796 Phil. 752
VELASCO JR., J.:
In due course, PSALM issued a Notice of Award dated April 30, 2014 in favor of TPVI, declaring the latter as the Winning Bidder. The execution of a Land Lease Agreement (LLA) and Assets Purchase Agreement (APA) in favor of TPVI, however, was subject to SPC's non-exercise of its Right to Top. The pertinent portion of the Notice of Award provides:[4]
TPVI SPC a. Purchase Price 441,191,500.00 211,391,388.88 b. Rentals 588,735,000.00 588,735,000.00 c. Option Price 58,873,500.00 58,873,500.00 Financial Bid, PhP 1,088,800,000.00 858,999,888.88
In accordance with the bidding procedures for the sale of the 153.1MW Naga Power Plant dated 6 February 2014, the Power Sector Assets and Liabilities Management Corporation (PSALM) Privatization Bids and Awards Committee (PBAC) hereby issues this Notice of Award which declares that TPVI is the Winning Bidder for the Sale of NPP.On the assumption that SPC validly exercised its Right to Top, PSALM executed the NPPC-APA and NPPC-LLA in SPC's favor, cancelling TPVI's Notice of Award in the process. The Right to Top and the resultant agreements from its exercise, however, were subsequently nullified by the Court through its September 28, 2015 Decision, the dispositive portion of which reads:
PSALM's execution of the APA, however, shall be subject to the second paragraph of Section IB-20 (Award to the Winning Bidder) of the Bidding Procedures, which provides that: "PSALM's entering into the Asset Purchase Agreement with the Winning Bidder shall be subject to SPC's rights under Section 3.02 of the LLA. Hence, if the exercise of the rights of SPC under Section 3.02 of the LLA is legally and validly consummated, PSALM shall not enter into the Asset Purchase Agreement with the Winning Bidder. Should SPC not exercise its rights under Section 3.02 of the LLA or if the exercise of the rights of SPC under Section 3.02 of the LLA is not legally and validly consummated, upon notice by PSALM, the Winning Bidder must enter into and fully and faithfully comply with the Asset Purchase Agreement."
WHEREFORE, the petition is hereby GIVEN DUE COURSE and the writ prayed for accordingly GRANTED. The right of first refusal (right to top) granted to Saicon Power Corporation under the 2009 Naga LBGT-LLA is hereby declared NULL and VOID. Consequently, the Asset Purchase Agreement (NPPC-APA) and Land Lease Agreement (NPPC-LLA) executed by the Power Sector Assets and Liabilities Management Corporation and SPC are ANNULLED and SET ASIDE.Petitioner Sergio R. Osmeña III (Osmeña) and respondents PSALM and SPC filed their respective motions for reconsideration. Meanwhile, respondent TPVI filed the instant Manifestation/Motion wherein it maintained that the nullification of SPC's Right to Top calls for the reinstatement of the cancelled April 30, 2014 Notice of Award in its favor.
No costs.
SO ORDERED.
Anything in these bidding procedures notwithstanding, PSALM's entering into the Asset Purchase Agreement with the Winning Bidder shall be subject to SPC's rights under Section 3.02 of the LLA. Hence, if the exercise of the rights of SPC under Section 3.02 of the LLA is legally and validly consummated, PSALM shall not enter into the Asset Purchase Agreement with the Winning Bidder. Should SPC not exercise its rights under Section 3.02 of the LLA or if the exercise of the rights of SPC under Section 3.02 of the LLA is not legally or validly consummated, upon Notice by PSALM, the Winning Bidder must enter into and fully and faithfully comply with the Asset Purchase Agreement. (emphasis added)Tucked at the end of the guidelines, however, is a severability clause that reads:[8]
IB-28 General ConditionsContrary to the postulations of respondents PSALM and SPC, the nullification of the Right to Top did not change the complexion of the bidding. By no means should this be considered an alteration of the terms of the public bidding, let alone a material one, for it was clearly a contingency expressly covered by the provisions of the Bidding Procedure as evidenced by the severability clause.
x x x x
26. If any one or more of the provisions of the Bidding Procedures or any part of the bidding package is held to be invalid, illegal or unenforceable, the validity, legality, or enforceability of the remaining provisions will not be affected thereby and shall remain in full force and effect. (emphasis added)
Article 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.The Court explained in The Wellex Group, Inc. v. U-Land Airlines, Co., Ltd.[11] that, under Art. 1185, if an obligation is conditioned on the non-occurrence of a particular event at a determinate time, that obligation arises (a) at the lapse of the indicated time, or (b) if it has become evident that the event cannot occur. To illustrate:[12]
x x x x
Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. x x x (emphasis added)
Petitioner Wellex and respondent U-Land bound themselves to negotiate with each other within a 40-day period to enter into a share purchase agreement. If no share purchase agreement was entered into, both parties would be freed from their respective undertakings.In the case at bar, PSALM's obligation to award the contract in TPVI's favor was dependent on the non-occurrence of an event: SPC's legal and valid exercise of its Right to Top. As phrased by PSALM: "the approval of the sale to TPVI was a conditional one, the consummation of which is dependent on the non-exercise by SPC of its right to top."[13] It has become apparent, however, that such event will never occur. SPC can never legally and validly invoke its Right to Top in view of its nullity. The condition, therefore, is deemed complied with by operation of law, and the obligation to execute the purchase contracts in favor of TPVI, due and demandable.
