SM LND, INC v.
BASES CONVERSION AND DEVELOPEMENT
AUTHORITY
G.R. No. 203655, August 13, 2014
CIVIL LAW; OBLIGATIONS AND CONTRACTS
FACTS:
Pursuant to RA 7227 (Bases Conversion and Development Act of 1992),
the BCDA opened for disposition and development its Bonifacio South
Property. Jumping on the opportunity, SM Land, Inc. (SMLI) submitted to
the BCDA an unsolicited proposal for the development of the lot through a
Public-Private Joint Venture Agreement which was accepted by the BCDA.
However, the BCDA clarified that its act should not be construed to bind the
agency to enter into a joint venture agreement with SMLI but only
constitutes an authorization to conduct detailed negotiations with SMLI and
iron out the terms and conditions of the agreement.
Upon arriving at mutually acceptable terms and conditions, a
Certification of Successful Negotiations (Certification) was issued by the
BCDA and signed by both parties with the provisions that the BCDA
undertook to “subject SMLI’s Original Proposal to Competitive Challenge”
and committed itself to “commence the activities for the solicitation for
comparative proposals.” Then, instead of proceeding with the Competitive
Challenge, the BCDA corresponded with SMLI stating that it will welcome
any “voluntary and unconditional proposal” to improve the original offer,
with the assurance that the BCDA will nonetheless respect any right which
may have accrued in favor of SMLI. In turn, SMLI increased the total secured
payments with an upfront payment.
Without responding to SMLI’s new proposal, the BCDA sent a
memorandum to the Office of the President (OP) categorically
recommending the termination of the Competitive Challenge. Alarmed by
this development, SMLI urged the BCDA to proceed with the Competitive
Challenge as agreed upon. However, the BCDA, via the assailed
Supplemental Notice No. 5, terminated the Competitive Challenge
altogether. In the meantime, the BCDA issued in favor of SMLI a check
without explanation attached to it but its value corresponds to the proposal
security posted by SMLI, with interest. SMLI attempted to return the check
but to no avail. The BCDA caused the publication of an “Invitation to Bid”
for the development of the subject property. This impelled SMLI to file an
Urgent Manifestation with Reiterative Motion to Resolve SMLI’s
Application for Temporary Restraining (TRO) and Preliminary Injunction.
The Court issued the TRO prayed for by SMLI and enjoined BCDA
from proceeding with the new selection process for the development of the
property. For its part, SMLI alleged in its petition that the Certification
issued by the BCDA and signed by the parties constituted a contract and that
under the said contract, BCDA cannot renege on its obligation to conduct
and complete the Competitive Challenge. The BCDA relies chiefly on the
reservation clause in the Terms of Reference (TOR), which mapped out the
procedure to be followed in the Competitive Challenge, which allegedly
authorized the agency to unilaterally cancel the Competitive Challenge.
BCDA add that the terms and conditions agreed upon are disadvantageous
to the government, and that it cannot legally be barred by estoppel in
correcting a mistake committed by its agents.
ISSUES:
Whether or not BCDA correct in issuing Supplemental Notice No. 5,
which unilaterally aborted the Competitive Challenge, and in subjecting
the development of the project to public bidding?
RULING:
NO. SMLI has the right to a completed Competitive Challenge
pursuant to the Detailed Guidelines for Competitive Challenge Procedure
for Public-Private Joint Ventures (NEDA JV Guidelines) and the
Certification issued by the BCDA. The reservation clause adverted to by the
BCDA cannot, in any way, prejudice said right. NEDA promulgated the
NEDA Joint Venture Guidelines, which detailed two (2) modes of selecting
a private sector Joint Venture partner: by competitive selection or through
negotiated agreements.
Competitive selection involves a selection process based on
transparent criteria, which should not constrain or limit competition, and is
open to participation, by any interested and qualified private entity.
Furthermore, it is well to point out that after BCDA accepted the unsolicited
proposal of SMLI and after both parties successfully concluded the detailed
negotiations on the terms and conditions of the project, SMLI acquired the
status of an Original Proponent.
