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SELLER or its nominee as per Section XIV hereof to meet the vessel arrival

THIRD DIVISION
schedules at Calaca, Batangas, Philippines as follows:

60,000 +/ - 10 % July 20, 1987
[G.R. No. 126204. November 20, 2001]
60,000 +/ - 10% September 4, 1987[5]

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might
NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS soon plague Australia, the shipments point of origin, which could seriously hamper
OCEANIC, INC., respondent. PHIBROs 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
DECISION 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
SANDOVAL-GUTIERREZ, J.: transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden of
a strike-free clause.NAPOCOR refused.
Where a person merely uses a right pertaining to him, without bad faith or intent
On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable
to injure, the fact that damages are thereby suffered by another will not make him
letter of credit. Instead of delivering the coal on or before the thirtieth day after receipt
liable.[1]
of the Letter of Credit, as agreed upon by the parties in the July contract, PHIBRO
This principle finds useful application to the present case. effected its first shipment only on November 17, 1987.

Before us is a petition for review of the Decision [2] dated August 27, 1996 of the Consequently, in October 1987, NAPOCOR once more advertised for the delivery
Court of Appeals affirming in toto the Decision[3] dated January 16, 1992 of the of coal to its Calaca thermal plant. PHIBRO participated anew in this subsequent
Regional Trial Court, Branch 57, Makati City. bidding. On November 24, 1987, NAPOCOR disapproved PHIBROs application for
pre-qualification to bid for not meeting the minimum requirements.[8] Upon further
The facts are: inquiry, PHIBRO found that the real reason for the disapproval was its purported failure
On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to satisfy NAPOCORs demand for damages due to the delay in the delivery of the first
to bid for the supply and delivery of 120,000 metric tons of imported coal for its coal shipment.
Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The Philipp Brothers This prompted PHIBRO to file an action for damages with application for injunction
Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate as one of the against NAPOCOR with the Regional Trial Court, Branch 57, Makati City. [9] In its
bidders. After the public bidding was conducted, PHIBROs bid was accepted. complaint, PHIBRO alleged that NAPOCORs act of disqualifying it in the October 1987
NAPOCORs acceptance was conveyed in a letter dated July 8, 1987, which was bidding and in all subsequent biddings was tainted with malice and bad faith. PHIBRO
received by PHIBRO on July 15, 1987. prayed for actual, moral and exemplary damages and attorneys fees.
The Bidding Terms and Specifications[4] provide for the manner of shipment of In its answer, NAPOCOR averred that the strikes in Australia could not be invoked
coals, thus: 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
SECTION V 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,
SHIPMENT 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 PHIBROs failure
The winning TENDERER who then becomes the SELLER shall arrange and provide to deliver the coal on time, it was compelled to purchase coal from ASEA at a higher
gearless bulk carrier for the shipment of coal to arrive at discharging port on or price. NAPOCOR claimed for actual damages in the amount of P12,436,185.73,
before thirty (30) calendar days after receipt of the Letter of Credit by the 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. 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.
On January 16, 1992, the trial court rendered a decision in favor of PHIBRO, the
dispositive portion of which reads:
Phibro was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was
to be effected thirty (30) days from Napocors opening of a confirmed and workable
WHEREFORE, judgment is hereby rendered in favor of plaintiff Philipp Brothers
letter of credit. Napocor was only able to do so on August 6, 1987.
Oceanic Inc. (PHIBRO) and against the defendant National Power Corporation
(NAPOCOR) ordering the said defendant NAPOCOR:
By that time, Australias coal industry was in the middle of a seething controversy and
unrest, occasioned by strikes, overtime bans, mine stoppages. The origin, the scope
1. To reinstate Philipp Brothers Oceanic, Inc. (PHIBRO) in the defendant
and the effects of this industrial unrest are lucidly described in the uncontroverted
National Power Corporations list of accredited bidders and allow
testimony of James Archibald, an employee of Phibro and member of the Export
PHIBRO to participate in any and all future tenders of National Power
Committee of the Australian Coal Association during the time these events transpired.
Corporation for the supply and delivery of imported steam coal;

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

a. The peso equivalent at the time of payment of $864,000 as actual The records also attest that Phibro periodically informed Napocor of these
damages; 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
b. The peso equivalent at the time of payment of $100,000 as moral be caused by the strikes and their after-effects.
damages;
Strikes are undoubtedly included in the force majeure clause of the Bidding Terms
c. The peso equivalent at the time of payment of $ 50,000 as and Specifications (supra). The renowned civilist, Prof. Arturo Tolentino, defines
exemplary damages; 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 Constracts, 126,
[1991]) He further states:
d. The peso equivalent at the time of payment of $73,231.91 as
reimbursement for expenses, cost of litigation and
attorneys fees; 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.
3. To pay the costs of suit;

4. The counterclaims of defendant NAPOCOR are dismissed for lack of Tolentino adds that the term generally applies, broadly speaking, to natural
merit. 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
SO ORDERED.[11] 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
Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the of war which prevents performance exempts a party from liability.
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: 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
There is ample evidence to show that although PHIBROs delivery of the shipment of Phibro from the effects of delay of the delivery of the shipment of coal. [12]
coal was delayed, the delay was in fact caused by a) Napocors own delay in opening
a workable letter of credit; and b) the strikes which plaqued the Australian coal Twice thwarted, NAPOCOR comes to us via a petition for review ascribing to the
industry from the first week of July to the third week of September 1987.Strikes are Court of Appeals the following errors:

does it necessarily follow that NAPOCOR acted unjustly. The Instruction to Bidders found in the Post- before this Court in a petition for review under Rule 45 of the Rules of Court. wars. stipulated period. award. typhoons. not to PHIBROs own deliberate acts and faults. it must be stressed that NAPOCOR was not bound under any contract to approve PHIBROs pre-qualification requirements. though foreseen. which are supported by substantial evidence. or which. and unfairly in disapproving PHIBROs application for pre-qualification to bid? Respondent Court of Appeals gravely and seriously erred in dismissing NAPOCORs counterclaims for damages and litigation expenses. Therefore. Batangas Philippines. not questions of fact.[17] First. were inevitable. storms. it is worthy to note that PHIBRO and Respondent Court of Appeals gravely and seriously erred in concluding and so NAPOCOR explicitly agreed in Section XVII of the Bidding Terms and holding that PHIBRO was entitled to injunctive relief.[21] . are almost beyond the power of review by this IB-17 RESERVATION OF NAPOCOR TO REJECT BIDS Court.[14] foreseeen.[13] Let us consider the case in its proper perspective.[16] However. testimonial and documentary. NAPOCOR had expressly It is axiomatic that only questions of law. governmental restrictions. we find it pointless to delve lengthily on the factual issues raised by petitioner. I With the foregoing settled jurisprudence. acts of the Government in either its sovereign or contractual capacity. strikes. other than the payment of expenses despite the clear absence of legal and factual bases for such money due.[25] is they carry even more weight when the said court affirms the factual findings of the trial explicit. we are left only with the burden of holding that PHIBROs delay in the delivery of imported coal was due to determining whether or not NAPOCOR acted wrongfully or with bad faith in NAPOCORs alleged delay in opening a letter of credit and to force majeure. thus: court. Extant in our Civil Code supply of imported coal despite the existence of valid grounds therefor such as is the rule that no person shall be responsible for those events which could not be serious impairment of its track record. Respondent Court of Appeals gravely and seriously erred in absolving PHIBRO from any liability for damages to NAPOCOR for its unjustified and deliberate The law is clear and so is the contract between NAPOCOR and refusal and/or failure to deliver the contracted imported coal within the PHIBRO. The existence of strikes in Australia having been Respondent Court of Appeals gravely and seriously erred in concluding and so duly established in the lower courts. floods. and disqualifying PHIBRO from participating in the subsequent public bidding. we have no reason to rule otherwise.[15] they defined force majeure as any disabling cause beyond the control of and without fault or negligence of the party. the findings of the Court of Appeals. moral and exemplary damages. attorneys fees and litigation any delay in or failure of the performance of its obligations. may be raised reserved its right to reject bids. by itself. he cannot be held liable for damages for non-performance. 1987 and future biddings for the industrial disputes which besieged Australia during that time. which causes may include but are not restricted to Acts IV of God or of the public enemy. In fact.[20] Stated differently. epidemics and quarantine restrictions. to actual or Specifications[24] that neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for compensatory. proceeding from the premise that PHIBRO was prevented by V force majeure from complying with its obligation. II The Court of Appeals is justified in sustaining the Regional Trial Courts decision exonerating PHIBRO from any liability for damages to NAPOCOR as it was clearly Respondent Court of Appeals gravely and seriously erred in concluding and so established from the evidence. capriciously. [22] This means that when an obligor is unable to fulfill his obligation because of a fortuitous event or force majeure. if any such delay or failure is due to Force Majeure. [18] The Qualification Documents/ Specifications for the Supply and Delivery of Coal for the findings of facts of the Court of Appeals are conclusive and binding on this Court[19] and Batangas Coal-Fired Thermal Power Plant I at Calaca. fires.[23] III In addition to the above legal precept. that what prevented holding that NAPOCOR acted maliciously and unjustifiably in disqualifying PHIBRO from complying with its obligation under the July 1987 contract was the PHIBRO from participating in the December 8. Specifically.

