G.R. No. L-66614 January 25, 1988 PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCO,vs. INTERMEDIATE APPELLATE COURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS ADMINISTRATION

This is a Petition for Review on certiorari seeking the reversal of the decision of the Intermediate Appellate Court, Third Division * dated February 29, 1984 in AC-G.R. No. CV No. 61705 entitled Mobil Oil Philippines, Inc., plaintiff-appellee vs. Primitivo Leveriza Parungao, Antonio C. Vasco and Civil Aeronautics Administration, defendants-appellants; Primitive Leveriza, Fe Leveriza Parungao and Antonio C. Leveriza, cross-defendant, affirming in totothe decision of the trial court dated April 6, 1976.

As found by the trial court and adopted by the Intermediate Appellate Court, the facts of this case are as follows:

Around three contracts of lease resolve the basic issues in the instant case. These three contracts are as follows:

First Contract. — For purposes of easy reference and brevity, this contract shall be referred to hereinafter as Contract A. This is a "CONTRACT OF LEASE", executed between the REPUBLIC OF THE PHILIPPINES, represented by Defendant CIVIL AERONAUTICS ADMINISTRATION, as lessor, and ROSARIO C. LEVERIZA, as lessee, on April 2, 1965, over a certain parcel of land at the MIA area, consisting of approximately 4,502 square meters, at a monthly rental of P450.20, for a period of 25 years, (Exhibit "A", Exhibit "I-Leverizas", Exhibit "I-CAA").

Second Contracts. — For purposes of easy references and brevity, this contract shall be referred to hereinafter as Contract B. This is a "LEASE AGREEMENT", executed between ROSARIO C. LEVERIZA, as lessor, and Plaintiff MOBIL OIL PHILIPPINES, INC., as lessee on May 21, 1965, over 3,000 square meters of that SAME Parcel of land subject of Contract A above mentioned, at a monthly rental of P1,500.00, for a period of 25 years (Exhibit 'B', Exhibit 4-Leverizas' ).

Third Contract. — For purposes of easy reference and brevity, this contract shall be referred to hereinafter as Contract C. This is a "LEASE AGREEMENT", executed between Defendant CIVIL AERONAUTICS ADMINISTRATION, as lessor, and plaintiff MOBIL OIL PHILIPPINES, INC., as lessee, on June 1, 1968 over that SAME parcel of land (Lot A, on plan being a portion of Parcel, Psu 2031), containing an area of 3,000 square meters more or less, at a monthly rental of P.25 per square meter for the second 200 square meters, and P.20 per square meter for the rest, for a period of 29 (sic) years. (Exhibit "C").

There is no dispute among the parties that the subject matter of the three contracts of lease above mentioned, Contract A, Contract B, and Contract C, is the same parcel of land, with the noted difference that while in Contract A, the area leased is 4,502 square meters, in Contract B and Contract C, the area has been reduced to 3,000 square meters. To summarize:

Contract A — a lease contract of April 2, 1965 between the Republic of the Philippines, represented by Defendant Civil Aeronautics Administration and Rosario C. Leveriza over a parcel of land containing an area of 4,502 square meters, for 25 years.

Contract B — a lease contract (in effect a sublease) of May 21, 1965 between defendant Rosario C. Leveriza and plaintiff Mobil Oil Philippines, Inc. over the same parcel of land, but reduced to 3,000 square meters for 25 years; and

Contract C — a lease contract of June 1, 1968 between defendant Civil Aeronautics Administration and plaintiff Mobil Oil Philippines, Inc., over the same parcel of land, but reduced to 3,000 square meters, for 25 years.

It is important to note, for a clear understanding of the issues involved, that it appears that defendant Civil Aeronautics Administration as LESSOR, leased the same parcel of land, for durations of time that overlapped to two lessees, to wit: (1) Defendant Rosario C. Leveriza, and that plaintiff Mobil Oil Philippines, Inc., as LESSEE, leased the same parcel of land from two lessors, to wit: (1) defendant Rosario C. Leveriza and (2) defendant Civil Aeronautics Administration, Inc., for durations of time that also overlapped.

For purposes of brevity defendant Civil Aeronautics Administration shall be referred to hereinafter as defendant CAA.

Rosario C. Leveriza, the lessee in Contract A and the lessor in Contract B, is now deceased. This is the reason why her successor-in-interest, her heirs, are sued, namely: Defendants Primitive Leveriza, her second husband, (now also deceased), Fe Leveriza Parungao, her daughter by her second husband, and Antonio C. Vasco, her son by her first husband. For purposes of brevity, these defendants shall be referred to hereinafter as Defendants Leveriza.

Plaintiff Mobil Oil Philippines, Inc., shall be referred to hereinafter simply as the Plaintiff. (pp. 95-99, Record on Appeal).

Plaintiff in this case seeks the rescission or cancellation of Contract A and Contract B on the ground that Contract A from which Contract B is derived and depends has already been cancelled by the defendant Civil Aeronautics Administration and maintains that Contract C with the defendant CAA is the only valid and subsisting contract insofar as the parcel of land, subject to the present litigation is concerned. On the other hand, defendants Leverizas' claim that Contract A which is their contract with CAA has never been legally cancelled and still valid and subsisting; that it is Contract C between plaintiff and defendant CAA which should be declared void.

Defendant CAA asserts that Exhibit "A" is still valid and subsisting because its cancellation by Guillermo Jurado was ineffective and asks the court to annul Contract A because of the violation committed by defendant Leveriza in leasing the parcel of land to plaintiff by virtue of Contract B without the consent of defendant CAA. Defendant CAA further asserts that Contract C not having been approved by the Director of Public Works and Communications is not valid. ...

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After trial, the lower court render judgment on April 6, 1976 the dispositive part of which reads:

WHEREFORE, after having thus considered the evidence of all the parties, testimonial and documentary, and their memoranda and reply-memoranda, this Court hereby renders judgment:

1. Declaring Contract A as having been validly cancelled on June 28, 1966, and has therefore ceased to have any effect as of that date;

2. Declaring that Contract B has likewise ceased to have any effect as of June 28, 1966 because of the cancellation of Contract A;

3. Declaring that Contract C was validly entered into on June 1, 1968, and that it is still valid and subsisting;

4. Ordering defendant CAA to refund to defendants Leverizas the amount of P32,189.30 with 6% per annum until fully paid;

5. Ordering defendants Leverizas to refund to plaintiff the amount of P48,000.00 with 6% interest per annum until fully paid;

6. Dismissing defendants Leverizas' four counterclaims against plaintiff;

7. Dismissing defendants Leverizas' cross-claim against defendant CAA;

8. Dismissing defendant CAA's counterclaim against plaintiff;

9. Dismissing defendant CAA's counterclaim against defendant Leverizas.

No pronouncements as to costs.

