.
On September 29, 1997, the RTC denied petitioners motion to dismiss holding that to rule on the
allegations of petitioner would be to prematurely decide the merits of the case without allowing the
parties to present evidence. It further held that the defect in the certification against forum shopping
was cured by respondents submission of the corporate secretarys certificate authorizing its counsel
to execute the certification against forum shopping. The dispositive portion thereof, states:
WHEREFORE, foregoing premises considered, the motion to dismiss filed by the defendant
Liwayway Vinzons-Chato and the motion to strike out and expunge from the record the said
motion to dismiss filed by plaintiff Fortune Tobacco Corporation are both denied on the
grounds aforecited. The defendant is ordered to file her answer to the complaint within ten
(10) days from receipt of this Order.
SO ORDERED.
13

The case was elevated to the Court of Appeals via a petition for certiorari under Rule 65. However,
same was dismissed on the ground that under Article 32 of the Civil Code, liability may arise even if
the defendant did not act with malice or bad faith. The appellate court ratiocinated that Section 38,
Book I of the Administrative Code is the general law on the civil liability of public officers while Article
32 of the Civil Code is the special law that governs the instant case. Consequently, malice or bad
faith need not be alleged in the complaint for damages. It also sustained the ruling of the RTC that
the defect of the certification against forum shopping was cured by the submission of the corporate
secretarys certificate giving authority to its counsel to execute the same.
Undaunted, petitioner filed the instant recourse contending that the suit is grounded on her acts
done in the performance of her functions as a public officer, hence, it is Section 38, Book I of the
Administrative Code which should be applied. Under this provision, liability will attach only when
there is a clear showing of bad faith, malice, or gross negligence. She further averred that the Civil
Code, specifically, Article 32 which allows recovery of damages for violation of constitutional rights,
is a general law on the liability of public officers; while Section 38, Book I of the Administrative Code
is a special law on the superior public officers liability, such that, if the complaint, as in the instant
case, does not allege bad faith, malice, or gross negligence, the same is dismissible for failure to
state a cause of action. As to the defect of the certification against forum shopping, she urged the
Court to strictly construe the rules and to dismiss the complaint.
Conversely, respondent argued that Section 38 which treats in general the public officers "acts" from
which civil liability may arise, is a general law; while Article 32 which deals specifically with the public
officers violation of constitutional rights, is a special provision which should determine whether the
complaint states a cause of action or not. Citing the case of Lim v. Ponce de Leon,
14
respondent
alleged that under Article 32 of the Civil Code, it is enough that there was a violation of the
constitutional rights of the plaintiff and it is not required that said public officer should have acted with
malice or in bad faith. Hence, it concluded that even granting that the complaint failed to allege bad
faith or malice, the motion to dismiss for failure to state a cause of action should be denied inasmuch
as bad faith or malice are not necessary to hold petitioner liable.
The issues for resolution are as follows:
(1) May a public officer be validly sued in his/her private capacity for acts done in connection
with the discharge of the functions of his/her office?
(2) Which as between Article 32 of the Civil Code and Section 38, Book I of the
Administrative Code should govern in determining whether the instant complaint states a
cause of action?
(3) Should the complaint be dismissed for failure to comply with the rule on certification
against forum shopping?
(4) May petitioner be held liable for damages?
On the first issue, the general rule is that a public officer is not liable for damages which a person
may suffer arising from the just performance of his official duties and within the scope of his
assigned tasks.
15
An officer who acts within his authority to administer the affairs of the office which
he/she heads is not liable for damages that may have been caused to another, as it would virtually
be a charge against the Republic, which is not amenable to judgment for monetary claims without its
consent.
16
However, a public officer is by law not immune from damages in his/her personal capacity
for acts done in bad faith which, being outside the scope of his authority, are no longer protected by
the mantle of immunity for official actions.
17

Specifically, under Section 38, Book I of the Administrative Code, civil liability may arise where there
is bad faith, malice, or gross negligence on the part of a superior public officer. And, under Section
39 of the same Book, civil liability may arise where the subordinate public officers act is
characterized by willfulness or negligence. Thus
Sec. 38. Liability of Superior Officers. (1) A public officer shall not be civilly liable for acts
done in the performance of his official duties, unless there is a clear showing of bad faith,
malice or gross negligence.
x x x x
Section 39. Liability of Subordinate Officers. No subordinate officer or employee shall
be civilly liable for acts done by him in good faith in the performance of his duties. However,
he shall be liable for willful or negligent acts done by him which are contrary to law, morals,
public policy and good customs even if he acts under orders or instructions of his superior.
In addition, the Court held in Cojuangco, Jr. v. Court of Appeals,
18
that a public officer who directly or
indirectly violates the constitutional rights of another, may be validly sued for damages under Article
32 of the Civil Code even if his acts were not so tainted with malice or bad faith.
Thus, the rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity
for acts done in the course of the performance of the functions of the office, where said public officer:
(1) acted with malice, bad faith, or negligence; or (2) where the public officer violated a constitutional
right of the plaintiff.
Anent the second issue, we hold that the complaint filed by respondent stated a cause of action and
that the decisive provision thereon is Article 32 of the Civil Code.
A general statute is one which embraces a class of subjects or places and does not omit any subject
or place naturally belonging to such class. A special statute, as the term is generally understood, is
one which relates to particular persons or things of a class or to a particular portion or section of the
state only.
19

A general law and a special law on the same subject are statutes in pari materia and should,
accordingly, be read together and harmonized, if possible, with a view to giving effect to both. The
rule is that where there are two acts, one of which is special and particular and the other general
which, if standing alone, would include the same matter and thus conflict with the special act, the
special law must prevail since it evinces the legislative intent more clearly than that of a general
statute and must not be taken as intended to affect the more particular and specific provisions of the
earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning
at all.
20

The circumstance that the special law is passed before or after the general act does not change the
principle. Where the special law is later, it will be regarded as an exception to, or a qualification of,
the prior general act; and where the general act is later, the special statute will be construed as
remaining an exception to its terms, unless repealed expressly or by necessary implication.
21

Thus, in City of Manila v. Teotico,
22
the Court held that Article 2189 of the Civil Code which holds
provinces, cities, and municipalities civilly liable for death or injuries by reason of defective
conditions of roads and other public works, is a special provision and should prevail over Section 4
of Republic Act No. 409, the Charter of Manila, in determining the liability for defective street
conditions. Under said Charter, the city shall not be held for damages or injuries arising from the
failure of the local officials to enforce the provision of the charter, law, or ordinance, or from
negligence while enforcing or attempting to enforce the same. As explained by the Court:
Manila maintains that the former provision should prevail over the latter, because Republic
Act 409 is a special law, intended exclusively for the City of Manila, whereas the Civil Code
is a general law, applicable to the entire Philippines.
The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true
that, insofar as its territorial application is concerned, Republic Act No. 409 is a special law
and the Civil Code a general legislation; but, as regards the subject matter of the provisions
above quoted, Section 4 of Republic Act 409 establishes a general rule regulating the liability
of the City of Manila for "damages or injury to persons or property arising from the failure of"
city officers "to enforce the provisions of" said Act "or any other law or ordinance, or from
negligence" of the city "Mayor, Municipal Board, or other officers while enforcing or
attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code
constitutes a particular prescription making "provinces, cities and municipalities . . . liable for
damages for the death of, or injury suffered by, any person by reason" specifically "of
the defective condition of roads, streets, bridges, public buildings, and other public works
under their control or supervision." In other words, said section 4 refers to liability arising
from negligence, in general, regardless of the object thereof, whereas Article 2189
governs liability due to "defective streets," in particular. Since the present action is
based upon the alleged defective condition of a road, said Article 2189 is decisive
thereon.
23

In the case of Bagatsing v. Ramirez,
24
the issue was which law should govern the publication of a tax
ordinance, the City Charter of Manila, a special act which treats ordinances in general and which
requires their publication before enactment and after approval, or the Tax Code, a general law,
which deals in particular with "ordinances levying or imposing taxes, fees or other charges," and
which demands publication only after approval. In holding that it is the Tax Code which should
prevail, the Court elucidated that:
There is no question that the Revised Charter of the City of Manila is a special act since it
relates only to the City of Manila, whereas the Local Tax Code is a general law because it
applies universally to all local governments. Blackstone defines general law as a universal
rule affecting the entire community and special law as one relating to particular persons or
things of a class. And the rule commonly said is that a prior special law is not ordinarily
repealed by a subsequent general law. The fact that one is special and the other general
creates a presumption that the special is to be considered as remaining an exception of the
general, one as a general law of the land, the other as the law of a particular case. However,
the rule readily yields to a situation where the special statute refers to a subject in
general, which the general statute treats in particular. Th[is] exactly is the
circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the
City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and
scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances
levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to
ordinances in general, the Revised Charter of the City of Manila is doubtless
dominant, but, that dominant force loses its continuity when it approaches the realm
of "ordinances levying or imposing taxes, fees or other charges" in particular. There,
the Local Tax Code controls. Here, as always, a general provision must give way to a
particular provision. Special provision governs.
Let us examine the provisions involved in the case at bar. Article 32 of the Civil Code provides:
ART. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates, or in any manner impedes or impairs any of the following rights
and liberties of another person shall be liable to the latter for damages:
x x x x
(6) The right against deprivation of property without due process of law;
x x x x
(8) The right to the equal protection of the laws;
x x x x
The rationale for its enactment was explained by Dean Bocobo of the Code Commission, as follows:
"DEAN BOCOBO. Article 32, regarding individual rights, Attorney Cirilo Paredes proposes
that Article 32 be so amended as to make a public official liable for violation of another
persons constitutional rights only if the public official acted maliciously or in bad faith. The
Code Commission opposes this suggestion for these reasons:
"The very nature of Article 32 is that the wrong may be civil or criminal. It is not necessary
therefore that there should be malice or bad faith. To make such a requisite would defeat the
main purpose of Article 32 which is the effective protection of individual rights. Public officials
in the past have abused their powers on the pretext of justifiable motives or good faith in the
performance of their duties. Precisely, the object of the Article is to put an end to official
abuse by the plea of good faith. In the United States this remedy is in the nature of a tort.
"Mr. Chairman, this article is firmly one of the fundamental articles introduced in the New
Civil Code to implement democracy. There is no real democracy if a public official is abusing
and we made the article so strong and so comprehensive that it concludes an abuse of
individual rights even if done in good faith, that official is liable. As a matter of fact, we know
that there are very few public officials who openly and definitely abuse the individual rights of
the citizens. In most cases, the abuse is justified on a plea of desire to enforce the law to
comply with ones duty. And so, if we should limit the scope of this article, that would
practically nullify the object of the article. Precisely, the opening object of the article is to put
an end to abuses which are justified by a plea of good faith, which is in most cases the plea
of officials abusing individual rights."
25

The Code Commission deemed it necessary to hold not only public officers but also private
individuals civilly liable for violation of the rights enumerated in Article 32 of the Civil Code. It is not
necessary that the defendant under this Article should have acted with malice or bad faith,
otherwise, it would defeat its main purpose, which is the effective protection of individual rights. It
suffices that there is a violation of the constitutional right of the plaintiff.
26

Article 32 was patterned after the "tort" in American law.
27
A tort is a wrong, a tortious act which has
been defined as the commission or omission of an act by one, without right, whereby another
receives some injury, directly or indirectly, in person, property, or reputation.
28
There are cases in
which it has been stated that civil liability in tort is determined by the conduct and not by the mental
state of the tortfeasor, and there are circumstances under which the motive of the defendant has
been rendered immaterial. The reason sometimes given for the rule is that otherwise, the mental
attitude of the alleged wrongdoer, and not the act itself, would determine whether the act was
wrongful.
29
Presence of good motive, or rather, the absence of an evil motive, does not render lawful
an act which is otherwise an invasion of anothers legal right; that is, liability in tort is not precluded
by the fact that defendant acted without evil intent.
30

The clear intention therefore of the legislature was to create a distinct cause of action in the nature of
tort for violation of constitutional rights, irrespective of the motive or intent of the defendant.
31
This is
a fundamental innovation in the Civil Code, and in enacting the Administrative Code pursuant to the
exercise of legislative powers, then President Corazon C. Aquino, could not have intended to
obliterate this constitutional protection on civil liberties.
In Aberca v. Ver,
32
it was held that with the enactment of Article 32, the principle of accountability of
public officials under the Constitution acquires added meaning and assumes a larger dimension. No
longer may a superior official relax his vigilance or abdicate his duty to supervise his subordinates,
secure in the thought that he does not have to answer for the transgressions committed by the latter
against the constitutionally protected rights and liberties of the citizen. Part of the factors that
propelled people power in February 1986 was the widely held perception that the government was
callous or indifferent to, if not actually responsible for, the rampant violations of human rights. While
it would certainly be too naive to expect that violators of human rights would easily be deterred by
the prospect of facing damage suits, it should nonetheless be made clear in no uncertain terms that
Article 32 of the Civil Code makes the persons who are directly, as well as indirectly, responsible for
the transgression, joint tortfeasors.
On the other hand, Sections 38 and 39, Book I of the Administrative Code, laid down the rule on the
civil liability of superior and subordinate public officers for acts done in the performance of their
duties. For both superior and subordinate public officers, the presence of bad faith, malice, and
negligence are vital elements that will make them liable for damages. Note that while said provisions
deal in particular with the liability of government officials, the subject thereof is general, i.e., "acts"
done in the performance of official duties, without specifying the action or omission that may give
rise to a civil suit against the official concerned.
Contrarily, Article 32 of the Civil Code specifies in clear and unequivocal terms a particular specie of
an "act" that may give rise to an action for damages against a public officer, and that is, a tort for
impairment of rights and liberties. Indeed, Article 32 is the special provision that deals specifically
with violation of constitutional rights by public officers. All other actionable acts of public officers are
governed by Sections 38 and 39 of the Administrative Code. While the Civil Code, specifically, the
Chapter on Human Relations is a general law, Article 32 of the same Chapter is a special and
specific provision that holds a public officer liable for and allows redress from a particular class of
wrongful acts that may be committed by public officers. Compared thus with Section 38 of the
Administrative Code, which broadly deals with civil liability arising from errors in the performance of
duties, Article 32 of the Civil Code is the specific provision which must be applied in the instant case
precisely filed to seek damages for violation of constitutional rights.
The complaint in the instant case was brought under Article 32 of the Civil Code. Considering that
bad faith and malice are not necessary in an action based on Article 32 of the Civil Code, the failure
to specifically allege the same will not amount to failure to state a cause of action. The courts below
therefore correctly denied the motion to dismiss on the ground of failure to state a cause of action,
since it is enough that the complaint avers a violation of a constitutional right of the plaintiff.
Anent the issue on non-compliance with the rule against forum shopping, the subsequent
submission of the secretarys certificate authorizing the counsel to sign and execute the certification
against forum shopping cured the defect of respondents complaint. Besides, the merits of the
instant case justify the liberal application of the rules.
33

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of
Appeals dated May 7, 1999 which affirmed the Order of the Regional Trial Court of Marikina, Branch
272, denying petitioners motion to dismiss, is AFFIRMED. The Presiding Judge, Regional Trial
Court of Marikina, Branch 272, is hereby DIRECTEDto continue with the proceedings in Civil Case
No. 97-341-MK with dispatch.
With costs.
SO ORDERED.



Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND
CONSTRUCTION SUPPLY, Respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision
1
dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345
which affirmed with modification the Decision
2
of the Regional Trial Court, Branch 41, San Fernando,
Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and
Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January
27, 1992. Respondent, doing business under the name and style Carwin Construction and
Construction Supply (Carwin Construction), was pre-qualified together with two other contractors.
Since respondent submitted the lowest bid, he was awarded the contract for the concreting
of Sitio 5 Bahay Pare.
3
On November 4, 1992, a Contract Agreement was executed by respondent
and petitioner.
4
On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to
Proceed with the concreting of Sitio 5 Bahay Pare.
5
Accordingly, respondent undertook the works,
made advances for the purchase of the materials and payment for labor costs.
6

On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga
conducted a final inspection of the project and found it 100% completed in accordance with the
approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates
of Final Inspection and Final Acceptance.
7

Thereafter, respondent sought to collect payment for the completed project.
8
The DPWH prepared
the Disbursement Voucher in favor of petitioner.
9
However, the DPWH withheld payment from
respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release
of funds on the ground that the contractors license of respondent had expired at the time of the
execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department
on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects
were valid and effective although its contractors license had already expired when the projects were
contracted.
10

In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal
Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the
Contractors License Law, does not provide that a contract entered into after the license has expired
is void and there is no law which expressly prohibits or declares void such contract, the contract is
enforceable and payment may be paid, without prejudice to any appropriate administrative liability
action that may be imposed on the contractor and the government officials or employees
concerned.
11

In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal
Department on whether Carwin Construction should be paid for works accomplished despite an
expired contractors license at the time the contracts were executed.
12

In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department,
recommended that payment should be made to Carwin Construction, reiterating his earlier legal
opinion.
13
Despite such recommendation for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages
against petitioner before the RTC.
14

On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion
to Dismiss the complaint on the grounds that the complaint states no cause of action and that the
RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the
decision of the District Auditor to disapprove the claim.
15

Following the submission of respondents Opposition to Motion to Dismiss,
16
the RTC issued an
Order dated March 11, 1996 denying the Motion to Dismiss.
17
The OSG filed a Motion for
Reconsideration
18
but it was likewise denied by the RTC in its Order dated May 23, 1996.
19

On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of
administrative remedies and the doctrine of non-suability of the State.
20

Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which
reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the
plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San
Fernando, Pampanga, to pay the following:
a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare,
Candaba, Pampanga plus interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.
21

The RTC held that petitioner must be required to pay the contract price since it has accepted the
completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long
standing and consistent pronouncement against enriching oneself at the expense of another.
22

Dissatisfied, petitioner filed an appeal with the CA.
23
On April 28, 2003, the CA rendered its Decision
sustaining the Decision of the RTC. It held that since the case involves the application of the
principle of estoppel against the government which is a purely legal question, then the principle of
exhaustion of administrative remedies does not apply; that by its actions the government is estopped
from questioning the validity and binding effect of the Contract Agreement with the respondent; that
denial of payment to respondent on purely technical grounds after successful completion of the
project is not countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which
reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the
interest shall be six percent (6%) per annum computed from June 21, 1995.
SO ORDERED.
24

Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF
ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO
RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT.
25

Petitioner contends that respondents recourse to judicial action was premature since the proper
remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section
48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing
Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim
against the government under Section 2(1),
26
Article IX of the 1987 Constitution and Section 26
27
of
P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the
principle of primary jurisdiction results in a lack of cause of action.
Respondent, on the other hand, in his Memorandum
28
limited his discussion to Civil Code provisions
relating to human relations. He submits that equity demands that he be paid for the work performed;
otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered
nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its
inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the court, he should first avail of
all the means afforded him by administrative processes.
29
The issues which administrative agencies
are authorized to decide should not be summarily taken from them and submitted to a court without
first giving such administrative agency the opportunity to dispose of the same after due
deliberation.
30

Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary
jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact.
31

Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of
primary jurisdiction, which are based on sound public policy and practical considerations, are not
inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the
part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will
irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to
make the rule impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice;
32
(f) where judicial intervention is urgent; (g)
when its application may cause great and irreparable damage; (h) where the controverted acts
violate due process; (i) when the issue of non-exhaustion of administrative remedies has been
rendered moot;
33
(j) when there is no other plain, speedy and adequate remedy; (k) when strong
public interest is involved; and, (l) in quo warranto proceedings.
34
Exceptions (c) and (e) are
applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that
payment to a contractor with an expired contractors license is proper, respondent remained unpaid
for the completed work despite repeated demands. Clearly, there was unreasonable delay and
official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of its contract
is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an
examination of the probative value of the evidence presented by the parties. There is a question of
law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to
the truth or the falsehood of alleged facts.
35
Said question at best could be resolved
only tentatively by the administrative authorities. The final decision on the matter rests not with them
but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing
of an administrative nature is to be or can be done.
36
The issue does not require technical knowledge
and experience but one that would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim
against the Government, and, under Section 48
37
of P.D. No. 1445, the administrative remedy
available to respondent is an appeal of the denial of his claim by the District Auditor to the COA
itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for
specific performance and damages was not prematurely filed and within the jurisdiction of the RTC
to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in
Rocamora v. RTC-Cebu (Branch VIII):
38

The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the
Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by
the government. The road had been completed; the Pope had come and gone; but the plaintiffs had
yet to be paid for the properties taken from them. Given this official indifference, which apparently
would continue indefinitely, the private respondents had to act to assert and protect their interests.
39

On the question of whether a contractor with an expired license is entitled to be paid for completed
projects, Section 35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to
submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a
supervisory capacity of a construction work within the purview of this Act, without first securing a
license to engage in the business of contracting in this country; or who shall present or file the
license certificate of another, give false evidence of any kind to the Board, or any member thereof in
obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or
license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a
fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain
and free from ambiguity, it must be given its literal meaning and applied without interpretation.
40
This
rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by the legislature in a statute correctly express its
intention or will and preclude the court from construing it differently. The legislature is presumed to
know the meaning of the words, to have used words advisedly, and to have expressed its intent by
use of such words as are found in the statute.
41
Verba legis non est recedendum, or from the words
of a statute there should be no departure.
42

The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void
contracts entered into by a contractor whose license had already expired. Nonetheless, such
contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for
the projects he completed. Such payment, however, is without prejudice to the payment of the fine
prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of anothers injury) states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as "basic principles to be observed for the rightful relationship between human beings
and for the stability of the social order, x x x designed to indicate certain norms that spring from the
fountain of good conscience, x x x guides human conduct [that] should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice."
43
The rules thereon apply equally well to the Government.
44
Since respondent
had rendered services to the full satisfaction and acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the finished project at no cost would
undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such
unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court
of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to
costs.





EN BANC

LORNA A. MEDINA, G.R. No. 176478
Petitioner,

Present:

PUNO, C.J.,
QUISUMBING,
- versus - YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
COMMISSION ON AUDIT AZCUNA,
(COA), represented by the TINGA,
Audit Team of EUFROCINIA CHICO-NAZARIO,
*

MAWAK, SUSAN PALLERNA, VELASCO, JR.,
and MA. DOLORES TEPORA, NACHURA,
Respondents. REYES, and
LEONARDO DE
CASTRO, JJ. Promu
lgated:

February 4, 2008

x------------------------------------------------------------------------------------ x

DECISION

TINGA, J.:

While highlighting the interplay between the powers of two constitutional
offices, one mandated as the government monitor of public fund expenditures
and the other as the sentinel against graft and corruption in government, this
case resolves some questions about the extent of their powers.

This is a petition for review on certiorari
[1]
under Rule 45 of the 1997 Rules
of Civil Procedure seeking the reversal of the Decision
[2]
and Resolution
[3]
of the
Court of Appeals in CA-G.R. SP No. 89539. The Court of Appeals decision affirmed
the two joint orders issued by the Office of the Deputy Ombudsman
for Luzon finding herein petitioner Lorna A. Medina guilty of grave misconduct
and dishonesty. The Resolution of the same court denied petitioners motion for
reconsideration of the said decision.

The instant petition originated from the audit conducted by respondent
Commission on Audit (COA) on the cash and accounts handled by petitioner in
her official capacity as Municipal Treasurer of General Mariano Alvarez, Cavite. In
the Joint Affidavit
[4]
executed by herein respondents Eufrocinia M. Mawak, head
of the audit team, and Susana L. Pallerna, Ma. Dolores C. Tepora and a certain
Nelson T. Alvarez, who were all state auditors of the Provincial Auditors Office of
Cavite, they all stated that they had examined petitioners financial records
covering 19 August 1999 to 26 September 2000 and discovered a total cash
shortage in the aggregate amount of P4,080,631.36. They thus directed petitioner
to immediately restitute the shortage within 72 hours from receipt of the demand
letter but petitioner allegedly failed to comply. The state auditors submitted a
report to the Provincial Auditors Office and recommended the relief of petitioner
from her post as municipal treasurer and the filing of criminal charges against her.

COA, represented by the aforementioned state auditors, filed an
administrative case docketed as OMB-L-A-04-0361-F before the Office of the
Deputy Ombudsman for Luzon, charging petitioner with grave misconduct and
dishonesty. As directed, petitioner filed a Counter-Affidavit
[5]
and a Position
Paper
[6]
mainly raising the following defenses: (1) the audit team was not
independent and competent; (2) the computation of her accountabilities was
overstated and erroneous; (3) the audit team failed to verify documents such as
bank reconciliation statements, general ledgers and cashbooks presented during
the cash count; (4) the documents in support of the audit report were not signed,
hence, were self-serving; (5) the cash shortage in the amount of P379,646.51
under the SEF and Trust Fund as well as the disallowed amount of P585,803.37
had no basis as the same pertained to a previous audit and, thus, should have
been excluded from the computation of the total shortage; (6) the cash items
amounting to P883,952.91 in the form of reimbursement expense receipts should
not have been disallowed because they were actually received by individual
payees; (7) petitioners cash on hand accountability was overstated because a
collection was not immediately recorded; and (8) the audit team erroneously
credited petitioners accounts to another cashier.

In a Decision
[7]
dated 8 November 2004, Deputy Ombudsman Victor C.
Fernandez approved the recommendation of the Graft Investigation and
Prosecution Officer to dismiss petitioner from service based on the existence of
substantial evidence of a discrepancy in petitioners account
totaling P4,080,631.36. The said decision noted petitioners supposed failure to
file a counter-affidavit and position paper despite due notice.

On 29 November 2004, petitioner filed an urgent motion
[8]
stating that she
complied with the directive to file a counter-affidavit and position paper and
praying that the defenses therein be considered in reversing the8 November
2004 decision. The motion was treated as a motion for reconsideration of the
said decision.

On 31 January 2005, Deputy Ombudsman Fernandez issued the first
assailed Joint Order
[9]
denying petitioners urgent motion. Although the order
acknowledged the erroneous statement in the 8 November 2004Decision stating
that petitioner failed to submit a counter-affidavit, nevertheless, it affirmed the
Resolution and Decision both dated 8 November 2004. Deputy Ombudsman
Fernandez ruled that petitioners Counter-Affidavit and Position Paper did not
present exculpatory arguments that would negate the allegation of discrepancy
on petitioners accounts. He also held that petitioners concerns relating to the
conduct of the audit should have been raised at the time of the audit or
immediately thereafter, and that petitioners failure to produce the amount of
cash shortage despite demand created a presumption that she appropriated
public funds under her custody for her own personal use.
[10]


Petitioner sought reconsideration
[11]
on grounds of newly discovered and
material evidence and grave errors of fact and/or law prejudicial to her own
interest. The purported newly discovered evidence consisted of petitioners
request for reconsideration of the audit report filed and still pending before the
office of the audit team head, herein respondent Mawak, and letters sent by
petitioners counsel to the provincial auditor of Cavite questioning the audit and
requesting a re-audit of petitioners accounts.

In the second assailed Joint Order dated 22 March 2005,
[12]
Deputy
Ombudsman Fernandez denied petitioners motion for reconsideration. He
reiterated that petitioners allegations as regards the incompetence of the audit
team and the errors in the audit report were matters which may be properly
ventilated during trial. He explained that petitioner failed to produce the missing
funds despite notice thereof creating a presumption that the same were
appropriated for personal use and for the purpose of preliminary investigation,
such findings warranted the filing of criminal charges against petitioner. The
deputy ombudsman held that petitioners belated request for re-audit could not
be considered newly discovered evidence and denied the request for a formal
investigation on the ground that petitioner was afforded due process when she
filed her counter-affidavit and position paper.
[13]


Petitioner elevated the matter to the Court of Appeals via a Petition for
Review
[14]
questioning the denial of her request for a formal investigation, the
penalty of dismissal, and the sufficiency of the evidence against her.

The Court of Appeals dismissed the petition in the assailed Decision
dated 23 October 2006.
[15]
It held that petitioner was not entitled to a formal
investigation and it affirmed the deputy ombudsmans factual finding that
petitioner was guilty of grave misconduct and dishonesty. The appellate court also
denied petitioners motion for reconsideration in a Resolution dated 30 January
2007.

Hence, the instant petition
[16]
seeking the reversal of the Court of Appeals
decision on the following grounds: (1) the Court of Appeals failed to order a
formal reinvestigation, to reopen and review the records of the administrative
case, to consider newly discovered evidence attached to petitioners motion for
reconsideration of the deputy ombudsmans Decision and to consider material
allegations in the motion for reconsideration of the assailed decision; (2)
petitioner was able to overcome the presumption that she appropriated the
missing funds for personal use; (3) the filing of the administrative case was
baseless; and (4) the penalty of dismissal was unwarranted.

The instant petition reiterates the issues brought up before the Court of
Appeals, namely: whether petitioner was deprived of her right to due process,
whether the penalty of dismissal is proper and whether petitioners guilt for grave
misconduct and dishonesty is supported by substantial evidence.

Invoking her right to due process, petitioner, on one hand, insists that she is
entitled to a formal investigation, citing the Administrative Code of 1987, Book V,
Title I, Subtitle A, Section 48 (2)
[17]
and (3).
[18]
On the other hand, in support of its
argument that the propriety of conducting a formal investigation rests on the
sound discretion of the hearing officer, respondent COA, through the Office of the
Solicitor General (OSG), relies on Administrative Order No. 07, as amended by
Administrative Order No. 17, Rule III, Section 5,
[19]
governing the procedure in
administrative cases filed before the Office of the Ombudsman.

The validity of Administrative Order No. 07, Rule III, Section 5 is not in
dispute. However, petitioner argues that said provision is inferior to the provision
in the Administrative Code which entitles the respondent to a formal investigation
if he so desires.

Petitioners theory is erroneous.

Administrative Order No. 07, as amended by Administrative Order No. 17,
particularly governs the procedure in administrative proceedings before the
Office of the Ombudsman. The Rules of Procedure of the Office of the
Ombudsman was issued pursuant to the authority vested in the Office of the
Ombudsman under Republic Act No. 6770, otherwise known as The Ombudsman
Act of 1989. When an administrative agency promulgates rules and regulations,
it makes a new law with the force and effect of a valid law. Rules and
regulations when promulgated in pursuance of the procedure or authority
conferred upon the administrative agency by law, partake of the nature of a
statute.
[20]


On the other hand, the provisions in the Administrative Code cited by
petitioner in support of her theory that she is entitled to a formal investigation
apply only to administrative cases filed before the Civil Service Commission (CSC).
In particular, Section 48(2) and Section 48(3) are subsumed under Subtitle A of
Title I, which pertains to the CSC and to the procedure of administrative cases
filed before the CSC. The administrative complaint against petitioner was filed
before the Office of the Ombudsman, suggesting that a different set of procedural
rules govern. And rightly so, the Deputy Ombudsman applied the provisions of
Rules of Procedure of the Office of the Ombudsman in ruling that the prerogative
to elect a formal investigation pertains to the hearing officer and not to
petitioner.

