G.R. No. L-28114 - IN RE: Tuazon de Perez

In 1985, the City of Cebu decided to construct a modern abattoir.
The City Treasurer, Ricardo Pestano, issued a certificate of availability of funds on April 30, 1985, amounting to P5,419,180.00, specifically for the construction of the Cebu City abattoir.
After public bidding, H. Franco Construction Company, Inc. (HFCCI) was awarded the contract for the abattoir's construction.
The City of Cebu, through Mayor Ronald R. Duterte, entered into a contract with HFCCI with the following terms:

Contract cost: P8,368,920.00
First installment certified by the City Treasurer for P2,092,230.00, payable upon certification of substantial completion by the City Engineer.
The City included the amount of P6,276,690.00 in the 1986 budget for second, third, and final installment payments due to the contractor.

On March 13, 1986, Senator John H. Osmena, then Officer-In-Charge of Cebu City, ordered suspension of the project and a review of the contract by the Commission on Audit (COA).
HFCCI was asked to account for the value of progress; on April 24, 1986, HFCCI claimed P2,142,964.29 for work accomplished.
HFCCI filed a civil action on May 21, 1987 against the City of Cebu for recovery of investment and damages due to nonpayment.
The City admitted the contract but claimed it was null and void as declared by COA in its 2nd Indorsement dated September 4, 1986, attributing any liability to responsible officers personally.

On December 15, 1988, the City of Cebu, through Mayor Tomas R. Osmena, entered into a court-approved compromise agreement to pay HFCCI P1,500,000.00 as full and final settlement.
On March 8, 1989, a writ of execution was served against the City; P1,500,000.00 and P15,052.00 lawful fees were garnished from the City's bank funds.

The trial court judgment based on the compromise agreement was reviewed by COA.
In its 3rd Indorsement (May 2, 1989), COA ruled the original contract void due to lack of fund availability, thus the compromise agreement was invalid and any expenditure would be the personal liability of the responsible officers.
Petitioner Mayor Tomas R. Osmena’s request for reconsideration was denied in COA’s 5th Indorsement dated January 23, 1991.
Petitioner argued:

The COA decision of September 4, 1986, was null and void, issued without or in excess of jurisdiction or with grave abuse of discretion.
The COA decision never became final.
The contract had been executed and could not be declared void.

Whether the Commission on Audit had jurisdiction and authority to declare the abattoir contract void.
Whether the COA’s declaration of the contract as void became final and binding due to non-appeal.
Whether the compromise agreement based on a void contract is valid and enforceable against the City of Cebu.
Whether the payment pursuant to a court-approved compromise agreement can absolve the petitioner of personal liability for an unlawful expenditure of public funds.
Whether petitioner can claim quantum meruit given the void status of the contract.