Topic: Conflict of Interest

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

[G.R. No. 183789 : August 24, 2011]

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION,

PETITIONER, VS. POZZOLANIC PHILIPPINES INCORPORATED, RESPONDENT.

PEREZ, J.:

The Facts

In 1986, Pozzolanic Australia won the public bidding for the purchase of the fly ash
generated by NPC's power plant in Batangas. Pozzolanic Australia then negotiated with
NPC for a long-term contract for the purchase of all fly ash to be produced by NPC's future
power plants. NPC accepted Pozzolanic Australia's offer and they entered into a long-term
contract, dated 20 October 1987, denominated as "Contract for the Purchase of Fly Ash of
Batangas Coal-Fired Thermal Power Plant Luzon" (the Batangas Contract). Under Article I
of the contract, NPC, referred to therein as the "CORPORATION," granted Pozzolanic
Australia, the "PURCHASER," a right of first refusal to purchase the fly ash generated by the
coalfired plants that may be put up by NPC in the future.

The specific provision of the contract states: PURCHASER has first option to
purchase Fly Ash under similar terms and conditions as herein contained from the second
unit of Batangas Coal-Fired Thermal Plant that the CORPORATION may construct.
PURCHASER may also exercise the right of first refusal to purchase fly ash from any new
coal-fired plants which will be put up by CORPORATION. In 1988, while the necessary
clearances and approvals were being obtained by Pozzolanic Australia in connection with
the operation of its fly ash business in the Philippines, its major stockholders decided that it
would be more advantageous for the company to organize a Philippine corporation and to
assign to such corporation Pozzolanic Australia's rights to the commercial use of fly ash in
the Philippines.

Accordingly, in April 1989, respondent Pozzolanic was formally incorporated to take

over Pozzolanic Australia's business in the Philippines. Respondent then commenced to
exercise its rights under the Batangas contract in June, 1989. In 1998, the Masinloc Coal-
Fired Thermal Power Plant (Masinloc Plant) started operations to provide power for NPC.
Late that year, respondent began the installation of its fly ash processing equipment in the
Masinloc Plant and began off taking the fly ash produced therein.
 Subsequently, on 15 February 1999, NPC and respondent, on an interim basis and
prior to the conduct of a public bidding for the contract to purchase the Masinloc Plant's fly
ash, executed a contract whereby respondent was given the right to purchase the said fly
ash for a period of one year. The fourth and fifth "WHEREAS" clauses of the contract
provide: WHEREAS, under the `Contract for the Purchase of the Fly Ash of Batangas Coal-
Fired Thermal Power Plant' dated 20 October 1987, PURCHASER was granted the right of
first refusal over any and all fly ash that may be produced by any of NPC's coal-fired power
plants in the Philippines;

WHEREAS, NPC intends to bid out the long term contract for the Fly Ash that may
be produced by the Masinloc Coal Fired Thermal Power Plant subject to the second
paragraph of Article I of the original contract between the parties which was signed on 20
October 1987 giving PURCHASER the right of first refusal. In October 1999, the Sual Coal-
Fired Power Plant started providing electricity in the Luzon region. NPC thereafter caused to
be published in the Philippine Star and the Manila Bulletin an "Invitation to Pre-Qualify and to
Bid," inviting all interested buyers to pre-qualify for the purchase of fly ash from the Masinloc
and/or Sual Power Plants.

As a result, respondent sent letters to NPC calling its attention to respondent's right
of first refusal under the Batangas Contract. It also demanded that any tender documents to
be issued in connection with the bidding on the right to purchase the Masinloc and Sual
Plants' fly ash include notices informing prospective bidders of respondent's right of first
refusal.

In a letter dated 7 March 2000, NPC informed respondent that it had decided to defer
indefinitely the bidding on the right to purchase the Masinloc Plant's fly ash and to proceed
first with the bidding on the right to purchase the Sual Plant's fly ash. Thus, on 7 April 2000,
NPC released the tender documents for the bidding on the Sual Plant's fly ash, which tender
documents made no reference to respondent's right of first refusal.

This prompted respondent to file a complaint with the trial court praying that NPC be
ordered to allow Pozzolanic to exercise its right of first refusal by permitting it to match the
price and terms offered by the winning bidder and by awarding the contract for the purchase
of the Sual Plant's fly ash to Pozzolanic if it matches the price and terms offered by said
winning bidder.

This complaint was dismissed by the trial court on the ground of forum shopping, it
appearing that the Province of Zambales, et al. had previously filed a case against
respondent and NPC, claiming exclusive right to withdraw the fly ash of the Masinloc Plant.
Respondent appealed the order of dismissal to the Court of Appeals. CA affirmed the
decision of the trial court.

Issue

Whether or not the right of first refusal is invalid for being contrary to public policy?

Ruling of the Court

Yes, the right of first refusal granted to respondent in the Batangas Contract
invalid for being contrary to public policy as the same violates the requirement of
competitive public bidding in the award of government contracts, for the following
reasons:

(1) The grant to respondent of the right of first refusal constitutes an unauthorized
provision in the contract that was entered into pursuant to the bidding.
 By respondent's own admission, the right of first refusal granted to it was
"contractually bargained for and acquired from NPC after it won the public bidding for
the purchase of the fly ash produced by the Batangas Power Plant. This clearly
indicates that the right of first refusal was not included in the bid documents
presented to the other bidders who participated in the bidding. As a result, the
contract signed by NPC and respondent is different from that which was bidded out.

As pointed out by the Court in Agan, if the winning bidder is allowed to later
include or modify certain provisions in the contract awarded such that the contract is
altered in any material respect, then the essence of fair competition in the public
bidding is destroyed. A public bidding would be a farce if, after the contract is
awarded, the winning bidder may modify the contract and include provisions which
are favorable to it that were not previously made available to the other bidders. The
government cannot enter into a contract with the highest bidder and incorporate
substantial provisions beneficial to him, not included or contemplated in the terms
and specifications upon which the bids were invited.