On June 2, 1976, defendant Leveriza filed a motion for new trial on the ground of newly discovered evidence, lack of jurisdiction of the court over the case and lack of evidentiary support of the decision which was denied in the order of November 12,1976 (Rollo, p. 17).

On July 27, 1976, the CAA filed a Motion for Reconsideration, averring that because the lot lease was properly registered in the name of the Republic of the Philippines, it was only the President of the Philippines or an officer duly designated by him who could execute the lease contract pursuant to Sec. 567 of the Revised Administrative Code; that the Airport General Manager has no authority to cancel Contract A, the contract entered into between the CAA and Leveriza, and that Contract C between the CAA and Mobil was void for not having been approved by the Secretary of Public Works and Communications. Said motion was however denied on November 12, 1976 (Rollo, p. 18).

On appeal, the Intermediate Appellate Court, being in full accord with the trial court, rendered a decision on February 29, 1984, the dispositive part of which reads: WHEREFORE, finding no reversible error in the decision of the lower court dated April 6, 1976, the same is hereby affirmed in toto.

Hence, this petition.

The petitioners raised the following assignment of errors:

I: THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION (CAA) HAD THE STATUTORY AUTHORITY TO LEASE, EVEN WITHOUT APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, REAL PROPERTY BELONGING TO THE REPUBLIC OF THE PHILIPPINES.

II: THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION HAD STATUTORY AUTHORITY, WITHOUT THE APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, TO CANCEL A LEASE CONTRACT OVER REAL PROPERTY OWNED BY THE REPUBLIC OF THE PHILIPPINES, WHICH CONTRACT WAS APPROVED, AS REQUIRED BY LAW, BY THE SECRETARY.

III: THE INTERMEDIATE APPELLATE COURT ERRED WHEN IT RULED THAT THE CONTRACT OF SUBLEASE (CONTRACT B) ENTERED INTO BETWEEN PETITIONERS' PREDECESSOR-IN-INTEREST AND RESPONDENT MOBIL OIL PHILIPPINES, INC. WAS WITHOUT THE CONSENT OF THE ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION.

The petition is devoid of merit.

There is no dispute that Contract "A" at the time of its execution was a valid contract. The issue therefore is whether or not said contract is still subsisting after its cancellation by CAA on the ground of a sublease executed by petitioners with Mobil Oil Philippines without the consent of CAA and the execution of another contract of lease between CAA and Mobil Oil Philippines (Contract "C").

Petitioners contend that Contract "A" is still subsisting because Contract "B" is a valid sublease and does not constitute a ground for the cancellation of Contract "A", while Contract "C", a subsequent lease agreement between CAA and Mobil Oil Philippines is null and void, for lack of approval by the Department Secretary. Petitioners anchor their position on Sections 567 and 568 of the Revised Administrative Code which require among others, that subject contracts should be executed by the President of the Philippines or by an officer duly designated by him, unless authority to execute the same is by law vested in some other officer (Petition, Rollo, pp. 15-16).

At the other extreme, respondent Mobil Oil Philippines asserts that Contract "A" was validly cancelled on June 28, 1966 and so was Contract "B" which was derived therefrom. Accordingly, it maintains that Contract "C" is the only valid contract insofar as the parcel of land in question is concerned and that approval of the Department Head is not necessary under Section 32 (par. 24) of the Republic Act 776 which expressly vested authority to enter into such contracts in the Administrator of CAA (Comment; Rollo, p. 83).

On its part, respondent Civil Aeronautics Administration took the middle ground with its view that Contract "A" is still subsisting as its cancellation is ineffective without the approval of the Department Head but said contract is not enforceable because of petitioners' violation of its terms and conditions by entering into Contract "B" of sublease without the consent of CAA. The CAA further asserts that Contract "C" not having been approved by the Secretary of Public Works and Communications, is not valid (Rollo, p. 43). However, in its comment filed with the Supreme Court, the CAA made a complete turnabout adopting the interpretation and ruling made by the trial court which was affirmed by the Intermediate Appellate Court (Court of Appeals), that the CAA Administrator has the power to execute the deed or contract of lease involving real properties under its administration belonging to the Republic of the Philippines without the approval of the Department Head as clearly provided in Section 32, paragraph (24) of Republic Act 776.

The issue narrows down to whether or not there is a valid ground for the cancellation of Contract "A."

Contract "A" was entered into by CAA as the lessor and the Leverizas as the lessee specifically "for the purpose of operating and managing a gasoline station by the latter, to serve vehicles going in and out of the airport."

As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision of paragraph 7 of said Contract reads in full:

7. The Party of the Second part may transfer her rights to the leased premises but in such eventuality, the consent of the Party of the First Part shall first be secured. In any event, such transfer of rights shall have to respect the terms and conditions of this agreement.

Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of the contract. Said paragraph reads:

8. Failure on the part of the Party of the Second Part to comply with the terms and conditions herein agreed upon shall be sufficient for revocation of this contract by the Party of the First Part without need of judicial demand.

It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract "B") with Mobil Oil Philippines without the consent of CAA (lessor). The cancellation of the contract was made in a letter dated June 28, 1966 of Guillermo P. Jurado, Airport General Manager of CAA addressed to Rosario Leveriza, as follows:

June 28, 1966

Mrs. Rosario Leveriza Manila International Airport

Madam:

It has been found out by the undersigned that you have sublet the property of the CAA leased to you and by virtue of this, your lease contract is hereby cancelled because of the violation of the stipulations of the contract. I would like to inform you that even without having sublet the said property the said contract would have been cancelled as per attached communication.

Very truly yours,

For the Director: SGD GUILLERMO P. JURADO  Airport General Manager

Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the Airport General Manager had no legal authority to make the cancellation. They maintain that it is only the Secretary of Public Works and Communications, acting for the President, or by delegation of power, the Director of Civil Aeronautics Administration who could validly cancel the contract. They do admit, however, and it is evident from the records that the Airport General Manager signed "For the Director." Under the circumstances, there is no question that such act enjoys the presumption of regularity, not to mention the unassailable fact that such act was subsequently affirmed or ratified by the Director of the CAA himself (Record on Appeal, pp. 108-110).

Petitioners argue that cancelling or setting aside a contract approved by the Secretary is, in effect, repealing an act of the Secretary which is beyond the authority of the Administrator.

Such argument is untenable. The terms and conditions under which such revocation or cancellation may be made, have already been specifically provided for in Contract "A" which has already been approved by the Department Head, It is evident that in the implementation of aforesaid contract, the approval of said Department Head is no longer necessary if not redundant.

