C & C Commercial Corporation vs. National Waterworks and Sewerage Authority

Republic Act No. 912’s preference for Philippine-made materials applies to NAWASA as a government-owned corporation exercising proprietary or governmental functions, but the preference arises only when the local materials are actually available, practicable, usable, and covered by an existing certification from the Director of the Bureau of Public Works.

C & C Commercial Corporation manufactures asbestos cement pressure pipes, while NAWASA is a public corporation undertaking waterworks and sewerage projects. Republic Act No. 912 directs that Philippine-made materials and products be used in government construction or repair work whenever available, practicable, and usable, upon proper certification by the Director of the Bureau of Public Works. The law’s nationalistic policy of preferring local materials over foreign products is the statutory backdrop.

C & C Commercial Corporation was a local manufacturer of asbestos cement pressure pipes and had previously supplied NAWASA with such pipes up to 12 inches in diameter; pipes above that size that it supplied to NAWASA were imported. On July 19, 1965, C & C filed a complaint alleging that NAWASA had started to negotiate for direct purchase of centrifugally cast iron pipes for the improvement of the San Pablo Waterworks System in violation of Republic Act No. 912 and the law on public biddings, excluding C & C, which could supply asbestos cement pressure pipes that were available, practicable, usable, and would serve the project at lower cost. NAWASA answered on August 6, 1965; Filipino Pipe and Foundry Corporation intervened on August 10, 1965; and on August 16, 1965 the CFI issued a preliminary injunction restraining NAWASA from further negotiating the purchase of CCI pipes from the intervenor. After a partial stipulation of facts on September 23, 1965, the CFI rendered a partial decision on January 31, 1966 dismissing the complaint as to San Pablo and dissolving the injunction; that partial decision became final.

On January 22, 1965, NAWASA called for bids for labor and materials for the Davao Metropolitan Waterworks System, requiring proposals for 24-inch steel pipes, asbestos cement pressure pipes, and cast iron pipes. The bidding was held on February 23, 1965, and on March 15, 1965 the committee on award recommended awarding the bid to the lowest bidder, Tirso del Rosario, under his proposal to supply steel pipes. On August 10, 1965, C & C filed a first supplemental complaint seeking to restrain NAWASA from proceeding with the Davao award, alleging that specifying steel pipes, admittedly imported, without preferring C & C’s locally produced asbestos cement pressure pipes violated Republic Act No. 912. The CFI admitted the supplemental complaint on August 14, 1965 and issued a preliminary injunction on September 17, 1965.

As early as November 26, 1962, NAWASA called for bids for 18-inch steel pipes for the Iloilo Waterworks System; the bidding was conducted on December 27, 1962. C & C participated by offering to supply the 18-inch steel pipes but lost; the lowest bidder was Regal Trading Corporation, and the bid was awarded to it. On September 8, 1965, almost three years after the bidding, C & C filed a second supplemental complaint seeking to restrain NAWASA from formalizing or implementing the Iloilo award, alleging that specifying steel pipes violated Republic Act No. 912 because C & C’s asbestos cement pressure pipes were locally available, practicable, and usable. The CFI admitted the second supplemental complaint on September 24, 1965 over NAWASA’s objection.

On September 13, 1965, NAWASA advertised for bids for 30 to 42-inch steel pipes for the interim waterworks project in Manila and suburbs, with bidding to take place on December 14, 1965. On November 10, 1965, C & C filed a third supplemental complaint seeking to restrain the bidding on the same ground that specifying steel pipes violated Republic Act No. 912. The CFI admitted the supplemental complaint over NAWASA’s objection and on November 20, 1965 issued a preliminary injunction restraining NAWASA from holding the bidding scheduled on December 14, 1965 or any subsequent date until further orders. Pending the case, NAWASA filed three separate motions to dissolve the preliminary injunctions for Davao, Iloilo, and Manila, pleading the crying need for more adequate water supply and the possible cancellation of its $20,200,000 World Bank loan if the work schedule under the loan agreement was not met; the CFI took no action on the motions.

During the trial, NAWASA’s staff civil engineer Leopoldo del Rosario testified that NAWASA inspected local plants every six months and that C & C did not manufacture asbestos cement pressure pipes beyond 12 inches; C & C’s president, Clara Reyes Pastor, admitted that the sizes it locally manufactured and furnished NAWASA were only 12 inches in diameter, that pipes above 12 inches it supplied to NAWASA were imported, and that its biggest mandril was 16 inches. The evidence showed that at the time NAWASA specified 18 and 24-inch diameter steel pipes for the Davao and Iloilo projects, there were no locally produced materials in those sizes.

C & C claimed it had a complete plant equipped with machinery, technicians, and skilled laborers capable of producing 18 to 42-inch pipes if NAWASA specified asbestos cement, and that it could import bigger mandrels worth $25,000 from abroad. The evidence showed, however, that C & C had not produced pipes larger than 12 inches even up to the time of trial. C & C later secured a certification from the Director of Public Works on July 6, 1966, but at that time it was still actually producing asbestos pipes up to 12 inches only, which its existing equipment was found capable of producing.

