Surigao Mineral Reservation Board vs. Cloribel

An invitation to bid is not an offer that, upon acceptance, ripens into a perfected contract; it is merely an invitation to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. Where the invitation expressly reserves the right to reject any and all bids, the exercise of that right cannot give rise to a cause of action for breach of contract, and a bidder who accepted those terms is estopped from challenging the rejection. Moreover, a bid that fails to comply with mandatory requirements—such as a required bid bond—confers no vested right upon the bidder.

The Surigao Mineral Reservations Board, an agency of the Philippine government, issued an Invitation to Bid on May 12, 1965, for the exploration and development of mineral deposits in a portion of the Surigao Mineral Reservation. Two bidders responded: Mac-Arthur International Minerals Co. and Benguet Consolidated, Inc. The Board referred both bids to an Evaluation Committee. After considering the committee’s report, the Board rejected both bids. The company sought reconsideration, which the Board denied. The company then sued the Board and the Executive Secretary before the Court of First Instance of Manila, claiming a perfected contract and seeking to nullify the rejection and to prevent any acts impairing its alleged rights.

• The Invitation to Bid and the Bids: On May 12, 1965, the Surigao Mineral Reservations Board issued an Invitation to Bid for the exploration and development of mineral deposits in a specified portion of the Surigao Mineral Reservation. The invitation explicitly stated that “the Government reserves the right to reject any and all bids, waive any defect of form or accept such bid as may be deemed most advantageous to it.” Two bids were submitted: one by Mac-Arthur International Minerals Co. and another by Benguet Consolidated, Inc. The company’s bid was submitted without the mandatory bid bond, despite the invitation’s express provision that “bids not accompanied by bid bonds will be rejected.”

• Evaluation and Rejection: Both bids were referred to an Evaluation Committee created by the Board. Upon consideration of the committee’s report, the Board rejected both bids. The company sought reconsideration, which the Board denied.

• The Trial Court Action: The company filed a petition in the Court of First Instance of Manila (Civil Case No. 67400) naming the Board and the Executive Secretary as respondents. The petition sought to annul the proceedings leading to the rejection of its bid and to prevent the Board, the Evaluation Committee, and the Executive Secretary from taking any steps that might impair the rights the company claimed to have acquired by virtue of its bid submission. The company’s theory was that the Invitation to Bid constituted an offer, which its bid unqualifiedly accepted, resulting in a perfected contract binding upon the Board. Respondent Judge Cloribel issued a restraining order on November 16, 1966, and subsequently denied the government’s motion to dismiss on December 9, 1966.

• No Cause of Action — Invitation to Bid is Not an Offer: Petitioners maintained that the company’s theory was “absolutely untenable.” An invitation to bid is not an offer that can mature into a contract upon acceptance; rather, it is a mere invitation to make proposals, and the advertiser is under no obligation to accept any bid, highest or lowest, unless the contrary clearly appears.

• Express Reservation of Right to Reject: Petitioners pointed out that the Invitation to Bid expressly reserved the government’s right to reject any and all bids. The company accepted that term by submitting its bid and was therefore bound by it and estopped from assailing the Board’s exercise of that reserved right.

• Failure to Submit Bid Bond: Petitioners argued that the company did not faithfully adhere to the terms of the Invitation because its bid did not include the mandatory bid bond. The invitation explicitly stated that bids without bid bonds would be rejected, and this failure alone justified the Board’s rejection.

• Grave Abuse of Discretion: Because the company’s complaint disclosed no cause of action on its face, respondent judge acted with grave abuse of discretion amounting to excess of jurisdiction in issuing the restraining order and in refusing to dismiss the case.

• Perfected Contract: The company contended that the Invitation to Bid was an “offer,” which it accepted without qualification by submitting its bid. This acceptance, according to the company, resulted in a perfected contract binding upon the government. Consequently, the Board was obligated to implement the alleged contract and to refrain from any action that would defeat or impair the company’s supposed rights thereunder.

• Right to Injunctive Relief: By characterising the transaction as a perfected contract, the company argued it had a clear legal right that warranted the issuance of a restraining order and injunctive relief to preserve the status quo pending resolution of the merits.

• Grave Abuse of Discretion: Whether respondent Judge committed grave abuse of discretion amounting to excess of jurisdiction in issuing the restraining order dated November 16, 1966, and in denying the motion to dismiss on December 9, 1966.

