Osmeña v. Power Sector Assets
REITERATIONFacts
The Antecedents: The Power Sector Assets and Liabilities Management Corporation (PSALM) commenced the 3rd round of bidding for the sale of the Naga Power Plant Complex (NPPC). Both SPC Power Corporation (SPC) and Therma Power Visayas, Inc. (TPVI) submitted bids. PSALM issued a Notice of Award dated April 30, 2014, in favor of TPVI. However, the execution of the Land Lease Agreement (LLA) and Assets Purchase Agreement (APA) in favor of TPVI was subject to SPC's exercise of its Right to Top. Assuming SPC validly exercised its Right to Top, PSALM executed the NPPC-APA and NPPC-LLA in SPC's favor and cancelled TPVI's Notice of Award. Procedural History: The Supreme Court, in a September 28, 2015 Decision, declared SPC's Right to Top null and void, and consequently annulled and set aside the NPPC-APA and NPPC-LLA executed in SPC's favor. Petitioner Sergio R. Osmeña III and respondents PSALM and SPC filed motions for reconsideration, which were denied with finality. Meanwhile, TPVI filed a Manifestation/Motion praying for the reinstatement of its cancelled Notice of Award, arguing that the nullification of SPC's Right to Top should lead to the reinstatement of its award. PSALM and SPC contended that the Court's Decision altered the terms of the bidding and called for a new bidding. The Petition: TPVI implored the Court to clarify the effect of the annulment of SPC's Right to Top on its Notice of Award and prayed for its reinstatement.
Issue(s)
Whether the nullification of SPC's Right to Top necessitates the reinstatement of TPVI's Notice of Award. Whether the Supreme Court's September 28, 2015 Decision altered the terms of the public bidding.
Ruling
The Court GRANTED the Manifestation/Motion of TPVI, LIFTED the Entry of Judgment, AMENDED the dispositive portion of the September 28, 2015 Decision to include a directive for the reinstatement of the April 30, 2014 Notice of Award in favor of TPVI (excluding the portion granting SPC the Right to Top), and directed PSALM to execute the NPPC-APA and NPPC-LLA in favor of TPVI with dispatch.
Ratio Decidendi
On whether the nullification of SPC's Right to Top necessitates the reinstatement of TPVI's Notice of Award: The Court ruled in the affirmative. It held that the Bidding Procedures contained a severability clause (IB-28, Sec. 26) which allows the award in favor of TPVI to survive despite the nullification of a specific provision. This clause clearly intended to isolate and detach any invalid provision so that the remaining provisions could continue in force. The nullification of SPC's Right to Top was a contingency expressly covered by the Bidding Procedures, not an alteration of its terms. The Court reasoned that the Notice of Award dated April 30, 2014, constituted a perfected contract between PSALM and TPVI, conditioned on SPC's non-exercise or failure to legally and validly exercise its Right to Top. Since the condition (SPC's valid exercise of its Right to Top) was rendered void by the Court's decision, the condition should be deemed not written, and the obligation to award the NPPC-LLA and NPPC-APA to TPVI became due and demandable. This application is further justified under Articles 1181 and 1185 of the Civil Code, where an obligation conditioned upon the non-happening of an event becomes effective when it becomes evident that the event cannot occur, as SPC could never legally and validly invoke its Right to Top due to its nullity. On whether the Supreme Court's September 28, 2015 Decision altered the terms of the public bidding: The Court held that the Decision did not alter the terms of the public bidding. The presence of the severability clause in the Bidding Procedures (IB-28, Sec. 26) and the Land Lease Agreement (Sec. 14.16) meant that the nullification of SPC's Right to Top was a foreseen possibility and did not invalidate the entire bidding process. The Court emphasized that its previous decision only nullified SPC's Right to Top and the subsequent agreements, not the entire third round of bidding. The Court also noted that the allegation that the Right to Top discouraged other bidders was speculative, and there was no guarantee that a new bidding would yield more participants or higher bids. Furthermore, SPC's own mistake in relying heavily on its Right to Top, despite knowing its potential invalidity due to the severability clause and the Court's warning in LTFRB v. Stronghold, meant that SPC was not deprived of a fair chance to bid. The Court also found that SPC did not legally and validly exercise its Right to Top because its acceptance was qualified, constituting a counter-offer, and the OGCC had opined that SPC's exercise of the right should be consistent with the 2009 LLA provisions, which stipulated an earlier expiration date than what SPC proposed.
Main Doctrine
The nullification of a specific provision in a bidding process, such as a 'Right to Top,' does not invalidate the entire bidding process if a severability clause is present, and the Notice of Award, being a perfected contract, should be reinstated if the condition for its cancellation is subsequently rendered void.