October 14, 2009

COA DECISION NO. 2009-094

SUBJECT : Motion for Reconsideration Dated 23 March 2009 of Clark DevelopmentCorporation (CDC) of COA Decision No. 2009-008 dated 12 February 2009 relative tothe money claim of NTM-Jin Hung Joint Venture Representing Bid Security in theAmount of P26M

RESOLUTION

FACTS OF THE CASEThis instant Motion for Reconsideration moves to set aside this Commission's order embodied in COADecision No. 2009-008 dated 12 February 2009 for Respondent Clark Development Corporation (CDC) torefund the amount of P26M to NTM-Jin Hung Joint Venture (claimant) which the latter posted as bid securityas the winning bidder of the privatization of the former Mimosa Leisure Estate. The dispositive portion ofCOA Decision No. 2009-008 reads:

"WHEREFORE, premises considered, the instant money claim is hereby GIVEN due course.Accordingly, CDC is hereby ordered to refund the bid security amounting to P26 million to NTM-JINHUNG Joint Venture."

In ruling for the claimant, this Commission found no justification for CDC to further withhold the P26M bidsecurity since a failure of bidding was declared. Firstly, this Commission brushed aside the assignedtechnical infirmities of the claim, particularly on the prematurity of claimant's action, holding thatadherence to the procedures suggested by CDC would only delay the disposition of the claim. It was pointedout that in its Answer, CDC had the opportunity to categorically state, but opted not to do so, whether or notit is willing to refund the bid security. Thus, to avoid acting on a similar claim in the future, as for sure,claimant would file the same claim with the Commission in the event that CDC denies the subject moneyclaim should the same be referred to it, resolution on the merits was deemed appropriate. Secondly, it wasalso observed that there was absence of any circumstance that would warrant forfeiture of the bid securityin accordance with Section 40.1 of the Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No.9184.It bears stressing that it was CDC that stopped the privatization process and that claimant had not signifiedits refusal to enter into contract with it. On the contrary, claimant was steadfast in pursuing its interest tosign the MOU, despite the revocation of the Notice of Award (NOA), as shown by its offer to deposit 10% ofthe total investment commitment or P142M. It ruled that to allow CDC to forfeit the bid security would be tocondone an act violative of Article 22 of the Civil Code and tantamount to unjust enrichment at the expenseof another.Hence, the instant motion for reconsideration contending, yet again, that the claim was filed prematurelyand, therefore, this Commission should have not entertained the same, CDC, submitted that the properaction would have been for COA to dismiss the claim first and then to give CDC the opportunity to act on thesame. Nevertheless, CDC justified the revocation of the NOA and the subsequent forfeiture of the bidsecurity on the ground that claimant failed to comply with its obligations under the Terms of Reference(TOR), particularly on its undertaking to enter into and execute a Lease Agreement within ten (10) calendardays from the receipt of the NOA (instead of the MOU). It is averred that since claimant failed to post therequired financial consideration or the "Bid Offer" that would necessitate the signing of the LeaseAgreement, CDC had to declare the bidding a failure and the consequent forfeiture of the bid security.ISSUEWhether or not there was valid reason for CDC to forfeit the bid security of NTM-Jin Hung Joint Ventureamounting to P26M.DISCUSSIONThis Commission agrees that the subject claim for refund should have been filed first before the CDC. Ascited by CDC, the prematurity of the action of the claimant was impliedly recognized by this Commission inthe assailed decision. However, the action of the Commission was justified not only by practicality but moreso in keeping with the dictate of speedy disposition of any matter or case before it with little regard to therigid technical rules of procedure as enshrined in Section 3 of Rule I of the 1997 COA Rules of Procedure.Thus, as cited in the assailed decision, the Supreme Court in a certain case, held:

"Let it be emphasized that the rules of procedure should be viewed as mere tools designed tofacilitate the attainment of justice. Their strict and rigid application, which would result intechnicalities that tend to frustrate rather than promote substantial justice, must always beeschewed." (Ginete vs. Court of Appeals, G.R. No. 127596, 24 September 1998, Italics supplied.)

Accordingly, this Commission found it appropriate to directly resolve the merits of the claim as warrantedby the evidence on record, instead of referring it to CDC, for it could reasonably be expected that claimantwould later on file the same claim in the event that CDC would deny it. In the same manner that adherenceto the procedures at this stage, as invoked by CDC in the instant motion for reconsideration, would merelyduplicate the actions that had been taken so far. And since the issue of prematurity was rendered moot andacademic when CDC raised as another issue the merits of claimant's claim, resolution of the instant motionon the merits may now proceed.