It is the non-occurrence or non-execution of the share purchase agreement that would give rise to the obligation to both parties to free each other from their respective undertakings. This includes returning to each other all that they received in pursuit of entering into the share purchase agreement.
At the lapse of the 40-day period, the parties failed to enter into a share purchase agreement. This lapse is the first circumstance provided for in Article 118.5 that gives rise to the obligation. Applying Article 1185, the parties were then obligated to return to each other all that they had received in order to be freed from their respective undertakings.
However, the parties continued their negotiations after the lapse of the 40-day period. They made subsequent transactions with the intention to enter into the share purchase agreement. Despite that, they still failed to enter into a share purchase agreement. Communication between the parties ceased, and no further transactions took place.
It became evident that, once again, the parties would not enter into the share purchase agreement. This is the second circumstance provided for in Article 1185. Thus, the obligation to free each other from their respective undertakings remained.
14.16. SeverabilityThus, SPC was fully aware of the possibility that the Land-Based Gas Turbine (LBGT)-LLA provisions, the Right to Top included, would not necessarily be upheld by the courts at every turn.
If any one or more of the provisions of this Agreement is declared invalid or unenforceable in any respect under any Philippine Law, the validity, legality or enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
In the field of public contracts, these stipulations are weighed with the taint of invalidity for contravening the policy requiring government contracts to be awarded through public bidding. Unless clearly falling under statutory exceptions, government contracts for the procurement of goods or services are required to undergo public bidding "to protect the public interest by giving the public the best possible advantages thru open competition." x x xThe above disquisition served as nothing less than a warning. The clear message conveyed is that the advantage granted is generally viewed as invalid, in consonance with the more fundamental principle that all government procurement must undergo public bidding under equal terms. It must first be established that the beneficiary has an existing interest in the object of the contract before his preferential right can "escape the taint of invalidity.
These clauses escape the taint of invalidity only in the narrow instance where the right of first refusal (or "right to top") is founded on the beneficiary's "interest on the object over which the right of first refusal is to be exercised" (such as a "tenant with respect to the land occupied, a lessee vis-a-vis the property leased, a stockholder as regards shares of stock, and a mortgagor in relation to the subject of the mortgage") and the government stands to benefit from the stipulation. x x x (emphasis added)
As SPC also participated in the bidding, the bid for the lease component clearly computed on the basis of, and was for twenty-five (25) years. However, by now stating in your letter that the "lease has a Term often (10) years and will expire on 29 January 2020," SPC would effectively have less than six (6) years from today to use the property, which is extremely short for the lease component computed and based on the twenty-five (25) year term that was offered during the bidding. While we are aware that the second paragraph of Section 3.02 of the LLA-LBGT provides that the property covered by the right to top will be "governed" by the LLA-LBGT, we are of the reasonable belief that this does not include "Term" under Section 2.01 thereof considering that the "Draft Land Lease Agreement for the 153.1-MW Naga Power Plant," which formed part of the bid documents, specifically provided for a "Term" of twenty-five (25) years.It is clear from the tenor of SPC's letter that its acceptance of PSALM's offer can never be categorized as unqualified. Instead, what SPC communicated was its counter-offer for a longer lease period. This is further made evident by our pronouncement in Development Bank of the Philippines v. Medrano (Medrano),[20] to wit:
On the basis of the foregoing, SPC confirms that it is exercising its right to top the winning bid of TPVI and will pay the amount of P1,143,240,000.00 on the understanding that the Term of the lease is twenty-five (25) years from closing date.
Under the law, a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of an offer may be express and implied; a qualified offer constitutes a counter-offer. Case law holds that an offer, to be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds. We have also previously held that the ascertainment of whether there is a meeting of minds on the offer and acceptance depends on the circumstances surrounding the case.As applied, it can readily be seen that there is no identity between what was offered and what was accepted. There is a glaring difference not only in the term of the lease but also in its reckoning period. It cannot then meet the criteria of an "unqualified acceptance" as discussed in the Medrano case.
We agree with PSALM's position that SPC's Right to Top should be consistent with the 2009 LLA provisions. It is established that the 2009 LLA is the source of SPC's Right to Top and explicitly provides that such right is to be exercised in accordance with its provisions.Thus, when the 30-day period to exercise the Right to Top was about to lapse, the standing offer to SPC was for a lease expiring on January 29, 2020. Without SPC communicating its unqualified acceptance of such offer before the Right to Top expired, the award of the purchase contracts to TPVI became due.
Section 3.02 of the 2009 LLA is clear. If SPC opts to exercise the Right to Top, the property will form part of the Leased Premises and shall be subject to the LLA's provisions. Section 2.01 of the LLA is explicit that the lease shall expire on 29 January 2020. Should SPC opt to exercise the Right to Top, it must do so within the 2009 LLA's parameters.
