SECOND DIVISION
[ G.R. No. 183444, October 12, 2011 ]DEPARTMENT OF PUBLIC WORKS v. RONALDO E. QUIWA +
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, PETITIONER, VS. RONALDO E. QUIWA, DOING BUSINESS UNDER THE NAME "R.E.Q. CONSTRUCTION," EFREN N. RIGOR, DOING BUSINESSS UNDER THE NAME "CHIARA CONSTRUCTION," ROMEO R. DIMATULAC, DOING BUSINESS UNDER THE NAME "ARDY CONSTRUCTION" AND
FELICITAS C. SUMERA, DOING BUSINESS UNDER THE NAME "F.C.S. CONSTRUCTION," REPRESENTED BY HER ATTORNEY-IN-FACT ROMEO M. DE LEON, RESPONDENTS.
D E C I S I O N
DEPARTMENT OF PUBLIC WORKS v. RONALDO E. QUIWA +
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, PETITIONER, VS. RONALDO E. QUIWA, DOING BUSINESS UNDER THE NAME "R.E.Q. CONSTRUCTION," EFREN N. RIGOR, DOING BUSINESSS UNDER THE NAME "CHIARA CONSTRUCTION," ROMEO R. DIMATULAC, DOING BUSINESS UNDER THE NAME "ARDY CONSTRUCTION" AND
FELICITAS C. SUMERA, DOING BUSINESS UNDER THE NAME "F.C.S. CONSTRUCTION," REPRESENTED BY HER ATTORNEY-IN-FACT ROMEO M. DE LEON, RESPONDENTS.
D E C I S I O N
SERENO, J.:
Assailed in this Petition for Review on Certiorari is the 26 June 2008 Decision of the Court of Appeals in CA-G.R. CV No. 76584,[1] affirming the trial court's judgment in favor of herein respondents in their money claims against
petitioner DPWH.
The Factual Antecedents
With the eruption of Mt. Pinatubo in 1991 and the consequent onslaught of lahar and floodwater, the rehabilitation of the affected areas became urgent. River systems needed to be channeled, dredged, desilted and diked to prevent flooding and overflowing of lahar; and to avert damage to life, limb and property of the people in the area.
In 1992, a number of contractors, including herein respondents, were engaged by the DPWH through its Project Manager, Philip F. Meñez, for the aforesaid services pursuant to an emergency project under the Mount Pinatubo Rehabilitation Project. It was alleged that prior to the engagement of the contractors, Undersecretary Teodoro T. Encarnacion of DPWH, who had overall supervision of the infrastructure and flood control projects, met with the contractors and insisted on the urgency of the said projects. Respondents claimed that they had accomplished works on the Sacobia-Bamban-Parua River Control Project pursuant to this emergency project.[2] Ronaldo E. Quiwa claimed that under two construction agreements with the DPWH, his construction company, the R.E.Q. Construction, had accomplished the channeling of the Sacobia-Bamban-Parua River Control Project for the excavated spoils of 69,835 cubic meters, pegged at P3,448,258.25 for one project, and 80,480 cubic meters at the cost of P4,019,976.00 for another, or a total amount of P7,508,234.25.[3] Efren Rigor, on behalf of Chiara Construction, alleged that the sum of money due him for the channeling of the Sacobia-Bamban-Parua River was P8,854,654.10 for three accomplished projects.[4] Romeo Dimatulac of Ardy Construction claimed P1,402,928.45 for double diking;[5] and Felicitas C. Sumera, P4,232,363.40 for her construction company.[6]
Initially, R.E.Q. Construction filed its money claim with the DPWH, which referred the matter to the Commission on Audit.[7] The COA returned the claims to the DPWH with the information that the latter had already been given the funds and the authority to disburse them.[8] When respondent Quiwa filed his claims with the DPWH, it failed to act on these, resulting in the withholding of the payment due him, despite the favorable report and Certification of Completion made by the Asstistant Project Manager for Operations, Engineer Rolando G. Santos.[9] Prompted by the prolonged inaction of the DPWH on their claims, respondents jointly filed an action for a sum of money against the DPWH.[10] The case was decided in their favor by the Regional Trial Court (RTC) of Manila, Branch 51, in Civil Case No. 96-77180.[11]
As found by the RTC, the respondents, plaintiffs therein, were duly licensed contractors, who had completed the construction works on the Sacobia-Bamban-Parua River as certified by the DPWH itself. In 1992, the funding for the infrastructure and other work requirements under the Mt. Pinatubo Rehabilitation Program in the amount of P400 million pesos was initially allocated by the government, and was later increased to P700M. Despite the completion of respondents' works in accordance with the specifications and the allocation of the funds to cover the said services, the DPWH unjustly denied the claims. The court a quo gave credence to the evidence presented by respondents, consisting of contract agreements; statement of work accomplished, certified and signed by the engineers of the DPWH; and testimonial evidence of witnesses. It ruled that respondents were able to prove their claims by a preponderance of evidence. The RTC found that the contracts between DPWH and the plaintiffs were valid contracts, as all the requisites thereof -- consent, subject matter and cause -- were present; and, notwithstanding the absence of the signature of the regional director on the agreement executed with Quiwa and Sumera, the contract was ratified when he affixed his signature to the Inspection and Certification of Completion of the projects.
