406 Phil. 964
YNARES-SANTIAGO, J.:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant:On appeal to the Court of Appeals, the said Judgment was affirmed in toto. With the denial of its Motion for Reconsideration on January 26, 2000, petitioner now comes to this Court with the instant petition arguing that the Court of Appeals gravely erred:The claims for attorney's fees and other damages are hereby denied for lack of merit.
- Ordering the defendant to pay the plaintiff the amount of SEVEN HUNDRED SIXTY EIGHT THOUSAND FOUR HUNDRED NINETY THREE PESOS (P768,493.00) per month starting December 15, 1991 until December 31, 1995 with legal interest starting December 16, 1992, the date defendant received plaintiff's extra-judicial demand, until defendant finally pays the entire amount;
- Ordering defendant to pay costs of suit.
SO ORDERED.[8]
(a) When it refused to hold that the second Negotiated Contract of November 8, 1990 is null and void ab initio, notwithstanding that the execution thereof was in violation of Secs. 85, 86 and 87 of the Auditing Code of the Philippines (PD 1445) and LOI 968.Petitioner's remonstrations can be reduced to two (2) essential arguments:
(b) When it refused to categorically hold that the said Negotiated Contract of November 8, 1990 required the prior approval of the City Council, notwithstanding the fact that the said contract would require the expenditure of public funds in the amount of P18,817,920.00 for one-year dumping operation, or the total amount of P94,089,600.00 for five years, and that it is the City Council that is vested by the Local Government Code (BP Blg. 337) with the power to appropriate city funds to cover expenses of the City Government.
(c) When it held that Petitioner started to dump garbage at the dumpsite and paid for such service, despite the fact that Respondent's evidence proved otherwise; furthermore, the Court of Appeals failed to cite any specific evidence to support said conclusions of fact.
(d) When it held that the said Negotiated Contract of November 8, 1990 was ratified by the Petitioner by the aforesaid initial dumping of garbage and payment of services, overlooking the elementary doctrine that a void contract cannot be ratified.
(e) When it wrongly applied an Executive Order and administrative resolution as the applicable law to govern the aforesaid contract, notwithstanding that the Auditing Code of the Philippines (PD 1445) and the Local Government Code (BP 337) then had not been repealed by any legislative enactment, nor could the said executive issuances repeal them.
(f) When it held that the equities of the case should lean in favor of the respondent and thus failed to apply the doctrine that Government is not estopped to question the illegal acts of its officials.
(g) When it wrongly applied the Imus case, not the Osmeña case, to the present case.[9]
The issue of whether or not the subject negotiated contract is null and void ab initio will be discussed first.
First. That the second negotiated contract is null and void ab initio because its execution was done in violation of existing laws, more particularly Sections 85, 86 and 87 of Presidential Decree No. 1445 (otherwise known as the Auditing Code of the Philippines) and Section 177 (b) of Batas Pambansa Blg. 337 (also known as the Local Government Code of 1983); andSecond. That the facts and evidence do not support the Court of Appeals' conclusion that, notwithstanding the lack of appropriation, subsequent acts of the petitioner constituted a ratification of the subject negotiated contract.
Section 85. 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 unexpected balance of which, free of other obligations, is sufficient to cover the proposed expenditure; (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 appropriation account. (Underscoring ours)Section 86 of PD 1445 also provides as follows:
Section 86. Certificate showing appropriation to meet contract. - Except in a 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 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 or 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 fiscal year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certification 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. (Underscoring ours)Petitioner stresses that failure to comply with the requirements underlined in Sections 85 and 86 of PD 1445 rendered the subject contract void, invoking Section 87 of PD 1445 which provides:
Section 87. Void contract and liability of officer. - Any contract entered into contrary to the requirements of the two 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.Is a contract entered into by the city mayor involving the expenditure of public funds by the local government without prior appropriation by the city council valid and binding? Petitioner insists that the answer is in the negative, arguing that there is no escaping the stringent and mandatory requirement of a prior appropriation, as well as a certification that funds are available therefor.