On various occasions,
[21]
the Court has ruled on the primacy of special laws
and of their implementing regulations over the Administrative Code of 1987 in
settling controversies specifically subject of these special laws. For instance,
in Hon. Joson v. Exec. Sec. Torres,
[22]
the Court held that the Local Government
Code of 1991, the Rules and Regulations Implementing the Local Government
Code of 1991, and Administrative Order No. 23 (A.O. No.
23)
[23]
govern administrative disciplinary proceedings against elective local
officials, whereas the Rules of Court and the Administrative Code of 1987 apply in
a suppletory character to all matters not provided in A.O. No. 23.
[24]
The aforesaid
ruling is based on the principle of statutory construction that where there are two
statutes applicable to a particular case, that which is specially intended for the
said case must prevail.
[25]


More significantly, in Lapid v. Court of Appeals,
[26]
the Court expressly
upheld the applicability of The Ombudsman Act of 1989 and the implementing
rules and regulations thereof to the exclusion of the Local Government Code and
the Administrative Code of 1989 on the issue of the execution of the
Ombudsmans decision pending appeal. The Court noted that petitioner therein
was charged before the Office of the Ombudsman and accordingly, The
Ombudsman Act of 1989 should apply exclusively. The Court explained, thus:

There is no basis in law for the proposition that the provisions of the
Administrative Code of 1987 and the Local Government Code on execution pending
review should be applied suppletorily to the provisions of the Ombudsman Act as there
is nothing in the Ombudsman Act which provides for such suppletory application. xxx
xxx xxx

And while in one respect, the Ombudsman Law, the Administrative Code of
1987 and the Local Government Code are in pari materia insofar as the three laws relate
or deal with public officers, the similarity ends there. It is a principle in statutory
construction that where there are two statutes that apply to a particular case, that
which was specially designed for the said case must prevail over the other. In the instant
case, the acts attributed to petitioner could have been the subject of administrative
disciplinary proceedings before the Office of the President under the Local Government
Code or before the Office of the Ombudsman under the Ombudsman Act. Considering
however, that petitioner was charged under the Ombudsman Act, it is this law alone
which should govern his case.
[27]


Thus, as between the Administrative Code of 1987 and Administrative
Order No. 07, as amended, issued by the Office of the Ombudsman, the latter
governs in this case which involves an administrative complaint filed with the
Office of the Ombudsman and which raises the question of whether petitioner is
entitled to a formal investigation as a matter of right.

Even assuming the Administrative Code is applicable, still there is a
formidable hindrance to petitioners prayer for a formal investigation. The records
show that petitioner sought a reinvestigation only as an afterthought, that is,
after the deputy ombudsman had already rendered a decision on the
administrative complaint. The reinvestigation should have been requested at the
first opportunity but definitely before the rendition of a decision.

As correctly pointed out by the OSG, the denial of petitioners request for a
formal investigation is not tantamount to a denial of her right to due process.
Petitioner was required to file a counter-affidavit and position paper and later on,
was given a chance to file two motions for reconsideration of the decision of the
deputy ombudsman. The essence of due process in administrative proceedings is
the opportunity to explain ones side or seek a reconsideration of the action or
ruling complained of. As long as the parties are given the opportunity to be heard
before judgment is rendered, the demands of due process are sufficiently
met.
[28]


Petitioners assertion that the Court of Appeals refused to reopen and
review the case and ignored material issues and arguments in her motion for
reconsideration of the 23 October 2006 Decision in violation of her right to due
process, is quite hollow.

The appellate court disposed of petitioners contention that she was able to
controvert the accusations against her in this wise:

Regarding the second, third and fourth assigned errors, We judiciously believe
that the issues raised therein are essentially factual in nature. The rule is that the
findings of fact in administrative decisions must be respected as long as they are
supported by substantial evidence, even if not overwhelming or preponderant. It is not
for the reviewing court to weight the conflicting evidence, determine the credibility of
the witnesses or otherwise substitute its own judgment for that of the administrative
agency on the sufficiency of evidence. It has been consistently held that substantial
evidence is all that is needed to support an administrative finding of fact which means
such relevant evidence as a reasonable mind might accept to support a conclusion.
[29]


Nothing prevents the Court of Appeals from adopting the factual findings
and conclusion of the deputy ombudsman on the ground that the findings and
conclusions were based on substantial evidence. Well-settled is the rule that the
findings of fact of administrative bodies, if based on substantial evidence, are
controlling on the reviewing authority. It is settled that it is not for the appellate
court to substitute its own judgment for that of the administrative agency on the
sufficiency of the evidence and the credibility of the witnesses. Administrative
decisions on matters within their jurisdiction are entitled to respect and can only
be set aside on proof of grave abuse of discretion, fraud or error of law.
[30]
Guided
by this principle, the appellate court correctly affirmed the finding of guilt for
grave misconduct and dishonesty.

Unfazed, petitioner now asks this Court to once again review the factual
findings and conclusions of the Deputy Ombudsman which had already been
affirmed by the Court of Appeals. Whether the finding of petitioners guilt for
grave misconduct and dishonesty is supported by substantial evidence, suffice it
to say these are factual issues calling for a review of the records of the case. Clear
and unmistakable is the rule that the Supreme Court is not a trier of facts. Just as
well entrenched is the doctrine that pure issues of fact may not be the proper
subject of appeal by certiorari under Rule 45 of the Revised Rules of Court as this
mode of appeal is generally confined to questions of law. Only questions of law,
not questions of fact, may be raised before the Supreme Court in a petition for
review under Rule 45. This Court cannot be tasked to go over the proofs
presented by the petitioners in the lower courts and analyze, assess and weigh
them to ascertain if the court a quo and the appellate court were correct in their
appreciation of the evidence.
[31]


Anyhow, the Court adopts the following findings of the Court of Appeals
which are borne out by the records of the case:

x x x It is a fact that an examination was conducted on the cash and accounts of
respondent and that a shortage was found. While the latter argues that the auditors did
not observe the proper procedure in conducting an examination and as a consequence
of which, she was not able to justify the alleged shortage, we take note that the latter
was given the opportunity to make such explanation when the auditors sent her a
demand letter.
[32]


On the penalty of dismissal which petitioner claims is too harsh, petitioner
argues that the mitigating circumstances of this being her first offense and of the
unreasonable length of time in filing the administrative case should be considered
in her favor.

Jurisprudence is replete with cases declaring that a grave offense cannot be
mitigated by the fact that the accused is a first time offender or by the length of
service of the accused. In Civil Service Commission v. Cortez,
[33]
the Court held as
follows:

The gravity of the offense committed is also the reason why we cannot consider
the first offense circumstance invoked by respondent. In several cases, we imposed
the heavier penalty of dismissal or a fine of more than P20,000.00, considering the
gravity of the offense committed, even if the offense charged was respondents first
offense. Thus, in the present case, even though the offense respondent was found
guilty of was her first offense, the gravity thereof outweighs the fact that it was her first
offense.
[34]



Also, in Concerned Employees v. Nuestro,
[35]
a court employee charged with
and found guilty of dishonesty for falsification was meted the penalty of dismissal
notwithstanding the length of her service in view of the gravity of the offense
charged.

To end, it must be stressed that dishonesty and grave misconduct have
always been and should remain anathema in the civil service. They inevitably
reflect on the fitness of a civil servant to continue in office. When an officer or
employee is disciplined, the object sought is not the punishment of such officer or
employee but the improvement of the public service and the preservation of the
publics faith and confidence in the government.
[36]


WHEREFORE, the instant petition for review on certiorari is DENIED. The
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 89539 are
hereby AFFIRMED. Costs against petitioner.

SO ORDERED.


EN BANC
[G.R. No. 159139. January 13, 2004]
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, MA.
CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ, AUGUSTO
C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY SALCEDO,
and MANUEL ALCUAZ JR., petitioners, vs. COMMISSION ON
ELECTIONS; COMELEC CHAIRMAN BENJAMIN ABALOS SR.;
COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN
EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F.
BALBUENA, LAMBERTO P. LLAMAS, and BARTOLOME SINOCRUZ
JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA PACIFIC
CONSORTIUM, respondents.
D E C I S I O N
PANGANIBAN, J .:
There is grave abuse of discretion (1) when an act is done contrary to the
Constitution, the law or jurisprudence;
[1]
or (2) when it is executed whimsically,
capriciously or arbitrarily out of malice, ill will or personal bias.
[2]
In the
present case, the Commission on Elections approved the assailed Resolution
and awarded the subject Contract not only in clear violation of law and
jurisprudence, but also in reckless disregard of its own bidding rules and
procedure. For the automation of the counting and canvassing of the ballots
in the 2004 elections, Comelec awarded the Contract to Mega Pacific
Consortium an entity that had not participated in the bidding. Despite this
grant, the poll body signed the actual automation Contract with Mega Pacific
eSolutions, Inc., a company that joined the bidding but had not met the
eligibility requirements.
Comelec awarded this billion-peso undertaking with inexplicable haste,
without adequately checking and observing mandatory financial, technical and
legal requirements. It also accepted the proferred computer hardware and
software even if, at the time of the award, they had undeniably failed to pass
eight critical requirements designed to safeguard the integrity of elections,
especially the following three items:
They failed to achieve the accuracy rating criteria of 99.9995 percent
set-up by the Comelec itself
They were not able to detect previously downloaded results at various
canvassing or consolidation levels and to prevent these from being
inputted again
They were unable to print the statutorily required audit trails of the
count/canvass at different levels without any loss of data
Because of the foregoing violations of law and the glaring grave abuse of
discretion committed by Comelec, the Court has no choice but to exercise its
solemn constitutional duty
[3]
to void the assailed Resolution and the subject
Contract. The illegal, imprudent and hasty actions of the Commission have
not only desecrated legal and jurisprudential norms, but have also cast
serious doubts upon the poll bodys ability and capacity to conduct automated
elections. Truly, the pith and soul of democracy -- credible, orderly, and
peaceful elections -- has been put in jeopardy by the illegal and gravely
abusive acts of Comelec.
The Case
Before us is a Petition
[4]
under Rule 65 of the Rules of Court, seeking (1)
to declare null and void Resolution No. 6074 of the Commission on Elections
(Comelec), which awarded Phase II of the Modernization Project of the
Commission to Mega Pacific Consortium (MPC); (2) to enjoin the
implementation of any further contract that may have been entered into by
Comelec either with Mega Pacific Consortium and/or Mega Pacific
eSolutions, Inc. (MPEI); and (3) to compel Comelec to conduct a re-bidding
of the project.
The Facts
The following facts are not disputed. They were culled from official
documents, the parties pleadings, as well as from admissions during the Oral
Argument on October 7, 2003.
On June 7, 1995, Congress passed Republic Act 8046,
[5]
which authorized
Comelec to conduct a nationwide demonstration of a computerized election
system and allowed the poll body to pilot-test the system in the March 1996
elections in the Autonomous Region in Muslim Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act
8436
[6]
authorizing Comelec to use an automated election system (AES) for
the process of voting, counting votes and canvassing/consolidating the results
of the national and local elections. It also mandated the poll body to acquire
automated counting machines (ACMs), computer equipment, devices and
materials; and to adopt new electoral forms and printing materials.
Initially intending to implement the automation during the May 11, 1998
presidential elections, Comelec -- in its Resolution No. 2985 dated February 9,
1998
[7]
-- eventually decided against full national implementation and limited
the automation to the Autonomous Region in Muslim Mindanao
(ARMM). However, due to the failure of the machines to read correctly some
automated ballots in one town, the poll body later ordered their manual count
for the entire Province of Sulu.
[8]

In the May 2001 elections, the counting and canvassing of votes for both
national and local positions were also done manually, as no additional ACMs
had been acquired for that electoral exercise allegedly because of time
constraints.
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a
modernization program for the 2004 elections. It resolved to conduct biddings
for the three (3) phases of its Automated Election System; namely, Phase I -
Voter Registration and Validation System; Phase II - Automated Counting and
Canvassing System; and Phase III - Electronic Transmission.
On January 24, 2003, President Gloria Macapagal-Arroyo issued
Executive Order No. 172, which allocated the sum of P2.5 billion to fund the
AES for the May 10, 2004 elections. Upon the request of Comelec, she
authorized the release of an additional P500 million.
On January 28, 2003, the Commission issued an Invitation to Apply for
Eligibility and to Bid, which we quote as follows:
INVITATION TO APPLY FOR ELIGIBILITY AND TO BID
The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act
Nos. 8189 and 8436, invites interested offerors, vendors, suppliers or lessors to apply
for eligibility and to bid for the procurement by purchase, lease, lease with option to
purchase, or otherwise, supplies, equipment, materials and services needed for a
comprehensive Automated Election System, consisting of three (3) phases: (a)
registration/verification of voters, (b) automated counting and consolidation of votes,
and (c) electronic transmission of election results, with an approved budget of TWO
BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos.
Only bids from the following entities shall be entertained:
a. Duly licensed Filipino citizens/proprietorships;
b. Partnerships duly organized under the laws of the Philippines and of
which at least sixty percent (60%) of the interest belongs to citizens of
the Philippines;
c. Corporations duly organized under the laws of the Philippines, and of
which at least sixty percent (60%) of the outstanding capital stock
belongs to citizens of the Philippines;
d. Manufacturers, suppliers and/or distributors forming themselves into a
joint venture, i.e., a group of two (2) or more manufacturers, suppliers
and/or distributors that intend to be jointly and severally responsible or
liable for a particular contract, provided that Filipino ownership thereof
shall be at least sixty percent (60%); and
e. Cooperatives duly registered with the Cooperatives
Development Authority.
Bid documents for the three (3) phases may be obtained starting 10 February 2003,
during office hours from the Bids and Awards Committee (BAC) Secretariat/Office of
Commissioner Resurreccion Z. Borra, 7
th
Floor, Palacio del Governador, Intramuros,
Manila, upon payment at the Cash Division, Commission on Elections, in cash or
cashiers check, payable to the Commission on Elections, of a non-refundable amount
of FIFTEEN THOUSAND PESOS (Php15,000.00) for each phase. For this purpose,
interested offerors, vendors, suppliers or lessors have the option to participate in any
or all of the three (3) phases of the comprehensive Automated Election System.
A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the Session
Hall, Commission on Elections, Postigo Street, Intramuros, Manila. Should there be
questions on the bid documents, bidders are required to submit their queries in writing
to the BAC Secretariat prior to the scheduled Pre-Bid Conference.
Deadline for submission to the BAC of applications for eligibility and bid envelopes
for the supply of the comprehensive Automated Election System shall be at the
Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila on 28
February 2003 at 9:00 a.m.
The COMELEC reserves the right to review the qualifications of the bidders after the
bidding and before the contract is executed. Should such review uncover any
misrepresentation made in the eligibility statements, or any changes in the situation of
the bidder to materially downgrade the substance of such statements, the COMELEC
shall disqualify the bidder upon due notice without any obligation whatsoever for any
expenses or losses that may be incurred by it in the preparation of its bid.
[9]