The court a quo likewise sustained the claim of Rigor and Dimatulac even in the absence of a written contract. It held that there was already a perfected contract, since there was a concurrence of the essential requisites thereof. It also, in effect, held that DPWH was already estopped from repudiating the contract, as the latter had already made representations and assurances that the plaintiffs would be paid for the work that they would do, and as even then DPWH Undersecretary Teodoro T. Encarnacion had told them to "fast-track" the project.[12]
The RTC also ruled that the claim of the respondents against DPWH was proper since they had already made a demand on the Commission on Audit regarding the payment of their construction services. Thus, they first availed themselves of the proper administrative remedy in filing their claim with COA, which unfortunately referred the claim to the DPWH. The court a quo also reasoned that the contracts could not be declared void on the ground of the absence of a certification of availability of funds issued by the proper accounting official. It found that there was already an advice of allotment from the Department of Budget and Management to cover the projects.[13] The respondents were thus correct in suing the government for the nonpayment of the services they had rendered. Consequently, the court a quo disposed:
Not amenable to the trial court's Decision, Petitioner DPWH, through the Office of the Solicitor General, filed an appeal[14] to question the said Decision. DPWH mainly argued that there was no valid contract between it and respondents.[15] It claimed that there was no certification of the availability of funds issued by the DPWH Chief Accountant or by the head of its accounting unit as required by Executive Order No. 292, or the Administrative Code of 1987.[16] It also alleged other deficiencies and irregularities, which rendered the contract void from its inception, such as the absence of the requirements enumerated in Presidential Decree (P.D.) Nos. 1594 and 1445; and the lack of authority on the part of Engineer Philip Meñez, Project Manager II of the DPWH to enter into contracts on behalf of DPWH. DPWH likewise contested the RTC's award of attorney's fees and costs of suit to respondents.
The Court of Appeals (CA), similar to the court a quo, sided with respondents. The CA resolved in the affirmative the issue of whether the respondents are entitled to their claim representing actual expenses for the construction projects they undertook. It found that there was already a fund allocation for the projects, and that the payment for the channeling services rendered by the respondents had been included in the said fund allocation as testified to by DPWH's witness, Felix Desierto. It ruled that DPWH officials who approved the projects, even though middle-rank, had the authority to bind the department. The CA held:
The CA further held that revalidation was not part of the contract and, thus, not a precondition for payment to the respondents. The constitution of the revalidation team after the commencement of the construction project indicated that approval by DPWH was not meant to be a condition for the payment of the project.[18] With the completion of the project, the CA ruled that the DPWH was estopped from refusing to pay plaintiffs:[19]
According to the CA, the absence of a written contract with R. Dimatulac and Rigor did not affect the validity and the enforceability of the contracts between DPWH and the contractors.
With the affirmance of the RTC Decision, DPWH filed a Petition for Review[21] before this Court, alleging that the following were errors committed by the Court of Appeals:[22]
Petitioner insists that there was no valid contract between it and the respondents, and, thus, the latter had no cause of action against the former. Consequently, there was no basis to grant the Complaint and to award attorney's fees and the costs of suit in favor of the respondents.[23]
On the other hand, respondents, in their comment, reiterates the correctness of the RTC and the CA Decisions. They also brought to the attention of this Court the fact that the individual defendants in the case, DPWH former Secretaries Gregorio T. Vigilar and Jose P. de Jesus, and Undersecretary Teodoro T. Encarnacion did not file an appeal to this Court. Both the RTC and the CA Decisions adjudged these defendants jointly and solidarily liable with DPWH to pay the amount awarded to the respondents. Respondents are effectively claiming that the said judgments have become final and executory against defendant public officials.
The Issues
We find that the crux of the Petition is simply whether the DPWH is liable to pay the claims filed against them by the plaintiffs. Corollary to this main issue, the following sub-issues beg for resolution:
The Court's Ruling
It should be borne in mind that a review under Rule 45 of the Rules of Court is discretionary and must be granted only when there are special and important reasons therefor.[24] We find that these reasons are not present in this case.
As a general rule, the factual findings of the trial court, when affirmed by the appellate court, attain conclusiveness and are given utmost respect by this Court.[25] DPWH never questioned the completion of the Sacobia-Bamban-Parua river works. Neither did it question the authority of those who certified the completion of the works by respondents. The trial court ruled that the works were completed, as shown by the evidence presented before it. This finding was affirmed by the Court of Appeals. There is, therefore, no reason for us to view these factual findings.
With the findings of the trial and the appellate courts, there is no longer any issue on whether the contractors completed the projects in accordance with the specifications agreed upon. The regular course of a contract is that after the complete rendering of services, the contractors are subsequently paid. The DPWH, however, deviated from this course.
It should be noted that the completion of the works was recognized by the DPWH, as shown by the certifications issued by its engineers and even by municipal officials. Notwithstanding the said recognition, DPWH chose not to act on the claims of respondents, and later denied liability for the payment of the works on the ground of the invalidity of the contracts.