1) can be entered into only when there is an appropriation therefor; andHowever, the very same Presidential Decree No. 1445, which is the cornerstone of petitioner's arguments, does not provide that the absence of an appropriation law ipso facto makes a contract entered into by a local government unit null and void. Section 84 of the statute specifically provides:
2) must be certified by the proper accounting official/agency that funds have been duly appropriated for the purpose, which certification shall be attached to and become an integral part of the proposed contact.
Revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. (Underscoring ours)Consequently, public funds may be disbursed not only pursuant to an appropriation law, but also in pursuance of other specific statutory authority, i.e., Section 84 of PD 1445. Thus, when a contract is entered into by a city mayor pursuant to specific statutory authority, the law, i.e., PD 1445 allows the disbursement of funds from any public treasury or depository therefor. It can thus be plainly seen that the law invoked by petitioner Quezon City itself provides that an appropriation law is not the only authority upon which public funds shall be disbursed.
x x x LGUs remitting their contributions to the MMA within the prescribed period shall be entitled to a financial assistance in an amount equivalent to 20% of their remittances provided that the amount is used exclusively to augment the effective delivery of basic urban services requiring coordination.The Metropolitan Manila Council (or MMC) also issued Resolution No. 15, Series of 1991, authorizing the Chairman of the MMC to enter into a memorandum of agreement or (MOA) with any local chief executive in Metropolitan Manila for the purpose of managing garbage collection and disposal, among other basic urban services. Taking their cue from Executive Order No. 392 and the pertinent resolutions of the MMA and MMC, the then Mayors of Quezon City and the Municipality of Antipolo entered into a tripartite MOA with respondent Lexber, towards the establishment of the proposed Quezon City Landfill Disposal System.
Pursuant to the provisions of Section 86 of P.D. No. 1445, LOI 968 and Section 46 of P.D. No. 177, I hereby certify that funds have been duly appropriated and alloted under Advice of Allotment No. 1 and 2 dated March 31, 1991 and in the total amount of P2,620,169.00; P11,783,399.00 covering the contract entered into with Lexber, Inc. with business address at 65 Panay Avenue, Quezon City said amount is available for expenditure on account thereof.[21]The existence of said document led the trial court to conclude thus:
However, a close examination of the Certificate of Availability of Funds dated December 3, 1990 shows that the appropriated amounts of P1,700,000.00, 2,641,922.00, and P40,000.00 totaled P4,381,922.00 and not P4,341,922.00, which amount is, in fact, P853.00 more than the contract price of Negotiated Contract dated September 10, 1990. This only shows that as of April 4, 1991, there was sufficient appropriation to cover at least for a period of three (3) months, in order to comply with the provisions of Section 86 of PD 1445. Moreover, any payment made will comply with the provision of Section 84 of PD 1445 which states that: "Revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority."The Court of Appeals affirmed the trial court's findings that the second negotiated contract was executed by virtue of a specific statutory authority, or pursuant to law, holding that:
In any case, the defendant city can easily make available the necessary funds at the beginning of the year in the general appropriation to cover the probable expenses which it would have to incur, considering that pursuant to Resolution No, 72, Series of 1990 of the Metropolitan Manila Authority, the Local Government Units are entitled to a financial assistance in an amount equivalent to 20% of their remittances provided that the amount is used exclusively to augment the effective delivery of basic services requiring coordination. In fact, the amount of FIVE MILLION PESOS (P5,000,000.00) has already been set aside in order to be available to augment garbage collection and disposal in Quezon City.
It must be noted that the Negotiated Contract dated November 8, 1990 is not ipso facto absolutely null and void. The subject thereof is perfectly within the authority of the city government. It is pursuant to the Tripartite Agreement entered into between the plaintiff, the defendant, and the Municipality of Antipolo. The plaintiff was given the exclusive right to exercise acts stated in the two negotiated contracts, which are entered into to further carry out and implement the provisions of the Tripartite Agreement.[22]
Executive Order No. 392 (constituting the Metropolitan Manila Authority, providing for its powers and functions and for other purposes) and pertinent Resolution No. 72, Series of 1990 of MMA, and Resolution No. 15, Series of 1991 of MMC, find application and therefore should govern the subject transactions.While it is true that the MMA has no legislative power, E.O. No. 392 specifically empowered the MMA to "have jurisdiction over the delivery of basic urban services requiring coordination," such as "sanitation and waste management."[24] Said E.O. did not repeal pertinent provisions of B.P. 337, but specifically exempts the MMA from the application of E.O. 392[25] (Section 11 of E.O 392). There is no conflict as well with the provisions of P.D. No. 1445 because Sec. 84 thereof also recognizes appropriation by "other statutory authority."
