GR L 70826; (October, 1987) (Digest)
G.R. No. L-70826 October 12, 1987
University of the Philippines, College of Agriculture and/or University of the Philippines, petitioner, vs. Domingo P. Gabriel, doing business under the name and style: Allied Plumbing Company and The Honorable Intermediate Appellate Court, respondents.
FACTS
The University of the Philippines (UP) contracted Beta Construction Company, Inc. to construct the Biological Science Building at its College of Agriculture. Beta subcontracted the plumbing works to Allied Plumbing Company, which UP’s Bidding Committee approved. After completing the work, Allied sued both Beta and UP for the unpaid balance, alleging Beta refused to pay. Beta countered that Allied’s work was defective and incomplete, necessitating repairs by another contractor, and that Beta had overpaid.
The trial court ruled in favor of Allied, holding both Beta and UP jointly and severally liable for the unpaid balance. Only UP appealed. The Intermediate Appellate Court affirmed the decision, applying Article 1729 of the Civil Code, which allows laborers and materialmen to sue the owner up to the amount still owed by the owner to the contractor at the time the claim is made. The appellate court found that UP had been notified by Allied of the unpaid claims but still released subsequent payments to Beta, thereby making UP liable.
ISSUE
Whether the University of the Philippines is solidarity liable with Beta Construction Company for the unpaid obligations of the general contractor to its subcontractor.
RULING
No. The Supreme Court reversed the appellate court’s decision and absolved UP from liability. The legal logic proceeds from the nature of UP’s function and the applicable law governing public works contracts. The Court held that UP, as an institution of higher learning, performs a governmental function. The construction of its building is a public works project. Consequently, the relationship is governed not by the general provisions of the Civil Code (Article 1729) but by the specific provisions of Act No. 3688 , as amended.
Act No. 3688 requires contractors for public works to post a performance bond for the protection of laborers and material suppliers. The law provides the exclusive remedy: if the government does not sue on the bond within six months of final settlement, the supplier may request a certified copy of the contract and bond and sue the contractor and its sureties in the name of the government. UP, as the owner, is not solidarity liable with the contractor under this regime. The subcontractor’s proper recourse was against Beta and the surety company on the performance bond, not against UP. Since Allied Plumbing did not avail of this statutory remedy, UP cannot be held liable for the contractor’s debts.