G.R. No. 162368 - Perez-Ferraris vs. Ferraris

Petitioner Asbestos Integrated Manufacturing, Inc. (AIMI) was a one hundred percent Filipino-owned and controlled manufacturing and trading corporation organized and existing under Philippine laws.
AIMI engaged in the marketing of asbestos cement pressure pipes manufactured by Asbestos Cement Products Philippines, Inc. (ACPPI), which was also one hundred percent Filipino-owned and controlled and organized under Philippine laws.
Respondent Eternit Corporation (Eternit) was a domestic corporation incorporated under Philippine laws with ninety percent of its capital stock owned and controlled by aliens.
Respondent Sanvar Development Corporation (Sanvar) was a one hundred percent Filipino-owned and controlled corporation organized under Philippine laws to undertake businesses commonly carried on by general contractors and subcontractors, and whose secondary purpose included trading (buy and sell), manufacturing, dealing in commodities, and operating as wholesaler, retailer, importer, among others.
Respondent Metropolitan Waterworks and Sewerage System (MWSS) was a government-owned and controlled corporation.

On 18 May 1976, MWSS, under an interim program of construction, improvement, repair, and expansion to ensure continuous and adequate potable water supply in Metro Manila, conducted a public bidding for asbestos cement pipe requirements.
AIMI and Sanvar participated in the 18 May 1976 bidding.
Sanvar submitted a total bid price of P373,122.30, while AIMI submitted P423,913.96, which was 13.6% higher than Sanvar’s bid.
No award was made because the pipes needed for the projects mentioned in the bidding would instead come from pipes to be supplied in the 27 September 1976 public bidding.
On 27 September 1976, MWSS conducted another public bidding for asbestos cement pressure pipes.
Sanvar submitted a total bid price of P2,653,360.00, while AIMI submitted P3,259,492.00, which was 22.84% higher than Sanvar’s bid.
As a result, the contract to supply asbestos cement pressure pipes was awarded to Sanvar.

AIMI, claiming that Sanvar was only a “mere dealer or distributor or marketing arm” of alien-owned Eternit, filed a petition before the Court of First Instance of Manila, docked as Civil Case no. 105410, against MWSS, Eternit, and Sanvar.
AIMI sought to nullify the award and to restrain the respondents from enforcing it.
AIMI invoked 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 reserved to Filipinos and Filipino-owned corporations the exclusive right to enter into contracts with government-owned or controlled corporations for the supply of materials, equipment, goods, and commodities.
Finding AIMI’s petition sufficient in form and substance, and that the acts complained of, unless restrained, would cause great harm and irreparable injury, the trial court issued an order on 12 November 1976, restraining respondents:

from entering into contracts covering the public biddings of 18 May 1976 and 27 September 1976; and
from making and accepting deliveries under any contract that might be entered into; and
from otherwise implementing the MWSS board resolution awarding the bids to Sanvar Development Corporation and/or Eternit Corporation, until further orders from the court.

The trial court set the hearing for the issuance of a writ of preliminary injunction on 18 November 1976.
Respondents filed separate motions:

On 25 February 1977, the trial court lifted the restraining order issued on 12 November 1976, and denied the motion for the issuance of a writ of preliminary injunction, for reasons stated in its order of even date.
AIMI filed a motion for reconsideration.
After hearing, the trial court issued an order on 28 January 1977, giving respondents until Monday, 31 January 1977 to file comment or opposition, with conditions:

if no deliveries of asbestos pipes had yet been made, no deliveries should commence until the incident was finally resolved;
if deliveries had started, they should be stopped in the meanwhile; and
no payments for deliveries should be made until the court issued its order no...(Subscriber-Only)

Whether Sanvar was an alter ego or agent/marketing arm of Eternit, so as to disqualify it under nationalization and anti-dummy laws

Whether the evidence AIMI presented was sufficient to show that Sanvar operated as an alter ego or agency of Eternit, warranting annulment of the MWSS award and restraint of contract enforcement.

Whether AIMI could invoke the cited laws to defeat Sanvar’s participation and the award

Whether Rep. Act No. 5183 and the Anti-Dummy Act (Com. Act No. 108) barred the award and participation given Sanvar’s alleged relationship with Eternit.
Whether the Retail Trade Nationalization Act (Rep. Act No. 1180) could be invoked against Sanvar on the same theory.
Whether the Flag Law (Com. Act No. 138) required preferential treatment for AIMI over Sanvar and whether it could be invoked on AIMI’s theory.

Ruling:

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Ratio:

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