LEGAL NOTE 0026: CONTRUCTOR SUED DPWH. CAN HE SUE WITHOUT FIRST EXHAUSTING ADMIN REMEDIES? CAN CONTRACTOR BE PAID EVEN IF HE DID NOT COMPLY WITH PD1445? CAN DPWH INVOKE THE DOCTRINE OF THE NON-SUABILITY OF THE STATE?
SOURCE: GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), DPWH UNDERSECRETARIES TEODORO E. ENCARNACION AND EDMUNDO E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT SECRETARY JOEL L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH DISTRICT ENGINEER ANGELITO M. TWAÑO, FELIX A. DESIERTO OF THE TECHNICAL WORKING GROUP VALIDATION AND AUDITING TEAM, AND LEONARDO ALVARO, ROMEO N. SUPAN, VICTORINO C. SANTOS OF THE DPWH PAMPANGA 2ND ENGINEERING DISTRICT VS. ARNULFO D. AQUINO (G.R. No. 180388, 18 JANUARY 2011, SERENO, J.) SUBJECTS: EXCEPTION TO EXHAUSTION OF ADMIN REMEDIES; GOVT IMMUNITY FROM SUIT NOT APPLIED. (BRIEF TITLE: VIGILAR ET AL VS. AQUINO)
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THE CASE STORY:
AQUINO CONSTRUCTED A DIKE BULLDOZING A PART OF THE PORAC RIVER IN JULY 1992. HE FILED A COLLECTION CASE AGAINST DPWH ET AL. THE DEFENSES OF DPWH ARE: NON-SUABILITY OF THE STATE; FAILURE OF AQUINO TO EXHAUST ADMIN REMEDIES AND HIS FAILURE TO COMPLY WITH PD 1445. RTC AND CA RULED IN FAVOR OF AQUINO. SC AFFIRMED.
DPWH ARGUES THAT AQUINO SHOULD HAVE EXHAUSTED ADMIN REMEDIES BY FIRST FILING ITS CLAIM AT COA.
SC SAID, AQUINO’S CASE FALSE UNDER THE EXCEPTIONS TO THE RULE ON EXHAUSTION OF ADMIN REMEDIES BECAUSE THERE IS UNREASONABLE DELAY OR OFFICIAL INACTION THAT WILL IRRETRIEVABLY PREJUDICE THE COMPLAINANT AND THE QUESTION INVOLVED IS PURELY LEGAL AND WILL ULTIMATELY HAVE TO BE DECIDED BY THE COURTS OF JUSTICE.
Said the Court:
Firstly, petitioners claim that the Complaint filed by respondent before the Regional Trial Court was done without exhausting administrative remedies. Petitioners aver that respondent should have first filed a claim before the Commission on Audit (COA) before going to the courts. However, it has been established that the doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In Republic of the Philippines v. Lacap, this Court enumerated the numerous exceptions to these rules, namely: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively so small as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) where the application of the doctrine may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) where the issue of non-exhaustion of administrative remedies has been rendered moot; (j) where there is no other plain, speedy and adequate remedy; (k) where strong public interest is involved; and (l) in quo warranto proceedings. In the present case, conditions (c) and (e) are present.
The government project contracted out to respondent was completed almost two decades ago. To delay the proceedings by remanding the case to the relevant government office or agency will definitely prejudice respondent.
More importantly, the issues in the present case involve the validity and the enforceability of the “Contract of Agreement” entered into by the parties. These are questions purely of law and clearly beyond the expertise of the Commission on Audit or the DPWH. In Lacap, this Court said:
… It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said question at best could be resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative nature is to be or can be done. The issue does not require technical knowledge and experience but one that would involve the interpretation and application of law. (Emphasis supplied.)
DPWH ARGUES THAT AQUINO FAILED TO COMPLY WITH PD 1445.
SC RULED THAT EVEN IF AQUINO VIOLATED PD 1445, STILL EQUITY AND PUBLIC INTEREST DEMAND THAT AQUINO BE PAID.
