A Collection of Case Digests

Office of the Ombudsman, Petitioner, vs. Antonio Z. De Guzman, Respondent; G.R. No. 197886; 04 October 2017

63

On Ultra Vires Acts

Facts:

Sometime 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 ₱5.00 per kilogram.This contract would expire on December 31, 2002.

Sometime 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. It also hired 25 drivers for these vehicles on a contractual basis. All of these drivers’ contracts would expire on March 31, 2004, except that of a certain Oliver A. Cruz.

The Central Mail Exchange Center of the Philippine Postal Corporation conducted a post study of the delivery system and found that the expenses for the salaries and maintenance of its vehicles for Luzon deliveries were higher than its previous system of outsourcing deliveries to Aboitiz Air. On April 15, 2004, it submitted a recommendation that the Philippine Postal Corporation would save ₱6,110,152.44 per annum if deliveries were outsourced instead at the cost of ₱8.00 per kilogram.

On April 29, 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 7, 2004, De Guzman sent a letter to Aboitiz Air, now Aboitiz One, Inc. (Aboitiz One), through its Chief Operating Officer, Efren E. Uy, stating:

“Pending finalization of the renewal of our contract, you may now re-assume to undertake the carriage of mail from and to Regions 1, 2, 5, & CAR starting 11 May 2004 until further notice. The terms and conditions shall be the same as stipulated in the previous contract except for the schedule and the rate. The attached revised schedule shall be followed and the rate shall be P8.00 per Kilogram.”

Aboitiz One accepted the proposal and commenced its delivery operations in Luzon on May 20, 2004. When Postmaster General Diomedo P. Villanueva (Postmaster General 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 20, 2005, Atty. Sim Oresca Mata, Jr. filed an administrative complaint with the Office of the Ombudsman against De Guzman. He 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.

Issue:

Whether  or not the act of respondent of procuring Aboitiz One’s services in outsourcing mail deliveries in Luzon was ultra vires.

Ruling:

No.

Authority of Respondent 

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 Corporationn and has the power to sign contracts on behalf of the corporation as “authorized and approved by the Board [of Directors].”  Valid corporate acts are those that have “the vote of at least a majority of the members present at a meeting at which there is a quorum.”

Lack of Board Approval

The Board of Directors never actually took a vote on whether or not it should renew its contract with Aboitiz One for the outsourcing of its mail deliveries. There was also no board resoluti9n issued after approving it. As there was no majority vote or a board resolution, respondent was not authorized to enter into the contract dated May 7, 2004.

Ratification

There was no evidence presented that the Board of Directors repudiated the contract dated May 7, 2004 with Aboitiz One. The contract remained effective until January 31, 2006. While the transcript of the April 29, 2004 Special Board Meeting does not mention the proposal to increase the cost of delivery from ₱5.00 to ₱8.00 per kilogram, the Central Mail Exchange Center’s cost-benefit analysis and recommendation for price increase was sent to the Board of Directors on April 20, 2004.  This memorandum was the reason for the April 29, 2004 Special Board Meeting. Therefore, the Board of Directors was informed that the renewal of the Aboitiz One contract would include an increase in costs.

Postmaster General Villanueva approved the payments when he resumed work. Subsequent Postmaster General Rama, upon his assumption to office, also approved the payments to Aboitiz One. The Corporate Auditor Commission on Audit likewise certified that it did not issue any notice of disallowance on the Aboitiz One contract.

Conclusion

Considering that the Board of Directors remained silent and the Postmaster Generals continued to approve the payments to Aboitiz One, they are presumed to have substantiaily ratified respondent’s unauthorized acts. Therefore, respondent’s action is not considered ultra vires.

Author’s note: The act was ultra vires, as it was done without authority, but it was tacitly/impliedly ratified.