NAPOCOR acted on the strong conviction that PHIBRO had a Since there is no evidence to prove bad faith and arbitrariness on the part of seriously-impaired track record. may not be reviewed by the court.000 metric tons of Ulan steam coal at US$31. qualification to bid was without any intent to injure or a purposive motive to perpetrate damage. NAPOCOR cannot be faulted from believing so. NAPOCOR is justified in entertaining doubts on PHIBROs qualification in the authorities a wide discretion as to who is the best and most advantageous or capability to assume an obligation under a new contract. that is. i. Naturally. we held: In practice. Significantly. courts. investigation. Otherwise. It appears from the records that when NAPOCOR was exercised. bidder. (Emphasis supplied) bidder. evaluation. The discretion given to the . Moreover. PHIBROs actuation in 1987 raised doubts as to the real situation of the deliberation and decision. Apparently. compel it to accept his bid. NARRA.e. to waive any Government agencies concerned. investigation. it is worth mentioning that at the time NAPOCOR issued its subsequent not entitled to damages representing lost profits. Verily. Accordingly. Esguerra and Sons v. a reservation of the government of its right to reject any bid. and when honestly coal industry in Australia.[34] effect that the bidders shall be subject to the right of the government to reject any and all bids subject to its discretion. the lowest bid or of NAPOCORs act should therefore be judged on the basis of the general principles any bid for that matter may be rejected on a mere technicality. a person will be protected only when he acts in the action to compel the Government to award the contract in his favor.[32] Accordingly.[33] rejected. will have to determine under all the facts and circumstances when the exercise of a right is unjust.[28] In Celeste v. the losing bidders have no cause to convinced that NAPOCORs act of disapproving PHIBRO's application for pre- complain. makes its choice in rejecting any Code which provides that every person must. nor to legitimate exercise of his right. in the exercise of his rights and in the or all bids. NAPOCOR reserves the right to reject any or all bids. in the sound exercise of their discretion. there is a condition imposed upon the bidders to the there has been an abuse of right. PHIBRO had not yet delivered the first shipment of coal under the July 1987 contract. we rule that the private respondents are juncture. x x x. 486 [1960]). 1987. NAPOCOR had reason to ponder- Government agencies entrusted with that function. and observe honesty unless an unfairness or injustice is shown.44 per metric ton. or when x x x [I]n the invitation to bid.[31] we decreed: US$33. it strays into the realm of delivery of coal or any supply undertaken by a policy decision-making. give everyone his due. PHIBRO unexpectedly offered the immediate delivery of 60. availing itself of that right. a bidder has no ground of and good faith. The exercise of such discretion involves inquiry.00 per metric ton for arrival at Calaca. comparison. and We went over the record of the case with painstaking solicitude and we are unless an unfairness or injustice is shown. The discretion to accept or reject a bid and award contracts is vested in the Batangas on September 20-21. paragraph 15 of the Instructions to Bidders states that the Government hereby reserves the right to reject any or all bids submitted. which was due on or before September 5. [27] And where the regulating human relations. x x x. when he acts with prudence and in good faith. and deliberation. The exercise of this discretion is a policy decision that necessitates prior inquiry. In the case ofA. 1249 (1962).[29] we had the occasion to rule: Did NAPOCOR abuse its right or act unjustly in disqualifying PHIBRO from the public bidding? Moreover. Aytona. Office of the constrained to consider an offer from another coal supplier (ASEA) at a price of President. [30] In Bureau Veritas v. act with justice. which are quasi-judicial functions. the losing bidder has no cause to complain nor right to dispute that choice performance of his duties. The role of the Courts is to minor informality in the bids received. This task can best be discharged by the consequently in relations to contracts. generally vests 1987.. unless it is apparent that it is used as a shield to a 1987 but it could not deliver the coal it had undertaken under its contract? fraudulent award. in a legal sense. one characteristic of a fortuitous event. At this the petitioners in evaluating the bids. nor right to dispute that choice.000 metric tons authorities on this matter is of such wide latitude that the Courts will not of coal from the same source to arrive at Calaca not later than September 20/21. not by the Courts. Even the lowest bid or any bid may be but not when he acts with negligence or abuse. 4 SCRA 1245. October 1987. The right is also reserved to ascertain whether a branch or instrumentality of the Government has transgresses its reject the bids of any bidder who has previously failed to constitutional boundaries. is that the concurrence must be such as to render . and comparison.how come PHIBRO could assure the immediate delivery of 60.[35] Of course. (Emphasis supplied) Invitation to Bid. the propriety This Court has held that where the right to reject is so reserved.C. Here the government has made its choice. 108 Phil. Court of Appeals. We rule in the negative. the forefront provision of which is Article 19 of the Civil government as advertiser. interfere therewith. But the Courts will not interfere with executive or legislative properly perform or complete on time any and all contracts for discretion exercised within those boundaries.[26] (Emphasis supplied) Owing to the discretionary character of the right involved in this case. (Jalandoni v.

35 to US$ 47. As understood in law. one who acted pursuant to the sincere belief that another willfully committed the yardstick is the frame of mind of the actor at the time he committed the act. On tenders for the supply and delivery of about 960.000 metric tons out advised they would like to have continuous business relation with NPC so they are of at least 1.000 which PHIBRO would have earned had it been allowed to of a contract is measured not solely by the smallest amount of bid for its performance. Thus. We cannot fault NAPOCOR if it in bad faith. Consequently. may be. participate in biddings in which it was disqualified and in subsequent tenders but also by the responsibility of the bidder. moral and exemplary damages. the options are: one. its presence may be That NAPOCOR believed all along that PHIBROs failure to deliver on time was ascertained through the partys actuation or through circumstantial evidence.95 per metric ton (Exh. J-1). considering that the reasons the Regional Trial Court computed what could have been the profits of PHIBRO had invoked were not valid. Bad faith has always been a question of intention. x x x. [41] The unfounded is manifest from its letters[37] reminding PHIBRO that it was bound to deliver circumstances under which NAPOCOR disapproved PHIBRO's pre-qualification to bid the coal within 30 days from its (PHIBROs) receipt of the Letter of Credit.000 metric tons of coal out of at least both points. we cannot penalize NAPOCOR for the course of NAPOCORs Board Resolution. JJ-6 and JJ-7). AA-1. in legal action and fails to deliver. PHIBRO was unjustly excluded from participating in at least five (5) tenders xxxxxx beginning December 1987 to 1990.200. honesty. thus: action it took. it contemplates a state of mind ASEA or an indication of PHIBROs inconsistency. there was really the bidder has committed such fraud.[38] 1. On the technical-economic aspect. NAPOCOR cannot be made liable for actual.11 M. for the supply and delivery of imported coal with a total volume of about 1. On the legal aspect.200. on the evidence before him.000 metric tons from the public bidding of December 1987 to 1990. It bears stressing that the award of US$ 864. The measure of the damages will be limited to actual NAPOCOR allowed it to participate in the subsequent public bidding. The Court. to AA-2). considering the price of the latest purchase with ASEA. The measure it adopted was would be constrained to take legal action. to use 100% Semirara and September 1988 at US$41. In determining the existence of good faith. Management claims that if PBO delivers in (Exhs. It ruled that and compensatory damages. On the at US$ 44.35 per metric ton (Exh. The same honest belief can be deduced from one of self-protection.00 to US$ 48. otherwise it do not show an intention to cause damage to the latter. The first option will result in a 75 MW derating 1988 at US$ 39. suffered damages equivalent to its standard 3% margin in 960. particular conduct. We will stand to lose around P30 M.25 per other hand.[40] While confined in the realm of thought. the contract makes them liable for damages. The price of imported coal for delivery in 1988 was quoted November 1987 and January 1988. it was reported that Philipp Brothers PHIBRO would have won the tenders for the supply of about 960. An awarding official is justified in considering a bidder not qualified or not responsible if he has previously defrauded the .00 to US$48. JJ). and for supply and delivery of imported coal. Correspondingly. there are some advantages. there will be an additional expense metric ton in September 1990 (Exh.000 per metric ton. thus: Justice as to avoid a court action or arbitration. thereafter. The circumstances warrant such affirmatively operating with furtive design or with some motive of self-interest or ill-will contemplation. it is also justified in treating PHIBROs fide believes that a bidder has seriously impaired its track record because of a failure to deliver a serious impairment of its track record. reliability is decreased.000 metric tons qualification documents is to ensure that only those responsible and qualified bidders of coal at the most conservative price of US$ 30. an act prejudicial to the interest of the government cannot be considered to have acted disregarding actualities or facts outside his knowledge. J-2) and for the 1989 deliveries. J-3) and US$38.50 to US$49. If PBO reacts to any in June 1988 by bidders at US$ 41. PHIBRO The very purpose of requiring a bidder to furnish the awarding authority its pre. PHIBRO would have won the of $786. if NPC goes into an urgent coal order. and oil will be needed as supplement.000 metric tons valued at no less than US$32 Million.000 or P16.[39] Otherwise stated.50 per metric ton (Exh. the integrity. This policy is necessary to found PHIBROs unexpected offer actually a result of its desire to minimize losses on protect the interest of the awarding body against irresponsible bidders. or for ulterior purpose. to go into urgent coal order. Management stressed that failure of PBO to deliver under Corollarily. if the awarding body bona effect the delivery of coal. it is justified in disqualifying the bidder. AA. therefore finds that as a result of its disqualification. in November second. despite the fact that there is yet no judicial no fortuitous event or force majeure which could render it impossible for PHIBRO to determination to that effect.it impossible for the debtor to fulfill his obligation in a normal manner. We willing to sit down or even proposed that the case be submitted to the Department of quote the trial courts ruling. the official bona fide believes above circumstance. or the total could bid and be awarded with government contracts.200. in awarding to PHIBRO actual damages in the amount of $864. However. [36] Faced with the public in such contracts or if. NAPOCOR is justified in assuming that. Consequently. It is that corrupt motive mistook PHIBROs unexpected offer a mere attempt on the latters part to undercut that operates in the mind. That the trial court.35 to US $ 43.50 per metric ton (Exh. the part of NAPOCOR is inconsequential. trustworthiness of the bidder is to be considered.000.000 metric tons awarded during said period based on its proven track record of 80%.