Petitioner DPWH primarily argues that the contracts with herein respondents were void for not complying with Sections 85 and 86 of P.D. 1445, or the Government Auditing Code of the Philippines, as amended by Executive Order No. 292. These sections require an appropriation for the contracts and a certification by the chief accountant of the agency or by the head of its accounting unit as to the availability of funds. It should be noted that there was an appropriation amounting to P400 million, which was increased to P700 million. The funding was for the rehabilitation of the areas devastated and affected by Mt. Pinatubo, which included the Sacobia-Bamban-Parua River for which some of the channeling, desilting and diking works were rendered by herein respondents' construction companies.
It was, however, undisputed that there was no certification from the chief accountant of DPWH regarding the said expenditure. In addition, the project manager has a limited authority to approve contracts in an amount not exceeding P1 million.[26] Notwithstanding these irregularities, it should be pointed out that there is no novelty regarding the question of satisfying a claim for construction contracts entered into by the government, where there was no appropriation and where the contracts were considered void due to technical reasons. It has been settled in several cases that payment for services done on account of the government, but based on a void contract, cannot be avoided. The Court first resolved such question in Royal Trust Construction v. Commission on Audit.[27] In that case, the court issued a Resolution granting the claim of Royal Trust Construction under a void contract. The unpublished Resolution reads as follows:
The above case became the authority in granting claims of a contractor against the government based on a void contract. This exercise of equity to compensate contracts with the government was repeated in Eslao vs. COA.[28] In the said case, the respondent therein, Commission on Audit (COA), was ordered to pay the company of petitioner for the services rendered by the latter in constructing a building for a state university, notwithstanding the contract's violations of the mandatory requirements of law, including the prior appropriation of funds therefor. The Court, in resolving the case, cited the unpublished Resolution in Royal Construction, wherein the Court allowed the payment of the company's services sans the legal requirements of prior appropriation.
Royal Trust Construction was again mentioned in Melchor v. COA,[29] which was decided a few months after Eslao. In Melchor, it was found that the contract was approved by an unauthorized person and, similar to the case at bar, the required certification of the chief accountant was absent. The Court did not deny or justify the invalidity of the contract. The Court, however, found that the government unjustifiably denied what the latter owed to the contractors, leaving them uncompensated after the government had benefited from the already completed work.
In EPG Construction Co., et al v Hon. Gregorio R. Vigilar,[30] the Court again refused to stamp with legality DPWH's act of evading the payment of contracts that had been completed, and from which the government had already benefited. The Court held:
The Court also held in the above case:
To emphasize, the contracts in the above cases, as in this case, were not illegal per se. There was prior appropriation of funds for the project including appropriation; and payment to the contractors, upon the subsequent completion of the works, was warranted.
As to Public Works and Highways officials Gregorio R. Vigilar, Teodoro T. Encarnacion and Jose P. de Jesus, their personal liability should not be sustained. They were sued in their official capacity, and it would be unfair to them to pay the contractors out of their own pockets. In Melchor, the Court declared that it was unjust to hold the public official liable for the payment of a construction that benefited the government.
We also depart from the CA and the RTC rulings awarding the respondents attorney's fees and costs of suit. The Constitution provides that "no money shall be paid out of the Treasury except in pursuance of an appropriation made by law."[31] Attorney's fees and costs of suit were not included in the appropriation of expenditures for the Sacobia-Bamban-Parua project. In addition, we are not disposed to say that there was bad faith on the part of the DPWH in not settling its liability to the respondents for the works accomplished by the latter. The DPWH relied on P.D. 1445, Section 87, which provides that contracts in violation of Sections 85 and 86 thereof are void. The subject contracts undoubtedly lacked the legal requirement of certification of the chief accountant of DWPH. It was also clear that the project manager had no authority to approve the contracts, since the amounts involved were beyond his authority.[32] A strict application of the law, as the DPWH officials did, would therefore give a reasonable basis for the denial of the claim and eliminate the badge of bad faith on their part. The DPWH officials were apparently apprehensive that they might end up being liable to the government if they had wrongfully paid the contractors. This apprehension clearly showed in their letter to the DOJ Secretary.[33]
In conclusion, we uphold the CA in affirming the liability of the DPWH for the works accomplished by herein contractors. We, however, delete the liability of Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus, as well as other monetary awards in favor of respondents, as these awards were not directly for the subject accomplished works and were not funded by the department.
IN VIEW THEREOF, the assailed 26 June 2008 Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus are absolved from their solidary liability with the government for the payment of the subject contracts. The payment is solely on account of DPWH. Likewise, attorney's fees and costs of suit are hereby DELETED.
SO ORDERED.
Carpio, (Chairperson), Brion, Reyes, and Perlas-Bernabe,* JJ., concur.
* Designated as additional member of the Second Division vice Associate Justice Jose P. Perez per Special Order No. 1114 dated 3 October 2011.
[1] Rollo, pp. 47-56; CA rollo, pp. 368-377; Decision penned by Associate Justice Agustin S. Dizon, with Associate Justices Regalado E. Maambong and Celia C. Librea-Leagogo concurring.
[2] Records, Vol. 1, pp. 4-5.
[3] Id. at 9-15.
[4] Id. at 15-22.
[5] Id. at 22-24.
[6] Id. at 24-26.
[7] First Folder of Exhibits, p. 32.
