University of the Philippines v. Gabriel
REITERATIONFacts
The Antecedents: The University of the Philippines (UP) entered into a contract with Beta, Construction Co., Inc. for the construction of a building. Beta, in turn, sub-contracted the plumbing works to Allied Plumbing Company (Allied). Allied claimed to have completed its works and additional works but alleged that Beta, refused to remit the balance of P64,626.08 plus P4,017.90 for extra works, totaling P68,843.98. Allied filed a complaint for sum of money with damages against UP and Beta,. Procedural History: The trial court ruled in favor of Allied, holding Beta, and UP solidarity liable for the unpaid amount. UP appealed to the Intermediate Appellate Court (IAC), which affirmed the trial court's decision. UP then filed a petition for review with the Supreme Court. The Petition: UP questions its solidarity liability with Beta, for the unpaid balance claimed by Allied, arguing that Allied's work was defective and that UP had not approved the works as required by the sub-contract. UP also contends that Article 1729 of the New Civil Code and Act No. 3959 were misapplied.
Issue(s)
Whether the University of the Philippines is solidarity liable with Beta, Construction Company, Inc. for the unpaid balance of the sub-contractor, Allied Plumbing Company. Whether Article 1729 of the New Civil Code applies in this case. Whether Act No. 3959 makes UP solidarity liable for the claims of Allied.
Ruling
The petition is GRANTED. The decision of the Intermediate Appellate Court is MODIFIED. The University of the Philippines is absolved from paying Allied Plumbing Company the amount of P68,843.98.
Ratio Decidendi
On the solidarity liability of UP: The Supreme Court held that UP is not solidarity liable with Beta, for the claims of Allied. The Court found that the sub-contract required the approval of the UP College of Agriculture for the works completed by Allied. There was no evidence presented to show that UP approved the works performed by Allied. Furthermore, UP was notified of Allied's claim but Beta, in its letter to UP, disputed Allied's claim and alleged overpayment and damages caused by Allied's incompetence. Faced with conflicting claims, UP was justified in relying on Beta's representation, especially in the absence of UP's approval of Allied's work. On the applicability of Article 1729 of the New Civil Code: The Court found that Article 1729, which allows those who furnish labor or materials to have an action against the owner up to the amount owing from the latter to the contractor, was not applicable in this case. The Court emphasized that the article applies to valid claims. In this instance, UP argued that Allied did not fully accomplish the works as per specifications and that there was an alleged overpayment by Beta,. More importantly, the sub-contract stipulated that payment was contingent upon approval by UPCA, which was not obtained by Allied. Therefore, Allied's claim was not a valid claim against UP under Article 1729. On the applicability of Act No. 3959: The Supreme Court ruled that Act No. 3959 was misapplied by the appellate court. The Court clarified that Act No. 3959 was intended for private entities and has been superseded by the Labor Code for private employment. For government employment, the applicable law is Act No. 3688, which governs the protection of persons furnishing material and labor for the construction of public works. UP, performing a governmental function, should be treated as constructing public works. Under Act No. 3688, Allied should have applied for a certified copy of the contract and bond from UP and sued Beta, and its sureties. The failure to do so meant that UP could not be held solidarity liable directly for the sub-contractor's claims.
Main Doctrine
A sub-contractor cannot hold the owner of a public works project solidarity liable for unpaid claims if the sub-contractor fails to comply with the requirements of Act No. 3688, which mandates that claims for labor and materials must be filed against the contractor and its sureties after exhausting remedies under the performance bond, and not directly against the owner, especially when the owner has not been shown to have approved the work or to have acted in bad faith.