in denying unreasonable refusal to his demands. we partially grant the prayer of NAPOCOR as we find that it did not act disallowed the trial court's award of actual damages for unrealized profits in the amount in bad faith in disapproving PHIBRO's pre-qualification to bid. Tandocs claim that he could have litigation and attorneys fees. 500. v. by reason of plaintiff's clearly unjustifiable claims or defendant's And in National Power Corporation v.91 as reimbursement for expenses.00. mental anguish. with. Mental In Pantranco North Express. and that these claims have been litigation expenses to PHIBRO. the facts of this case do not warrant the granting of such deny its (bidder's) claims for unrealized commissions. earned P2 million in profits is highly speculative and no concrete evidence was presented to prove the same. Basic is the rule that to recover actual damages. for it may amount to imposing a saying that actual or compensatory damages cannot be presumed. Thus.000. [48] In LBC Express. therefore. As a In Lufthansa German Airlines v. there is no Before the court may consider the question of whether or not exemplary damages showing that the same has been awarded to him. foremost Trial courts must be reminded that attorney's fees may not be awarded to a party of which was his ability to invite investors and to win the bid. there was no assurance that the former would get it or compensatory damages. We find this to be erroneous. transmuted into judicial admissions. which necessarily and At this point. Moreover. is inherently impossible for a corporation to suffer mental anguish. temperate. social the obligee failed to obtain. PHIBRO another opportunity to participate in future public bidding. no senses. Court of Appeals. entitled to from the evidence presented is that for the one-month period. To reiterate. or guesswork as to the fact and amount of damages. NAPOCOR did not act in bad faith. granted to a . likewise contests the judgment of the lower courts bidding. wounded feelings.125. be suffered on a future period. respect to the expenses of litigation. A corporation. the plaintiff must show that he is entitled to moral. comprehend not only the value of the loss suffered. of US$75. The only unearned income to which Tandoc is We agree with NAPOCOR. We adopt the same policy with proved. we believe that. ruled that even if NAPOCOR does not expenditures. conjectures. This Court went further simply because the judgment is favorable to him. and griefs of life all of which cannot be suffered by respondent bank negotiate on the ground that there was still the requisite public bidding to be complied as an artificial person. moral damages are not. the amount of loss must not only for a corporation has no reputation in the sense that an individual has. thus: Neither can we award exemplary damages under Article 2234 of the Civil Code. and besides. a winning income was P73. serious anxiety. it cannot experience physical suffering and mental anguish. but depended on a number of factors. which is P6. Evidently.[44] this Court denied the suffering can be experienced only by one having a nervous system and it flows from plaintiffs claim for actual damages which was premised on a contract he was about to real ills. NAPOCOR is justified in resisting PHIBROs claim for damages. The award of moral damages is likewise improper. it be capable of proof but must actually be proven with reasonable degree of certainty. NAPOCOR should give inherently include the reservation by the NAPOCOR of its right to reject any or all bids. no emotions.[45] this Court likewise matter of fact. As earlier mentioned. and proved with reasonable degree of certainty. but must be duly premium on the right to redress grievances in court. as a general rule.[46] the Court. that the latter would award the contract to him since there was the requisite public NAPOCOR. A winning party may be entitled to expenses of litigation only where he. was compelled to incur said the bidders claim for unrealized commissions. has no feelings. Court of Appeals. v.[47] While it is true that besmirched reputation is included in moral damages. and similar injury. As to the alleged contract he was about to negotiate with Minister Hipolito.[42] A court cannot merely rely on speculations. or contract with Minister Hipolito. moral shock. It was held that the realization of profits by respondent x x x was not a certainty. Court of Appeals. in this petition. 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. it cannot cause mental anguish to a corporation. The claimed loss of profit arising out of that alleged contract which was awarding PHIBRO the amount of $73. these admissions cannot prevail over the rules and regulations governing the bidding for NAPOCOR contracts. while indemnification for damages shall Moral damages are granted in recompense for physical suffering. the delay on its part was due to a fortuitous event. cost of still to be negotiated is a mere expectancy. Court of Appeals.[49] we ruled: thereof.00 for being highly speculative. considering that his annual net This Court has laid down the rule that in the absence of stipulation. [50] This cannot be said of the case at bar.231.[43] it is imperative that the basis of the alleged unearned humiliation. Inc. besmirched reputation. during which his business was interrupted. but also that of the profits which fright.00. corporation. unlike in the case of a natural person. in the interest of fairness. sorrows. If Tandoc was about to negotiate a should be awarded. being an artificial person and having profits is not too speculative and conjectural as to show the actual damages which may existence only in legal contemplation. premised upon competent proof or best evidence obtainable of the actual amount Inc.

With households and businesses being entirely dependent on the electricity supplied by NAPOCOR. of actual. we believe there is greater strain of commitment in this kind of obligation. and costs of suit. public interest demands that one who offers to deliver coal at an appointed time must give a reasonable assurance that it can carry through. we take this occasion to remind PHIBRO of the indispensability of coal to a coal-fired thermal plant. WHEREFORE. The award. the decision of the Court of Appeals in CA-G. With the deleterious possible consequences that may result from failure to deliver the needed coal. CV No. in favor of PHIBRO. But before we dispose of this case. cost of litigation and attorneys fees. SO ORDERED. the delivery of coal cannot be venturesome. Indeed. reimbursement for expenses.R. 126204 dated August 27. is DELETED. . moral and exemplary damages. 1996 is hereby MODIFIED.

These were:[11] Environment and Natural Resources (DENR) was issued designating the Chief of Planning Division (herein petitioner Engr.: steps were taken by the office of petitioner Veneracion: This original action for certiorari with prayer for temporary restraining order and (a) The preparation of the Invitation to Bid which invited all interested bidders preliminary injunction seeks the reversal of the 12 September 2000 Decision of the to submit sealed bids for the purchase of polyethylene plastic bags for Commission on Audit (COA) as well as its 06 December 2001 Resolution denying the use in seedling production. During the said time.[4] (d) Prince Enterprises. No. respectively. Metro Manila. Metro Manila. herein represented by GUILLERMO N.[7] motion for reconsideration of petitioners herein. 100 (1993) and Joint Regional Executive Director which forwarded the same to the Prequalification Bids Memorandum Circular No. and TESSIE BRINGAS. 95-31 of the Special Audit (b) The posting of said Invitation To Bid at the bulletin boards of the different Office of the COA recommending the filing of criminal charges against petitioners for sectors under the DENR-CAR. March 18. Joseph Humiding) as members of the Bids and (a) Fluid Air Technologies (Fluid Air). Metro Manila. In 1994. No. 3. JOSEPH HUMIDING. Polyethylene plastic bags needed by the DENR-CAR in the production of pine tree BASALI. ATTY.[12] . program. E. 151987. the following CHICO-NAZARIO. Baguio City.[2] as amended. directed the conduct of a bidding for the Commissioners. Hence. procurement of polyethylene plastic bags. 1 (1993). herein petitioners Director (b) Kinship Industrial Sales and Services (Kinship Industrial).R. (d) The distribution of said canvass papers and invitation to bid. to known suppliers of the DENR-CAR. As lead agency. 2005] in the Cordillera Administrative Region. They were to join the previous appointee. petitioners. Suppliers of the DENR-CAR were invited to submit bid offers. based in appointees to take their place. respondents. vs. an unnumbered Special Order of 1993 of the Department of personal delivery of the canvass papers. Francis Basali) and the Chief of the Legal Division (herein petitioner Atty. [3] Quezon City. Humiding and Basali were the active participation of all government agencies nationwide in the urban greening members of the PBAC.. also based in Fredric Villanueva and the Secretariat Tessie B. in their capacity as Chairman and petitioner Veneracion. Petitioner Veneracion then took over as the Officer-In. CARAGUE. and Charge Regional Executive Director (OIC-RED) of DENR-CAR. in particular. Inc. RAUL C. specifically mandated and Awards Committee (PBAC). J. FLORES and EMMANUEL DALMAN. Paraaque City. petitioners held the same positions in a hold-over capacity as there were yet no (c) Torquoise Commercial and Industrial Sales and Services. Bringas. 2. In preparation for the bidding that was to be conducted on 12 July 1994.[5] DIRECTOR FREDRIC VILLANUEVA. the DENR-CAR had to produce as many pine tree EN BANC seedlings as possible for the tree-planting activities of the other government agencies [G. based in Quezon City. the generative facts of the case are as personal delivery. 100. and requiring petitioners to refund the amount of P316. based in Baguio City.[6] DECISION 5.[1] The assailed decision and resolution both affirmed the Special Audit Office (SAO) Report No. The first three (3) establishments submitted their sealed bids to the Office of the Region pursuant to the provisions of Executive Order No.[8] violation of Section 3(e) of Republic Act No. THE COMMISSION ON seedlings had to be purchased at the soonest possible time as the propagation of AUDIT. as OIC-RED. ENGR.[10] follows: 6. On 6 August 1993.138.50 representing an alleged overprice in (c) The preparation of canvass papers inviting the submission of quotations on the purchase of polyethylene plastic bags which the Special Audit Team disallowed on the lowest prices of the plastic bags sought to be purchased.[9] post-audit. Petitioners Villanueva. Awards Committee of the DENR-Cordillera Administrative Region (DENR-CAR). pine seedlings had to be conducted before the end of the rainy season. FRANCIS 4. either by mail or through 1. by mail and From the parties respective pleadings. 3019. the DENR-CAR was tasked as implementing agency of a national project dubbed Adopt-A-Street/Park Program throughout the Cordillera Administrative 7.O.

664.960. the audit team declared that the purchase of SUBMITTED BEFORE IT FOR RESOLUTION. In her Independent Auditors Report dated 14 February 1995. among other things. [14] dismissing petitioners request for reconsideration. . . The audit team thus recommended the . The reasons behind the audit were GRAFT AND CORRUPTION PRACTICES. On 2 July 1997.[23] And. the PBAC. Belandres. the instant petition where it is averred that respondent COA gravely abused its discretion amounting to lack or excess of jurisdiction 12. personally attended the deliberations. as amended. the resident auditor of the DENR-CAR from the respondent by Fluid Air in the amount of P161. Quiambao. Jr. in its Resolution denying petitioners motion for . except for the procurement of 24 units 11. 3019. 1. office supplies and BY THE EVIDENCE OF THE PETITIONERS.[22] accordance with applicable laws and regulations and in conformity with generally accepted state accounting principles. 14.90 The assailed COA Decision. except for the effect of any adjustments which might have been made action against those accountable officers responsible for the irregularities committed had the agency conducted a physical count of its inventories and fixed assets as of relative thereto. petitioners filed a Motion for Reconsideration which was denied. hence. IN NOT EVALUATING THE FACTS AND CIRCUMSTANCES AS PRESENTED stated that disbursements for purchases of plastic bags. the PBAC found that the bids tendered by Fluid Air and Kinship Industrial were the most 16. In its report (SAO Report No. the instant appeal for reconsideration of the findings under SAO Report No. however. [18] At the pith of the controversy is the scope of the Commission on Audits authority and the limits of its participation in public biddings of government agencies. IN FAVORING AND EXONERATING ITS OWN AUDITOR AND INSTEAD filing of criminal charges against the officers concerned pursuant to Section 3(e) of FINDING FAULT IN THE PETITIONERS.[19] COA Regional Office of the Cordillera Administrative Region. On 12 September 2000. 1994. specifically Findings No. regularity and propriety. conducted its deliberations. addressed to the COA Chairman. Another Notice of Disallowance was issued against plastic bags supplied Estrellita B.098. . Republic Act No.. . Ong.138. the financial statements referred to above present fairly. During the opening of the sealed bids.[13] 15.50 representing the alleged overprice in the purchase of said plastic bags.[16] Hence. the dispositive portion of which reads: 10. . the Special Audit Office. petitioners filed a letter-request for reconsideration of the findings of the Audit Team. 95-31. from Gregoria S. . a special audit was conducted by the Special Audit Office of respondent COA. and recovery of the amount of P316. financial position of the Department of Environment and Natural Resources as of for lack of merit by respondent COA in the second assailed Resolution dated 6 December 31. It is directed that a copy of this decision be furnished the Office of the Ombudsman for Luzon for filing of appropriate criminal In our opinion. composed of herein petitioners. [and] plastic bags were made without a public bidding and that the acquisition was marked by an overprice of as much as P316. [15] Accordingly. .473. in compliance with COA Assignment Order 95-030 . COA. From 2 March to 5 May 1995.60. On 17 October 2000. on selected financial transactions and operations of the SHOULD BE CHARGED BEFORE THE OFFICE OF THE OMBUDSMAN FOR DENR-CAR for the calendar years 1992 to 1994. issued a Notice of Disallowance of the amount of P154. IN NOT APPLYING THE CORRECT LAW AND JURISPRUDENCE IN THE CASE 13. in all material respects. stated that the various plastic representing the total alleged overprice in the purchase of plastic bags from Kinship bags were purchased without the benefit of public bidding and were overpriced by as much as P344. auditor Belandres stated of overhead projectors covered by Notice of Disallowance No. with COA Auditor Belandres in attendance.[21] December 31.50. 95-31).50. they were declared the winning bidders. 7 and 8.[20] 9. On 12 July 1994. the DENR-CAR purchased from Kinship Industrial and from Fluid Air polyethylene plastic bags in varying sizes and quantities. and the results of its operations for the year ended in December 2001. Industrial. On 11 March 1997. . contained in a Memorandum dated 6 March 1997. Pursuant thereto.00. the 17.8. 014-03-97 for in part: P27. IN FINDING THAT PETITIONERS SHOULD BE HELD LIABLE AND THUS dated 23 February 1995. 1994 or had the records allowed us to apply alternative procedures. through State Auditor Vivencio C. where Director Ong . [17] . equipment were examined for legality. cannot be given due course. respondent COA rendered the first assailed decision advantageous to the government.138. Director of the Special Audit Office.

