G.R. No. 115221 March 17, 2000

JULIUS G. FROILAN, petitioner, vs. THE HONORABLE SANDIGANBAYAN, respondent.

Once again, the issue of whether or not the constitutional right of an accused to be presumed innocent has been overcome so as to warrant a judgment of conviction confronts this Court.

On a petition for certiorari, petitioner, Julius Froilan, has challenged the judgment of conviction of respondent court finding him as well as three (3) other co-accused guilty of the crime of violation of Section 3(g) of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt practices Act, for being contrary to law and jurisprudence.

The facts of the case as found by the Sandiganbayan and quoted both by petitioner and the Office of the Solicitor General in their respective pleadings filed before us are quoted verbatim, to wit:

Needing chemicals for its laboratory, the Bohol Agricultural College, a government educational institution in Bilar, Bohol, purchased on June 13, 1984, chemicals priced at P10,633.00 from the JDS Traders, a business firm in Tagbilaran City. As required in the procurement of government supplies, an RIV (Requisition and Issue Voucher) was prepared on May 30, 1984 by Benigno V. Mandin, Supply Officer, and approved by Mateo M. Limbago, Superintendent of the school (Exhibit A). It would appear that requests for price quotations were sent out to and filled out by three suppliers, namely: Farmacia Libertad, Tower View General Merchandise and JDS Traders, all of Tagbilaran City (Exhibits B, C and D). On the basis of the quotations submitted by these suppliers, an abstract of canvass (Exhibit E) was prepared by Supply Officer Benigno Mandin, and recommended for approval by a Committee on Award, composed of Sergio L. Salubre, Rutillo G. Real and Victorio S. Pabe. The award was in favor of JDS Traders which supposedly submitted the lowest quotation of P10,633.00, broken down as follows:

Qty.

Unit

Name of Article

Unit Price

Amount

1 gal. Ether Solution AR P1,455.00/gal. P1,455.00

1 gal. Carbon Tetra-Chloride AR

1,55.00/gal. 1550.00

1 Kilo Glucose Powder AR 1,420.00/kilo 1,420.00

1 lit. Nitric Acid AR 1,320.00/lit. 1,320.00

1 lit. Hydrochloric Acid AR 1,358.00/lit. 1,358.00

1 kilo Sodium Hydroxide AR 1,380.00/kilo 1,380.00

1 lit. Sodium Chloride AR 1,425.00/lit. 1,425.00

1 lit. Acetone AR 725.00/lit 725.00

Total

P10,633.00

On June 13, 1984, Purchase Order No. 84-61 was approved by accused Mateo M. Limbago. The purchase order, however, appears to have been received by accused Julius Froilan, the supplier, on June 11, 1984 or two days earlier. Froilan signed a certification stamped on the purchase order, stating that he will refund the difference if the prices are found to be overpriced.

It was Josef Enerio who operated JDS Traders; accused Froilan merely acted as an agent and used its receipts in the transaction. Thus, on June 14, 1984, accused Froilan issued JDS Traders Sales Invoice No. 057 in the total amount of P10,633.00. On the same date, Anastacio Macalolot, acting as authorized representative of the Bohol Agricultural College, accepted the articles described in Invoice No. 057 (Exhibit H). The corresponding Request for Obligation of Allotment (ROA) for sum of P10,633.00 was then prepared by accountant Wenceslao Guimadan and approved by accused Mateo M. Limbago (Exhibit I). On June 22, 1984, the corresponding disbursement voucher (Exhibit J) was processed and approved. Finally, on June 26, 1984, accused Froilan received payment and issued an Official Receipt for P10,633.00 under the business name of JDS Traders (Exhibit K).

Almost three years later, on March 24, 1987, Lebe C. Siono, Auditor I of the Commission on Audit, acting on a complaint made by unspecified concerned parties, wrote a letter (Exhibit N) to the COA Price Monitoring Division (PMD), Central Office, Quezon City, requesting for confirmation of the prices of various chemicals delivered to the Bohol Agricultural College covered by the said Purchase Oorder No. 84-61. Director Jose F. Mabanta of the COA Technical Services Office wrote a reply on May 15, 1987, stating that based on actual canvass made in the open market and verification from purchase documents or other government agencies with similar purchases, the prices in Metro Manila for the articles in question as compared to the quoted prices thereof, were as follows:

Item/Description

Quoted Price (as of 6-13-84) Price

Price Findings

Date

1 gal. Ether solution AR P1,455.00/gal P2,007.70/20 lit. or 401.5/gal.

(12/86)

1 gal. Carbon Tetrachloride AR

1,550.00/gal. 110.00/lit. or 440.00/gal. (1/86)

1 kilo Glucose Powder AR 1,420.00/kilo 22.00/kilo (4/87)

1 lit. Nitric Acid AR 1,320.00/lit. 380.00/2.5 lit. or 152.00/lit.

( /87)

1 lit. Hydrochloric Acid AR 1,358.00/lit. 313.60/lit. or 52.27/lit. Baker

(10/86)

1 kilo Sodium Hydroxide AR

1,380.00/kilo 190.00/kilo (1/87)

1 lit. Sodium Chloride AR 1,425.00/lit. 190.00/kilo (1/87)

1 lit. Acetone AR 725.00/lit. 380.00/4 lit. or 95.00/lit. (5/86)

(Exhibit P)

Using the above-quoted prices, State Auditor Lebe C. Siono Submitted to the Director of the COA Technical Services Office, a formula for computing the refund of the overprice by the dealer in the total amount of P5,233.17, which was arrived at as follows:

Article Description Qty. Unit

Quoted Unit Price

PMD Findings per Unit

Action taken by Auditor Unit Price allowed in Audit

Ether Solution AR 1 gal. P1,455/gal. P401.54 (P1,003.85)

Carbon Tetrachloride AR 1 gal. 1,550/gal. 440.00 ( 1,100.00)

Glucose Powder AR 1 kilo 1,420/kilo 22.00 ( 55.00)

Nitric Acid AR 1 liter 1,320/ltr 152.00 ( 380.00)

Hydrochloric Acid AR 1 liter 1,358/ltr 52.27 ( 130.67)

Sodium Hydroxide AR 1 kilo 1,380/kilo 190.00 ( 475.00)

Sodium Chloride AR 1 liter 1,425/ltr. 190.00 ( 475.00)

Acetone AR 1 liter 725/ltr. 95.00 ( 237.50)

P10,633.00

P1,542.81

P3,857.02

Add: 100% Allowance for price fluctuations from 1984-87

P1,542.81

Provincial delivery 50% 771.41

Total allowable price in audit P3,857.02 ==========

Total original purchase price P10,633.00

Less: Quoted PMD price findings 1,542.81

Total overprice 9,090.19

Less allowable price 3,857.02

Net overprice P5,233.17 =========

(Exhibit Q-1)

On June 17, 1987, Auditor Siono wrote a letter addressed to JDS Traders, accused Limbago, Salubre, Real and Pabe informing them of the disallowance of P5,232.87 and demanding the settlement thereof (Exhibit 15). On February 17, 1988, accused Froilan refunded the full amount of P5,232.87, as evidenced by Official Receipt No. 1683654-L (Exhibit 16-Froilan), the certification dated February 19, 1988 issued by Disbursing Officer Ranulfo Opus (Exhibit 17-Froilan), and the certification dated September 22, 1988 issued by Auditor Lebe Siono (Exhibit 18-Froilan). This notwithstanding, an Information for the violation of Sec. 3 (g) of Republic Act No. 3019 was filed against all the herein accused. 1

The Sandiganbayan found petitioner together with the three (3) other co-accused guilty of the crime as charged. The dispositive portion of the judgment of conviction is quoted hereunder:

WHEREFORE, judgment is hereby rendered, finding accused SERGIO SALUBRE, RUTILLO REAL, VICTORIO PABE AND JULIUS FROILAN, GUILTY beyond reasonable doubt in the Violation of Sec. 3 (g) of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, for which they are hereby sentenced to each suffer the indeterminate penalty of Six (6) Years and One (1) Month as the minimum, to Nine (9) Years as the maximum; to each suffer perpetual disqualification from public office, to jointly and severally indemnify the government in the additional amount of P1,542.81; and, to pay their proportionate share of the costs of the action.

Accused MATEO M. LIMBAGO and JOSEF ENERIO are hereby ACQUITTED for insufficient evidence; accordingly, the bail bond posted by Mateo M. Limbago and the property bond filed by Josef Enerio for their respective provisional liberty are hereby ordered cancelled.

SO ORDERED. 2

Petitioner filed this petition for certiorari assailing the said decision on the following assignment of errors:

I

THE HONORABLE SANDIGANBAYAN ERRED IN FINDING PETITIONER, A PRIVATE INDIVIDUAL, GUILTY OF VIOLATING SECTION 3 (g) OF RA 3019.

