Title
Republic vs. Lacap
Case
G.R. No. 158253
Decision Date
Mar 2, 2007
Contractor with expired license completed project; denied payment by COA. SC ruled in favor, citing unjust enrichment, legal issue, and exceptions to exhaustion of remedies.

Case Summary (G.R. No. 149610)

Key Dates

Invitation to Bid: January 27, 1992.
Notice to Proceed: September 25, 1992.
Final inspection and acceptance: October 29, 1992.
Contract Agreement executed: November 4, 1992.
DPWH Legal opinions: September 1, 1993 and July 20, 1994.
Complaint filed (RTC): July 3, 1995.
RTC decision: February 19, 1997.
Court of Appeals decision: April 28, 2003.
Supreme Court decision: March 2, 2007.

Applicable Law and Constitutional Basis

Constitutional basis applied: 1987 Philippine Constitution (Article IX, Section 2(1)) — as the decision date is after 1990.
Statutes and rules invoked: Republic Act No. 4566 (Contractor’s License Law), specifically Section 35 (penalties); Presidential Decree No. 1445 (Government Auditing Code), specifically Section 48 (appeal from auditor decision) and Section 26 (general jurisdiction of COA); Civil Code Article 22 (unjust enrichment). Doctrines considered: exhaustion of administrative remedies, doctrine of primary jurisdiction, estoppel against the government, plain meaning rule in statutory construction, and equitable principle against unjust enrichment.

Factual Background

Carwin Construction was pre-qualified and submitted the lowest bid for the concreting of Sitio 5, Bahay Pare. After award, a Contract Agreement was executed and a Notice to Proceed issued. Respondent performed the work, advanced funds for materials and labor, and the DPWH conducted final inspection on October 29, 1992, finding the project 100% complete, issuing Certificates of Final Inspection and Final Acceptance. The DPWH prepared a disbursement voucher but payment was withheld after the District Auditor of COA disapproved final release on the ground that respondent’s contractor’s license had been expired at the time of contract execution.

Administrative Opinions and Pre-Action Events

The DPWH Legal Department issued written opinions (September 1, 1993 and July 20, 1994) advising that RA No. 4566 does not expressly void contracts entered into after a license has expired and therefore the contract was enforceable and payment could be made, subject to possible administrative liability or fines. Despite these legal opinions and respondent’s demands, payment remained withheld and the District Auditor’s disapproval was not reversed administratively prior to respondent’s filing suit.

Procedural History

Respondent filed a complaint for specific performance and damages in the Regional Trial Court (RTC) on July 3, 1995. Petitioner moved to dismiss on grounds of lack of cause of action and lack of jurisdiction because respondent did not first appeal the District Auditor’s disapproval to the Commission on Audit under Section 48 of P.D. No. 1445. The RTC denied the motion to dismiss, and after trial entered judgment in favor of respondent ordering payment of P457,000 plus interest at 12% from demand and costs. The petitioner appealed to the Court of Appeals (CA). The CA affirmed the RTC’s decision with modification reducing interest to 6% per annum computed from June 21, 1995. Petitioner sought review by the Supreme Court.

Issues Presented

The petition raised primarily: (a) whether respondent’s complaint was prematurely filed for failure to exhaust administrative remedies, since an appeal to the COA was available under P.D. No. 1445, Section 48; and (b) whether the COA has primary jurisdiction to resolve respondent’s money claim against the government such that judicial action was improper prior to exhausting administrative avenues.

Court of Appeals’ Rationale (as adopted in lower proceedings)

The CA held that the case involved application of estoppel against the government, a legal question rendering the doctrine of exhaustion of administrative remedies inapplicable. The CA concluded the government, by its actions, was estopped from questioning the validity and binding effect of the Contract Agreement; refusing payment on technical grounds after acceptance of the completed project was inequitable.

Supreme Court’s Analysis — Exhaustion and Primary Jurisdiction Doctrines

The Supreme Court reaffirmed the general rule favoring exhaustion of administrative remedies and the primary jurisdiction doctrine, which requires administrative agencies to decide matters within their specialized competence. It also acknowledged well-established exceptions to these doctrines, permitting judicial intervention in certain circumstances. Of the enumerated exceptions, the Court found two applicable here: (c) unreasonable delay or official inaction causing irreparable prejudice to the complainant, and (e) the question presented being a pure question of law that ultimately must be resolved by the courts. The Court emphasized that where no administrative determination of law can finally dispose of the issue, exhaustion of administrative remedies is not required.

Supreme Court’s Application of Exceptions to the Present Facts

The Court found that despite DPWH legal opinions recommending payment, respondent suffered unreasonable delay and official inaction—repeated demands were unmet and the disapproval by the District Auditor had not produced timely resolution. The core question — whether a contractor whose license had expired at the time of contract execution is nevertheless entitled to payment for completed projects — was treated as a pure question of law. This legal issue did not call for technical administrative fact-finding; the final resolution rested with the judiciary. Accordingly, the Court concluded the complaint was not prematurely filed and the RTC had jurisdiction to decide the matter.

Statutory Construction of R.A. No. 4566, Section 35

Applying the plain meaning rule (verba legis), the Court examined Section 35 of R.A. No. 4566, which prescribes misdemeanor penalties and fines for contractors who submit bids, contract, or undertake construction without first securing a license, or who use an expired certificate or license. The Court found the statute did not expressly declare contracts entered into by an unlicensed or expired-license contractor to be void. Under the plain meaning of the statute, the legislative text penalizes misconduct but does not automatically void the contract or deprive the contractor of a claim for payment for work actually performed and accepted.

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster—building context before diving into full texts.

About Privacy Terms