It is further contended that even granting that such cancellation was effective, a subsequent billing by the Accounting Department of the CAA has in effect waived or nullified the rescission of Contract "A."

It will be recalled that the questioned cancellation of Contract "A" was among others, mainly based on the violation of its terms and conditions, specifically, the sublease of the property by the lessee without the consent of the lessor.

The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after the cancellation of Contract "A" is obviously an error. However, this Court has already ruled that the mistakes of government personnel should not affect public interest. In San Mauricio Mining Company v. Ancheta (105 SCRA 391, 422), it has been held that as a matter of law rooted in the protection of public interest, and also as a general policy to protect the government and the people, errors of government personnel in the performance of their duties should never deprive the people of the right to rectify such error and recover what might be lost or be bartered away in any actuation, deal or transaction concerned.

In the case at bar, the lower court in its decision which has been affirmed by the Court of Appeals, ordered the CAA to refund to the petitioners the amount of rentals which was not due from them with 6% interest per annum until fully paid.

Petitioners further assail the interpretation of Contract "A", claiming that Contract "B" was a mere sublease to respondent Mobil Oil Philippines, Inc. and requires no prior consent of CAA to perfect the same. Citing Article 1650 of the Civil Code, they assert that the prohibition to sublease must be expressed and cannot be merely implied or inferred (Rollo, p. 151).

As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior consent interprets the first sentence of paragraph 7 of Contract "A" to refer to an assignment of lease under Article 1649 of the Civil Code and not to a mere sublease. A careful scrutiny of said paragraph of Contract "A" clearly shows that it speaks of transfer of rights of Rosario Leveriza to the leased premises and not to assignment of the lease (Rollo, pp. 48-49).

Petitioners likewise argued that it was contemplated by the parties to Contract "A" that Mobil Oil Philippines would be the owner of the gasoline station it would construct on the leased premises during the period of the lease, hence, it is understood that it must be given a right to use and occupy the lot in question in the form of a sub-lease (Rollo, p. 152).

In Contract "A", it was categorically stated that it is the lessee (petitioner) who will manage and operate the gasoline station. The fact that Mobil Oil was mentioned in that contract was clearly not intended to give approval to a sublease between petitioners and said company but rather to insure that in the arrangements to be made between them, it must be understood that after the expiration of the lease contract, whatever improvements have been constructed in the leased premises shall be relinquished to CAA. Thus, this Court held that "the primary and elementary rule of construction of documents is that when the words or language thereof is clear and plain or readily understandable by any ordinary reader thereof, there is absolutely no room for interpretation or construction anymore." (San Mauricio Mining Company v. Ancheta, supra).

Finally, petitioners contend that the administrator of CAA cannot execute without approval of the Department Secretary, a valid contract of lease over real property owned by the Republic of the Philippines, citing Sections 567 and 568 of the Revised Administrative Code, which provide as follows:

SEC. 567. Authority of the President of the Philippines to execute contracts relative to real property. — When the Republic of the Philippines is party to a deed conveying the title to real property or is party to any lease or other contract relating to real property belonging to said government, said deed or contract shall be executed on behalf of said government by the President of the Philippines or by an officer duly designated by him, unless authority to execute the same is by law expressly vested in some other officer. (Emphasis supplied)

SEC. 568. Authority of national officials to make contract. — Written contracts not within the purview of the preceding section shall, in the absence of special provision, be executed, with the approval of the proper Department Head, by the Chief of the Bureau or Office having control of the appropriation against which the contract would create a charge; or if there is no such chief, by the proper Department Head himself or the President of the Philippines as the case may require.

On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real property belonging to the Republic of the Philippines under its administration even without the approval of the Secretary of Public Works and Communications, which authority is expressly vested in it by law, more particularly Section 32 (24) of Republic Act 776, which reads:

Sec. 32. Powers and Duties of the Administrator. — Subject to the general control and supervision of the Department Head, the Administrator shall have, among others, the following powers and duties:

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(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and all government aerodromes except those controlled or operated by the Armed Forces of the Philippines including such power and duties as: ... (b) to enter into, make and execute contracts of any kind with any person, firm, or public or private corporation or entity; (c) to acquire, hold, purchase, or lease any personal or real property; right of ways, and easements which may be proper or necessary: Provided, that no real property thus acquired and any other real property of the Civil Aeronautics Administration shall be sold without the approval of the President of the Philippines. ...

There is no dispute that the Revised Administrative Code is a general law while Republic Act 776 is a special law nor in the fact that the real property subject of the lease in Contract "C" is real property belonging to the Republic of the Philippines.

Under 567 of the Revised Administrative Code, such contract of lease must be executed: (1) by the President of the Philippines, or (2) by an officer duly designated by him or (3) by an officer expressly vested by law. It is readily apparent that in the case at bar, the Civil Aeronautics Administration has the authority to enter into Contracts of Lease for the government under the third category. Thus, as correctly ruled by the Court of Appeals, the Civil Aeronautics Administration has the power to execute the deed or contract involving leases of real properties belonging to the Republic of the Philippines, not because it is an entity duly designated by the President but because the said authority to execute the same is, by law expressly vested in it.

Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator (Director) of the Civil Aeronautics Administration by reason of its creation and existence, administers properties belonging to the Republic of the Philippines and it is on these properties that the Administrator must exercise his vast power and discharge his duty to enter into, make and execute contract of any kind with any person, firm, or public or private corporation or entity and to acquire, hold, purchase, or lease any personal or real property, right of ways and easements which may be proper or necessary. The exception, however, is the sale of properties acquired by CAA or any other real properties of the same which must have the approval of the President of the Philippines. The Court of appeals took cognizance of the striking absence of such proviso in the other transactions contemplated in paragraph (24) and is convinced as we are, that the Director of the Civil Aeronautics Administration does not need the prior approval of the President or the Secretary of Public Works and Communications in the execution of Contract "C."

In this regard, this Court, ruled that another basic principle of statutory construction mandates that general legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable (Sto. Domingo v. De los Angeles, 96 SCRA 139),. that specific statute prevails over a general statute (De Jesus v. People, 120 SCRA 760) and that where two statutes are of equal theoretical application to a particular case, the one designed therefor specially should prevail (Wil Wilhensen, Inc. v. Baluyot, 83 SCRA 38)

WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of Appeals appealed from is AFFIRMED in toto. SO ORDERED.

G.R. No. 120319 October 6, 1995 LUZON DEVELOPMENT BANK, vs. ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR,

From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE) arose an arbitration case to resolve the following issue:

Whether or not the company has violated the Collective Bargaining Agreement provision and the Memorandum of Agreement dated April 1994, on promotion.