[8] Id. at 77.
[9] Supra note 7.
[10] Records, Vol. 1, pp. 1-34.
[11] Records, Vol. II, pp. 264-273, penned by Judge Rustico V. Panganiban.
[12] Id. at 270-271.
[13] Id. The Advice of Allotment states: "The following allotments are made available in support of their functions, projects, purpose and all other expenditures authorized for the calendar year. The allotment for any given quarter shall only become self-executory at the beginning of that quarter. It is the primary responsibility of the head of the department, bureau or agency concerned to keep expenditures within the limits of the amount alloted." The purpose is "to cover funding requirements for the implementation of necessary infrastructure projects and other works under the Mt. Pinatubo Rehabilitation Project." The appropriation was P400 million.
[14] Id. at 284.
[15] CA rollo, p. 56-91.
[16] Id. at 72-75.
[17] Id. at 345-346.
[18] Id. at 346-347.
[19] Id. at 347.
[20] Id. at 349.
[21] Rollo, pp. 8-44.
[22] Id. at 20-21.
[23] Id. at 21.
[24] ROC, R45 §6.
[25] See Spouses Pudadera v. Magallanes, G.R. No. 170073, 18 October 2010 citing Uraca v. Court of Appeals, 344 Phil. 253, 267 (1997).
[26] Fourth Folder of Exhibits, Department Order No. 135, Series of 1990, p 1.
[27]Rollo (G.R. No. 84202), pp. 65-66.
[28] G.R. No. 89745, 8 April 1991, 195 SCRA 730.
[29] G.R. No. 95398, 16 August 1991, 200 SCRA 704
[30] G.R. No. 131544, 16 March 2001, 354 SCRA 566.
[31] Constitution, Art. VI, §29 (1).
[32] Fourth Folder of Exhibits, p. 1. DPWH Department Order No. 135, Series of 1990.
[33] The letter dated 14 September 1993, written by Joel L. Altea, Asst. Secretary for Comptrollership and Financial Management of the DPWH, was addressed to the then DOJ Secretary Franklin M. Drilon, seeking an opinion on whether the DPWH Secretary would be personally liable in case he signed and allowed claims for work that turn out to have been mistakenly validated by the Validation Committee and the COA.
With the eruption of Mt. Pinatubo in 1991 and the consequent onslaught of lahar and floodwater, the rehabilitation of the affected areas became urgent. River systems needed to be channeled, dredged, desilted and diked to prevent flooding and overflowing of lahar; and to avert damage to life, limb and property of the people in the area.
In 1992, a number of contractors, including herein respondents, were engaged by the DPWH through its Project Manager, Philip F. Meñez, for the aforesaid services pursuant to an emergency project under the Mount Pinatubo Rehabilitation Project. It was alleged that prior to the engagement of the contractors, Undersecretary Teodoro T. Encarnacion of DPWH, who had overall supervision of the infrastructure and flood control projects, met with the contractors and insisted on the urgency of the said projects. Respondents claimed that they had accomplished works on the Sacobia-Bamban-Parua River Control Project pursuant to this emergency project.[2] Ronaldo E. Quiwa claimed that under two construction agreements with the DPWH, his construction company, the R.E.Q. Construction, had accomplished the channeling of the Sacobia-Bamban-Parua River Control Project for the excavated spoils of 69,835 cubic meters, pegged at P3,448,258.25 for one project, and 80,480 cubic meters at the cost of P4,019,976.00 for another, or a total amount of P7,508,234.25.[3] Efren Rigor, on behalf of Chiara Construction, alleged that the sum of money due him for the channeling of the Sacobia-Bamban-Parua River was P8,854,654.10 for three accomplished projects.[4] Romeo Dimatulac of Ardy Construction claimed P1,402,928.45 for double diking;[5] and Felicitas C. Sumera, P4,232,363.40 for her construction company.[6]
Initially, R.E.Q. Construction filed its money claim with the DPWH, which referred the matter to the Commission on Audit.[7] The COA returned the claims to the DPWH with the information that the latter had already been given the funds and the authority to disburse them.[8] When respondent Quiwa filed his claims with the DPWH, it failed to act on these, resulting in the withholding of the payment due him, despite the favorable report and Certification of Completion made by the Asstistant Project Manager for Operations, Engineer Rolando G. Santos.[9] Prompted by the prolonged inaction of the DPWH on their claims, respondents jointly filed an action for a sum of money against the DPWH.[10] The case was decided in their favor by the Regional Trial Court (RTC) of Manila, Branch 51, in Civil Case No. 96-77180.[11]
As found by the RTC, the respondents, plaintiffs therein, were duly licensed contractors, who had completed the construction works on the Sacobia-Bamban-Parua River as certified by the DPWH itself. In 1992, the funding for the infrastructure and other work requirements under the Mt. Pinatubo Rehabilitation Program in the amount of P400 million pesos was initially allocated by the government, and was later increased to P700M. Despite the completion of respondents' works in accordance with the specifications and the allocation of the funds to cover the said services, the DPWH unjustly denied the claims. The court a quo gave credence to the evidence presented by respondents, consisting of contract agreements; statement of work accomplished, certified and signed by the engineers of the DPWH; and testimonial evidence of witnesses. It ruled that respondents were able to prove their claims by a preponderance of evidence. The RTC found that the contracts between DPWH and the plaintiffs were valid contracts, as all the requisites thereof -- consent, subject matter and cause -- were present; and, notwithstanding the absence of the signature of the regional director on the agreement executed with Quiwa and Sumera, the contract was ratified when he affixed his signature to the Inspection and Certification of Completion of the projects.
