SECOND DIVISION
G.R. No. 223751, March 15, 2017
SECOND DIVISION MIGUEL "LUCKY" GUILLERMO AND AV MANILA CREATIVE PRODUCTION CO., Petitioners, v. PHILIPPINE INFORMATION AGENCY AND DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, Respondents.
D E C I S I O N
LEONEN, J.:
In determining the sufficiency of a cause of action for resolving a motion to dismiss, a court must determine, hypothetically admitting the factual allegations in a complaint, whether it can grant the prayer in the complaint.1
This resolves the Petition for Review on Certiorar2 praying that respondents Philippine Information Agency and Department of Public Works and Highways be ordered to pay the money claims of petitioners Miguel "Lucky" Guillermo and AV Manila Creative Production, Co.
On December 10, 2010, Miguel "Lucky" Guillermo (Guillermo) and AV Manila Creative Production, Co. (AV Manila) filed a Complaint3 for a sum of money and damages before the Regional Trial Court of Marikina City, Branch 263.
Guillermo and AV Manila alleged that in the last few months of the Administration of Former President Gloria Macapagal-Arroyo (Arroyo Administration), then Acting Secretary of the Department of Public Works and Highways Victor Domingo (Acting Secretary Domingo), consulted and discussed with Guillermo and AV Manila the urgent need for an advocacy campaign (Campaign).4 The purpose of the Campaign was to counteract the public's negative perception of the performance of the outgoing Arroyo Administration.5 After meetings with Acting Secretary Domingo and some preliminary work, Guillermo and AV Manila formally submitted in a letter-proposal dated February 26, 2010 the concept of "Joyride," a documentary film showcasing milestones of the Arroyo Administration.6 Acting Secretary Domingo signed a marginal note on the letter-proposal, which read, "OK, proceed!"7 Guillermo and AV Manila allegedly worked on "Joyride" on a tight schedule and submitted the finished product on April 4, 2010.8 "Joyride" was aired on NBN-Channel4 on April 5, 2010.9
Guillermo and AV Manila further claimed that communications and meetings on the Campaign and "Joyride" ensued between them and various government agencies.10 These covered instructions from government agencies, emphasis on the proprietary nature of "Joyride," and discussions on the terms of reference, deliverables, and submissions.11 Among the government agencies alleged by Guillermo and AV Manila to have been involved in the communications and meetings were: the National Economic and Development Authority and National Anti-Poverty Commission,12 Former Cabinet Secretary Corazon K. Imperial,13 Department of Public Works and Highways Senior Undersecretary Manuel M. Bonoan,14 the Pro Performance System-Steering Committee (PPS-SC),15 and respondent Philippine Information Agency.16
Petitioners alleged that under the foregoing exchanges, they, working with the Department of Public Works and Highways' production team, committed to the following deliverables: (a) reproduction and distribution of a revised, expanded, and more comprehensive "Joyride" documentary, for distribution to the Department of Foreign Affairs, the Department of Transportation and Communication, Philippine consulates and embassies, and for showing to various transport sectors, as well as to the audience of the Independence Day rites on June 12, 2010 at the Quirino Grandstand in Rizal Park;17 (b) production and distribution of a "Joyride" coffee table book;18 (c) production of "Joyride" comics;19 (d) production of a "Joyride" infomercial entitled "Sa Totoo Lang!" in the form of a 45-second advertisement, which captured the essence of the full length film;20 and (e) production of a "Joyride" infomercial entitled "Sa Totoo Lang-GFX", which was a representation of improved government services, presented in a 45-second advertisement.21 On April 20, 2010, petitioners submitted samples and storyboards of the foregoing to respondent Department of Public Works and Highways.22 Petitioner also presented to respondent Department of Public Works and Highways the total consideration for the services to be rendered and for the deliverable items committed to be delivered:
a)Production of Documentary Film "Joyride" including 5,000 copies of DVD ReproductionP5,500,000.00b)Production of 45secs Infomercials "Sa Totoo Lang" including Reproduction in Prints, Betacam Tapes and Film RollsP4,500,000.00c)Creatives and Concept Design of "Joyride" Coffee Table Book and ComicsP4,600,000.00d)Pre-Production Lay-out and ProofingsP500,000.00e)Reproduction of VideoP1,200,000.00f)Production of Coffee Table BookP7,500,000.00g)Production of ComicsP1,000,000.00h)Freight and HandlingP200,000.00TOTALP25,000,000.0023
Having resolved that the Complaint failed to state a cause of action, we deem it unnecessary to address the other issue presented by plaintiffs-appellants pertaining to non-exhaustion of administrative remedies.
