Emilio Aguinaldo College

School of Engineering, Computer Science and Technology

Congressional East Ave., Brgy. Burol Main, City of Dasmariñas, Cavite
(+63) 046-4164324 loc. 148
www.eac.edu.ph/cavite

TCPC632 – CE LAWS, ETHICS & CONTRACTS

EXERCISE no. 3

Lesson 9 P.D. – 1594

(FINALS)

Submitted by:
GROUP 7
Karl Addission F. Separa
John Kenneth Hernandez
Lorraine Faye C. Coloma
TCIE 3-2
05/03/22

Submitted to:

Engr. Lydia Nardo Erda

PRESIDENTIAL DECREE NO. 1594: Prescribing Policies, guidelines, rules, and Regulations
for Government Infrastructure Contracts, has been implemented since June 11, 1978, for all
government projects in the Philippines.
For your activity, make a research paper for all the cases relative to violating the implementation
of PD 1594.

Government Agency Name: NATIONAL HOUSING AUTHORITY, R-II BUILDERS INC.,

R-II HOLDINGS INC., HARBOUR CENTRE PORT TERMINAL INC.
Year: August 15, 2007
Projects: To convert the Smokey Mountain dumpsite into a habitable housing project.
Case: President Corazon C. Aquino signed Memorandum Order No. (MO) 1612 on March 1,
1988, approving and ordering the execution of the Comprehensive and Integrated Metropolitan
Manila Waste Management Plan (the Plan). The Metro Manila Commission was entrusted with
implementing the Plan produced by the Presidential Task Force on Waste Management
established by Memorandum Circular No. 39, in collaboration with other government entities.
MO 161-A3 was issued the next day, on March 2, 1988, containing the guidelines that prescribed
the functions and responsibilities of fifteen (15) different government departments and offices
tasked with implementing the Plan, namely: the Department of Public Works and Highway
(DPWH), Department of Health (DOH), Department of Environment and Natural Resources
(DENR), Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine Constabulary
Integrated National Police, Philippine Information Agency and the Local Government Unit
(referring to the City of Manila), Department of Social Welfare and Development, Presidential
Commission for Urban Poor, National Housing Authority (NHA), Department of Labor and
Employment, Department of Education, Culture and Sports (now Department of Education), and
Presidential Management Staff.
Respondent NHA was directed to "conduct feasibility studies and develop low-cost housing
projects at the dumpsite, and absorb scavengers in NHA resettlement/low-cost housing projects,"
while the DENR was directed to "review and evaluate proposed projects under the Plan
concerning their environmental impact, conduct regular monitoring of Plan activities to ensure
compliance with environmental standards, and assist DOH in the conduct of the Plan."
Smokey Mountain was a wasteland near Balut, Tondo, and Manila until President Aquino issued
MO 161-A, where a large number of Filipinos lived in deplorable conditions, gathering objects
from the rubbish that could have a monetary value. The Estero Marala, the National
Government's land on the south, B and I Realty Co.'s property on the east, and Radial Road 10
on the west define the boundaries of the Smokey Mountain dumpsite (R-10).
The Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was enacted on July
9, 1990.7 Its stated policy in Section 1 is to "recognize the indispensable role of the private
sector as the main engine for national growth and development and provide the most appropriate
favorable incentives to mobilize private resources for the purpose." Sec. 3 authorized and
empowered "all government infrastructure agencies, including government-owned and controlled
infrastructure."
According to RA 6957, a "build-and-transfer" scheme is "a contractual arrangement whereby the
contractor undertakes the construction, including financing, of a given infrastructure facility and
then turns it over to the government agency or local government unit concerned, which shall pay
the contractor its total investment expended on the project, plus a reasonable rate of return
thereon" after completion.
Decision: In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining
Order and/or Writ of Preliminary Injunction under Rule 65, the petitioner, in his capacity as a
taxpayer, seeks:
To declare the Joint Venture Agreement (JVA) dated March 9, 1993, between the National
Housing Authority and R-II Builders, Inc. and the Smokey Mountain Development and
Reclamation Project embodied therein, as well as all subsequent amendments to the, said JVA
and all other agreements signed and executed in relation thereto – including, but not limited to,
the Smokey Mountain Asset Pool Agreement dated September 26, 1994, and the separate
agreements for Phase I and Phase II – NULL AND VOID.
To enjoin respondents, notably respondent NHA, from further implementing and/or enforcing
the said project and any agreements linked thereto, as well as deriving and/or enjoying any
rights, benefits, or interests therefrom.
To compel respondents to disclose all documents and information relating to the project,
including, but not limited to, any subsequent agreements concerning the project's various phases,
the revisions to the original plan, the additional works incurred thereon, respondent R-II
Builders, Inc.'s current financial condition, and the project's transactions.