At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB.

On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:

WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of Agreement on promotion.

Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same.

In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as final and binding.

Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.

Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government.

Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision.

In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor disputes.

On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases

. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.

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It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not appealable to the latter. 10

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:

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(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

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Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision.

An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state, contemplates an authority to which the state delegates governmental power for the performance of a state function. 14 An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court,16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17

The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.

In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated, modified or corrected. 19

In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the Court of Appeals petitions of this nature for proper disposition.

ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals. SO ORDERED.

G.R. No. 102976 October 25, 1995 IRON & STEEL AUTHORITY, vs. CA & MARIA CRISTINA FERTILIZER CORP

Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA are spelled out in the following terms:

Sec. 2. Objectives — The Authority shall have the following objectives:

(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for the products of the industry;

(b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability and viability to service the domestic market and to compete in international markets;

(c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and supply of iron and steel products for the country and to ensure that industry prices and profits are at levels that provide a fair balance between the interests of investors, consumers suppliers, and the public at large;

(d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity, and in coordination, with appropriate government agencies to encourage capital investment in priority areas of the industry;

(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive dependence of the country on imports of iron and steel.

The list of powers and functions of the ISA included the following:

Sec. 4. Powers and Functions. — The authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority;

xxx xxx xxx

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979.

The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion program embracing, among other

things, the construction of an integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate occupancy of NSC.

Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC. 2

Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation proceedings, was also impleaded as party-defendant.

On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant installation.

The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion.

In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4

Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridical existence continued until the winding up of its affairs could be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed the Solicitor General to continue the expropriation case.

The trial court denied the motion for reconsideration, stating, among other things that:

The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a government controlled private corporation engaged in private business and for profit, specially now that the government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the National Steel Corporation in line with the pronounced policy of the present administration to disengage the government from its private business ventures. 5 (Brackets supplied)

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court of Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the Solicitor General:

It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit."

At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases.

In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired.

Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for continued prosecution of the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power would be exercised "not on behalf of the National Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue which we must resolve at this time.

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law may be parties in a civil action.

Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly categorized into two (2) groups:

(a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand, or juridical person such as corporations, on the other hand; and

(b) entities authorized by law to institute actions.

Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings like those here involved:

Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority;

xxx xxx xxx

It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of contracts "for and in behalf of the Government" in the following terms:

xxx xxx xxx

(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such sector;

xxx xxx xxx

Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court to be a non-incorporated agency

or instrumentality of the Republic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock, and accordingly vested with a juridical personality distinct from the personality of the Republic. Among such incorporated agencies or instrumentalities are: National Power Corporation; 6 Philippine Ports Authority; 7 National Housing Authority; 8 Philippine National Oil Company; 9Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and so forth. It is worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of the Government.

We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as "legal personality." The relevant definitions are found in the Administrative Code of 1987:

Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular statute, require a different meaning:

(1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government.

xxx xxx xxx

(4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein.

xxx xxx xxx

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.

xxx xxx xxx

When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified successor agency or instrumentality of the Republic of the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regarded as folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no special statutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic.

The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties:

Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or administrator, or a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied)

In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of the complaint stated:

7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron and steel making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied)

The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation, even though the latter may be an ultimate user of the properties involved should the condemnation suit be eventually successful.

From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent domain proceedings.

It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff.

In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper party to sue for recovery of possession of property although the "real" or registered owner of the property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court said:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. . . . 15 (Emphasis supplied)

In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and Court of Appeals had required, was to generate unwarranted delay and create needless repetition of proceedings:

More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the proper party would result in needless delay in the settlement of this matter and also in derogation of the policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very same complaint already proved by the Republic of the Philippines and bring back as it were to square one. 16(Emphasis supplied)

As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon the ground that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by its own delegate or agent.

While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement of the present expropriation proceedings before the Iligan Regional Trial Court, provided that:

Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his general supervisory authority, the President of the Philippines shall have such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter.

Among such special powers and duties shall be:

xxx xxx xxx

(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction. (Emphasis supplied)

The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms:

Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the National Government, anddirect the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied)

In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a determination that it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to proceed with the suit. 17

It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Code already quoted above.

Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "public purpose" is not present in the instant case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those proceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partial privatization of the NSC.

WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to costs.

SO ORDERED.

G.R. No. 145972. March 23, 2004] IGNACIA BALICAS vs. FACT-FINDING & INTELLIGENCE BUREAU (FFIB), OFFICE OF THE OMBUDSMAN

This petition for review on certiorari assails the Court of Appeals’ decision[1] dated August 25, 2000 and resolution[2] of November 13, 2000 in CA-G.R. SP No. 56386, which affirmed the Ombudsman’s decision [3] dismissing petitioner from government service for gross neglect of duty in connection with the tragedy at the Cherry Hills Subdivision in Antipolo City on August 3, 1999.

The antecedent facts as summarized in the Ombudsman’s decision are as follows:

Based on the evidence adduced by the complainant, the following is the chronological series of events which led to the development of the CHS (Cherry Hills Subdivision):

August 28, 1990 – Philjas Corporation, whose primary purposes, among others are:  to own, develop, subdivide, market and provide low-cost housing for the poor, was registered with the Securities and Exchange Commission (SEC).

February 19, 1991 – then City Mayor Daniel S. Garcia, endorsed to the Housing and Land Use Regulatory Board (HLURB) the proposed CHS.

Thereafter, or on 07 March 1991, based on the favorable recommendations of Mayor Garcia, respondent TAN, issued the Preliminary Approval and Locational Clearance (PALC) for the development of CHS.

On July 5, 1991, then HLURB Commissioner respondent TUNGPALAN issued Development Permit No. 91-0216 for “land development only” for the entire land area of 12.1034 hectares covered by TCT No. 35083 (now TCT 208837) and with 1,003 saleable lots/units with project classification B.P. 220 Model A-Socialized Housing (p. 96, Records), with several conditions for its development.

Three (3) days thereafter or on July 8, 1991, respondent JASARENO, allowed/granted the leveling/earth-moving operations of the development project of the area subject to certain conditions.

On November 18, 1991, then HLURB Commissioner AMADO B. DELORIA issued Certificate of Registration No. 91-11-0576 in favor of CHS, with License to Sell No.  91-11-0592 for the 1,007 lots/units in the subdivision.

Eventually, on December 10, 1991, respondent POLLISCO issued Small Scale Mining Permit (SSMP) No. IV-316 to Philjas to extract and remove 10,000 cu. meters of filling materials from the area where the CHS is located.