requires the presence of the Auditor during 14 February 1995. 78-87 dated September 6. 1594. of the overpricing of the bidded items is the There is no doubt that the Commission on Audit. [26] During the deliberations and The scope of the functions of the auditor during the opening of bids is clearly delineated opening of the sealed bids.000) and that it can be done thru sealed canvass.[28] In fine. resident auditor Estrellita B. identification and security of alteration of bids. or uses of government funds stoppage or suspension of the deliberations. is responsibility of the bidding committee and not of the representative of this empowered to examine and audit the use of funds by an agency of the national Commission. acumen and judgment. 2. prejudice the government. The determination. the technical and financial evaluation of the bids rests with the responsibility in the bidding process falls on the PBAC members. members of the bidding committee who exercise discretionary functions and for that We affirm the findings of respondent COA. and on the Resolution of the PBAC finding Fluid Air and Kinship 2. or Parenthetically. the attendance sheet. as members of the PBAC 1. ability. were responsible for the conduct of prequalification. under the Constitution. extravagant or unconscionable expenditures. as representative of the COA. maintenance of documentary integrity. In contrast. the resident auditor should have caused the immediate excessive. they cannot be made liable for the alleged irregularities in the bidding process considering that they complied with the requirements of bidding and The pertinent portion of said Executive Order reads as follows: they conducted the bidding itself in the presence of and under the advisement of the COA representative. Respondent COA. evaluation of bids and recommending awards of contracts. Series of 1940. She even affixed her signature on the Minutes of the Proceedings. during the public bidding on and properties. establish the techniques and methods causing undue injury to the government (Section 3[e] of Rep. petitioners argue that as they relied on the expertise of the above occasions.reconsideration. and promulgate accounting and auditing rules. physical security of the records of the bidding. viz: process. replied The alleged failure of the Resident Auditor in the performance of her duties can not that it did not act in grave abuse of discretion as its findings were anchored on the report also be given credence.[27] After the plastic bags were bought and paid for. Act No. bidding. as represented by the Office of the Solicitor General. . COA Circular No. the COA representative. auditor Belandres did not disallow the transaction as evidenced by her Independent Auditors Report dated Executive Order No. Belandres stated that for as long as the Among the rules and regulations issued by the COA pursuant to the above-quoted bidding was not contrary to Presidential Decree No. therefore. to Petitioners. Authority for the Auditor's Presence: Industrial to be the lowest bidders whose offers were the most advantageous to the government. 78-87 dated 06 September 1978 which requires the through simplified bidding even for amounts exceeding Fifty Thousand Pesos attendance of an auditor or his duly authorized representative in the opening of bids. respondent COA underscored the Special Audit Teams observation government representatives tasked with protecting government interests mere that: automatons. 269. serves only as an observer who can only perform post-audit functions and who cannot participate or be actively involved in the bidding as this would 3.[31] 12 July 1994. the Constitution has provided that the COA shall have exclusive authority. who is hereby authorized to secure and identify such papers and . .[30] For this purpose. on the other hand. petitioners. unnecessary. (P50. materials.[24] government on a post-audit basis. 3019) considering required therefore. matter it is presumed that so much is reposed in their integrity. and regulations that if there had been any suspicion of irregularity or any deliberate act on their part to including those for the prevention and disallowance of irregular. to wit: transactions and operations of the DENR-CAR for the years 1992 to 1994. The resident auditor. in refutation. [25] it can be conducted mandate is COA Circular No. auditor Belandres never caused the stoppage of the bidding by the said circular. be tantamount to exercising pre-audit functions and encroaching into the government agencys management prerogatives. petitioners challenge the ruling of respondent COA that the role equipment) be made in the presence of a representative of the Auditor of the COA representative in public bidding is merely as witness as this would make General.[29] Respondent thus concluded that the ultimate Parenthetically. ". argue in the main that they cannot be charged for define the scope of its audit and examination. Under the Manual On Public Bidding published by the COA. subject to the limitations in this Article. that the opening of all bids and quotations for similar services (contract for public service or for furnishing supplies. 1978 states the of the Special Audit Office (SAO) that conducted a special audit of the financial extent of auditorial involvement with regard to the opening of bids.

The important thing to bear in mind is that for purposes of the instant petition. in any event. the team conducted recanvass of cover the entire amount thereof. let alone irregular.e. [33] altogether. petitioners nevertheless advance the we ruled that the role of the COA representative at the time of the bidding was only as additional argument that. 95-31 of the Special Audit Team finding that the responsibility for Commission on Audit. however. respondent COA cannot be estopped by the acts of its resident auditor during As respondent COA obviously relied on the foregoing circular in affirming SAO the public bidding of 12 July 1994. (2) Sufficient funds are available for the purpose.[35] A pre-audit is an examination of financial transactions before their consumption or payment. the COA auditor was not conducting a pre-audit. filed against security of the records of the bidding means that (c)opies of the tenders or offers should petitioners.[32] On the other hand. The term "secure" necessarily implies: prequalification of contractors. In Development Bank of the Philippines v. as witness or observer. The main issue having been settled thus. it is the latter which has the technical expertise to determine the offers that will best meet 2. their initials or other identifying marks. audit functions and the PBAC members of the procuring entity (i. are specifically tasked with the conduct of papers and samples at said bidding. DENR-CAR). Physical security of the records of the bidding. COA had already passed necessary expenses. (e)very document should be properly identified by each and every member of the claiming that the COA auditor did more than just observe and that they merely relied Committee on Bids and by the Auditor or his duly authorized representative by affixing on her representations made during the opening of the bids. it can be safely said that at the time proper safeguard of the interests of the Government. allegedly did not take into account additional expenses incurred by the winning bidders all of whom were Manila-based like freight cost. Verily. by ensuring that every document is audit were not overpriced.[38] And rightfully so. was merely as a witness 3. handling.[39] The presence of only with specific functions to perform as hereunder delineated and explained." of the subject public bidding in 1994. Her presence thereat. Commission on so if the acts of its officials are erroneous. Maintenance of documentary integrity.[41] we had occasion to rule that the COA is not estopped from determining whether there has been an overprice in the items up for bid pertains to the questioning. . Report No. To quote the relevant portions of its audit report: [42] appropriation law or other specific statutory authority. bidding. at some convenient portion of the document. insurance and other Moreover. under the said circular. i. and (4) The transaction is approved by proper authority prices from three (3) suppliers of polyethylene plastic bags with the same and the claim is duly supported by authentic underlying evidences. Between the COA auditor who can only perform post- 1. only means that Petitioners. evaluation of bids and recommending of awards of contracts. The special audit team that conducted the re-canvass properly identified and/or marked and that the records of the bidding are securely kept. (3) The proposed expenditure is not unreasonable or extravagant and In order to determine whether the agency was able to acquire the most advantageous the unexpended balance of appropriations where it will be charged to is sufficient to price thru the modes of procurement adopted. it cannot be said that respondent COA the well-established principle that estoppel does not lie against the government. rests the burden of ensuring that the process undertaken is above-board and The Auditor's presence or that of his duly authorized representative is as witness that the outcome thereof is most advantageous to the government. In Danville Maritime v. Audit. therefore. usually the right up-hand corner of the document. the previous acts of its officials considering members of the PBAC and not the COA auditor. physical This argument is a matter of defense in the criminal case.[36] A The matter of overpricing has been sufficiently studied and explained by the pre-audit seeks to determine that: (1) The proposed expenditure complies with an Special Audit Team. Maintenance of documentary integrity. 89-299 lifting the pre-audit of government transactions. harp on their alleged good faith to negate criminal liability. as correctly pointed out by respondent. In contrast to the duties of the COA auditor in public bidding. [37] specifications as that purchased by the agency. in the process of post-audit.e. is fundamental (Emphasis supplied) only to the extent of guaranteeing documentary integrity and transparency in the bidding process. the PBAC members... samples of the materials submitted by the bidders as will ensure the Applying the foregoing to the facts before us. The Executive Order enjoins the presence of the Auditor to be present and secure the under the Administrative Code of 1987. if any. whether respondent COAs recommendation to file criminal charges be furnished the Auditor or his duly authorized representative for his file and reference will be able to survive prosecutorial and/or judicial scrutiny is a different matter and to secure the same against tampering and/or improper handling. COA Circular No. Nature and Extent of the Auditor's Participation: to ensure documentary integrity. Upon the agency that called for the bidding. it must be kept in mind that as early as 1989. the plastic bags subject matter of the special a witness to insure documentary integrity.[34] where the petitioner thereat likewise argued that the bidding conducted was valid as the COA representative who was then present made no objections to the same.[40] on the other hand. more acted in grave abuse of its discretion. the needs and requirements of its office. the COA representative.