The grant of the right of first refusal in this case did not only substantially
amend the terms of the contract bidded upon, so that resultantly, the other bidders
thereto were deprived of the terms and opportunities granted to respondent after it
won the public auction, it so altered the bid terms - the very admission by all parties
that the disposal of fly ash must be through public bidding - by effectively barring any
and all true biddings in the future. The grant of first refusal was a grant to respondent
of the right to buy fly ash in all coal-fired plants of NPC. Proceeding from the afore-
cited jurisprudence, the Batangas Contract is, consequently, a nullity.

(2) The right to buy fly ash precedes and is the basis of the right of first refusal,
and the consequent right cannot be acquired together with and at the same
time as the precedent right.

The right of first refusal has long been recognized, both legally and
jurisprudentially, as valid in our jurisdiction. It is significant to note, however, that in
those cases where the right of refusal is upheld by both law and jurisprudence, the
party in whose favor the right is granted has an interest on the object over which the
right of first refusal is to be exercised. In those instances, the grant of the right of first
refusal is a means to protect such interest.

In the case at bar, however, there is no basis whatsoever for the grant to
respondent of the right of first refusal with respect to the fly ash of NPC power plants
since the right to purchase at the time of bidding is that which is precisely the bidding
subject, not yet existent much more vested in respondent.

It is significant to note that, in the tender documents for the bidding of the fly
ash of the Masinloc Power Plant, NPC gave respondent the opportunity to top the
highest bid by fifteen percent (15%). Respondent protested this, however, as an
infringement upon its alleged right of first refusal to purchase the Masinloc fly ash, as
supposedly guaranteed by the Batangas Contract.

In effect, therefore, in asserting its right of first refusal, what respondent is

asking is that it be given undue advantage over any other party interested to
purchase the fly ash of NPC's power plants. Obviously, this cannot be countenanced.
It is inherent in public biddings that there shall be a fair competition among the
bidders. The specifications in such biddings provide the common ground or basis for
 the bidders. The specifications should, accordingly, operate equally or
indiscriminately upon all bidders.

(3) The right of first refusal is against the public policy that contracts must be
awarded through public bidding.

In this jurisdiction, public bidding is the established procedure in the grant of

government contracts. The award of public contracts through public bidding is a
matter of public policy. Thus, respondent's right of first refusal cannot take
precedence over the dictates of public policy.

The right of first refusal of respondent being invalid, it follows that it has no
binding effect. It does not create an obligation on the part of petitioner to
acknowledge the same. Neither does it confer a preferential right upon respondent to
the fly ash of NPC's power plants.

Based on the foregoing, the Sual Contract is clearly a negotiated contract by

virtue of which, NPC awards to respondent the right to withdraw the fly ash of the
Sual Plant - without public bidding - in exchange for which, respondent (1) waives its
rights to the fly ash of the Masinloc Plant and (2) consents to withdraw its case
against NPC. As a result, the Sual Contract is invalid for failure to comply with the
rules on public bidding.

The foregoing principles on the necessity of a public bidding for all

government contracts obviously apply to the Masinloc Contract as well, the same
being a public contract since one of the parties thereto is a government entity. While
its terms do not expressly provide that the same was executed pursuant to the right
of first refusal granted to respondent under the Batangas Contract, the circumstances
under which it was drafted, as narrated above, clearly indicate that the Masinloc
Contract is a recognition of the challenged right of first refusal. The case filed by
respondent for the recognition and enforcement of its right of first refusal was settled
only after the execution of the Masinloc Contract, pursuant to which, respondent was
awarded the exclusive right to withdraw the fly ash of the Masinloc Power Plant
without the benefit of a public bidding.

As adverted to above, the disposal of NPC power plants' fly ash is governed
by COA Circular Nos. 86-264 and 89-296.These circulars direct that public auction
shall be the primary mode of disposal of assets of the government and sale through
negotiation shall be resorted to only in case of failure of public auction. For failure to
abide by the requirement of a public bidding in the disposal of government assets,
this Court is left with no option but to likewise declare the Sual and Masinloc
Contracts null and void.

In conclusion, this Court stresses that although a right of first refusal is a

contractual prerogative recognized by both law and jurisprudence, the grant of such
right in this case is invalid for being contrary to public policy.

WHEREFORE, we GRANT the petition for review on certiorari. The Decision dated
30 April 2008 and Order dated 27 June 2008 of the Regional Trial Court of Quezon City,
Branch 96 in Civil Case No. Q-00-40731 are hereby REVERSED AND SET ASIDE. Further,
the Batangas, Sual and Masinloc Contracts are hereby declared NULL AND VOID for being
contrary to law and public policy. Petitioner is hereby ordered to conduct a bidding of the
right to purchase the fly ash produced by the Batangas, Masinloc and Sual Power Plants
within thirty (30) days from the finality of this Decision.
 SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

[G.R. No. 237837. June 10, 2019.]

EMMANUEL CEDRO ANDAYA, ATTY. SYLVIA CRISOSTOMO BANDA, JOSEFINA SAN

PEDRO SAMSON, ENGR. ANTONIO VILLAROMAN SILLONA, BERNADETTE TECSON
LAGUMEN, AND MARIA GRACIA DE LEON ENRIQUEZ, petitioners, vs. FIELD
INVESTIGATION OFFICE OF THE OFFICE OF THE OMBUDSMAN, respondent.

PERLAS-BERNABE, J:

The Facts

At the time material to this case, Andaya was Acting Director of the National Printing
Office (NPO) while Atty. Banda was Chairman, Samson was Vice Chairman, and Sillona,
Lagumen, and Enriquez were Members of the Bids and Awards Committee (BAC).

On September 2, 2010, after obtaining a certification of availability of funds, the NPO

Technical Working Group made a purchase request to the BAC for the checkup, repair, and
supply parts of Elevator II with an estimated cost of P680,000.00. Three (3) suppliers
submitted their respective quotations, namely, Eastland Printink, Inc. (EPI), C.A. Enterprises,
and Giraqui Trading.

On December 13, 2010, however, the BAC passed a Resolution stating that it
would resort to negotiated procurement for the following reasons: (a) the delay in the
elevator's repair would hamper the NPO's operations which will result in considerable losses
on the part of the government; and (b) the allocated budget for the elevator's repair must be
disbursed before the end of the fiscal year for it not to revert to the general fund. The
Resolution was approved by Andaya and the Notice of Award was thereafter issued to EPI,
having the lowest quotation in the amount of P665,000.00.