• RA 912 Preference: C & C Commercial Corporation (plaintiff-appellee) argued that NAWASA violated Republic Act No. 912 by specifying steel pipes for the Davao, Iloilo, and Manila waterworks projects without giving preference to its locally produced asbestos cement pressure pipes, which were available, practicable, usable, and would serve the projects at lower cost.
• Public Bidding: C & C argued that NAWASA’s negotiation for direct purchase of centrifugally cast iron pipes for the San Pablo Waterworks System violated Republic Act No. 912 and the law on public biddings and excluded C & C, which could supply asbestos cement pressure pipes.
• Capacity and Certification: C & C maintained that it had a complete plant equipped with machinery, technicians, and skilled laborers capable of producing pipes 18 to 42 inches in diameter if NAWASA specified asbestos cement, and that it had subsequently secured the Director of Public Works’ certification for its asbestos cement pressure pipes.
• Interpretation of “Practicable”: C & C sought a judicial pronouncement on whether “practicable” under Republic Act No. 912 means that the cheapest locally produced or manufactured products should be preferred and specified in government construction and repair works.

• Scope of RA 912: NAWASA (defendant-appellant) argued that Republic Act No. 912 applies only to construction or repair works undertaken by the Government; NAWASA, though a public corporation, is not a municipal corporation or agency of the State empowered to regulate or administer local affairs, nor one of the arms through which political authority is made effective, so it is not within the term “Government” in the law.
• Non-Availability of Local Pipes: NAWASA denied violating Republic Act No. 912 and argued that at the time it called for bids for Davao, C & C’s plant could produce asbestos cement pressure pipes only up to 12 inches in diameter; at the time of the Manila bid, the largest asbestos cement pipes available were 24 inches produced by Eternit Corporation, which did not protest the bids.
• Public Need and World Bank Loan: NAWASA sought dissolution of the injunctions, pleading the urgent need for more adequate water supply in Davao, Iloilo, and especially Manila and suburbs, and the possible cancellation of its $20,200,000 World Bank loan if it failed to comply with the work schedule under the loan agreement.

• Scope of RA 912: Whether NAWASA is embraced within the term “Government” in Section 1 of Republic Act No. 912, so that the law’s preference for Philippine-made materials applies to its waterworks projects.
• Violation of RA 912: Whether NAWASA violated Republic Act No. 912 in specifying steel pipes and awarding contracts for the Davao and Iloilo waterworks projects without preferring C & C’s locally produced asbestos cement pressure pipes.
• Manila Interim Project: Whether the issue concerning NAWASA’s specification of 30 to 42-inch steel pipes for the Manila and suburbs interim waterworks project was mooted by Republic Act No. 4858 and the President’s authorization to procure the materials by negotiated sale.

• Scope of RA 912: Yes. NAWASA, like any corporation exercising proprietary or governmental functions, is deemed embraced within “Government” in Republic Act No. 912 and must give preference to local materials when available, practicable, and usable.
• Violation of RA 912: No. Local asbestos cement pressure pipes in the required sizes above 12 inches were not available at the time of the bids, and C & C had no existing certification for those sizes; its later certification did not cover larger pipes.
• Manila Interim Project: Yes. The Manila issue became moot and academic because Republic Act No. 4858 authorized the President to allow procurement of the needed supplies as an exception to Republic Act No. 912, and the President authorized NAWASA’s General Manager to purchase the pipes and materials by negotiated sale.

• Scope of RA 912: The term “Government” in Republic Act No. 912 is not limited to the strict “Government of the Philippines.” Section 2 of the Revised Administrative Code itself recognizes an exception when a different meaning is given by a particular statute or is plainly collected from the context. Republic Act No. 912 and Commonwealth Act No. 138, the Flag Law, are statutes in pari materia: both relate to the same subject matter and pursue the same nationalistic purpose of giving preference to locally produced materials in government purchases, works, or projects. Commonwealth Act No. 138 expressly includes purchases by government-owned companies, and the two laws should be construed together to attain the expressed national policy. NAWASA, like any other corporation exercising proprietary or governmental functions, is therefore embraced within the term “Government” in Republic Act No. 912, and in the repair or construction of its works or projects or the purchase of materials therefor, local materials should be given preference when available, practicable, and usable.
• Violation of RA 912: Republic Act No. 912 grants a preference to locally produced materials only when they are available, practicable, and usable, will serve the purpose as equally well as foreign materials, and are covered by the proper certification of the Director of the Bureau of Public Works. The evidence showed that C & C had not produced asbestos cement pressure pipes larger than 12 inches in diameter; its president admitted that the sizes it locally manufactured and furnished NAWASA were only up to 12 inches, that pipes above 12 inches supplied to NAWASA were imported, and that its biggest mandril was 16 inches. NAWASA’s practice was to inspect local manufacturing plants every six months, and at the time it specified 18 and 24-inch steel pipes for Davao and Iloilo, there were no locally produced materials in those sizes. C & C’s claim that it could produce larger pipes if it imported bigger mandrels worth $25,000 did not make those pipes “available” within the meaning of the law; the Director of Public Works could not certify availability, practicability, usability, and durability before the machinery, equipment, or tools needed to produce the products were actually bought and installed. C & C also failed to produce the necessary certification at the time the calls for bids were made. Its later certification on July 6, 1966 did not improve its position because it was still actually producing asbestos pipes up to 12 inches only. Since Republic Act No. 912 grants a preference that creates a special privilege, the law is strictly construed, and the right arising from it exists only after strict compliance with all its conditions. C & C failed to prove that right.
• Manila Interim Project: The issue concerning the Manila and suburbs interim project became moot and academic by reason of Republic Act No. 4858, which authorizes the President to allow the procurement of supplies necessary for the rehabilitation of the project as an exception to the restrictions and preferences provided for in Republic Act No. 912. The President authorized the General Manager of NAWASA under that statutory power to purchase all the pipes and materials necessary for the project by negotiated sales.

