Case Summary (G.R. No. 170530)
Key Dates
- August 14, 1990: Commencement of original Pier 2 and rock causeway contract
- October 1, 1992: Consortium’s letter offering to undertake reclamation for ₱36,294,857.03
- December 18, 1992: PPA’s counteroffer to reduce price to ₱30,794,230.89
- August 26, 1993: Notice of Award issued to petitioner for ₱30,794,230.89, subject to conditions
- 1994: Completion of fendering requirement
- September 9, 1994: PPA Board denies approval of supplemental reclamation contract
- June 30, 1997: Petition for specific performance filed in the Regional Trial Court (RTC)
- June 8, 1998: RTC grants specific performance and orders execution of contract
- 2000–2004: Appeals and procedural motions before the Court of Appeals (CA) and this Court
- August 22, 2005: CA reverses RTC’s decision and dismisses petition
- July 5, 2010: Supreme Court issues final decision
Applicable Law
- 1987 Philippine Constitution (post-1990 decision)
- Presidential Decree (P.D.) No. 1594 and its IRR (Government infrastructure contracts)
- P.D. No. 857 (Revising PPA Charter)
- Executive Order No. 380 (Revised levels of authority for GOCC contracts)
- Revised Administrative Code, Book I, Sec. 51 (Contract execution authority)
Facts
The joint venture secured a public bid for Pier 2 and rock causeway construction at San Fernando, La Union, in 1990. In October 1992 it offered to undertake an additional 4,280 sqm reclamation adjacent to Pier 2. After price negotiations, PPA’s general manager issued a Notice of Award on August 26, 1993 at ₱30,794,230.89, conditioning contract execution on fendering completion (accomplished in 1994), provision of security documents, and acceptance of stipulated cost terms. Thereafter PPA’s Board of Directors refused to approve the supplemental agreement in September 1994, citing lack of legal basis for negotiated award and the distinct nature of the reclamation work. No formal notice of disapproval was sent; petitioner requested reconsideration but received no reply.
Procedural History
Petitioner filed for specific performance and damages in June 1997 before RTC Manila, alleging PPA’s unjustified refusal to execute the awarded contract caused delays and financial losses. PPA countered that the Notice of Award was revoked by Board’s non-approval, and that petitioner lacked required registration and equipment for subsequent bidding. The RTC granted specific performance in June 1998; PPA’s appeal was initially dismissed by CA for lateness but later reinstated by this Court en banc. On August 22, 2005, the CA reversed the RTC and dismissed the petition. Petitioner sought certiorari under Rule 45, challenging CA’s ruling.
Issue
Whether a binding, perfected contract for the reclamation project existed between the joint venture and PPA, which hinges on whether PPA’s general manager had authority to bind PPA absent express Board approval.
Ruling of the Supreme Court
The petition is denied. No perfected contract existed because the Notice of Award lacked the required approval of PPA’s Board or other competent authority as mandated by law.
Legal Analysis
- Essential Elements of Contract
- Consent, object certain, and cause must concur. Negotiation ends in perfection only when these elements are agreed.
- Government Contracts
- Subject to Civil Code requisites plus statutory requirements for approval by competent authority. Absent such approval, no contract is perfected.
- Authority to Bind PPA
- P.D. 857 vests in the Board the power to “make or enter into contracts” and permits the general manager only “to sign contracts” and perform duties assigned by the Board.
- Executive Order No. 380 and IRR of P.D. 1594 require Board approval for negotiated infrastructure contracts not exceeding ₱50 million.
- Revised Administrative Code Sec. 51 mandates that contracts by corporate agencies b
Case Syllabus (G.R. No. 170530)
Procedural Background
- Petition for review on certiorari filed under Rule 45 seeking to annul and set aside the August 22, 2005 Decision of the Court of Appeals (CA) and its November 14, 2005 Resolution denying petitioner’s motion for reconsideration.
- The CA decision had reversed the June 8, 1998 Decision of the Regional Trial Court (RTC), Manila, Branch 14, which granted petitioner’s action for specific performance.
- The case reached the Supreme Court after the CA, upon remand by the Supreme Court on liberal interpretation grounds, dismissed petitioner’s complaint for lack of merit.
Factual Background
- In 1990, petitioner (a joint venture) was awarded the construction of Pier 2 and the rock causeway for the Port of San Fernando, La Union, pursuant to public bidding by the Philippine Ports Authority (PPA).
- An adjacent 4,280-square-meter area was earmarked for reclamation as part of the overall port development.
- On October 1, 1992, petitioner offered to undertake the reclamation work for ₱36,294,857.03 as extra work under the existing contract.
- PPA’s Assistant General Manager replied on December 18, 1992, conditioning a Notice of Award on petitioner reducing its price to ₱30,794,230.89 and subject to “approval of higher authority.”
- On August 26, 1993, PPA issued a formal Notice of Award for Phase I of the reclamation project in the amount of ₱30,794,230.89, instructing petitioner to sign the contract and post performance security, subject to additional conditions:
- Completion of fendering at Pier 2 and the Port of Tabaco.
- Exclusion of mobilization/demobilization costs unless covered in a Supplemental Agreement.
- The PPA Board of Directors, at its September 9, 1994 meeting, declined to approve the Supplemental Agreement by resolution, citing lack of legal basis to negotiate a supplemental contract for a project distinct from the original Pier 2 construction.
Trial Court Proceedings
- Petitioner filed a complaint for specific performance and damages on June 30, 1997, alleging PPA’s unjustified refusal to conclude the reclamation contract.
- Prayer for relief: (a) execution of the contract for ₱30,794,230.89; (b) actual and exemplary damages of ₱1,000,000.00 each; (c) attorney’s fees of ₱300