Thereafter, or on January 12, 1994, Philjas applied for a Small Scale Mining Permit (SSMP) under P.D. 1899 with the Rizal Provincial Government to extract and remove 50,000 metric tons of filling materials per annum on CHS’ 2.8 hectares.

Thus, on January 17, 1994, respondent MAGNO, informed ELIEZER I. RODRIGUEZ of Philjas that CHS is within the EIS System and as such must secure ECC from the DENR.  Philjas was accordingly informed of the matter such that it applied for the issuance of ECC from the DENR-Region IV, on February 3, 1994.

On March 12, 1994, an Inspection Report allegedly prepared by respondent BALICAS, attested by respondent RUTAQUIO and approved by respondent TOLENTINO re: field evaluation to the issuance of ECC, was submitted.

Consequently, on April 28, 1994, upon recommendations of respondent TOLENTINO, Philjas’ application for ECC was approved by respondent PRINCIPE, then Regional Executive Director, DENR under ECC-137-R1-212-94.

A Mining Field Report for SSMP dated May 10, 1994 was submitted pursuant to the inspection report prepared by respondents CAYETANO, FELICIANO, HILADO and BURGOS, based on their inspection conducted on April 25 to 29, 1994.  The report recommended, among others, that the proposed extraction of materials would pose no adverse effect to the environment.

Records further disclosed that on August 10, 1994, respondent BALICAS monitored the implementation of the CHS Project Development to check compliance with the terms and conditions in the ECC.  Again, on August 23, 1995, she conducted another monitoring on the project for the same purpose.  In both instances, she noted that the project was still in the construction stage hence, compliance with the stipulated conditions could not be fully assessed, and therefore, a follow-up monitoring is proper.  It appeared from the records that this August 23, 1995 monitoring inspection was the last one conducted by the DENR.

On September 24, 1994, GOV. CASIMIRO I. YNARES, JR., approved the SSMP applied for by Philjas under SSMP No. RZL-012, allowing Philjas to extract and remove 50,000 metric tons of filling materials from the area for a period of two (2) years from date of its issue until September 6, 1996.[4]

Immediately after the tragic incident on August 3, 1999, a fact-finding investigation was conducted by the Office of the Ombudsman through its Fact-Finding and Intelligence Bureau (FFIB), which duly filed an administrative complaint with the Office of the Ombudsman against several officials of the Housing and Land Use Regulatory Board (HLURB), Department of Environment and Natural Resources (DENR), and the local government of Antipolo.

The charge against petitioner involved a supposed failure on her part to monitor and inspect the development of Cherry Hills Subdivision, which was assumed to be her duty as DENR senior environmental management specialist assigned in the province of Rizal.

For her part, petitioner belied allegations that monitoring was not conducted, claiming that she monitored the development of Cherry Hills Subdivision as evidenced by three (3) monitoring reports dated March 12, 1994, August 10, 1994 and August 23, 1995.  She averred that she also conducted subsequent compliance monitoring of the terms and conditions of Philjas’ Environmental Compliance Certificate (ECC) on May 19, 1997 and noted no violation thereon.  She further claimed good faith and exercise of due diligence, insisting that the tragedy was a fortuitous event.  She reasoned that the collapse did not occur in Cherry Hills, but in the adjacent mountain eastern side of the subdivision.

On November 15, 1999, the Office of the Ombudsman rendered a decision imposing upon petitioner the supreme penalty of dismissal from office for gross neglect of duty finding:

RESPONDENT BALICAS

Records show that she monitored and inspected the CHS [Cherry Hills Subdivision] only thrice (3), to wit:

1.  Inspection Report dated 12 March 1994

2.  Monitoring Report dated 10 August 1994

3.  Monitoring Report dated 23 August 1995

Verily, with this scant frequency, how can respondent Balicas sweepingly claim that there was no violation of ECC compliance and that she had done what is necessary in accordance with the regular performance of her duties.  She herself recognized the fact that the “collapsed area is not the subdivision in question but the adjacent mountain eastern side of the CHS.”  It is incumbent upon her to establish the same in her monitoring and inspection reports and make objective recommendations re: its possible adverse effect to the environment and to the residents of the CHS and nearby areas.  Her defense that the position of the CHS shows the impossibility of checking the would-be adverse effect clearly established her incompetence.  No expert mind is needed to know that mountains cause landslide and erosion.  Cherry Hills Subdivision is a living witness to this.[5]

Petitioner seasonably filed a petition for review of the Ombudsman’s decision with the Court of Appeals.  In its decision dated August 25, 2000, the Court of Appeals dismissed the petition for lack of merit and affirmed the appealed decision.  It found that the landslide was a preventable occurrence and that petitioner was guilty of gross negligence in failing to closely monitor Philjas’ compliance with the conditions of the ECC given the known inherent instability of the ground where the subdivision was developed.  The appellate court likewise denied petitioner’s motion for reconsideration in its resolution dated November 13, 2000.

Petitioner now comes to this Court for review on certiorari, under Rule 45 of the Rules of Civil Procedure, of the appellate court’s decision. She alleges that the Court of Appeals committed serious errors of law in affirming the Ombudsman’s conclusion that:

1   There was gross negligence on the part of petitioner Balicas in the performance of her official duties as Senior Environmental Management Specialist (SEMS) of the Provincial Environment and Natural Resources Office (PENRO) Province of Rizal, DENR Region IV; and the alleged gross neglect of duty of petitioner warranted the imposition of the extreme penalty of dismissal from the service.

2.  The landslide which caused the death of several residents of the subdivision and the destruction of property is not a fortuitous event and therefore preventible.[6]

The main issues are whether or not the Court of Appeals committed serious errors of law in: (1) holding petitioner guilty of gross neglect of duty and (2) imposing upon her the extreme penalty of dismissal from office.

In order to ascertain if there had been gross neglect of duty, we have to look at the lawfully prescribed duties of petitioner.  Unfortunately, DENR regulations are silent on the specific duties of a senior environmental management specialist.  Internal regulations merely speak of the functions of the Provincial Environment and Natural Resources Office (PENRO) to which petitioner directly reports.