II

THE HONORABLE SANDIGANBAYAN ERRED IN GIVING CREDENCE TO THE PROSECUTION'S WITNESS, MS. BELMONTE AND IN RULING THAT PETITIONER WAS GUILTY OF OVERPRICING THE CHEMICALS HE SUPPLIED TO THE BOHOL AGRICULTURAL COLLEGE.

III

THE HONORABLE SANDIGANBAYAN ERRED IN FINDING THAT THERE WAS A CONSPIRACY AMONG PETITIONER AND HIS OTHER CO-ACCUSED.

IV

THE HONORABLE SANDIGANBAYAN ERRED IN NOT FINDING THAT THE GOVERNMENT WAS AMPLY PROTECTED IN THE TRANSACTION BETWEEN PETITIONER AND THE BOHOL AGRICULTURAL COLLEGE. 3

Meanwhile, the other accused, Sergio L. Salubre, Rutillo Real and Victorio S. Pabe also filed a petition forcertiorari with this Court. 4 Said petition was denied on August 31, 1994 for failure to comply with the requirements of Supreme Court Revised Circular No. 1-88. Said accused filed a motion for reconsideration which was denied with finality on October 19, 1994. Unfated, they filed a motion for leave to file second motion for reconsideration. This, again, was denied by this Court in a Resolution dated February 1, 1995. Another motion for reconsideration was filed which was likewise denied on April 3, 1995. In an apparent attempt to revive their petition, the said accused moved to consolidate G.R. No. 115977 with this petition, but their motion was denied on May 29, 1995. Subsequent motions for reconsideration and relief from judgment filed by the three accused were all denied by this Court considering that judgment had already been entered in the Book of Entries of Judgments.

On November 22, 1995, accused Salubre, Real and Pabe filed with this Court a petition for habeas corpus, 5praying for their immediate release from commitment. This petition was consolidated with G.R. No. 115977 and the instant case. On February 7, 1996, this Court denied the petition for habeas corpus upon a finding that their commitment was a necessary consequence of the finality of the judgment of their conviction by the Sandiganbayan in Criminal Case No. 12881. Petitioners' motion for reconsideration was denied on June 26, 1996.

Going back to the instant petition for certiorari, we rule in favor of petitioner.

Petitioner strongly argues that there was no reason for him to be convicted of the offense charged because he was the one who gave the guarantee to the government that in case there would be a finding of an overprice by the Commission on Audit (COA), he would refund the same. It is undisputed that an actual refund of P5,232.87 was made by petitioner, which was the amount found by the COA to have been the overprice. Further, petitioner contends that if one of his co-accused, Mr. Mateo Limbago, the Superintendent of the Bilar Agricultural College (BAC), was acquitted by the Sandiganbayan on the ground that the government was amply protected by the guarantee given by him, then why should he be convicted when he was the one who gave the very same guarantee that protected the government from any possible injury brought about by the contract he executed with the BAC, the same contract alleged to be grossly and manifestly disadvantageous to the government in the Information?

After carefully reviewing the records of the case, we are constrained to agree with petitioner. The Information filed with the Sandiganbayan charged petitioner and five (5) other accused with the crime of entering into a contract that was alleged to be grossly and manifestly disadvantageous to the government. In this connection, it is axiomatic that in conspiracy the act of one is the act of all. 6 Too, conspiracy is never presumed. Like the physical acts constituting the crime itself, the elements of conspiracy must be proven beyond reasonable doubt. 7

In this case, we are not persuaded with the theory of the prosecution that there was a conspiracy by and among the accused to defraud the government by overpricing the acquisition cost of the goods supplied to the BAC. We find it difficult to imagine how conspiracy in this case could have existed in the criminal act of causing damage to the government in terms of overpricing the goods bought by the latter from petitioner when, in reality, petitioner gave his guarantee to refund whatever overpricing the Commission on Audit will find out later on. In fact, it is not disputed that when the COA found an overprice in the amount of P5,232.87 and sought a refund thereof, petitioner, true to his promise, did actually make a refund.

Significantly, we note that one of petitioner's co-accused in the criminal case below, namely, Mr. Mateo Limbago, the Superintendent of the Bilar Agricultural College, was acquitted by the Sandiganbayan on the ground, among others, that the government after all was amply protected by petitioner in the transaction. The Sandiganbayan held:

. . . With such important things to attend to, it is plausible that accused Limbago really did not bother to read the unit prices of the chemicals being purchased and merely satisfied himself with the assurance that the purchase order was awarded to the supplier who submitted the lowest quotation and that, with the written undertaking of the winning supplier to refund the difference in case of an overprice, the government was amply protected.. . .8

In the case at bar, it will be noted that one of the principal reasons for Mr. Limbago's acquittal was the fact that the government the only entity which the law seeks to protect was amply protected by virtue of the written undertaking issued by petitioner, as the winning bidder, to refund whatever amount may be found as the overprice. Petitioner, being the one who gave the written guarantee and who saved the government from any perceived injury, must likewise be acquitted.

Likewise, the fact of the government being protected at all times by petitioner assumes another significance insofar as the innocence of petitioner is concerned. It must be remembered that in the crime for which petitioner was charged, i.e., Section 3 (g) of Republic Act No. 3019, 9 the elements are: (a) that the accused is a public officer; (b) that he entered into a contract or transaction on behalf of the government; and (c) that such contract or transaction is grossly and manifestly disadvantageous to the government.

Readily, we find that one of the elements of the crime, i.e., that the contract or transaction is grossly and manifestly disadvantageous to the government, is conspicuously missing. The government was amply protected in the subject transaction, and consequently the contract was not grossly and manifestly disadvantageous to the government. Hence, the requirement of a moral certainty that the crime was committed, in order to uphold the judgment of conviction of petitioner, is absent in this case. Conviction must rest on nothing less than a moral certainty of guilt. 10

In essence, the prosecution has failed to overcome the constitutional presumption of innocence enjoyed by petitioner.1wphi1 Failure of the prosecution's evidence to overcome the constitutional presumption of innocence entitles the accused to an acquittal. 11

Lastly, in the challenged decision, we note that the Sandiganbayan found the computation of the Commission on Audit erroneous in that, there should still be a payable of P1,541.81 due from petitioner. We have reviewed the records of the case and find no basis to uphold such finding by the Sandiganbayan. Assuming arguendo that there was indeed an error in the computation as declared by the Sandiganbayan, the same cannot be ascribed to petitioner but to the COA, Petitioner cannot be held liable therefor.

WHEREFORE, the petition is GRANTED, The Decision of the Sandiganbayan in Criminal Case No. 12281, insofar as it found petitioner guilty of violation of Section 3 (g)

of Republic Act No. 3019, is REVERSED and SET ASIDE. Consequently, petitioner is ACQUITTED of the crime charged.SO ORDERED.

G.R. No. 126151 January 20, 2000 MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), former SECRETARY JESUS B. GARCIA, in his capacity as the Secretary of the Department of Transportation and Communication (DOTC), and GEN. FRANCISCO E. ATAYDE (RET.), in his capacity as the General Manager of the Ninoy Aquino International Airport, petitioners, vs. HON. SERGIO D. MABUNAY, Presiding Judge, Regional Trial Court of Manila, Branch 24 and LANTING SECURITY AND WATCHMAN AGENCY, respondents.

In their petition for review on certiorari under Rule 45 of the Rules of Court, the Manila International Airport Authority (MIAA), former Secretary Jesus B. Garcia, in his capacity as the Secretary of the Department of Transportation and Communication (DOTC), and Gen. Francisco E. Atayde (Ret.) in his capacity as the General Manager of the Ninoy Aquino International Airport, assail the decision dated August 30, 1996 of respondent Judge Sergio D. Mabunay, Presiding Judge Regional Trial Court of Manila, Branch 24, insofar as it ruled that under the laws and regulations, it is necessary for the Manila International Airport Authority to contract for security services through public bidding. The petitioners claim that the ruling interferes with "the absolute prerogative" of the petitioners to award security services either through negotiated contract or public bidding.1wphi1.nt

Private respondent Lanting Security and Watchman Agency ("Lanting" for brevity) is a bonded security agency, which entered into an Agreement with the Manila International Airport Authority to render security services on a month-to-month basis to commence on April 31, 1987 renewable at the sole option of the MIAA. The contract was renewed by MIAA from 1988 to 1995. In 1995, upon the recommendation of the MIAA's former General Manager for the privatization of the Aviation Security Services of MIAA, a subsidiary company, the Philippine Aviation Security Services Corporation (PASSCOR) was formed, and the MIAA Board of Directors approved the award of security services in favor of PASSCOR effective September 1, 1995. Having been informed that PASSCOR would take over the operations and management of the security of the MIAA, and that the security services contract that MIAA entered into with Lanting would be terminated by August 31, 1995, Lanting filed a complaint for injunction, which was docketed as Civil Case No. 95-75048 with the respondent Regional Trial Court of Manila, Branch XXIV, challenging the "highly irregular" awarding by MIAA of the security services contract to PASSCOR without going through public bidding, as being not only contrary to law, but likewise against public policy. The respondent Regional Trial Court issued a writ of preliminary injunction ordering MIAA not to terminate the security services of Lanting and not to award the security contract in favor of PASSCOR.