Worthy to stress at this point is the fact that pursuant to Sec. 1, E.O. 392, the then Metropolitan Manila Authority was tasked, among others, with the delivery of basic services in the Metropolitan Area, whose services include garbage collection and disposal. To carry out this mandate and effectively deliver other basic urban services requiring coordination of local government units, the Metropolitan Manila Authority through its Resolution No. 72, Series of 1990, granted financial assistance to all local government units (LGUs) comprising Metropolitan Manila in an amount equivalent to 20% of their remittances as provided under E.O. 392. Likewise, the Metropolitan Manila Council, in its Resolution No. 15, Series of 1991, resolved to authorize the Chairman of the MMC to enter into memorandum of Agreement (MOA) with the Local Chief Executives in Metro Manila for the purpose of, among other things, the management of garbage collection and its disposal.
The foregoing authorities therefore fully clothed Mayor Brigido Simon, Jr. with the authority to enter and sign the subject contract for and in behalf of the city government even without express authority from the City Council.[23]
"x x x city and municipal treasurers of the local government units comprising Metropolitan Manila shall continue to collect all revenues and receipts accruing to the Metropolitan Manila Commission and remit the same to the Authority; Provided that such income collections as well as the share of the authority from the regular sources of revenue in the General Fund of the city or municipality as local counterpart for the integrated basic services and developmental projects shall be treated as a trust fund in their account. Provided further that the remittance thereof shall be effected within the first thirty (30) days following the end of each month. x x x"There was, thus, no justifiable reason for petitioner not to allocate or appropriate funds at the start of each fiscal year considering that a trust fund had been established to pay for "the effective delivery of basic urban services requiring coordination," foremost of which is the collection and disposal of garbage.
Granting but without conceding that Mayor Brigido Simon, Jr. needs to secure prior authorization from the City Council for the enforceability of the contracts entered into in the name of the City government, which he failed to do according to the appellant, We believe that such will not affect the enforceability of the contract because of the subsequent ratification made by the City government. Thus, when appellant City government, after the construction by the appellee of the dumpsite structure in accordance with the contract plans and specifications, started to dump garbage collected in the City and consequently paid the appellee for the services rendered, such acts produce and constitute a ratification and approval of the negotiated contract and necessarily should imply its waiver of the right to assail the contract's enforceability.[28]We are not dissuaded by petitioner's arguments that there can be no ratification due to the absence of an explicit or tacit approval of the second negotiated contract. At the outset, the issue raised by petitioner that the subject contract is null and void ab initio, and therefore not capable of ratification, has been laid to rest by the inevitable conclusion that the said contract is valid and binding. Consequently, ratification of the subject contract is not necessary.
Moreover, the contention of appellant, if sustained, will undeniably result in grave injustice and inequity to appellate Lexber, Inc. The records will reveal that appellee never solicited upon the City government to utilize its properties for a landfill site, as appellee originally conceived of devoting its property to a more viable undertaking, bamboo plantation in partnership with foreign firm. On the other hand, it was the City government, then beset with serious garbage problem that enticed and convinced Lexber, Inc. to offer its properties as a landfill site, with the assurance of the opportunities contained in the tri-partite agreement. When appellee acceded to their request, three contracts unilaterally prepared by the City government was presented to him, the terms and conditions of which were all established and prescribed by appellant, and appellee's mere participation in the contract's perfection was simply the affixing of his signature therein.Finally, we come to the issue raised by petitioner that the Court of Appeals gravely erred in holding that the Imus case, not the Osmeña case, is applicable to the instant controversy. We note that the Court of Appeals did not discuss either case but merely adopted the exhaustive discussion of the trial court on the matter. Before the court a quo, herein respondent Lexber relied on the ruling of this Court in the case of Imus Electric Company v. Municipality of Imus,[38] wherein this Court ruled:
Clearly, the equities of the case are with appellee Lexber, Inc. Even fair dealing alone would have required the appellant to abide by its representations, which it did in the inception, but was later dishonored by the new administration of Mayor Mathay, Jr. Appellee faithfully performed its undertakings set forth in the contract, upon the appellant's assurance that sufficient funds shall come from the city's statutory contribution to the MMA. Had it not (sic) for the said assurance, Lexber, Inc. for sure, would not have ventured into such costly business undertaking. No one in his right frame of mind would have entered into such kind of contract and invest his fortune unless assured of the availability of funds to compensate its financial investment.
