SECOND DIVISION
[G.R. No. 131544. March 16, 2001]
EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING, SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD INC., PERFORMANCE BUILDERS DEV’T. CO., DE LEON-ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All represented by their Atty. IN FACT, MARCELO D, FORONDA, petitioners, vs. HON. GREGORIO R. VIGILAR, In His Capacity as Secretary of Public Works and Highways, respondent.
D E C I S I O N
BUENA,
J.:
Sought to be reversed in
the instant Petition for Certiorari is the Decision, dated 07 November 1997, of
the Regional Trial Court of Quezon City, Branch 226, in Civil Case No.
Q-96-29243,[1] dismissing the Petition for Mandamus filed
by herein petitioners against herein respondent Hon. Gregorio Vigilar, in his
capacity as Secretary of the Department of Public Works and Highways (DPWH).
The tapestry of facts
unfurls.
In 1983, the Ministry of
Human Settlement, through the BLISS Development Corporation, initiated a
housing project on a government property along the east bank of the Manggahan
Floodway in Pasig City. For this purpose, the Ministry of Human Settlement
entered into a Memorandum of Agreement (MOA) with the Ministry of Public Works
and Highways,[2] where the latter undertook to develop the
housing site and construct thereon 145 housing units.
By virtue of the MOA, the
Ministry of Public Works and Highways forged individual contracts with herein
petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa
Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders
Inc., Glass World Inc., Performance Builders Development Co. and De Leon
Araneta Construction Co., for the construction of the housing units. Under the contracts, the scope of
construction and funding therefor covered only around “2/3 of each housing
unit.”[3] After complying with the terms of said
contracts, and by reason of the verbal request and assurance of then DPWH
Undersecretary Aber Canlas that additional funds would be available and
forthcoming, petitioners agreed to undertake and perform “additional
constructions”[4] for the completion of the housing units,
despite the absence of appropriations and written contracts to cover subsequent
expenses for the “additional constructions.”
Petitioners then received
payment for the construction work duly covered by the individual written
contracts, thereby leaving an unpaid balance of P5,918,315.63,[5] which amount represents the expenses for the
“additional constructions” for the completion of the existing housing
units. On 14 November 1988, petitioners
sent a demand letter to the DPWH Secretary and submitted that their claim for
payment was favorably recommended by DPWH Assistant Secretary for Legal
Services Dominador Madamba, who recognized the existence of implied contracts covering the additional constructions.
Notwithstanding, DPWH Assistant Secretary Madamba opined that payment of
petitioners’ money claims should be based on quantum meruit and should be forwarded to the Commission on Audit (COA) for its due
consideration and approval. The money
claims were then referred to COA which returned the same to the DPWH Auditor
for auditorial action. On the basis of
the Inspection Report of the Auditor’s Technical Staff, the DPWH Auditor
interposed no objection to the payment of the money claims subject to whatever
action the COA may adopt.
In a Second Indorsement
dated 27 July 1992, the COA returned the documents to the DPWH, stating that
funds should first be made available before COA could pass upon and act on the
money claims. In a Memorandum dated 30
July 1992, then DPWH Secretary Jose De Jesus requested the Secretary of Budget
and Management to release public funds for the payment of petitioners’ money
claims, stating that the “amount is urgently needed in order to settle once and
for all this (sic) outstanding obligations of the government.” In a Letter of
the Undersecretary of Budget and Management dated 20 December 1994, the amount
of P5,819,316.00 was then released for the payment of petitioners’ money
claims, under Advise of Allotment No. A4-1303-04-41-303.
In an Indorsement dated
27 December 1995, the COA referred anew the money claims to the DPWH pursuant
to COA Circular 95-006, thus:
“Respectfully returned thru the Auditor to the Honorable Secretary, Department of Public Works and Highways, Port Area, Manila, the above-captioned subject (Re: Claim of Ten (10) contractors for payment of Work accomplishments on the construction of the COGEO II Housing Project, Pasig, Metro Manila) and reiterating the policy of this office as embodied in COA Circular No. 95-006 dated May 18, 1995 totally lifting its pre-audit activities on all financial transactions of the agencies of the government involving implementation/prosecution of projects and/or payment of claims without exception so as to vest on agency heads the prerogative to exercise fiscal responsibility thereon.