. Supplier Description COA Difference Managements Comments: Acquisition Quantity Percentage Price TSO/ Recanvassed Evaluated Unit (Pcs.850.50.5595 14. Estrellita Belandres. (5) (7) (3) (4) h.do . hence. this unfamiliarity with the prices of plastic bags. Estrellita Belandres.00 1.00 P0. Without any objection.do size: 10 x 3. Overpriced (4/3x100%) [(2) x 10%] (1-3) Amount (4x5) Consultation made with the DENR-CAR Members of the PBAC revealed the following: (2) (6) (1) . who was the PBACs resource 8 person and guide in its proceedings.do . .250 0. the offers that appeared to be the lowest were chosen and the Secretariat was directed to prepare the Resolution adjudging the winning bidders who Fluid Air happened to be Fluid Air Technologies and Kinship Industrial Sales and Services..7888 P150. 4 x 6 Secretariat as well as Administrative Division representative in the person of Miss Services Tessie Bringas.00 373.960.. the team (*) Included a mark-up of 10% allowable adopted the canvass prices of the thickest plastic bags.358 0. For purpose of conservatism.1062 j. Inc. quotation obtained. The Members of the PBAC were also not familiar with the prices of the A. who together with the PBAC Members and Sales & black.500. hence. .00 connected with the DENR Offices but not directly 7. Mrs. 8 it was routinary for the PBAC to award the items to the firms with the lowest quotations.00 16. all signed each and every copy of the canvass form as the sealed envelopes were being opened and offered for inspection.00 14. Comparing the agencys purchase price with the quotations of various suppliers and Legend: with the TSO price evaluation disclosed that the items purchased by the agency were overpriced by a total amount of P344. Auditor.275 1.14% 12 i. the Chairman and a Member of the then PBAC are Mining Engineers by profession while the other is a Lawyer..3938 2. .50 .940 2.973. C.49% Pacheco.855 0. the 24 units Members being 27.48% PBAC relied on the quotations stated herein. P344.098. .90 272. .60 The PBAC relied in good faith 534. During the opening of the sealed bids which was done only on July 12. The overpricing is shown as follows: (Annex 1-E) price variance to the lowest price .000 58. On the inadequacy of the bidding process and overpricing.192 P0.165.50 0. Price/pc. Besides.344.000 P118. 1994. 28. .320.200 36.. Technologies The said Resolution was signed by all the PBAC Members including the DENR- .000 CAR 102. Overhead 17.do size: 6 x 2. Projector concerned with tree planting and seedling production where plastic bags are needed.) Total Overprice Price/pc.00 plastic bags.500.84% with the quotations given in the canvass forms.00 COA Resident 372.025 100.do size: 4 x 1. In the presence of the COA Resident Industrial plastic bag.30 0.098. Price/pc.50 0.2112 P0.335.727% Auditor. the Kinship Polyethylene P1.

[44] WHEREFORE. . There is no showing that notices of biddings were published in public places. In view of the limited publicity. No costs. each of the required documents therein appeared to be regular on its face and the canvass quotations were obtained from firms checked by the canvassers. the PBAC was not able to draw more bidders.[43] It is only upon a clear showing of grave abuse of discretion that the Courts will set aside decisions of government agencies entrusted with the regulation of activities coming under their special technical knowledge and training. We do not perceive any abuse of discretion on the part of respondent COA in relying on the above-quoted report of the COA audit team.k. that the then PBAC Members were exercising their duties in addition to their main and regular functions which do not provide them enough time to look deeply into such matter. When the sealed bids were opened. the petition dated 18 February 2002 is DISMISSED for lack of merit. If it so happens that one of the offerors is not engaged in the business of dealing in plastic bags. In sum. And this is what actually happened. it is respectfully submitted that individual background checking by the PBAC of each offeror in addition to the documents submitted by each is over and beyond the work responsibility of the PBAC Members.. . The 12 September 2000 Decision and the 06 December 2001 Resolution of the Commission on Audit are AFFIRMED. however. the discretion it exercised in ruling for the disallowance of the transaction in question must be respected as it is supported by substantial evidence. It is stressed.. premises considered. resulting to overpricing. In relying on the quotations of the three suppliers one of whom is not even qualified as such. The PBAC left entirely to the canvassers the determination of which suppliers are to be served canvass quotations. PBAC took the risk of not getting the most advantageous price for the government. SO ORDERED. Well-established is the rule that findings of administrative agencies are accorded not only respect but also finality when the decision or order is not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. Teams Rejoinder: The procedures adopted by the PBAC which is to require the submission of at least (3) sealed quotations did not ensure the widest publicity needed for competitive bidding.

as effected by acceptance of the proposal. Inc. containing the rules to be followed in the bidding. resulting in the contract is perfected. be subjected to post-qualification proceedings.. No. 2004] Inc.] for the proposed Insular Life Building in Lucena City for its evaluation and analysis. in an amount equivalent to ten (10) percent of the bid or five (5) percent of the bid in Managers or Cashiers check payable to Insular Life. whose proposal had been deemed acceptable DECISION and complying with the requirements of the owner ([petitioner]) and the project. offered by the winning bidder of the other partys acceptance thereof.] and furnished copies of the Instruction to Bidders to participating bidders. [G. Specified Contractors. the Insular Life Assurance Company. as well as past and present projects.845. To produce an agreement. 147410. A. Asset Builders Corporation.. vs.]. J. 1993.] recommended that [respondent] and the other bidders. request the bidder to extend the bid validity period after expiration of the original validity period. LTD.: Agreements within five (5) days after the receipt of the Notice of Award[. [respondent] bound and obliged itself to Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of enter into a Contract with the petitioner within ten (10) days from notice of the award. [9] Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. Q. including the general FIRST DIVISION construction x x x contract.. 2000 Decision[2] and the March 7. AND SPECIFIED CONTRACTORS. [petitioners] designated Project is DISMISSED. and that said bidders be subjected to [petitioner]. Division of the [petitioner]. The Decision of the Court a quo is AFFIRMED. Inc. Limited. with four (4) other bidders. submitted a report of its evaluation to the Real Property The assailed Resolution denied petitioners Motion for Reconsideration. the respective proposals of the bidders were opened. in due time.K. ASSET [after] opening of bids[.[4] Manager[. including the inspection of their respective offices.] and that failure on the part of the winning bidder to execute the contract shall constitute a Where the parties merely exchange offers and counteroffers.[12] business to participate in the bidding of [petitioners] proposed Insular Life building in .] and Serg Construction.962. valid for sixty (60) days. and that the bond heretofore. A party may withdraw its offer or counteroffer prior to its receipt nullification of the award. The Facts On January 21. petitioner. invited companies/corporations engaged in the building construction credit and financial investigations. who was designated as Project Coordinator of the petitioner[. INC. including the following rules: (a) all bond proposals shall be accompanied with a bid bond from the Insular General Insurance Company.] Alarilla The Case Construction[. Sometime in November. 1994. As [could] be gleaned from the Report of AWIA. equipment. namely. which bid bonds will be returned to the bidder after sixty (60) days from opening of bids or after award of the project. Engineer Pete S. shall be notified in writing to personally appear to execute the Contract PANGANIBAN. no agreement or breach of the agreement. [Petitioner] distributed copies of Bid Document[s]. respondent. whichever date comes first. 2001 with good and sufficient securities for the faithful compliance thereof. submitted their respective bid proposals secured by bid bonds. 1992.[A.. assailing the September 20.[6] [and] (c) the bidder. with the winning bidder and Bid Proposal Forms[. Espiritu (Espiritu for brevity) of the Real Property Department.54[11] bid was the lowest among the bidders. February 5.[5] (b) the bid shall be valid for sixty (60) days THE INSULAR LIFE ASSURANCE COMPANY. [respondent]. The [petitioner] forwarded a Summary of Bids and Tender Documents to Adrian Wilson IN THE LIGHT OF ALL THE FOREGOING.] but the owner of the project (the [petitioner]) had the option to BUILDERS CORPORATION. Q. 61607. AWIA. the offer must be shall be retained by the owner ([petitioner]) as payment due for liquidated damages. Calderon Construction [Co.K. [respondents] P12. The dispositive part of the Decision reads as follows: On November 9.R. CALDERON The appellate court summarized the facts of the case as follows: [CONSTRUCTION] CO. the appeal of the [petitioner] International Associate[s].[7] certain and the acceptance timely and absolute. Lucena City.[10] (AWIA for brevity). Court.[8] Under its Proposal Formwhich the [respondent] submitted to the [petitioner].

