Whether Rizal Technological University May Enter into Contract with a Company Whose Registration Was Revoked by SEC

DOJ OPINION NO. 078 , s. 2012 October 5, 2012 Dr. Jesus Rodrigo F. Torres President Rizal Technological University Boni Ave.,Mandaluyong City Dear Dr. Torres : This refers to your query on the following: "1.) Whether or not the Rizal Technological University can legally enter into contract for Janitorial Services with Care Best International, Inc.";and "2.) Whether or not the University may be held accountable for signing a contract with Care Best International, Inc.,despite notice of the revocation of its corporate registration." You state that the University through your Bids and Awards Committee (BAC) opened bidding for procurement of janitorial services, and that three (3) bidders submitted bid envelopes, namely: (1) D' Triumph Cleaners and Allied Services, Inc. (D' Triumph) 1 (2) Care Best International, Inc. (Care Best) 2 and (3) RTU-KMPC (RTU) ; 3 that when the checklist of eligibility requirements and technical requirements were examined by BAC, the documents submitted by D' Triumph and Care Best, were found eligible; and that the third bidder, RTU-KMPC, which is in the nature of cooperative, was exempted from checklist evaluation as to eligibility requirements, hence, only the technical requirement envelope was opened and found to be eligible. Further, you mention that one bidder, D' Triumph, in an unverified letter, informed your office that the Certificate of Registration of Care Best was revoked by Securities and Exchange Commission (SEC) on the ground of fraud in its procurement, thus you indorsed this matter on 20 March 2012 to your Legal Office. Moreover, you point out that the University's "BAC made a careful evaluation, validation and verification of all submitted eligibility, technical and financial requirements and found Care Best International, Inc. to be the lowest and most responsive bidder." DHIaTS It appears that by virtue of BAC Resolution No. 7, dated 23 March 2012, the award bid was granted to Care Best; that on 2 May 2012, D' Triumph, however, opposed the award via a Motion for Reconsideration, which prompted an inquiry by the SEC and revealed that, "on 22 May 2008, the SEC issued an Order revoking the certificate of registration of Care Best International, Inc.;and that the said Order is currently the subject of a petition for review filed before the Court of Appeals. " It also appears that Care Best, in its Comment on the Motion for Reconsideration filed by D' Triumph, alleged that the SEC Order dated 22 May 2008 was seasonably elevated to the Court of Appeals and is still pending with the said Court, and, as such, SEC cannot as yet implement such Order, hence, your query. At the outset, please be informed that the Secretary of Justice, pursuant to settled policy and precedents, does not pass upon issues which, as in this case, are sub-judice or pending litigation in court. 4 Nonetheless, for your information and guidance only ,you may find the following relevant to your query. Section 12, RA 9184, provides: "Section 12. Functions of the BAC. The BAC shall have the following functions: advertise and/or post the invitation to bid, conduct pre-procurement and pre-bid conferences, determine the eligibility of prospective bidders, receive bids, conduct the evaluation of bids, undertake post-qualification proceedings, recommend award of contracts to the Head of the Procuring Entity or his duly authorized representative: Provided, That in the event the Head of the Procuring Entity shall disapprove such recommendation, such disapproval shall be based only on valid, reasonable and justifiable grounds to be expressed in writing, copy furnished the BAC; recommend the imposition of sanctions in accordance with Article XXIII, and perform such other related functions as may be necessary, including the creation of a Technical Working Group from a pool of technical, financial and/or legal experts to assist in the procurement process. "In proper cases, the BAC shall also recommend to the Head of the Procuring Entity the use of Alternative Methods of Procurement as provided for in Article XVI hereof. IHCSET "The BAC shall be responsible for ensuring that the Procuring Entity abides by the standards set forth by this Act and the IRR, and it shall prepare a procurement monitoring report that shall be approved and submitted by the Head of the Procuring Entity to the GPPB on a semestral basis. The contents and coverage of this report shall be provided in the IRR." You have clearly emphasized that absent "protest/unverified position paper filed by any party during the bidding process",the procedure for the award was finalized. Worthy to note also is the fact that upon the BAC's receipt of unverified information on the alleged revocation of SEC registration of Care Best, you have, under the circumstances, diligently forwarded the matter to your legal office and thence, upon "careful evaluation, validation and verification of all the submitted eligibility, technical and financial requirements",Care Best was awarded the bid, having the "lowest and responsive bid." The turning of the wheels of procedure for the said bid enjoys the long-standing presumption in favor of the regularity in the performance of official duty and functions (Rules of Court, Rule 131, Sec. 3) and of the legality and validity of administrative regulations issued pursuant to law. Said issuances remain effective unless and until declared otherwise by the courts, or amended, revised or revoked. 5 It may well be worthy to note however that at the time of the bid in 29 February 2012, the SEC Order of Revocation dated 22 May 2008 has long been issued against Care Best and due diligence dictates that the latter should have disclosed that a petition for review before the appellate court is pending on the matter of Care Best's certificate of registration. The non-disclosure creates a rather questionable cloud that taints the exercise of good faith for Care Best. PD 902-A, 6 is clear: " Section 3 . The Commission shall have absolute jurisdiction, supervision and control over all corporations, partnerships, or associations, who are the grantees of primary franchises and/or a license or permit issued by the government to operate in the Philippines ,and in the exercise of its authority, it shall have the power to enlist the aid and support of and to deputize any and all enforcement agencies of the government, civil or military as well as any private institution, corporation, firm, association or person." (Emphasis supplied) xxx xxx xxx "Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx "l) To suspend, or revoke ,after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: 1. Fraud in procuring its certificate of registration; 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; 3. Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; 4. Continuous inoperation for a period of at least five (5) years; 5. Failure to file by-laws within the required period; 6. Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period; xxx xxx xxx" The paramount authority, therefore, of the SEC to revoke certificate of registration is entrenched in Section 6, PD 902-A. Correlatively, the following provisions of the Civil Code, insofar as pertinent, read: " Article 1330 . A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable." aDcHIC xxx xxx xxx " Article 1338 . There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to." " Article 339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud ."(Emphasis supplied) On the same line, the Court ruled in Armando Aliling vs. Jose Feliciano, et al. : 7 xxx xxx xxx "Bad faith, under the law, does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud." xxx xxx xxx In sum, we defer to the expertise, competence and wisdom of the University's BAC which has primary jurisdiction to act over said matter whether to: (1) await the resolution of the appellate court on the petition for review and, accordingly, in such ground nullifies/reaffirms the bid award, as the case may be; or (2) nullify the bid contract based on the above discussion. Please be advised accordingly. TAHCEc Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. For brevity. 2. Ibid. 3. Ibid. 4. Secretary of Justice Op. Nos. 53 and 51, s. 2010; Nos. 25, 22, and 16, s. 2009. 5. DOJ Opinion No. 011, s. 2001, February 27, 2001. 6. REORGANIZATION OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS AND PLACING THE SAID AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT, 11 March 1976. 7. G.R. No. 185829, April 25, 2012.