On August 30, 1996, the parties formulated and submitted a Compromise Agreement, which was approved by the Regional Trial Court and which contained the following terms and conditions:

1. MIAA shall not implement the termination of Lanting's security services by August 31, 1996 and instead shall extend as it hereby extends such services by a period of ten (10) months beginning 01 September 1996 to 30 June 1997. For this purpose, MIAA and Lanting shall execute the necessary Extension Contract.

2. To effect the above extension, MIAA shall allow Lanting to redeploy a total of 274 guards within the NAIA Complex which shall be inclusive of the currently deployed 114 Lanting guards effective not later than midnight of August 28, 1996.

3. Upon execution hereof, MIAA shall be free to engage immediately the services of other security agencies, including that of Philippine Aviation Security Services Corp. (PASSCOR), to meet the security needs at the NAIA Complex, also for a period of ten (10) months beginning 01 September 1996 up to 30 June 1997.

4. Subject to paragraph 6 hereof, Lanting shall withdraw as it hereby withdraws its instant complaint.

5. The parties shall jointly move as they so move and pray for this Honorable Court to lift the writ of preliminary injunction dated September 15, 1995 which it issued in the above-captioned case.

6. Further, the parties shall jointly move as they respectfully move and pray for the Honorable Court to resolve the following residual issues:

6.1 Whether or not the 160 Lanting security guards whose services phased-out effective July 31, 1996 are entitled to back wages for the period during the month of August 1996 when they were not deployed at the NAIA Complex;

6.2 Whether or not MIAA has the option, under existing laws, rules and regulations, to contract security services by negotiation of through public bidding.

7. Finally, MIAA undertakes to effect compliance with the trial court's order on paragraph 6.1 in the event said issue is resolved in favor of payment of the security guard's backwages, within seven (7) days from receipt of said order of the trial court. MIAA may however opt to appeal any adverse resolution on paragraph 6.2 hereof.1

On the issue defined in 6.2 above, which was left to the Court for resolution, the court ruled as follows:

With respect to 6.2 in the Compromise Agreement, the court rules that under the laws and regulations, it is necessary for the defendant to contract for security services through public bidding.

The following grounds are invoked to support the instant petition for certiorari:

PETITIONER MIAA HAS THE OPTION TO RESORT TO NEGOTIATED CONTRACT OR PUBLIC BIDDING.

SECTION 62, CHAPTER 13, BOOK IV OF THE ADMINISTRATIVE CODE OF 1987 HAS NO APPLICATION TO THE CASE AT BAR.2

Petitioners allege that the "only issue to be resolved in this petition refers to the right of MIAA to award security services through negotiated contract or public bidding". Petitioners submit that the option to make such award is addressed to the exclusive and sole discretion of the MIAA, and the awarding of the contract to PASSCOR cannot be branded as highly irregular despite the fact that no public bidding was conducted. The petitioners point out that the Philippines is a signatory to the convention for international civil aviation, and the selection of an airport security agency is of paramount importance involving as it does national security and safety.

Petitioners contend that the applicable law is Section 68 of R.A. 7845, whereunder the government agency concerned has the option to resort to public bidding or negotiated contract wherever it is impractical or more expensive for the government to directly undertake certain functions and operations.

In its Comment, private respondent Lanting alleges that Section 68 of R.A. 7845 does not give government agencies the unqualified discretion to choose by what manner they may contract out services which they themselves cannot directly undertake. Lanting submits that the applicable legal provision is Section 62, referring to public bidding of contracts and the exceptions thereto, is applicable. Since none of the exceptional circumstances provided under Section 62 is present to justify an award by negotiated contract, the award should go through a public bidding. Respondent Lanting also points to Section 417 of the Government Auditing Rules and Regulations of the COA, which lays down the criteria for evaluating offers for security and janitorial services.

The only legal question posed herein is whether the court a quo erred in ruling that under existing laws and regulations the contract for security services should be awarded through public bidding.

We hold that it did not. The petition must perforce be dismissed.

Section 68 of R.A. 7845 which is the General Appropriations Act for 1995, specifically refers to contracts for services related to the functions and operations of the government and its agencies. It reads:

Sec. 68. Service Contracts. Departments, bureaus, offices or agencies of the National Government are hereby authorized to enter into contracts with other government agencies, private firms or individuals and non-governmental organizations for services related or incidental to their respective functions and operations, through public bidding or negotiated contracts whenever it is impractical or more expensive for the government to directly undertake such functions and operations, subject to pertinent accounting and auditing rules and regulations: PROVIDED, That the execution of the service contracts shall not operate to automatically abolish or render vacant any existing occupied position in the contracting office or agency.

Petitioners' position that the above-quoted section gives the government agency concerned the sole option to resort to public bidding or to negotiated contract whenever it is impractical or more expensive for the government to directly undertake a certain function or operation, is not tenable. There is nothing in said provision which does away with the general requirement of public bidding in the award of government contract. This was the ruling in National Food Authority vs. Court of Appeals,3 involving the award of a contract for security services by the National Food Authority wherein the said government agency relied on Section 31 of Republic Act No. 7645, which is the counterpart provision of Section 78 of Republic Act No. 7845. This Court held:

Petitioners' manifest reluctance to hold a public bidding and award a contract to the winning bidder smacks of favoritism and partiality toward the security agencies to whom it awarded the negotiated contracts and cannot be countenanced. A competitive public bidding aims to protect the public interest by giving the public the best possible advantages thru open competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the execution of public contracts.

The General Appropriations Act (GAA) of 1993 cannot be used by petitioners to justify their actuations. An appropriations acts is primarily a special type of legislation whose content is limited to specified sums of money dedicated to a specific purpose or a separate fiscal unit. Section 31 on the General Provisions of the GAA of 1993 merely authorizes the heads of departments, bureaus, offices or agencies of the national government to hire, through public bidding or negotiated contracts, contractual personnel to perform specific activities or services related or incidental to their functions. This law specifically authorizes expenditures for the hiring of these personnel. It is not the governing law on the award of the service contracts by government agencies nor does it do away with the general requirement of public bidding.

Indeed, public bidding in government contracts has been observed in this jurisdiction since the time of the Philippine Commission:

Bidding was introduced in the Philippines by the American Laws on Public Bidding until finally Act No. 22 (1900) of the Philippine Commission was enacted

which became the first law on public bidding in this jurisdiction. This was followed by several related Acts such as Act Nos. 74(1901), 82(1901) and 83(1901) culminating in the promulgation by President Quezon on February 3, 1936, of Executive Order No. 16 declaring as a general policy that public bidding must be the means adopted in the purchase of supplies, materials and equipment except on very extraordinary cases and with his prior approval. These Acts and Executive Order as well as the rules and regulations promulgated pertinent thereto were later incorporated in the Administrative Code and in subsequent Public Works Acts, although with slight modifications. Up to the present, this policy and medium still hold both in procurement and construction contracts of the government, and the latest enactment relative thereto is Presidential Decree No. 1594 (1978) and its Implementing Rules and Regulations.4

As early as 1936, then President Quezon declared as a matter of general policy that Government contracts for public service or for furnishing supplies, materials and equipment to the Government should be subjected to public bidding.5 There were a number of amendments,6 the latest of which, Executive Order No. 40 dated June 1, 1963 of President Diosdado Macapagal, reiterated the directive that no government contract for public service or for furnishing supplies, materials and equipments to the government or any of its branches, agencies or instrumentalities, shall be entered into without public bidding except for very extraordinary reasons to be determined by a Committee constituted thereunder. Of more recent date is Executive Order No. 301, S. 1987, issued by President Corazon Aquino, which prescribed the guidelines for decentralization of negotiated contracts. Section 1 of this issuance reiterated the legal requirement of public bidding for the award of contracts for public services and for furnishing supplies, materials and equipment to the government, and expressly specified the exceptions thereto.

By positive provision of the annual General Appropriations Acts7 government offices and agencies are authorized to enter into contracts for services related or incidental to their respective functions and operations, either through public bidding or negotiated contract, whenever it is impractical or more expensive for the government to directly undertake such functions and operation, subject to accounting or auditing rules and regulations. As earlier stated, these provisions are not to be construed as doing away with the general requirement of public bidding. Indeed, public bidding is the accepted method for arriving at a fair and reasonable price and it ensures that overpricing and favoritism, and other anomalous practices are eliminated or minimized8 and we reiterate that Section 68 of the General Appropriations Act has not dispensed with such requirement for contracts for services awarded thereunder. Although the legislature in making appropriations under its exclusive jurisdiction leaves largely to administrative discretion the choice of ways and means to accomplish the object of appropriation, that administrative discretion may not transcend the statutes.9

WHEREFORE, the petition is denied for lack of merit. SO ORDERED.1wphi1.nt

[G.R. No. 143684. July 31, 2000]

RODOLFO MADRID, JR., vs. HON. ANIANO A. DESIERTO, et al.

