HON. TOMAS R. OSMEÑA, PETITIONER, VS. COMMISSION ON AUDIT AND HONORABLE EUFEMIO C. DOMINGO, RESPONDENTS.

Sometime in 1985 the City of Cebu decided to construct a modern
abattoir. For this project, the City
Treasurer, Ricardo Pestaño, issued a certificate of availability of funds dated
April 30, 1985, in the amount of FIVE MILLION FOUR HUNDRED NINETEEN THOUSAND
AND ONE HUNDRED EIGHTY (P5,419,180.00) PESOS, specifically “for the
construction of Cebu City Abbatoir (sic).”^[1] After
a public bidding, H. Franco Construction Company, Inc. (HFCCI) was awarded to
do the construction of the abattoir. Thus, the City of Cebu, through its Mayor, Ronald R. Duterte, entered
into a contract with HFCCI, the terms of which are as follows:

“WHEREAS, the contract cost for this project is EIGHT MILLION
THREE HUNDRED SIXTY-EIGHT THOUSAND NINE HUNDRED TWENTY (P8,368,920.00) PESOS;

X X X

“WHEREAS, the City treasurer of Cebu City certified the availability of funds for the first
installment due to the CONTRACTOR in the amount of TWO MILLION NINETY TWO
THOUSAND TWO HUNDRED THIRTY (P2,092,230.00) PESOS, which is to be due and
payable upon certification of the City Engineer, concurred in by the Project
Management Staff that the project substantially completed;

“WHEREAS, the CITY OF
CEBU shall include the Budget for calendar year 1986, the amount of SIX MILLION TWO HUNDRED SEVENTY SIX THOUSAND SIX HUNDRED NINETY
(P6,276,690.00) PESOS which represents the second, third and final installment
payments due to the CONTRACTOR.”^[2]

On March 13, 1986, Sen. John H. Osmeña, then Officer-In-Charge of
the City of Cebu, ordered the suspension of the project and review of the
contract by the COA. He also wrote
HFCCI asking them to account for the value of their progress. On April 24, 1986, HFCCI claimed the amount of
TWO MILLION ONE HUNDRED FORTY TWO THOUSAND NINE HUNDRED SIXTY FOUR AND 29/100
(P2,142,964.29) PESOS as the value of the work accomplished.

Unable to collect the said amount after so many demands HFCCI
instituted a civil action,^[3] dated
May 21, 1987 against the City of Cebu, for recovery of investment and damages.

In its answer dated June 5, 1987, the City of Cebu, while
admitting having entered into a contract with HFCCI, alleged that the contract
it entered into was null and void as declared by the Commission on Audit in its
2nd Indorsement dated September 4, 1986. Therefore whatever amount is due to HFCCI is to the sole liability of
the officer or officers who entered into the said contract.^[4]

Nevertheless, on December 15, 1988, the City of Cebu, through its
Mayor, Tomas R. Osmeña, entered into a compromise agreement, approved by the
court, to the effect that as a full and final settlement to the claim of HFCCI,
the City of Cebu shall pay the amount of ONE MILLION FIVE HUNDRED THOUSAND
(P1,500,000.00) PESOS.

On the strength of the Court’s Order dated March 3, 1989 the
Provincial Deputy Sheriff, RTC, Branch 5, Cebu City was ordered on March 8,
1989, to serve a writ of execution against the City of Cebu through its Mayor,
Tomas R. Osmeña. Thus, the amount of
P1,500,000.00 and P15,052.00, as lawful fees, were garnished from the City’s
funds deposited in the Philippine National Bank.^[5]

The trial court’s judgment based on the compromise agreement was
referred to the COA’s Regional Director, who in turn indorsed the same to the
Chairman of the COA. In its 3rd
Indorsement dated May 2, 1989, the COA ruled that:

“It may not be disputed that the contract for the construction
of the Cebu City Abattoir was declared void in a 2nd Indorsement dated
September 4, 1986, of this Commission. And since no appeal appears to have been taken thereon, said decision
became final.

“Consequently, ‘if a compromise is based upon an antecedent
claim which is undisputedly and undoubtedly illegal, the compromise may be
considered invalid on the ground of illegality as well as lack of
consideration.’ (Sec. 29, 15 Am. Jur 2d) Besides the compromise agreement
entered into by the City of Cebu with H. Franco Construction Co., Inc., after
the contract by and between them had been declared void by this Commission, is
a circumvention of the constitutional provision that the party aggrieved by any
decision, order or ruling of the Commission may within thirty (30) days from
receipt of a copy thereof appeal on certiorari to the Supreme Court
(Sec. 2-2, Art. XII-D, 1973 Constitution; Sec. 7, Art. IX-A, 1987
Constitution).

“Under the circumstances, this Commission concurs in the view
expressed by that Office that the expenditure involved would be the personal
liability of the officer directly responsible for its incurrence (Sec. 103,
P.D. No. 1445).”^[6]

Petitioner’s request for reconsideration of the above ruling was
denied in COA’s 5th Indorsement dated January 23, 1991,^[7] hence
this petition, with the following arguments:

“1)   the decision of the Public Respondent as
contained in the 2nd Indorsement dated September 4, 1986 is null and void for
having been made without, in excess of jurisdiction or with grave abuse of
discretion;

“2)   that
Public Respondent’s decision has never become final because it was made
without, in excess of jurisdiction, or with grave abuse of discretion.”^[8]

Petitioner argues that the decision of COA invalidating the
contract between the City of Cebu and HFCCI was void since it was already
executed and fulfilled. Petitioner
further stresses that COA has no authority to declare a contract already
executed void. And since the 2nd
Indorsement is a nullity, it never attained finality.

