G.R. No. 181704 - Bureau of Customs Employees Association vs. Teves

Case Summary (G.R. No. 181704)

Key Dates and Procedural Posture

Invitation to bid and distribution of bid documents occurred in November 1992. Bids were opened November 9, 1993; ABC submitted the lowest bid of P12,961,845.54 (readjusted to P13,000,000). Post-qualification and evaluations occurred in January–February 1994; IL prepared a Notice to Proceed and AWIA informed ABC of a pre-construction meeting in March 1994. ABC sent a letter dated April 5, 1994 declining to undertake the project. IL filed suit December 23, 1994. The Regional Trial Court dismissed IL’s complaint and awarded damages on ABC’s counterclaim. The Court of Appeals affirmed. IL’s Rule 45 petition was denied by the Supreme Court, which affirmed the lower courts and imposed costs against IL.

Applicable Law and Legal Framework

Constitutional framework: 1987 Philippine Constitution (applicable because the decision date is after 1990). Governing private-law principles: the Civil Code provisions on contracts (including consensual nature of contracts, required elements, offer and acceptance, and interpretation of contracts), and specific jurisprudential rules cited in the decision concerning offer, acceptance, counter-offer, communication of acceptance, stages of contract formation (negotiation, perfection, consummation), and estoppel. Contractual documents at issue included the Instruction to Bidders and the Bid Proposal Form, which prescribed the manner and form of acceptance and remedies for failure to execute a contract.

Undisputed Factual Background

IL invited contractor bids and furnished an Instruction to Bidders setting conditions including (a) submission of bid bonds, (b) a 60-day bid validity period subject to extension by owner, and (c) requirement that a bidder whose proposal is accepted be notified in writing and must execute the Construction Agreement within five days after receipt of Notice of Award, failing which the bid bond would be retained as liquidated damages. ABC submitted a valid bid bond and the lowest monetary proposal. AWIA and IL conducted post-qualification and recommended ABC. IL and ABC engaged in clarification and a conference where IL proposed adjusting ABC’s bid to P13,000,000 to reflect a wage increase; ABC later agreed to the readjustment. IL prepared a Notice to Proceed and AWIA scheduled a pre-construction conference; ABC attended the pre-construction meeting and a ground-breaking ceremony was held. ABC did not sign a Construction Agreement or commence work and on April 5, 1994 informed IL it could not undertake the project. IL engaged another contractor at a higher price and sought damages; ABC counterclaimed.

Central Legal Issue

Whether a valid and binding construction contract was perfected between IL and ABC such that ABC’s withdrawal constituted breach and rendered it liable for damages claimed by IL. The Supreme Court characterized this as essentially a single, controlling issue: existence of a contract.

Governing Contract Principles Applied by the Court

The Court reiterated established principles: contracts are consensual and perfected by mere consent (Article 1315 and related jurisprudence); the offer must be certain and the acceptance seasonable and absolute—any qualified acceptance is a counter-offer; the stages of a contract are negotiation (preparation), perfection (agreement on essential elements), and consummation (performance); acceptance must be communicated to the offeror when the offeror prescribes the manner of acceptance. The Instruction to Bidders explicitly required written Notice of Award to effect acceptance and fixation of execution obligations.

Application of Law to Facts — Why No Contract Was Perfected

The Court found the parties never moved beyond negotiation into perfection. IL failed to demonstrate it gave ABC the formal written Notice of Award required by its own Instruction to Bidders; therefore, the requisite communication of acceptance was not proven. IL’s internal memoranda and documents to which ABC was not privy did not substitute for the prescribed written notice. The March 14 document was a Notice to Proceed conditioned upon execution of the Construction Agreement; it did not itself constitute the required unconditional acceptance. IL’s subsequent proposal to adjust ABC’s bid to P13,000,000 constituted further negotiation and a counter-offer rather than an unconditional acceptance. ABC’s April 5, 1994 withdrawal occurred before any communicated acceptance and therefore was permissible; an offeror or offeree may revoke or withdraw an offer prior to receipt of communicated acceptance.

Treatment of the Bid Bond and Its Expiry

Although a bid bond is a customary and required accessory to secure the bid and show good faith, the Court held that the lapse of the bid bond on January 8, 1994 did not ipso facto prove expiration of the underlying bid offer. The bond is accessory and may be waived by the owner; its expiration, however, did not cure IL’s failure to comply with its own requirement of communicating acceptan

Case Syllabus (G.R. No. 181704)

Case Reference and Procedural Posture

Decision reported at 466 Phil. 751, G.R. No. 147410, dated February 05, 2004, First Division.
This case is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the September 20, 2000 Decision and the March 7, 2001 Resolution of the Court of Appeals in CA-G.R. CV No. 61607.
The dispositive part of the Court of Appeals Decision: the petition of petitioner (Insular Life) was dismissed and the decision of the court a quo was affirmed.
The assailed Court of Appeals Resolution denied petitioner’s Motion for Reconsideration.
The petition to the Supreme Court was ultimately denied and the assailed Decision and Resolution were affirmed; costs were imposed against petitioner.