“The audit of the transaction shall be done after payment.”
In a letter dated 26
August 1996, respondent DPWH Secretary Gregorio Vigilar denied the subject
money claims prompting herein petitioners to file before the Regional Trial
Court of Quezon City, Branch 226, a Petition for Mandamus praying that herein
respondent be ordered:
“1) To pay petitioners the total of P5,819,316.00;
“2) To pay petitioners moral and exemplary damages in the amount to be fixed by the Court and sum of P500,000.00 as attorney’s fees.
On 18 February 1997, the
lower court conducted a pre-trial conference where the parties appeared and
filed their respective pre-trial briefs.
Further, respondent submitted a Memorandum to which petitioners filed a
Rejoinder.
On 07 November 1997, the
lower court denied the Petition for Mandamus, in a Decision which disposed as
follows:
“WHEREFORE, in view of all the foregoing, the instant Petition for Mandamus is dismissed. The order of September 24, 1997, submitting the Manifestation and Motion for Resolution, is hereby withdrawn.
“SO ORDERED.”
Hence, this petition
where the core issue for resolution focuses on the right of
petitioners-contractors to compensation for a public works housing project.
In the case before us,
respondent, citing among others Sections 46[6] and 47,[7] Chapter 7, Sub-Title B, Title I, Book V of
the Administrative Code of 1987 (E.O 292), posits that the “existence of
appropriations and availability of funds as certified to and verified by the
proper accounting officials are conditions sine qua non for the
execution of government contracts.”[8] Respondent harps on the fact that “the
additional work was pursued through the verbal request
of then DPWH Undersecretary Aber P. Canlas, despite the absence of the
corresponding supplemental contracts and appropriate funding.”[9] According to respondent, “sans
showing of certificate of availability of funds, the implied contracts are
considered fatally defective and considered inexistent and void ab initio.”
Respondent concludes that “inasmuch as the additional work done was pursued in
violation of the mandatory provisions of the laws concerning contracts
involving expenditure of public funds and in excess of the public official’s
contracting authority, the same is not binding on the government and impose no
liability therefor.”[10]
Although this Court
agrees with respondent’s postulation that the “implied contracts”, which
covered the additional constructions, are void, in view of violation of
applicable laws, auditing rules and lack of legal requirements,[11] we nonetheless find the instant petition
laden with merit and uphold, in the interest of substantial justice,
petitioners-contractors’ right to be compensated for the "additional
constructions" on the public works housing project, applying the principle of quantum meruit.
Interestingly, this case
is not of first impression. In Eslao
vs. Commission on Audit,[12] this Court likewise allowed recovery by the
contractor on the basis of quantum meruit, following our pronouncement
in Royal Trust Construction vs.
Commission on Audit,[13] thus:
“In Royal Trust Construction vs. COA, a case involving the widening and deepening of the Betis River in Pampanga at the urgent request of the local officials and with the knowledge and consent of the Ministry of Public Works, even without a written contract and the covering appropriation, the project was undertaken to prevent the overflowing of the neighboring areas and to irrigate the adjacent farmlands. The contractor sought compensation for the completed portion in the sum of over P1 million. While the payment was favorably recommended by the Ministry of Public Works, it was denied by the respondent COA on the ground of violation of mandatory legal provisions as the existence of corresponding appropriations covering the contract cost. Under COA Res. No. 36-58 dated November 15, 1986, its existing policy is to allow recovery from covering contracts on the basis of quantum meruit if there is delay in the accomplishment of the required certificate of availability of funds to support a contract.” (Emphasis ours)
In the Royal
Construction case, this Court, applying the principle of quantum meruit in
allowing recovery by the contractor, elucidated:
“The work done by it (the contractor) was impliedly authorized and
later expressly acknowledged by the Ministry of Public Works, which has twice
recommended favorable action on the petitioner’s request for payment. Despite the admitted absence of a specific
covering appropriation as required under COA Resolution No. 36-58, the
petitioner may nevertheless be compensated for the services rendered by it, concededly
for the public benefit, from the general fund allotted by law to the
Betis River project. Substantial
compliance with the said resolution, in view of the circumstances of this case,
should suffice. The Court also feels
that the remedy suggested by the respondent, to wit, the filing of a complaint
in court for recovery of the compensation claimed, would entail additional
expense, inconvenience and delay which in fairness should be imposed on the
petitioner.