CDC claimed that the letters of claimant dated 31 May 2006 requesting additional time of one to threemonths to secure certain requirements of the Korean Government and 15 June 2006 requesting CDC todefer "any further conclusion or any further contract because claimant was still securing the requireddocuments," demonstrated its inability to comply with the undertakings provided in the TOR, namely: (1) toenter into a contract with CDC, and (2) to furnish the required performance security, within ten (10)calendar days from its receipt of the NOA. Thus, the forfeiture of the bid security was warranted under thecircumstances.This Commission disagrees. Section 40.1 of the Implementing Rules and Regulations (IRR) of R.A. No. 9184puts aside the forfeiture of the bid security where the failure, refusal or inability to comply with the requiredundertakings is through no fault of the winning bidder. Section 40 of R.A. No. 9184 called such instances asjustifiable causes. In the case at bar, records would bear out that claimant was without fault or, at the veryleast, was impelled by justifiable causes for its failure to enter into a contract with CDC and to furnish theperformance security. If at all, there was merely a temporary inability on the part of claimant to comply withthe undertakings due to extraordinary but justifiable causes beyond its effective control.Even before the issuance of the NOA, claimant had already informed the CDC of its predicaments. In itsletter dated 31 May 2006, claimant informed CDC that it needed one to three months to completely submitthe necessary documents. Thus, additional time, within which to comply was requested. After the issuanceof the NOA, claimant wrote another letter on 15 June 2006, the date the period of the signing of contractwas supposed to end, requesting deferment of any conclusion of any contract because, apparently, thePhilippine Senate was posed to investigate the alleged anomaly tainting the bidding process of the project.Claimant's representative, Mr. Kim Hyun Joo, in his letter dated 06 July 2006 said that in two occasions hemet with CDC officials for the purpose of signing the MOU; first at the BCDA Office on 13 June 2006 andsecond on 15 June 2006 at the CDC Chairman's Office. For whatever reasons, however, the MOU was notsigned on both occasions. Nevertheless, in the absence of evidence to the contrary, this shows that claimantwas, indeed, serious about the project.At any rate, even if the signing of the MOU proceeded on the 15th of June 2006 as required under the NOA,the same would have not served its purpose because, as opined by the Office of the Government CorporateCounsel (OGCC) in its Contract Review No. 187, s. 2006, the MOU was not the contract to be entered into bythe parties under the TOR and that it would be a deviation therefrom should the signing of the same bepursued. This observation was brought to the attention of claimant only on 19 June 2006 where claimantwas advised of the immediate need of signing the Lease Agreement instead of the MOU. However, it isobserved that CDC informed claimant of the referral of its letter of 15 June 2006 to OGCC. It would appear,therefore, that as of 19 July 2006, claimant could not have complied with the advice of CDC considering thatthe justifications on its request for deferment were still under consideration by the OGCC. In other words,claimant was justified not to heed the advice of CDC because its request for deferment could have beenfound meritorious. Unfortunately, though, under OGCC's Contract Review No. 210, s. 2006, dated 03 July2006, the justifications were found unmeritorious, hence, the order for the parties to proceed with theexecution of the Lease Agreement.Be that as it may, it was unfair for CDC to revoke right away the NOA and to declare the bidding process afailure two days after the OGCC opined, that there was no legal grounds to defer the signing of the leaseagreement on 05 July 2006, without priorly apprising the claimant of the same and on the basis alone of thealleged inability by claimant to comply with its undertakings under the TOR as allegedly demonstrated inthe latter's letters of 31 May 2006 and 15 June 2006, thereby denying claimant of the opportunity to makegood its obligations under the TOR. More importantly, the declaration of failure of bidding was attended byabuse of rights on the part of CDC. Such declaration was not in accordance with Section 41 of R. A. No. 9184and Section 41.1 of its IRR. Therein, the right to declare a failure of bidding is reserved to CDC as theprocuring entity: (1) if there is a prima facie evidence of collusion; (2) if the BAC is found to have failed infollowing the prescribed bidding procedures; and (3) for any justifiable and reasonable ground where theaward of the contract will not redound to the benefit of the government. But as the records of the case willshow, there is not an indication, much less, an allegation that any of such situations was obtaining when thebidding was declared a failure.In all of these, the apparent inequity on the part of CDC should not cost claimant its P26M bid security.Clearly, to allow CDC to keep for itself the P26M by way of forfeiting claimant's bid security where under thecircumstances claimant was unilaterally and unjustly declared non-compliant of the provisions of the TORwould be to allow CDC to enrich itself at the expense of claimant. As cited in COA Decision No. 2009-008,"there is unjust enrichment when a person unjustly retains a benefit to the loss of another or where a personretains money or property of another against the fundamental principle of justice, equity and goodconscience." (David Reyes vs. Jose Lim, et al., G.R. No. 134241, August 11, 2003)RULINGWHEREFORE, premises considered, the instant Motion for Reconsideration is hereby DENIED. Accordingly,COA Decision No. 2009-008 dated 12 February 2009 is affirmed; and CDC is hereby ordered to refund thebid security amounting to P26M to claimant NTM-JIN HUNG Joint Venture.

(SGD.) REYNALDO A. VILLARChairman

(SGD.) JUANITO G. ESPINO, JR.Commissioner

Copy furnished:

Copy furnished:MR BENIGNO RICAFORTEPresident and CEOClark Development CorporationBldg. 2122 Elpidio Quirino St.,Clark Special Economic ZoneMR. KIM HYUN JOOAuthorized RepresentativeNTM-JUN HUNG Joint VentureMakati CityATTY. ALBERTO H. HABITANCounsel for NTM-JIN HUNG Joint VentureG/F Senor Ivan de Palacio Bldg.,Malakas St., Diliman, Quezon CityThe Supervising AuditorClark Development CorporationBldg. 2122 Elpidio Quirino St.,Clark Special Economic Zone

The Regional DirectorCOA Regional Office No. IIISan Fernando, PampangaThis CommissionThe Assistant Commissioners

Corporate Government Sector Legal Services SectorBoth of this Commission