The court a quo likewise sustained the claim of Rigor and Dimatulac even in the absence of a written contract. It held that there was already a perfected contract, since there was a concurrence of the essential requisites thereof. It also, in effect, held that DPWH was already estopped from repudiating the contract, as the latter had already made representations and assurances that the plaintiffs would be paid for the work that they would do, and as even then DPWH Undersecretary Teodoro T. Encarnacion had told them to "fast-track" the project.[12]
The RTC also ruled that the claim of the respondents against DPWH was proper since they had already made a demand on the Commission on Audit regarding the payment of their construction services. Thus, they first availed themselves of the proper administrative remedy in filing their claim with COA, which unfortunately referred the claim to the DPWH. The court a quo also reasoned that the contracts could not be declared void on the ground of the absence of a certification of availability of funds issued by the proper accounting official. It found that there was already an advice of allotment from the Department of Budget and Management to cover the projects.[13] The respondents were thus correct in suing the government for the nonpayment of the services they had rendered. Consequently, the court a quo disposed:
WHEREFORE, in view of the foregoing, judgment is hereby ordered in favor of plaintiffs Ronaldo Quiwa doing business under the name R.E.Q . Construction, Efren N. Rigor, doing business under the name Chiara Construction, Romeo R. Dimatulac, doing business under the namme (sic) Ardy Construction and against Felicitas C. Sumera, doing business under the namee (sic) FC.S. (sic) Construction and against defendants Department of Public Works and Highways, Gregorio R. Vigilar, Teodoro T. Encarnacion and Jose P. de Jesus, ordering them to jointly and solidarily pay plaintiffs the following amounts:
1) To plaintiff Ronaldo Z. Quiwa
First: The principal sum of P3,488,258.25 representing the actual work accomplishments of Quiwa's first project, the channeling with disposal of Sacobia-Bamban-Parua River from Sta. 2 + 100 to Sta. 2 + 500 (left bank) in Bamban, Tarlac and the principal sum of P3,843,252.90 representing the actual work accomplishments of Quiwa's second project which is Channeling with Disposal of Sacobia-Bamban-Parua River from Sta. 1 + 200 to Sta. 1 + 500 at Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
Second: The sum of 10% of the total amount due as attorney's fees; and
Third: The sum equivalent to the lawful fees paid by plaintiff Quiwa in entering and docketing the action which must be the proportion of the filing fees for his total claim in the amount of P7,331,511.115 as costs of suit.
2) To plaintiff Efren Rigor
First: The principal sum of P3,843,252.90 representing the actual work accomplishments of plaintiff Rigor's first project, the channeling and disposal of Sacobia-Bamban-Parua River Channeling Section 1 + 200 Sta. 1 + 500 in Bamban, Tarlac, and the principal sum of P3,155,641.20 representing the actual accomplisments of plaintiff Rigor's second project which is the Channeling and Disposal Sacobia-Bamban-Parua River from Station -0 + 700 to Station-1 + 000 in Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
Second: The sum of 10% of the total amount due as attorney's fees; and
Third: The sum equivalent to the lawful fees paid by Plaintiff Rigor in entering or docketing the action which must be the proportion of the filing fees for his total claim in the amount of P6,998,849.10 as costs of suit.
3) For Plaintiff Romeo Dimatulac
First: The principal sum of P1,402,928.45 representing the actual work accomplishments of plaintiff Dimatulac project, the Double Diking at Sacobia-Bamban-Parua River Control System from Station 2 + 000 to Station 2 + 400 in Bamban, Tarlac with legal rate of interest from July 1922 until fully paid;
Second: The sum of 10% of the total amount due as attorney's fees; and
Third: The sum equivalent to the lawful fees paid by plaintiff Dimatulac in entering and docketing the action which must be the proportion of the filing fee for his total claim in the amount of P1,402,928.45 as costs of suit.
4) To plaintiff Felicitas C. Sumera
First: The principal sum of P4,232,363.40 representing the actual work accomplishments of plaintiff Sumera's project, the Channeling with disposal of the Sacobia-Bamban-Parua River Control covering Station -1 = 500 to Station -1 + 800 in Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
Second: The sum of 10% of the total amount due as attorney's fees; and
Third: The sum equivalent to the lawful fees paid by plaintiff Sumera's (sic) in entering and docketing the action which must be the
proportion of the filing fees for her total claim in the amount of P4,232,363.40 as costs of suit.. (sic)
SO ORDERED.