On February 11, 2003, Comelec issued Resolution No. 5929 clarifying
certain eligibility criteria for bidders and the schedule of activities for the
project bidding, as follows:
1.) Open to Filipino and foreign corporation duly registered and licensed
to do business and is actually doing business in the Philippines, subject
to Sec. 43 of RA 9184 (An Act providing In the Modernization
Standardization and Regulation of the Procurement Activities of the
Government and for other purposes etc.)
2.) Track Record:
a) For counting machines should have been used in at least one (1)
political exercise with no less than Twenty Million Voters;
b) For verification of voters the reference site of an existing data base
installation using Automated Fingerprint Identification System
(AFIS) with at least Twenty Million.
3.) Ten percent (10%) equity requirement shall be based on the total
project cost; and
4.) Performance bond shall be twenty percent (20%) of the bid offer.
RESOLVED moreover, that:
1) A. Due to the decision that the eligibility requirements and the rest of the
Bid documents shall be released at the same time, and the memorandum
of Comm. Resurreccion Z. Borra dated February 7, 2003, the documents
to be released on Friday, February 14, 2003 at 2:00 oclock p.m. shall be
the eligibility criteria, Terms of Reference (TOR) and other pertinent
documents;
B. Pre-Bid conference shall be on February 18, 2003; and
C. Deadline for the submission and receipt of the Bids shall be on March
5, 2003.
2) The aforementioned documents will be available at the following offices:
a) Voters Validation: Office of Comm. Javier
b) Automated Counting Machines: Office of Comm. Borra
c) Electronic Transmission: Office of Comm. Tancangco
[10]

On February 17, 2003, the poll body released the Request for Proposal
(RFP) to procure the election automation machines. The Bids and Awards
Committee (BAC) of Comelec convened a pre-bid conference on February 18,
2003 and gave prospective bidders until March 10, 2003 to submit their
respective bids.
Among others, the RFP provided that bids from manufacturers, suppliers
and/or distributors forming themselves into a joint venture may be entertained,
provided that the Philippine ownership thereof shall be at least 60
percent. Joint venture is defined in the RFP as a group of two or more
manufacturers, suppliers and/or distributors that intend to be jointly and
severally responsible or liable for a particular contract.
[11]

Basically, the public bidding was to be conducted under a two-
envelope/two stage system. The bidders first envelope or the Eligibility
Envelope should establish the bidders eligibility to bid and its qualifications to
perform the acts if accepted. On the other hand, the second envelope would
be the Bid Envelope itself. The RFP outlines the bidding procedures as
follows:
25. Determination of Eligibility of Prospective Bidders
25.1 The eligibility envelopes of prospective Bidders shall be opened first to
determine their eligibility. In case any of the requirements specified in Clause
20 is missing from the first bid envelope, the BAC shall declare said
prospective Bidder as ineligible to bid. Bid envelopes of ineligible Bidders
shall be immediately returned unopened.
25.2 The eligibility of prospective Bidders shall be determined using simple
pass/fail criteria and shall be determined as either eligible or ineligible. If
the prospective Bidder is rated passed for all the legal, technical and
financial requirements, he shall be considered eligible. If the prospective
Bidder is rated failed in any of the requirements, he shall be considered
ineligible.
26. Bid Examination/Evaluation
26.1 The BAC will examine the Bids to determine whether they are
complete, whether any computational errors have been made, whether
required securities have been furnished, whether the documents have been
properly signed, and whether the Bids are generally in order.
26.2 The BAC shall check the submitted documents of each Bidder against
the required documents enumerated under Clause 20, to ascertain if they are
all present in the Second bid envelope (Technical Envelope). In case one (1)
or more of the required documents is missing, the BAC shall rate the Bid
concerned as failed and immediately return to the Bidder its Third bid
envelope (Financial Envelope) unopened. Otherwise, the BAC shall rate the
first bid envelope as passed.
26.3 The BAC shall immediately open the Financial Envelopes of the
Bidders whose Technical Envelopes were passed or rated on or above the
passing score. Only Bids that are determined to contain all the bid
requirements for both components shall be rated passed and shall
immediately be considered for evaluation and comparison.
26.4 In the opening and examination of the Financial Envelope, the BAC
shall announce and tabulate the Total Bid Price as calculated. Arithmetical
errors will be rectified on the following basis: If there is a discrepancy
between words and figures, the amount in words will prevail. If there is a
discrepancy between the unit price and the total price that is obtained by
multiplying the unit price and the quantity, the unit price shall prevail and the
total price shall be corrected accordingly. If there is a discrepancy between
the Total Bid Price and the sum of the total prices, the sum of the total prices
prevail and the Total Bid Price shall be corrected accordingly.
26.5 Financial Proposals which do not clearly state the Total Bid Price shall
be rejected. Also, Total Bid Price as calculated that exceeds the approved
budget for the contract shall also be rejected.
27. Comparison of Bids
27.1 The bid price shall be deemed to embrace all costs, charges and fees
associated with carrying out all the elements of the proposed Contract,
including but not limited to, license fees, freight charges and taxes.
27.2 The BAC shall establish the calculated prices of all Bids rated passed
and rank the same in ascending order.
x x x x x x x x x
29. Postqualification
29.1 The BAC will determine to its satisfaction whether the Bidder selected
as having submitted the lowest calculated bid is qualified to satisfactorily
perform the Contract.
29.2 The determination will take into account the Bidders financial,
technical and production capabilities/resources. It will be based upon an
examination of the documentary evidence of the Bidders qualification
submitted by the Bidder as well as such other information as the BAC deems
necessary and appropriate.
29.3 A bid determined as not substantially responsive will be rejected by the
BAC and may not subsequently be made responsive by the Bidder by
correction of the non-conformity.
29.4 The BAC may waive any informality or non-conformity or irregularity
in a bid which does not constitute a material deviation, provided such waiver
does not prejudice or affect the relative ranking of any Bidder.
29.5 Should the BAC find that the Bidder complies with the legal, financial
and technical requirements, it shall make an affirmative determination which
shall be a prerequisite for award of the Contract to the Bidder. Otherwise, it
will make a negative determination which will result in rejection of the
Bidders bid, in which event the BAC will proceed to the next lowest
calculated bid to make a similar determination of that Bidders capabilities to
perform satisfactorily.
[12]

Out of the 57 bidders,
[13]
the BAC found MPC and the Total Information
Management Corporation (TIMC) eligible. For technical evaluation, they were
referred to the BACs Technical Working Group (TWG) and the Department of
Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II,
DOST said that both MPC and TIMC had obtained a number of failed marks in
the technical evaluation. Notwithstanding these failures, Comelec en banc, on
April 15, 2003, promulgated Resolution No. 6074 awarding the project to
MPC. The Commission publicized this Resolution and the award of the project
to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein
Petitioners Information Technology Foundation of the Philippines, represented
by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter
[14]
to
Comelec Chairman Benjamin Abalos Sr. They protested the award of the
Contract to Respondent MPC due to glaring irregularities in the manner in
which the bidding process had been conducted. Citing therein the
noncompliance with eligibility as well as technical and procedural
requirements (many of which have been discussed at length in the Petition),
they sought a re-bidding.
In a letter-reply dated June 6, 2003,
[15]
the Comelec chairman -- speaking
through Atty. Jaime Paz, his head executive assistant -- rejected the protest
and declared that the award would stand up to the strictest scrutiny.
Hence, the present Petition.
[16]

The Issues
In their Memorandum, petitioners raise the following issues for our
consideration:
1. The COMELEC awarded and contracted with a non-eligible entity; x x
x
2. Private respondents failed to pass the Technical Test as required in the
RFP. Notwithstanding, such failure was ignored. In effect, the
COMELEC changed the rules after the bidding in effect changing the
nature of the contract bidded upon.
3. Petitioners have locus standi.
4. Instant Petition is not premature. Direct resort to the Supreme Court is
justified.
[17]

In the main, the substantive issue is whether the Commission on
Elections, the agency vested with the exclusive constitutional mandate to
oversee elections, gravely abused its discretion when, in the exercise of its
administrative functions, it awarded to MPC the contract for the second phase
of the comprehensive Automated Election System.
Before discussing the validity of the award to MPC, however, we deem it
proper to first pass upon the procedural issues: the legal standing of
petitioners and the alleged prematurity of the Petition.
This Courts Ruling
The Petition is meritorious.
First Procedural Issue:
Locus Standi of Petitioners
Respondents chorus that petitioners do not possess locus standi,
inasmuch as they are not challenging the validity or constitutionality of RA
8436. Moreover, petitioners supposedly admitted during the Oral Argument
that no law had been violated by the award of the Contract. Furthermore, they
allegedly have no actual and material interest in the Contract and, hence, do
not stand to be injured or prejudiced on account of the award.
On the other hand, petitioners -- suing in their capacities as taxpayers,
registered voters and concerned citizens -- respond that the issues central to
this case are of transcendental importance and of national interest.
Allegedly, Comelecs flawed bidding and questionable award of the Contract
to an unqualified entity would impact directly on the success or the failure of
the electoral process. Thus, any taint on the sanctity of the ballot as the
expression of the will of the people would inevitably affect their faith in the
democratic system of government. Petitioners further argue that the award of
any contract for automation involves disbursement of public funds in
gargantuan amounts; therefore, public interest requires that the laws
governing the transaction must be followed strictly.
We agree with petitioners. Our nations political and economic future
virtually hangs in the balance, pending the outcome of the 2004 elections.
Hence, there can be no serious doubt that the subject matter of this case is a
matter of public concern and imbued with public interest;
[18]
in other words, it
is of paramount public interest
[19]
and transcendental importance.
[20]
This
fact alone would justify relaxing the rule on legal standing, following the liberal
policy of this Court whenever a case involves an issue of overarching
significance to our society.
[21]
Petitioners legal standing should therefore be
recognized and upheld.
Moreover, this Court has held that taxpayers are allowed to sue when
there is a claim of illegal disbursement of public funds,
[22]
or if public money
is being deflected to any improper purpose;
[23]
or when petitioners seek to
restrain respondent from wasting public funds through the enforcement of an
invalid or unconstitutional law.
[24]
In the instant case, individual petitioners,
suing as taxpayers, assert a material interest in seeing to it that public funds
are properly and lawfully used. In the Petition, they claim that the bidding was
defective, the winning bidder not a qualified entity, and the award of the
Contract contrary to law and regulation. Accordingly, they seek to restrain
respondents from implementing the Contract and, necessarily, from making
any unwarranted expenditure of public funds pursuant thereto. Thus, we hold
that petitioners possess locus standi.
Second Procedural Issue:
Alleged Prematurity Due to Non-Exhaustion
of Administrative Remedies
Respondents claim that petitioners acted prematurely, since they had not
first utilized the protest mechanism available to them under RA 9184, the
Government Procurement Reform Act, for the settlement of disputes
pertaining to procurement contracts.
Section 55 of RA 9184 states that protests against decisions of the
Bidding and Awards Committee in all stages of procurement may be lodged
with the head of the procuring entity by filing a verified position paper and
paying a protest fee. Section 57 of the same law mandates that in no case
shall any such protest stay or delay the bidding process, but it must first be
resolved before any award is made.
On the other hand, Section 58 provides that court action may be resorted
to only after the protests contemplated by the statute shall have been
completed. Cases filed in violation of this process are to be dismissed for lack
of jurisdiction. Regional trial courts shall have jurisdiction over final decisions
of the head of the procuring entity, and court actions shall be instituted
pursuant to Rule 65 of the 1997 Rules of Civil Procedure.
Respondents assert that throughout the bidding process, petitioners never
questioned the BAC Report finding MPC eligible to bid and recommending the
award of the Contract to it (MPC). According to respondents, the Report
should have been appealed to the Comelec en banc, pursuant to the
aforementioned sections of RA 9184. In the absence of such appeal, the
determination and recommendation of the BAC had become final.
The Court is not persuaded.
Respondent Comelec came out with its en banc Resolution No. 6074
dated April 15, 2003, awarding the project to Respondent MPC even before
the BAC managed to issue its written report and recommendation on April 21,
2003. Thus, how could petitioners have appealed the BACs recommendation
or report to the head of the procuring entity (the chairman of Comelec), when
the Comelec en banc had already approved the award of the contract to MPC
even before petitioners learned of the BAC recommendation?
It is claimed
[25]
by Comelec that during its April 15, 2003 session, it
received and approved the verbal report and recommendation of the BAC for
the award of the Contract to MPC, and that the BAC subsequently re-affirmed
its verbal report and recommendation by submitting it in writing on April 21,
2003. Respondents insist that the law does not require that the BAC Report
be in writing before Comelec can act thereon; therefore, there is allegedly
nothing irregular about the Report as well as the en banc Resolution.
However, it is obvious that petitioners could have appealed the BACs
report and recommendation to the head of the procuring entity (the Comelec
chair) only upon their discovery thereof, which at the very earliest would have
been on April 21, 2003, when the BAC actually put its report in writing and
finally released it. Even then, what would have been the use of
protesting/appealing the report to the Comelec chair, when by that time the
Commission en banc (including the chairman himself) had already approved
the BAC Report and awarded the Contract to MPC?
And even assuming arguendo that petitioners had somehow gotten wind
of the verbal BAC report on April 15, 2003 (immediately after the en banc
session), at that point the Commission en banc had already given its approval
to the BAC Report along with the award to MPC. To put it bluntly, the
Comelec en banc itself made it legally impossible for petitioners to avail
themselves of the administrative remedy that the Commission is so impiously
harping on. There is no doubt that they had not been accorded the
opportunity to avail themselves of the process provided under Section 55 of
RA 9184, according to which a protest against a decision of the BAC may be
filed with the head of the procuring entity. Nemo tenetur ad impossible,
[26]
to
borrow private respondents favorite Latin excuse.
[27]

Some Observations on the
BAC Report to the Comelec
We shall return to this issue of alleged prematurity shortly, but at this
interstice, we would just want to put forward a few observations regarding the
BAC Report and the Comelec en bancs approval thereof.
First, Comelec contends that there was nothing unusual about the fact that
the Report submitted by the BAC came only after the former had already
awarded the Contract, because the latter had been asked to render its report
and recommendation orally during the Commissions en banc session on April
15, 2003. Accordingly, Comelec supposedly acted upon such oral
recommendation and approved the award to MPC on the same day, following
which the recommendation was subsequently reduced into writing on April 21,
2003. While not entirely outside the realm of the possible, this interesting and
unique spiel does not speak well of the process that Comelec supposedly
went through in making a critical decision with respect to a multi-billion-peso
contract.
We can imagine that anyone else standing in the shoes of the Honorable
Commissioners would have been extremely conscious of the overarching
need for utter transparency. They would have scrupulously avoided the
slightest hint of impropriety, preferring to maintain an exacting regularity in the
performance of their duties, instead of trying to break a speed record in the
award of multi-billion-peso contracts. After all, between April 15 and April 21
were a mere six (6) days. Could Comelec not have waited out six more days
for the written report of the BAC, instead of rushing pell-mell into the arms of
MPC? Certainly, respondents never cared to explain the nature of the
Commissions dire need to act immediately without awaiting the formal, written
BAC Report.
In short, the Court finds it difficult to reconcile the uncommon
dispatch with which Comelec acted to approve the multi-billion-peso deal,
with its claim of having been impelled by only the purest and most noble of
motives.
At any rate, as will be discussed later on, several other factors combine to
lend negative credence to Comelecs tale.
Second, without necessarily ascribing any premature malice or
premeditation on the part of the Comelec officials involved, it should
nevertheless be conceded that this cart-before-the-horse maneuver (awarding
of the Contract ahead of the BACs written report) would definitely serve as a
clever and effective way of averting and frustrating any impending protest
under Section 55.
Having made the foregoing observations, we now go back to the question
of exhausting administrative remedies. Respondents may not have realized it,
but the letter addressed to Chairman Benjamin Abalos Sr. dated May 29,
2003
[28]
serves to eliminate the prematurity issue as it was an actual written
protest against the decision of the poll body to award the Contract. The letter
was signed by/for, inter alia, two of herein petitioners: the Information
Technology Foundation of the Philippines, represented by its president,
Alfredo M. Torres; and Ma. Corazon Akol.
Such letter-protest is sufficient compliance with the requirement to exhaust
administrative remedies particularly because it hews closely to the procedure
outlined in Section 55 of RA 9184.
And even without that May 29, 2003 letter-protest, the Court still holds that
petitioners need not exhaust administrative remedies in the light of Paat v.
Court of Appeals.
[29]
Paat enumerates the instances when the rule on
exhaustion of administrative remedies may be disregarded, as follows:
(1) when there is a violation of due process,
(2) when the issue involved is purely a legal question,
(3) when the administrative action is patently illegal amounting to lack or
excess of jurisdiction,
(4) when there is estoppel on the part of the administrative agency
concerned,
(5) when there is irreparable injury,
(6) when the respondent is a department secretary whose acts as an alter
ego of the President bears the implied and assumed approval of the
latter,
(7) when to require exhaustion of administrative remedies would be
unreasonable,
(8) when it would amount to a nullification of a claim,
(9) when the subject matter is a private land in land case proceedings,
(10) when the rule does not provide a plain, speedy and adequate remedy,
and
(11) when there are circumstances indicating the urgency of judicial
intervention.
[30]