An Original Proponent, per the TOR, pertains to the party whose
unsolicited proposal for the development and privatization of the subject
property through Joint Venture with BCDA has been accepted by the latter,
subject to certain conditions, and is now being subjected to a Competitive
Challenge. In this regard, SMLI insists that as an Original Proponent, it
obtained the right to a completed Competitive Challenge. A scrutiny of the
NEDA JV Guidelines reveals that certain rights are conferred to an Original
Proponent. As correctly pointed out by SMLI, these rights include the right
to the conduct and completion of a competitive challenge. By their mutual
consent and in signing the Certification, both parties, in effect, entered into
a binding agreement to subject the unsolicited proposal to the Competitive
Challenge. Evidently, the Certification partakes of a contract wherein BCDA
committed itself to proceed with the Third Stage of the process and
simultaneously grants SMLI the right to expect that the BCDA will fulfill its
obligations under the same. The preconditions to the conduct of the
Competitive Challenge having been met, what is left, therefore, is to subject
the terms agreed upon to a Competitive Challenge
SYLLABUS:
Government Contracts; Procurement Process; To streamline the procurement
process and expedite the acquisition of goods and services, Executive Order No. (EO)
423 was issued on April 30, 2005, which prescribed the rules and procedures on the
review and approval of government contracts.·To streamline the procurement
process and expedite the acquisition of goods and services, Executive Order
No. (EO) 423 was issued on April 30, 2005, which prescribed the rules and
procedures on the review and approval of government contracts. The EO, in
part, provides: Section 8. Joint Venture Agreements.·The NEDA, in
consultation with the GPPB, shall issue guidelines regarding joint venture
agreements with private entities with the objective of promoting
transparency, competitiveness, and accountability in government
transactions, and, where applicable, complying with the requirements of an
open and competitive public bidding. Taking its cue from the above quoted
provision, the NEDA promulgated the NEDA JV Guidelines, which detailed
two (2) modes of selecting a private sector JV partner: by competitive
selection or through negotiated agreements.
Joint Ventures; Competitive Selection and Negotiated Agreements,
Distinguished.·Competitive selection involves a selection process based on
transparent criteria, which should not constrain or limit competition, and is
open to participation by any interested and qualified private entity. Selection
by negotiated agreements or negotiated projects, on the other hand, comes
about as an end result of an unsolicited proposal from a private sector
proponent, or if the government has failed to identify an eligible private
sector partner for a desired activity after subjecting the same to a competitive
selection.
Same; Negotiated Agreements; Swiss Challenge Method; Relevant to the case at bar
is the selection modality by negotiated agreement arising from the submission and
acceptance of an unsolicited proposal, known as the Swiss Challenge method, in esse
a hybrid mechanism between the direct negotiation approach and the competitive
bidding route. Relevant to the case at bar is the selection modality by
negotiated agreement arising from the submission and acceptance of an
unsolicited proposal, known as the Swiss Challenge method, in esse a hybrid
mechanism between the direct negotiation approach and the competitive
bidding route. With the availability of the Swiss Challenge method for
utilization by those in the private sector, PSEs have studied, formulated, and
submitted numerous suo moto or unsolicited proposals with the ultimate
goal of assisting the public sector in elevating the country’s place in the
global economy, as in the case herein.
Contracts; Government Contracts; The failure of the government to abide by the
rules it itself set would have detrimental effects on the private sector’s confidence
that the government will comply with its statutory and contractual obligations to
the letter.·Needless to say, allowing government agencies to retract their
commitments to the project proponents will essentially render inutile the
incentives offered to and have accrued in favor of the private sector entity.
Without securing these rights, the business community will be wary when it
comes to forging contracts with the government. Simply put, the failure of
the government to abide by the rules it itself set would have detrimental
effects on the private sector’s confidence that the government will comply
with its statutory and contractual obligations to the letter.
Asia’s Emerging Dragon v DOTC and MIAA, GR 169914 Republic v CA
and Cong. Baterina., GR 174166 Intervention
Facts:
The facts of the two cases are intertwined, both involves the controversies
surrounding the NAIA Airport III (NAIA3) project.