We DISMISS this appeal, and AFFIRM the Order dated 14 August 2012 issued by the Regional Trial Court, Branch 263, Marikina City.
IT IS SO ORDERED.50
A complaint states a cause of action if it sufficiently avers the existence of the three (3) essential elements of a cause of action, namely: (a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (b) an obligation on the part of the named defendant to respect or not to violate such right; and (c) an act or omission on the part of the named defendant violative of the right of the plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. If the allegations of the complaint do not state the concurrence of these elements, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.
It is well to point out that the plaintiff's cause of action should not merely be "stated" but, importantly, the statement thereof should be "sufficient." This is why the elementary test in a motion to dismiss on such ground is whether or not the complaint alleges facts which if true would justify the relief demanded. As a corollary, it has been held that only ultimate facts and not legal conclusions or evidentiary facts are considered for purposes of applying the test. This is consistent with Section 1, Rule 8 of the Rules of Court which states that the complaint need only allege the ultimate facts or the essential facts constituting the plaintiffs cause of action. A fact is essential if they cannot be stricken out without leaving the statement of the cause of action inadequate. Since the inquiry is into the sufficiency, not the veracity, of the material allegations, it follows that the analysis should be confined to the four corners of the complaint, and no other.77
When a motion to dismiss is premised on this ground, the ruling thereon should be based only on the facts alleged in the complaint. The court must resolve the issue on the strength of such allegations, assuming them to be true. The test of sufficiency of a cause of action rests on whether, hypothetically admitting the facts alleged in the complaint to be true, the court can render a valid judgment upon the same, in accordance with the prayer in the complaint. This is the general rule.79
WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that, after proper proceedings, judgment be rendered ordering the defendants to jointly and severally:
1. Pay the plaintiffs the amount of PESOS: TWENTY-FIVE MILLION (Php25,000,000.00) to cover plaintiffs' services and the delivered items which were received and used by the defendants as above-mentioned;
2. Pay the plaintiff Guillermo an amount of not less than PESOS: ONE HUNDRED THOUSAND (P100,000.00) as and by way of moral damages;
3. Pay the plaintiffs an amount of not less than PESOS: ONE HUNDRED THOUSAND (P100,000.00) as and by way of exemplary or corrective damages;
4. Pay the plaintiffs an amount of not less than PESOS: ONE HUNDRED THOUSAND (P100,000.00) as and by way of attorney's fees and litigation expenses; and
5. Pay the cost of the suit.80
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.
Thus, the Administrative Code of 1987 expressly prohibits the entering into contracts involving the expenditure of public funds unless two prior requirements are satisfied. First, there must be an appropriation law authorizing the expenditure required in the contract. Second, there must be attached to the contract a certification by the proper accounting official and auditor that funds have been appropriated by law and such funds are available. Failure to comply with any of these two requirements renders the contract void.
In several cases, the Court had the occasion to apply these provisions of the Administrative Code of 1987 and the Government Auditing Code of the Philippines. In these cases, the Court clearly ruled that the two requirements—the existence of appropriation and the attachment of the certification—are "conditions sine qua non for the execution of government contracts."
In COMELEC v. Quijano-Padilla, we stated: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.