This prompted respondent Field Investigation Office (FIO) of the Ombudsman to file
a complaint against petitioners for Serious Dishonesty, Gross Neglect of Duty, Grave
Misconduct, and Conduct Prejudicial to the Interest of the Service, alleging that the BAC
failed to justify the recourse to negotiated procurement under emergency cases pursuant to
Section 53 (b) of Republic Act (RA) No. 9184 for the repair of an unserviceable elevator. The
FIO alleged that an unserviceable elevator did not pose any imminent danger to life or
property nor was immediate action necessary to prevent damage to or loss of life and
property, or to restore vital services, infrastructure facilities, and other public utilities. Further,
the contract was awarded to EPI despite the latter being a printing company and not a
contractor for elevator repair and maintenance. As for Andaya, the FIO added that he acted
with gross inexcusable negligence in allowing the BAC to adopt negotiated procurement
without complying with the formalities under RA 9184.

In defense, petitioners claimed that their resort to negotiated procurement was

justified as the elevator in question was used to transfer heavy rolls and pallets of paper, as
well as printed forms from one floor to another. Moreover, they believed in good faith that the
repair was urgent and necessary to restore public services and infrastructure facilities and
they had no intent to circumvent RA 9184 or to cause any damage to the government or the
NPO. Finally, they maintained that EPI is a qualified contractor, as the company's secondary
purpose is "to engage in general construction business."

Ombudsman Ruling

In a Decision dated June 27, 2016, the Ombudsman found petitioners guilty of
Gross Neglect of Duty and Grave Misconduct, and accordingly, dismissed them from
service. In ruling that petitioners were guilty of Grave Misconduct, the Ombudsman found
that they violated the rules of procurement under RA 9184 when they resorted to negotiated
procurement instead of conducting a public bidding, taking into account that the cost of the
contract was P665,000.00, which is beyond the threshold for alternative modes of
procurement. Likewise, the project was hastily awarded to EPI, a contractor engaged in
printing, not in elevator repair and services. Moreover, it observed that the public was not
duly notified of the award to EPI for failure to comply with the required publication of the
procurement in the Philippine Government Electronic Procurement System.

Further, petitioners failed to substantiate that immediate and compelling

justification exists in this case to dispense with public bidding. Contrary to petitioners'
explanation that immediate action was necessary to restore vital public services of the NPO,
records show that they resorted to negotiated procurement "in order not to hamper [the
NPO's] day to day transactions since the elevator has been inoperational since July 2010
and in order not to lose the budget." Likewise, the repair was undertaken only for the
convenience of the NPO employees in carrying documents in the NPO building; therefore,
the emergency procurement was not necessary to address an unforeseen emergency or to
restore vital services. Finally, the Ombudsman added that petitioners' negligence denied the
government of a fair system of determining the best possible price for its procurement.

Petitioners moved for reconsideration, which was denied in an Order 19 dated

October 10, 2016. Aggrieved, petitioners appealed to the CA via petition for review under
Rule 43 of the Rules of Court.

Court of Appeals Ruling

In a Decision dated August 31, 2017, the CA affirmed the Ombudsman's

Decision, finding that petitioners failed to justify their resort to negotiated procurement
considering that: (a) the elevator became non-functional in July 2010 but the purchase
request was made only in September 2010, thereby disproving the alleged immediacy of its
repair; (b) the elevator, which was merely used for carrying loads of paper and other printed
materials, is not indispensable to the NPO's mandate to provide printing services for the
government; and (c) the reversion of the budget allocation for the repair of the elevator to the
general fund is too flimsy a reason to dispense with the required public bidding. Stressing
that alternative modes of procurement can be resorted to only in highly exceptional cases,
the CA opined that petitioners' justifications failed to satisfy any of the extraordinary
circumstances under RA 9184 permitting resort to negotiated procurement. As such, it
affirmed the penalty of dismissal from the service meted by the Ombudsman.

Petitioners' motion for reconsideration was denied in a Resolution dated

February 23, 2018; hence, this petition.

Issue
 Whether or not petitioners' resort to negotiated procurement as an alternative mode
of procurement was proper and justified?

Ruling of the Court

No, petitioners’ resort to negotiated procurement is not proper. The petition is

bereft of merit.

Section 10, Article IV, in relation to Section 5, paragraphs (n) and (o), Article I of RA
9184, mandates that all acquisition of goods, consulting services, and the contracting for
infrastructure projects by any branch, department, office, agency, or instrumentality of the
government, including state universities and colleges, government-owned and/or -controlled
corporations, government financial institutions, and local government units shall be done
through competitive bidding. This is in consonance with the law's policy and principle of
promoting transparency in the procurement process, implementation of procurement
contracts, and competitiveness by extending equal opportunity to enable private contracting
parties who are eligible and qualified to participate in public bidding.

Public bidding is the primary process to procure goods and services for the
government. A competitive public bidding aims to protect public interest by giving it the best
possible advantages through open competition. It is precisely the mechanism that enables
the government agency to avoid or preclude anomalies in the execution of public contracts.
Strict observance of the rules, regulations, and guidelines of the bidding process is the only
safeguard to a fair, honest, and competitive public bidding.

