Power Sector v. Pozzolanic Philippines
REITERATIONFacts
The Antecedents: Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned corporation created by Republic Act No. 9136 to manage and privatize certain National Power Corporation (NPC) assets. Respondent Pozzolanic Philippines Incorporated traces its rights to Pozzolanic Australia, which won a public bidding and entered into a "Contract for the Purchase of Fly Ash of Batangas Coal-Fired Thermal Power Plant" dated 20 October 1987 (the Batangas Contract) that contained a clause granting a right of first refusal to the purchaser. Respondent was incorporated in April 1989 and commenced exercising the Batangas Contract rights in June 1989. Subsequent developments involved the Masinloc and Sual coal-fired plants, interim contracts, publications inviting bids, and transactions (including the Sual and Masinloc Contracts) which respondent claims flowed from its Batangas Contract right of first refusal. Procedural History: Respondent filed suit (Civil Case No. Q-00-40731) seeking enforcement of its alleged right of first refusal. The case generated multiple supplements and impleaded PSALM after the enactment of RA 9136. The trial court issued various orders, dismissed certain complaints by order dated 17 March 2008, and on 30 April 2008 rendered a Decision upholding respondent's right of first refusal and holding it binding on petitioner. Petitioner moved for reconsideration which was denied by order dated 27 June 2008. Petitioner filed a petition for review on certiorari under Rule 45 of the Rules of Court in this Court (G.R. No. 183789). The Petition: Petitioner seeks reversal of the trial court Decision and Order on two grounds: (1) that the trial court was divested of jurisdiction after its 17 March 2008 Order dismissing certain complaints and therefore its 30 April 2008 Decision is null and void; and (2) that respondent's alleged right of first refusal is invalid and contrary to public policy and therefore not binding on petitioner.
Issue(s)
Whether the trial court was divested of jurisdiction after its 17 March 2008 Order dismissing certain complaints and therefore the 30 April 2008 Decision is null and void. Whether the right of first refusal alleged by respondent is valid and binding on petitioner or whether it is contrary to public policy and thus void.
Ruling
The petition is GRANTED. The Decision dated 30 April 2008 and the Order dated 27 June 2008 of the Regional Trial Court of Quezon City, Branch 96 in Civil Case No. Q-00-40731 are REVERSED AND SET ASIDE. The Batangas, Sual and Masinloc Contracts are declared NULL AND VOID for being contrary to law and public policy. Petitioner is ordered to conduct a public bidding for 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.
Ratio Decidendi
On Whether the trial court was divested of jurisdiction: The Court held that petitioner is estopped from attacking the trial court's jurisdiction because petitioner itself invoked the court's authority by raising and pressing issues in its Comment to NPC's Motion to Dismiss and in its Position Paper, thereby submitting matters for adjudication. The Court reiterated the settled principle that a party cannot invoke the jurisdiction of a court to secure affirmative relief and thereafter question that same jurisdiction when the result is adverse. The opinion explained that petitioner failed to raise the jurisdictional objection at the earliest opportunity (i.e., immediately after receipt of the 17 March 2008 Order) and only raised it later in a Supplemental Motion for Reconsideration, rendering the claim an afterthought. The Court therefore applied estoppel and procedural repose doctrines to bar the jurisdictional attack, noting that to allow the contention would encourage parties to speculate on litigation outcomes. The Court relied on prior jurisprudence holding that one who submits a case for decision cannot accept the judgment only if favorable and attack it for lack of jurisdiction if adverse. On Whether the right of first refusal is valid and binding on petitioner: The Court held that the right of first refusal in the Batangas Contract is invalid as contrary to public policy because it subverted the requirement of competitive public bidding for the disposition of government assets. The Court reasoned that the right of first refusal was a post-bid provision bargained for after the award and was not part of the bid documents, thereby materially altering the subject of the public bidding and defeating the three core principles of public bidding: an offer to the public, an opportunity for competition, and a basis for exact comparison of bids. Applying precedent such as Agan, Jr. v. Philippine International Air Terminals Co., Inc. (PIATCO), Commission on Audit v. Link Worth International, Inc., and Information Technology Foundation of the Philippines v. Commission on Elections, the Court emphasized that substantive changes to a contract awarded after public bidding without a new bidding process are void for being contrary to public policy. The Court further distinguished valid instances of first refusal where the grantee already had a vested interest in the subject matter (e.g., tenants, lessees, stockholders, mortgagees) and held that respondent had no vested interest in future fly ash not yet existing at the time of bidding, so the grant could not be justified as protective of an existing interest. Consequently, because the Batangas right of first refusal paved the way for negotiated awards of Sual and Masinloc rights without public bidding, the Batangas, Sual and Masinloc Contracts were declared null and void.
Main Doctrine
A contractual right of first refusal that effectively subverts the requirement of competitive public bidding for the disposal of government assets is void as contrary to public policy.