MANUEL L. PADILLA, PETITIONER, VS. CALIXTO ZALDIVAR, ET. AL., RESPONDENTS.

Padilla versus Zaldivar

The Case

This is Padilla versus Zaldivar, a special civil action for mandamus and prohibition brought directly before the Supreme Court by Manuel L. Padilla against Calixto Zaldivar and the other public respondents, arising from a public bidding for the importation of rice under the Rice Importation Law for 1964. Padilla's bid was excluded because it was not accompanied by the required bidder's proposal bond, and he asked the Court to compel the government to consider his bid or, in the alternative, to award him a portion of the import quota still allotted to the private sector. The case matters because it fixes the rule that the proposal bond is an indispensable requirement for the validity of a bid, and that the discretion of the awarding agency over bids is not to be controlled by mandamus.

Procedural History

There were no proceedings in a trial court or in the Court of Appeals. Padilla filed the present petition for mandamus and prohibition directly before the Supreme Court, together with a prayer for a writ of preliminary injunction restraining the respondents from signing the contract of importation covering the forty five thousand metric tons awarded to the other bidders. The Supreme Court heard the petition and rendered its decision dismissing it.

Facts

On April 13, 1964, Republic Act Number 3848, the Rice Importation Law for 1964, was approved. It authorized the importation during that calendar year of rice from any source, including the United States, equivalent to any shortage certified by the National Economic Council, but in no case exceeding three hundred thousand metric tons. Two hundred thousand metric tons were to be imported directly by the Government, and the right to import not more than one hundred thousand metric tons was to be awarded through public bidding within fifteen days after approval to private enterprises willing and capable to undertake the importation. The determining consideration was the best terms as to price, quality, schedule of delivery, and manner of financing.

Pursuant to the law, the Rice and Corn Administration published an Invitation to Bid for the supply of one hundred thousand metric tons of foreign polished rice, with bids to be opened on April 24, 1964. The Invitation to Bid required each bid to be accompanied by a bidder's proposal bond in the form of cash or certified check equivalent to two percent of the total cost and freight value of the bid, and it expressly provided that bids accompanied by an insufficient proposal bond shall be disqualified from participating in the selection of awards. It also reserved to the Rice and Corn Administration the right to reject any or all bids and to waive any informality in the bids received.

Several bidders submitted bids. Padilla's bid was not accompanied by the required bidder's proposal bond, and so his envelope was not opened, and his bid was neither read nor considered. The next day, April 25, 1964, the Rice and Corn Administration awarded forty five thousand metric tons to Adelina Fores, Food Enrichment Enterprises, and HI Development Corporation, whose bids were considered the lowest and most advantageous. Padilla sent telegraphic appeals to the Committee on Bids, the Executive Secretary, and the President, without success. On April 30, 1964, the importation contracts were executed with the awardees, who posted their performance bonds and opened their letters of credit. Padilla then filed this petition on May 8, 1964.

Issues

• Whether or not the Rice and Corn Administration and the Executive Secretary acted with grave abuse of discretion in disqualifying and rejecting Padilla's bid while awarding the right to import forty five thousand metric tons of rice to the other bidders.
• Whether or not Padilla is entitled to be awarded the right to import fifty thousand of the fifty five thousand metric tons allotted by law to the private sector.

Applicable Provisions

Section 1 of Republic Act Number 3848 provides:

However, the Government may reject all bids and undertake the importation if the terms and conditions of the winning bidder cannot equal or better those that can be obtained if the importation were to be undertaken by the Government.

This provision bears on the case because it confirms that the law fixes only a maximum quota and leaves the Government free to reject bids and import on its own terms.

The Invitation to Bid provides on the proposal bond:

Bids accompanied by insufficient proposal bond shall be disqualified from participating in the selection of awards.

This is the very requirement whose breach excluded Padilla, and the Court reasoned that if mere insufficiency disqualifies, total want of the bond disqualifies all the more.

The Invitation to Bid further provides on the purpose of the bond:

If for any reason a bidder fails to enter into contract with the Rice and Corn Administration after his offer is accepted within the period of thirty-six (36) hours or if the offer or withdraws his offer after the opening of the bid, the amount of his proposal bond shall be forfeited in favor of the Rice and Corn Administration.

This shows that the bond secures the good faith of the bidder and binds him to enter into the contract should his proposal be accepted.

Ruling

On the first issue, the Court held that there was no grave abuse of discretion. Padilla admittedly failed to accompany his bid with the required bidder's proposal bond, a requirement the Court described as indispensable in public biddings for government contracts. The Court explained that the purpose of the bond is to insure the good faith of the bidders and bind them to enter into a contract with the Government should their proposal be accepted, and that the bond is the only hold which the Government has on a bidder. Padilla never questioned the reasonableness of the requirement before the opening of the bids; by submitting his bid in the prescribed form, he expressed his assent to its terms. The Court reasoned that if mere insufficiency of the bond is a disqualification, then total want of it is a disqualification. His late submission of a performance bond commitment from an insurer did not cure the defect, because a performance bond is different from a proposal bond, and in any event it was submitted several days after the bidding. The proviso allowing the Rice and Corn Administration to waive informalities was a matter wholly within its discretion, which cannot be controlled in a petition of this nature.

On the second issue, the Court held that Padilla's alternative claim could not be considered because he was a disqualified bidder, and any award of the balance of the quota could only be made in favor of qualified bidders. Even among the disqualified bidders his was not the lowest, since another disqualified party had offered a lower price for the same variety of rice. Finally, the Court noted that the Rice and Corn Administration is not unconditionally bound to allot the full one hundred thousand metric tons to the private sector, since the law fixes only a maximum and even allows the Government to reject any bid and undertake the importation itself.

Doctrine

A bidder's proposal bond is an indispensable requirement for the validation of a bid proposal in a public bidding for a government contract. A person who submits a bid assents to the terms and conditions of the Invitation to Bid and is bound by them if his bid is considered. If mere insufficiency of the proposal bond disqualifies a bidder, total want of it disqualifies him all the more. A performance bond is distinct from a proposal bond: the former guarantees faithful performance of the contract by the winning bidder, while the latter insures the good faith of the bidder and binds him to enter into the contract if his proposal is accepted. The agency's power to waive informalities in bids is discretionary and cannot be controlled by mandamus. Where the law fixes only a maximum import quota, the agency is not bound to allot the full amount to the private sector.

Disposition

The petition was dismissed with costs, and the awards to the other bidders stood.

Remember This

The line worth memorizing is that if mere insufficiency of a proposal bond disqualifies a bidder, total want of it disqualifies him all the more. Examiners use this case to test the distinction between a proposal bond and a performance bond, and the limits of mandamus against the discretionary power of a government bidding agency.