DPWH Payment of Final Billing to Oaminal Construction for Completion of Mactan Circumferential Road Project

DOJ OPINION NO. 050, s. 2015 July 13, 2015 Secretary Rogelio L. Singson Department of Public Works and Highways Bonifacio Drive, Port Area Manila Dear Secretary Singson: This refers to your 8 June 2015 letter-request seeking this Department's opinion on the payment by the Department of Public Works and Highways (DPWH) of the final billing to Henry S. Oaminal Construction & General Merchandise ("Oaminal Construction") for its completion of the project entitled: "Widening of Mactan Circumferential Road Section 1:K0018+035-K0023+29; Section 2: K0024+400-K0025+000, Lapu-Lapu City, Cebu ('Mactan Circumferential Road Project')". HTcADC You state that Congressman Henry S. Oaminal is the current Congressman of Misamis Occidental, District Two; that Oaminal Construction is a construction firm that undertakes government projects; that it is the DPWH's stand that Oaminal Construction is previously owned and still believed to be owned and in control of his family; and that the said Congressman has an undeniable influence to the same, which is in violation of Republic Act (RA) No. 6713 ("Code of Conduct and Ethical Standards of Public Officials and Employees") and other laws such as Section 3 (h) and (j) of RA No. 3019 ("Anti-Graft and Corrupt Practices Act"), Sections 65.1 (a) and (c), 65.2, 65.3 (a) and (b) of RA No. 9184 ("Government Procurement Reform Act"), Section (1) (B) (v) and (vii) of RA No. 8799. ("Securities Regulation Code"), the Revised Penal Code and the National Internal Revenue Code. By way of a background, the relevant facts, as stated in your request and its supporting documents, are as follows: In its Memorandum dated 13 May 2015, Regional Director Ador G. Canlas, Regional Office VII of DPWH, has withdrawn the approval on the payment of the final billing amounting to P6,262,176.71 to Oaminal Construction in view of the findings of its Bids and Awards Committee (BAC) during the opening of the bids on 26 February 2015 conducted for the project entitled: Maintenance and Construction Services of other Infrastructure, Jct. (TER) Guindulman-Anda-Badiang-Cogtong Road leading to beaches and resorts, Anda-Bohol, under Contract ID No. 15H00014 ("Guindulman-Anda-Badiang-Cogtong Road Project"). At the said bidding, the BAC disqualified HSO Construction Corporation on the ground that it is owned by Congressman Oaminal, thus, to enter into contract with HSO Construction Corporation would be in violation of Section 14, Article VI of the 1987 Constitution. Also, the BAC found out that Oaminal Construction and HSO Construction Corporation are one and the same; that there exists a conflict of interest as defined under RA No. 6713; and that such conflicting interest arose from the time Congressman Oaminal assumed his position as a member of the House of Representatives sometime in the middle of year 2013 or while the implementation of the Mactan Circumferential Road Project is already ongoing. The BAC also found out that the following laws will be, or have already been, violated by Congressman Oaminal and other officials of HSO Construction Corporation: (i) Section 3 (h) [First Mode] of RA No. 3019 (Unlawful Intervention); (2) Section 3 (h) [Second Mode] of RA No. 3019 (Prohibited Interest); (3) Section 3 (j) of RA No. 3019; (4) Section 9 of RA No. 6713 (Conflict of Interest Rule); (5) Section 65.1 (a) & (c) of RA No. 9184; (6) Section 65.2 (d) of RA No. 9184; (7) Section 65.3 (a) & (b) of RA No. 9184; (8) Article 216 of the Revised Penal Code (RPC); (9) Article 171 of the RPC; (10) Article 172 of the RPC; (11) Section 254 of the National Internal Revenue Code (NIRC); (12) Section 255 of the NIRC;(13) Section 267 of the NIRC;and (14) Section (1) (B) (v) and (vii), Rule 68 of RA No. 8799 (Securities Regulation Code). As we see it, you are raising the instant query on whether the DPWH should proceed with the payment of the final billing to Oaminal Construction for the completion of the Mactan Circumferential Road Project despite the findings of the BAC Regional Office VII in the bidding for the Guindulman-Anda-Badiang-Cogtong Road Project. With regret, this Department is constrained to decline to render the opinion requested. At the outset, it is noted that your query involves the interpretation of the provisions of RA No. 9184 and its Implementing Rules and Regulations (IRR), which fall within the mandate of the Government Procurement and Policy Board (GPPB). The law gave GPPB a broad legal mandate to "protect national interest in all matters affecting public procurement" (Sec. 63 [a], R.A. No. 9184). Vested with the rule-making power (Sec. 63 [b],supra), the GPPB has the competence and primary jurisdiction to apply and interpret the rules in resolving the issue, taking into account the policy repercussions of addressing the question involved. 