The present controversy precisely falls within the exceptions listed as Nos.
7, 10 and 11: (7) when to require exhaustion of administrative remedies
would be unreasonable; (10) when the rule does not provide a plain, speedy
and adequate remedy, and (11) when there are circumstances indicating the
urgency of judicial intervention. As already stated, Comelec itself made the
exhaustion of administrative remedies legally impossible or, at the very least,
unreasonable.
In any event, the peculiar circumstances surrounding the unconventional
rendition of the BAC Report and the precipitate awarding of the Contract by
the Comelec en banc -- plus the fact that it was racing to have its Contract
with MPC implemented in time for the elections in May 2004 (barely four
months away) -- have combined to bring about the urgent need for judicial
intervention, thus prompting this Court to dispense with the procedural
exhaustion of administrative remedies in this case.
Main Substantive Issue:
Validity of the Award to MPC
We come now to the meat of the controversy. Petitioners contend that the
award is invalid, since Comelec gravely abused its discretion when it did the
following:
1. Awarded the Contract to MPC though it did not even participate in the
bidding
2. Allowed MPEI to participate in the bidding despite its failure to meet the
mandatory eligibility requirements
3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC
despite the issuance by the BAC of its Report, which formed the basis of the
assailed Resolution, only on April 21, 2003
[31]

4. Awarded the Contract, notwithstanding the fact that during the bidding
process, there were violations of the mandatory requirements of RA 8436 as
well as those set forth in Comelecs own Request for Proposal on the
automated election system
5. Refused to declare a failed bidding and to conduct a re-bidding despite
the failure of the bidders to pass the technical tests conducted by the
Department of Science and Technology
6. Failed to follow strictly the provisions of RA 8436 in the conduct of the
bidding for the automated counting machines
After reviewing the slew of pleadings as well as the matters raised during
the Oral Argument, the Court deems it sufficient to focus discussion on the
following major areas of concern that impinge on the issue of grave abuse of
discretion:
A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder
B. Failure of the automated counting machines (ACMs) to pass the DOST
technical tests
C. Remedial measures and re-testings undertaken by Comelec and DOST after the
award, and their effect on the present controversy
A.
Failure to Establish the Identity,
Existence and Eligibility of the
Alleged Consortium as a Bidder
On the question of the identity and the existence of the real bidder,
respondents insist that, contrary to petitioners allegations, the bidder was not
Mega Pacific eSolutions, Inc. (MPEI), which was incorporated only on
February 27, 2003, or 11 days prior to the bidding itself. Rather, the bidder
was Mega Pacific Consortium (MPC), of which MPEI was but a part. As proof
thereof, they point to the March 7, 2003 letter of intent to bid, signed by the
president of MPEI allegedly for and on behalf of MPC. They also call attention
to the official receipt issued to MPC, acknowledging payment for the bidding
documents, as proof that it was the consortium that participated in the
bidding process.
We do not agree. The March 7, 2003 letter, signed by only one signatory -
- Willy U. Yu, President, Mega Pacific eSolutions, Inc., (Lead Company/
Proponent) For: Mega Pacific Consortium -- and without any further proof,
does not by itself prove the existence of the consortium. It does not show that
MPEI or its president have been duly pre-authorized by the other members of
the putative consortium to represent them, to bid on their collective behalf
and, more important, to commit them jointly and severally to the bid
undertakings. The letter is purely self-serving and uncorroborated.
Neither does an official receipt issued to MPC, acknowledging payment for
the bidding documents, constitute proof that it was the purported consortium
that participated in the bidding. Such receipts are issued by cashiers without
any legally sufficient inquiry as to the real identity or existence of the
supposed payor.
To assure itself properly of the due existence (as well as eligibility and
qualification) of the putative consortium, Comelecs BAC should have
examined the bidding documents submitted on behalf of MPC. They would
have easily discovered the following fatal flaws.
Two-Envelope,
Two-Stage System
As stated earlier in our factual presentation, the public bidding system
designed by Comelec under its RFP (Request for Proposal for the Automation
of the 2004 Election) mandated the use of a two-envelope, two-stage
system. A bidders first envelope (Eligibility Envelope) was meant to establish
its eligibility to bid and its qualifications and capacity to perform the contract if
its bid was accepted, while the second envelope would be the Bid Envelope
itself.
The Eligibility Envelope was to contain legal documents such as articles of
incorporation, business registrations, licenses and permits, mayors permit,
VAT certification, and so forth; technical documents containing documentary
evidence to establish the track record of the bidder and its technical and
production capabilities to perform the contract; and financial documents,
including audited financial statements for the last three years, to establish the
bidders financial capacity.
In the case of a consortium or joint venture desirous of participating in the
bidding, it goes without saying that the Eligibility Envelope would necessarily
have to include a copy of the joint venture agreement, the consortium
agreement or memorandum of agreement -- or a business plan or some other
instrument of similar import -- establishing the due existence, composition and
scope of such aggrupation. Otherwise, how would Comelec know who it was
dealing with, and whether these parties are qualified and capable of delivering
the products and services being offered for bidding?
[32]

In the instant case, no such instrument was submitted to Comelec during
the bidding process. This fact can be conclusively ascertained by scrutinizing
the two-inch thick Eligibility Requirements file submitted by Comelec last
October 9, 2003, in partial compliance with this Courts instructions given
during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of
MPC, in connection with the bidding conducted in March 2003. Included in
the file are the incorporation papers and financial statements of the members
of the supposed consortium and certain certificates, licenses and permits
issued to them.
However, there is no sign whatsoever of any joint venture agreement,
consortium agreement, memorandum of agreement, or business plan
executed among the members of the purported consortium.
The only logical conclusion is that no such agreement was ever submitted
to the Comelec for its consideration, as part of the bidding process.
It thus follows that, prior the award of the Contract, there was no
documentary or other basis for Comelec to conclude that a consortium had
actually been formed amongst MPEI, SK C&C and WeSolv, along with
Election.com and ePLDT.
[33]
Neither was there anything to indicate the exact
relationships between and among these firms; their diverse roles,
undertakings and prestations, if any, relative to the prosecution of the project,
the extent of their respective investments (if any) in the supposed consortium
or in the project; and the precise nature and extent of their respective liabilities
with respect to the contract being offered for bidding. And apart from the self-
serving letter of March 7, 2003, there was not even any indication that MPEI
was the lead company duly authorized to act on behalf of the others.
So, it necessarily follows that, during the bidding process, Comelec had no
basis at all for determining that the alleged consortium really existed and was
eligible and qualified; and that the arrangements among the members were
satisfactory and sufficient to ensure delivery on the Contract and to protect the
governments interest.
Notwithstanding such deficiencies, Comelec still deemed the consortium
eligible to participate in the bidding, proceeded to open its Second Envelope,
and eventually awarded the bid to it, even though -- per the Comelecs own
RFP -- the BAC should have declared the MPC ineligible to bid and returned
the Second (Bid) Envelope unopened.
Inasmuch as Comelec should not have considered MPEI et al. as
comprising a consortium or joint venture, it should not have allowed them to
avail themselves of the provision in Section 5.4 (b) (i) of the IRR for RA 6957
(the Build-Operate-Transfer Law), as amended by RA 7718. This provision
states in part that a joint venture/consortium proponent shall be evaluated
based on the individual or collective experience of the member-firms of the
joint venture or consortium and of the contractor(s) that it has engaged for the
project. Parenthetically, respondents have uniformly argued that the said IRR
of RA 6957, as amended, have suppletory application to the instant case.
Hence, had the proponent MPEI been evaluated based solely on its own
experience, financial and operational track record or lack thereof, it would
surely not have qualified and would have been immediately considered
ineligible to bid, as respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in
arbitrarily failing to observe its own rules, policies and guidelines with respect
to the bidding process, thereby negating a fair, honest and competitive
bidding.
Commissioners Not
Aware of Consortium
In this regard, the Court is beguiled by the statements of Commissioner
Florentino Tuason Jr., given in open court during the Oral Argument last
October 7, 2003. The good commissioner affirmed that he was aware, of his
own personal knowledge, that there had indeed been a written agreement
among the consortium members,
[34]
although it was an internal matter
among them,
[35]
and of the fact that it would be presented by counsel for
private respondent.
[36]

However, under questioning by Chief Justice Hilario G. Davide Jr. and
Justice Jose C. Vitug, Commissioner Tuason in effect admitted that, while he
was the commissioner-in-charge of Comelecs Legal Department, he had
never seen, even up to that late date, the agreement he spoke of.
[37]
Under
further questioning, he was likewise unable to provide any information
regarding the amounts invested into the project by several members of the
claimed consortium.
[38]
A short while later, he admitted that the Commission
had not taken a look at the agreement (if any).
[39]

He tried to justify his position by claiming that he was not a member of the
BAC. Neither was he the commissioner-in-charge of the Phase II
Modernization project (the automated election system); but that, in any case,
the BAC and the Phase II Modernization Project Team did look into the aspect
of the composition of the consortium.
It seems to the Court, though, that even if the BAC or the Phase II Team
had taken charge of evaluating the eligibility, qualifications and credentials of
the consortium-bidder, still, in all probability, the former would have referred
the task to Commissioner Tuason, head of Comelecs Legal
Department. That task was the appreciation and evaluation of the legal
effects and consequences of the terms, conditions, stipulations and covenants
contained in any joint venture agreement, consortium agreement or a similar
document -- assuming of course that any of these was available at the
time. The fact that Commissioner Tuason was barely aware of the situation
bespeaks the complete absence of such document, or the utter failure or
neglect of the Comelec to examine it -- assuming it was available at all -- at
the time the award was made on April 15, 2003.
In any event, the Court notes for the record that Commissioner Tuason
basically contradicted his statements in open court about there being one
written agreement among all the consortium members, when he subsequently
referred
[40]
to the four (4) Memoranda of Agreement (MOAs) executed by
them.
[41]