• Existence of a Cause of Action: Whether the company’s petition in Civil Case No. 67400 stated a cause of action—specifically, whether a perfected contract arose from the Invitation to Bid and the company’s submission of its bid, such that the Board’s rejection was a breach giving rise to a judicially enforceable right.

• Grave Abuse of Discretion; No Cause of Action: The restraining order and the order denying dismissal were annulled because the company’s complaint revealed no cause of action. Under Article 1326 of the Civil Code, an invitation to bid is not an offer but merely an invitation to make proposals, and the advertiser is not bound to accept the highest or lowest bidder unless the contrary appears. The company did not allege that the contrary appeared. Moreover, the Invitation to Bid expressly reserved the government’s right to reject any and all bids. By submitting its bid, the company accepted this condition and was estopped from challenging the Board’s exercise of that right. Furthermore, the company’s bid lacked the required bid bond, which was a mandatory condition, and this independently justified the rejection. Since no perfected contract existed, the company had no legal right capable of protection by injunction, and the trial judge acted with grave abuse of discretion in issuing the restraining order and in refusing to dismiss the case.

• Invitation to Bid as Invitation to Make Proposals — Under Article 1326 of the Civil Code, advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. The Court applied this doctrine to hold that the Board’s Invitation to Bid did not constitute an offer; hence, the company’s bid was a mere proposal that the Board was free to reject.

• Binding Effect of Bid Conditions on the Bidder — A bidder who submits a bid in response to an invitation thereby accepts all the terms and conditions stated therein, including a reservation of the right to reject any and all bids. The bidder is estopped from subsequently objecting to the exercise of that reserved right.

• Cause of Action as a Prerequisite for Injunctive Relief — A restraining order or preliminary injunction cannot lawfully issue when the complaint on its face shows that the applicant has no cause of action. The absence of a clear legal right is fatal to the claim for injunctive relief.

• “An Invitation to Bid, is not an ‘offer’, which, if accepted, matures into a contract. In the language of Article 1326 of our Civil Code, ‘advertisements for bidders are simply invitations to make proposals and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.’” — This passage encapsulates the core legal principle distinguishing an invitation to bid from a contractual offer.

• “This reservation of the ‘right’ of the Board ‘to reject any and all bids,’ is one of the terms and conditions of the Invitation to Bid which the Company has accepted and, hence, binds the same. As a consequence, it is now in estoppel to object to or assail the exercise of said ‘right’ by the Board.” — The Court underscored that the bidder’s acceptance of the invitation’s terms creates an estoppel.

• Leonquinco v. Postal Savings Bank, 47 Phil. 772 — Cited to support the principle that a reservation of the right to reject any and all bids, when included in an invitation to bid, is binding upon the bidder.

• Borromeo v. City of Manila, 62 Phil. 512 — Followed as authority on the binding nature of conditions set forth in calls for bids.

• Gutierrez v. Insular Life, 102 Phil. 524; De Lara v. Secretary of Public Works, L-13460, Nov. 28, 1968; Jalandoni v. National Settlement, L-15198, May 30, 1960; De Ocampo v. Municipal Council, L-9293, May 31, 1957; Esguerra v. Aytona, L-18751, Apr. 28, 1962 — Cited to reinforce the application of estoppel against a party who, having accepted the terms of an agreement, later challenges the other party’s exercise of a right expressly reserved therein.

• Alemany v. Sweeny, 2 Phil. 654; La Insular v. Jao Oge, 42 Phil. 367; De los Santos v. Provincial Sheriff, 64 Phil. 193; Alzua v. Johnson, 21 Phil. 308; North Negros Sugar Co. v. Hidalgo, 63 Phil. 664; Ayo v. Ilao, L-23293, Jan. 16, 1968; Commissioner of Customs v. Cloribel, L-20266, Jan. 31, 1967; Vivo v. Arca, L-21728, Dec. 1963 — Collectively cited for the settled rule that certiorari lies to correct a grave abuse of discretion where the complaint fails to state a cause of action.

• Article 1326, Civil Code of the Philippines — The provision states that advertisements for bidders are merely invitations to submit proposals, and the advertiser is not bound to accept the highest or lowest bidder unless the contrary appears. The Court applied this directly: because the Invitation to Bid was an “advertisement for bidders,” it did not constitute an offer; thus, no contract could arise from the mere submission of a bid.

Justices Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles, and Fernando concurred.