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated JUL 31 2000.

G.R. No. 143684 (Rodolfo Madrid, Jr., vs. Hon. Aniano A. Desierto, et al.)

This is a special civil action for certiorari wherein petitioner seeks the nullification of the

Resolution and Order of the Office of the Ombudsman in OMB-1-98-0215, entitled "Albay

Accredited Constructors Association, Inc. vs. Mayor Imelda Roces, et al." which dismissed

petitioners complaint and denied his motion for reconsideration, respectively.

This case started when the City Government of Legazpi City, Albay, invited bidders to

participate in the development and construction of the Legazpi City Public Market. Portland

Trade and Realty Corporation, Chanelay Development Corporation and Liberty Commercial

Center (hereinafter, "Liberty") participated in the bidding. After submitting their bid

statements, the bidding committee announced that it was awarding the project to Liberty.

Thus, the city Government of Legazpi, through Mayor Imelda Roces, entered into

renewable 50-year contract of lease with Liberty wherein the latter will construct a public

market on the property of the city government and, thereafter, pay the city government a P5.5

million annual lease for the use of the property. It was also stipulated in the contract that after

the end of the 50-year lease, Liberty will transfer ownership of the public market in favor of the

City Government of Legazpi City.

Claiming the irregularities, amounting to violations of Sec. 3(e), (g) and (j) of Republic Act No.

3019, attended the awarding of the project to Liberty, petitioner filed a complaint on 9January

1998, against respondents before the Office of the Ombudsman. In its resolution, dated 29

November 1999, the Ombudsman discussed each of the seven issues raised by petitioner and

found no probable cause to hold respondents liable for allegedly violating Republic Act No. 019.

Thus, petitioners complaint was dismissed. Petitioner filed a motion for reconsideration but

the same was denied in his Order dated 16 March 2000. Undaunted, petitioner filed the instant

special civil action for certiorari.

In dismissing the complaint for lack of probable cause, the Ombudsman stated:

First. On the issue of procedural infirmity due to the lack of approval from the ICC of NEDA

Board as required under R.A. 6957, the respondent public officers have sufficiently established

that the said procedural requirement is not necessary in the subject transaction. The

requirements under R.A. 6957 refer to transaction under the build-operate-transfer scheme of

the government and not to contract involving lease of property just like the one involved in the

instant case.

All the elements of a contract of lease are present in the transaction.

There is a subject matter, the use of the property of the Legazpi City; a cause or

consideration which is the amount of rental that shall be paid by the LCC; and consent among

the parties. The mere provision in the contract that the building shall belong to the city

government of Legazpi at the termination of the contract will not be sufficient to classify the

transaction under the BOT scheme. This kind of provision is ordinary in long-term lease

agreement.

However, even granting that the transaction properly falls under the BOT scheme, We

likewise submit that the mere lack of the required approval from NEDA would not be a cause

for violation of the Anti-Graft and Corrupt Practices Act. If, at all, this defect may be a ground

for the rescission or cancellation of the contract.

Second. The issue that another bidder, Chanelay Corporation, ought to have won the

bidding is mere conjectural. There was no evidence presented to show that the Chanelay

Corporation offered a better bid than the LCC. Moreover, if this allegation has some semblance

of truth, We submit that the Chanelay Corporation would have been the first to complain.

Third. On the issue that the conduct of lease failed to specify the value of the market

that LCC would construct, the approved plans and specifications attached to the contract

negate this charge. In addition, We submit that appropriate measures were resorted by the

ublic respondents to assure that the construction of the market would comply with the

approved plans and specifications by providing under the contract that the City Engineer of

Legazpi shall oversee the construction of the project.

Fourth. On the issue that the government is prejudiced by the option given to LCC to pay

rent on a monthly basis (instead on an annual basis), We find in the negative. Whether the rent

is paid monthly or annually would result in the same thing the receipt by the government of

the same sum of money. Moreover, We submit that mere reference made in the contract that

the amount of rent shall be such amount annually does not necessarily mean that payment

should be made in an annual basis. On the issue raised on the grant of tax relief, We find that it

is allowed under Ordinance No. 96-016 (Legazpi City Investment Incentive Code of 1996).

Fifth. The issue that the period of lease granted to LCC may be extended indefinitely

without public bidding and the required government approval is belied by the provision

contained in the contract. The contract provides that after the term of the lease, the

government shall have the option to negotiate for its renewal. This provision, which incidentally

is standard in any contract of lease, does not mean that the procedural requirement in the

execution of the contract as well as the limit in the term of the contract shall not be observed in

case the contract is renewed.

Sixth. The issue raised that the LCC has the absolute right to determine and fix

reasonable fees, rentals and charges on the market is misplaced. It is but proper that being the

lessee of the leased premises and the operator of the market, discretion and prerogatives must

be exercised by the LCC in the management of the market.

Seventh. The issue that the LCC did not post any performance bond was adequately

explained by the fact that the city government of Legazpi has failed to completely surrender the

leased premises to the LCC free from any occupant. In effect, the obligation of LCC to proceed

with the construction of the commercial complex and the concomitant obligation to post

performance are conditional upon the fulfillment by the city government of Legazpi of its

obligation to clear the premises from its old market tenants. We find that the non-fulfillment by

the lessor of its obligation has the effect of suspending the obligation of the lessee-LCC.The

prevailing rule is that the court will not interfere with the decision of the Ombudsman in

prosecuting or dismissing a complaint. Only in instances where there is a showing of patent

abuse of discretion will this Court step in and substitute its judgment over that of the

ombudsman. Our review of the very exhaustive pleading of petitioner shows that the decision

of the Office of the Ombudsman must be upheld. Petitioner failed to sufficiently show that any

grave abuse of discretion was committed by the Ombudsman in rendering the challenged

resolution and order which, on the contrary, appear to be in accord with the facts and

applicable law.

IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED.

Very truly yours, VIRGINIA ANCHETA-SORIANO Clerk of Court (Sgd.) ENRIQUETA ESGUERRA-VIDAL Asst. Clerk of Court

G.R. No. 126204 November 20, 2001 NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS OCEANIC, INC., respondent.

Where a person merely uses a right pertaining to him, without bad faith or intent to injure, the fact that damages are thereby suffered by another will not make him liable.1

This principle finds useful application to the present case.

Before us is a petition for review of the Decision2 dated August 27, 1996 of the Court of Appeals affirming in toto the Decision3 dated January 16, 1992 of the Regional Trial Court, Branch 57, Makati City.

The facts are:

On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bid for the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The Philipp Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate as one of the bidders. After the public bidding was conducted, PHIBRO's bid was accepted. NAPOCOR's acceptance was conveyed in a letter dated July 8, 1987, which was received by PHIBRO on July 15, 1987.The "Bidding Terms and Specifications"4provide for the manner of shipment of coals, thus:

"SECTION V

SHIPMENT

The winning TENDERER who then becomes the SELLER shall arrange and provide gearless bulk carrier for the shipment of coal to arrive at discharging port on or before thirty (30) calendar days after receipt of the Letter of Credit by the SELLER or its nominee as per Section XIV hereof to meet the vessel arrival schedules at Calaca, Batangas, Philippines as follows:

60,000 +/ - 10 % July 20, 1987

60,000 +/ - 10% September 4, 1987"5

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon plague Australia, the shipment's point of origin, which could seriously hamper PHIBRO's ability to supply the needed coal.6 From July 23 to July 31, 1987, PHIBRO again apprised NAPOCOR of the situation in Australia, particularly informing the latter that the ship owners therein are not willing to load cargo unless a "strike-free" clause is incorporated in the charter party or the contract of carriage.7 In order to hasten the

transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden of a "strike-free" clause. NAPOCOR refused.

On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter of credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment only on November 17, 1987.

Consequently, in October 1987, NAPOCOR once more advertised for the delivery of coal to its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. On November 24, 1987, NAPOCOR disapproved PHIBRO's application for pre-qualification to bid for not meeting the minimum requirements.8 Upon further inquiry, PHIBRO found that the real reason for the disapproval was its purported failure to satisfy NAPOCOR's demand for damages due to the delay in the delivery of the first coal shipment.

This prompted PHIBRO to file an action for damages with application for injunction against NAPOCOR with the Regional Trial Court, Branch 57, Makati City.9 In its complaint, PHIBRO alleged that NAPOCOR's act of disqualifying it in the October 1987 bidding and in all subsequent biddings was tainted with malice and bad faith. PHIBRO prayed for actual, moral and exemplary damages and attorney's fees.

