CASE DIGEST: DPWH VS. QUIWA

G.R. No. 183444: October 12, 2011

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, Petitioner, v. 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.

FACTS:

In 1992, a number of contractors, including herein respondents, were engaged by the DPWH through its Project Manager, Philip F.Mez, for the aforesaid services pursuant to an emergency project under the Mount Pinatubo Rehabilitation Project.Respondents claimed that they had accomplished works on the Sacobia-Bamban-Parua River Control Project pursuant to this emergency projectunder two construction agreements with the DPWH, his construction company, the R.E.Q. Construction.

Initially, R.E.Q. Construction filed its money claim with the DPWH, which referred the matter to the Commission on Audit.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. 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.

This prompted respondents jointly filed an action for a sum of money against the DPWH.

The RTC also ruled that the claim of the respondents against DPWH was proper since they had already made a demand on the Commission onAudit regarding the payment of their construction services.Thus, they first availed themselves of the properadministrative remedy in filing their claim with COA, which unfortunately referred the claim to the DPWH.

Petitioner DPWH, through the Office of the Solicitor General, filed an appeal

to question the said Decision.DPWH mainly argued that there was no valid contract between it and respondents.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.

The Court of Appeals (CA), similar to the courta 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 DPWHs witness, Felix Desierto.It ruled that DPWH officials who approved the projects, even though middle-rank, had the authority to bind the department.

Petitioner DPWH therefore resorted to appeal with the Supreme Court under Rule 45.

ISSUE:

Whether or not the DPWH is liable to pay the claims filed against them by the plaintiffs.

HELD:

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 its unpublished resolution inRoyal Trust Construction v. Commission on Audit and subsequently affirmed and amended in sever subsequent cases. The cases however, are not illegal per se, owing to the fact that prior appropriation of funds for the project including appropriation; and payment to the contractors, uponthe subsequent completion of the works, was warranted.

Petitioner DPWH primarily argues that the contracts with herein respondents were void for not complying with Sections 85 and 86 ofP.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 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 exceedingP1 million.Notwithstanding these irregularities, where there was no appropriation and where the contracts were considered void due to technical reasons, the government is bound to satisfy claims against it.