Not amenable to the trial court's Decision, Petitioner DPWH, through the Office of the Solicitor General, filed an appeal[14] to question the said Decision. DPWH mainly argued that there was no valid contract between it and respondents.[15] It claimed that there was no certification of the availability of funds issued by the DPWH Chief Accountant or by the head of its accounting unit as required by Executive Order No. 292, or the Administrative Code of 1987.[16] It also alleged other deficiencies and irregularities, which rendered the contract void from its inception, such as the absence of the requirements enumerated in Presidential Decree (P.D.) Nos. 1594 and 1445; and the lack of authority on the part of Engineer Philip Meñez, Project Manager II of the DPWH to enter into contracts on behalf of DPWH. DPWH likewise contested the RTC's award of attorney's fees and costs of suit to respondents.
The Court of Appeals (CA), similar to the court a quo, sided with respondents. The CA resolved in the affirmative the issue of whether the respondents are entitled to their claim representing actual expenses for the construction projects they undertook. It found that there was already a fund allocation for the projects, and that the payment for the channeling services rendered by the respondents had been included in the said fund allocation as testified to by DPWH's witness, Felix Desierto. It ruled that DPWH officials who approved the projects, even though middle-rank, had the authority to bind the department. The CA held:
...[I]t appears that all the procedures followed by the project managers and plaintiff-appellees were in accordance with the usual DPWH procedures, such that, there was no reason for plaintiffs-appellees not to rely on the authority of the project managers who allowed them to proceed with their projects from start to finish.[17]
The CA further held that revalidation was not part of the contract and, thus, not a precondition for payment to the respondents. The constitution of the revalidation team after the commencement of the construction project indicated that approval by DPWH was not meant to be a condition for the payment of the project.[18] With the completion of the project, the CA ruled that the DPWH was estopped from refusing to pay plaintiffs:[19]
...[I]t is readily seen that defendant-appellant's conduct in allowing the subject projects to continue without objecting thereto and in even assigning its own employees to oversee these projects estopped defendant-appellant from adopting a position that such projects were not authorized. Without a doubt, such acts induced plaintiff-appellees to believe that such projects will be honored by defendant-appellant and that they will be compensated for all their expenditures.[20]
According to the CA, the absence of a written contract with R. Dimatulac and Rigor did not affect the validity and the enforceability of the contracts between DPWH and the contractors.
With the affirmance of the RTC Decision, DPWH filed a Petition for Review[21] before this Court, alleging that the following were errors committed by the Court of Appeals:[22]
IN NOT FINDING THAT THE PURPORTED CONTRACTS BETWEEN THE PARTIES ARE NULL AND VOID FROM THE BEGINNING AND HENCE, NOT BINDING BETWEEN THEM;
IN NOT FINDING THAT [RESPONDENTS QUIWA ET AL.] HAVE NO CAUSE OF ACTION AGAINST [PETITIONER DPWH];
IN NOT FINDING THAT THE AWARD OF ATTORNEY'S FEES AND COSTS OF SUIT IS UNWARRANTED AND HAS NO BASIS IN LAW.
Petitioner insists that there was no valid contract between it and the respondents, and, thus, the latter had no cause of action against the former. Consequently, there was no basis to grant the Complaint and to award attorney's fees and the costs of suit in favor of the respondents.[23]
On the other hand, respondents, in their comment, reiterates the correctness of the RTC and the CA Decisions. They also brought to the attention of this Court the fact that the individual defendants in the case, DPWH former Secretaries Gregorio T. Vigilar and Jose P. de Jesus, and Undersecretary Teodoro T. Encarnacion did not file an appeal to this Court. Both the RTC and the CA Decisions adjudged these defendants jointly and solidarily liable with DPWH to pay the amount awarded to the respondents. Respondents are effectively claiming that the said judgments have become final and executory against defendant public officials.
We find that the crux of the Petition is simply whether the DPWH is liable to pay the claims filed against them by the plaintiffs. Corollary to this main issue, the following sub-issues beg for resolution:
Whether, in the absence of the legal requirements under PD 1445, a valid contract between the DPWH and the plaintiffs exists;
Whether the plaintiffs are entitled to payment for accomplishing 100% of the work, attorney's fees and costs of suit;
Whether the Secretary and the Undersecretary of DWPH should be held jointly and solidarily liable to plaintiffs.
It should be borne in mind that a review under Rule 45 of the Rules of Court is discretionary and must be granted only when there are special and important reasons therefor.[24] We find that these reasons are not present in this case.
As a general rule, the factual findings of the trial court, when affirmed by the appellate court, attain conclusiveness and are given utmost respect by this Court.[25] DPWH never questioned the completion of the Sacobia-Bamban-Parua river works. Neither did it question the authority of those who certified the completion of the works by respondents. The trial court ruled that the works were completed, as shown by the evidence presented before it. This finding was affirmed by the Court of Appeals. There is, therefore, no reason for us to view these factual findings.
With the findings of the trial and the appellate courts, there is no longer any issue on whether the contractors completed the projects in accordance with the specifications agreed upon. The regular course of a contract is that after the complete rendering of services, the contractors are subsequently paid. The DPWH, however, deviated from this course.
It should be noted that the completion of the works was recognized by the DPWH, as shown by the certifications issued by its engineers and even by municipal officials. Notwithstanding the said recognition, DPWH chose not to act on the claims of respondents, and later denied liability for the payment of the works on the ground of the invalidity of the contracts.
