NEW MANILA LUMBER COMPANY, INC., PLAINTIFF AND APPELLANT, VS. REPUBLIC OF THE PHILIPPINES, DEFENDANT AND APPELLEE.

On May 8, 1958, the plaintiff lumber company filed in the court
below a complaint against the defendant Republic of the Philippines for
the recovery of a sum of money. The complaint alleges, among other
things, that defendant, thru the Director of Schools, entered into a
contract with one Alfonso Mendoza to build two school houses; that
plaintiff furnished the lumber materials in the construction of the
said buildings; that prior to the payment by defendant of any amount
due the contractor, the latter executed powers of attorney in favor of
the plaintiff “constituting it as his sole, true and lawful
attorney-in-fact with specific and exclusive authority to collect and
receive from the defendant any and all amounts due or may be due to
said contractor from the defendant in connection with the construction
of the aforesaid school buildings, as may be necessary to pay materials
supplied by the plaintiff”; and that originals of the powers of
attorney were received by defendant (thru the Director of Public
Schools) who promised to pay plaintiff, but that it, nevertheless, paid
the contractor several amounts on different occasions without first
making payment to plaintiff. The complaint, therefore, prays that
defendant be ordered to pay plaintiff the sum of P18,327.15, the unpaid
balance of the cost of lumber supplied and used in the construction of
the school buildings, with interest at the legal rate from the date
same was due, plus attorney’s fees and costs.

Served with a copy of the complaint, the defendant Republic of the
Philippines, through the Solicitor General, moved to dismiss the same
on the grounds (1) that it does not allege a sufficient cause of
action, (2) that plaintiff has no right to institute the action under
Act No. 3688, and (3) that the court is without jurisdiction to
entertain the same against the defendant.

The motion was opposed by plaintiff, but after hearing, the court
below—holding that “there is no juridical tie between
plaintiff-supplier and defendant-owner”—sustained the motion to dismiss
on the first ground, and on June 23, 1958 issued an order dismissing
plaintiff’s complaint. Its motion for reconsideration having been
denied, plaintiff took the present appeal.

The appeal is without merit.

Briefly stated, plaintiff’s complaint seeks to enforce against the
Republic of the Philippines a money claim for the payment of materials
it furnished for the construction of two public school buildings
undertaken by contractor Alfonso Mendoza, on the basis of powers of
attorney executed by the latter authorizing said plaintiff to collect
and receive from defendant Republic any amount due or may be due to
said contractor as contract price for the payment of the materials so
supplied.

Section one of Public Act No. 3688, entitled “An Act for the
protection of persons furnishing material and labor for the
construction of public works”, reads in part as follows:

“SECTION 1. Any person, partnership or corporation
entering into a formal contract with the Government of the Philippine
Islands for the construction of any public building, or the prosecution
and completion of any public work, or for repairs upon any public
building or public work, shall be required, before commencing such
work, to execute the usual penal bond, with good and sufficient
sureties, with the additional obligation that such contractor or his or
its sub-contractors shall promptly make payments to all persons
supplying him or them with labor and materials in the prosecution of
the work provided for in such contract; and any person, company or
corporation who has furnished labor or materials used in the
construction or repair of any public building or public work, and
payment for which has not been made, shall have the right to intervene
and be made a party to any action instituted by the Government of the
Philippine Islands on the bond of the contractor, and to have their
rights and claims adjudicated in such action and judgment rendered
thereon, subject, however, to the priority of the claim and judgment of
the Government of the Philippine Islands. If the full amount of the
liability of the surety on said bond is insufficient to pay the full
amount of said claims and demands, then, after paying the full amount
due the Government, the remainder shall be distributed pro rata among
said intervenors. If no suit should be brought by the Government of the
Philippine Islands within six months from the completion and final
settlement of said contract, or if the Government expressly waives its
right to institute action on the penal bond, then the person or persons
supplying the contractor with labor and materials shall, upon
application therefor, and furnishing affidavit to the department under
the direction of which said work has been prosecuted, that labor or
materials for the prosecution of such work have been supplied by him or
them, and payment for which has not been made, be furnished with a
certified copy of said contract and bond, upon which he or they shall
have a right of action, and shall be, and are hereby, authorized to
bring suit in the name of the Government of the Philippine Islands in
the Court of First Instance in the district in which said contract was
to be performed and executed, and not elsewhere, for his or their use
and benefit, against said contractor and his sureties, and to prosecute
the same to final judgment and execution, * * *.”

In the case at bar, it is not disputed that defendant Republic has
already instituted a suit against the contractor for the forfeiture of
the latter’s bond posted to secure the faithful performance of
stipulations in the construction contract with regards to one of the
two school buildings (Civil Case No. 26815, Court of First Instance of
Manila), The contractor has a similar bond with respect to the other
school building. Pursuant to Act 3688, plaintiff’s legal remedy is, not
to bring suit against the Government, there being no privity of
contract between them, but to intervene in the civil case
above-mentioned as an unpaid supplier of materials to the contractor,
or file an action in the name of the Republic against said contractor
on the latter’s other bond.

Plaintiff argues that an implied contract between it and the
defendant Republic arose, when the latter, thru the Director of Public
Schools, on being furnished copies of the powers of attorney executed
by the contractor, promised to make payment to plaintiff for the
materials supplied for the construction of the school buildings. It
will be observed, however, that defendant was not a party to the
execution of the powers of attorney. Besides, the Director of Public
Schools had no authority to bind defendant on the payment. While he was
the official who entered into contract with the contractor for the
construction of the school buildings, payment of the contract price was
not within his exclusive control but subject to approval under existing
laws not only by the Department Head (Sec. 568, Rev. Adm. Code), but
also by the Auditor General.

At any rate, under the facts alleged in the complaint, the powers of
attorney in question made plaintiff the contractor’s agent in the
collection of whatever amounts may be due the contractor from the
defendant. And since it is also alleged that, after the execution of
the powers of attorney, the contractor (principal) demanded and
collected from defendant the money the collection of which he entrusted
to plaintiff, the agency apparently has already been revoked. (Articles
1920 and 1924, new Civil Code.)

The point is made by plaintiff that the powers of attorney executed
by the contractor in its favor are irrevocable and are coupled with
interest. But even supposing that they are, still their alleged
irrevocability cannot affect defendant who is not a party thereto. They
are obligatory only on the principal who executed the agency.

Plaintiff also cites Article 1729 of the new Civil Code, which provides that—

“Those who put their labor upon or furnish materials
for a piece of work undertaken by the contractor have an action against
the owner up to the amount owing from the latter to the contractor at
the time the claim is made. * * .”

This article, however, as expressly provided in its last paragraph,
“is subject to the provisions of special law.” The special law
governing in the present case, as already seen, is Act No. 3688.

There is another reason for upholding the order of dismissal
complained of Plaintiff’s action being a claim for a sum of money
arising from an alleged implied contract between it and the Republic of
the Philippines, the same should have been lodged with the Auditor
General. The State cannot be sued without its consent.

In view of the foregoing, the order of dismissal appealed from is affirmed, with costs against plaintiff-appellant.

Paras, C. J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, and Barrera, JJ., concur.