Alternative methods of procurement, however, are allowed under RA 9184 which

would enable dispensing with the requirement of open, public, and competitive bidding, but
only in highly exceptional cases and under the conditions set forth in Article XVI thereof.
One of these alternative modes of procurement is negotiated procurement, which, pursuant
to Section 53 of RA 9184, may be availed by the procuring entity only in the following
instances, to wit:

Section 53. Negotiated Procurement. — Negotiated Procurement

shall be allowed only in the following instances:

a. In case of two (2) failed biddings as provided in Section 35 hereof;

b. In case of imminent danger to life or property during a state of calamity, or

when time is of the essence arising from natural or man-made calamities or
other causes where immediate action is necessary to prevent damage to or
loss of life or property, or to restore vital public services, infrastructure
facilities and other public utilities;

c. Take-over of contracts, which have been rescinded or terminated for

causes provided for in the contract and existing laws, where immediate
action is necessary to prevent damage to or loss of life or property, or to
restore vital public services, infrastructure facilities and other public utilities;

d. Where the subject contract is adjacent or contiguous to an on-going

infrastructure project, as defined in the IRR: Provided, however, That the
original contract is the result of a Competitive Bidding; the subject contract
to be negotiated has similar or related scopes of work; it is within the
 contracting capacity of the contractor; the contractor uses the same prices
or lower unit prices as in the original contract less mobilization cost; the
amount involved does not exceed the amount of the ongoing project; and,
the contractor has no negative slippage: Provided, further, That negotiations
for the procurement are commenced before the expiry of the original
contract. Whenever applicable, this principle shall also govern consultancy
contracts, where the consultants have unique experience and expertise to
deliver the required service; or,

e. Subject to the guidelines specified in the IRR, purchases of Goods from

another agency of the government, such as the Procurement Service of the
DBM, which is tasked with a centralized procurement of commonly used
Goods for the government in accordance with Letter of Instruction No. 755
and Executive Order No. 359, series of 1989.

xxxx xxxx xxxx xxx

In this case, competitive public bidding was dispensed with by petitioners for
the checkup, repair, and supply parts of Elevator II in the NPO building. However, as
correctly found by the Ombudsman and affirmed by the CA, petitioners' resort to
negotiated procurement as an alternative mode of procurement was not proper and
justified. Their reasons do not satisfy any of the highly exceptional
circumstances enumerated in Section 53 as above-quoted, particularly
paragraph (b), as records are bereft of evidence to show that the immediate
repair of the subject elevator was necessary to prevent damage to or loss of
life or property, or to restore vital public services, infrastructure facilities, and
other public utilities.

First, the alleged urgency of the repair of the subject elevator is belied by the fact that
the purchase request therefor was made only in September 2010, whereas it supposedly
became non-operational in July 2010. The delay in the submission of the purchase request
is inconsistent with the immediate nature of the service required and negates the existence
of an emergency.

Second, the elevator, which was merely used for carrying loads of paper and other
printed materials, is not indispensable to the NPO's mandate to provide printing services for
the government. To be sure, the NPO can continue with its day-to-day operations even
without the elevator, albeit, perhaps, with some inconvenience. Such inconvenience,
however, does not warrant a complete disregard of the required public bidding.

Finally, the adoption of negotiated procurement in order to utilize the funds allocated
for the repair and service of the elevator before the end of the fiscal year lest the amount
revert to the general fund is likewise devoid of legal justification. Clearly, therefore,
petitioners utterly failed to justify the negotiated procurement in this case.

All told, substantial evidence exists to hold petitioners guilty for Grave Misconduct
and Gross Neglect of Duty.

The petitioners grossly disregarded the law and were remiss in their duties in strictly
observing the directives of RA 9184, which resulted in undue benefits to EPI. Such gross
disregard of the law is so blatant and palpable that the same amounts to a willful intent to
subvert the clear policy of the law for transparency and accountability in government
contracts, thereby warranting the penalty of dismissal from the service pursuant to Section
46, Rule 10 of the Revised Rules on Administrative Cases in the Civil Service, with
accessory penalties. Considering that both Grave Misconduct and Gross Neglect of Duty are
of similar gravity and that both are punished by dismissal under the pertinent civil service
laws and rules applicable to petitioners, they are thus punished with the said ultimate
penalty, together with the attending disabilities.

Verily, it must be stressed that serious offenses, such as Grave Misconduct and
Gross Neglect of Duty, have always been and should remain anathema in the civil service.
They inevitably reflect on the fitness of a civil servant to continue in office. When an officer or
employee is disciplined, the object sought is not the punishment of such officer or employee,
but the improvement of public service and the preservation of the public's faith and
confidence in the government. Indeed, public office is a public trust, and public officers and
employees must at all times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead
modest lives. This high constitutional standard of conduct is not intended to be mere
rhetoric and taken lightly as those in the public service are enjoined to fully comply with this
standard or run the risk of facing administrative sanctions ranging from reprimand to the
extreme penalty of dismissal from the service, as in this case.

WHEREFORE, the petition is DENIED. The Decision dated August 31, 2017 and the
Resolution dated February 23, 2018 rendered by the Court of Appeals in CA-G.R. SP No.
149420 are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

[G.R. No. 140183. July 10, 2003.]

TEODORO K. KATIGBAK and BIENVENIDO E. MERELOS, petitioners, vs. THE
SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.
CORONA, J :
The Facts
The National Housing Authority (NHA) entered into a contract for the land
development of the Pahanocoy Sites and Services, Phase I, in Bacolod City with Arceo
Cruz of A.C. Cruz Construction. Before the project could be completed, however, the NHA
rescinded the contract and engaged the services of Jose Cruz of Triad Construction and
Development Corporation for the unfinished portion thereof. Consequently, Arceo Cruz
lodged a complaint with the Office of the Ombudsman.
After preliminary investigation, an information was filed with the Sandiganbayan
charging petitioners Teodoro K. Katigbak and Bienvenido Merelos as Chairman of the
Board of Directors and member of the Board of Directors, respectively, of the NHA and
their co-accused with the crime of violation of Section 3, paragraph (e) of RA 3019, as
amended. Specifically, the petitioners and their co-accused were indicted for having
allegedly conspired, through evident bad faith and manifest partiality, in unilaterally
rescinding the contract for land development with the private complainant, Arceo Cruz, and
subsequently awarding the same, without public bidding and at an exorbitant rate, to
private respondent, Jose Cruz, thereby granting unwarranted benefits to said private
respondent while causing damage and undue injury to the government and the private
respondent.
Upon arraignment, the petitioners and their co-accused, assisted by their counsels,
entered the plea of "not guilty" to the charge in the amended information. Pre-trial was
waived by the parties per Order dated March 18, 1997. Thereafter, trial on the merits
ensued during which the prosecution presented four witnesses. The prosecution rested its
case after the admission of its Exhibits with submarkings.
Petitioners, with prior leave of court, jointly filed a Demurrer to Evidence. The
Sandiganbayan promulgated the questioned Resolution denying the demurrer to evidence
of all the accused. Petitioners' joint motion for reconsideration was denied by the
Sandiganbayan. Undaunted, petitioners Teodoro Katigbak and Bienvenido Merelos filed
the present petition for certiorari and prohibition assailing the questioned resolutions of the
Sandiganbayan.

