The Supreme Court (SC) has affirmed the ruling of the Commission on Audit (COA) which denied the P43.7 million claimed by a contractor for payment on additional work done in the government’s Mount Pinatubo Rehabilitation Program.
Also upheld by the SC were COA’s findings that the additional work done by Movertrade Corporation (Movertrade) was not included in the contract, was not approved by the Department of Public Works and Highways (DPWH), no budget was appropriated for such added work, and there was breach in the contract.
Reiterating its 2019 decision on a similar issue, the SC said:
“The Court has since reiterated that a contractor cannot recover compensation based on the principle of quantum meruit (as much as deserved) where he had been bound by a written agreement and then found guilty of breach thereof.”
The SC’s unanimous full court decision that denied Movertrade’s petition against COA and DPWH was written by Associate Justice Henri Jean Paul B. Inting and was made public last Feb. 23.
Court records showed that on Feb. 7, 1996, DPWH contracted Movertrade to undertake, execute, and complete works in the Pampanga Bay and the primary Pasac-Guagua-San Fernando waterways affected by the 1991 Mt. Pinatubo eruptions and mudflows for P188.69 million.
Movertrade undertook additional dredging work to allegedly counter the fast siltation of the river system. It said the work yielded 984,354.26 cubic meters. It then charged DPWH P43.7 million for the job.
In 1998, Movertrade requested payment. When it was not granted, it formally demanded in 2005 payment for the additional work. DPWH said the firm’s claim must be filed with COA.
Movertrade filed a petition with COA. It said that while “the additional dredging works were not covered by a valid contract... recovery may be allowed on the basis of quantum meruit....”
In its answer, DPWH told COA that Movertrade’s claim was unmeritorious because the contract did not provide for any cost for delay, the contract price was deemed inclusive of works associated with delays, and any work performed in excess, unless approved, will not be paid.
In denying the claim, COA ruled that the principle of quantum meruit does not apply because the project was covered by a written agreement between the parties, Movertrade did not obtain the approval prior to the commencement of additional dredging works in violation of the contract, and that the Government Auditing Code prohibits the execution of contracts without an appropriation sufficient to cover the proposed expenditure.
Instead of filing a motion for reconsideration, Movertrade elevated the case to the SC.
Movertrade told the SC that while there had been no written contract covering the additional dredging works, the DPWH engineers supervised and expected such works, and the people of Pampanga benefitted from the project. Thus, it insisted, it was entitled to the payment of its claim on the basis of quantum meruit.
Represented by the Office of the Solicitor General (OSG), COA told the SC that Movertrade’s petition should be dismissed outright for failure to file a motion for reconsideration. On the merits, the OSG pointed out that quantum meruit cannot be applied because Movertrade undertook the alleged additional works without DPWH’s approval as required by the contract.
In resolving the petition, the SC said that even if it were to ignore the procedural flaw in the case, “the petition would still be unmeritorious.”
It cited that in 1997, Movertrade had also charged DPWH for the costs of side dumping as the firm alleged that there no existing or available spoil sites where it could pump the dredge spoils.
Instead of utilizing the spoil sites identified by the DPWH for the Project, Movertrade side dumped the materials within the river, the costs for which it charged as dredging works. The SC said in 2015, it affirmed COA’s denial of the money claim.
In its 2015 decision, the SC said: “... contracts have the force of law between the parties and should be complied with in good faith. In this case, the contract specifically provides the manner of disposing dredge spoils. Thus, petitioner (Movertrade) cannot unilaterally change the manner of disposal without first amending the contract or obtaining the express consent or approval of respondent DPWH. Otherwise, petitioner would be guilty of breaching the contract. Without a doubt, petitioner's failure to dump the dredge spoils at the designated spoil sites constituted a breach.”
The SC pointed out that its 2015 ruling “applies squarely to the present controversy.”
“Likewise, the additional dredging works subject of the present case were undertaken without DPWH's prior approval and in breach of the Agreement,” it said.
It also said:
“Movertrade already acknowledged that it is not authorized to undertake works beyond those specified in the Agreement without DPWH's prior approval and that, in the event it nonetheless proceeds, it will not be compensated therefor.
“Movertrade failed to establish (a) that it obtained the requisite approval and (b) much less, that DPWH authorized it to undertake dredging works in addition to those already provided in the Agreement.
“In these lights, the Court finds no grave abuse of discretion in the COA Proper's denial of the subject money claim.
“WHEREFORE, the instant petition is DISMISSED. SO ORDERED.”