1 Also, the issue raised in the instant request involves questions of fact and law which are justiciable by nature and may require that the parties, DPWH and Oaminal Construction, to submit such issue to the proper courts for determination of each party's right in relation to the completed project. As a matter of policy, the Secretary of Justice has consistently refrained from rendering opinion on questions that are justiciable in nature or can be the subject of litigation before the courts. 2 Moreover, the issue raised herein involves the substantive rights of private parties, in this case, Oaminal Construction. Since the opinion of the Secretary of Justice is merely advisory in nature, such opinion would not be binding upon the private parties who may be adversely affected thereby and who may, in all probability, take issue therewith and contest the same before the courts. 3 This notwithstanding, and in view of the importance of the issue presented, we herein below provide some comments and observations, for your information and guidance. aScITE It may be argued that the DPWH's act of awarding the contract to Oaminal Construction for the construction of the Mactan Circumferential Road Project precludes it from asserting, at the time of the completion of the said project, that Oaminal Construction allegedly violated the provisions of RA No. 6713, RA No. 3019, RA No. 9184, RA No. 8799, the Revised Penal Code and the National Internal Revenue Code. Thus, the DPWH is barred by estoppel from the non-payment of the final billing to Oaminal Construction. In other words, the proposition that the DPWH is precluded or estopped from disapproving the payment of the final billing to Oaminal Construction, in view of the latter's completion of the Mactan Circumferential Road Project, which was constructed with DPWH's consent and approval, might be put forward on the one hand, following the Supreme Court in the case of Heirs of Gamboa v. Teves, G.R. No. 176579, October 9, 2012 : The government cannot plausibly hide behind the mantle of its general immunity to resist the application of this equitable principle for "[t]he rule on non-estoppel of the government is not designed to perpetrate an injustice." 108 Hence, this Court has allowed several exceptions to the rule on the government's non-estoppel. As succinctly explained in Republic of the Philippines v. Court of Appeals : The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. However, like all general rules, this is also subject to exceptions, viz. : "Estoppel against the public are little favored. They should not be invoked except in rare and unusual circumstances and may not be invoked where they would operate to defeat the effective operation of a policy adopted to protect the public. They must be applied with circumspection and should be applied only in those special cases where the interests of justice clearly require it. Nevertheless, the government must not be allowed to deal dishonorably or capriciously with its citizens, and must not play an ignoble part or do a shabby thing; and subject to limitations ...,the doctrine of equitable estoppel may be invoked against public authorities as well as against private individuals." In Republic v. Sandiganbayan, the government, in its effort to recover ill-gotten wealth, tried to skirt the application of estoppel against it by invoking a specific constitutional provision. The Court countered: "We agree with the statement that the State is immune from estoppel, but this concept is understood to refer to acts and mistakes of its officials especially those which are irregular (Sharp International Marketing vs. Court of Appeals, 201 SCRA 299; 306 [1991]; Republic v. Aquino, 120 SCRA 186 [1983]),which peculiar circumstances are absent in the case at bar. Although the State's right