In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as reason for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987 those strikes had already ceased. And, even assuming that the strikes were still ongoing, PHIBRO should have shouldered the burden of a "strike-free" clause because their contract was "C and F Calaca, Batangas, Philippines," meaning, the cost and freight from the point of origin until the point of destination would be for the account of PHIBRO. Furthermore, NAPOCOR claimed that due to PHIBRO's failure to deliver the coal on time, it was compelled to purchase coal from ASEA at a higher price. NAPOCOR claimed for actual damages in the amount of P12,436,185.73, representing the increase in the price of coal, and a claim of P500,000.00 as litigation expenses.10

Thereafter, trial on the merits ensued.

On January 16, 1992, the trial court rendered a decision in favor of PHIBRO, the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff Philipp Brothers Oceanic Inc. (PHIBRO) and against the defendant National Power Corporation (NAPOCOR) ordering the said defendant NAPOCOR:

1. To reinstate Philipp Brothers Oceanic, Inc. (PHIBRO) in the defendant National Power Corporation's list of accredited bidders and allow PHIBRO to participate in any and all future tenders of National Power Corporation for the supply and delivery of imported steam coal;

2. To pay Philipp Brothers Oceanic, Inc. (PHIBRO);

a. The peso equivalent at the time of payment of $864,000 as actual damages,

b. The peso equivalent at the time of payment of $100,000 as moral damages;

c. The peso equivalent at the time of payment of $50,000 as exemplary damages;

d. The peso equivalent at the time of payment of $73,231.91 as reimbursement for expenses, cost of litigation and attorney's fees;

3. To pay the costs of suit;

4. The counterclaims of defendant NAPOCOR are dismissed for lack of merit.

SO ORDERED."11

Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the Court of Appeals. On August 27, 1996, the Court of Appeals rendered a Decision affirming in toto the Decision of the Regional Trial Court. It ratiocinated that:

"There is ample evidence to show that although PHIBRO's delivery of the shipment of coal was delayed, the delay was in fact caused by a) Napocor's own delay in opening a workable letter of credit; and b) the strikes which plaqued the Australian coal industry from the first week of July to the third week of September 1987. Strikes are included in the definition of force majeure in Section XVII of the Bidding Terms and Specifications, (supra), so Phibro is not liable for any delay caused thereby.

Phibro was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was to be effected thirty (30) days from Napocor's opening of a confirmed and workable letter of credit. Napocor was only able to do so on August 6, 1987.

By that time, Australia's coal industry was in the middle of a seething controversy and unrest, occasioned by strikes, overtime bans, mine stoppages. The origin, the scope and the effects of this industrial unrest are lucidly described in the uncontroverted testimony of James Archibald, an employee of Phibro and member of the Export Committee of the Australian Coal Association during the time these events transpired.

xxx xxx xxx

The records also attest that Phibro periodically informed Napocor of these developments as early as July 1, 1987, even before the bid was approved. Yet, Napocor did not forthwith open the letter of credit in order to avoid delay which might be caused by the strikes and their after-effects.

"Strikes" are undoubtedly included in the force majeure clause of the Bidding Terms and Specifications (supra). The renowned civilist, Prof. Arturo Tolentino, defines force majeure as "an event which takes place by accident and could not have been foreseen." (Civil Code of the Philippines, Volume IV, Obligations and Contracts, 126, [1991]) He further states:

"Fortuitous events may be produced by two general causes: (1) by Nature, such as earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an armed invasion, attack by bandits, governmental prohibitions, robbery, etc."

Tolentino adds that the term generally applies, broadly speaking, to natural accidents. In order that acts of man such as a strike, may constitute fortuitous event, it is necessary that they have the force of an imposition which the debtor could not have resisted. He cites a parallel example in the case of Philippine National Bank v. Court of Appeals, 94 SCRA 357 (1979), wherein the Supreme Court said that the outbreak of war which prevents performance exempts a party from liability.

Hence, by law and by stipulation of the parties, the strikes which took place in Australia from the first week of July to the third week of September, 1987, exempted Phibro from the effects of delay of the delivery of the shipment of coal."12

Twice thwarted, NAPOCOR comes to us via a petition for review ascribing to the Court of Appeals the following errors:

I

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding that PHIBRO's delay in the delivery of imported coal was due to NAPOCOR's alleged delay in opening a letter of credit and to forcemajeure, and not to PHIBRO's own deliberate acts and faults."13

II

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding that NAPOCOR acted maliciously and unjustifiably in disqualifying PHIBRO from participating in the December 8, 1987 and future biddings for the supply of imported coal despite the existence of valid grounds therefor such as serious impairment of its track record."14

III

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding that PHIBRO was entitled to injunctive relief, to actual or compensatory, moral and exemplary damages, attorney's fees and litigation expenses despite the clear absence of legal and factual bases for such award."15

IV

"Respondent Court of Appeals gravely and seriously erred in absolving PHIBRO from any liability for damages to NAPOCOR for its unjustified and deliberate refusal and/or failure to deliver the contracted imported coal within the stipulated period."16

V

"Respondent Court of Appeals gravely and seriously erred in dismissing NAPOCOR's counterclaims for damages and litigation expenses."17

It is axiomatic that only questions of law, not questions of fact, may be raised before this Court in a petition for review under Rule 45 of the Rules of Court.18 The findings of facts of the Court of Appeals are conclusive and binding on this Court19 and they carry even more weight when the said court affirms the factual findings of the trial court.20 Stated differently, the findings of the Court of .Appeals, by itself, which are supported by substantial evidence, are almost beyond the power of review by this Court.21

With the foregoing settled jurisprudence, we find it pointless to delve lengthily on the factual issues raised by petitioner. The existence of strikes in Australia having been duly established in the lower courts, we are left only with the burden of determining whether or not NAPOCOR acted wrongfully or with bad faith in disqualifying PHIBRO from participating in the subsequent public bidding.

Let us consider the case in its proper perspective.

The Court of Appeals is justified in sustaining the Regional Trial Court's decision exonerating PHIBRO from any liability for damages to NAPOCOR as it was clearly established from the evidence, testimonial and documentary, that what prevented PHIBRO from complying with its obligation under the July 1987 contract was the industrial disputes which besieged Australia during that time. Extant in our Civil Code is the rule that no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.22 This means that when an obligor is unable to fulfill his obligation because of a fortuitous event or force majeure, he cannot be held liable for damages for non-performance.23

In addition to the above legal precept, it is worthy to note that PHIBRO and NAPOCOR explicitly agreed in Section XVII of the "Bidding Terms and Specifications"24 that "neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of the

performance of its obligations, other than the payment of money due, if any such delay or failure is due to Force Majeure." Specifically, they defined force majeure as "any disabling cause beyond the control of and without fault or negligence of the party, which causes may include but are not restricted to Acts of God or of the public enemy; acts of the Government in either its sovereign or contractual capacity; governmental restrictions; strikes, fires, floods, wars, typhoons, storms, epidemics and quarantine restrictions."

The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, we have no reason to rule otherwise.

However, proceeding from the premise that PHIBRO was prevented by force majeure from complying with its obligation, does it necessarily follow that NAPOCOR acted unjustly, capriciously, and unfairly in disapproving PHIBRO's application for pre-qualification to bid?

First, it must be stressed that NAPOCOR was not bound under any contract to approve PHIBRO's pre-qualification requirements. In fact, NAPOCOR had expressly reserved its right to reject bids. The Instruction to Bidders found in the "Post-Qualification Documents/Specifications for the Supply and Delivery of Coal for the Batangas Coal-Fired Thermal Power Plant I at Calaca, Batangas Philippines,"25 is explicit, thus:

"IB-17 RESERVATION OF NAPOCOR TO REJECT BIDS

NAPOCOR reserves the right to reject any or all bids, to waive any minor informality in the bids received.The right is also reserved to reject the bids of any bidder who has previously failed to properly perform or complete on time any and all contracts for delivery of coal or any supply undertaken by a bidder."26(Emphasis supplied)

This Court has held that where the right to reject is so reserved, the lowest bid or any bid for that matter may be rejected on a mere technicality.27 And where the government as advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no cause to complain nor right to dispute that choice unless an unfairness or injustice is shown. Accordingly, a bidder has no ground of action to compel the Government to award the contract in his favor, nor to compel it to accept his bid. Even the lowest bid or any bid may be rejected.28 In Celeste v. Court of Appeals,29 we had the occasion to rule:

"Moreover, paragraph 15 of the Instructions to Bidders states that 'the Government hereby reserves the right to reject any or all bids submitted.' In the case of A.C. Esguerra and Sons v. Aytona, 4 SCRA 1245, 1249 (1962), we held:

'x x x [I]n the invitation to bid, there is a condition imposed upon the bidders to the effect that the bidders shall be subject to the right of the government to reject any and all bids subject to its discretion. Here the

government has made its choice, and unless an unfairness or injustice is shown, the losing bidders have no cause to complain, nor right to dispute that choice.'