Issue
Whether or not the Sandiganbayan gravely abused its discretion amounting to lack
or want of jurisdiction when it denied petitioner’s demurrer to evidence?
 Ruling of the Court

Yes, petition should be granted.

In order to be held liable for violation of Section 3 paragraph (e) of RA 3019, as
amended, the following elements must concur: (1) the accused is a public officer
discharging administrative, judicial or official functions; (2) he must have acted with
manifest partiality, evident bad faith or inexcusable negligence; and (3) his action has
caused undue injury to any party, including the Government, or has given any party any
unwarranted benefit, advantage or preference in the discharge of his functions.
The foregoing testimonies of the prosecution witnesses did not disclose any role
played by the petitioners in the so-called "conspiracy loop" alleged by the public
respondent in its Comment. The testimony of private complainant Arceo Cruz dwelt
principally on the acts of accused Robert Balao in unilaterally rescinding the contract for
land development with the private complainant and then awarding the contract for the
unfinished portion of the project, without public bidding and at an exorbitant rate, to private
respondent Jose Cruz/Triad Construction. The same testimony also told of the damage
suffered by the private complainant because of the acts of accused Balao. Nowhere,
however, in his said testimony did it appear that petitioners participated in the decision to
rescind the subject contract and to award the unfinished portion of the project to the private
respondent. On the contrary, private complainant even absolved the petitioners of any
participation in the complained acts of their co-accused Balao by admitting that he never
accused any member of the NHA Board of Directors of anything in his complaint filed with
the Office of the Ombudsman.
A careful scrutiny of the documentary evidence adduced by the prosecution does
not support the charge of violation of Section 3, paragraph (e) of RA 3019, as amended, in
the instant information against the petitioners. Significantly, the said pieces of documentary
evidence were offered only for the purpose of establishing the participation and liability of
their co-accused, Robert Balao, as noted in the written Formal Offer of Exhibits of the
prosecution. The same was prepared and signed by Atty. Nicanor V. Villarosa, counsel of
the private complainant, with the written approval of Prosecutor Manuel M. Corpuz of the
Office of the Special Prosecutor. In this connection, the rule is explicit that courts should
consider the evidence only for the purpose for which it is offered.
The prosecution relies heavily on NHA Board Resolution No. 2453 dated March 12,
1992 to establish the alleged conspiracy between the petitioners and their co-accused.
This resolution purportedly approved the cancellation of the NHA contract for land
development with the private complainant on the ground of "mutual termination" and the
award of the contract for the unfinished portion of the project to the private respondent
Jose Cruz/Triad Construction. However, the Court is bothered by the unexplained failure of
the prosecution to include in its formal offer of exhibits such a very vital piece of evidence
in proving the existence of the alleged conspiracy among the petitioners. We emphasize
that any evidence a party desires to submit for the consideration of the court must formally
be offered by him. Such a formal offer is necessary because it is the duty of the judge to
rest his findings of fact and his judgment strictly on the evidence offered by the parties at
the trial; and no finding of fact can be sustained if not supported by such evidence.
Documents not regularly received in evidence during the trial will not be considered in
disposing of the issues in an action.
In view of the complete absence of evidence, both testimonial and documentary, to
prove the liability of the petitioners for the crime charged in the information, we find no
basis for respondent Sandiganbayan's conclusion in its assailed Resolution dated April 7,
1999 "that the prosecution has sufficiently proven the allegations in the Amended
Information and the elements of the offense" as against herein petitioners. Since the
petitioners satisfactorily demonstrated that the prosecution had failed to prove the crime
charged against them, respondent Sandiganbayan's denial of their motion to dismiss the
instant criminal case on demurrer to evidence constituted grave abuse of discretion. The
denial was a capricious and whimsical exercise of judgment equivalent to lack of
jurisdiction.
Indeed, there remains no further reason to hold the petitioners for trial. They have
the right to be protected against hasty, malicious and oppressive prosecution; to be secure
from an open and public accusation of a crime and from the trouble, expense and anxiety
of a public trial. Similarly situated is the State, which must be shielded at all times from
useless and expensive litigations that only contribute to the clogging of court dockets and
take a heavy toll on its limited time and meager resources.
WHEREFORE, in view of the foregoing, the instant petition for certiorari and
prohibition is hereby GRANTED. The assailed resolutions of the Sandiganbayan in
Criminal Case No. 22647 denying petitioners' demurrer to evidence are REVERSED and
SET ASIDE. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION
G.R. No. 236383, June 26, 2019

OFFICE OF THE OMBUDSMAN, PETITIONER, v. MARILYN H. CELIZ AND LUVISMINDA

H. NARCISO, RESPONDENTS.

REYES, A., JR., J.