of action to recover ill-gotten wealth is not vulnerable to estoppel[;] it is non sequitur to suggest that a contract, freely and in good faith executed between the parties thereto is susceptible to disturbance ad infinitum. A different interpretation will lead to the absurd scenario of permitting a party to unilaterally jettison a compromise agreement which is supposed to have the authority of res judicata (Article 2037, New Civil Code), and like any other contract, has the force of law between parties thereto (Article 1159, New Civil Code; Hernaez vs. Kao, 17 SCRA 296 [1966]; 6 Padilla, Civil Code Annotated, 7th ed., 1987, p. 711; 3 Aquino, Civil Code, 1990 ed., p. 463) . . ." The Court further declared that "(t)he real office of the equitable norm of estoppel is limited to supply[ing] deficiency in the law, but it should not supplant positive law." (Emphasis supplied.) However, it cannot be overemphasized that estoppel is a principle based on equity, along with laches and acquiescence. 4 As explained by the Supreme Court: The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. Said doctrine springs from equitable principles and the equities of the case. It is designed to aid the law in the administration of justice where without its aid injustice might result. 5 It being an equitable principle, the "clean hands" doctrine is likewise applicable. As held by the Supreme Court in PAGASA v. CA, 6 "Pagasa cannot rely on equity because he who comes into equity must come with clean hands. Equity refuses to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful or inequitable conduct in the matter with relation to which he seeks relief (30 C.J.S. 1009)." This is further elaborated on by the Court in the case of DPWH v. Quiwa, et al. : 7 Parties who do not come to court with clean hands cannot be allowed to profit from their own wrongdoing. The action (or inaction) of the party seeking equity must be "free from fault, and he must have done nothing to lull his adversary into repose, thereby obstructing and preventing vigilance on the part of the latter." ... While petitioner is correct in saying that one who seek equity must do equity, and one who comes into equity must come with clean hands, it is equally true that an allegation of fraud and dishonesty to come within the doctrine's purview must be substantiated: Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them. This court recognizes that certain omissions will qualify as "acting with unclean hands. " The omission, though, must be such as to give rise to a confusion that leads to an undesirable state of things. (Emphasis supplied; citations omitted) Whether or not there is anything fraudulent, dishonest, or an omission or other action that "give[s] rise to a confusion that leads to an undesirable state of things" is, as stated by the Supreme Court, a matter of substantiation. In this regard, we note that the allegations militating against sustaining the validity of the contract are quite serious, to wit, violations of Republic Act (RA) No. 6713 ("Code of Conduct and Ethical Standards of Public Officials and Employees") and other laws such as Section 3 (h) and (j) of RA No. 3019 ("Anti-Graft and Corrupt Practices Act"), Sections 65.1 (a) and (c), 65.2, 65.3 (a) and (b) of RA No. 9184 ("Government Procurement Reform Act"), Section (1) (B) (v) and (vii) of RA No. 8799 ("Securities Regulation Code"), the Revised Penal Code and the National Internal Revenue Code all of which go directly into the validity of the contract under which payment is proposed to be made. HEITAD Since such determination involves not mere questions of law, but questions of fact, this Department deems it more prudent to leave to concerned government agencies, such as the DPWH, to determine. Please be guided accordingly. Very truly yours, LEILA M. DE LIMA Secretary Footnotes 1. Secretary of Justice, Op. Nos. 55, 24, 16 & 2, s. 2013. 2. Id., Op. No. 15, 9 & 7, s. 2012; Nos. 57, 56 & 54, s. 2011. 3. Id., Op. Nos. 15, 9, 7, 5, 4 & 3, s. 2012. 4. PAGASA Industrial Corporation v. Court of Appeals (G.R. No. L-54158 August 31, 1984). 5. Philippine National Bank v. Intermediate Appellate Court, et al. (G.R. No. 66715, 18 September 1990) citing Philippine National Bank v. Court of Appeals (L-30831, November 21, 1979, 94 SCRA 368). 6. Supra, footnote #4. 7. G.R. No. 183444, 8 February 2012.