WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff [Kanlaon] and against the herein defendants [PNR and COA]. Accordingly, defendant PNR is ordered to pay the plaintiff the following amount[s]:1. P333,894.07 representing the unreleased retention money plus legal interest at 12% per annum computed from the date of the first written demand; [and]
2. P531,652.72 representing the unpaid contract price for the completed projects plus legal interest of 12% per annum computed from the date of the first written demand.
Defendant COA is absolved of any liability for actual damages or moral damages.
However, both defendant PNR and defendant COA are solidarily liable for reasonable attorney's fees in the amount of P50,000.00 and cost of suit.
SO ORDERED.16
I. The Court of Appeals erred in finding that the projects were completed.
II. The Court of Appeals erred in affirming the 12 December 2000 Decision of the trial court, as modified by the Order dated February 22, 2001.
III. The Court of Appeals erred in ruling that interest should be reckoned from the date of respondent's first written demand.17
SECTION 46. Appropriation Before Entering into Contract. --
1. No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure; and
2. Notwithstanding this provision, contracts for the procurement of supplies and materials to be carried in stock may be entered into under regulations of the Commission provided that when issued, the supplies and materials shall be charged to the proper appropriations account.
SECTION 47. Certificate Showing Appropriation to Meet Contract. -- Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three (3) months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished.
SECTION 48. Void Contract and Liability of Officer. -- Any contract entered into contrary to the requirements of the two (2) immediately preceding sections shall be void, and the officer or officers entering into the contract shall be liable to the Government or other contracting party for any consequent damage to the same extent as if the transaction had been wholly between private parties. (Emphasis supplied)
It is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract.21
Endnotes:
* Designated additional member per Special Order No. 978 dated 30 March 2011.
1 Under Rule 45 of the Rules of Court.
2 Rollo, pp. 58-68. Penned by Associate Justice Sesinando E. Villon, with Associate Justices Martin S. Villarama, Jr. (now a member of this Court) and Mario L. Guariña III, concurring.
3 Id. at 73.
4 Id. at 44-51. Penned by Judge Noel G. Tijam (now an Associate Justice of the Court of Appeals).
5 Id. at 57.
6 Id. at 18-20. The contract was dated 12 July 1990.
7 Id. at 21-23. The contract was dated 19 July 1990.
8 Id. at 24-26. The contract was dated 19 July 1990.
9 Kanlaon alleged that it completed the College Station on 23 November 1990, the Biñan Station on 19 November 1990, and the Buendia Station on 12 November 1990.
10 Records, p. 17.
11 Id. at 19.
12 Id. at 32-40. The COA directed PNR to suspend the payment due to Kanlaon for the following reasons:
1. The contracts were not approved by the PNR Board of Directors pursuant to Executive Order No. 164, as amended by Executive Order No. 380;
2. The contracts were not submitted to the COA for review in accordance with COA Circular No. 89-299;
3. The contracts did not contain a Certificate of Availability of Funds as required under Sections 85 and 86 of P.D. 1445; and
4. No request for inspection of work accomplishment was made.
13 Id. at 1-7.
14 Kanlaon claimed that PNR had the following remaining balance on the three projects: College Station at P131,962.65; Biñan Station at P141,391.89; and Buendia Station at P288,298.18.
15 Rollo, pp. 35-43.
16 Id. at 51.
17 Id. at 12.
18 Entitled "Ordaining and Instituting a Government Auditing Code of the Philippines." Also known as the "Government Auditing Code of the Philippines." Dated 11 June 1978. Sections 85 and 86 of P.D. 1445 provides:
Section 85. Appropriation before entering into contract.
1. No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure.
2. Notwithstanding this provision, contracts for the procurement of supplies and materials to be carried in stock may be entered into under regulations of the Commission provided that when issued, the supplies and materials shall be charged to the proper appropriation account.
Section 86. Certificate showing appropriation to meet contract. Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three months, or banking transactions of government-owned or controlled banks no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished.
19 COMELEC v. Quijano-Padilla, 438 Phil. 72 (2002); Agan, Jr. v. Phil. International Air Terminals Co., Inc., 450 Phil. 744 (2003); and Osmeña v. Commission on Audit, G.R. No. 98355, 2 March 1994, 230 SCRA 585.
20 438 Phil. 72 (2002).
21 Id. at 93-94.
22 Section 48, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987 and Section 87 of the Government Auditing Code of the Philippines.
23 Melchor v. Commission on Audit, G.R. No. 95398, 16 August 1991, 200 SCRA 704.
24 See also Section 87 of the Government Auditing Code of the Philippines.
CONCURRING OPINION
SERENO, J.:
I fully agree that contracts of government agencies without the proper appropriation and the accompanying Certificate of Availability of Funds are void for being contrary to law. In the case of government corporations, of course, the first requirement is not imposable. However, it must be noted that this rule notwithstanding, recovery for unpaid services or sale of goods may still be had, as we enunciated in Vigilar v. Aquino,[1] Royal Trust Corporation v. COA,[2] Eslao v. COA,[3] Melchor v. COA,[4] EPG Construction Company v. Vigilar,[5] and Department of Health v. C.V. Canchela & Associates, Architects.[6] Public interest and equity may dictate that the contractor should be compensated for services rendered and work done that benefited the government and the public.[7] In the instant case, considering that respondent has already been paid the equivalent of around eighty seven (87%) percent of the total contract price, the application of equity principles do not seem to be as imperative as in the cases earlier cited. There is no reason to remand the case for reception of evidence to determine quantum meruit, which is the default solution when the contract supporting the services rendered has been declared void. Had payment to respondent been significantly less as to amount to unjust enrichment on the part of government, I may have had to disagree with the ponencia.
Endnotes:
1 G.R. No. 180388, January 18, 2011.
2 Supreme Court Resolution En Banc, G.R. No. 84202, November 22, 2988, cited in Eslao v. COA, 195 SCRA 730.
3 G.R. No. 89745, April 8, 1991, 195 SCRA 730.
4 G.R. No. 95938, August 16, 1991, 200 SCRA 705.
5 G.R. No. 131544, March 16, 2001, 354 566.
6 Supra at note 7.
7 Vigilar v. Aquino, G.R. No. 180388, January 18, 2011.