Case Summary (G.R. No. 75197)
Factual Background
• 1966: ERI awarded a five-year arrastre contract for Piers 3 and 5 after public bidding. ERI invested heavily on government assurances of renewal without rebidding.
• 1971–1974: Upon Customs’ call for rebidding, ERI sought injunctive relief. The Supreme Court ordered rebidding; ERI prevailed and executed a five-year contract (effective January 1, 1974). ERI increased capital from ₱2 million to ₱20 million in August 1974.
• Late 1978: Enrique Razon allegedly coerced into endorsing blank certificates representing 60% of ERI’s shares to President Marcos’s brother-in-law, Alfredo “Bejo” Romualdez. ERI was renamed MPSI; Razon retained nominal presidency with limited powers.
• July 1, 1980: PPA executed an eight-year management contract with ERI/MPSI.
• February–July 1986: After the Marcos administration’s ouster, Razon reorganized MPSI’s board, restored presidential powers and corporate name, and audited operations.
• July 18–19, 1986: Following truckers’ demonstrations and alleged service complaints, PPA demanded an explanation by 9 AM July 19. ERI/MPSI’s response was delayed and reportedly undelivered. PPA cancelled the contract effective immediately and took over operations.
• July 21, 1986: Marina appointed interim operator. ERI/MPSI filed a certiorari petition and sought injunctive relief in both the Supreme Court and the Regional Trial Court (RTC), resulting in motions to withdraw, charges of forum-shopping, and disciplinary proceedings against counsel.
Petitioners’ Allegations
• The contract, characterized as a franchise or vested property right due to its long enjoyment, could not be cancelled without prior hearing and investigation.
• PPA’s cancellation was an exercise of regulatory adjudication rather than a simple proprietary rescission, thus triggering due-process safeguards.
Respondents’ Defenses
- The operative contract was controlled by Romualdez via Metro Port Services, Inc., rendering it tainted by corruption.
- Under R.A. No. 3019, Sec. 5, Romualdez was barred from any government transaction; the contract was therefore void ab initio.
- ERI/MPSI admitted grounds for cancellation; no hearing was required for proprietary contract termination.
- Marina’s interim designation was within PPA’s prerogative and Marina was qualified for the task.
Illegality of Contract and Resulting Nullity
• Under the Anti-Graft and Corrupt Practices Act (R.A. No. 3019, Sec. 5) and Civil Code Arts. 1409, 1422, a contract entered into with an unlawful cause or by one barred from contracting with government is void and automatically avoided.
• Enrique Razon’s transfer of 60% equity to Romualdez, motivated by illegal renewal assurances, constituted an illicit causa and facilitated Romualdez’s prohibited participation.
• The 1980 management contract, derived directly from that illegal transfer, was itself void without need for judicial annulment.
Due Process and
Case Syllabus (G.R. No. 75197)
Facts of the Case
- E. Razon, Inc. (ERI), also known as Metro Port Service, Inc. (MPSI), was organized on June 21, 1962 to bid for arrastre service management at South Harbor, Manila.
- In 1966, ERI secured a five-year contract to operate arrastre services at Piers 3 and 5; it invested heavily in equipment under assurances of renewal without rebidding.
- In 1971, the Bureau of Customs called for rebidding of all piers; ERI sought injunctive relief via certiorari before the CFI of Manila, which was upheld by this Court in Virata v. Bocar directing ERI’s award.
- A new five-year management contract (renewable for five more years) covering all South Harbor piers was executed January 18, 1974; ERI’s capitalization rose from ₱2 million to ₱20 million that August.
- Between 1977 and 1978, renewal talks stalled; parties allegedly linked to President Marcos coerced Enrique Razon into endorsing blank stock certificates representing 60% of ERI’s equity to Alfredo “Bejo” Romualdez, Marcos’s brother-in-law, without consideration.
- ERI’s corporate name changed to MPSI; Razon remained nominal president under amended bylaws that stripped him of executive power.
- The 1974 contract expired December 31, 1978, was extended to June 30, 1980, then replaced by an eight-year contract effective July 1, 1980.
- After the 1986 regime change, Razon regained control through stockholders’ action, reconveyed the 60% equity under a Deed of Reconveyance, restored bylaws powers, audited accounts, and improved operations—acknowledged by PPA on July 9, 1986.
- On July 18–19, 1986, PPA demanded explanations for alleged mismanagement; before ERI could respond, PPA cancelled the contract effective immediately and, on July 21, 1986, appointed Marina Port Services, Inc. as interim operator.
- ERI filed simultaneous petitions in the Supreme Court and the RTC of Manila; withdrew the RTC petition, prompting forum-shopping and misconduct charges against its counsel.
Procedural History
- 1971: CFI issues writ restraining rebidding; this Court orders public bidding, confirms ERI a