Nonetheless, petitioner relies on a letter[7] dated December 13, 1999 from the chief of personnel, DENR Region IV, which defines the duties of a senior environmental management specialist as follows:

1.  Conducts investigation of pollution sources or complaints;

2.  Review[s] plans and specifications of proposes (sic) or existing treatment plants and pollution abatement structures and devices to determine their efficiency and suitability for the kind of pollutants to be removed and to recommend issuance or denial of permits;

3.  Conducts follow-up inspection of construction of pollution abatement/work and structures to oversee compliance with approved plans and specifications;

4.  Recommends remedial measures for the prevention, abatement and control of pollution;

5.  Prepares technical reports on pollution investigation and related activities; and

6.  Performs related work as assigned.

It is readily apparent that no monitoring duty whatsoever is mentioned in the said letter.  The PENRO, on the other hand, is mandated to:

1.  conduct surveillance and inspection of pollution sources and control facilities and undertake/initiate measures relative to pollution-related complaints of the general public for appropriate referral to the regional office;

2.  comment on the project description, determine if the project fall within the Environmental Impact Statement (EIS) System[8] and submit the same to the regional office; and

3.  implement programs and projects related to environmental management within the PENRO.[9]

In addition, the PENRO is likewise tasked to monitor the project proponent’s compliance with the conditions stipulated in the ECC, with support from the DENR regional office and the Environmental Management Bureau.[10] The primary purpose of compliance monitoring is to ensure the judicious implementation of sound and standard environmental quality during the development stage of a particular project. Specifically, it aims to:

1.  monitor project compliance with the conditions set in the ECC;

2.  monitor compliance with the Environmental Management Plan (EMP) and applicable laws, rules and regulations; and

3.  provide a basis for timely decision-making and effective planning and management of environmental measures through the monitoring of actual project impacts vis-à-vis predicted impacts in the EIS.[11]

Based on the foregoing, the monitoring duties of the PENRO mainly deal with broad environmental concerns, particularly pollution abatement.  This general monitoring duty is applicable to all types of physical developments that may adversely impact on the environment, whether housing projects, industrial sites, recreational facilities, or scientific undertakings.

However, a more specific monitoring duty is imposed on the HLURB as the sole regulatory body for housing and land development. It is mandated to encourage greater private sector participation in low-cost housing through (1) liberalization of development standards, (2) simplification of regulations and (3) decentralization of approvals for permits and licenses.[12]

P.D. No. 1586[13] prescribes the following duties on the HLURB (then Ministry of Human Settlements) in connection with environmentally critical projects requiring an ECC:

SECTION 4.  Presidential Proclamation of Environmentally Critical Areas and Projects. – The President of the Philippines may, on his own initiative or upon recommendation of the National Environment Protection Council, by proclamation declare certain projects, undertakings or areas in the country as environmentally critical.  No person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative.  For the proper management of said critical project or area, the President may by his proclamation reorganize such government offices, agencies, institutions, corporations or instrumentalities including the re-alignment of government personnel, and their specific functions and responsibilities.

For the same purpose as above, the Ministry of Human Settlements [now HLURB] shall: (a) prepare the proper land or water use pattern for said critical project(s) or area(s); (b) establish ambient environmental quality standards; (c) develop a program of environmental enhancement or protective measures against calamitous factors such as earthquake, floods, water erosion and others; and (d) perform such other functions as may be directed by the President from time to time. (Emphasis ours.)

The legal duty to monitor housing projects, like the Cherry Hills Subdivision, against calamities such as landslides due to continuous rain, is clearly placed on the HLURB, not on the petitioner as PENRO senior environmental management specialist.  In fact, the law imposes no clear and direct duty on petitioner to perform such narrowly defined monitoring function.

In the related case of Principe v. Fact-Finding and Intelligence Bureau,[14] this Court found Antonio Principe, regional executive director for DENR Region IV who approved Philjas’ application for ECC, not liable for gross neglect of duty.  The Court reversed the decision of the Court of Appeals and thereby annulled the decision of the Ombudsman in OMB-ADM-09-661, dated December 1, 1999, dismissing Principe from the government service.  We ordered his reinstatement with back pay and without loss of seniority.[15]

The rationale for our decision in Principe bears reiteration: the responsibility of monitoring housing and land development projects is not lodged with the DENR, but with the HLURB as the sole regulatory body for housing and land development.  Thus, we must stress that we find no legal basis to hold petitioner, who is an officer of DENR, liable for gross neglect of the duty pertaining to another agency, the HLURB.  It was grave error for the appellate court to sustain the Ombudsman’s ruling that she should be dismissed from the service.  The reinstatement of petitioner is clearly called for.

WHEREFORE, the petition is hereby GRANTED.  The Court of Appeals’ decision affirming the Ombudsman’s dismissal of petitioner IGNACIA BALICAS from office is REVERSED and SET ASIDE, and petitioner’s REINSTATEMENT to her position with back pay and without loss of seniority rights is hereby ordered.

SO ORDERED.

[G.R. No. 86695, September 03, 1992]  MARIA ELENA MALAGA, DOING BUSINESS UNDER THE NAME B.E. CONSTRUCTION; JOSIELEEN NAJARRO, DOING BUSINESS UNDER THE NAME BEST BUILT CONSTRUCTION; JOSE N. OCCEÑA, DOING BUSINESS UNDER THE NAME THE FIRM OF JOSE N. OCCEÑA; AND THE ILOILO BUILDERS CORPORATION, PETITIONERS, VS. MANUEL R. PENACHOS, JR., ALFREDO MATANGGA, ENRICO TICAR AND TERESITA VILLANUEVA, IN THEIR RESPECTIVE CAPACITIES AS CHAIRMAN AND MEMBERS OF THE PRE-QUALIFICATION BIDS AND AWARDS COMMITTEE (PBAC) - BENIGNO PANISTANTE, IN HIS CAPACITY AS PRESIDENT OF ILOILO STATE COLLEGE OF FISHERIES, AS WELL AS IN THEIR RESPECTIVE PERSONAL CAPACITIES; AND HON. LODRIGIO L. LEBAQUIN, RESPONDENTS. 

This controversy involves the extent and applicability of P.D. 1818, which prohibits any court from issuing injunctions in cases involving infrastructure projects of the government.

The facts are not disputed.

The Iloilo State College of Fisheries (henceforth ISCOF) through its Pre-qualification, Bids and Awards Committee (henceforth PBAC) caused the publication in the November 25, 26, 28, 1988 issues of the Western Visayas Daily an Invitation to Bid for the construction of a Micro Laboratory Building at ISCOF. The notice announced that the last day for the submission of pre-qualification requirements (PRE C-1)* was December 2, 1988, and that the bids would be received and opened on December 12, 1988, at 3 o'clock in the afternoon.[1]

Petitioners Maria Elena Malaga and Josieleen Najarro, respectively doing business under the name of B.E. Construction and Best Built Construction, submitted their pre-qualification documents at two o'clock in the afternoon of December 2, 1988. Petitioner Jose Occeña submitted his own PRE-C1 on December 5, 1988. All three of them were not allowed to participate in the bidding because their documents were considered late, having been submitted after the cut-off time of ten o'clock in the morning of December 2, 1988.