“Accordingly, in the interest of substantial justice and equity, the respondent Commission on Audit is DIRECTED to determine on a quantum meruit basis the total compensation due to the petitioner for the services rendered by it in the channel improvement of the Betis River in Pampanga and to allow the payment thereof immediately upon completion of the said determination.” (Emphasis ours)
Similarly, this Court
applied the doctrine of quantum meruit in Melchor vs. Commission
on Audit[14] and explained that where payment is based on
quantum meruit, the amount of recovery would only be the reasonable
value of the thing or services rendered regardless of any agreement as to
value.[15]
Notably, the peculiar
circumstances present in the instant case buttress petitioners’ claim for compensation
for the additional constructions, despite the illegality and void nature of the
“implied contracts” forged between the DPWH and petitioners-contractors. On
this matter, it bears stressing that the illegality of the subject contracts
proceeds from an express declaration or prohibition by law,[16] and not from any intrinsic illegality. Stated differently, the subject contracts
are not illegal per se.
Of equal significance are
circumstances attendant and peculiar in this case which necessitate allowance
of petitioners’ money claims—on the basis of quantum meruit— for
work accomplished on the government housing project.
To begin with,
petitioners-contractors assented and agreed to undertake additional
constructions for the completion of the housing units, believing in good faith
and in the interest of the government and, in effect, the public in general,
that appropriations to cover the additional constructions and completion of the
public works housing project would be available and forthcoming. On this particular score, the records reveal
that the verbal request and assurance of then DPWH Undersecretary Canlas led
petitioners-contractors to undertake the completion of the government
housing project, despite the absence of covering appropriations, written
contracts, and certification of availability of funds, as mandated by law and
pertinent auditing rules and issuances.
To put it differently, the “implied contracts,” declared void in this
case, covered only the completion and final phase of construction of the
housing units, which structures, concededly, were already existing, albeit not
yet finished in their entirety at the time the “implied contracts” were entered
into between the government and the contractors.
Further,
petitioners-contractors sent to the DPWH Secretary a demand letter pressing for
their money claims, on the strength of a favorable recommendation from
the DPWH Assistant Secretary for Legal Affairs to the effect that implied
contracts existed and that the money claims had ample basis applying the
principle of quantum meruit.
Moreover, as can be gleaned from the records, even the DPWH Auditor
interposed no objection to the payment of the money claims, subject to whatever
action the COA may adopt.
Beyond this, the sum of
P5,819,316.00 representing the amount of petitioners’ money claims, had already
been released by the Department of Budget and Management (DBM), under Advise of
Allotment No. A4-1303-04-41-303.
Equally important is the glaring fact that the construction of the
housing units had already been completed by petitioners-contractors and the
subject housing units had been, since their completion, under the control and
disposition of the government pursuant to its public works housing project.
To our mind, it would be
the apex of injustice and highly inequitable for us to defeat
petitioners-contractors’ right to be duly compensated for actual work performed
and services rendered, where both the government and the public have, for
years, received and accepted benefits from said housing project and reaped the
fruits of petitioners-contractors’ honest toil and labor.
Incidentally, respondent
likewise argues that the State may not be sued in the instant case, invoking
the constitutional doctrine of Non-suability of the State,[17] otherwise known as the Royal Prerogative of Dishonesty.
Respondent’s argument is
misplaced inasmuch as the Principle of State Immunity finds no application in
the case before us.
Under these
circumstances, respondent may not validly invoke the Royal Prerogative of
Dishonesty and conveniently hide under the State’s cloak of
invincibility against suit, considering that this principle yields
to certain settled exceptions. True
enough, the rule, in any case, is not absolute for it does not say that the
state may not be sued under any circumstance.[18]
Thus, in Amigable
vs. Cuenca,[19] this Court, in effect, shred the protective
shroud which shields the State from suit, reiterating our decree in the
landmark case of Ministerio vs. CFI
of Cebu[20] that “the doctrine of governmental immunity from suit cannot serve
as an instrument for perpetrating an injustice on a citizen.” It is just as
important, if not more so, that there be fidelity to legal norms on the part of
officialdom if the rule of law were to be maintained.[21]
Although the Amigable
and Ministerio cases generously tackled the issue of the State’s
immunity from suit vis a vis the payment of just compensation for
expropriated property, this Court nonetheless finds the doctrine enunciated in
the aforementioned cases applicable to the instant controversy, considering
that the ends of justice would be subverted if we were to uphold, in this
particular instance, the State’s immunity from suit.
