In 2001, the Philippine Postal Corporation entered into a contract with Aboitiz Air Transport Corporation (Aboitiz Air) for the carriage of mail at a rate of PHP 5.00 per kilogram which would expire on December 31, 2002.
In October 2003 or after the expiry of its contract with Aboitiz Air, the Philippine Postal Corporation purchased 40 vehicles for mail deliveries in Luzon and hired 25 drivers for these vehicles on a contractual basis. A study conducted by the Central Mail Exchange Center of the Philippine Postal Corporation found that the expenses for the salaries and maintenance of its vehicles for Luzon deliveries were higher than its previous system of outsourcing its deliveries to Aboitiz Air.
On April 2004, the Board of Directors of the Philippine Postal Corporation held a Special Board Meeting where De Guzman, the Officer-in-Charge, endorsed for approval the Central Mail Exchange Center’s recommendation to outsource mail delivery in Luzon.
On May 2004, De Guzman sent a letter to Aboitiz Air, noe Aboitiz One, Inc. (Aboitiz One), stating that the latter may now re-assume to undertake the carriage of mail from and to Regions 1, 2, 5, and CAR starting May 2004 until further notice. Accordingly, the terms and conditions shall be the same as stipulated in the previous contract except for the schedule and the rate which shall be PHP 8.00 per kilogram.
Aboitiz One accepted the proposal and commenced its delivery operations in Luzon on May 20, 2004. When Postmaster General Diomedo P. Villanueva resumed work, the Aboitiz One contract had already been fully implemented. Thus, the Postmaster General approved payments made to Aboitiz One for services rendered.
On October 2005, Atty. Sim Oresca Mata, Jr. filed an administrative complaint with the Office of the Ombudsman against De Guzman and alleged that the Aboitiz One contract renewal was done without public bidding and that the rate per kilogram was unilaterally increased without the Philippine Postal Corporation Board of Directors’ approval.
Consequently, the Office of the Ombudsman found De Guzman guilty of grave misconduct and dishonesty. Meanwhile, the Court of Appeals rendered its Decision annulling the Decision and Order of the Office of the Ombudsman. The Court of Appeals found that according to the Minutes of the April 29, 2004 Special Board Meeting, the engagement of Aboitiz’s services was approved by the Board of Directors.
Issues:
- Whether or not Antonio Z. De Guzman committed grave misconduct and dishonesty in (a) engaging the services of Aboitiz One, Inc. allegedly without the approval of the Philippine Postal Corporation Board of Directors, and (b) in procuring Aboitiz One, Inc.’s services through negotiated procurement; and
- Whether or not the Court of Appeals erred in absolving De Guzman of his administrative offenses
Ruling:
The petition is partially granted. Antonio Z. De Guzman is found guilty of gross neglect of duty. Accordingly, the Postmaster General may only execute contracts for procurement of services with the Board of Directors’ approval. However, this lack of authority may be ratified through the Board of Directors’ silence or acquiescence. If the contract is executed without complying with the laws of procurement, the erring public official may be held administratively liable.
Respondent was designated Officer-in-Charge when the contract between the Philippine Postal Corporation and Aboitiz One was effected, since the Postmaster General had taken a leave of absence. Thus, he is considered to have been exercising the functions of the Postmaster General during this period. Under Republic Act No. 7354, the powers of the Philippine Postal Corporation are exercised by the Board of Directors, with the President appointing all seven (7) members and with the Postmaster General as one of the members to represent the government shareholdings.
The Postmaster General manages the Philippine Postal Corporation and has the power to sign contracts on behalf of the corporation as authorized and approved by the Board of Directors. Unfortunately, in this case, there is no board resolution authorizing respondent to enter into a contract with Aboitiz One for the outsourcing of mail deliveries in Luzon. There are also no Minutes of the April 29, 2004 Special Board Meeting.
In Brias v. Hord, it was held that while the minutes of a board meeting are not equivalent to a board resolution, they may be examined to determine what actually took place during the meeting. Accordingly, the minutes of the transactions of a board, once approved by the board, is prima facie evidence of what actually took place during that meeting.
A contract entered into by corporate officers who exceed their authority generally does not bind the corporation except when the contract is ratified by the Board of Directors. Considering that the Board of Directors remained silent and the Postmaster General continued to approve the payments to Aboitiz One, they are presumed to have substantially ratified respondent’s unauthorized acts. Therefore, respondent’s action is not considered ultra vires.
However, the ratification of respondent’s unauthorized acts does not necessarily mean that the May 2004 contract with Aboitiz One was validly executed. To determine if respondent committed grave misconduct when he entered into this contract, it must first be determined if public bidding was necessary.
As a general rule, all government procurement must undergo competitive bidding. However, the government entity may, subject to certain conditions, resort to alternative methods of procurement, namely: (1) limited source bidding, (2) direct contracting, (3) repeat order, (4) shopping, and (5) negotiated procurement. The procuring entity must secure that in any of these methods, it secures the most advantageous price for the government.