On December 12, 1988, the petitioners filed a complaint with the Regional Trial Court of Iloilo against the chairman and members of PBAC in their official and personal capacities. The plaintiffs claimed that although they had submitted their PRE-C1 on time, the PBAC refused without just cause to accept them. As a result, they were not included in the list of pre-qualified bidders, could not secure the needed plans and other documents, and were unable to participate in the scheduled bidding.

In their prayer, they sought the resetting of the December 12, 1988 bidding and the acceptance of their PRE-C1 documents. They also asked that if the bidding had already been conducted, the defendants be directed not to award the project pending resolution of their complaint.

On the same date, Judge Lodrigio L. Lebaquin issued a restraining order prohibiting PBAC from conducting the bidding and awarding the project.[2]

On December 16, 1988, the defendants filed a motion to lift the restraining order on the ground that the court was prohibited from issuing restraining orders, preliminary injunctions and preliminary mandatory injunctions by P.D. 1818.

The decree reads pertinently as follows:Section 1. No Court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or amining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation.

The movants also contended that the question of the propriety of a preliminary injunction had become moot and academic because the restraining order was received late, at 2 o'clock in the afternoon of December 12, 1988, after the bidding had been conducted and closed at eleven thirty in the morning of that date.

In their opposition to the motion, the plaintiffs argued against the applicability of P.D. 1818, pointing out that while ISCOF was a state college, it had its own charter and separate existence and was not part of the national government or of any local political subdivision. Even if P.D.1818 were applicable, the prohibition presumed a valid and legal government project, not one tainted with anomalies like the project at bar.

They also cited Filipinas Marble Corp. vs. IAC,[3] where the Court allowed the issuance of a writ of preliminary injunction despite a similar prohibition found in P.D. 385. The Court therein stated that:The government, however, is bound by basic principles of fairness and decency under the due process clause of the Bill of Rights. P.D. 385 was never meant to protect officials of government-lending institutions who take over the management of a borrower corporation, lead that corporation to bankruptcy through mismanagement or misappropriation of its funds, and who, after ruining it, use the mandatory provisions of the decree to avoid the consequences of their misdeeds (p. 188, underscoring supplied).

On January 2, 1989, the trial court lifted the restraining order and denied the petition for preliminary injunction. It declared that the building sought to be constructed at the ISCOF was an infrastructure project of the government falling within the coverage of P.D. 1818. Even if it were not, the petition for the issuance of a writ of preliminary injunction would still fail because the sheriff's return showed that PBAC was served a copy of the restraining order after the bidding sought to be restrained had already been held. Furthermore, the members of the PBAC could not be restrained from awarding the project because the authority to do so was lodged in the President of the ISCOF, who was not a party to the case.[4]

In the petition now before us, it is reiterated that P.D. 1818 does not cover the ISCOF because of its separate and distinct corporate personality. It is also stressed again that the prohibition under P.D. 1818 could not apply to the present controversy because the project was vitiated with irregularities, to wit:1. The invitation to bid as published fixed the deadline of submission of pre-qualification document on December 2, 1988 without indicating any time, yet after 10:00 o'clock of the given date, the PBAC already refused to accept petitioners' documents.2. The time and date of bidding was published as December 12, 1988 at 3:00 p.m. yet it was held at 10:00 o'clock in the morning.3. Private respondents, for the purpose of inviting bidders to participate, issued a mimeographed "Invitation to Bid" form, which by law (P.D. 1594 and Implementing Rules, Exh. B-1) is to contain the particulars of the project subject of bidding for the purposes of(i) enabling bidders to make an intelligent and accurate bids;(ii) for PBAC to have a uniform basis for evaluating the bids;(iii) to prevent collusion between a bidder and the PBAC, by opening to all the particulars of a project.

Additionally, the Invitation to Bid prepared by the respondents and the Itemized Bill of Quantities therein were left blank.[5] And although the project in question was a "Construction," the private respondents used an Invitation to Bid form for "Materials."[6]

The petitioners also point out that the validity of the writ of preliminary injunction had not yet become moot and academic because even if the bids had been opened before the restraining order was issued, the project itself had not yet been awarded. The ISCOF president was not an indispensable party because the signing of the award was merely a ministerial function which he could perform only upon the recommendation of the Award Committee. At any rate, the complaint had already been duly amended to include him as a party defendant.

In their Comment, the private respondents maintain that since the members of the board of trustees of the ISCOF are all government officials under Section 7 of P.D. 1523 and since the operations and maintenance of the ISCOF are provided for in the General Appropriations Law, it should be considered a government institution whose infrastructure project is covered by P.D. 1818.

Regarding the schedule for pre-qualification, the private respondents insist that PBAC posted on the ISCOF bulletin board an announcement that the deadline for the submission of pre-qualification documents was at 10 o'clock of December 2, 1988, and the opening of bids would be held at 1 o'clock in the afternoon of December 12, 1988. As of ten o'clock in the morning of December 2, 1988, B.E. Construction and Best Built Construction had filed only their letters of intent. At two o'clock in the afternoon, B.E. and Best Built file through their common representative, Nenette Garuello, their pre-qualification documents which were admitted but stamped "submitted late." The petitioners were informed of their disqualification on the same date, and the disqualification became final on December 6, 1988. Having failed to take immediate action to compel PBAC to pre-qualify them despite their notice of disqualification, they cannot now come to this Court to question the bidding proper in which they had not participated.

In the petitioners' Reply, they raise as an additional irregularity the violation of the rule that where the estimated project cost is from P1M to P5M, the issuance of plans, specifications and proposal book forms should be made thirty days before the date of bidding.[7] They point out that these forms were issued only on December 2, 1988, and not at the latest on November 12, 1988, the beginning of the 30-day period prior to the scheduled bidding.

In their Rejoinder, the private respondents aver that the documents of B.E. and Best Built were received although filed late and were reviewed by the Award Committee, which discovered that the contractors had expired licenses. B.E.'s temporary certificate of Renewal of Contractor's License was valid only until September 30, 1988, while Best Built's license was valid only up to June 30, 1988.

The Court has considered the arguments of the parties in light of their testimonial and documentary evidence and the applicable laws and jurisprudence. It finds for the petitioners.

The 1987 Administrative Code defines a government instrumentality as follows:Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions, and government-owned or controlled corporations. (Sec. 2 (5) Introductory Provisions).

The same Code describes a chartered institution thus:Chartered institution - refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the state. (Sec. 2 (12) Introductory Provisions).

It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by P.D. 1818.

