G.R. No. 244443, October 15, 2019
STO. NIÑO CONSTRUCTION REPRESENTED BY DEXTER W. TSANG, PETITIONER, VS. COMMISSION ON AUDIT, REPRESENTED BY HON. MICHAEL G. AGUINALDO, CHAIRPERSON, RESPONDENT.

FACTS

On April 23, 2009, the Bids and Awards Committee (BAC) of the Department of Public Works and Highways (DPWH) conducted a public bidding for the improvement and rehabilitation of Payao Road in Zamboanga Sibugay. Petitioner Sto. Niño Construction (STC) was declared the lowest responsive bidder per BAC Resolution No. 05-059 dated May 8, 2009, but no award of contract was issued due to pending fund allocation. Prior to the bidding, former Representative Belma Cabilao requested funding assistance for the project. A marginal note from former President Gloria Macapagal-Arroyo directed the immediate release of funds to fast-track the project. While waiting for fund release, STC began the project upon the verbal instruction of Rep. Cabilao to minimize insurgency problems, with assurances from her and Undersecretary Renato Ebarle that funding would be available. STC completed the project on November 18, 2009, as certified by the DPWH District Engineer, costing P11,425,875.67, but no payment was released. STC filed a Petition for Money Claim with the Commission on Audit (COA). The DPWH District Engineer, in its comment, affirmed STC’s claims, noted the project’s completion and turnover, and recommended payment of P8,238,271.35 based on quantum meruit and a COA inspection. COA denied the claim, holding that under Sections 85 and 86 of P.D. No. 1445 (Government Auditing Code), appropriation and availability of funds are indispensable for government contracts, and contracts entered without them are void under Section 87. COA also denied the application of quantum meruit, distinguishing the cases cited by STC (Soler v. CA and EPG Construction v. Vigilar) by noting the lack of a Notice of Award or written contract and the absence of DPWH’s consent or authorization for STC to proceed. COA issued a Notice of Finality of Decision after STC belatedly filed a Motion for Reconsideration, which COA denied. STC filed a Petition for Certiorari with the Supreme Court.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in denying Sto. Niño Construction’s money claim for the completed rehabilitation project of Payao Road due to the absence of a prior appropriation and a written contract.

RULING

Yes, the Supreme Court granted the petition, finding that COA committed grave abuse of discretion by overlooking relevant facts that constituted implied authorization and curative acts by the DPWH. The Court relaxed the doctrine of finality of judgments due to compelling circumstances warranting equity jurisdiction. While Sections 85 and 86 of P.D. No. 1445 require appropriation and availability of funds as prerequisites for a valid government contract, the Court found that DPWH’s subsequent actions cured the initial lack of these requisites. These actions included: (1) DPWH itself conducting the public bidding and declaring STC the lowest responsive bidder; (2) the District Engineer certifying to the project’s completion; (3) DPWH, through its District Engineer, admitting the project’s commencement, completion, turnover, and acceptance by the government, and its public use; and (4) the Audit Team Leader recommending payment based on a COA technical inspection. The Court held that these acts constituted curative authorization, intended to validate an action that initially lacked legal requisites. Since the government and the public of Zamboanga Sibugay clearly benefited from the constructed road, there was no legal impediment to paying STC for the work actually rendered and accepted. The COA’s denial of the claim, while strictly citing the lack of prior appropriation and contract, failed to consider these subsequent validating acts by the government agency.