The Facts
On November 20, 2007, the Department of Public Works and Highways (DPWH)
Region VI Director, Rolando M. Asis , submitted the approved Program of Works and
Estimates for the proposed Asphalt Overlay Project in Iloilo City to the DPWH Secretary. In
the program, it was estimated that the amount of P54,500,000.00 is necessary to
implement the project, which intends to repair about 2.4 kilometers of the Iloilo-Jaro
Diversion Road, starting from the Iloilo-Antique Road up to Dungon Bridge.
Former Iloilo City Mayor Jerry P. Treñas requested Director Asis to immediately
implement the project, in time for the upcoming Dinagyang Festival. Director Asis, thus,
requested then DPWH Secretary Ebdane for clearance to implement the project through
negotiated procurement. He reasoned that the project is urgent because this was the
primary route for the Dinagyang Festival, and there is a need to further promote tourism in
the region. On November 29, 2007, Secretary Ebdane approved the request.
On January 2, 2008, the BAC unanimously approved an unnumbered Resolution,
which recommended the direct negotiation of the contract for the Asphalt Overlay Project
to International Builders' Corporation (IBC). Director Asis approved the Resolution. Thus,
BAC Chairman Berna sent an invitation to the President of IBC, requesting them to submit
a quotation for the project, together with the other bid requirements. IBC's bid offer was
opened and negotiated at the DPWH Regional Office. The following day, the BAC
unanimously approved another unnumbered Resolution recommending the award of the
project to IBC, with an Approved Budget for the Contract in the amount of
P54,308,803.44.
Director Asis informed IBC of BAC's recommendation, with the caveat that the
Notice to Proceed cannot be issued until the funds to cover the contract cost are released.
In light of the unavailability of funds, Director Asis asked the IBC President whether they
were willing to take the risk of proceeding with the project, pending the release of an
appropriation. He likewise guaranteed to process the payment as soon as the funds for the
project are released. In response, the IBC President agreed to take on the risk, and
committed to immediately proceed with the implementation of the Asphalt Overlay Project.
Meanwhile, the Assistant Ombudsman for Visayas sent a letter to the Commission
on Audit (COA) Region VI, requesting the conduct of a special audit examination on the
Asphalt Overlay Project. The State Auditor reported that there were no entries in the books
showing that allotments were received, and that obligation requests were made for the
implementation of the project. Moreover, the DPWH Region VI informed the State Auditor
that there was no project contract submitted for certification as to the availability of
allotments and availability of funds.
Subsequently, the OMB Region VI Field Investigation Office (FIO) filed their
Complaint-Affidavit, charging the respondents and several other officials and employees of
the DPWH Region VI with violating Republic Act (R.A.) No. 9184 and R.A. No. 3019, and
holding them liable for Grave Misconduct. It was specifically alleged that the application of
negotiated procurement was unwarranted under the circumstances. There was also no
available appropriation at the time of the execution of the contract for the Asphalt Overlay
Project.
 In light of their participation in the procurement and implementation of the Asphalt
Overlay Project, the OMB Region VI FIO alleged that the respondents were guilty of Grave
Misconduct for patently intending to violate or disregard the procurement law, and for
violating Section 3(e) of R.A. No. 3019.
Ombudsman’s Ruling
In a Joint Resolution28 dated October 6, 2015, the OMB found probable cause to
charge the respondents with a violation of Section 3(e) of R.A. No. 3019. The OMB,
likewise, found all of them guilty of Grave Misconduct, and meted the penalty of dismissal
from the service, thus:
WHEREFORE, let the attached Information for Violation of Section 3(e) of RA No.
3019 be FILED against respondents Rolando M. Asis, Berna C. Coca, Luvisminda H.
Narciso, Fernando S. Tuares, Danilo M. Peroy and Marilyn H. Celiz.
Respondents Rolando M. Asis, Berna C. Coca, Luvisminda H. Narciso, Fernando
S. Tuares, Danilo M. Peroy and Marilyn H. Celiz are found GUILTY OF GRAVE
MISCONDUCT and hereby meted the penalty of DISMISSAL from the service, which shall
carry with it cancellation of eligibility, forfeiture of retirement benefits and the perpetual
disqualification from re-employment in the government service.
Court of Appeals Ruling
In the event that the penalty of dismissal can no longer be imposed due to their
separation from the service, it shall be converted into FINE amounting to respondents'
salary for ONE (1) YEAR, payable to the Office of the Ombudsman, and may be deducted
from their accrued leave credits or any receivable from their office. It is understood,
however, that the accessory penalties of forfeiture of retirement benefits, cancellation of
eligibility and perpetual disqualification to hold public office shall still be applied.

the CA found the respondents' appeal partially meritorious. Instead of Grave

Misconduct, they were deemed liable for Simple Misconduct because there was no
evidence of corrupt motives on their part. The dispositive portion of the CA's decision,
thus, reads:
WHEREFORE, the Petition For Review under Rule 43 filed by petitioners Marilyn
H. Celiz and Luvisminda H. Narciso is PARTIALLY GRANTED. The Office of the
Ombudsman's 6 October 2015 Joint Resolution in OMB-V-C-14-0182 and OMB-V-A-14-
0174 is MODIFIED. We find petitioners Marilyn H. Celiz and Luvisminda H. Narciso guilty
of SIMPLE MISCONDUCT and are hereby meted the penalty of SUSPENSION for ONE
(1) MONTH and ONE (1) DAY.
Petitioners who have not retired shall be REINSTATED after serving their
suspension. They shall be entitled to payment of backwages and all benefits from the time
that they served the foregoing suspension up to the time of their actual reinstatement.

xxxx xxxx xxxx xxxx

Disagreeing with the findings of the CA, the OMB filed the present petition for
review, attributing reversible errors on the CA. The OMB argues that the CA clearly found
that the respondents violated P.D. No. 1445 and R.A. No. 9184 in the procurement of the
Asphalt Overlay Project. For this reason, the OMB asserts that respondents, as BAC
members who assented to the violation of the relevant procurement laws, should be held
liable for Grave Misconduct.
Issue
 Whether or not the application of negotiated procurement by DPWH Region VI was
unwarranted under the circumstances?

Ruling of the Court

No, the respondents violated R.A. No. 9184 and P.D. No. 1445 in the
procurement of the Asphalt Overlay Project.
Generally, all government procurement must be done through competitive
bidding.44 Alternative methods of procurement, however, are available under the
conditions provided in R.A. No. 9184. For infrastructure projects in particular, the only
alternative mode is negotiated procurement.
In negotiated procurement, the procuring entity directly negotiates the contract with
a technically, legally and financially capable supplier, contractor or consultant. It may be
resorted to in the following cases:
(a) when there has been a failure of public bidding for the second time;