Since there is no evidence to prove bad faith and arbitrariness on the part of the petitioners in evaluating the bids, we rule that the private respondents are not entitled to damages representing lost profits." (Emphasis supplied)

Verily, a reservation of the government of its right to reject any bid, generally vests in the authorities a wide discretion as to who is the best and most advantageous bidder. The exercise of such discretion involves inquiry, investigation, comparison, deliberation and decision, which are quasi-judicial functions, and when honestly exercised, may not be reviewed by the court.30 In Bureau Veritas v. Office of the President,31 we decreed:

"The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award. (Jalandoni v. NARRA, 108 Phil. 486 [1960]) x x x. The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts. The role of the Courts is to ascertain whether a branch or instrumentality of the Government has transgresses its constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it strays into the realm of policy decision-making. x x x." (Emphasis supplied)

Owing to the discretionary character of the right involved in this case, the propriety of NAPOCOR's act should therefore be judged on the basis of the general principles regulating human relations, the forefront provision of which is Article 19 of the Civil Code which provides that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."32Accordingly, a person will be protected only when he acts in the legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not when he acts with negligence or abuse.33

Did NAPOCOR abuse its right or act unjustly in disqualifying PHIBRO from the public bidding?

We rule in the negative.

In practice, courts, in the sound exercise of their discretion, will have to determine under all the facts and circumstances when the exercise of a right is unjust, or when there has been an abuse of right.34

We went over the record of the case with painstaking solicitude and we are convinced that NAPOCOR's act of disapproving PHIBRO's application for pre-qualification to bid was without any intent to injure or a purposive motive to perpetrate damage. Apparently, NAPOCOR acted on the strong conviction that PHIBRO had a "seriously-impaired" track record. NAPOCOR cannot be faulted from believing so. At this juncture, it is worth mentioning that at the time NAPOCOR issued its subsequent Invitation to Bid, i.e., October 1987, PHIBRO had not yet delivered the first shipment of coal under the July 1987 contract, which was due on or before September 5, 1987. Naturally, NAPOCOR is justified in entertaining doubts on PHIBRO's qualification or capability to assume an obligation under a new contract.

Moreover, PHIBRO's actuation in 1987 raised doubts as to the real situation of the coal industry in Australia. It appears from the records that when NAPOCOR was constrained to consider an offer from another coal supplier (ASEA) at a price of US$33.44 per metric ton, PHIBRO unexpectedly offered the immediate delivery of 60,000 metric tons of Ulan steam coal at US$31.00 per metric ton for arrival at Calaca, Batangas on September 20-21, 1987."35 Of course, NAPOCOR had reason to ponder how come PHIBRO could assure the immediate delivery of 60,000 metric tons of coal from the same source to arrive at Calaca not later than September 20/21, 1987 but it could not deliver the coal it had undertaken under its contract?

Significantly, one characteristic of a fortuitous event, in a legal sense, and consequently in relations to contracts, is that "the concurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner."36 Faced with the above circumstance, NAPOCOR is justified in assuming that, may be, there was really no fortuitous event or force majeure which could render it impossible for PHIBRO to effect the delivery of coal. Correspondingly, it is also justified in treating PHIBRO's failure to deliver a serious impairment of its track record. That the trial court, thereafter, found PHIBRO's unexpected offer actually a result of its desire to minimize losses on the part of NAPOCOR is inconsequential. In determining the existence of good faith, the yardstick is the frame of mind of the actor at the time he committed the act, disregarding actualities or facts outside his knowledge. We cannot fault NAPOCOR if it mistook PHIBRO's unexpected offer a mere attempt on the latter's part to undercut ASEA or an indication of PHIBRO's inconsistency. The circumstances warrant such contemplation.

That NAPOCOR believed all along that PHIBRO's failure to deliver on time was unfounded is manifest from its letters37 reminding PHIBRO that it was bound to deliver the coal within 30 days from its (PHIBRO's) receipt of the Letter of Credit, otherwise it would be constrained to take legal action. The same honest belief can be deduced from NAPOCOR's Board Resolution, thus:

"On the legal aspect, Management stressed that failure of PBO to deliver under the contract makes them liable for damages, considering that the reasons invoked were not valid. The measure of the damages will be limited to actual and compensatory damages. However, it was reported that Philipp Brothers advised they would like to have continuous business relation with NPC so they are willing

to sit down or even proposed that the case be submitted to the Department of Justice as to avoid a court action or arbitration.

xxx xxx xxx

On the technical-economic aspect, Management claims that if PBO delivers in November 1987 and January 1988, there are some advantages. If PBO reacts to any legal action and fails to deliver, the options are: one, to use 100% Semirara and second, to go into urgent coal order. The first option will result in a 75 MW derating and oil will be needed as supplement. We will stand to lose around P30 M. On the other hand, if NPC goes into an urgent coal order, there will be an additional expense of $786,000 or P16.11 M, considering the price of the latest purchase with ASEA. On both points, reliability is decreased."38

The very purpose of requiring a bidder to furnish the awarding authority its pre-qualification documents is to ensure that only those "responsible" and "qualified" bidders could bid and be awarded with government contracts. It bears stressing that the award of a contract is measured not solely by the smallest amount of bid for its performance, but also by the "responsibility" of the bidder. Consequently, the integrity, honesty, and trustworthiness of the bidder is to be considered. An awarding official is justified in considering a bidder not qualified or not responsible if he has previously defrauded the public in such contracts or if, on the evidence before him, the official bona fide believes the bidder has committed such fraud, despite the fact that there is yet no judicial determination to that effect.39 Otherwise stated, if the awarding body bona fide believes that a bidder has seriously impaired its track record because of a particular conduct, it is justified in disqualifying the bidder. This policy is necessary to protect the interest of the awarding body against irresponsible bidders.

Thus, one who acted pursuant to the sincere belief that another willfully committed an act prejudicial to the interest of the government cannot be considered to have acted in bad faith. Bad faith has always been a question of intention. It is that corrupt motive that operates in the mind. As understood in law, it contemplates a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill-will or for ulterior purpose.40While confined in the realm of thought, its presence may be ascertained through the party's actuation or through circumstantial evidence.41 The circumstances under which NAPOCOR disapproved PHIBRO's pre-qualification to bid do not show an intention to cause damage to the latter. The measure it adopted was one of self-protection. Consequently, we cannot penalize NAPOCOR for the course of action it took. NAPOCOR cannot be made liable for actual, moral and exemplary damages.

Corollarily, in awarding to PHIBRO actual damages in the amount of $864,000, the Regional Trial Court computed what could have been the profits of PHIBRO had NAPOCOR allowed it to participate in the subsequent public bidding. It ruled that "PHIBRO would have won the tenders for the supply of about 960,000 metric tons out of at least 1,200,000 metric tons" from the public bidding of December 1987 to 1990. We quote the trial court's ruling, thus:

". . . PHIBRO was unjustly excluded from participating in at least five (5) tenders beginning December 1987 to 1990, for the supply and delivery of imported coal with a total volume of about 1,200,000 metric tons valued at no less than US$32 Million. (Exhs. "AA," "AA-1-1," to "AA-2"). The price of imported coal for delivery in 1988 was quoted in June 1988 by bidders at US$41.35 to US$43.95 per metric ton (Exh. "JJ"); in September 1988 at US$41.50 to US$49.50 per metric ton (Exh. "J-1"); in November 1988 at US$39.00 to US$48.50 per metric ton (Exh. "J-2") and for the 1989 deliveries, at US$44.35 to US$47.35 per metric ton (Exh. "J-3") and US$38.00 to US$48.25 per metric ton in September 1990 (Exh. "JJ-6" and "JJ-7"). PHIBRO would have won the tenders for the supply and delivery of about 960,000 metric tons of coal out of at least 1,200,000 metric tons awarded during said period based on its proven track record of 80%. The Court, therefore finds that as a result of its disqualification, PHIBRO suffered damages equivalent to its standard 3% margin in 960,000 metric tons of coal at the most conservative price of US$30,000 per metric ton, or the total of US$864,000 which PHIBRO would have earned had it been allowed to participate in biddings in which it was disqualified and in subsequent tenders for supply and delivery of imported coal."

We find this to be erroneous.

Basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must actually be proven with reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof.42 A court cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of damages. Thus, while 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,43 it is imperative that the basis of the alleged unearned profits is not too speculative and conjectural as to show the actual damages which may be suffered on a future period.

In Pantranco North Express, Inc. v. Court of Appeals,44 this Court denied the plaintiff's claim for actual damages which was premised on a contract he was about to negotiate on the ground that there was still the requisite public bidding to be complied with, thus:

"As to the alleged contract he was about to negotiate with Minister Hipolito, there is no showing that the same has been awarded to him. If Tandoc was about to negotiate a contract with Minister Hipolito, there was no assurance that the former would get it or that the latter would award the contract to him since there was the requisite public bidding. The claimed loss of profit arising out of that alleged contract which was still to be negotiated is a mere expectancy. Tandoc's claim that he could have earned P2 million in profits is highly speculative and no concrete evidence was presented to prove the same. The only unearned income to which Tandoc is entitled to from the evidence presented is that for the one-month period, during which his business was interrupted, which is P6,125.00, considering that his annual net income was P73,500.00."