Petitioner DPWH primarily argues that the contracts with herein respondents were void for not complying with Sections 85 and 86 of P.D. 1445, or the Government Auditing Code of the Philippines, as amended by Executive Order No. 292. These sections require an appropriation for the contracts and a certification by the chief accountant of the agency or by the head of its accounting unit as to the availability of funds. It should be noted that there was an appropriation amounting to P400 million, which was increased to P700 million. The funding was for the rehabilitation of the areas devastated and affected by Mt. Pinatubo, which included the Sacobia-Bamban-Parua River for which some of the channeling, desilting and diking works were rendered by herein respondents' construction companies.
It was, however, undisputed that there was no certification from the chief accountant of DPWH regarding the said expenditure. In addition, the project manager has a limited authority to approve contracts in an amount not exceeding P1 million.[26] Notwithstanding these irregularities, it should be pointed out that there is no novelty regarding the question of satisfying a claim for construction contracts entered into by the government, where there was no appropriation and where the contracts were considered void due to technical reasons. It has been settled in several cases that payment for services done on account of the government, but based on a void contract, cannot be avoided. The Court first resolved such question in Royal Trust Construction v. Commission on Audit.[27] In that case, the court issued a Resolution granting the claim of Royal Trust Construction under a void contract. The unpublished Resolution reads as follows:
NOV 23 1988
Gentlemen
Quoted hereunder, for your information, is a resolution of the Court En Banc dated NOV 22 1988
G.R. No. 84202 (ROYAL TRUST CONSTRUCTION v. COMMISSION ON AUDIT). - The petitioner undertook 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 but without any written contract and the covering appropriation. The purpose of the project was to prevent the flooding of the neighboring areas and to irrigate the adjacent farmlands. On December 16, 1985, the petitioner sought compensation in the sum of P1,299,736.00 "for the completed portion of the P2.3 million Betis River project, which was implemented or undertaken sometime in mid-May, 1984."
In a memorandum dated February 17, 1986, then Public Works Minister Jesus Hipolito recommended immediate "payment of the works already completed" from the cash disbursement ceiling of P300,000.00 for Betis River. On July 16, 1986, his successor, Minister Rogaciano M. Mercado manifested that his office was interposing "no objection to the proposal to use the P294,000.00 release for Betis River Control, Betis, Mexico, Pampanga, for the partial payment of work already accomplished for the channel improvement of said river from Sta. 2+200 to Sta. 5-100, subject, however, to existing budgetary accounting and auditing rules and regulations."
On July 20, 1987, the Chairman of the Commission on Audit ruled that "payment to the contractor for the work accomplished, starting with the first partial payment in the amount of P268,051.14 only on the basis of quantum meruit may be allowed, in keeping with the time-honored principle that no one may be permitted to unjustly enrich himself at the expense of another." However, in a subsequent indorsement dated August 27, 1987, Chairman Domingo reversed himself and held:
"However, this Commission is only too aware of its existing policy on recovery from government contracts on the basis of quantum meruit. Under COA Resolution No. 36-58, dated November 15, 1986, this Commission has adhered to a policy of barring such recovery where the project subject of the contract is patently violative of the mandatory legal provisions relating to, among others, the existence of the corresponding appropriation covering the contract cost. The mere delay in the accomplishment of the required certificate of availability of funds (CAF) to support a contract presents an entirely different situation considering that since the covering funds have in fact been already appropriated and budgetarily allotted to the implementing agency, the delayed execution of the CAF would not alter such fact."
Even so, he added that "considering the sacrifices already made by the appellant in accomplishing the project in question, which are favorable circumstances attendant to the claim, payment on the basis of quantum meruit may be given due course but only upon order of a court."
The respondent is now faulted for grave abuse of discretion in disallowing the petitioner's claim without an order from a court. The Solicitor General, in support of the Commission on Audit, agrees that the said payment cannot be made because it is barred for lack of the required covering appropriation, let alone the corresponding written contract.
We hold for the petitioner.
The work done by it 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 compensation claimed, would entail additional expense, inconvenience and delay which in fairness should not 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."
Very truly yours,
(sgd)
Daniel T. Martinez
Clerk of Court
The above case became the authority in granting claims of a contractor against the government based on a void contract. This exercise of equity to compensate contracts with the government was repeated in Eslao vs. COA.[28] In the said case, the respondent therein, Commission on Audit (COA), was ordered to pay the company of petitioner for the services rendered by the latter in constructing a building for a state university, notwithstanding the contract's violations of the mandatory requirements of law, including the prior appropriation of funds therefor. The Court, in resolving the case, cited the unpublished Resolution in Royal Construction, wherein the Court allowed the payment of the company's services sans the legal requirements of prior appropriation.
Royal Trust Construction was again mentioned in Melchor v. COA,[29] which was decided a few months after Eslao. In Melchor, it was found that the contract was approved by an unauthorized person and, similar to the case at bar, the required certification of the chief accountant was absent. The Court did not deny or justify the invalidity of the contract. The Court, however, found that the government unjustifiably denied what the latter owed to the contractors, leaving them uncompensated after the government had benefited from the already completed work.
In EPG Construction Co., et al v Hon. Gregorio R. Vigilar,[30] the Court again refused to stamp with legality DPWH's act of evading the payment of contracts that had been completed, and from which the government had already benefited. The Court held:
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, 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.