[15] The [petitioner prepared] a draft of the contract to Transportation buildings in its compound. As-built[s] drawings Department and Assistant Vice-President of the [petitioner]. Asset Builders Corporation is a (sic) AAA category Contractor. RPD[. evaluation and credit investigation of 7.000. Safety programs (first aid kit and hard hats) to award the Lucena [p]roject to Asset Builders Corporation. 1994 at the job site. Juan.[13] 2. including [respondents] Operations Manager. Submitt[al] of shop drawings prior to use of materials [respondent]. clarification and negotiation be undertaken with prospective contractors. 1994. On the basis of the above very positive indicators. declaring that they and AWIA had [to] report to the management of the [respondent] the proposal of [petitioners] representatives. series of 1993. Espiritu suggested that a bid On the same day. However. 1994. Schedule of] Prices. with the recommendation that the award be given to the [respondent]: 8. effective December 3. Under Construction Co.. 03. etc. Centeno. addressed to the qualification. by letter. and the National Historical Institute Building. Channel of [c]ommunications among Architect. 1994 at experience in vertical and horizontal projects. 1994.845. the results of which are satisfactory and acceptable. On January 25. Sajorda (Sajorda for brevitys sake). For your consideratio[n/a]pproval.e. Centeno. [Contractor submittals i. 1994. Project Contractors Key [p]ersonnel [l]ist with [s]ignatures and Engineer Ramon Abu. [Torrijos] informed. in favor of [respondent]. the President of [respondent]. B. (GSIS) Headquarters Complex.] pending execution of and its past and present projects. Januario L. Engineer Bernardo A. Subsequently. i. The company [has been] subjected to a the job site.e.] E. head of the Real Property 6. Project Manager of AWIA. Night work 3.00 to accommodate the wage increase brought about by Wage Order No.[Petitioner] concurred with the recommendation of Espiritu and.K. a pre-construction conference [would] be held on March 22.[. the Government Service Insurance System be executed by the [petitioner] and the [respondent].000. 10. ASSET 1993. Rogelio P. emphasizing that: informed Rogelio P. indeed. Work Schedule. Sanitation 2. with the [ultimate] paragraph of the Notice to Proceed. by Memorandum that. CAR (Contractors All Ris[k I]nsurance) . Inc. for some clarifications.] and Adrian Wilson Intl Associates.] and evaluations of [respondent] and Q. agreed to the readjustment of the amount of its bid as proposed by the [petitioner]. the [respondent] may start its concurrence of [respondent].] recommen[d] 9. the [respondent] 5. Role of AWIA On February 24. submitted to Mabini L. post. [16] A Board of Directors of [petitioner] of the award of the general construction of the copy of the Notice of Award was appended to said letter. Mariano.L. Flores (Flores for brevity). visited [respondents] main office at the Tektite Tower mobilization and proceed with the construction immediately[.] Mariano Associates and Co. [F. Insular Life. [Inc. Calderon [respondent]. inspection[. for the conformity of the latters President. for its consideration and approval. 4. pursuant to the AWARD to [respondent]. On February 14. [respondents] representatives were noncommittal. the four (4) and two (2) storey Air the Construction Agreement.[14] 11. 1994. during which the following will be discussed: post qualification and credit investigation. were effected. Abraham Torrijos of [petitioners] Real Property [respondent] and advised AWIA to coordinate with [respondent] and inform the latter Department (hereinafter referred to as Torrijos) recommended the approval by the that a pre-construction meeting [would] be held on March 22. It has extensive Lucena Building. of the general construction of the Proposed 2. On March 9. the Chief Operating Officer and Senior Executive Vice-President of the [petitioner]. [Petitioner] proposed that [respondent] [p]ositions adjust its bid from P12. We honestly believe that they will do a good job. 1994. and [respondents] equipment. a conference was held by and among the representatives of the [petitioner] and of the [respondent].961.[17] Sajorda forthwith Proposed Lucena Building. that [petitioner] had awarded the general construction contract of the proposed Lucena Building to the On February 23. thus making it technically competent and financially capable of 1.54 to P13. 3. Contract Amount and completion time contracting the work. [petitioner]. his findings on the post-qualification. [Flores] signed a Notice to Proceed. On March 14..

Centeno. ESPIRITU -.] as per TCT lot description[s. with the [respondent] as the General Contractor. 5 SETS OF [R]MDA PLANS/SPECS[19] was also erected in the project site. 5 SETS OF SPECS FOR GENERAL CONSTRUCTION Further. 12. Flores 6 SETS OF ELMA PLANS of the [petitioner] in attendance. Espiritu and Januario L.AWIA Project Manager weeks. SABATER -. much representatives of the [petitioner] and its Project Manager and of the [respondent]. the President of [respondent]. . As per plan. [23] On April 25. in attendance: any Construction Agreement. 1994. the [respondent] did not affix its conformity to any Notice of Award. EDMUNDO C. On March 22. to enable the latter to secure a Building Permit for the project: the monuments and the staking out of the building: ONE (1) LOT DOCUMENTS/PLANS FOR BUILDING PERMIT We have the honor to request your good office. 1994. Neither did it execute the person of its Project Engineer. Security measures During the conference. J. which rendered its bid unattractive.G. On March 18.G. SAJORDA -. to be 18.IL/RPD Asst. a Ground Breaking ceremony was held at the project site.] provided the cost will be reimbursed to the Owner[. per Mr. Issuance of building and other permits being worked out by the Contractor. Actual site mobilization to be first week of April 1994. Photographs every month J. received by Roy Roxas. 1994. 1994. the Pre-Construction Conference ensued with the However. since the previous two (2) BERNARDO [A]. 1994. [and] Pete S. the [petitioner] transmitted to the [respondent] the following On March 26.] prior to staking out the building[. Sub-contracting [for] approval of subs. informing the [petitioner] that the [respondent would] not Attendees: CARLOS M. TORRIJOS -.[21] The [respondent] received a copy of the Memorandum of Sajorda. Owners review of payrolls. JANUARIO L. Undistributed PETE S. [22] 5 COPIES OF PRC ID [&] PTR OF DESIGN ENGRS. we can do the 4 SETS OF STRUCTURAL COMPUTATION relocation[. Subsequently. in relocating the monuments[.5[0M] along the existing adjacent building walls will expose the CHB footing. for the AWIA a letter requesting for the TCT lot description for the purpose of relocation of [respondent]. prices had escalated. with Rogelio B. Billings based on actual work accomplishments.000. on March 17. (sic) payments etc. J. Quizon. evidenced by a Transmittal Sheet.ASSET Project Manager 15.00 lump sum. Jacobo G. the [respondent] wrote the [petitioner] a letter dated April 5. A billboard announcing the construction of [the] Insular Life Building in Lucena City. Tests as required by spec[]s 1.] with an approximate fee of P5. Contract Amount and Completion Time: Contract is for P13.AWIA Resident Engineer 13. Thereafter. Project Manager be able to undertake the project anymore[.G. the proposed depth [of] excavation of about 2. day one to be 5 days after receipt of NTP by the made[18] Contractor. Manager[20] 16. the Project Manager of [respondent]. Take note of specific requirements before final payment is completed within 210 calendar days. sent to documents.IL/RPD Project Coordinator materials not billable ABRAHAM P. etc.AWIA Asst. ESPIRITU -. Quizon.IL/RPD Manager 14.000. in less commence its construction of the project. 1994.000. problems may occur regarding structur[al] excavation for footing [and footing] 3 SETS OF ELECTRICAL LOAD COMPUTATION tie beams at Grid Line A & 4. the following were discussed and clarified: 17.00.] because the prerequisite paper work and attendant processing could not be fast-trac[k]ed and that. QUIZON -. vouchers. Quizon. FLORES -.] likewise.

By way of riposte. infra: [respondent] from the project. any modification or variation therefrom would annul damages or.000.00 and P14. 1994 of the complaint of the [petitioner] and ordering the latter to pay damages to the [letter].. [and] (c) the [respondent] was liable for damages to the [petitioner]. The appellate court explained that when the exact [respondent] in the amount of P13.500. of the project[.[28] xxxxxxxxx The [petitioner] alleged.the [petitioner] wrote a letter to the [respondent]. judgment be rendered in its favor.[27] dated December [5].000. its bid had expired by January 8. inter alia. is hereby ordered to pay Asset Builders Corporation the sums of Pesos: Five Hundred Thousand (P500. 1994. inter alia.[29] counterclaims for damages against the [petitioner].000. in response to its April 5.Furthermore. five (5) days after the receipt of the Notice of Award shall cause [the] annulment of the award. to execute the Contract within Thousand (P75. 1993 or until January 8.500. x x x: construction contract was perfected between it and the [petitioner]. shall constitute a first lien on the recovery from [petitioner]. the dispositive portion of which is quoted. judgment is rendered DISMISSING the Complaint with costs against project[.500. The amount of bid bond deposited with the proposal shall be retained by the Filing fees on the amount of P2. thereof. by the [petitioner].00 formers unqualified acceptance of the latters bid.] and interposed Hence this Petition.00) as The exact amount of damages to the Owner due to the failure to execute the Contract compensation for the injury to the latters business standing. contract was perfected by and between the [petitioner] and the [respondent] for the construction of petitioners building project in Lucena City. in its favor. quoted.00 and ruling.135. the [petitioner] filed a complaint[24] against the [respondent]. x x x: The Issues xxxxxxxxx After due proceedings. Award or Notice to Proceed. According to the appellate courts the services of another contractor for the project at the price of P14.] which impelled the latter to engage The CA affirmed the lower courts Decision. (b) the [respondent] waived On December 23. since the [petitioner] for [the CAs] resolution.. that it never received any Notice of or want of diligence. the [respondent] sent a letter to the [petitioner] averring that: (a) it xxxxxxxxx never received any written Notice of Award from the [petitioner]. without the [petitioner] asking the [respondent] for the extension thereof[. and Pesos: Seventy Five may be deemed difficult to determine. the failure of petitioner to prove that it gave respondent a written notice of the that. Insular Life Assurance Co. The [petitioner] interposed its appeal from the Decision of the Court a quo and posed.] but the [respondent] unjustly and arbitrarily withdrew from the project and refused to execute the Construction Contract with the [petitioner. Failure. Ltd. pursuant to Section 10 of the Instruction to Bidders. consequently. for its withdrawal.] without prejudice to further action of the [petitioner] against the [respondent] [petitioner]. 1993 (sic)[. for Damages.] its offer was automatically withdrawn after said date. in favor of the [respondent] and against the [petitioner].000. by way of liquidated damages. [and] (b) since its bid offer had a lifetime of sixty (60) days from November 9. the threshold issues of whether or not: (a) a construction had not requested the [respondent] for the extension of the lifetime thereof.000. alternatively.000. estoppel did not apply because of petitioners own carelessness complaint.00) by way of attorneys fees and expenses of litigation. informing the [respondent] that.00. praying that. in its complain[t t]hat the [respondent] was duly Ruling of the Court of Appeals notified by AWIA of the award. did not give birth to consent.00 [respondent] sought in the counter-claim Owner as payment due for liquidated damages incurred. the [petitioner] was impelled to engage the services of another contractor to complete the WHEREFORE.000. ordering the dismissal . 1994. the [respondent] alleged. infra: On the counter-claim. as required in the Instruction to which was [the] difference between the contract price of the project with the Bidders. by way of actual terms desired were not in the offer. despite the award of the project to the [respondent]. In its Answer[26] to the that offer. Section 9 of the Instruction to Bidders and was estopped from claiming that no with the Regional Trial Court[25] of Makati City.000. in view of the unjust withdrawal of the [respondent]. 1997. after due proceedings. the [petitioner] was obliged to pay the amount of P1. the Court a quo rendered a Decision.