Parties and Roles

Petitioner: The Insular Life Assurance Company, Limited (referred to in the opinion as IL).
Respondent: Asset Builders Corporation (referred to in the opinion as ABC).
Adrian Wilson International Associates, Inc. (AWIA) acted as petitioner’s designated Project Manager and performed bid evaluation and post-qualification activities.
Key corporate officers and employees appearing in the record: Engineer Pete S. Espiritu (Real Property Department, Project Coordinator), Januario L. Flores (Real Property Department head and Assistant Vice-President), Abraham Torrijos (Real Property Department), Engineer Bernardo A. Sajorda (AWIA Project Manager), Rogelio P. Centeno (President of ABC), Jacobo G. Quizon / J.G. Quizon (ABC Project Manager), Roy Roxas (recipient of transmittal for ABC).

Relevant Dates and Chronology (as stated in the record)

Sometime in November 1992: Petitioner invited building construction companies to bid for the proposed Insular Life building in Lucena City and distributed Bid Documents and Instruction to Bidders.
November 9, 1993: Opening of bids; bids were secured with bid bonds valid for sixty (60) days.
January 8, 1994: Date referenced as the expiration of the 60-day bid bond period counting from November 9, 1993 (respondent’s position that its bid expired on that date).
January 21, 1994: Espiritu recommended post-qualification, inspection and financial investigation of ABC and other prospective contractors.
January 25, 1994: Post-qualification inspections of ABC and Q.K. Calderon Construction Co., Inc. were effected.
February 14, 1994: Espiritu suggested a bid clarification and negotiation with prospective contractors.
February 23, 1994: Torrijos recommended Board approval of award in favor of ABC, noting ABC’s AAA category and satisfactory post-qualification and credit investigation results.
February 24, 1994: Conference where petitioner proposed that ABC adjust its bid from P12,961,845.54 (noting record discrepancy P12,962,845.54) to P13,000,000.00 to accommodate a wage increase; ABC initially noncommittal but later agreed to the readjustment.
March 9, 1994: Flores submitted findings recommending award to ABC.
March 14, 1994: Flores signed a Notice to Proceed addressed to ABC for the conformity of ABC’s President; petitioner prepared a draft construction contract; Torrijos informed AWIA by letter that the general construction contract had been awarded to ABC and advised coordination for a pre-construction meeting; a copy of a document appended was noted in the record as a Notice to Proceed and not a Notice of Award.
March 17, 1994: ABC received a copy of Sajorda’s Memorandum informing ABC of the pre-construction conference.
March 18, 1994: Petitioner transmitted documents to ABC to enable it to secure a building permit; transmittal acknowledged as received by Roy Roxas for ABC.
March 22, 1994: Pre-construction conference took place; attendees included representatives of AWIA, petitioner, and ABC; contract amount and completion time discussed as P13,000,000.00 to be completed within 210 calendar days.
March 26, 1994: ABC requested TCT lot description for monument relocation and advised of potential excavation problems; indicated possible reimbursement for relocation cost.
Groundbreaking ceremony occurred after March 26, 1994 with ABC president and petitioner representatives in attendance; a billboard announcing ABC as general contractor was erected.
April 5, 1994: ABC sent a letter informing petitioner it would not undertake the project due to inability to fast-track prerequisite paperwork and escalating prices making its bid unattractive.
April 25, 1994: Petitioner wrote ABC asserting unjust withdrawal and advising it engaged another contractor and reserving right to take action against ABC for withdrawal pursuant to Instruction to Bidders Section 10.
December 23, 1994: Petitioner filed a complaint for damages against ABC in the Regional Trial Court of Makati City.
December 5, 1997: Court a quo rendered judgment dismissing petitioner’s complaint and granting ABC’s counterclaims, awarding ABC P500,000.00 for injury to business standing and P75,000.00 attorney’s fees.
September 20, 2000: Court of Appeals decision affirmed the trial court.
March 7, 2001: Court of Appeals denied petitioner’s Motion for Reconsideration.
February 05, 2004: Supreme Court decision denying the petition and affirming the lower courts’ rulings.

Bid Documents, Instruction to Bidders, and Contractual Terms at Issue

Instruction to Bidders included the following salient rules:
- All bond proposals must be accompanied by a bid bond from Insular General Insurance Company, Inc. equivalent to ten percent (10%) of the bid or five percent (5%) in Manager’s or Cashier’s check payable to Insular Life; bid bonds to be returned after sixty (60) days from opening of bids or after award, whichever comes first.
- The bid shall be valid for sixty (60) days after opening of bids, but the owner (petitioner) had the option to request the bidder to extend the bid validity period after expiration of the original validity period.
- The bidder whose proposal is acceptable and complies with requirements shall be notified in writing to personally appear to execute the Contract Agreements within five (5) days after receipt of the Notice of Award; failure to execute the contract shall constitute a breach as effected by acceptance of the proposal, resulting in annulment of the award and forfeiture of the bid bond as liquidated damages.
ABC’s Proposal Form obligated ABC to enter into a contract with petitioner within ten (10) days from notice of the award, with good and sufficient securities for faithful compliance thereof.
The March 14, 1994 Notice to Proceed contained an ultimate paragraph indicating ABC might start mobilization and proceed with construction immediately pending execution of the Construction Agreement, and that issuance of Notice to Proceed depended upon execution of the construction agreement (as noted in the Court’s discussion).

Trial Court Proceedings, Findings and Reliefs

Petitioner’s complaint alleged: ABC unjustly withdrew after being duly notified by AWIA of the award in ABC’s favor, refused to execute the Construction Contract, petitioner engaged another contractor at P14,500,000.00, and petitioner suffere