Government Agency Name: DEVELOPMENT BANK OF THE PHILIPPINES

Year: August 30, 2006
Projects: The project architect was designated as DBP's representative and was given specific
permission by DBP to condemn or reject the contractor's faulty work or poor craftsmanship at
any time before the completion, approval, and acceptance of such work.
Case: The Honorable court of appeals erroneously ordered the petitioner DBP to return the
amount of P26,725.00 representing the liquidated damages assessed/ deducted from the
respondent’s retention fee.
The honorable court of appeals erroneously ordered the petitioner DBP to return the amount of
P26,725.00 representing the liquidated damages assessed/deducted from the respondent's
retention fee.
2. Respondent Failed to Exercise Administrative Remedies and Elevate the Objective Decision
of COA Acting Chief Gregorio Yamzon, Regional Office No. III, and COA Auditor Marcelita
Sarmiento for Review by Higher COA Authorities as Required by Section 48 of Pd 1594 (Sic),
Otherwise Known as the Government Auditing Code of the Philippines.
The following issues must be resolved to properly resolve the instant case: (1) whether the
contract extension was following Presidential Decree No. 1594's implementing rules and
regulations; and (2) whether Architect Jose Vicente Salazar III, DBP Project Architect, was
authorized to accept the refurbishing project.
Before we address these matters, we must determine whether the respondent failed to exhaust
administrative remedies by failing to appeal COA Regional Office No. 1's unfavorable rulings.
According to Section 48 of Presidential Decree No. 1445, higher COA authorities have
transferred III Acting Chief Gregorio B. Yamzon and DBP Cabanatuan City Branch Auditor
Marcelita Sarmiento.
When she did not dispute the imposition of the P2,000.00 per day penalty to higher COA
authority, the respondent failed to exhaust administrative options. Despite this, the trial court
appropriately actions the result of the matter and proceeded to hear it, even though neither
petitioner nor defendant Sarmiento had filed a request to dismiss the case for lack of cause of
action. Petitioner cannot introduce this basis on appeal since he neglected to raise it at the correct
time, namely in a request to dismiss. The Supreme Court explained in Sunville Timber Products,
Inc. v. Abad this Court explained:
The theory of exhaustion of administrative remedies requires that a dispute that falls under their
jurisdiction be resolved first by the competent administrative authorities before being brought to
the courts of justice for review. Non-observance of the concept leads to the lack of a cause of
action, which is one of the reasons for the dismissal of the complaint permitted by the Rules of
Court. The problem isn't one of jurisdiction. Failure to raise it as a reason for a motion to dismiss
constitutes a waiver of the objection, and the court may proceed with the matter as if the doctrine
had been applied.
Decision: An updated petition for review on appeal is before us, seeking to overturn the Court of
Appeals' decision in CA-G.R. CV No. 58925, issued March 18, 2003, which changed the
judgment of Branch 26 of the Cabanatuan City Regional Trial Court (RTC) in Civil Case No.
486-AF, dated October 17, 1997, the decretal section of which reads:
WHEREFORE, in light of the foregoing, judgment is entered in favor of the plaintiff and against
the defendant Development Bank of the Philippines, ordering the latter to pay the plaintiff the
sum of P26,725.00, which represents the total penalty charges/liquidated damages less
overpayment of the contract price, plus legal interest at the rate of 6% per annum from the date
of filing of the complaint until payment is made before finality. If the sum awarded is not paid,
the interest rate will be calculated at 12% per year from the moment the judgment becomes final
and executory until it is entirely fulfilled.
Government Agency Name: CLIMAX MINING LTD., CLIMAX-ARIMCO MINING
CORP., and AUSTRALASIAN PHILIPPINES MINING INC.
Year:  February 28, 2005
Projects: To engage in the manufacturing and trading of plastic raw materials
Case: TPI Philippines Cement Corporation (TP Cement) and TPI Philippines Vinyl Corporation
(TP Vinyl), Petitioners, are wholly owned subsidiaries of Thai Petrochemical Industry Public
Company, Ltd. Both petitioner companies were registered with the Securities and Exchange
Commission. On June 1, 1995, petitioners employed Atty. Benedicto A. Cajucom
VII, Respondent, as Vice-President for Legal Affairs, with a monthly salary of P70,000.00.