As correctly pointed out by the court a quo, appellant having taken advantage of and benefited from the appellee through the assailed negotiated contract shall not be permitted to attack it on the ground that the contract did not bear the necessary approval.[37]
The defendants contend that the contract in question is null and void on the ground that the former municipal council of Imus approved it without having the necessary funds to pay for the value of the service to be rendered by the plaintiff for a period of ten (10) years, which amounted to P24,300, and without the provincial treasurer's previous certificate to the effect that said funds have been appropriated and were available, in violation of the provisions of sections 606, 607 and 608 of the Regional Administrative Code of 1917. The above-cited legal provisions read as follows:Petitioner, on the other hand, argued that the above-quoted ruling is no longer applicable, citing this Court's ruling in the more recent case of Osmeña v. Commission on Audit,[39] to wit:SEC. 606. Appropriation antecedent to making of contract. - No contract involving the expenditure of public funds shall be made until there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure. This provision shall not, however, be construed to prevent the purchasing and carrying of supplies in stock, under the regulations of the Bureau of Audits, provided that when issued such supplies shall be charged to the proper appropriation account.The defendants contend that the additional appropriation made by the then municipal council was inadequate on the ground that it was the duty of the latter to appropriate funds for the whole terms of the contract and that the contract in question falls within the prohibition of section 608 because in reality there was no appropriation for the sum of P24,300, nor did the provincial treasurer certify that such appropriation was made and that the funds for the same were available. (Underscoring ours)
SEC. 607. Certificate showing appropriation to meet contract. - Except in the case of a contract for personal service or for supplies to be carried in stock, no contract involving an expenditure by the Insular Government of three thousand pesos or more shall be entered into or authorized until the Insular Auditor shall have certified to the officer entering into such obligation that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. When application is made to the Insular Auditor for the certificate herein required, a copy of the proposed contract or agreement shall be submitted to him accompanied by a statement in writing from the officer making the application showing all obligations not yet presented for audit which have been incurred against the appropriation to which the contract in question would be chargeable; and such certificate, when signed by the Auditor, shall be attached to and become a part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the Government is discharged from the contract in question.
Except in the case of a contract for supplies to be carried in stock, no contract involving the expenditure by any province, municipality, township, or settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. Such certificate, when signed by the said treasurer, shall be attached to and become a part of the proposed contract and the sum so certified shall not thereafter be available for expenditure for any other purpose until the contract in question is lawfully abrogated or discharged.
For the purpose of making the certificate hereinabove required ninety per centum of the estimated revenues and receipts which should accrue during the current fiscal year, but which are yet uncollected, shall be deemed to be in the treasury of the particular branch of the Government against which the obligation in question would create a charge.
