G.R. No. 250296 - Republic, represented by the Department of Public Works and Highways vs. A.D. Gonzales, Jr. Construction and Trading Company, Inc.

Case Summary (G.R. No. 250296)

Factual Background

The case stemmed from a money claim filed by Gonzales Construction against DPWH for unpaid balances allegedly due for two projects. Gonzales Construction alleged that it entered into two contracts with DPWH: (1) Rehabilitation of Gumain-Porac Division Channel, Sta. 5+800 to Sta. 6+100, in the amount of PHP 2,695,980.00 (the Gumain Project); and (2) Abacan River Control Cut-Off Channel along Manggahan Sto. Rosario, Mexico, Pampanga, Sta. 17+500 to Sta. 18+033, in the amount of PHP 8,174,294.32 (the Abacan Project).

As to the Abacan Project, Gonzales Construction asserted that Gonzales, for the company, signed the contract and submitted it to the Regional Director of DPWH for signature. As to the Gumain Project, it was signed by Gonzales for the company and by District Engineer Angelita M. Twano of DPWH for the government side, and it was submitted to the regional director for signature. Gonzales Construction further claimed that it fully performed its undertakings and submitted completion documents. It stated that the works were inspected and verified as complying with the plans, specifications, and special provisions.

According to Gonzales Construction, despite project completion, only PHP 1,178,252.42 was paid as partial payment for the Abacan Project, leaving an unpaid amount of PHP 9,692,021.92 for both projects. It asserted that its last demand for payment was made on March 26, 1999.

Litigation in the RTC

In support of its complaint, Gonzales Construction presented witnesses including Remedios P. Soto of the Commission on Audit, Aurelio Gonzales, Jr., and Engineer Jesus O. Obordo, then assistant chief of the Construction Division, DPWH. It also offered documentary evidence. DPWH raised special and affirmative defenses: first, that DPWH, as an unincorporated government agency, could not be sued without the State’s consent; second, that the contracts were void for lack of the certification required by Presidential Decree No. 1445 on the availability or appropriation of funds; third, that the contracts were not signed by the Regional Director nor the DPWH Secretary; and fourth, that the complaint was premature due to failure to exhaust administrative remedies. Notably, DPWH did not present evidence.

The RTC, by Decision dated July 17, 2014, ruled in favor of Gonzales Construction and ordered DPWH to pay: PHP 5,364,086.35 representing the unpaid accomplished work on the Abacan Project, PHP 50,000.00 as attorney’s fees, and costs of suit. The RTC found that a perfected contract existed between DPWH and Gonzales Construction when DPWH informed Gonzales Construction of the award of the Abacan Project and Gonzales signed it as conformity. It also reasoned that implied consent to suit attached because the State had entered the contract through its officers or agents in furtherance of a legitimate aim and purpose.

The RTC also ruled that DPWH was estopped from invoking non-compliance with Presidential Decree No. 1445, given that higher authorities had ordered the construction of the projects as an emergency measure due to Mt. Pinatubo, even without full compliance with paperwork requirements. On quantum meruit, the RTC found that the Abacan Project was 90.61% accomplished and valued completed works at PHP 7,332,292.45. Since partial payment of PHP 1,968,206.10 had already been made for the Abacan Project, the RTC computed the unpaid balance at PHP 5,364,086.35. Regarding the Gumain Project, the RTC found no substantial evidence supporting the claim for PHP 2,695,980.00, and it denied payment on that project. It further found that exceptions to exhaustion of administrative remedies applied because of long delay and because the issue on the effect of Presidential Decree No. 1445 non-compliance was purely legal.

DPWH sought reconsideration, but it was denied in an Order.

Appellate Review in the CA

The CA affirmed the RTC with modification in a Decision dated January 31, 2019. It deleted the RTC’s award of attorney’s fees and costs of suit, but it maintained the principal award of PHP 5,364,086.35. It also added interest at six percent (6%) per annum from the finality of its Decision until full payment.

The CA emphasized that it could only consider errors assigned by DPWH. Since DPWH did not properly raise issues, the CA limited its review primarily to whether the RTC erred in awarding PHP 5,364,086.35 on quantum meruit and on related matters of attorney’s fees and costs. The CA held that while certification as to availability of funds is ordinarily a condition sine qua non for government contracts, its absence does not automatically bar recovery for services rendered. Relying on DPWH v. Quiwa and R.G. Cabrera Construction v. DPWH and COA, the CA applied the principle that the government should not unjustly deny what it owes after it benefited from the contractor’s performance.