(b) when there is imminent danger to life or property during a state of calamity, or
when time is of the essence arising from natural or man-made calamities or other causes
where immediate action is necessary to prevent damage or loss of life or property, or to
restore vital public services, infrastructure facilities and other public utilities;
(c) in take-over of contracts that were rescinded or terminated for cause and
immediate action is necessary;
(d) where the contract is adjacent or contiguous to an on-going infrastructure
project, the original contract of which was the result of a competitive bidding; or
(e) under other instances specified in the implementing rules and regulations of
R.A. No. 9184.
xxxx xxxx xxxx xxxx
As aptly held by the CA, there must be an immediate and compelling need to justify
negotiated procurement other than that provided by the respondents. The requirement of
urgency is qualified under the law as "arising from natural or man-made calamities or other
causes where immediate action is necessary to prevent damage to or loss of life or
property. As such, it does not cover situations outside this qualification.
Section 53(b), Article XVI of R.A. No. 9184 evidently does not contemplate a yearly
occasion and the promotion of tourism to justify resort to negotiated procurement. Since
the Dinagyang Festival is an annual event that has always been scheduled to take place in
the middle of January, there was plenty of time for the preparation of the necessary
infrastructure. Furthermore, aside from the promotion of tourism, there was no showing
that the repairs were necessitated by a calamity, that there was imminent danger to life or
property, or that there was a loss of vital public services and utilities.
Sufficient appropriation is also required before the government enters into a
contract. While Sections 85 and 86 of the Government Auditing Code requires an
appropriation prior to the execution of the contract, the enactment of R.A. No. 9184
modified this requirement by requiring the availability of funds upon the commencement of
the procurement process.
The requirement of availability of funds before the execution of a government
contract, however, has been modified by R.A. No. 9184. The said law presents a novel
policy which requires, not only the sufficiency of funds at the time of the signing of
the contract, but also upon the commencement of the procurement process.
Clearly, the respondents and the other DPWH officials intended to circumvent the
requirement that there should be prior appropriation. The execution of the contract with
IBC, as well as the issuance of the Notice of Award, was delayed until such time that the
SARO was issued. By the time the funds for the project were released, the award of the
contract to IBC was already a foregone conclusion. IBC had commenced construction
activities as early as January 10, 2008, almost a year prior to the execution of the contract
for the project.
WHEREFORE, premises considered, the present petition is GRANTED. The
Decision dated September 15, 2017 and the Resolution dated December 11, 2017 of the
Court of Appeals in CA-G.R. CEB-SP. No. 10438 are hereby REVERSED and SET
ASIDE. A new judgment is entered finding respondents Marilyn H. Celiz and Luvisminda
H. Narciso GUILTY of GRAVE MISCONDUCT. As such, they are DISMISSED from the
government service with all the accessory penalties of cancellation of eligibility, forfeiture
of leave credits and retirement benefits, and disqualification for re-employment in the
government service.
SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 204171, April 15, 2015

OFFICE OF THE OMBUDSMAN, Petitioner, v. WILFREDO B. AGUSTINO, RUDY G.

CANASTILLO, EDWARD G. CANASTILLO, CECIL C. CALIGAN, Respondent.

MENDOZA, J.:

The Facts

In 1998, the national government appropriated Twenty Eight Million Pesos

(P28,000,000.00) for the construction of Junction Bancal-Leon-Camandag Road in Leon,
Iloilo, with an approximate stretch of 1.003 kilometers, to be implemented by the
Department of Public Works and Highways.

After a public bidding, the project was awarded to Roma Construction and
Development Corporation (Roma Construction) for a total contract price of
P26,851,792.82, to be completed from January 20, 2001 until January 14, 2002. The
corresponding contract was signed by and between DPWH-Region VI Assistant Regional
Director, respondent Rudy Canastillo and Roma Construction represented by Rogelio Yap.
It was duly approved by DPWH-Regional VI Regional Director, respondent Wilfredo
Agustino. DPWH-Region VI directed the Iloilo Sub-District Engineering Office in Sta.
Barbara to manage the implementation of the project, with respondent Edward Canastillo
as the acting head and respondent Cecil Caligan as the acting assistant head.
On July 18, 2002, Rev. Fr. Meliton B. Oso, requested the Case Building Team of
the Office of the Ombudsman-Visayas to conduct the necessary fact-finding investigation.
In the course of its investigation, the Case Building Team required Romulo C. Cabana, Sr.,
then Mayor of Leon, Iloilo, who was the whistleblower of the alleged irregularities, to
substantiate his allegations.

In his affidavit, Cabana enumerated three irregularities in the controversial project.

First, the contract completion dates were unjustifiably revised several times to
delay the project;

Second, barangay officials and residents testified that it was Timberland

Construction, not Roma Construction, that was working on the project.
Lastly, under Item No. 102 (3) of the original contract, rock excavation of
15,275.50 cum. costing P6,248,443.28 was supposed to be undertaken through the use of
dynamites. Change Order No. 1, however, unnecessarily increased the volume of the solid
rock for excavation to 28,404.36 cu. m. costing P11,618,803.46 even though no increase
in blasting activities was observed. Change Order No. 1 was submitted, reviewed,
recommended and approved by respondents Caligan, Edward Canastillo, Rudy Canastillo,
and Agustino, respectively.

The Case Building Team recommended that an administrative complaint be filed

against the respondents. The recommendation was approved by the Deputy Ombudsman
for the Visayas on April 1, 2003. Thus, the subject administrative case for grave
misconduct was filed.

Ombudsman’s Ruling

In its decision, dated February 28, 2005, the Ombudsman held that the
respondents committed grave misconduct. On the issue of improper extension of contract
completion, it stated that the "Time Suspension Orders/Reports" of Caligan prevailed over
the bare allegations of Cabana. Similarly, on the issue of subcontracting, the Ombudsman
held that it needed more than mere presence of heavy equipment of Timberland
Construction to conclude that Roma Construction indeed had the project illegally
subcontracted.

On the issue of the solid rock excavation under Item No. 102 (3) of the project
contract, however, the Ombudsman found that there was manifest irregularity. Because of
Change Order No. 1, the solid rock excavation with a volume of 15,275.50 cu. m. costing
P6,248,443.28, in the original project contract, was increased to 28,404.36 cu. m. at
P11,618,803.46. Caligan even testified before the Sangguniang Panlalawigan of Iloilo on
July 1, 2002 that the 28,404.38 cu. m. of solid rocks were actually excavated from the
mountainside and pushed down the ravine as excess materials.
 The respondents moved for reconsideration but their motion was denied by the
Ombudsman-Visayas in its April 21, 2005 order, which was approved by Acting
Ombudsman Orlando C. Casimiro on March 6, 2008.

