Case Digest (G.R. No. L-45515)
Facts:
The case involves Asbestos Integrated Manufacturing, Inc. (AIMI) as the petitioner and Hon. Elviro L. Peralta, the Presiding Judge of Branch XVII of the Manila Court of First Instance, along with the Metropolitan Waterworks and Sewerage System (MWSS), Eternit Corporation, and Sanvar Development Corporation as respondents. The events leading to this case began on May 18, 1976, when MWSS conducted a public bidding for asbestos cement pipes required for its construction and improvement projects in Metro Manila. AIMI, a 100% Filipino-owned corporation engaged in manufacturing and trading asbestos cement pressure pipes, participated in the bidding but submitted a higher bid of P423,913.96 compared to Sanvar's bid of P373,122.30. No contract was awarded at that time.
In a subsequent bidding on September 27, 1976, Sanvar again submitted a lower bid of P2,653,360.00, while AIMI's bid was P3,259,492.00. Consequently, the contract was awarded to Sanvar. AIMI contested this d...
Case Digest (G.R. No. L-45515)
Facts:
1. Parties Involved:
- Petitioner: Asbestos Integrated Manufacturing, Inc. (AIMI), a 100% Filipino-owned and controlled corporation engaged in the marketing of asbestos cement pressure pipes.
- Respondents:
- Eternit Corporation (Eternit): A domestic corporation with 90% of its capital stock owned and controlled by aliens.
- Sanvar Development Corporation (Sanvar): A 100% Filipino-owned and controlled corporation engaged in trading and manufacturing.
- Metropolitan Waterworks and Sewerage System (MWSS): A government-owned and controlled corporation.
2. Background of the Case:
- On May 18, 1976, MWSS conducted a public bidding for asbestos cement pipe requirements. AIMI and Sanvar participated, with Sanvar submitting a lower bid (P373,122.30) compared to AIMI's bid (P423,913.96). No award was made at this time.
- On September 27, 1976, another public bidding was held. Sanvar submitted a bid of P2,653,360.00, while AIMI submitted a higher bid of P3,259,492.00. The contract was awarded to Sanvar.
3. Legal Claims:
- AIMI filed a petition to nullify the award, claiming that Sanvar was a mere dealer or distributor of Eternit, an alien-owned corporation. AIMI invoked several laws, including the Retail Trade Nationalization Act (Rep. Act No. 1180), the Flag Law (Com. Act No. 138), the Anti-Dummy Act (Com. Act No. 108), and Rep. Act No. 5183, which reserves to Filipinos the exclusive right to enter into contracts with government entities.
4. Procedural History:
- The trial court initially issued a restraining order on November 12, 1976, preventing the respondents from implementing the contract award to Sanvar.
- On January 25, 1977, the trial court lifted the restraining order and denied AIMI's motion for a preliminary injunction.
- On February 2, 1977, the trial court dismissed AIMI's complaint, prompting AIMI to file the present petition for certiorari.
Issue:
- Whether Sanvar Development Corporation is an alter ego or marketing arm of Eternit Corporation, thereby making it ineligible to participate in the bidding under the applicable laws.
- Whether the Flag Law (Com. Act No. 138) and other relevant laws (Rep. Act No. 5183, Com. Act No. 108, and Rep. Act No. 1180) apply to Sanvar, given its status as a 100% Filipino-owned corporation.
- Whether AIMI is entitled to the contract award under the Flag Law, despite submitting a higher bid than Sanvar.
Ruling:
The Supreme Court dismissed the petition, ruling in favor of the respondents. The Court held that:
Sanvar is not an alter ego of Eternit: The evidence presented by AIMI was insufficient to prove that Sanvar was a mere agent or alter ego of Eternit. The dealership agreement between Sanvar and Eternit did not establish an agency relationship but rather a buyer-seller relationship. Sanvar purchased products from Eternit and resold them independently.
Applicability of the Flag Law and Other Laws: Since Sanvar is a 100% Filipino-owned corporation, the laws invoked by AIMI (Rep. Act No. 5183, Com. Act No. 108, and Rep. Act No. 1180) do not apply. The Flag Law also does not apply because both AIMI and Sanvar are domestic entities, and the materials offered were produced in the Philippines.
No Preference for AIMI Under the Flag Law: Even if the Flag Law were applicable, AIMI's bid was 22.84% higher than Sanvar's, exceeding the 15% margin allowed under the law. Therefore, AIMI was not entitled to the contract award.
Ratio:
Alter Ego Doctrine: The alter ego doctrine requires clear and convincing evidence that one corporation is merely a tool or instrumentality of another. In this case, the evidence did not support the claim that Sanvar was an alter ego of Eternit.
Interpretation of Contracts: The Court emphasized that the essence of a contract determines the applicable law, not the labels used by the parties. The dealership agreement between Sanvar and Eternit was a buyer-seller relationship, not an agency relationship.
Flag Law Application: The Flag Law provides preferences for domestic entities and locally produced goods. Since both AIMI and Sanvar are domestic entities offering locally produced goods, the Flag Law does not grant AIMI any preference over Sanvar.
Bid Price Disparity: Even if AIMI were entitled to a preference under the Flag Law, its bid was significantly higher than Sanvar's, making it ineligible for the contract award.
Conclusion:
The Supreme Court dismissed AIMI's petition, lifting the temporary restraining order and upholding the trial court's decision to award the contract to Sanvar. The Court found no legal basis to nullify the contract or to grant AIMI any preference under the applicable laws.