The law expressly declares void a contract that fails to comply with the two requirements, namely, an appropriation law funding the contract and a certification of appropriation and fund availability. The clear purpose of these requirements is to insure that government contracts are never signed unless supported by the corresponding appropriation law and fund availability.
The three contracts between PNR and Kanlaon do not comply with the requirement of a certification of appropriation and fund availability. Even if a certification of appropriation is not applicable to PNR if the funds used are internally generated, still a certificate of fund availability is required. Thus, the three contracts between PNR and Kanlaon are void for violation of Sections 46, 47, and 48, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987, as well as Sections 85, 86, and 87 of the Government Auditing Code of the Philippines.
However, Kanlaon is not left without recourse. The law itself affords it the remedy. Section 48 of the Administrative Code of 1987 provides that "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." Kanlaon could go after the officers who signed the contract and hold them personally liable.83 (Citations omitted)
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.
Endnotes:
* Designated as additional member per Raffle dated February 15, 2017.
1Heirs of Maramag v. Maramag, 606 Phil. 782 (2009) (Per J. Nachura, Third Division].
2Rollo, pp. 3-45.
3 Id. at 64-85.
4 Id. at 66, Complaint.
5 Id. at 65.
6 Id. at 67.
7 Id.
8 Id. at 68.
9 Id. at 69.
10 Id. at 69-71.
11 Id. at 71.
12 Id. at 69.
13 Id.
14 Id. at 70.
15 Id. at 75.
16 Id.
17 Id. at 72.
18 Id.
19 Id.
20 Id. at 73.
21 Id.
22 Id.
23 Id. at 74.
24 Id. at 75.
25 Id. at 97.
26 Id. at 98-100.
27 Id. at 26.
28 Id. at 77.
29 Id. at 78.
30 Id.
31 Id.
32 Id. at 79.
33 Id. at 79-80.
34 Id. at 80.
35 Id.
36 Id. at 81.
37 Id.
38 Id. at 82.
39 Id. at 127-137.
40 Id. at 188-191. The Order was issued by Presiding Judge Armando C. Velasco of Branch 263, Regional Trial Court, Marikina.
41 Id. at 190, Regional Trial Court Order.
42 Id.
43 Id. at 192-204.
44 Id. at 217.
45 Id. at 47-60. The Decision was penned by Associate Justice Nina G. Antonio-Valenzuela and concurred in by Associate Justices Fernanda Lampas Peralta and Jane Aurora C. Lantion of the Sixth Division, Court of Appeals, Manila.
46 Id. at 56, Court of Appeals Decision.
47 Id.
48 Id. at 56-58.
49 Id. at 58-59.
50 Id. at 59.
51 Id. at 62-63.
52 Id. at 3-45.
53 Id. at 24, Petition.
54 Id.
55 Id.
56 Id. at 25-26.
57 Id. at 26.
58 Id. at 27.
59 Id. at 28-36.
60 Id. at 36.
61 Id. at 37.
62 Id.
63 Id. at 38.
64 Id. at 356-360, Comment.
65 Ordaining and Instituting a Government Auditing Code of the Philippines (1978).
66Rollo, pp. 356-360.
See Pres. Decree No. 1445 (1978), sec. 26, which provides:
Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed, including non-governmental entities subsidized by the government, those funded by donation through the government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or those partly funded by the government.
67 Id. at 360.
68 Id.
69 Id.
70 Id. at 366.
71 Id.
72 Id.
73 Id. at 367.
74 Id. at 368.
75 Id. at 371.
76 G.R. No. 197380, October 8, 2014, 738 SCRA 33 [Per J. Perlas-Bernabe, First Division].
77 Id. at 41-43.
78 606 Phil. 782 (2009) [Per J. Nachura, Third Division].
79 Id. at 792.
80Rollo, p. 83, Complaint.
81 Id. at 69-75.
82 662 Phil. 771 (2011) [Per J. Carpio, Second Division].
83 Id. at 779-781 [Per J. Carpio, Second Division].