Saturday, June 23, 2012

EPG Construction Co. vs. Vigilar (Consti1)

Second Division

Buena, March 16, 2001

Topic: Sovereignty - Suits not against the State - Justice and Equity

  • In 1983, the Ministry of Human Settlement (MHS), through the BLISS Development Corporation, intiated a housing project on a government property along the east bank of Manggahan Floodway in Pasig
  • The MHS entered into a Memorandum of Agreement (MOA) with Ministry of Public Works and Highways (MPWH) where the latter undertook to develop the housing site and construct thereon 145 housing units
  • By virtue of the MOA, MPWH forged individual contracts with petitioners EPG, Ciper, Septa, Phil. Plumbing, Home Construction, World Builders, Glass World, Performance Builders, and De Leon Araneta Construction for the construction of the housing units
  • Under the contracts, the scope of construction and funding covered only around "2/3 of each housing unit"
  • Petitioners agreed to undertake and perform "additional constructions" for the completion of the housing units despite the fact that there was only a verbal promise, and not a written contract, by the MPWH Undersecretary Aber Canlas that additional funds will be available and forthcoming
  • Unpaid balance for the additional constructions amounted to P5,918,315.63
  • Upon a demand letter from the petitioners, on November 14, 1988, DPWH Asst. Secretary Madamba opined that payment of petitioners' money claims should be based on quantum meruit (what one has earned) and should be forwarded to the Commission on Audit (COA)
  • In a Letter of the Undersecretary of Budget and Management dated December 20, 1994, the amount of P5,819,316.00 was then released for the payment of the petitioners' money claims under Advise of Allotment No. A4-1303-04-41-303
  • In an indorsement dated December 27, 1995, the COA referred anew the money claims to the DPWH
  • In a letter dated August 26, 1996, respondent Secretary Gregorio Vigilar denied the subject money claims
  • Petitioners filed before the RTC of QC, Branch 226 a Petition for Mandamus to order the respondent to pay petitioners their money claims plus damages and attorney's fees.
  • Lower court denied the petition on February 18, 1997
  1. Whether or not the implied, verbal contracts between the petitioners and then Undersecretary Canlas should be upheld
  2. Whether or not the State is immune from suit
  1.  Yes.
  2. No.
  1. While the court agrees with the respondent that the implied contracts are void, in view of violation of applicable laws, auditing rules, and lack of legal requirements, it still finds merit in the instant petition
    • The illegality of the implied contracts proceeds from an express declaration or prohibition by law, not from any intrinsic illegality
    • "in the interest of substantial justice," petitioners-contractors' right to be compensated is upheld, applying the principle of quantum meruit
    • Even the DPWH Asst. Sec. for Legal Affairs recommends their compensation; even the DPWH Auditor did not object to the payment of the money claims 
2. The respondent may not conveniently hide under the State's cloak of invincibility against suit, considering that this principle yields to certain settled exceptions.
    •  The State's immunity cannot serve as an instrument perpetrating injustice
Petition granted. RTC decision reversed and set aside.

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