The CA also sustained the RTC’s factual findings that 90.61% of the Abacan Project was accomplished. It cited evidentiary support, including the testimony of Engr. Obordo, inspection certificates and time-and-work accomplishment documents, and a statement showing accomplishment and approved payment valuation. Since DPWH did not controvert the evidence, the CA ruled that DPWH could not deny the actual work accomplished for which payment was due.

DPWH’s motion for reconsideration was denied in a Resolution dated November 5, 2019, prompting the petition under Rule 45.

The Court’s Issues and the Parties’ Arguments

The principal issue before the Court was whether the CA correctly affirmed the award of PHP 5,364,086.35 in favor of Gonzales Construction based on quantum meruit. DPWH argued, first, that the RTC had no jurisdiction over money claims because, under Presidential Decree No. 1445, the Commission on Audit (COA) had primary jurisdiction over money claims against government agencies. Second, DPWH contended that quantum meruit was inapplicable because Gonzales Construction did not present convincing evidence of the asserted 90.61% accomplishment of the Abacan Project.

Gonzales Construction countered that its suit fell within recognized exceptions to the doctrine of exhaustion of administrative remedies, citing long delay and the fact that the question on the effect of Presidential Decree No. 1445 non-compliance was purely legal. It also asserted that DPWH was barred by estoppel by laches from raising jurisdiction only on appeal, considering the long lapse of time and DPWH’s participation in prior proceedings. On the merits, Gonzales Construction argued that the emergency and urgency surrounding the Abacan Project warranted relaxation of the certification requirement. It further contended that DPWH was aware of and supervised the project, thereby estopping DPWH from denying or questioning the project’s performance. On the evidentiary issue, it maintained that the Court should not re-examine facts, and it invoked the principles of unjust enrichment and quantum meruit.

Jurisdiction Over Money Claims and the Court’s Disposition

The Court held that, under Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445, the COA had primary jurisdiction over money claims against government agencies and instrumentalities. It quoted Section 26 on COA’s general jurisdiction over auditing procedures, government accounts, and the examination, audit, and settlement of “debts and claims of any sort due from or owing to the Government.” In support, it cited Metropolitan Manila Development Authority v. D.M. Consunji, Inc., which explained that COA has jurisdiction over money claims against a government agency even when the basis is quantum meruit.

Nonetheless, the Court proceeded to rule on the merits in the interest of judicial economy. It found it unjust and contrary to the ends of justice to leave the case unresolved after an inordinate amount of time. It relied on R.G. Cabrera Corporation, which involved Mt. Pinatubo-related government rehabilitation projects where the DPWH did not pay rental obligations and where the contractor later sought payment before the COA. In that line of cases, the Court had recognized that certification of availability of funds, and attachment of that certification to the contract, are generally conditions sine qua non for executing government contracts. However, it also held that the absence of such certification does not necessarily preclude payment for services actually rendered where the contracts were not intrinsically illegal but were declared void merely for procedural non-compliance with Presidential Decree No. 1445 requirements.

Applying R.G. Cabrera Corporation and DPWH v. Quiwa, the Court ruled that Gonzales Construction should be paid what was due to it. It reasoned that denying compensation for work that benefited the public, solely on the ground of procedural defects, would amount to unjust enrichment at the expense of the contractor.

Quantum Meruit, Proof of Accomplishment, and Appellate Deference to Facts

On DPWH’s contention that Gonzales Construction failed to present convincing proof of 90.61% accomplishment, the Court reiterated that a petition under Rule 45 is limited to questions of law. It stressed that factual findings of the trial court, when affirmed by the appellate court, attain conclusiveness and receive the Court’s highest respect, absent recognized exceptions.

The Court found none of the exceptions. It noted that the RTC found 90.61% accomplishment and evaluated the completed works at PHP 7,332,292.45. The CA affirmed those findings after evaluating the same pieces of evidence. Since DPWH presented no evidence to the contrary, the Court refused to disturb the uniform factual findings.

Having settled Gonzales Construction’s entitlement, the Court maintained the principal award of PHP 5,364,086.35, computed as the unpaid accomplished work after partial payment of PHP 1,968,206.10.

Interest: Modification of the Accrual Point and Rate

While the Court denied the peti

Case Syllabus (G.R. No. 250296)

The petition sought review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) Decision dated January 31, 2019 and CA Resolution dated November 5, 2019 in CA-G.R. CV No. 105103.
The CA Decision denied the appeal filed by petitioner Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), but it affirmed the trial court’s ruling with modification.
The CA modified the award by deleting attorney’s fees and costs of suit, while maintaining the principal award of PHP 5,364,086.35 and adding six percent (6%) per annum interest from finality of the CA Decision until full payment.
The Supreme Court denied the petition and affirmed the CA Decision with modification on the interest accrual period.

