Vigilar v. Aquino

G.R. No. 180388 (January 18, 2011)

Aquino's contract was void, but he can recover for services rendered, highlighting equity’s role.

Facts:

On June 19, 1992, Angelito M. TwaAo, the Officer-in-Charge District Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering District of Pampanga, sent an Invitation to Bid to Arnulfo D. Aquino, the owner of A.D. Aquino Construction and Supplies, for the construction of a dike at Barangay Ascomo-Pulungmasle, Guagua, Pampanga. The project was awarded to Aquino on July 7, 1992, and a "Contract of Agreement" was executed for the amount of PhP 1,873,790.69.

The project was completed by July 9, 1992, and a Certificate of Project Completion was issued on July 16, 1992, signed by the Project Engineer and other DPWH officials. However, Aquino claimed that he was still owed PhP 1,262,696.20, which the petitioners refused to pay. Consequently, Aquino filed a Complaint for collection of the sum of money with damages before the Regional Trial Court of Guagua, Pampanga, which was docketed as Civil Case No. 3137.

The petitioners contended that the complaint was a suit against the state, that Aquino failed to exhaust administrative remedies, and that the contract was void due to violations of Presidential Decree No. 1445, as it lacked proper appropriation and a Certificate of Availability of Funds.

On November 28, 2003, the lower court ruled in favor of Aquino, ordering the DPWH to pay him the full contract amount, plus attorney's fees. The Court of Appeals later reversed this decision, declaring the contract null and void ab initio and ordering the Commission on Audit (COA) to determine the amount due to Aquino on a quantum meruit basis.

Dissatisfied with the appellate court's decision, the petitioners sought a reversal and dismissal of the complaint.

Legal Issues:

  1. Did the Court of Appeals err in holding that the doctrine of non-suability of the state does not apply in this case?
  2. Did the Court of Appeals err in not dismissing the complaint for failure to exhaust all administrative remedies?
  3. Did the Court of Appeals err in ordering the COA to allow payment to Aquino on a quantum meruit basis despite his failure to comply with the requirements of Presidential Decree No. 1445?

Arguments:

Petitioners' Arguments:

  • The complaint was against the state, invoking the doctrine of non-suability.
  • Aquino failed to exhaust administrative remedies, as he should have filed a claim with the COA before going to court.
  • The contract was void due to non-compliance with Presidential Decree No. 1445, which mandates proper appropriation and a Certificate of Availability of Funds.

Respondent's Arguments:

  • The doctrine of non-suability of the state does not apply, as the issues involve the validity and enforceability of the contract, which are purely legal questions.
  • The exhaustion of administrative remedies is not an absolute rule and exceptions apply, particularly given the lengthy time since the project was completed and the nature of the claims.
  • The Court of Appeals correctly ordered payment on a quantum meruit basis, as the work was completed and the government benefitted from it, despite the contract's invalidity.

Court's Decision and Legal Reasoning:

The Supreme Court denied the petition for lack of merit, affirming the Court of Appeals' decision. The Court reasoned that:

  1. The doctrine of exhaustion of administrative remedies does not apply rigidly in this case due to the presence of exceptions, particularly the unreasonable delay and the legal nature of the issues involved.
  2. The Court of Appeals was justified in ordering payment on a quantum meruit basis, as the contractor had completed the project and the government had benefitted from the work done. The Court emphasized that public interest and equity necessitate compensation for services rendered, even if the contract was void due to procedural violations.
  3. The doctrine of governmental immunity from suit cannot be used to deny just compensation for work performed, especially when the government has accepted the benefits of that work.

The Court reiterated that allowing the state to escape liability in such circumstances would be unjust and inequitable.

Significant Legal Principles Established:

  • The doctrine of exhaustion of administrative remedies is not absolute and has exceptions, particularly in cases involving purely legal questions and unreasonable delays.
  • Quantum meruit may be applied to ensure that a contractor is compensated for work done, even if the contract is deemed void due to procedural violations.
  • The principle of governmental immunity from suit does not preclude claims for just compensation when the state has benefitted from the work performed.