To be sure, this Court –
as the staunch guardian of the citizens’ rights and welfare – cannot sanction
an injustice so patent on its face, and allow itself to be an instrument in the
perpetration thereof. Justice and
equity sternly demand that the State’s cloak of invincibility against suit be
shred in this particular instance, and that petitioners–contractors be duly
compensated – on the basis of quantum meruit – for
construction done on the public works housing project.
IN VIEW WHEREOF, the instant petition is GRANTED. The assailed decision of the Regional Trial
Court dated 07 November 1997 is REVERSED AND SET ASIDE.
ACCORDINGLY, the
Commission on Audit is hereby directed to determine and ascertain with
dispatch, on a quantum meruit basis, the total compensation due to petitioners-contractors
for the additional constructions on the housing project and to allow payment
thereof upon the completion of said determination. No costs.
SO ORDERED.
Bellosillo, (Chairman),
Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.
[1] Rollo, pp.
14-20.
[2] Now Department of
Public Works and Highways.
[3] Rollo, p.
104.
[4] Rollo, p.
188.
[5] Rollo, p. 14.
[6] “Section 46. Appropriation Before Entering into
Contract.
(1) No contract involving the expenditure of public funds
shall be entered into unless there is an appropriation therefor, the unexpended
balance of which, free of other obligations, is sufficient to cover the proposed
expenditure; X X X”
[7] “Section 47. Certificate Showing Appropriation to Meet
Contract.
Except in the case of a contract for personal service, for supplies for current
consumption or to be carried in stock not exceeding the estimated consumption
for three (3) months, or banking transactions of government-owned or controlled
banks, no contract involving the expenditure of public funds by any government
agency shall be entered into or authorized unless the proper accounting
official of the agency concerned shall have certified to the officer entering
into the obligation that funds have been duly appropriated for the purpose and
that the amount necessary to cover the proposed contract for the current
calendar year is available for expenditure on account thereof, subject to
verification by the auditor concerned.
The certificate signed by the proper accounting official and the auditor
who verified it, shall be attached to and become an integral part of the proposed
contract, and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the obligation of the government agency
concerned under the contract is fully extinguished.”
[8] Rollo p. 94.
[9] Ibid.
[10] Ibid.
[11] Section 48,
Chapter 7, Sub-Title B, Title I, Book V, Executive Order 292, otherwise known
as The Administrative Code of 1987, provides: “Any contract entered into
contrary to the requirements of the two (2) immediately preceding sections
shall be void, and the officer or officers entering into the contract shall be
liable to the Government or other contracting party for any consequent damage
to the same extent as if the transaction had been wholly between private
parties.”
[12] 195 SCRA 730 [1991].
[13] G.R. No. 84202,
November 23, 1988 (Resolution of the Supreme Court En Banc).
[14] 200 SCRA 705 [1991].
[15] Tantuico, State
Audit Code of the Philippines Annotated, 471 [1982], cited in Melchor vs.
COA, Ibid.
[16] Section 48, Chapter
7, Sub-Title B, Title 1, Book V, E.O. 292; Article 1409, par. (7), Civil Code.
[17] Section 3,
Article XVI, 1987 Constitution provides: “ The State may not be sued
without its consent.”; Section 10, Book I, Chapter 3, E.O. 292, provides:
“Non-suability of the State.- No suit shall lie against the state except with
its consent as provided by law.”
[18] Department of
Agriculture vs. NLRC, 227 SCRA 693 [1993].
[19] 43 SCRA 360; See
also De los Santos vs. Intermediate Appellate Court, 223 SCRA 11 [1993].
[20] 40 SCRA 464 [1971].
[21] Ibid.