At this juncture, one might ask: What, then, if there are four MOAs instead
of one or none at all? Isnt it enough that there are these corporations coming
together to carry out the automation project? Isnt it true, as respondent aver,
that nowhere in the RFP issued by Comelec is it required that the members of
the joint venture execute a single written agreement to prove the existence of
a joint venture. Indeed, the intention to be jointly and severally liable may be
evidenced not only by a single joint venture agreement, but also by
supplementary documents executed by the parties signifying such
intention. What then is the big deal?
The problem is not that there are four agreements instead of only
one. The problem is that Comelec never bothered to check. It never based
its decision on documents or other proof that would concretely establish the
existence of the claimed consortium or joint venture or agglomeration. It
relied merely on the self-serving representation in an uncorroborated letter
signed by only one individual, claiming that his company represented a
consortium of several different corporations. It concluded forthwith that a
consortium indeed existed, composed of such and such members, and
thereafter declared that the entity was eligible to bid.
True, copies of financial statements and incorporation papers of the
alleged consortium members were submitted. But these papers did not
establish the existence of a consortium, as they could have been provided by
the companies concerned for purposes other than to prove that they were part
of a consortium or joint venture. For instance, the papers may have been
intended to show that those companies were each qualified to be a sub-
contractor (and nothing more) in a major project. Those documents did not by
themselves support the assumption that a consortium or joint venture existed
among the companies.
In brief, despite the absence of competent proof as to the existence and
eligibility of the alleged consortium (MPC), its capacity to deliver on the
Contract, and the members joint and several liability therefor, Comelec
nevertheless assumed that such consortium existed and was eligible. It then
went ahead and considered the bid of MPC, to which the Contract was
eventually awarded, in gross violation of the formers own bidding rules and
procedures contained in its RFP. Therein lies Comelecs grave abuse of
discretion.
Sufficiency of the
Four Agreements
Instead of one multilateral agreement executed by, and effective and
binding on, all the five consortium members -- as earlier claimed by
Commissioner Tuason in open court -- it turns out that what was actually
executed were four (4) separate and distinct bilateral
Agreements.
[42]
Obviously, Comelec was furnished copies of these
Agreements only after the bidding process had been terminated, as these
were not included in the Eligibility Documents. These Agreements are as
follows:
A Memorandum of Agreement between MPEI and SK C&C
A Memorandum of Agreement between MPEI and WeSolv
A Teaming Agreement between MPEI and Election.com Ltd.
A Teaming Agreement between MPEI and ePLDT.
In sum, each of the four different and separate bilateral Agreements is
valid and binding only between MPEI and the other contracting party, leaving
the other consortium members total strangers thereto. Under this setup,
MPEI dealt separately with each of the members, and the latter (WeSolv, SK
C&C, Election.com, and ePLDT) in turn had nothing to do with one another,
each dealing only with MPEI.
Respondents assert that these four Agreements were sufficient for the
purpose of enabling the corporations to still qualify (even at that late stage) as
a consortium or joint venture, since the first two Agreements had allegedlyset
forth the joint and several undertakings among the parties, whereas the latter
two clarified the parties respective roles with regard to the Project, with MPEI
being the independent contractor and Election.com and ePLDT the
subcontractors.
Additionally, the use of the phrase particular contract in the Comelecs
Request for Proposal (RFP), in connection with the joint and several liabilities
of companies in a joint venture, is taken by them to mean that all the members
of the joint venture need not be solidarily liable for the entire project or joint
venture, because it is sufficient that the lead company and the member in
charge of a particular contract or aspect of the joint venture agree to be
solidarily liable.
At this point, it must be stressed most vigorously that the submission of
the four bilateral Agreements to Comelec after the end of the bidding
process did nothing to eliminate the grave abuse of discretion it
had alreadycommitted on April 15, 2003.
Deficiencies Have
Not Been Cured
In any event, it is also claimed that the automation Contract awarded by
Comelec incorporates all documents executed by the consortium members,
even if these documents are not referred to therein. The basis of this
assertion appears to be the passages from Section 1.4 of the Contract, which
is reproduced as follows:
All Contract Documents shall form part of the Contract even if they or any one of
them is not referred to or mentioned in the Contract as forming a part thereof. Each of
the Contract Documents shall be mutually complementary and explanatory of each
other such that what is noted in one although not shown in the other shall be
considered contained in all, and what is required by any one shall be as binding as if
required by all, unless one item is a correction of the other.
The intent of the Contract Documents is the proper, satisfactory and timely execution
and completion of the Project, in accordance with the Contract
Documents. Consequently, all items necessary for the proper and timely execution
and completion of the Project shall be deemed included in the Contract.
Thus, it is argued that whatever perceived deficiencies there were in the
supplementary contracts -- those entered into by MPEI and the other
members of the consortium as regards their joint and several undertakings --
have been cured. Better still, such deficiencies have supposedly been
prevented from arising as a result of the above-quoted provisions, from which
it can be immediately established that each of the members of MPC assumes
the same joint and several liability as the other members.
The foregoing argument is unpersuasive. First, the contract being referred
to, entitled The Automated Counting and Canvassing Project Contract, is
between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it
is MPEI -- not MPC -- that is a party to the Contract. Nowhere in that Contract
is there any mention of a consortium or joint venture, of members thereof,
much less of joint and several liability. Supposedly executed sometime in
May 2003,
[43]
the Contract bears a notarization date of June 30, 2003, and
contains the signature of Willy U. Yu signing as president of MPEI (not for
and on behalf of MPC), along with that of the Comelec chair. It provides in
Section 3.2 that MPEI (not MPC) is to supply the Equipment and perform the
Services under the Contract, in accordance with the appendices thereof;
nothing whatsoever is said about any consortium or joint venture or
partnership.
Second, the portions of Section 1.4 of the Contract reproduced above
do not have the effect of curing (much less preventing) deficiencies in the
bilateral agreements entered into by MPEI with the other members of the
consortium, with respect to their joint and several liabilities. The term
Contract Documents, as used in the quoted passages of Section 1.4, has a
well-defined meaning and actually refers only to the following documents:
The Contract itself along with its appendices
The Request for Proposal (also known as Terms of Reference)
issued by the Comelec, including the Tender Inquiries and Bid
Bulletins
The Tender Proposal submitted by MPEI
In other words, the term Contract Documents cannot be understood as
referring to or including the MOAs and the Teaming Agreements entered into
by MPEI with SK C&C, WeSolv, Election.com and ePLDT. This much is very
clear and admits of no debate. The attempt to use the provisions of Section
1.4 to shore up the MOAs and the Teaming Agreements is simply
unwarranted.
Third and last, we fail to see how respondents can arrive at the conclusion
that, from the above-quoted provisions, it can be immediately established that
each of the members of MPC assumes the same joint and several liability as
the other members. Earlier, respondents claimed exactly the opposite -- that
the two MOAs (between MPEI and SK C&C, and between MPEI and WeSolv)
had set forth the joint and several undertakings among the parties;whereas
the two Teaming Agreements clarified the parties respective roles with regard
to the Project, with MPEI being the independent contractor and Election.com
and ePLDT the subcontractors.
Obviously, given the differences in their relationships, their respective
liabilities cannot be the same. Precisely, the very clear terms and stipulations
contained in the MOAs and the Teaming Agreements -- entered into by MPEI
with SK C&C, WeSolv, Election.com and ePLDT -- negate the idea that these
members are on a par with one another and are, as such, assuming the
same joint and several liability.
Moreover, respondents have earlier seized upon the use of the term
particular contract in the Comelecs Request for Proposal (RFP), in order to
argue that all the members of the joint venture did not need to be solidarily
liable for the entire project or joint venture. It was sufficient that the lead
company and the member in charge of a particular contract or aspect of the
joint venture would agree to be solidarily liable. The glaring lack of
consistency leaves us at a loss. Are respondents trying to establish the same
joint and solidary liability among all the members or not?
Enforcement of
Liabilities Problematic
Next, it is also maintained that the automation Contract between Comelec
and the MPEI confirms the solidary undertaking of the lead company and the
consortium member concerned for each particular Contract, inasmuch as the
position of MPEI and anyone else performing the services contemplated
under the Contract is described therein as that of an independent contractor.
The Court does not see, however, how this conclusion was arrived at. In
the first place, the contractual provision being relied upon by respondents is
Article 14, Independent Contractors, which states: Nothing contained herein
shall be construed as establishing or creating between the COMELEC and
MEGA the relationship of employee and employer or principal and agent, it
being understood that the position of MEGA and of anyone performing the
Services contemplated under this Contract, is that of an independent
contractor.
Obviously, the intent behind the provision was simply to avoid the creation
of an employer-employee or a principal-agent relationship and the
complications that it would produce. Hence, the Article states that the role or
position of MPEI, or anyone else performing on its behalf, is that of an
independent contractor. It is obvious to the Court that respondents
are stretching matters too far when they claim that, because of this provision,
the Contract in effect confirms the solidary undertaking of the lead company
and the consortium member concerned for the particular phase of the
project. This assertion is an absolute non sequitur.
Enforcement of Liabilities
Under the Civil Code Not Possible
In any event, it is claimed that Comelec may still enforce the liability of the
consortium members under the Civil Code provisions on partnership,
reasoning that MPEI et al. represented themselves as partners and members
of MPC for purposes of bidding for the Project. They are, therefore, liable to
the Comelec to the extent that the latter relied upon such
representation. Their liability as partners is solidary with respect to everything
chargeable to the partnership under certain conditions.
The Court has two points to make with respect to this argument. First, it
must be recalled that SK C&C, WeSolv, Election.com and
ePLDT never represented themselves as partners and members of MPC,
whether for purposes of bidding or for something else. It was MPEI alone that
represented them to be members of a consortium it supposedly
headed. Thus, its acts may not necessarily be held against the other
members.
Second, this argument of the OSG in its Memorandum
[44]
might possibly
apply in the absence of a joint venture agreement or some other writing that
discloses the relationship of the members with one another. But precisely,
this case does not deal with a situation in which there is nothing in writing to
serve as reference, leaving Comelec to rely on mere representations and
therefore justifying a falling back on the rules on partnership. For, again, the
terms and stipulations of the MOAs entered into by MPEI with SK C&C and
WeSolv, as well as the Teaming Agreements of MPEI with Election.com and
ePLDT (copies of which have been furnished the Comelec) are very clear with
respect to the extent and the limitations of the firms respective liabilities.
In the case of WeSolv and SK C&C, their MOAs state that their liabilities,
while joint and several with MPEI, are limited only to the particular areas of
work wherein their services are engaged or their products utilized. As for
Election.com and ePLDT, their separate Teaming Agreements specifically
ascribe to them the role of subcontractor vis--vis MPEI as contractor and,
based on the terms of their particular agreements, neither Election.com nor
ePLDT is, with MPEI, jointly and severally liable to Comelec.
[45]
It follows then
that in the instant case, there is no justification for anyone, much less
Comelec, to resort to the rules on partnership and partners liabilities.
Eligibility of a Consortium
Based on the Collective
Qualifications of Its Members
Respondents declare that, for purposes of assessing the eligibility of the
bidder, the members of MPC should be evaluated on a collective
basis. Therefore, they contend, the failure of MPEI to submit financial
statements (on account of its recent incorporation) should not by itself
disqualify MPC, since the other members of the consortium could meet the
criteria set out in the RFP.
Thus, according to respondents, the collective nature of the undertaking of
the members of MPC, their contribution of assets and sharing of risks, and the
community of their interest in the performance of the Contract lead to these
reasonable conclusions: (1) that their collective qualifications should be the
basis for evaluating their eligibility; (2) that the sheer enormity of the project
renders it improbable to expect any single entity to be able to comply with all
the eligibility requirements and undertake the project by itself; and (3) that, as
argued by the OSG, the RFP allows bids from manufacturers, suppliers and/or
distributors that have formed themselves into a joint venture, in recognition of
the virtual impossibility of a single entitys ability to respond to the Invitation to
Bid.
Additionally, argues the Comelec, the Implementing Rules and
Regulations of RA 6957 (the Build-Operate-Transfer Law) as amended by RA
7718 would be applicable, as proponents of BOT projects usually form joint
ventures or consortiums. Under the IRR, a joint venture/consortium
proponent shall be evaluated based on the individual or the collective
experience of the member-firms of the joint venture/consortium and of the
contractors the proponent has engaged for the project.
Unfortunately, this argument seems to assume that the collective nature
of the undertaking of the members of MPC, their contribution of assets and
sharing of risks, and the community of their interest in the performance of
the Contract entitle MPC to be treated as a joint venture or consortium; and to
be evaluated accordingly on the basis of the members collective qualifications
when, in fact, the evidence before the Court suggest otherwise.
This Court in Kilosbayan v. Guingona
[46]
defined joint venture as an
association of persons or companies jointly undertaking some commercial
enterprise; generally, all contribute assets and share risks. It requires a
community of interest in the performance of the subject matter, a right to direct
and govern the policy in connection therewith, and [a] duty, which may be
altered by agreement to share both in profit and losses.
Going back to the instant case, it should be recalled that the automation
Contract with Comelec was not executed by the consortium MPC -- or by
MPEI for and on behalf of MPC -- but by MPEI, period. The said Contract
contains no mention whatsoever of any consortium or members thereof. This
fact alone seems to contradict all the suppositions about a joint undertaking
that would normally apply to a joint venture or consortium: that it is a
commercial enterprise involving a community of interest, a sharing of risks,
profits and losses, and so on.
Now let us consider the four bilateral Agreements, starting with the
Memorandum of Agreement between MPEI and WeSolv Open Computing,
Inc., dated March 5, 2003. The body of the MOA consists of just seven (7)
short paragraphs that would easily fit in one page. It reads as follows:
1. The parties agree to cooperate in successfully implementing the Project in the
substance and form as may be most beneficial to both parties and other subcontractors
involved in the Project.
2. Mega Pacific shall be responsible for any contract negotiations and signing
with the COMELEC and, subject to the latters approval, agrees to give WeSolv an
opportunity to be present at meetings with the COMELEC concerning WeSolvs
portion of the Project.
3. WeSolv shall be jointly and severally liable with Mega Pacific only for the
particular products and/or services supplied by the former for the Project.
4. Each party shall bear its own costs and expenses relative to this agreement
unless otherwise agreed upon by the parties.
5. The parties undertake to do all acts and such other things incidental to,
necessary or desirable or the attainment of the objectives and purposes of this
Agreement.
6. In the event that the parties fail to agree on the terms and conditions of the
supply of the products and services including but not limited to the scope of the
products and services to be supplied and payment terms, WeSolv shall cease to be
bound by its obligations stated in the aforementioned paragraphs.
7. Any dispute arising from this Agreement shall be settled amicably by the
parties whenever possible. Should the parties be unable to do so, the parties hereby
agree to settle their dispute through arbitration in accordance with the existing laws of
the Republic of the Philippines. (Underscoring supplied.)
Even shorter is the Memorandum of Agreement between MPEI and SK
C&C Co. Ltd., dated March 9, 2003, the body of which consists of only six (6)
paragraphs, which we quote:
1. All parties agree to cooperate in achieving the Consortiums objective of
successfully implementing the Project in the substance and form as may be most
beneficial to the Consortium members and in accordance w/ the demand of the RFP.
2. Mega Pacific shall have full powers and authority to represent the Consortium
with the Comelec, and to enter and sign, for and in behalf of its members any and all
agreement/s which maybe required in the implementation of the Project.
3. Each of the individual members of the Consortium shall be jointly and
severally liable with the Lead Firm for the particular products and/or services supplied
by such individual member for the project, in accordance with their respective
undertaking or sphere of responsibility.
4. Each party shall bear its own costs and expenses relative to this agreement
unless otherwise agreed upon by the parties.
5. The parties undertake to do all acts and such other things incidental to,
necessary or desirable for the attainment of the objectives and purposes of this
Agreement.
6. Any dispute arising from this Agreement shall be settled amicably by the
parties whenever possible. Should the parties be unable to do so, the parties hereby
agree to settle their dispute through arbitration in accordance with the existing laws of
the Republic of the Philippines. (Underscoring supplied.)
It will be noted that the two Agreements quoted above are very similar in
wording. Neither of them contains any specifics or details as to the exact
nature and scope of the parties respective undertakings, performances and
deliverables under the Agreement with respect to the automation
project. Likewise, the two Agreements are quite bereft of pesos-and-centavos
data as to the amount of investments each party contributes, its respective
share in the revenues and/or profit from the Contract with Comelec, and so
forth -- all of which are normal for agreements of this nature. Yet, according to
public and private respondents, the participation of MPEI, WeSolv and SK
C&C comprises fully 90 percent of the entire undertaking with respect to the
election automation project, which is worth about P1.3 billion.
As for Election.com and ePLDT, the separate Teaming Agreements they
entered into with MPEI for the remaining 10 percent of the entire project
undertaking are ironically much longer and more detailed than the MOAs
discussed earlier. Although specifically ascribing to them the role
of subcontractor vis--vis MPEI as contractor, these Agreements are,
however, completely devoid of any pricing data or payment terms. Even the
appended Schedules supposedly containing prices of goods and services are
shorn of any price data. Again, as mentioned earlier, based on the terms of
their particular Agreements, neither Election.com nor ePLDT -- with MPEI -- is
jointly and severally liable to Comelec.
It is difficult to imagine how these bare Agreements -- especially the first
two -- could be implemented in practice; and how a dispute between the
parties or a claim by Comelec against them, for instance, could be resolved
without lengthy and debilitating litigations. Absent any clear-cut statement as
to the exact nature and scope of the parties respective undertakings,
commitments, deliverables and covenants, one party or another can easily
dodge its obligation and deny or contest its liability under the Agreement; or
claim that it is the other party that should have delivered but failed to.
Likewise, in the absence of definite indicators as to the amount of
investments to be contributed by each party, disbursements for expenses, the
parties respective shares in the profits and the like, it seems to the Court that
this situation could readily give rise to all kinds of misunderstandings and
disagreements over money matters.
Under such a scenario, it will be extremely difficult for Comelec to enforce
the supposed joint and several liabilities of the members of the
consortium. The Court is not even mentioning the possibility of a situation
arising from a failure of WeSolv and MPEI to agree on the scope, the terms
and the conditions for the supply of the products and services under the
Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv
would perforce cease to be bound by its obligations -- including its joint and
solidary liability with MPEI under the MOA -- and could forthwith disengage
from the project. Effectively, WeSolv could at any time unilaterally exit from its
MOA with MPEI by simply failing to agree. Where would that outcome leave
MPEI and Comelec?
To the Court, this strange and beguiling arrangement of MPEI with the
other companies does not qualify them to be treated as a consortium or joint
venture, at least of the type that government agencies like the Comelec
should be dealing with. With more reason is it unable to agree to the proposal
to evaluate the members of MPC on a collective basis.
In any event, the MPC members claim to be a joint venture/consortium;
and respondents have consistently been arguing that the IRR for RA 6957, as
amended, should be applied to the instant case in order to allow a collective
evaluation of consortium members. Surprisingly, considering these facts,
respondents have not deemed it necessary for MPC members to comply with
Section 5.4 (a) (iii) of the IRR for RA 6957 as amended.
According to the aforementioned provision, if the project proponent is a
joint venture or consortium, the members or participants thereof are required
to submit a sworn statement that, if awarded the contract, they shall bind
themselves to be jointly, severally and solidarily liable for the project
proponents obligations thereunder. This provision was supposed to mirror
Section 5 of RA 6957, as amended, which states: In all cases, a consortium
that participates in a bid must present proof that the members of the
consortium have bound themselves jointly and severally to assume
responsibility for any project. The withdrawal of any member of the
consortium prior to the implementation of the project could be a ground for the
cancellation of the contract.
The Court has certainly not seen any joint and several undertaking by the
MPC members that even approximates the tenor of that which is described
above. We fail to see why respondents should invoke the IRR if it is for their
benefit, but refuse to comply with it otherwise.
B.
DOST Technical Tests Flunked by the
Automated Counting Machines
Let us now move to the second subtopic, which deals with the substantive
issue: the ACMs failure to pass the tests of the Department of Science and
Technology (DOST).
After respondent consortium and the other bidder, TIM, had submitted
their respective bids on March 10, 2003, the Comelecs BAC -- through its
Technical Working Group (TWG) and the DOST -- evaluated their technical
proposals. Requirements that were highly technical in nature and that
required the use of certain equipment in the evaluation process were referred
to the DOST for testing. The Department reported thus:
TEST RESULTS MATRIX
[47]

[Technical Evaluation of Automated Counting Machine]
KEY REQUIREMENTS
[QUESTIONS]
MEGA-PACIFIC
CONSORTIUM
TOTAL
INFORMATION
MANAGEMENT
YES NO YES NO
1. Does the machine have an
accuracy rating of at least
99.995 percent
At
COLD environmental
condition
At NORMAL
environmental conditions
At HARSH environmental
conditions




















2. Accurately records and
reports the date and time
of the start and end of
counting of ballots per
precinct?

3. Prints election returns
without any loss of date
during generation of such
reports?

4. Uninterruptible back-up
power system, that will
engage immediately to
allow operation of at least

10 minutes after outage,
power surge or abnormal
electrical occurrences?
5. Machine reads two-sided
ballots in one pass?