Secondly, in ordering the payment of the obligation due respondent on a quantum meruit basis, the Court of Appeals correctly relied on Royal Trust Corporation v. COA, Eslao v. COA, Melchor v. COA, EPG Construction Company v. Vigilar, and Department of Health v. C.V. Canchela & Associates, Architects. All these cases involved government projects undertaken in violation of the relevant laws, rules and regulations covering public bidding, budget appropriations, and release of funds for the projects. Consistently in these cases, this Court has held that the contracts were void for failing to meet the requirements mandated by law; public interest and equity, however, dictate that the contractor should be compensated for services rendered and work done.
Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the contracts involved in both cases failed to comply with the relevant provisions of Presidential Decree No. 1445 and the Revised Administrative Code of 1987. Nevertheless, “(t)he illegality of the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party claiming thereunder may recover what had been paid or delivered.”
The government project involved in this case, the construction of a dike, was completed way back on 9 July 1992. For almost two decades, the public and the government benefitted from the work done by respondent. Thus, the Court of Appeals was correct in applying Eslao to the present case. In Eslao, this Court stated:
…the Court finds that the contractor should be duly compensated for services rendered, which were for the benefit of the general public. To deny the payment to the contractor of the two buildings which are almost fully completed and presently occupied by the university would be to allow the government to unjustly enrich itself at the expense of another. Justice and equity demand compensation on the basis of quantum meruit. (Emphasis supplied.)
DPWH ARGUES THAT THE STATE IS IMMUNED FROM SUIT.
SC RULED THAT THE DOCTRINE ON IMMUNITY FROM SUIT CANNOT BE USED AS AN INSTRUMENT TO PERPETUATE INJUSTICE.
Neither can petitioners escape the obligation to compensate respondent for services rendered and work done by invoking the state’s immunity from suit. This Court has long established in Ministerio v. CFI of Cebu, and recently reiterated in Heirs of Pidacan v. ATO, that the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. As this Court enunciated in EPG Construction:
To our mind, it would be the apex of injustice and highly inequitable to defeat respondent’s right to be duly compensated for actual work performed and services rendered, where both the government and the public have for years received and accepted benefits from the project and reaped the fruits of respondent’s honest toil and labor.
… … …
Under these circumstances, respondent may not validly invoke the Royal Prerogative of Dishonesty and conveniently hide under the State’s cloak of invincibility against suit, considering that this principle yields to certain settled exceptions. True enough, the rule, in any case, is not absolute for it does not say that the state may not be sued under any circumstance.
… … …
Although the Amigable and Ministerio cases generously tackled the issue of the State’s immunity from suit vis a vis the payment of just compensation for expropriated property, this Court nonetheless finds the doctrine enunciated in the aforementioned cases applicable to the instant controversy, considering that the ends of justice would be subverted if we were to uphold, in this particular instance, the State’s immunity from suit.
To be sure, this Court — as the staunch guardian of the citizens’ rights and welfare — cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof. Justice and equity sternly demand that the State’s cloak of invincibility against suit be shred in this particular instance, and that petitioners-contractors be duly compensated — on the basis of quantum meruit — for construction done on the public works housing project. (Emphasis supplied.)
 G.R. No. 158253, March 2, 2007, 517 SCRA 255.
Supreme Court Resolution En Banc, G.R. No. 84202, November 22, 1988, cited in Eslao v. COA, 195 SCRA 730.
 G.R. No. 89745, April 8, 1991, 195 SCRA 730.
 G.R. No. 95938, August 16, 1991, 200 SCRA 705.
 G.R. 131544, March 16, 2001, 354 SCRA 566.
 Supra at note 7.
 DOH v. C.V. Canchela Associates, Architects, G.R. Nos. 151373-74, November 17, 2005, 475 SCRA 218.
 G.R. No. L-31635, August 31, 1971, 40 SCRA 464.
 G.R. No. 186192, August 25, 2010.
 G.R. No. 131544, March 16, 2001, 354 SCRA 566.