The facts from a case named Agan v. PIATCO serves as a background. In
1993, six business leaders John Gokongwei, Henry Sy, Sr., Lucio Tan, George
Ty, and Alfonso Yuchengco met with then president FVR for a possibility of
investing the construction of a new airport terminal. They formed the
company Asia’s Emerging Dragon Corp. (AEDC) to pursue this goal.
AEDC then gave an unsolicited proposal to the Gov’t through the
DOTC/MIAA for the development of NAIA3 under the Build-Operate-
Transfer Law (BOT). Afterwards, DOTC created its Pre-qualification Bids
and Awards Committee (PBAC) to implement the NAIA3 project as the
overseer for biddings.
Afterwards, then DOTC Secretary Garcia endorsed the proposal of AEDC to
National Economic and Development Authority (NEDA), whose technical
committee eventually approved it. Afterwards, AEDC and DOTC signed a
Memorandum of Understanding (MOU), which essentially awards to AEDC
the NAIA3 project, with provisions that AEDC must have a soft opening in
two years.
Then, DOTC published in newspapers invitation for “competitive
comparative proposals” on AEDC’s unsolicited proposal, in accordance
with a law that governs unsolicited proposals. Essentially, it required
interested bidders to submit 3 separate sealed envelopes: first on pre-
qualification documents, second on technical proposals, and lastly on the
financial proposal.
Paircargo Consortium (which eventually changed name to PIATCO, a
consortium composed of People’s Air Cargo and Warehousing, Inc., Phil.
Air and Ground Services, and Security Bank Corp.) submitted their
competitive proposal to PBAC. The envelopes will be opened over a period
of time, each one opened only if the previous envelope would qualify. AEDC
would then oppose each instance the sealed envelopes would be opened,
citing primarily PIATCO’s dubious financial capabilities to undergo with the
project.
Eventually, PBAC found PIATCO’s proposal to be more favorable to the
government and required AEDC to match its proposal. Instead, AEDC
protested the undue preference given to PIATCO. Subsequently, after a
series of passes before the NEDA Investment Committee, DOTC issued a
notice of award to PIATCO, and had signed a concession agreement.
AEDC then filed with the RTC a petition for Declaration of nullity of the
proceedings (the DOTC/NEDA/PBAC approval proceedings) (This is the
Agan v. PIATCO case) against DOTC, and PBAC. It was in this case that
Cong. Baterina in GR 174166 filed a motion for Intervention and petition-in-
intervention, along with other group and MIAA employees who allege that
they stand the risk of unemployment upon the implementation of the
agreements.
a. RTC in this case granted the intervention of Baterina and MIAA. For
Baterina, they were granted standing in view of serious legal questions
involved and their impact to public interest
b. RTC in this case ruled that the concession agreements were null and
void. MRs of PIATCO denied with finality.
c. Other issues are not relevant to our topic.
--------
Then, there is another case, Republic v. Gingoyon, which dealt with the
expropriation of NAIA3 because it remained in the possession of PIATCO
after the decision in Agan. In this case, the Gov’t sought to take control of
the facilities and deposited 3B+(through MIAA) in Land Bank representing
NAIA3’s assessed value. Gov’t prayed for a writ of possession over NAIA3
Afterwards in Gingoyon, RTC gave two orders, first being the Order that it
will implement the writ of possession only after the payment of 3B+ as just
compensation (expropriation), second as the next order partially granting
Gov’t MR on the first Order. But still unsatisfied, the Gov’t filed another MR
for partial reconsideration of the second order. It was during this
reconsideration of the second order that Baterina and others also sought to
intervene. (in sum, Baterina intervened in two instances)
Baterina wanted to intervene in this expropriation proceeding by asserting
his legal interest by virtue of being a legislator, taxpayer, and concerned
citizen. They were saying that the government need not pay PIATCO
because the agreements were deemed null and void.
RTC in Gingoyon denied Baterina (and others’) Intervention with finality.