SEC. 608. Void contract; Liability of officer. - A purported contract entered into contrary to the requirements of the next preceding section hereof shall be wholly void, and the officer assuming to make such 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. (Underscoring ours)
The inconsistency of the defendants' claim becomes obvious merely by taking into consideration that the contract entered into by the parties was for the sale of electric current at the rate of P4.50 monthly for every lamp or light of 50 watts, or the sum of P202.50 every month. Under this agreement, the municipality of Imus was not bound, nor is it bound, to pay the price of the electric current until the same has been furnished, and inasmuch as the period of one month was made the basis thereof, there is no doubt but that neither is the said municipality obliged to pay for the current except at the end of every month. It is true that the duration of the contract was fixed at ten (10) years, a period which was accepted by the municipality on the ground that only under the terms of the contract and the law, the municipality was not bound to make advanced payments and, consequently, there was no reason for it to appropriate funds for the said public service except for a period of one month or one year, at most, if it had sufficient funds, in order to comply with the provisions of section 2296 of the Revised Administrative Code, which requires that municipalities should, at the beginning of every year, make a general appropriation containing the probable expenses which, they would have to incur. (Emphasis supplied)
The Auditing Code of the Philippines (P.D. 1445) further provides that no contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor and 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 the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof. Any contract entered into contrary to the foregoing requirements shall be VOID.The trial court, which was affirmed by the Court of Appeals, concluded that:
Clearly then, the contract entered into by the former Mayor Duterte was void from the very beginning since the agreed cost for the project (P8,368,920.00) was way beyond the appropriated amount (P5,419,180.00) as certified by the City Treasurer. Hence, the contract was properly declared void and unenforceable in COA's 2nd Indorsement, dated September 4, 1986. The COA declared and we agree, that:The prohibition contained in Sec. 85 of PD 1445 (Government Auditing Code) is explicit and mandatory. Fund availability is, as it has always been, an indispensable prerequisite to the execution of any government contract involving the expenditure of public funds by all government agencies at all levels. Such contracts are not to be as final and binding unless a certification as to the funds availability is issued (Letter of Instruction No. 767, s. 1978). Antecedent advance appropriation is thus essential to government liability on contracts. This contract being violative of the legal requirement aforequoted, the same contravenes Sec. 85 of PD 1445 and is null and void by virtue of Sec. 87.
The contention of defendant that the Imus case is no longer applicable in view of the explicit provisions of PD 1445 is without merit. The prohibitions expressed in Sections 85, 86, and 87 of PD 1445 are already embodied in the provision of Revised Administrative Code, specifically Sections 606, 607 and 608, yet, the Supreme Court treated the contract therein as valid and required the defendant municipality to comply with its obligation despite the absence of prior approved appropriation at the time of the execution of the contract. The reason is that the obligation is not payable until the performance of the services contracted. That is the difference between the "Imus case" and the "Osmeña case."Contrary to petitioner's arguments, the facts in the Osmeña case are not parallel to the facts in the instant case. While in the former the construction of an abattoir entailed the payment in full of a fixed amount, the case at bar involved a contract for services still to be rendered which was payable on a monthly basis, just as in the Imus case. In the latter case, the Supreme Court did not declare the contract null and void ab initio for the reason that appropriation for the project can be made subsequent to the execution of the contract. Consequently, the ruling in the Imus case is germane to the instant case. Furthermore, the trial court noted that while herein petitioner would attack the subject contract for being fatally defective, the Commission on Audit did not declare the said contract as null and void, unlike in the Osmeña case where the questioned contract was declared invalid by the COA. Hence, the ruling in the Osmeña case finds no application in the instant controversy.
In the former, the obligation to be rendered is the furnishing or sale of electric current which the defendant municipality is not bound to pay until the same has been furnished.
While in the latter, the contract is for the construction of a modern abattoir. The amount payable is already fixed at the time the contract was executed. Moreover, what made the Supreme Court declare the contract entered therein as invalid is the attainment of the finality of the findings of the Commission on Audit, which the petitioner mayor previously invoked.
Thus, the Highest Tribunal said, and this Court quotes:As a matter of fact, the City of Cebu relied on the above pronouncement and interposed the same as its affirmative defense, so much so that petitioner cannot now assert that it was void having been issued in excess of COA's jurisdiction. A party cannot invoke the jurisdiction of a court or an administrative body to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction. It is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny the same jurisdiction to escape a penalty.
Besides, neither the petitioner nor HFCCI questioned the ruling of COA declaring the invalidity of the abattoir contract, thereby resulting in its finality even before the civil case was instituted. Petitioner could have brought the case to the Supreme Court on a petition for certiorari within thirty days from receipt of a copy of the COA decision in the manner provided by law and the Rules of Court. A decision of the Commission or any of its Auditor not appealed within the period provided by law, shall be final and executory.[40]