whether that acceptance was arises.[40] However. the inter-office memoranda issued by petitioner.[55] While there was an initial offer made. The Court of Appeals gravely erred in not holding that ABC.[59] the Instruction to Bidders prepared by petitioner itself expressly required (1) Existence of a Contract a formal acceptance and (2) a period within which such acceptance was to be made known to respondent.[60] No such acceptance was communicated to No Contract respondent.] and that. the offer must be certain[41] and the acceptance seasonable and communicated to the latter. of the award of the construction of the building project to it before it withdrew wherein they fulfill or perform the terms agreed upon in the contract. The Court of Appeals gravely erred in not holding that there exists a valid Equally important are the three distinct stages of a contract -. the mere determination to accept the proposal of a bidder does not constitute a contract. there was only an offer and a counteroffer[51] that did from claiming the contract was not perfected. no meeting of minds was established. in fact. there is no basis to penalize IL for going to court. Second. been the perfection of the contract.[57] That is. the rule on the concurrence of the offer and its acceptance [54] did not and respondent? apply. inspections. because other matters or details -.[45] former within which to accept the offer was not itself founded upon or supported by any . there was no acceptance. I. as well as other supported the award in favor of ABC. [61] It is elementary that. there is no evidence that conducted. there was no contract. the Civil Code provides that no contract shall arise unless its acceptance is communicated to the offeror. negotiation and withdraw the offer. 1993.[50] At any time. memoranda between it and its own project manager.whether there was an acceptance by the object and the cause that would constitute the contract. Third. culminating in the its bid proposal.[58] Although consent may be either express or Sole Issue: implied. extinguishment thereof. [39] consent petitioner of the offer made by respondent. In any event. if so.[49] III. [56] The Petition is unmeritorious. V.its preparation or contract for the construction of the building project between IL [30] and negotiation.[36] From the moment of a meeting[37] of the offer and the acceptance[38] upon obligation. petitioner proposed a counteroffer to adjust VII.[33] a contract[34] is perfected[35] by mere There is no issue as regards the subject of the contract or the cause of the consent. the offer was already lacking. The Court of Appeals gravely erred in not holding that ABC is estopped In the present case. but when there allegedly came an The Courts Ruling acceptance that could have had a binding effect.[53] First. that transpired between them were indeed initiated by a formal offer. the parties did not get past the negotiation stage. [48] The last stage is its consummation. and. [46]Negotiation begins when the ABC. that decision must be communicated to the bidder. The Court of Appeals gravely erred in not holding that ABCs withdrawal In the case at bar. The offer and its acceptance did not meet to give birth to a contract.[31] prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. and credit investigations IL. its perfection.[32] respondents bid to accommodate the wage increase of December 3.in addition to the subject matter and the consideration -. at worst. [52] Clearly. only after the bid bond had lapsed were VI. as required by the terms of its proposal. no consent was given.[42] if qualified. its consummation. thereby perfecting the contract. either of the prospective contracting parties may stop the commenced. Without that express manifestation. not sum up to any final arrangement containing the elements of a contract. The events from the contract constituted a breach of that contract. The perfection or birth of the contract[47] occurs when they II. therefore. The controversy lies in the consent -.[43] the acceptance[44] would merely constitute a counter-offer. is liable for damages[. Moreover. were simply documents to which respondent was not privy. The Court of Appeals gravely erred in not holding that the contract had this policitacin was merely an imperfect promise that could not be considered a binding been perfected and that its consummation stage [had] in fact been commitment. The Court of Appeals gravely erred in not holding that IL has notified ABC agree upon the essential elements thereof. The period given to the absolute. instead of post-qualification proceedings. and finally. The effect of giving the Notice of Award to the latter would have No Notice of Award. but IV. but its perfection is another. The due execution of documents representing a contract is one thing. being consensual.would still be stipulated and agreed upon by the parties. There is really only one major issue: Was there a valid contract between petitioner In effect.

expiration of the bid bond did not constitute a waiver of Section 9 of the Instruction to Bidders.[84] without the latter.[85] yet it did not follow its own rules.[81] It is hardly separable from the waiver of a right. a fortiori.[79] Respondent. this right to withdraw was not exercised whimsically or arbitrarily by respondent.[74] only compliance.in fact belies the repeated requests.[68] This requisite ensures the good faith of bidders and binds them to enter thereon of such character as to change the position or status of the party claiming the into a contract with the owner. there is no room adduced. [82] The party claiming estoppel must show the following elements: (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question. leaving no doubt as to the intention of those giving up a right or a benefit that confirmation of that decision. The bond.[77] The contract must be fulfilled latters acceptance of the offer. respondents conduct and statements were always consistent and legally waive it. Petitioner did not even enter in its corporate logbooks the release to and receipt by mean that the bid also lapsed on the same date. The bid continued without a bond. Indeed. [71] did not it.[76] The language is clear and. respondent still had the freedom and the right agreement as effected by acceptance of the proposal.[86] for construction. provided that incomplete proposals might be sufficient cause for their rejection. the decision to award the contract had not As aptly held by the appellate court. but this allegation has not been proven. copy of the Notice of Award. petitioners claim of estoppel against it could not be applied. To be valid and effective. [69] One who submits estoppel. despite its for an adjustment of the bid to accommodate the wage increase -. if with. It had the means of knowing if respondent had been served a the more so is the total want thereof.[66] To the Courts mind. the former perfection of any contract arising from the first. never received a copy of the Notice of Award. to withdraw the offer by communicating such withdrawal to petitioner [62] before the like contracts in general. The proposal of respondent was merely validated by its bid bond. attitude or course of conduct that caused loss no acceptance of the offer made by respondent. The written Notice of Award.petitioners request legally pertains to them. the bid bond is an indispensable requirement for the validation of a bid conduct or statements of the party to be estopped. expressing and explaining its withdrawal. which constituted the acceptance of the proposal. given that the merely guaranteed the performance of the principal obligation and could not exist prerequisite paper work and attendant processing could not be fast-tracked.[75] This rule applies to the Instruction to Bidders. but still no formal acceptance was reliable. Such failure to comply with a condition or injury to the latter.[78] acceptance came to be known by respondent. [67] conference and the ground-breaking ceremony was part of the negotiation process.consideration. 1994.[65] Petitioner avers that an acceptance was made. The manner of acceptance of all bids was prescribed by petitioner made. Therefore. there was indeed never adopted an inconsistent position. the subsequent acts between the parties did not even serve as a terms. such prescription must be complied In the interpretation of a contract. respondent of that copy. Thus. respondents acts subsequent to the been made according to the terms of the Instruction to Bidders.[63] or. Third. if and when the bid is considered.[83] a bid not only signifies assent to the terms and conditions of a proposal. Respondent had no knowledge of such acceptance when it communicated its No Estoppel withdrawal to the former. which was an accessory. Good faith is always presumed. . The latter had every reason to withdraw its bid.[64] before the according to its literal sense. The Invitation to Bidders even None of these elements was proven. is the law between the parties. no contract was perfected. unless contrary evidence is parties. detriment or prejudice. Again. under the law. upon the Certainly. convincing and satisfactory Even Without a Bid Bond evidence. Notably. (2) reliance. which could Second. contrary to the claim of petitioner. but impliedly binds oneself to them. 1994. all the facts in question. to his injury.[73] When there is no ambiguity in the language of a contract. petitioner had the knowledge and the means of knowledge of the truth as to mere insufficiency of a bond required of a bidder is a ground for rejection. waivers must be couched in clear and unequivocal Besides. yet the former did not preserve a copy of such Notice. Estoppel cannot be sustained by mere argument or doubtful inference. on that basis. the literal meaning of its stipulations controls. if the offer has been accepted. it must be Subsistence of an Offer clearly proved in all its essential elements by clear. Of no moment was its reliance in good faith their terms are clear and leave no doubt as to the intention of the contracting upon respondent. should their proposal be accepted. which was which supposedly bore the signature of the latters employee who had received considered by petitioner.[72] The former was given for the benefit of petitioner. [70] If First. The existence of a second proposal -. It did send a formal letter on April 5. in good faith. The expiration of the bond on January 8. the action or inaction of petitioner that caused its own injury was its own which provides that failure to execute the Contract shall constitute a breach of fault. As of that date. and (3) action or inaction based proposal. itself.[80] The attendance of respondent in the pre-construction imposed for the perfection of a contract resulted in failure of the contract. Applying Article 1321 of the Civil Code.

[87] The misplacement of such vital document was inexcusable. 1994 Notice to Proceed clearly stated that its issuance would depend upon the execution of the construction agreement. . Costs against petitioner. Estoppel is a shield against injustice.Without it.[89] WHEREFORE. the March 14. the Petition is hereby DENIED. SO ORDERED. there was no contract.was a sine qua non to the perfection of the contract. the party invoking its protection should not be allowed to use it to conceal its own lack of diligence [88] or want of reasonable care and circumspection. Moreover. and the assailed Decision and Resolution AFFIRMED.