Note: This
particular
requirement
needs further
verification
6. Machine can detect
previously counted ballots
and prevent previously
counted ballots from being
counted more than once?

7. Stores results of counted
votes by precinct in
external (removable)
storage device?


Note: This
particular
requirement
needs further
verification
8. Data stored in external
media is encrypted?


Note: This
particular
requirement
needs further
verification
9. Physical key or similar
device allows, limits, or
restricts operation of the
machine?

10. CPU speed is at least
400mHz?


Note: This
particular
requirement
needs further
verification
11. Port to allow use of dot-
matrix printers?

12. Generates printouts of the
election returns in a format
specified by the








COMELEC?
Generates printouts
In format specified by
COMELEC













13. Prints election returns
without any loss of data
during generation of such
report?

14. Generates an audit trail of
the counting machine, both
hard copy and soft copy?

Hard copy

Soft copy


















Note: This
particular
requirement
needs further
verification
15. Does the City/Municipal
Canvassing System
consolidate results from all
precincts within it using
the encrypted soft copy of
the data generated by the
counting machine and
stored on the removable
data storage device?


Note: This
particular
requirement
needs further
verification
16. Does the City/Municipal
Canvassing System
consolidate results from all
precincts within it using
the encrypted soft copy of


Note: This
particular
requirement


Note: This
particular
requirement
the data generated by the
counting machine and
transmitted through an
electronic transmission
media?
needs further
verification
needs further
verification
17. Does the system output a
Zero City/Municipal
Canvass Report, which is
printed on election day
prior to the conduct of the
actual canvass operation,
that shows that all totals
for all the votes for all the
candidates and other
information, are indeed
zero or null?


Note: This
particular
requirement
needs further
verification
18. Does the system
consolidate results from all
precincts in the
city/municipality using the
data storage device coming
from the counting
machine?


Note: This
particular
requirement
needs further
verification
19. Is the machine 100%
accurate?


Note: This
particular
requirement
needs further
verification
20. Is the Program able to
detect previously
downloaded precinct
results and prevent these
from being inputted again
into the System?


Note: This
particular
requirement
needs further
verification
21. The System is able to print
the specified reports and
the audit trail without any
loss of data during
generation of the above-
mentioned reports?
Prints specified reports











Audit Trail











Note: This
particular
requirement
needs further
verification
22. Can the result of the
city/municipal
consolidation be stored in
a data storage device?


Note: This
particular
requirement
needs further
verification
23. Does the system
consolidate results from all
precincts in the
provincial/district/ national
using the data storage
device from different
levels of consolidation?



Note: This
particular
requirement
needs further
verification
24. Is the system 100%
accurate?











Note: This
particular
requirement
needs further
verification
25. Is the Program able to
detect previously
downloaded precinct
results and prevent these
from being inputted again
into the System?








Note: This
particular
requirement
needs further
verification
26. The System is able to print
the specified reports and



the audit trail without any
loss of data during
generation of the
abovementioned reports?
Prints specified reports
Audit Trail




































Note: This
particular
requirement
needs further
verification

27. Can the results of the
provincial/district/national
consolidation be stored in
a data storage device?


Note: This
particular
requirement
needs further
verification
According to respondents, it was only after the TWG and the DOST had
conducted their separate tests and submitted their respective reports that the
BAC, on the basis of these reports formulated its comments/recommendations
on the bids of the consortium and TIM.
The BAC, in its Report dated April 21, 2003, recommended that the Phase
II project involving the acquisition of automated counting machines be
awarded to MPEI. It said:
After incisive analysis of the technical reports of the DOST and the Technical
Working Group for Phase II Automated Counting Machine, the BAC considers
adaptability to advances in modern technology to ensure an effective and efficient
method, as well as the security and integrity of the system.
The results of the evaluation conducted by the TWG and that of the DOST (14 April
2003 report), would show the apparent advantage of Mega-Pacific over the other
competitor, TIM.
The BAC further noted that both Mega-Pacific and TIM obtained some failed
marks in the technical evaluation. In general, the failed marks of Total Information
Management as enumerated above affect the counting machine itself which are
material in nature, constituting non-compliance to the RFP. On the other hand, the
failed marks of Mega-Pacific are mere formalities on certain documentary
requirements which the BAC may waive as clearly indicated in the Invitation to Bid.
In the DOST test, TIM obtained 12 failed marks and mostly attributed to the
counting machine itself as stated earlier. These are requirements of the RFP and
therefore the BAC cannot disregard the same.
Mega-Pacific failed in 8 items however these are mostly on the software which can
be corrected by reprogramming the software and therefore can be readily corrected.
The BAC verbally inquired from DOST on the status of the retest of the counting
machines of the TIM and was informed that the report will be forthcoming after the
holy week. The BAC was informed that the retest is on a different parameters theyre
being two different machines being tested. One purposely to test if previously read
ballots will be read again and the other for the other features such as two sided ballots.
The said machine and the software therefore may not be considered the same
machine and program as submitted in the Technical proposal and therefore may be
considered an enhancement of the original proposal.
Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by
Executive Director Ronaldo T. Viloria of DOST is that the result of the test in the two
counting machines of TIM contains substantial errors that may lead to the failure of
these machines based on the specific items of the RFP that DOST has to certify.
OPENING OF FINANCIAL BIDS
The BAC on 15 April 2003, after notifying the concerned bidders opened the
financial bids in their presence and the results were as follows:
Mega-Pacific:
Option 1 Outright purchase: Bid Price of Php1,248,949,088.00
Option 2 Lease option:
70% Down payment of cost of hardware or Php642,755,757.07
Remainder payable over 50 months or a total of Php642,755,757.07
Discount rate of 15% p.a. or 1.2532% per month.
Total Number of Automated Counting Machine 1,769 ACMs (Nationwide)
TIM:
Total Bid Price Php1,297,860,560.00
Total Number of Automated Counting Machine 2,272 ACMs
(Mindanao and NCR only)
Premises considered, it appears that the bid of Mega Pacific is the lowest calculated
responsive bid, and therefore, the Bids and Awards Committee (BAC) recommends that
the Phase II project re Automated Counting Machine be awarded to Mega Pacific
eSolutions, Inc.
[48]

The BAC, however, also stated on page 4 of its Report: Based on the 14
April 2003 report (Table 6) of the DOST, it appears that both Mega-Pacific and
TIM (Total Information Management Corporation) failed to meet some of the
requirements. Below is a comparative presentation of the requirements
wherein Mega-Pacific or TIM or both of them failed: x x x. What followed was
a list of key requirements, referring to technical requirements, and an
indication of which of the two bidders had failed to meet them.
Failure to Meet the
Required Accuracy Rating
The first of the key requirements was that the counting machines were to
have an accuracy rating of at least 99.9995 percent. The BAC Report
indicates that both Mega Pacific and TIM failed to meet this standard.
The key requirement of accuracy rating happens to be part and parcel of
the Comelecs Request for Proposal (RFP). The RFP, on page 26, even
states that the ballot counting machines and ballot counting software must
have an accuracy rating of 99.9995% (not merely 99.995%) or better as
certified by a reliable independent testing agency.
When questioned on this matter during the Oral Argument, Commissioner
Borra tried to wash his hands by claiming that the required accuracy rating of
99.9995 percent had been set by a private sector group in tandem with
Comelec. He added that the Commission had merely adopted the accuracy
rating as part of the groups recommended bid requirements, which it had not
bothered to amend even after being advised by DOST that such standard was
unachievable. This excuse, however, does not in any way lessen Comelecs
responsibility to adhere to its own published bidding rules, as well as to see to
it that the consortium indeed meets the accuracy standard. Whichever
accuracy rating is the right standard -- whether 99.995 or 99.9995 percent --
the fact remains that the machines of the so-called consortium failed to even
reach the lesser of the two. On this basis alone, it ought to have been
disqualified and its bid rejected outright.
At this point, the Court stresses that the essence of public bidding is
violated by the practice of requiring very high standards or unrealistic
specifications that cannot be met -- like the 99.9995 percent accuracy rating in
this case -- only to water them down after the bid has been award. Such
scheme, which discourages the entry of prospective bona fide bidders, is in
fact a sure indication of fraud in the bidding, designed to eliminate fair
competition. Certainly, if no bidder meets the mandatory requirements,
standards or specifications, then no award should be made and a failed
bidding declared.
Failure of Software to Detect
Previously Downloaded Data
Furthermore, on page 6 of the BAC Report, it appears that the
consortium as well as TIM failed to meet another key requirement -- for the
counting machines software program to be able to detect previously
downloaded precinct results and to prevent these from being entered
again into the counting machine. This same deficiency on the part of both
bidders reappears on page 7 of the BAC Report, as a result of the recurrence
of their failure to meet the said key requirement.
That the ability to detect previously downloaded data at different
canvassing or consolidation levels is deemed of utmost importance can be
seen from the fact that it is repeated three times in the RFP. On page 30
thereof, we find the requirement that the city/municipal canvassing system
software must be able to detect previously downloaded precinct results and
prevent these from being inputted again into the system. Again, on page 32
of the RFP, we read that the provincial/district canvassing system software
must be able to detect previously downloaded city/municipal results and
prevent these from being inputted again into the system. And once more, on
page 35 of the RFP, we find the requirement that the national canvassing
system software must be able to detect previously downloaded
provincial/district results and prevent these from being inputted again into
the system.
Once again, though, Comelec chose to ignore this crucial deficiency,
which should have been a cause for the gravest concern. Come May 2004,
unscrupulous persons may take advantage of and exploit such deficiency by
repeatedly downloading and feeding into the computers results favorable to a
particular candidate or candidates. We are thus confronted with the grim
prospect of election fraud on a massive scale by means of just a few key
strokes. The marvels and woes of the electronic age!
Inability to Print
the Audit Trail
But that grim prospect is not all. The BAC Report, on pages 6 and 7,
indicate that the ACMs of both bidders were unable to print the audit
trail without any loss of data. In the case of MPC, the audit trail system was
not yet incorporated into its ACMs.
This particular deficiency is significant, not only to this bidding but to the
cause of free and credible elections. The purpose of requiring audit trails is to
enable Comelec to trace and verify the identities of the ACM operators
responsible for data entry and downloading, as well as the times when the
various data were downloaded into the canvassing system, in order to
forestall fraud and to identify the perpetrators.
Thus, the RFP on page 27 states that the ballot counting machines and
ballot counting software must print an audit trail of all machine operations for
documentation and verification purposes. Furthermore, the audit trail must be
stored on the internal storage device and be available on demand for future
printing and verifying. On pages 30-31, the RFP also requires that
the city/municipal canvassing system software be able to print an audit trail of
the canvassing operations, including therein such data as the date and time
the canvassing program was started, the log-in of the authorized users (the
identity of the machine operators), the date and time the canvass data were
downloaded into the canvassing system, and so on and so forth. On page 33
of the RFP, we find the same audit trail requirement with respect to
the provincial/district canvassing system software; and again on pages 35-36
thereof, the same audit trail requirement with respect to
the national canvassing system software.
That this requirement for printing audit trails is not to be lightly brushed
aside by the BAC or Comelec itself as a mere formality or technicality can be
readily gleaned from the provisions of Section 7 of RA 8436, which authorizes
the Commission to use an automated system for elections.
The said provision which respondents have quoted several times, provides
that ACMs are to possess certain features divided into two classes: those that
the statute itself considers mandatory and other features or capabilities that
the law deems optional. Among those considered mandatory are provisions
for audit trails! Section 7 reads as follows: The System shall contain the
following features: (a) use of appropriate ballots; (b) stand-alone machine
which can count votes and an automated system which can consolidate the
results immediately; (c) with provisions for audit trails; (d) minimum human
intervention; and (e) adequate safeguard/security measures. (Italics and
emphases supplied.)
In brief, respondents cannot deny that the provision requiring audit trails is
indeed mandatory, considering the wording of Section 7 of RA 8436. Neither
can Respondent Comelec deny that it has relied on the BAC Report, which
indicates that the machines or the software was deficient in that respect. And
yet, the Commission simply disregarded this shortcoming and awarded the
Contract to private respondent, thereby violating the very law it was supposed
to implement.
C.
Inadequacy of Post Facto
Remedial Measures
Respondents argue that the deficiencies relating to the detection of
previously downloaded data, as well as provisions for audit trails, are mere
shortcomings or minor deficiencies in software or programming, which can be
rectified. Perhaps Comelec simply relied upon the BAC Report, which states
on page 8 thereof that Mega Pacific failed in 8 items[;] however these are
mostly on the software which can be corrected by re-programming x x x and
therefore can be readily corrected.
The undersigned ponentes questions, some of which were addressed to
Commissioner Borra during the Oral Argument, remain unanswered to this
day. First of all, who made the determination that the eight fail marks of
Mega Pacific were on account of the software -- was it DOST or TWG? How
can we be sure these failures were not the results of machine defects? How
was it determined that the software could actually be re-programmed and
thereby rectified? Did a quali fi ed technical expert read and anal yze
the source code
[ 49]
for the programs and conclude that these could be
saved and remedied? (Such determination cannot be done by any other
means save by the examination and analysis of the source code.)
Who was this qualified technical expert? When did he carry out the
study? Did he prepare a written report on his findings? Or did the Comelec
just make a wild guess? It does not follow that all defects in software
programs can be rectified, and the programs saved. In the information
technology sector, it is common knowledge that there are many badly written
programs, with significant programming errors written into them; hence it does
not make economic sense to try to correct the programs; instead,
programmers simply abandon them and just start from scratch. Theres no
telling if any of these programs is unrectifiable, unless a qualified programmer
reads the source code.
And if indeed a qualified expert reviewed the source code, did he also
determine how much work would be needed to rectify the programs? And
how much time and money would be spent for that effort? Who would carry
out the work? After the rectification process, who would ascertain and how
would it be ascertained that the programs have indeed been properly rectified,
and that they would work properly thereafter? And of course, the most
important question to ask: could the rectification be done in time for the
elections in 2004?
Clearly, none of the respondents bothered to think the matter
through. Comelec simply took the word of the BAC as gospel truth, without
even bothering to inquire from DOST whether it was true that the deficiencies
noted could possibly be remedied by re-programming the
software. Apparently, Comelec did not care about the software, but focused
only on purchasing the machines.
What really adds to the Courts dismay is the admission made by
Commissioner Borra during the Oral Argument that the software currently
being used by Comelec was merely the demo version, inasmuch as the final
version that would actually be used in the elections was still being developed
and had not yet been finalized.
It is not clear when the final version of the software would be ready for
testing and deployment. It seems to the Court that Comelec is just keeping
its fingers crossed and hoping the final product would work. Is there a Plan
B in case it does not? Who knows? But all these software programs are part
and parcel of the bidding and the Contract awarded to the Consortium. Why
is it that the machines are already being brought in and paid for, when there is
as yet no way of knowing if the final version of the software would be able to
run them properly, as well as canvass and consolidate the results in the
manner required?
The counting machines, as well as the canvassing system, will never work
properly without the correct software programs. There is an old adage that is
still valid to this day: Garbage in, garbage out. No matter how powerful,
advanced and sophisticated the computers and the servers are, if the
software being utilized is defective or has been compromised, the results will
be no better than garbage. And to think that what is at stake here is the 2004
national elections -- the very basis of our democratic life.
Correction of Defects?
To their Memorandum, public respondents proudly appended 19
Certifications issued by DOST declaring that some 285 counting machines
had been tested and had passed the acceptance testing conducted by the
Department on October 8-18, 2003. Among those tested were some
machines that had failed previous tests, but had undergone adjustments and
thus passed re-testing.
Unfortunately, the Certifications from DOST fail to divulge in what manner
and by what standards or criteria the condition, performance and/or readiness
of the machines were re-evaluated and re-appraised and thereafter given the
passing mark. Apart from that fact, the remedial efforts of respondents were,
not surprisingly, apparently focused again on the machines -- the
hardware. Nothing was said or done about the software -- the deficiencies as
to detection and prevention of downloading and entering previously
downloaded data, as well as the capability to print an audit trail. No matter
how many times the machines were tested and re-tested, if nothing was done
about the programming defects and deficiencies, the same danger of massive
electoral fraud remains. As anyone who has a modicum of knowledge of
computers would say, Thats elementary!
And only last December 5, 2003, an Inq7.net news report quoted the
Comelec chair as saying that the new automated poll system would be used
nationwide in May 2004, even as the software for the system remained
unfinished. It also reported that a certain Titus Manuel of the Philippine
Computer Society, which was helping Comelec test the hardware and
software, said that the software for the counting still had to be submitted on
December 15, while the software for the canvassing was due in early
January.
Even as Comelec continues making payments for the ACMs, we keep
asking ourselves: who is going to ensure that the software would be tested
and would work properly?
At any rate, the re-testing of the machines and/or the 100 percent testing
of all machines (testing of every single unit) would not serve to eradicate the
grave abuse of discretion already committed by Comelec when it awarded the
Contract on April 15, 2003, despite the obvious and admitted flaws in the
bidding process, the failure of the winning bidder to qualify, and the inability
of the ACMs and the intended software to meet the bid requirements and
rules.
Comelecs Latest
Assurances Are
Unpersuasive
Even the latest pleadings filed by Comelec do not serve to allay our
apprehensions. They merely affirm and compound the serious violations of
law and gravely abusive acts it has committed. Let us examine them.
The Resolution issued by this Court on December 9, 2003 required
respondents to inform it as to the number of ACMs delivered and paid for, as
well as the total payment made to date for the purchase thereof. They were
likewise instructed to submit a certification from the DOST attesting to the
number of ACMs tested, the number found to be defective; and whether the
reprogrammed software has been tested and found to have complied with the
requirements under Republic Act No. 8436.
[50]

