G.R. No. 221773 - RG Cabrera Corp., Inc. vs. Department of Public Works and Highways

In June 1991, Mt. Pinatubo erupted, spewing thick volcanic ash and sand that devastated the surrounding mountains and hills in Pampanga, Tarlac, and Zambales.
The volcanic deposits were washed down by monsoon rains as lahar, which destroyed existing dike systems and flooded neighboring villages.
To address these problems, the Task Force Mount Pinatubo Rehabilitation Projects was created, headed by DPWH Regional Director Vicente B. Lopez.

From February to July 1992, DPWH Pampanga entered into several equipment lease contracts with RG Cabrera Corporation, Inc. for the maintenance and restoration of portions of the Porac-Gumain Diversion Channel System.
On September 1, 1992, an additional contract was executed for the lease of four (4) bulldozers.
After the lease periods ended, RG Cabrera attempted to collect rental fees from DPWH Pampanga; however, no payment was rendered by the government agency.
This non-payment led RG Cabrera to file five separate complaints for collection before the Regional Trial Court (RTC), Guagua, Pampanga.

The RTC initially ruled in favor of RG Cabrera, holding that the contracts of lease were binding because RG Cabrera had performed its obligations under the contracts.
The Office of the Solicitor General (OSG) objected in these cases on the ground that the contracts were defective for failing to comply with legal requirements.
On appeal, the Court of Appeals reversed the RTC decisions, noting that the state was immune from suit and that money claims should be filed before the Commission on Audit (COA).
RG Cabrera subsequently elevated the case to the Supreme Court, which denied the petitions for certiorari due to lack of evidence of reversible error by the CA.

In 2011, RG Cabrera filed money claims before the COA, which were docketed as COA CP Case Nos. 2011-200 and 2011-228.
The claims were detailed as follows:

For the lease contract involving one payloader from February 3, 1992, to March 3, 1992, rental fees amounted to P174,515.00.
For the lease contract involving four (4) bulldozers covering June 1, 1992, to July 15, 1992 (extended until August 28, 1992), rental fees totaled P2,392,077.50.
For the lease contract for the use of one payloader and two (2) dump trucks from July 1, 1992, to September 28, 1992, rental fees amounted to P1,790,676.00.
A separate claim in COA CP No. 2011-228 involved a contract for leasing four (4) bulldozers on September 1, 1992, with rental fees amounting to P587,211.50.
The aggregate claim for these contracts reached an amount of P4,357,268.50.

They were unauthorized and failed to comply with the statutory requirement of obtaining a certification as to the availability of funds under Presidential Decree (P.D.) No. 1445.
The state enjoys immunity from suit in contracts involving governmental functions.

The failure to obtain the technical certification does not inherently preclude the recovery of rental fees for the heavy equipment used in government rehabilitation projects.
The contracts, while flawed in technical requirements, were executed in good faith and actually conferred benefits to the public.
Payment should be made on the basis of quantum meruit since the government derived benefits from the lease of the equipment.

Non-compliance with the legal requirements resulted in void contracts, and therefore, the government should not be liable for any payment.
No quantum meruit relief should be granted as the COA had not determined the extent of the services rendered by the petitioner.

Whether the non-compliance with the certification requirement as mandated by Sections 86 and 87 of P.D. No. 1445 renders the lease contracts absolutely void and precludes RG Cabrera from recovering the rental fees.
Whether RG Cabrera is entitled to recover payments on a quantum meruit basis, given that the government's use of the leased equipment conferred definite benefits despite the technical defects in the contracts.