the Department of Budget and Management (DBM). in audit the amount of P68. JAIME P. 1.768.J. (3) Notice of Disallowance No. Chairperson-BAC of the NHA. the same having been paid contrary to the allowed ESCARDA and CARMELA S.: honoraria. 9184. Members VELASCO. CARPIO MORALES. JR. BRION. Commission YNARES-SANTIAGO.31 for honoraria paid covering the periods Petitioners. 2004-001 (04) dated November 22. J. MARIO P. ZOSA. Thus. CHICO-NAZARIO. and the TWG. which 3. as it the NHA. and ROGELIO TABLANG. and Settlement Board. LEONARDO-DE CASTRO.531. Recommendation of Award to the NHA General Manager. 2004 JOSEPH PETER SISON. This is a petition for certiorari assailing the decision[1] of the Adjudication and Settlement Board (ASB) of the Commission on Audit (COA) dated March 5. 2005 disallowing Commissioner Legal Adjudication and CORONA. together Settlement Board Chairperson. ROBERTO L. petitioner Joseph Peter Sison. RAMON (2) Notice of Disallowance No. BAUTISTA. NARANJO. 2004. The payment of honoraria should not be based on the Notice of Award but should be Audit Observation Memoranda[2] were issued by the Supervising Auditor of reckoned on the date of Recommendation of Award. C. Director IV. G.096. rates provided in DBM Circular No.. to wit: . disallowing in audit the amount of P290. ARLENE PUZON. 2004-002 (03) dated December 2. 2004-5 dated March 23. on Audit.versus . 2007. which should be in x-----------------------------------------------------------------------------------------x an amount not to exceed 25% of their respective basic monthly salary subject to availability of funds.00 as overpayment of honoraria covering FE P. ROSEMARIE SIOTING. AMORSONIA B. That the payment of honoraria was based on the Promulgated: number of projects completed by the BAC and TWGs under their respective level of responsibility and on the rate June 5. Assistant CARPIO. three (3) separate NDs were issued by the approved by the Board. 2004 of QUISUMBING. On January 3. PEREZ. and for the period covering Present: October to December 2003. NECITAS B. That the work of BAC and its TWG is up to the affirmed the Notices of Disallowance (ND) issued by the Legal and Adjudication Office. the periods January and March 2004 for want of legal basis. contrary to Section 4. of the Commission on Audit Legal Adjudication NACHURA. 2009 provided for under the IRR of R. informing that there were excess/unauthorized payments of honoraria to sometimes takes several months before an award is members of the BAC and the TWG. 2005-001 (04) dated May 24. DANILO G. 2004-5 dated March 23. on the ground that they were paid in excess of the allowed . DECISION 2.31 is Managements responsibility to present such made by the National Housing Authority (NHA) to petitioners. rates. disallowing the payment of honoraria in the amount of P364. Assistant General Manager and Respondents. ESCOBER. ELIZABETH S.* with the honoraria received by the regular and provisionary members of the BAC for ESPINA. It Corporate (LAO-C). notation/confirmation/approval. LAO-C. EMMA M.00 for the period covering April to June 2004.299. PUNO. CLEMENTE. JJ. GERONA.A.. the BAC and TWG members were given straight 25% of their basic monthly salary as honoraria for every month from March 2003-March 2004. 2005.* the months of January to June 2004. EN BANC (1) Notice of Disallowance No. sought reconsideration of the NDs on the following grounds: BERSAMIN. as members of the Bids recommendation to the Board for and Awards Committee (BAC) and the Technical Working Group (TWG).1 of Budget Circular No. No. 2004 MACATANGAY and NEOFITO HERNANDEZ. as members of the BAC and PERALTA. Since DBM has yet to issue the necessary Implementing Rules and Regulations for the grant of NACHURA. and the other petitioners. from March to September 2003 for want of legal basis.R. VALENZUELA. 177011 disallowing in audit the amount of P73.

It also clearly provides Department of Budget and Management (DBM) shall promulgate the that appeals from the decision of the Board shall be brought before the Commission necessary guidelines.[4] It also rejected petitioners request for a set-off of the disallowed amount against future collectibles from the NHA. which was the applicable law at that time. not exceeding 25% of the basic monthly salaries of the BAC members. the 1997 Revised Rules of Procedure of the COA states that: issued on October 8.[10] The non- observance of the doctrine results in the petition having no cause of action.A. justifying its dismissal. otherwise known as the Government them and submitted to the court without first giving such administrative agency the Procurement Act. No. Honoraria of BAC and TWG Members . The petition is bereft of merit. thus. Petition for Certiorari. was review the decision of the ASB. Honoraria of BAC Members. The LAO-C decision. collecting from NHA or from succeeding honoraria they are to receive as members of the BAC and TWG.A. That they should not be made to refund immediately APPEAL FROM DIRECTOR TO COMMISSION PROPER whatever remaining disallowance after a computation of the same is made using the recommendation of Award as the Section 1. covering the three and these Rules.) No. Who May Appeal and Where to Appeal. 2007 for lack of merit. not find any cogent reason to apply the cited exceptions to the instant case. therefore. the thousand pesos (P500. No. as this was Section 1. 2005-064.[12] provides that: opportunity to dispose of the same after due deliberation. The Procuring Entity may On January 30.[11] derogation of the principle of exhaustion of administrative remedies. [8] Section 15.00) to the ASB of the Commission.[5] resolution of the Commission may be brought to the Supreme Court on certiorariby the aggrieved party within thirty (30) days from receipt A petition for review[6] was then filed by petitioners before the ASB of the COA which of a copy thereof in the manner provided by law. was affirmed. in become final and executory. we still find sufficient is that before a party may seek the intervention of the court. the Court does the 25% limit provided under Section 15 thereof.[9] Section 15 of the Implementing Rules and Regulations (IRR) of R. In this case. 9184. the Rules of Court was denied on March 5. 9184. 2005. Proper in the same manner as other cases under the Commissions existing rules and regulations. the LAO-C denied the motions for reconsideration filed by JUDICIAL REVIEW petitioners in LAO-C Decision No. 2003. 4.A. They aver that the payments were in accordance with Republic Act (R. 2003. The general rule But even if we were to disregard this patent infirmity. reads as follows: RULE VI Section 15. the necessary consequence of the failure to exhaust It must first be stressed that petitioners failed to appeal the decision of the ASB to the administrative remedies is obvious: the disallowance as ruled by the LAO-C has now Commission on Audit Proper before filing the instant petition with this Court. the COA issued Resolution No. but instead they request that the same be party aggrieved by a final order or decision of the Director may deducted from the remaining unpaid COLA which they are appeal to the Commission Proper. Only after the Commission shall have acted thereon justified. he should first avail himself bases to uphold the three (3) NDs issued by the LAO-C. order or not in accordance with law and jurisprudence. For this purpose. imperative that the Commission Proper be first given the opportunity to honoraria. Correlatively.000. The reckoning date. petitioners filed the instant petition maintaining that the grant of It is. of all the means afforded him by administrative processes.[3] xxxx RULE XI On September 13. 2003-001 delegating grant payment of honoraria to the BAC members in an amount not to the authority to adjudicate and settle appeals from the decisions of the Directors exceed twenty five percent (25%) of their respective basic monthly involving suspensions and disallowances in amounts not exceeding five hundred salary subject to availability of funds. may a petition for certiorari be brought to the Court by the aggrieved party. While the 9184. (3) NDs. and stressed that they did not exceed principle of exhaustion of administrative remedies admits of exceptions. The issues which administrative agencies are authorized to decide should not be summarily taken from Section 15 of R.[7] Aggrieved. Any decision.

and not merely directory.[13] petitioners could not just award themselves the straight amount of 25% of their monthly basic salaries as honoraria.500. Further reading funds. This phrase was clarified in DBM Budget Circular No. that is 25% of their respective their respective basic monthly salary subject to availability of basic monthly salary subject to availability of funds. the DBM shall promulgate the necessary guidelines. 2004 ed. the [Department of Budget and of the same would reveal that an enabling rule.00 responsibility and accountability. honoraria are given as a recompense for their efforts and Procurement Project performance of substantially similar duties. As the rules and guidelines were still forthcoming. 9185 is explicit as it states: For this purpose.00 prescribed by the DBM. The honoraria shall right. thus. Petitioners contend that it would be unjust if the BAC and the TWG members were not paid their honoraria for work already performed just because the DBM had For this purpose. 9184. albeit in hindsight.A. in accordance with the R. However. the payment of honoraria is subject to the availability of funds and shall follow the guidelines and relevant rules which are promulgated by the DBM. 9184 uses the (TWG) may be paid honoraria only for successfully word may which signifies that the honorarium cannot be demanded as a matter of completed procurement projects. It agrees that they ought to Honorarium Rate Per be compensated. authorizing procuring entities or agencies to grant honoraria to BAC members is not self-executing. in this 4. 2005. it was.. not yet promulgated the necessary guidelines. The word shall has always been deemed mandatory. 2004-5 was issued on March 23.000. the DBM Budget Circular provides that the remunerate themselves the amount equivalent to 25% of their basic monthly salaries payment of honoraria should be made only for successfully completed procurement as honoraria for their services rendered as BAC members even before the DBM projects. Given the foregoing provisions. No. Section 15 of R. a DBM guideline.[17] not exceed the rates indicated below per procurement project: The government is not unmindful of the tasks that may be required of government employees outside of their regular functions. Paragraphs 4. The needed for its implementation as contained in the second procuring entity may also grant payment of honoraria to the TWG sentence thereof. This contention is untenable. error for petitioners to Furthermore. as it still needs an implementing guideline to be promulgated by the DBM (Government Procurement There is no dispute that petitioners can be paid honoraria for the services they Tool Kit. Thus. with substantially similar degrees of BAC Chair 3. 2004-5A dated October guidelines were promulgated.We quote with favor the ASBs rationale for the 7. Sofronio B.[18] However. This is not the intendment of the law. therefore.2 The total amount of honoraria received in a month case. to wit: disallowance: . petitioners should have first waited for the rules and guidelines of the DBM may not exceed twenty-five percent (25%) of the monthly basic before payment of the honoraria. the provision of Sec.[15] 2004. p. 15 of the GPRA members. Thus. 90). prescribing the guidelines for the grant of honoraria to government personnel involved in government procurement.00 of the BAC and the TWG must be circumscribed by applicable rules and guidelines TWG Chair and Members 2.000. subject to the relevant rules of the DBM. salary.1 and 4.2 of the budget circular provide that: An honorarium is defined as something given not as a matter of obligation but 4. [16] Section 15 of R. Ursal. DBM Budget Circular No. For this purpose.A. No. No.1 The chairs and members of the Bids and Awards in appreciation for services rendered. a voluntary donation in consideration of services Committee (BAC) and the Technical Working Group which admit of no compensation in money. A reading of the above-quoted provision would reveal that The procuring entity may grant payment of honoraria to the BAC the first sentence sets the limit as to the amount of honoraria that members in an amount not to exceed twenty five percent (25%) of may be granted to BAC members. the payment of honoraria to the members BAC Members 2.A. is Management] DBM shall promulgate the necessary guidelines. as provided by law.[14] rendered as BAC and TWG members.

described. No interpretation is needed for a law that is clear. IN VIEW OF THE FOREGOING. Since the payment of honoraria to petitioners did not comply with the law and the applicable rules and guidelines of the DBM. the DBM has already set the guidelines for the payment of honoraria as required by law.1 The chairs and members of the Bids and Awards Committee (BAC) and the Technical Working Group (TWG) may be paid honoraria only for successfully completed procurement projects. A procurement project shall be considered successfully completed once the contract has been awarded to the winning bidder. a procurement project refers to the entire project identified. In accordance with Section 7 of the Implementing Rules and Regulations Part A (IRR-A) of RA No. 5. plain and free from ambiguity. the notices of disallowance are hereby upheld. the petition is DISMISSED for lack of merit. scheduled and budgeted for in the Project Procurement Management Plan prepared by the agency. Now. 9184. . detailed. SO ORDERED.