TL;DR
The Supreme Court affirmed the Commission on Elections’ (COMELEC) decision to award a contract for election management systems to Smartmatic-TIM Corporation Joint Venture. The Court clarified that bidders for government projects cannot be disqualified solely for having Articles of Incorporation that initially specified a purpose related to a prior election, especially if those articles are amended before post-qualification. This ruling ensures that technical compliance, not overly strict interpretations of corporate purpose, is prioritized in government procurement, allowing for efficient and timely execution of essential public services like elections.
The 2016 Election Bid: Purpose or Technical Prowess?
In anticipation of the 2016 national elections, the COMELEC initiated a bidding process to lease new election management systems. Leo Querubin and others challenged the eligibility of Smartmatic-TIM Corporation Joint Venture (Smartmatic JV), arguing that Smartmatic-TIM Corporation (SMTC), a key partner in the JV, had a corporate charter limited to the 2010 elections. Petitioners claimed that SMTC’s participation in the 2016 bid was an ultra vires act, rendering the entire joint venture ineligible. This case reached the Supreme Court, questioning whether a company’s previously defined corporate purpose could restrict its ability to bid for similar future projects, even when technically qualified and compliant with procurement rules.
The petitioners anchored their argument on Section 14 of Batas Pambansa Blg. 68 (BP 68), the Corporation Code of the Philippines, emphasizing that corporations must state their specific purpose in their Articles of Incorporation (AOI). They pointed to SMTC’s original AOI, which explicitly mentioned the “automation of the 2010 national and local elections.” According to petitioners, this limited SMTC’s legal capacity, and its participation in the 2016 bidding process, using an AOI that was allegedly outdated at the time of bid submission, was a grave abuse of discretion by COMELEC. They contended that the subsequent amendment of SMTC’s AOI, though approved by the Securities and Exchange Commission (SEC), could not retroactively validate an initially invalid bid.
However, the Supreme Court disagreed with the petitioners’ narrow interpretation. The Court emphasized that the submission of an AOI was not explicitly mandated as an eligibility requirement in the bidding documents for this particular procurement. Referencing Section 23.1 of the Implementing Rules and Regulations of Republic Act No. 9184 (RA 9184), the Government Procurement Reform Act, the Court noted that while a registration certificate is required, the AOI itself is not listed as a mandatory document. The Court underscored that the COMELEC’s Bids and Awards Committee (BAC) must adhere to a non-discretionary “pass/fail” criterion based on a checklist of required documents, and cannot disqualify bidders for failing to submit documents not originally required.
Moreover, the Supreme Court addressed the ultra vires act argument by clarifying that SMTC’s participation was not beyond its corporate powers. Quoting Section 45 of BP 68, the Court explained that corporations possess powers conferred by their AOI and those “necessary or incidental” to those powers. The Court reasoned that bidding for the 2016 election system, given SMTC’s experience in the 2010 automation, was indeed incidental and directly furthered its business purpose. The Court also highlighted that SMTC had already amended its AOI to broaden its purpose to include “elections, whether regular or special,” and this amendment was approved by the SEC before the post-qualification stage, effectively removing any potential impediment.
Regarding the procedural aspects, the Supreme Court addressed the issue of jurisdiction and hierarchy of courts. While Rule 64 of the Rules of Court typically governs certiorari petitions from COMELEC rulings, the Court clarified that this rule applies to COMELEC’s quasi-judicial functions, not administrative functions like procurement. In procurement matters, recourse should generally be to the Regional Trial Court (RTC) under Section 58 of RA 9184. However, the Court recognized exceptions to the hierarchy of courts doctrine, particularly when issues are of transcendental importance and involve a constitutional body like COMELEC, justifying direct recourse to the Supreme Court in this case.
Finally, the Court dismissed the petitioners’ allegations regarding SMTC’s nationality, finding no credible evidence to support the claim that SMTC was not a Filipino corporation. Applying the control test, the Court examined SMTC’s General Information Sheet (GIS) and found that Filipino ownership exceeded 60%, satisfying the nationality requirement for joint ventures in government projects. The Court concluded that COMELEC did not commit grave abuse of discretion in granting Smartmatic JV’s protest and declaring it the bidder with the lowest calculated responsive bid.
FAQs
| What was the main point of contention in this case? | The petitioners argued that Smartmatic-TIM Corporation Joint Venture should have been disqualified from bidding because one of its partners, SMTC, had a corporate purpose limited to the 2010 elections, making its bid an ultra vires act. |
| Did the Supreme Court agree that submitting the Articles of Incorporation was mandatory for eligibility? | No, the Court clarified that while a registration certificate is required, the explicit submission of the Articles of Incorporation was not a mandatory eligibility requirement in the bidding documents for this procurement. |
| What does “ultra vires act” mean in this context? | An “ultra vires act” refers to actions by a corporation that are beyond the scope of its powers as defined in its Articles of Incorporation and the Corporation Code. Petitioners argued SMTC’s bid was ultra vires because it was allegedly outside its stated corporate purpose. |
| How did the Court address the issue of SMTC’s corporate purpose? | The Court ruled that bidding for the 2016 election system was “incidental” to SMTC’s broader corporate purpose and that the company had already amended its Articles to explicitly include future elections before the post-qualification stage. |
| Why did the Supreme Court take on this case directly instead of deferring to lower courts? | The Court invoked the exception to the hierarchy of courts doctrine because the case involved issues of transcendental importance related to the national elections and the actions of a constitutional body (COMELEC). |
| What is the “control test” mentioned in the decision? | The “control test” is used to determine the nationality of a corporation. Shares owned by corporations at least 60% Filipino-owned are considered Philippine nationality. The Court used this to verify SMTC’s Filipino ownership. |
For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Querubin v. COMELEC, G.R. No. 218787, December 08, 2015
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