WHEREFORE, the petition is hereby GIVEN DUE COURSE and the writ prayed for accordingly GRANTED. The right of first refusal (right to top) granted to Salcon Power Corporation (now SPC Power Corporation) under the 2009 Naga LBGT-LLA is hereby declared NULL and VOID. Consequently, the Asset Purchase Agreement (NPPC-APA) and Land Lease Agreement (NPPC-LLA) executed by the Power Sector Assets and Liabilities Management Corporation and SPC are ANNULLED and SET ASIDE. The Notice of Award dated April 30, 2014 in favor of Therma Power Visayas, Inc. is hereby REINSTATED, excluding the portion therein granting to SPC the Right to Top. Respondent PSALM is directed to execute the NPPC-APA and NPPC-LLA in favor of TPVI with dispatch.SO ORDERED.
No costs.
| Very truly yours, |
(SGD) | |
WILFREDO V. LAPITAN | |
Division Clerk of Court |
In light of the foregoing, we hold that the grant of right to top to SPC under the LBGT-LLA is void as it is not founded on the said lessee's legitimate interest over the leased premises. SPC's argument that the privatization of NPPC was even more advantageous to the Government, simply because it resulted in a higher price (Php54 million more) than TPVI's winning bid, is likewise untenable. Whatever initial gain from the higher price obtained for the NPPC compared to the original bid price of TPVI is negated by the fact that SPC's right to top had discouraged more potential buyers from submitting their bids, knowing that even their most reasonable bid can be defeated by SPC's exercise of its right to top. In fact, only SPC and TPVI participated in the 3rd Round of Bidding. Attracting as many bidders to participate in the bidding for public assets is still the better means to secure the best bid for the Government, and achieve the objective under the EPIRA to private NPC's assets in the most optimal manner.[5]I agree with SPC that since the existence of the right to top was a material and operative fact in the bidding for the NPPC, its nullification likewise nullified the entire bidding process. Thus, it is as if there was no bid and no Notice of Award to TPVI:
6. In fact, it can be reasonably assumed that all potential bidders, including TPVI, calculated their possible bids taking into consideration SPC's RTT. In other words, the existence of the RTT was a material and operative fact in the bidding which substantially affected the entire bidding process for the NPPC. The existence of the RTT prior to its nullification had consequences on the entire bidding process that cannot be ignored.Also, as argued by PSALM, SPC's right to top is one of the major factors considered by potential bidders:
7. If, as prayed for, the NOA in favor of TPVI is reinstated, it will give rise to the anomalous situation where it was able to bid on the project under circumstances materially different from the current situation. Worse, it perpetuates the perceived "defect" in the bid where, as this Honorable Court ruled, the "best price" was not availed of because of the existence of the RTT. This Honorable Court ruled that "SPC's [RTT] had discouraged more potential buyers from submitting their bids, knowing that even the most reasonable bid can be defeated by SPC's exercise of the [RTT]." Presumably, therefore this Honorable Court was of the impression that more bidders would have participated were it not for SPC's RTT. Following this Honorable Court's conclusion, therefore, the NOA of TPVI was itself a product of a bidding wherein potential bidders were "discouraged" to participate.
8. In short, while TPVI claims that the RTT was invalid, it wishes to have the whole bidding process, which took the RTT into consideration, to be validated. If only for consistency, this should not be countenanced.[6]
15. As earlier mentioned, the condition of the bidding of the Naga Power Plant Complex involved SPC's right to top the winning bid as one of the major parameters and considerations factored in by potential bidders on two points: (i) on whether to participate or not in the said bidding; and (ii) in the preparation of their bids for submission. In the event that there is a winning bidder, such bidder could only acquire the generation asset if and only if SPC chooses not to exercise its right to top.TPVI cites the severability clause in the PSALM Bidding Procedures, as follows:
16. All throughout the privatization of the Naga Power Plant Complex, SPC's right to top was a major feature therein that influenced the outcome of the public bidding as well as in the participation or non-participation of bidders.
17. Invalidating the right to top, which was present since the commencement of the privatization of the Naga Power Plant Complex, would change the complexion of the whole bidding process itself as it would no longer be one of the considerations to be factored in by potential bidders in participating in the bidding for the Naga Power Plant Complex and in the submission of the bid itself therein.[7]
IB-28 General ConditionsI am not persuaded. The nullity of the right to top, which was an essential and major parameter in the bidding, carried with it the nullity of the whole bidding process. It is significant that JG Summit referred to the distinctive character of the bidding as a "system" which can be thwarted if it excludes "any" of the three principles of public bidding.[9] The totality of the system would be destroyed if invalidation of one of its principles does not result in the invalidation of the whole process. A rebidding of the NPPC without SPC being accorded a right to top would encourage the participation of several other bidders to secure the best bid for the government.x x x
26. If any one or more of the provisions of the Bidding Procedures or any part of the Bidding Package is held to be invalid, illegal or unenforceable, the validity, legality, or enforceability of the remaining provisions will not be affected thereby and shall remain in full force and effect.[8]