G.R. No. 26201, March 14, 1927
ADRIANO PANLILIO, plaintiff-appellant, vs. TEODORO DAVID, JORGE B. VARGAS, as Director of Lands and SILVERIO APOSTOL, as acting Secretary of Agriculture and Natural Resources, defendants-appellants.

Ponente: OSTRAND, J.

FACTS

The Bureau of Lands invited bids for the lease of a 229-hectare public land in Hermosa, Bataan. Teodoro David, the original applicant, submitted a bid of P720 per annum accompanied by an uncertified check for six months’ rent (P360). Adriano Panlilio, the only other bidder, offered P2,600 per annum with a check for P1,300 bearing the notation “O. K.S. M.” (initials of a bank cashier). At the bid opening, David exercised his right to match the highest bid (Panlilio’s P2,600) and tendered an additional P940 in cash, making a total of P1,300 (combined with his original check). The Bureau accepted David’s payment and awarded him the lease.

Panlilio protested, arguing David’s bid was invalid because his initial check was uncertified, contrary to Bureau regulations requiring bids to be accompanied by “cash, certified check or postal money order.” The Director of Lands, initially advised by the Attorney-General (who mistakenly believed Panlilio’s check was certified), canceled David’s award and awarded the lease to Panlilio. Upon discovering that Panlilio’s check was also uncertified, the Director set aside both awards and declared the land open for re-bidding. Both bidders appealed to the Secretary of Agriculture and Natural Resources, who affirmed the Director’s decision.

David appealed to the Governor-General, who opined that the acceptance and encashment of David’s check cured its defect. Following a revised opinion from the Attorney-General agreeing with this view, the Director of Lands reinstated the award to David. Before a formal lease could be executed, Panlilio filed an action for injunction and mandamus to prevent the lease to David and compel its award to himself. David filed a cross-complaint for damages due to the delay. The trial court held both bids invalid for non-compliance with the certification requirement and declared no valid award could be made. Both parties appealed.

ISSUE

Was the award of the lease to Teodoro David valid despite his initial bid being accompanied by an uncertified check, after the Bureau accepted his payment (including the uncertified check which was later cashed) and he matched the highest bid?

RULING

YES. The award to David was valid. The Supreme Court reversed the trial court’s decision.

1. The regulatory requirement for a certified check, cash, or postal money order is directory, not mandatory. While the Director of Lands had the right to reject bids not complying with Administrative Order No. 3, the provision’s purpose is to prevent frivolous bids and ensure collection. It must be given a reasonable construction.

2. The defect in David’s bid was cured by acceptance and payment. The Bureau’s acceptance of David’s tender (including the uncertified check), the subsequent cashing of that check, and the deposit of the proceeds into the Insular Treasury rendered the initial formal defect inconsequential. The government, having received and retained the full payment, could not later invalidate the award based on that defect.

3. Panlilio’s bid was also defective. The notation “O. K.S. M.” on his check did not constitute a proper certification under modern banking practice.

4. David’s claim for damages is dismissed. The delay was primarily due to his own failure to comply with the regulations. Furthermore, Panlilio’s lawsuit was brought in good faith on a debatable issue of first impression.

DISPOSITIVE PORTION:
The judgment appealed from is reversed. The award of the lease to Teodoro David is declared valid and takes priority over the subsequent award to Adriano Panlilio. David’s cross-complaint for damages is dismissed. Panlilio is ordered to pay the costs.