The petition is devoid of merit.

The Commission on Audit has the power, authority and duty to
examine, audit and settle all accounts pertaining to revenue and receipts of
and expenditures or uses of funds and property, owned or held in trust by, or
pertaining to, the Government, or any of its subdivisions, agencies or
instrumentalities.^[9]

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^[10] 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.^[11] (Emphasis added) Any contract entered
into contrary to the foregoing requirements shall be VOID.^[12]

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 considered as final or binding unless such
a certification as to funds availability is issued (Letter of Instruction No.
767, s. 1978). Antecedent of advance
appropriation is thus essential to government liability on contracts (Zobel v.
City of Manila, 47 Phil. 169). This
contract being violative of the legal requirements aforequoted, the same
contravenes Sec. 85 of PD 1445 and is null and void by virtue of Sec. 87.”^[13]

As a matter of fact, the City of Cebu relied on the above
pronouncement and interposed the same as its affirmative defense,^[14]
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.^[15]

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.^[16]
A decision of the Commission or of any of its Auditor not appealed within the
period provided by law, shall be final and executory.^[17]

Petitioner cannot hide behind the argument that the payment was
made in compliance with the trial court’s judgment. As correctly stated by the Solicitor General:

“Since petitioner and HFCCI knew of
the absolute invalidity of said Abattoir Contract, the Compromise Agreement
relative to the petitioner’s obligation resulting from said Abattoir contract
is also void and inexistent and the decision based on said Compromise Agreement is unenforceable against the City of
Cebu. (Art. 1422, Civil Code of the
Philippines).”^[18]

The trial court’s
decision based on the compromise agreement could not have ratified a contract
which is void ab initio. Consequently
the settlement of the supposed obligation of the City of Cebu arising out of a
void contract becomes a personal liability of petitioner who is directly
responsible therefor.^[19]

Neither can petitioner rely on the principle of Quantum
Meruit. Quantum Meruit is based on
justice and equity, to compensate a property or benefit received if restitution
is equitable and if such action involves no violation, frustration or
opposition to public policy. In the
present case, however, the payment made to HFCCI was due to the compromise agreement which in turn was made
in pursuance to a supposed abattoir contract, which is a void contract. Furthermore, there was no evidence presented
as to the extent of work accomplished by HFCCI
as to substantiate the amount stipulated in the compromise
agreement. Finally, as observed by the
Solicitor General:

“In any event, it is respectfully submitted that since
petitioner’s act in entering into said Compromise Agreement x x x came after
public respondent had voided petitioner’s abattoir contract (he) may not be
allowed to evade the legal sanctions resulting from his failure to comply with
the law’s safeguards against undue expenditures of public funds.”^[20]

Premises considered, the Compromise Agreement entered into
between the City of Cebu, through its Mayor, Tomas Osmeña is void being merely
a derivative of a previously void Abattoir Contract, and thus becomes a
personal liability of the officer who entered into it pursuant to Sec. 87 &
103 of P.D. 1445.

WHEREFORE, petition is hereby DISMISSED for lack
of merit.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Puno, JJ., concur.

^[1]
Annex “A” of the Complaint,
Original Record, p. 6.

^[2]
Annex “B” of the Complaint,
Original Record, p. 18-19.

^[3]
H. Franco Construction Company, Inc. v.
City of Cebu, Civil Case No. CEB-5966, Celso M. Gimenez, presiding Judge,
Branch V, RTC of Cebu.

^[4]
Annex “E” of the Petition, Rollo,
pp. 27-29.

^[5]
Original Record, pp. 177, 181-185.

^[6]
Annex “B” of the Petition, Rollo, pp. 19-20.

^[7]
Annex “C” of the Petition, Rollo, p. 21

^[8]
Petition, p. 6; Rollo, p. 8.

^[9]
Sec. 2, Art. IX, 1987 Constitution

^[10]
Sec. 85, Chap. 3, Title II of P.D. 1445.

^[11]
Sec. 86, Chap. 3, Title II, P.D. 1445.

^[12]
Sec. 87, Chap. 3, Title II, P.D. 1445.

^[13]
Annex “A” of the Petition, Rollo, p. 40.

^[14]
Annex “E” of the Petition, Rollo,
p. 28.

^[15]
Marquez v. Secretary of Labor,
G.R. No. 80685, 171 SCRA 337, quoting from Dean v. Dean, 136 Or. 694, 86
A.L.R. 79 and Littleton v. Burges, 16 Wyo. 58.

^[16]
Sec. 50, Chap. 3, Title I, P.D. 1445;
Sec. 35, Chap. 5, Administrative Code of 1987.

^[17]
Sec. 51, Chap. 3, P.D. 1445; Sec. 36,
Chap. 5, Administrative Code of 1987.

^[18]
Respondent’s Memorandum, p. 5.

^[19]
Sec. 87 and Sec. 103 of P.D. 1445.

^[20]
Respondent’s Memorandum, p. 9.