Department of Public Works and Highways v. Quiwa
REITERATIONFacts
The Antecedents: Following the 1991 Mt. Pinatubo eruption, the Department of Public Works and Highways (DPWH) engaged several contractors, including herein respondents, for emergency rehabilitation projects. Respondents claimed to have completed channeling, dredging, and diking works on the Sacobia-Bamban-Parua River Control Project. They filed money claims for the accomplished works, totaling millions of pesos. Procedural History: Respondents' claims were initially referred to the Commission on Audit (COA), which returned them to DPWH, stating DPWH had the funds and authority to disburse. DPWH failed to act on the claims, prompting respondents to file a joint action for a sum of money. The Regional Trial Court (RTC) ruled in favor of the respondents, finding valid contracts and proof of work accomplishment by a preponderance of evidence. The Court of Appeals (CA) affirmed the RTC decision. The Petition: DPWH appealed to the Supreme Court, arguing that the contracts were void from inception due to non-compliance with legal requirements, specifically the absence of a certification of availability of funds and exceeding the project manager's authority. DPWH also contested the awards for attorney's fees and costs of suit.
Issue(s)
Whether, in the absence of the legal requirements under PD 1445, a valid contract between the DPWH and the plaintiffs exists, and 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.
Ruling
The Supreme Court affirmed the Court of Appeals' decision holding the DPWH liable for the works accomplished by the contractors. However, the Court modified the ruling by absolving the individual public officials (Gregorio Vigilar, Teodoro Encarnacion, and Jose de Jesus) from their solidary liability. The awards for attorney's fees and costs of suit were also deleted.
Ratio Decidendi
On the existence of a valid contract, DPWH's liability, and entitlement to payment, attorney's fees, and costs of suit: The Court acknowledged that the contracts might be void due to technical non-compliance with Sections 85 and 86 of P.D. 1445. However, citing jurisprudence, the Court reiterated that payment for services rendered to the government, even under a void contract, cannot be avoided if the government has benefited from the work and the contract was not illegal per se. DPWH was liable to pay the respondents on the basis of quantum meruit and equity. The Court deleted the awards for attorney's fees and costs of suit because these awards were not included in the appropriation and DPWH's reliance on P.D. 1445 did not constitute bad faith. On the joint and solidary liability of public officials: The Court absolved the individual public officials from joint and solidary liability. The Court reasoned that these officials were sued in their official capacities, and it would be unfair to hold them personally liable. It was unjust to hold public officials liable for payments of construction that benefited the government, especially when they acted based on their understanding of legal requirements and potential personal accountability.
Main Doctrine
Even if a contract with the government is void due to technical non-compliance with legal requirements such as appropriation and certification of availability of funds, the government may still be held liable to pay for services rendered and benefits received based on the principle of quantum meruit and equity, to prevent unjust enrichment, provided the contracts were not illegal per se and there was prior appropriation for the project.