Aggrieved, the respondents filed a petition for review under Rule 43 of the Rules of
Court before the CA.

Court of Appeals Ruling

In its assailed November 23, 2011 Decision, the CA granted the petition. It
reversed and set aside the Ombudsman's finding of administrative liability against the
respondents. The CA was of the view that the evidence presented to prove the
respondents' culpability for grave misconduct was insufficient. It found that the
Ombudsman erroneously concluded that P11,618,803.46, the amount allotted for
28,404.38 cu. m. of rock excavation under Change Order No. 1, was the actual amount
expended, when Change Order No. 2 decreased the volume to 16,518.00 cu. m. costing
P6,738,894.23. The CA further stated that Change Order No. 2 should not be considered
as a mere afterthought absent proof that it was issued to circumvent the law. It held that "
[u]nless it can be shown cogently and clearly that Change Order No. 2 was issued to
circumvent the law, [it] will always uphold the presumption of regularity in the performance
of official functions, and authenticity of official documents."

The Ombudsman filed its motion for reconsideration, but it was denied by the CA in
the assailed September 27, 2012 Resolution. Hence, this petition.

Issue

Whether or not respondents are liable for grave misconduct?

Ruling of the Court

Yes, respondents’ actions constitute grave misconduct.

In government construction projects, both the contractor and the government

agency are required to prepare a document known as a detailed estimate to provide the
costs of the project. During the bidding process, a prospective bidder submits a detailed
estimate, which includes the unit prices of construction materials, labor rates and
equipment rentals.18 In this case, Roma Construction and the DPWH-Region VI submitted
a detailed estimate for the road construction project. The central issue revolves around
Item No. 102 (3), covering the cost for solid rock excavation.

The respondents rigorously defended the actions of Roma Construction in

deviating from the detailed estimates. Although the respondents presented proof that
16,518.00 cu. m. of solid rock were excavated, they did not present a scintilla of evidence
to establish that blasting materials were used in the project. They never enlightened this
Court if they utilized 5,092 kgs. of dynamite, as indicated in the detailed estimates. The
change orders, subsequently issued by the respondents supposedly to provide another
detailed estimate of the project cost, did not indicate the discontinuance of the use of
blasting materials by the contractor. The respondents could have easily presented
documents to support the procurement of the materials for solid rock excavation, but they
failed to do so.

The government allotted a portion of the public funds for the blasting activities and,
yet, the respondents failed to faithfully apply those funds for its intended purpose. Such
omission without any justification cannot be dismissed. If the Court were to overlook this
questionable incident, then it would set a perilous precedent that detailed estimates for
government construction projects could be treated as mere scraps of paper. It defeats the
purpose of properly delineating the cost of the project for greater accountability.

Several circumstances demonstrate that Change Order No. 2 was indeed issued
as a mere afterthought, following the July 2002 investigation of the Sangguniang
Panlalawigan of Iloilo. First, Caligan during the investigation, only mentioned Change
Order No. 1 and blasting as the method for solid rock excavation. As the Ombudsman
correctly observed, Caligan could have then easily mentioned Change Order No. 2 to
remove the clouds of doubt surrounding the project.

Second, Change Order No. 2 did not contain the required detailed estimate of the
unit cost of the project. Notably, unlike Change Order No. 1 which was issued after an "as-
staked survey," Change Order No. 2 simply emerged without any technical survey therein.

Third, the undated Change Order No. 2 was forwarded to the office of respondent
Agustino only on July 19, 2002, after the investigation of the Sangguniang Panlalawigan.
Surprisingly, even the DPWH itself, through its own Fact-Finding Committee, which was
tasked to conduct its investigation on the incident of irregularities over the project, never
mentioned Change Order No. 2.

All these circumstances, taken together, destroy the presumption of regularity in

the performance of official functions and authenticity of official records. Change Order No.
2, which was conveniently made to escape liability, cannot be given any credence by this
Court. Such order was merely issued to make the solid rock excavation more acceptable
and to prevent the scrutiny of the project. Were it not for the investigation conducted by the
Sangguniang Panlalawigan of Iloilo, the respondents would have continued their
misconduct and profited from their misdeeds. Verily, the Court can only imagine the ill
consequences if the Sangguniang Panlalawigan of Iloilo and the Office of the Ombudsman
did not intervene and uncovered the anomalies surrounding the project.

The Court holds all the respondents administratively liable for grave misconduct. As
stated in the Ombudsman decision, Caligan and Edward Canastillo had direct knowledge
of the day-to-day activities in the project site, they being the acting assistant head and
acting head of the Iloilo Sub-Engineering District, respectively. Being in the frontline, they
had actual knowledge that there were no blasting activities of that magnitude in the area.

Rudy Canastillo and Agustino did not have a direct hand in the implementation of
the project, but the questionable change orders were recommended and approved by
them. Following the IRR of P.D. No. 1594 Agustino, as Regional Director, did not only
approve the change orders, but also sent his technical staff to conduct an on-the-spot
investigation to verify the need for the work to be prosecuted.This should have allowed him
to discover the irregularities in the project. The IRR would also indicate that the change
order was recommended for approval by Rudy Canastillo, as Assistant Regional Director,
and that he was empowered to review and evaluate the change orders. Yet, he kept silent
on the anomalies of the project. Their deliberate failure to prevent the questionable
occurrences in the implementation of the project indicated that they had knowledge of the
misdeeds and were in conspiracy with Caligan and Edward Canastillo.

WHEREFORE, the petition is GRANTED. The November 23, 2011 Decision and
the September 27, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 03526 are
REVERSED and SET ASIDE. The Decision, dated February 28, 2005, and the Order,
dated April 21, 2005, of the Office of the Ombudsman in Administrative Case No. OMB-V-
A-03-0204-D, finding Wilfredo Agustino, Rudy Canastillo, Edward G. Canastillo and Cecil
C. Caligan GUILTY of GRAVE MISCONDUCT and ordering their DISMISSAL from
government service, are hereby REINSTATED. The respondents are also perpetually
disqualified for reemployment in the government service.