In Lufthansa German Airlines v. Court of Appeals,45 this Court likewise disallowed the trial court's award of actual damages for unrealized profits in the amount of US$75,000.00 for being highly speculative. It was held that "the realization of profits by respondent . . . was not a certainty, but depended on a number of factors, foremost of which was his ability to invite investors and to win the bid." This Court went further saying that actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty.

And in National Power Corporation v. Court of Appeals,46 the Court, in denying the bidder's claim for unrealized commissions, ruled that even if NAPOCOR does not deny its (bidder's) claims for unrealized commissions, and that these claims have been transmuted into judicial admissions, these admissions cannot prevail over the rules and regulations governing the bidding for NAPOCOR contracts, which necessarily and inherently include the reservation by the NAPOCOR of its right to reject any or all bids.

The award of moral damages is likewise improper. To reiterate, NAPOCOR did not act in bad faith. Moreover, moral damages are not, as a general rule, granted to a corporation.47 While it is true that besmirched reputation is included in moral damages, it cannot cause mental anguish to a corporation, unlike in the case of a natural person, for a corporation has no reputation in the sense that an individual has, and besides, it is inherently impossible for a corporation to suffer mental anguish.48 In LBC Express, Inc. v. Court of Appeals,49 we ruled:

"Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot be suffered by respondent bank as an artificial person."

Neither can we award exemplary damages under Article 2234 of the Civil Code. Before the court may consider the question of whether or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral, temperate, or compensatory damages.

NAPOCOR, in this petition, likewise contests the judgment of the lower courts awarding PHIBRO the amount of $73,231.91 as reimbursement for expenses, cost of litigation and attorney's fees.

We agree with NAPOCOR.

This Court has laid down the rule that in the absence of stipulation, a winning party may be awarded attorney's fees only in case plaintiff's action or defendant's stand is so untenable as to amount to gross and evident bad faith.50 This cannot be said of the case

at bar. NAPOCOR is justified in resisting PHIBRO's claim for damages. As a matter of fact, we partially grant the prayer of NAPOCOR as we find that it did not act in bad faith in disapproving PHIBRO's pre-qualification to bid.

Trial courts must be reminded that attorney's fees may not be awarded to a party simply because the judgment is favorable to him, for it may amount to imposing a premium on the right to redress grievances in court. We adopt the same policy with respect to the expenses of litigation. A winning party may be entitled to expenses of litigation only where he, by reason of plaintiff's clearly unjustifiable claims or defendant's unreasonable refusal to his demands, was compelled to incur said expenditures. Evidently, the facts of this case do not warrant the granting of such litigation expenses to PHIBRO.

At this point, we believe that, in the interest of fairness, NAPOCOR should give PHIBRO another opportunity to participate in future public bidding. As earlier mentioned, the delay on its part was due to a fortuitous event.

But before we dispose of this case, we take this occasion to remind PHIBRO of the indispensability of coal to a coal-fired thermal plant. With households and businesses being entirely dependent on the electricity supplied by NAPOCOR, the delivery of coal cannot be venturesome. Indeed, public interest demands that one who offers to deliver coal at an appointed time must give a reasonable assurance that it can carry through. With the deleterious possible consequences that may result from failure to deliver the needed coal, we believe there is greater strain of commitment in this kind of obligation.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 126204 dated August 27, 1996 is hereby MODIFIED. The award, in favor of PHIBRO, of actual, moral and exemplary damages, reimbursement for expenses, cost of litigation and attorney's fees, and costs of suit, is DELETED.

SO ORDERED.

G.R. No. 120287 May 28, 2002 G & S TRANSPORT CORPORATION, petitioner, vs. COURT OF APPEALS, HON. ENRICO A. LANZANAS, TWO THOUSAND (2000) TRANSPORT CORPORATION, NISSAN CAR LEASE PHILIPPINES, INC., MANILA INTERNATIONAL AIRPORT AUTHORITY AND GUILLERMO G. CUNANAN, respondents.

This resolves the consolidated Petition for Review of the Decision of the Court of Appeals in CA-G.R. SP No. 36345, "Two Thousand (2000) Transport Corporation v. Hon. Guillermo L. Loja, Sr., as Judge, RTC, Manila, Branch 26, and G & S Transport Corporation," and in CA-G.R. SP No. 36356, "Nissan Car Lease Philippines, Inc. v. Hon. Guillermo L. Loja, Sr., as Judge RTC of Manila, Branch 26, and G & S Transport

Corporation," andPetition for Certiorari of the Order of the Regional Trial Court, Branch 7, Manila, in Civil Case No. 95-72586, "G & S Transport Corporation v. Manila International Airport Authority, Guillermo G. Cunanan, Two Thousand (2000) Transport Corporation and Nissan Car Lease Philippines, Inc."

Petitioner G & S Transport Corporation (G & S), with the name and style Avis Rent-A-Car, was the exclusive operator of coupon taxi services at the Ninoy Aquino International Airport (NAIA) under a five (5)-year contract of concession with respondent Manila International Airport Authority (MIAA).1 The concession contract expired on 31 January 1994 but was renewed by the parties on a monthly basis "until such time when a new concessionaire (shall have been) chosen."2 Under the arrangement, G & S was able to operate the coupon taxi service uninterruptedly beyond the period of five (5) years originally awarded by MIAA.1wphi1.nt

On 12 July 1994 MIAA initiated proceedings for public bidding to choose two (2) concessionaires of the coupon taxi services at the NAIA. Five (5) firms pre-qualified to join the bidding including petitioner G & S and respondents Two Thousand (2000) Transport Corporation (2000 TRANSPORT) and Nissan Car Lease Philippines, Inc. (NISSAN), after complying with the terms of reference, the instructions to bidders and the invitation to bid.3 On 23 September 1994 MIAA announced the ranking of the bidders on the basis of the fares per kilometer they each tendered -

1. Philippine International Transport Service Cooperative

. . . . . . . . . . . . .

. . P16.00 / km

2. 2000 Transport Cooperative . . . . . . . . . . . . . . . P17.00 / km

3. Nissan Car Lease Philippines . . . . . . . . . . . . . . . P18.00 / km

4. G&S Transport Corp. . . . . . . . . . . . . . . . P18.50 / km

5. Hyatt Transport Co., Inc. . . . . . . . . . . . . . . .

P24.00 / km4

The highest ranking bidder which offered the lowest rate per kilometer was Philippine International Transport Service Cooperative but was however disqualified as the bond it submitted was not a cash bond as required by the bidding rules.5 Consequently, on 5 December 1994 MIAA selected 2000 TRANSPORT and NISSAN as the winning bidders and issued in their favor the respective notice of awards of the coupon taxi service concession.6

On 10 January 1995 petitioner G & S filed a complaint for injunction and mandamus with preliminary injunction and temporary restraining order against MIAA and its General Manager Guillermo G. Cunanan, 2000 TRANSPORT and NISSAN, which was

docketed as Civil Case No. 95-72586 and subsequently raffled to RTC-Br. 26, Manila. The complaint sought to disqualify 2000 TRANSPORT from the award of the concession contract for submitting itsArticles of Incorporation with the signature of one (1) of its incorporators allegedly falsified and its income tax returns falsely attested to by its treasurer, and for the existence of allegedly reasonable grounds to believe that 2000 TRANSPORT was a dummy corporation for two (2) Korean nationals. It also asserted that the concession contract should have been executed in favor of G & S since it was more deserving than both 2000 TRANSPORT and NISSAN in terms of facilities, financial standing, organizational set-up and capability. G & S subsequently amended the complaint to state that no new legitimate concessionaire had been properly chosen as a result of the failure of MIAA to disqualify 2000 TRANSPORT from the entire process of selecting two (2) coupon taxi service concessionaires and to allege that G & S remainded to be the only legitimate service provider, and prayed that the month-to-month renewal of the concession contract with G & S should instead be enforced until a more deserving concessionaire would have been selected.

As prayed for in the complaint, the trial court issued a temporary restraining order enjoining MIAA from awarding to 2000 TRANSPORT and NISSAN the new concessions to operate the NAIA coupon taxi service and from removing G & S as such concessionaire, and thereafter scheduled for hearing the application for preliminary injunction.

Meanwhile respondents 2000 TRANSPORT and NISSAN each moved to dismiss the complaint for failure to state a cause of action and for improper venue and to lift the temporary restraining order. On 30 January 1995, after the parties were heard although the motions were still pending, the trial court granted the writ of preliminary injunction which barred MIAA from doing any of the acts earlier restrained.

Respondents 2000 TRANSPORT and NISSAN assailed before the Court of Appeals the issuance of the writ of preliminary injunction through their respective petitions for certiorari with prayer for temporary restraining order and preliminary injunction under Rule 65 of the Revised Rules of Court.7 Respondent 2000 TRANSPOT belied the claims that it falsified its Articles of Incorporation and that it was a dummy corporation. On the other hand, NISSAN alleged that the complaint of G & S did not state a cause of action since the allegations concerned exclusively the disqualification of 2000 TRANSPORT.

