Case Digest: E. Razon, Inc vs Philippine Ports Authority, et.al., G.R. No. 75197

E. Razon, Inc vs Philippine Ports Authority, et.al., GR No. 75197, June 22, 1987

Subject: Obligations and Contracts

FACTS

After a public bidding, petitioner ERI was awarded in 1966 a five-year contract to operate the arrastre service for Piers 3 and 5 at the South Harbor. Thereafter, it allegedly invested millions of pesos in acquiring port-handling equipment upon assurance from the government that its contract would be renewed without public bidding. Thus, when the Bureau of Customs informed petitioner ERI in 1971 of its decision to call for a new bidding and accordingly issued an invitation to bid for the operation of the arrastre service for any and all piers in South Harbor, including Piers 3 and 5, petitioner ERI instituted a special civil action for certiorari, prohibition, mandamus and injunction with preliminary and mandatory injunction and/or restraining order before the then Court of First Instance of Manila against the Secretary of Finance, Commissioner of Customs and members of the Bidding Committee to enjoin them from proceeding with the bidding and to compel them to renew petitioner ERI's contract. The Court of First Instance, presided by Judge Juan Bocar, issued the writ prayed for, whereupon then Secretary of Finance Cesar Virata elevated the case before this Court in G.R. No. 33426 entitled, "Cesar Virata, et al. vs. Hon. Juan Bocar, et al.

ISSUE

Whether or not the management contract is void.

RULING

Yes.

Under the law, a contract which is the direct result of a previous illegal contract, is also void and inexistent.

Petitioners attempt to evade the consequence of the Romualdez connection by alleging that the 60% equity of petitioner E. Razon, Inc. was obtained thru force and duress and without any monetary consideration whatsoever. Otherwise stated, the transfer of the shares of stock to persons close to President Marcos, later disclosed to be Alfredo "Bejo" Romualdez was, at the very least, voidable for lack of consent, or altogether void for being absolutely fictitious or simulated. The transfer of the control of petitioner E. Razon, Inc. from petitioner Enrique Razon to Alfredo "Bejo" Romualdez, which We have resolved to be null and void, served as the direct link to petitioner company's obtaining the Management Contract. Being the direct consequence and result of a previous illegal contract, the Management Contract itself is null and void as provided in Article 1422 of the Civil Code.