Afterwards, it directed MIAA to immediately release to PIATCO the
proferred value of 3B+. It was here that AEDC filed a motion for leave to
admit attached answer-in-intervention, asserting that they should be given
preference over NAIA3 because of the MOU, and also its right as the
project’s original proponent.
Issue: W/N Baterina and AEDC may intervene Held: No to both.
Ratio:
For Baterina, they did not meet the requisite legal interest for a party-in-
intervention and they could not be deemed as indispensable parties in the
cases they intervened in because:
1. The amount directed by the court to be paid by the Gov’t to PIATCO came
from the money deposited by MIAA (3B+), which the court deemed as
a public corporation enjoying autonomy whose budgets need not be
approved by the Congress.
2. The interests of Baterina may be duly litigated in a separate proceeding.
For AEDC,
1. One of the main issues resolved by the court is the issue of unsolicited
proposals.
Applying several laws, the court(s) ruled that AEDC has
no right to intervene as the existing laws essentially say that the rights
of an entity who gave an unsolicited proposal would be defeated if the
project was not awarded to them in a proper bidding. Hence, given
that AEDC was defeated by PIATCO in the bidding with PBAC, it
didn’t have a right over NAIA3
2. Even if there is a MOU executed between them and DOTC, the lower
courts invalidated(?) that MOU.
3. Hence, AEDC has no legal right as an intervenor in the expropriation case.
SYLLABUS
Remedial Law; Mandamus; Only specific legal rights are enforceable by mandamus,
that the right sought to be enforced must be certain and clear, and that the writ will
not issue in cases where the right is doubtful.·It is well-established in our
jurisprudence that only specific legal rights are enforceable by mandamus,
that the right sought to be enforced must be certain and clear, and that the
writ will not issue in cases where the right is doubtful. Just as fundamental
is the principle governing the issuance of mandamus that the duties to be
performed must be such as are clearly and peremptorily enjoined by law or
by reason of official station.
Same; Same; The rights or privileges of an original proponent of an unsolicited
proposal for an infrastructure project are never meant to be absolute; An unsolicited
proposal is subject to evaluation, after which, the government agency or local
government unit (LGU) concerned may accept or reject the proposal outright.·The
rights or privileges of an original proponent of an unsolicited proposal for
an infrastructure project are never meant to be absolute. Otherwise, the
original proponent can hold the Government hostage and secure the award
of the infrastructure project based solely on the fact that it was the first to
submit a proposal. The absurdity of such a situation becomes even more
apparent when considering that the proposal is unsolicited by the
Government. The rights or privileges of an original proponent depends on
compliance with the procedure and conditions explicitly provided by the
statutes and their IRR. An unsolicited proposal is subject to evaluation, after
which, the government agency or local government unit (LGU) concerned
may accept or reject the proposal outright.
Same; Same; Asia’s Emerging Dragon Corp. (AEDC) does not possess any legal
personality to interfere with or restrain the activities of the Government as regards
Ninoy Aquino International Airport International Passenger Terminal III (NAIA
IPT III).·In all, just as AEDC has no legal right to the NAIA IPT III Project,
corollarily, it has no legal right over the NAIA IPT III facility. AEDC does
not own the NAIA IPT III facility, which this Court already recognized in
Gingoyon as owned by PIATCO; nor does AEDC own the land on which
NAIA IPT III stands, which is undisputedly owned by the Republic through
the Bases Conversion Development Authority (BCDA). AEDC did not fund
any portion of the construction of NAIA IPT III, which was entirely funded
by PIATCO. AEDC also does not have any kind of lien over NAIA IPT III or
any kind of legal entitlement to occupy the facility or the land on which it
stands. Therefore, nothing that the Government has done or will do in
relation to the project could possibly prejudice or injure AEDC. AEDC then
does not possess any legal personality to interfere with or restrain the
activities of the Government as regards NAIA IPT III. Neither does it have
the legal personality to demand that the Government deliver or sell to it the
NAIA IPT III facility despite the express willingness of AEDC to reimburse
the Government the proferred amount it had paid PIATCO and complete
NAIA IPT III facility at its own cost.