On 6 February 1995 the appellate court issued a temporary restraining order prohibiting the enforcement of the writ of preliminary injunction. While the temporary restraining order was in place, MIAA terminated the month-to-month renewal of the concession contract with G & S and executed the concession contracts with the winning bidders 2000 TRANSPORT and NISSAN which immediately commenced their respective coupon taxi services at the NAIA.8 The temporary restraining order (issued by the Court of Appeals) had already expired when the appellate court conducted hearings on the application of 2000 TRANSPORT and NISSAN for a writ of preliminary injunction.

On 3 March 1995, upon separate motions of 2000 TRANSPORT and NISSAN, the presiding judge9 of RTC-Br. 26, Manila, inhibited himself from hearing Civil Case No. 95-72586. The case was re-raffled and in due time referred to the RTC-Br. 7 which extensively heard the motions to dismiss separately filed by 2000 TRANSPORT and NISSAN.

On 11 April 1995 the trial court dismissed the complaint in Civil Case No. 95-72586.10 It ruled that the complaint failed to state a cause of action against herein respondents and that mandamus was unavailable to compel the award of the concession contract in favor of G & S since such decision was discretionary upon the MIAA. On 16 June 1995 the trial court denied reconsideration of the Order of dismissal.

On 16 May 1995 the Court of Appeals granted the petitions for certiorari of 2000 TRANSPORT and NISSAN in CA-G.R. SP No. 36345 and CA-G.R. SP No. 36356, set aside the 30 January 1995 Order of the trial court issuing the writ of preliminary injunction, and prohibited the trial court from "hearing and taking further cognizance of Civil Case No. 95-72586 except to dismiss the same."11 The appellate court held that the trial court gravely abused its discretion when it issued the writ of preliminary injunction since under PD 1818 no court would have jurisdiction to restrain the operation of a public utility and since the selection of winning bidders was solely the discretion of the sponsoring government agency. Hence, the instant petition for review under Rule 45 of the Revised Rules of Courtassailing the 16 May 1995 Decision of the Court of Appeals, which was joined with the instant petition for certiorari under Rule 65, seeking to nullify and set aside the 11 April 1995 Order of the trial court dismissing Civil Case No. 95-72586.

G & S argues in its petition for review that irregularities attending the bidding for the coupon taxi service at the NAIA warranted the issuance of the writ of preliminary injunction and that PD 1818 was not applicable to divest the trial court of jurisdiction to hear the complaint in Civil Case No. 95-72586. G & S asserts in its petition under Rule 65 that allegations in the complaint that 2000 TRANSPORT falsified its Articles of Incorporation and income tax returns, and was a dummy corporation for two (2) Korean nationals, and that irregularities rigged the bidding stated fully a cause of action against 2000 TRANSPORT and NISSAN which would have justified the disqualification of respondent 2000 TRANSPORT from the bidding and the continuation of the month-to-month renewal of the concession contract in favor of G & S. Petitioner also justified resorting to Rule 65 in lieu of an ordinary appeal before the Court of Appeals to question the Order of dismissal of the trial court on grounds of expediency and necessity for a speedier remedy than appeal and further explains that joining the petitions for review and for certiorari in just one (1) pleading was essential to avoid conflicting rulings in case the petitions were brought separately in different fora.

To begin with, petitioner could have joined together all his allegations of error in one petition for review under Rule 45 of the 1997 Rules of Civil Procedure since only questions of law are raised in the instant casse. At any rate, there is nothing irregular in joining both petitions for review (Rule 45) and certiorari (Rule 65) in one pleading for

purposes of resolving the issues raised by petitioner G & S. This procedural step may even avoid inconsistency of rulings which might result in case the writ of preliminary injunction is validated but the civil case from which the writ emanated is ordered dismissed. Although a petition for review under Rule 45 is an appeal process while a petition for certiorari under Rule 65 is an original action and the rule is that joinder of causes of action shall not include special civil actions governed by special rules,12 the conceptual and procedural differences between them are overshadowed by the more significant probability of divergent rulings in case the two (2) petitions are not joined which in the end would only cause difficulties in determining which of the conflicting decisions should be enforced.

For the same reason, resort to certiorari under Rule 65 before this Court in lieu of an ordinary appeal to the Court of Appeals to assail the final Order of dismissal is fully justified by the necessity to bring all the issues before one (1) forum to ensure harmony of rulings. It must however be emphasized that in disposing of the issue regarding the propriety and legality of the Order, the applicable standard will of course be whether the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction,13 and the only reversible errors will be errors of jurisdiction and not errors of judgment.14

We find that the trial court did not abuse its discretion in dismissing the complaint in Civil Case No. 95-72586 for failure to state a cause of action against respondents 2000 TRANSPORT and NISSAN. As admitted by petitioner G & S itself, the trial court used the correct "guidelines by which the failure of the complaint to state a cause of action as a ground in a motion to dismiss must be considered."15 Concededly therefore the only errors involved in this petition are mere errors of judgment, if any, and not errors of jurisdiction for which the instant petition would be the inappropriate mode for seeking a reversal. The allegations of errors of judgment are in fact fairly obvious on the face of the instant petition for certiorari under Rule 65.

We nonetheless examine the Order of the trial court in the interest of justice. The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the facts alleged therein?16 Only ultimate facts and not legal conclusions or evidentiary facts which in the first place should not have been alleged in the complaint are considered for purposes of applying the test.17 Furthermore, actions which are prematurely commenced would fall under the objection.18

Petitioner G & S prayed for a permanent injunction to bar the award of the concession contract to 2000 TRANSPORT and NISSAN; a writ of mandamus compelling MIAA to grant to it the concession contract; the disqualification of 2000 TRANSPORT from the bidding; the nullification of the entire bidding process; and the payment of damages which would of course be a mere consequence of the other relief sought.19 The ultimate facts supposedly justifying the complaint for injunction and mandamus were -

15. On October 26, 1994, the Manila Standard published a news item reporting that (2000) Transport has been accused of submitting to MIAA falsified documents in connection with their bid for the NAIA coupon taxi service. Investigating this report, plaintiff [G & S] discovered that on October 8, 1994, a certain Meliton Solpot had executed an Affidavit, wherein he stated that the corporate tax returns submitted by [2000 Transport] to MIAA during the bidding are (sic) falsified as his purported signatures thereon are (sic) not his signatures x x x x Plaintiff further discovered that on October 25, 1994, the same Meliton Solpot executed a Sworn Statement before the National Bureau of Investigation (NBI) alleging that his signatures on the partnership annual income tax return of [2000 Transport] dated December 1993 and February 3, 1994 as well as those found in the Articles of Incorporation of [2000 Transport] on file with the Securities and Exchange Commission are (sic) not his genuine signatures x x x x 17. In the meantime, plaintiff [G & S] was able to secure from the SEC a copy of the Articles of Incorporation of [2000 Transport]. In said Articles, it clearly appears that one of the alleged incorporators is a certain Meliton Solpot. It further appears that the two (2) Korean incorporators who appear to have subscribed to twenty percent (20%) of the authorized capital stock of the corporation had paid up eighty percent (80%) of the paid-in capital, thereby indicating that in fact, and for all intents and purposes, the Korean incorporators were in control of the corporation x x x x Moreover, plaintiff was also able to secure a copy of the General Information Sheet for 1994 filed by [2000 Transport] with the SEC which shows that Sooja Park Lim, a Korean, is the Chairman and President of [2000 Transport] while Young Kon Jo, a Korean, is the Vice President of [2000 Transport] x x x x 23. Since [2000 Transport] was not duly qualified to participate in the bidding and has flagrantly violated the Constitution, MIAA and Cunanan have neither factual nor legal basis to declare said defendant as one of the winning bidders, to award to said defendant, a Contract of Concession for the NAIA coupon taxi service and allowing it to operate the said service. Furthermore, the participation of a disqualified bidder in the bidding affects the integrity of the entire bidding process and renders the same ineffective, null and void. Consequently, MIAA and Cunanan should be finally and permanently enjoined from awarding to [2000 Transport and Nissan] a Contract of Concession for the NAIA coupon taxi service and / or otherwise authorizing or allowing them to operate the NAIA coupon taxi service x x x x 25. While plaintiff had made the third lowest bid insofar as the fare is concerned, it certainly is way ahead of all other bidders, insofar as the other factors stated in the Instruction to Bidders are concerned. As the present operator and concessionaire of the NAIA coupon taxi service for the last five (5) years, its existing facilities, financial standing, organizational set-up, relevant experience, quality, capability and kind of services offered far outrank any of the other bidders. Thus, assuming, without conceding, that [2000 Transport] was not disqualified to participate in the bidding and / or the bidding process is not fatally flawed, plaintiff should be declared as one of the winning bidders based on these other factors. The other winning bidder should be determined between [2000 Transport and Nissan] based on these other factors.20

It is clear