Parties and Procedural Posture

A.D. Gonzales, Jr. Construction and Trading Company, Inc. (Gonzales Construction) sued the DPWH in the Regional Trial Court (RTC) Branch 46, San Fernando City, Pampanga for collection of sum of money with damages.
The RTC ruled in favor of Gonzales Construction and ordered DPWH to pay PHP 5,364,086.35, plus PHP 50,000.00 as attorney’s fees and costs of suit.
The DPWH sought reconsideration, but the RTC denied the same via an Order.
The DPWH appealed to the CA, which affirmed the RTC’s principal award but modified the awards on attorney’s fees, costs, and interest.
The DPWH then filed the present petition before the Supreme Court raising jurisdiction and evidentiary issues.

Key Factual Allegations

Gonzales Construction alleged that it entered into two contracts with DPWH for emergency rehabilitation and control works after Mt. Pinatubo’s eruption.
The first contract involved Rehabilitation of Gumain-Porac Division Channel, Sta. 5+800 to Sta. 6+100 for PHP 2,695,980.00 (the Gumain Project).
The second contract involved Abacan River Control Cut-Off Channel for PHP 8,174,294.32 with specified locations and chainage (the Abacan Project).
Gonzales Construction claimed full performance and submission of completion documents, and it asserted that inspection and verification found the works to conform to plans, specifications, and special provisions.
It alleged that DPWH paid only PHP 1,178,252.42 as partial payment for the Abacan Project, leaving an unpaid balance of PHP 9,692,021.92 for both projects.
Gonzales Construction made its last demand on March 26, 1999 and then filed the RTC complaint.

Contracts, Signatories, and Government Handling

Gonzales Construction alleged that the Gumain Project contract was signed by Aurelio Gonzales, Jr. (Gonzales) for the company and by District Engineer, Angelita M. Twano on DPWH’s side, with submission to the regional director for signature.
Gonzales Construction alleged that the Abacan Project contract was signed by Gonzales for the company and was submitted to the Regional Director of DPWH for signature.
The RTC found a basis for a perfected contract between the parties in connection with DPWH’s award notice and Gonzales’s signature as conformity.

DPWH Defenses Raised

DPWH asserted that, as an unincorporated agency of the State, it could not be sued without the State’s consent, which it claimed the State did not give.
DPWH invoked the defense that the contracts were void due to the absence of a certification that funds had been duly appropriated as allegedly required by Presidential Decree No. 1445 (the Government Auditing Code of the Philippines).
DPWH alleged that the contracts were not properly signed by the Regional Director or the DPWH Secretary.
DPWH argued that Gonzales Construction’s complaint was premature because it allegedly failed to exhaust administrative remedies.
The RTC noted that DPWH did not present any evidence during trial.

RTC Findings and Basis

The RTC ruled that Gonzales Construction was entitled to payment for the Abacan Project in the amount of PHP 5,364,086.35 representing unpaid accomplished work.
The RTC held that when the State enters into a contract through its officers or agents for a legitimate purpose, the State may be sued even without express consent, and it treated DPWH’s participation as implied consent to be sued.
The RTC ruled that DPWH was estopped from asserting non-compliance with Presidential Decree No. 1445 because higher authorities had ordered the projects as emergency measures even without the complete paperwork due to Mt. Pinatubo.
The RTC recognized that DPWH had already paid for the Abacan Project a partial amount of PHP 1,968,206.10, and it computed the remaining unpaid balance based on the portion actually accomplished.
The RTC applied quantum meruit to hold Gonzales Construction entitled to fair compensation for partially completed work benefitting the government.
The RTC found that ninety point six one percent (90.61%) of the Abacan Project was accomplished, valuing the completed works at PHP 7,332,292.45, and it subtracted the earlier partial payment to reach PHP 5,364,086.35.
The RTC denied recovery for the Gumain Project, holding that Gonzales Construction presented no substantial evidence proving actual accomplished work beyond the contract-related documents.
On administrative remedies, the RTC ruled that exceptions applied, including unreasonable delay and a pure question of law, and it found that the long lapse of time and failure to pay justified judicial intervention.

CA Appellate Treatment

The CA explained that it could only resolve matters within the scope of properly assigned errors, so it did not consider DPWH’s reiterated defenses for failure to raise them as errors.
The CA limited review to whether the RTC erred in awarding Gonzales Construction PHP 5,364,086.35 based on quantum meruit, as well as the matters on attorney’s fees and costs of suit.
The CA held that although certification as to availability of funds is a condition sine qua non for government contracts, absence of such certification does not necessarily bar a contractor from receiving compensation for services actually rendered.
The CA relied on quantum meruit reasoning that the government cannot unjustly deny what it owes, particularly where public benefit has already been received and the contractor remains u