Due to the country's economic recession at the time, petitioner TP Cement cut its corporate term
from 50 years to 2 years and 7 months since it had no feasible projects. On January 27, 1998, it
was dissolved. Petitioner TP Vinyl changed its business model from manufacturing to selling and
distributing Thai Petrochemical goods. Thus, petitioners implemented cost-cutting measures
resulting in the termination of the service of their employees, including respondents.

Petitioners sent the respondent a notice terminating his employment effective December 30,
1998, on December 3, 1998. Petitioners submitted an "Establishment Termination Report" of the
respondent's separation from the service with the Department of Labor and Employment (DOLE)
on the same day.

The respondent contested the petitioners' action, claiming that the termination of his services was
based erroneously on the petitioners' probable losses, instead of their actual, substantial, and
imminent losses, as shown by the following: (1) an increase or raise in his monthly salary
from P70,000.00 in 1995 to P80,000.00 in 1996; (2) hiring by petitioners of more marketing and
accounting employees for the period from July 1997 to December 1998; (3) acquisition by
petitioners in 1998 of a warehouse; and (4) expansion in 1998 of their operations by including
sales and marketing of oil products. Respondent further claimed that petitioners were motivated
by revenge in terminating his services. This stemmed from his October 7, 1996 memorandum to
petitioners' Executive Vice-President Thun Tritasavit, also a petitioner herein, questioning his
financial transactions detrimental to petitioners' interests.

Eventually, or on January 12, 1999, the respondent filed with the Office of the Labor Arbiter a
complaint about illegal dismissal against petitioners, docketed as NLRC-NCR Case No. 00-01-
00485-99.

In due time, the Labor Arbiter issued a Decision on March 31, 1999, stating that petitioners
failed to adduce sufficient evidence to indicate that their asserted damages are considerable and
impending, and concluding that the respondent was wrongfully fired. The decision's last
paragraph reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents TPI

Phils. Cement Corp., TPI Phil. Vinyl Corp., and Thun Tritasavit, jointly and solidarily to:
1. reinstate complainant Benedicto A. Cajucom VII to his former position without loss of
seniority rights and privileges with backwages of P240,000.00, subject to adjustment upon actual
reinstatement;

2. pay complainant moral and exemplary damages at P5,000,000.00.

Decision: The private respondent's infringement of the petitioners' entitlement to statutory due
process demands compensation in the form of nominal damages. The amount of such damages is
left to the court's sound judgment, considering all relevant factors. Given the facts of the case, we
believe it is appropriate to set the amount at P30,000.00. We believe that this type of monetary
penalty would dissuade companies from violating employees' statutory due process rights in the
future. It at the very least vindicates or recognizes the basic right guaranteed to the latter by the
Labor Code and its Implementing Rules.
They reaffirm that respondent was discharged from the service due to retrenchment, which is an
approved reason. However, due process was not followed since the appropriate notices were not
delivered to the respondent and the Department of Labor one month before his termination took
effect. As a result, petitioners should be held culpable for violating his right to due process and
should compensate him in the form of nominal damages, as determined by our judgment in
Agabon, which we fix at P20,000.00.
Now, on the issue of whether a respondent is entitled to back wages, we rule that the Court of
Appeals erred in awarding him such back wages based on Serrano. Our ruling, in this case, has
been overturned by Agabon cited earlier.
It is worth repeating that, under Article 283, the respondent is entitled to an award of separation
pay equal to one-half (1/2) month's pay for each year of service in the event of a retrenchment to
avoid losses (with a fraction of at least six [6 months considered one [1 whole year). He should
be awarded P160,000.00 as separation compensation because he was employed by petitioners for
four (4) years, from June 1, 1995 to December 30, 1998, with a monthly wage of P80,000.00.
As a result, the petition is partially approved. The challenged April 6, 2001 Decision and July 18,
2001 Resolution in CA-G.R. SP No. 58076 is AFFIRMED with MODIFICATION in that
petitioners must pay respondent (1) P160,000.00 in separation pay and (2) P20,000.00 in
nominal damages. Back wages are no longer awarded.