Malaga v Panachos

213 SCRA 516

Iloilo State College of Fisheries (ISCOF) through PBAC announced that the last day for submission of pre-
qualification requirements was December 2, 1988 and that the bids would be received and opened on
December 12, 1988. However, petitioners were not allowed to participate in the bidding because their
documents were considered late for submitting the requirements after 10:00 am of December 2, 1988.

Petitioners filed a complaint against PBAC and prayed that the bidding be reset and their documents be
accepted. In the event that the bidding had already been conducted, they further pray that the
defendants be ordered not to award the project pending the resolution. Restraining order was then
issued.

Respondents on the other hand filed a motion to lift the restraining order on the ground that courts are
prohibited from issuing such under PD 1818.

Petitioner pointed out that PD 1818 is not applicable because ISCOF, although a State College, has its
own charter and separate existence, making it not part of the national government or of any local
political subdivision.

Issue:

1. W/N ISCOF is a part of the national government

2. W/N PD 1818 is applicable to this case

Ruling:

1. Yes. Under the Administrative Code of 1987, the definition of government instrumentality includes
Regulatory agencies, chartered institutions and GOCCs. Chartered institutions, defined by the same code
include the State Universities and Colleges and the monetary authority of the State. Further, there are
clear indications that ISCOF is a government instrumentality, to wit: (1) it was created in pursuance of
the integrated fisheries development policy of the State; (2) the Treasurer of the Republic of the
Philippines shall be the ex-officio treasurer of the State College, with all accounts and expenses to be
audited by CoA; (3) heads of the bureaus and offices are authorized to loan or transfer to it equipment,
with the President's (State College) approval, for the benefit of the public and (4) maintenance and
funds of the ISCOF be included in the General Appropriations Law.

2. No. Although ISCOF is a government instrumentality, the Court ruled that PD 1818 is not applicable in
this case for there were irregularities committed by the PBAC. As a general rule, where a law requires a
previous advertisement before government contracts be awarded, non compliance of the requirement
will render the same VOID and of no offect. Two irregularities committed by the PBAC justified the
injunction of the bidding and the award of the project. The purpose of the rules is to secure competitive
bidding and to prevent favoritism, collusion and fraud in the award of these contracts to the detriment
of the public.
PD 1818 was not intended to shield from judicial scrutiny irregularities committed by administrative
agencies.

Malaga vs. Penachos (Digest)

Ma. Elena Malaga, et. al. vs. Manuel R. Penachos, Jr., et.al.
GR No. 86995 03 September 1992

Chartered Institution and GOCC, defined.

FACTS: The Iloilo State College of Fisheries (ISCOF) through its Pre-qualifications, Bids and Awards
Committee (PBAC) caused the publication in the November 25, 26 and 28, 1988 issues of the Western
Visayas Daily an Invitation to Bid for the construction of a Micro Laboratory Building at ISCOF. The
notice announced that the last day for the submission of pre-qualification requirements was on
December 2, 1988, and that the bids would be received and opened on December 12, 1988 at 3 o'clock
in the afternoon.

Petitioners Malaga and Najarro, doing business under the name of BE Construction and Best Built
Construction, respectively, submitted their pre-qualification documents at two o'clock in the afternoon
of December 2, 1988. Petitioner Occeana submitted his own PRE-C1 on December 5, 1988. All three of
them were not allowed to participate in the bidding as their documents were considered late.

On December 12, 1988, the petitioners filed a complaint with the Iloilo RTC against the officers of PBAC
for their refusal without just cause to accept them resulting to their non-inclusion in the list of pre-
qualified bidders. They sought to the resetting of the December 12, 1988 bidding and the acceptance of
their documents. They also asked that if the bidding had already been conducted, the defendants be
directed not to award the project pending resolution of their complaint.

On the same date, Judge Lebaquin issued a restraining order prohibiting PBAC from conducting the
bidding and award the project. The defendants filed a motion to lift the restraining order on the ground
that the court is prohibited from issuing such order, preliminary injunction and preliminary mandatory
injunction in government infrastructure project under Sec. 1 of P.D. 1818. They also contended that the
preliminary injunction had become moot and academic as it was served after the bidding had been
awarded and closed.

On January 2, 1989, the trial court lifted the restraining order and denied the petition for preliminary
injunction. It declared that the building sought to be constructed at the ISCOF was an infrastructure
project of the government falling within the coverage of the subject law.

ISSUE: Whether or not ISCOF is a government instrumentality subject to the provisions of PD 1818?

RULING: The 1987 Administrative Code defines a government instrumentality as follows:

Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. This
term includes regulatory agencies, chartered institutions, and government-owned or controlled
corporations. (Sec. 2 (5) Introductory Provisions).

The same Code describes a chartered institution thus:

Chartered institution - refers to any agency organized or operating under a special charter, and vested
by law with functions relating to specific constitutional policies or objectives. This term includes the
state universities and colleges, and the monetary authority of the state. (Sec. 2 (12) Introductory
Provisions).

It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by
P.D. 1818.

There are also indications in its charter that ISCOF is a government instrumentality. First, it was created
in pursuance of the integrated fisheries development policy of the State, a priority program of the
government to effect the socio-economic life of the nation. Second, the Treasurer of the Republic of the
Philippines shall also be the ex-officio Treasurer of the state college with its accounts and expenses to be
audited by the Commission on Audit or its duly authorized representative. Third, heads of bureaus and
offices of the National Government are authorized to loan or transfer to it, upon request of the
president of the state college, such apparatus, equipment, or supplies and even the services of such
employees as can be spared without serious detriment to public service. Lastly, an additional amount of
P1.5M had been appropriated out of the funds of the National Treasury and it was also decreed in its
charter that the funds and maintenance of the state college would henceforth be included in the
General Appropriations Law.

Nevertheless, it does not automatically follow that ISCOF is covered by the prohibition in the said decree
as there are irregularities present surrounding the transaction that justified the injunction issued as
regards to the bidding and the award of the project (citing the case of Datiles vs. Sucaldito).