There are also indications in its charter that ISCOF is a government instrumentality. First, it was created in pursuance of the integrated fisheries development policy of the State, a priority program of the government to effect the socio-economic life of the nation. Second, the Treasurer of the Republic of the Philippines shall also be the ex-officio Treasurer of the state college with its accounts and expenses to be audited by the Commission on Audit or its duly authorized representative. Third, heads of bureaus and offices of the National Government are authorized to loan or transfer to it, upon request of the president of the state college, such apparatus, equipment, or supplies and even the services of such

employees as can be spared without serious detriment to public service. Lastly, an additional amount of P1.5M had been appropriated out of the funds of the National Treasury and it was also decreed in its charter that the funds and maintenance of the state college would henceforth be included in the General Appropriations Law.[8]

Nevertheless, it does not automatically follow that ISCOF is covered by the prohibition in the said decree.

In the case of Datiles and Co. vs. Sucaldito,[9] this Court interpreted a similar prohibition contained in P.D. 605, the law after which P.D. 1818 was patterned. It was there declared that the prohibition pertained to the issuance of injunctions or restraining orders by courts against administrative acts in controversies involving facts or the exercise of discretion in technical cases. The Court observed that to allow the courts to judge these matters would disturb the smooth functioning of the administrative machinery. Justice Teodoro Padilla made it clear, however, that on issues definitely outside of this dimension and involving questions of law, courts could not be prevented by P.D. No. 605 from exercising their power to restrain or prohibit administrative acts.

We see no reason why the above ruling should not apply to P.D. 1818.

There are at least two irregularities committed by PBAC that justified injunction of the bidding and the award of the project.

First, PBAC set deadlines for the filing of the PRE-C1 and the opening of bids and then changed these deadlines without prior notice to prospective participants.

Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government infrastructure contracts, PBAC shall provide prospective bidders with the Notice to Pre-qualification and other relevant information regarding the proposed work. Prospective contractors shall be required to file their ARC-Contractors Confidential Application for Registration & Classifications & the PRE-C2 Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules, this was referred to as Pre-C1) not later than the deadline set in the published Invitation to Bid, after which date no PRE-C2 shall be submitted and received. Invitations to Bid shall be advertised for at least three times within a reasonable period but in no case less than two weeks in at least two newspapers of general circulations.[10]

PBAC advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and announced that the opening of bids would be at 3 o'clock in the afternoon of December 12, 1988. This schedule was changed and a notice of such change was merely posted at the ISCOF bulletin board. The notice advanced the cut-off time for the submission of pre-qualification documents to 10 o'clock in the morning of December 2, 1988, and the opening of bids to 1 o'clock in the afternoon of December 12, 1988.

The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the PBAC meeting held on December 6, 1988. While it may be true that there were fourteen contractors who were pre-qualified despite the change in schedule, this fact did not cure the defect of the irregular notice. Notably, the petitioners were disqualified because they failed to meet the new deadline and not because of their expired licenses.**

We have held that where the law requires a previous advertisement before government contracts can be awarded, non-compliance with the requirement will, as a general rule, render the same void and of no effect.[11] The fact that an invitation for bids has been communicated to a number of possible bidders is not necessarily sufficient to establish compliance with the requirements of the law if it is shown that other possible bidders have not been similarly notified.[12]

Second, PBAC was required to issue to pre-qualified applicants the plans, specifications and proposal book forms for the project to be bid thirty days before the date of bidding if the estimated project cost was between P1M and P5M. PBAC has not denied that these forms were issued only on December 2, 1988, or only ten days before the bidding scheduled for December 12, 1988. At the very latest, PBAC should have issued them on November 12, 1988, or 30 days before the scheduled bidding.

It is apparent that the present controversy did not arise from the discretionary acts of the administrative body nor does it involve merely technical matters. What is involved here is non-compliance with the procedural rules on bidding which required strict observance. The purpose of the rules implementing P.D. 1594 is to secure competitive bidding and to

prevent favoritism, collusion and fraud in the award of these contracts to the detriment of the public. This purpose was defeated by the irregularities committed by PBAC.

It has been held that the three principles in public bidding are the offer to the public, an opportunity for competition and a basis for exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption.[13]

In the case at bar, it was the lack of proper notice regarding the pre-qualification requirement and the bidding that caused the elimination of petitioners B.E. and Best Built. It was not because of their expired licenses, as private respondents now claim. Moreover, the plans and specifications which are the contractors' guide to an intelligent bid, were not issued on time, thus defeating the guaranty that contractors be placed on equal footing when they submit their bids. The purpose of competitive bidding is negated if some contractors are informed ahead of their rivals of the plans and specifications that are to be the subject of their bids.

P.D. 1818 was not intended to shield from judicial scrutiny irregularites committed by administrative agencies such as the anomalies above described. Hence, the challenged restraining order was not improperly issued by the respondent judge and the writ of preliminary injunction should not have been denied. We note from Annex Q of the private respondent's memorandum, however, that the subject project has already been "100% completed as to the Engineering Standard." This fait accompli has made the petition for a writ of preliminary injunction moot and academic.

We come now to the liabilities of the private respondents.

It has been held in a long line of cases that a contract granted without the competitive bidding required by law is void, and the party to whom it is awarded cannot benefit from it.[14] It has not been shown that the irregularities committed by PBAC were induced by or participated in by any of the contractors. Hence, liability shall attach only to the private respondents for the prejudice sustained by the petitioners as a result of the anomalies described above.

As there is no evidence of the actual loss suffered by the petitioners, compensatory damage may not be awarded to them. Moral damages do not appear to be due either. Even so, the Court cannot close its eyes to the evident bad faith that characterized the conduct of the private respondents, including the irregularities in the announcement of the bidding and their efforts to persuade the ISCOF president to award the project after two days from receipt of the restraining order and before they moved to lift such order. For such questionable acts, they are liable in nominal damages at least in accordance with Article 2221 of the Civil Code, which states:Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant may be vindicated or, recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

These damages are to be assessed against the private respondents in the amount of P10,000.00 each, to be paid separately for each of petitioners B.E. Construction and Best Built Construction. The other petitioner, Occeña Builders, is not entitled to relief because it admittedly submitted its pre-qualification documents on December 5, 1988, or three days after the deadline.

WHEREFORE, judgment is hereby rendered: a) upholding the restraining order dated December 12, 1988, as not covered by the prohibition in P.D. 1818; b) ordering the chairman and the members of the PBAC board of trustees, namely, Manuel R. Penachos, Jr., Alfredo Matangga, Enrico Ticar, and Teresita Villanueva, to each pay separately to petitioners Maria Elena Malaga and Josieleen Najarro nominal damages of P10,000.00 each; and c) removing the said chairman and members from the PBAC board of trustees, or whoever among them is still incumbent therein, for their malfeasance in office. Costs against PBAC.

Let a copy of this decision be sent to the Office of the Ombudsman.

SO ORDERED.