• Statutes in pari materia — Statutes relating to the same subject matter are construed together to give effect to the legislative policy embodied in them. Republic Act No. 912 and Commonwealth Act No. 138 both aim to give preference to locally produced materials in government works or purchases; Commonwealth Act No. 138’s inclusion of government-owned companies informed the SC’s construction of “Government” in Republic Act No. 912 to include NAWASA.
• Preference for Philippine-made materials under Republic Act No. 912 — Republic Act No. 912 requires the use of Philippine-made materials and products in government construction or repair work, whether done directly or through contract awards, when they are (a) available, (b) practicable, (c) usable, (d) will serve the purpose as equally well as foreign materials, and (e) covered by the proper certification of the Director of the Bureau of Public Works and/or his assistants. The SC applied this to NAWASA but found the conditions absent for the larger pipes required in the bids.
• “Available” under Republic Act No. 912 — A local product is not “available” merely because the manufacturer promises to acquire machinery or equipment abroad and produce the required sizes later. The SC held that the Director of Public Works cannot certify availability, practicability, usability, and durability before the machinery, equipment, or tools needed to produce the products are actually bought and installed. C & C’s larger pipes were therefore not available.
• Strict construction of statutes granting preference or privilege — Statutes granting advantages to private persons create special privileges or monopolies and are viewed with suspicion and strictly construed; rights existing only by virtue of such statutes arise only after strict compliance with all the conditions found in the statute. The SC applied this to Republic Act No. 912’s preference, requiring an existing and effective certification before any right could be claimed.
• Moot and academic by supervening statute — A supervening statute may render an issue moot and academic. Republic Act No. 4858 authorized the President to allow procurement for the Manila interim project as an exception to Republic Act No. 912, and the presidential authorization to purchase by negotiated sale mooted the issue on the Manila project.

• “We have to declare, therefore, that the NAWASA, like any other corporation exercising proprietary or governmental functions should be deemed embraced within the term "Government" found in Republic Act 912, and in the repair or construction of their works or projects or the purchase of materials therefor, local materials should be given preference when available, practicable and usable.” — This is the SC’s holding that NAWASA is covered by Republic Act No. 912 despite not being a municipal corporation or an arm of political authority.
• “Since Republic Act 912 grants preference only upon the certification of availability, practicability and usability of locally produced materials by the Director of Public Works, that certification must be existing and effective before any right arising therefrom may be claimed to have been violated.” — This states the certification requirement and why C & C’s later certification did not establish a violation at the time of the bids.
• “It would really be unfair to require in order to be "available" within the meaning of the law that herein appellee should have in stock the sizes of pipes called for in the bids in the quantity needed by the appellant; but We cannot also believe, by any stretch of the imagination, that the Director of Public Works would certify to the availability, practicability, usability and durability of certain products even before the machinery, equipment or tools needed to produce said products are actually bought from abroad and installed in its plant by the manufacturer.” — This defines the SC’s interpretation of “available” and rejects C & C’s promise to import mandrels as sufficient.
• “Statutes granting advantages to private persons have in many instances created special privileges or monopolies for the grantees and thus have been viewed with suspicion and strictly construed.” — This is the SC’s basis for strictly construing Republic Act No. 912’s preference and requiring strict compliance with its conditions.

• Section 1, Republic Act No. 912 — Requires the use of Philippine-made materials and products in government construction or repair work, whether done directly or through contract awards, whenever available, practicable, usable, and will serve the purpose as equally well as foreign materials, upon proper certification by the Director of the Bureau of Public Works and/or his assistants. The SC applied it to NAWASA but found no violation because the larger local pipes were not available and certified.
• Section 2, Revised Administrative Code — Defines “Government” but recognizes an exception when a different meaning is given by a particular statute or is plainly collected from the context. The SC used this exception to construe “Government” in Republic Act No. 912 broadly enough to include NAWASA.
• Commonwealth Act No. 138 (Flag Law) — Gives native products and domestic entities preference in government purchases and expressly includes government-owned companies. The SC treated it as in pari materia with Republic Act No. 912 and used it to support NAWASA’s inclusion within “Government.”
• Republic Act No. 4858 — Authorizes the President to allow the procurement of supplies necessary for the rehabilitation of the Manila interim project as an exception to the restrictions and preferences in Republic Act No. 912. The SC applied it to render the Manila project issue moot and academic.