In its Partial Compliance and Manifestation dated December 29, 2003,
Comelec informed the Court that 1,991 ACMs had already been delivered to
the Commission as of that date. It further certified that it had already paid the
supplier the sum of P849,167,697.41, which corresponded to 1,973 ACM units
that had passed the acceptance testing procedures conducted by the MIRDC-
DOST
[51]
and which had therefore been accepted by the poll body.
In the same submission, for the very first time, Comelec also disclosed to
the Court the following:
The Automated Counting and Canvassing Project involves not only the
manufacturing of the ACM hardware but also the development of three (3) types of
software, which are intended for use in the following:
1. Evaluation of Technical Bids
2. Testing and Acceptance Procedures
3. Election Day Use.
Purchase of the First Type of
Software Without Evaluation
In other words, the first type of software was to be developed solely for the
purpose of enabling the evaluation of the bidders technical bid. Comelec
explained thus: In addition to the presentation of the ACM hardware, the
bidders were required to develop a base software program that will enable
the ACM to function properly. Since the software program utilized during the
evaluation of bids is not the actual software program to be employed on
election day, there being two (2) other types of software program that will still
have to be developed and thoroughly tested prior to actual election day use,
defects in the base software that can be readily corrected by reprogramming
are considered minor in nature, and may therefore be waived.
In short, Comelec claims that it evaluated the bids and made the decision
to award the Contract to the winning bidder partly on the basis of the
operation of the ACMs running a base software. That software was therefore
nothing but a sample or demo software, which would not be the actual one
that would be used on election day. Keeping in mind that the Contract
involves the acquisition of not just the ACMs or the hardware, but also the
software that would run them, it is now even clearer that the Contract was
awarded without Comelec having seen, much less evaluated, the final product
-- the software that would finally be utilized come election day. (Not even the
near-final product, for that matter).
What then was the point of conducting the bidding, when the software that
was the subject of the Contract was still to be created and could conceivably
undergo innumerable changes before being considered as being in final
form? And that is not all!
No Explanation for Lapses
in the Second Type of Software
The second phase, allegedly involving the second type of software, is
simply denominated Testing and Acceptance Procedures. As best as we
can construe, Comelec is claiming that this second type of software is also to
be developed and delivered by the supplier in connection with the testing and
acceptance phase of the acquisition process. The previous pleadings,
though -- including the DOST reports submitted to this Court -- have not
heretofore mentioned any statement, allegation or representation to the effect
that a particular set of software was to be developed and/or delivered by the
supplier in connection with the testing and acceptance of delivered ACMs.
What the records do show is that the imported ACMs were subjected to
the testing and acceptance process conducted by the DOST. Since the initial
batch delivered included a high percentage of machines that had failed the
tests, Comelec asked the DOST to conduct a 100 percent testing; that is, to
test every single one of the ACMs delivered. Among the machines tested on
October 8 to 18, 2003, were some units that had failed previous tests but had
subsequently been re-tested and had passed. To repeat, however, until now,
there has never been any mention of a second set or type of software
pertaining to the testing and acceptance process.
In any event, apart from making that misplaced and uncorroborated claim,
Comelec in the same submission also professes (in response to the concerns
expressed by this Court) that the reprogrammed software has been tested
and found to have complied with the requirements of RA 8436. It
reasoned thus: Since the software program is an inherent element in the
automated counting system, the certification issued by the MIRDC-DOST that
one thousand nine hundred seventy-three (1,973) units passed the
acceptance test procedures is an official recognition by the MIRDC-DOST that
the software component of the automated election system, which has been
reprogrammed to comply with the provisions of Republic Act No. 8436 as
prescribed in the Ad Hoc Technical Evaluation Committees ACM Testing and
Acceptance Manual, has passed the MIRDC-DOST tests.
The facts do not support this sweeping statement of Comelec. A scrutiny
of the MIRDC-DOST letter dated December 15, 2003,
[52]
which it relied upon,
does not justify its grand conclusion. For claritys sake, we quote in full the
letter-certification, as follows:
15 December 2003
HON. RESURRECCION Z. BORRA
Commissioner-in-Charge
Phase II, Modernization Project
Commission on Elections
Intramuros, Manila
Attention: Atty. Jose M. Tolentino, Jr.
Project Director
Dear Commissioner Borra:
We are pleased to submit 11 DOST Test Certifications representing 11 lots and
covering 158 units of automated counting machines (ACMs) that we have tested from
02-12 December 2003.
To date, we have tested all the 1,991 units of ACMs, broken down as follow: (sic)
1
st
batch - 30 units 4
th
batch - 438 units
2
nd
batch - 288 units 5
th
batch - 438 units
3
rd
batch - 414 units 6
th
batch - 383 units
It should be noted that a total of 18 units have failed the test. Out of these 18 units,
only one (1) unit has failed the retest.
Thank you and we hope you will find everything in order.
Very truly yours,
ROLANDO T. VILORIA, CESO III
Executive Director cum
Chairman, DOST-Technical Evaluation Committee
Even a cursory glance at the foregoing letter shows that it is completely
bereft of anything that would remotely support Comelecs contention that the
software component of the automated election system x x x has been
reprogrammed to comply with RA 8436, and has passed the MIRDC-DOST
tests. There is no mention at all of any software reprogramming. If the
MIRDC-DOST had indeed undertaken the supposed reprogramming and the
process turned out to be successful, that agency would have proudly
trumpeted its singular achievement.
How Comelec came to believe that such reprogramming had been
undertaken is unclear. In any event, the Commission is not forthright and
candid with the factual details. If reprogramming has been done, who
performed it and when? What exactly did the process involve? How can we
be assured that it was properly performed? Since the facts attendant to the
alleged reprogramming are still shrouded in mystery, the Court cannot give
any weight to Comelecs bare allegations.
The fact that a total of 1,973 of the machines has ultimately passed the
MIRDC-DOST tests does not by itself serve as an endorsement of the
soundness of the software program, much less as a proof that it has been
reprogrammed. In the first place, nothing on record shows that the tests and
re-tests conducted on the machines were intended to address the serious
deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter does
not even indicate what kinds of tests or re-tests were conducted, their exact
nature and scope, and the specific objectives thereof.
[53]
The absence of
relevant supporting documents, combined with the utter vagueness of the
letter, certainly fails to inspire belief or to justify the expansive confidence
displayed by Comelec. In any event, it goes without saying that remedial
measures such as the alleged reprogramming cannot in any way mitigate the
grave abuse of discretion already committed as early as April 15, 2003.
Rationale of Public Bidding Negated
by the Third Type of Software
Respondent Comelec tries to assuage this Courts anxiety in these words:
The reprogrammed software that has already passed the requirements of
Republic Act No. 8436 during the MIRDC-DOST testing and acceptance
procedures will require further customization since the following additional
elements, among other things, will have to be considered before the final
software can be used on election day: 1. Final Certified List of Candidates x
x x 2. Project of Precincts x x x 3. Official Ballot Design and Security Features
x x x 4. Encryption, digital certificates and digital signatures x x x. The
certified list of candidates for national elective positions will be finalized on or
before 23 January 2004 while the final list of projects of precincts will be
prepared also on the same date. Once all the above elements are
incorporated in the software program, the Test Certification Group created by
the Ad Hoc Technical Evaluation Committee will conduct meticulous testing of
the final software before the same can be used on election day. In addition to
the testing to be conducted by said Test Certification Group, the Comelec will
conduct mock elections in selected areas nationwide not only for purposes of
public information but also to further test the final election day
program. Public respondent Comelec, therefore, requests that it be given up
to 16 February 2004 to comply with this requirement.
The foregoing passage shows the imprudent approach adopted by
Comelec in the bidding and acquisition process. The Commission says that
before the software can be utilized on election day, it will require
customization through addition of data -- like the list of candidates, project of
precincts, and so on. And inasmuch as such data will become available only
in January 2004 anyway, there is therefore no perceived need on Comelecs
part to rush the supplier into producing the final (or near-final) version of the
software before that time. In any case, Comelec argues that the software
needed for the electoral exercise can be continuously developed, tested,
adjusted and perfected, practically all the way up to election day, at the same
time that the Commission is undertaking all the other distinct and diverse
activities pertinent to the elections.
Given such a frame of mind, it is no wonder that Comelec paid little
attention to the counting and canvassing software during the entire bidding
process, which took place in February-March 2003. Granted that the software
was defective, could not detect and prevent the re-use of previously
downloaded data or produce the audit trail -- aside from its other shortcomings
-- nevertheless, all those deficiencies could still be corrected down the
road. At any rate, the software used for bidding purposes would not be the
same one that will be used on election day, so why pay any attention to its
defects? Or to the Comelecs own bidding rules for that matter?
Clearly, such jumbled ratiocinations completely negate the rationale
underlying the bidding process mandated by law.
At the very outset, the Court has explained that Comelec flagrantly
violated the public policy on public biddings (1) by allowing MPC/MPEI to
participate in the bidding even though it was not qualified to do so; and (2) by
eventually awarding the Contract to MPC/MPEI. Now, with the latest
explanation given by Comelec, it is clear that the Commission further
desecrated the law on public bidding by permitting the winning bidder to
change and alter the subject of the Contract (the software), in effect allowing a
substantive amendment without public bidding.
This stance is contrary to settled jurisprudence requiring the strict
application of pertinent rules, regulations and guidelines for public bidding for
the purpose of placing each bidder, actual or potential, on the same
footing. The essence of public bidding is, after all, an opportunity for fair
competition, and a fair basis for the precise comparison of bids. In common
parlance, public bidding aims to level the playing field. That means each
bidder must bid under the same conditions; and be subject to the same
guidelines, requirements and limitations, so that the best offer or lowest bid
may be determined, all other things being equal.
Thus, it is contrary to the very concept of public bidding to permit a
variance between the conditions under which bids are invited and those under
which proposals are submitted and approved; or, as in this case, the
conditions under which the bid is won and those under which the awarded
Contract will be complied with. The substantive amendment of the contract
bidded out, without any public bidding -- after the bidding process had been
concluded -- is violative of the public policy on public biddings, as well as the
spirit and intent of RA 8436. The whole point in going through the public
bidding exercise was completely lost. The very rationale of public bidding was
totally subverted by the Commission.
From another perspective, the Comelec approach also fails to make
sense. Granted that, before election day, the software would still have to be
customized to each precinct, municipality, city, district, and so on, there still
was nothing at all to prevent Comelec from requiring prospective
suppliers/bidders to produce, at the very start of the bidding process, the
next-to-final versions of the software (the best software the suppliers had) --
pre-tested and ready to be customized to the final list of candidates and
project of precincts, among others, and ready to be deployed thereafter. The
satisfaction of such requirement would probably have provided far better
bases for evaluation and selection, as between suppliers, than the so-called
demo software.
Respondents contend that the bidding suppliers counting machines were
previously used in at least one political exercise with no less than 20 million
voters. If so, it stands to reason that the software used in that past electoral
exercise would probably still be available and, in all likelihood, could have
been adopted for use in this instance. Paying for machines and software of
that category (already tried and proven in actual elections and ready to be
adopted for use) would definitely make more sense than paying the same
hundreds of millions of pesos for demo software and empty promises of
usable programs in the future.
But there is still another gut-level reason why the approach taken by
Comelec is reprehensible. It rides on the perilous assumption that nothing
would go wrong; and that, come election day, the Commission and the
supplier would have developed, adjusted and re-programmed the software
to the point where the automated system could function as envisioned. But
what if such optimistic projection does not materialize? What if, despite all
their herculean efforts, the software now being hurriedly developed and tested
for the automated system performs dismally and inaccurately or, worse, is
hacked and/or manipulated?
[54]
What then will we do with all the machines
and defective software already paid for in the amount of P849 million of our
tax money? Even more important, what will happen to our country in case of
failure of the automation?
The Court cannot grant the plea of Comelec that it be given until February
16, 2004 to be able to submit a certification relative to the additional elements
of the software that will be customized, because for us to do so would
unnecessarily delay the resolution of this case and would just give the poll
body an unwarranted excuse to postpone the 2004 elections. On the other
hand, because such certification will not cure the gravely abusive actions
complained of by petitioners, it will be utterly useless.
Is this Court being overly pessimistic and perhaps even engaging in
speculation? Hardly. Rather, the Court holds that Comelec should not have
gambled on the unrealistic optimism that the suppliers software development
efforts would turn out well. The Commission should have adopted a much
more prudent and judicious approach to ensure the delivery of tried and tested
software, and readied alternative courses of action in case of
failure. Considering that the nations future is at stake here, it should have
done no less.