The Court also held in the above case:
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, and not from any intrinsic illegality. Stated differently, the subject contracts are not illegal per se.
To emphasize, the contracts in the above cases, as in this case, were not illegal per se. There was prior appropriation of funds for the project including appropriation; and payment to the contractors, upon the subsequent completion of the works, was warranted.
As to Public Works and Highways officials Gregorio R. Vigilar, Teodoro T. Encarnacion and Jose P. de Jesus, their personal liability should not be sustained. They were sued in their official capacity, and it would be unfair to them to pay the contractors out of their own pockets. In Melchor, the Court declared that it was unjust to hold the public official liable for the payment of a construction that benefited the government.
We also depart from the CA and the RTC rulings awarding the respondents attorney's fees and costs of suit. The Constitution provides that "no money shall be paid out of the Treasury except in pursuance of an appropriation made by law."[31] Attorney's fees and costs of suit were not included in the appropriation of expenditures for the Sacobia-Bamban-Parua project. In addition, we are not disposed to say that there was bad faith on the part of the DPWH in not settling its liability to the respondents for the works accomplished by the latter. The DPWH relied on P.D. 1445, Section 87, which provides that contracts in violation of Sections 85 and 86 thereof are void. The subject contracts undoubtedly lacked the legal requirement of certification of the chief accountant of DWPH. It was also clear that the project manager had no authority to approve the contracts, since the amounts involved were beyond his authority.[32] A strict application of the law, as the DPWH officials did, would therefore give a reasonable basis for the denial of the claim and eliminate the badge of bad faith on their part. The DPWH officials were apparently apprehensive that they might end up being liable to the government if they had wrongfully paid the contractors. This apprehension clearly showed in their letter to the DOJ Secretary.[33]
In conclusion, we uphold the CA in affirming the liability of the DPWH for the works accomplished by herein contractors. We, however, delete the liability of Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus, as well as other monetary awards in favor of respondents, as these awards were not directly for the subject accomplished works and were not funded by the department.
IN VIEW THEREOF, the assailed 26 June 2008 Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus are absolved from their solidary liability with the government for the payment of the subject contracts. The payment is solely on account of DPWH. Likewise, attorney's fees and costs of suit are hereby DELETED.
SO ORDERED.
Carpio, (Chairperson), Brion, Reyes, and Perlas-Bernabe,* JJ., concur.
* Designated as additional member of the Second Division vice Associate Justice Jose P. Perez per Special Order No. 1114 dated 3 October 2011.
[1] Rollo, pp. 47-56; CA rollo, pp. 368-377; Decision penned by Associate Justice Agustin S. Dizon, with Associate Justices Regalado E. Maambong and Celia C. Librea-Leagogo concurring.
[2] Records, Vol. 1, pp. 4-5.
[3] Id. at 9-15.
[4] Id. at 15-22.
[5] Id. at 22-24.
[6] Id. at 24-26.
[7] First Folder of Exhibits, p. 32.
[8] Id. at 77.
[9] Supra note 7.
[10] Records, Vol. 1, pp. 1-34.
[11] Records, Vol. II, pp. 264-273, penned by Judge Rustico V. Panganiban.
[12] Id. at 270-271.
[13] Id. The Advice of Allotment states: "The following allotments are made available in support of their functions, projects, purpose and all other expenditures authorized for the calendar year. The allotment for any given quarter shall only become self-executory at the beginning of that quarter. It is the primary responsibility of the head of the department, bureau or agency concerned to keep expenditures within the limits of the amount alloted." The purpose is "to cover funding requirements for the implementation of necessary infrastructure projects and other works under the Mt. Pinatubo Rehabilitation Project." The appropriation was P400 million.
[14] Id. at 284.
[15] CA rollo, p. 56-91.
[16] Id. at 72-75.
[17] Id. at 345-346.
[18] Id. at 346-347.
[19] Id. at 347.
[20] Id. at 349.
[21] Rollo, pp. 8-44.
[22] Id. at 20-21.
[23] Id. at 21.
[24] ROC, R45 §6.
[25] See Spouses Pudadera v. Magallanes, G.R. No. 170073, 18 October 2010 citing Uraca v. Court of Appeals, 344 Phil. 253, 267 (1997).
[26] Fourth Folder of Exhibits, Department Order No. 135, Series of 1990, p 1.
[27]Rollo (G.R. No. 84202), pp. 65-66.
[28] G.R. No. 89745, 8 April 1991, 195 SCRA 730.
[29] G.R. No. 95398, 16 August 1991, 200 SCRA 704
[30] G.R. No. 131544, 16 March 2001, 354 SCRA 566.
[31] Constitution, Art. VI, §29 (1).
[32] Fourth Folder of Exhibits, p. 1. DPWH Department Order No. 135, Series of 1990.
[33] The letter dated 14 September 1993, written by Joel L. Altea, Asst. Secretary for Comptrollership and Financial Management of the DPWH, was addressed to the then DOJ Secretary Franklin M. Drilon, seeking an opinion on whether the DPWH Secretary would be personally liable in case he signed and allowed claims for work that turn out to have been mistakenly validated by the Validation Committee and the COA.