E.L. Saniel Construction vs. Commission on Audit and PNOC Shipping and Transport Corporation (PSTC)

A petition for certiorari under Rule 64 must be filed within the remaining period, not less than five days, from notice of denial of the motion for reconsideration, reckoned from notice to counsel of record; and a contractor's claim for additional government construction works on quantum meruit fails absent prior approval or timely notice for Variation Orders under Annex "E" of the IRR-A of Republic Act No. 9184.

PSTC was a wholly owned subsidiary of PNOC engaged in the marine transport of petroleum products, while E.L. Saniel Construction was a contractor engaged for projects at PSTC's Limay Office. The dispute arose in the context of PSTC's dissolution, the PNOC Board's creation of a Disposal Committee, and the COA's money-claim procedure under the 2009 COA Revised Rules of Procedure. It also implicated the government procurement regime under Republic Act No. 9184 and its IRR-A, particularly Annex "E" on Variation Orders.

PSTC was a wholly owned subsidiary of the Philippine National Oil Company engaged in the business of marine transport of petroleum products. E.L. Saniel Construction was awarded the project for the rehabilitation of the PSTC Limay Office (Rehabilitation Project) for the bid price of PHP 4,980,000.00 on January 5, 2010. Thereafter, the project for the design and construction of slope protection/riprap at PSTC's Limay Office (Riprap Project) was also awarded to E.L. Saniel for the bid price of PHP 1,350,000.00 on September 22, 2010. Both projects were fully paid by PSTC.

According to E.L. Saniel, it discovered during the construction of the projects that the terrain where the Limay Office was situated posed a particular condition requiring additional constructions. E.L. Saniel thus performed additional works resulting in additional billings: PHP 2,412,736.42 for riprap and additional works under the Riprap Project; PHP 69,608.97 for construction of sewer and drain canal; PHP 257,829.00 for revise trusses and roofing; and PHP 222,768.00 for backfilling and compaction, for a total of PHP 2,962,942.39. These billings remained unpaid by PSTC.

On February 7, 2013, the PNOC Board of Directors issued Resolution No. 2111, Series of 2013, which shortened the corporate life of PSTC until March 15, 2013 due to the continuous deterioration of its financial condition. The dissolution, approved by the President of the Philippines in a Memorandum dated July 5, 2013, resulted in the cessation of PSTC's business operations. The PNOC Board created the PSTC Disposal Committee to handle the disposition of PSTC's assets. In a letter dated May 19, 2014, Atty. Joseph John M. Literal, Chairman of the PSTC Disposal Committee, directed all suppliers and contractors to file their respective petitions for money claim with the COA for settlement pursuant to Rule VIII, Section 2 of the 2009 COA Revised Rules of Procedure. On June 23, 2014, PSTC issued a Certification of Non-Payment in the total gross invoice amount of PHP 26,928.88, certifying that only that amount was reflected as the outstanding liability in the records and books of PSTC. Consequently, E.L. Saniel filed a Petition to be Paid Money Claims on November 5, 2014, demanding payment of the unpaid principal amount of PHP 2,962,942.39, plus PHP 1,066,659.26 in accrued interest, and attorney's fees of PHP 500,000.00.

The COA dismissed the money claims of various suppliers and contractors, including E.L. Saniel's, for payment of goods and services delivered or rendered following the dissolution of PSTC. The COA ruled that the disposition of PSTC's assets and settlement of its obligations rested upon the PSTC Disposal Committee, and that only unbooked and/or contested obligations should be brought as money claims under the COA's jurisdiction. It found that the various claims appeared to be booked trade payables arising from PSTC's ordinary course of business and refused to give due course to the individual money claims. E.L. Saniel moved for reconsideration, contending that its claims were not booked as evidenced by the Certification from PSTC stating that its claims were not reflected in its books. The COA denied the motion for lack of merit.

In denying the motion, the COA found that the Riprap Project started on November 8, 2010 and was completed on January 7, 2011; that PSTC received E.L. Saniel's letter-request for additional work on June 6, 2011, or five months after the project completion; that E.L. Saniel failed to justify its failure to file the request for additional work scope within the required period; and that the Bids and Awards Committee of PSTC denied E.L. Saniel's letter-request in its letter dated July 6, 2011 on the ground that the scope of work and actual area of the rip-rapped portion were more than the estimated and awarded costs of the project. The COA also noted that E.L. Saniel received a copy of the COA Decision on January 30, 2017 but filed its Motion for Reconsideration only on May 11, 2017, or 101 days from receipt, although it still ruled on the merits in the interest of substantial justice. On May 19, 2021, the COA issued a Notice of Finality of Decision stating that Decision No. 2016-397 had become final and executory. E.L. Saniel contended that it did not receive COA Resolution No. 2020-294 until a copy was released upon its request on September 2, 2021, and thereafter filed the present Petition.

• Grave Abuse of Discretion / Disregard of Facts: E.L. Saniel maintained that the COA committed grave abuse of discretion amounting to lack or excess of jurisdiction when it arbitrarily disregarded the relevant facts and circumstances surrounding the Certification of Non-Payment recommending the settlement of claim based on a revised computation for additional work, which entirely cured the defect cited by the COA in its Decision, and the necessity and urgency of the additional constructions performed.
• Unjust Enrichment: E.L. Saniel pointed out that the government, through PSTC, clearly benefited from the construction works, and to deny it compensation for the additional works would be unjustified and would constitute unjust enrichment on the part of the government and its employees, who derived benefits at its expense.
• Quantum Meruit: Citing Royal Trust Construction vs. Commission on Audit, E.L. Saniel maintained that the principle of quantum meruit applies in allowing its recovery, such that the mere absence of formal documents required for the additional works would not necessarily rule out the possibility of the contractor receiving payment for services already rendered to the government.
• Timeliness: E.L. Saniel claimed that it received a copy of the assailed COA Decision denying its money claim on May 9, 2017, and thus had 30 days, or until June 8, 2017, to file the petition for certiorari unless a motion for reconsideration was filed, which it filed on May 11, 2017. It admitted that while the assailed COA Resolution denying its Motion for Reconsideration may have been sent to its counsel on September 8, 2020, it learned of its issuance and obtained a copy thereof only on September 2, 2021; hence, it had 28 remaining days, or until September 30, 2021, within which to file the instant Petition, and it timely filed on September 20, 2021.
• Justification for Lack of Prior Approval: E.L. Saniel maintained that its failure to obtain prior approval for the additional works was justified under the circumstances that changes are inevitable in every construction project, even if carefully studied and planned, and that it had been its practice in past projects to immediately act on problems that arise during construction to prevent delays and deliver quality work, citing Section 3.2 of Annex "E" of the IRR-A of Republic Act No. 9184.

• Timeliness: Respondent COA, through the Office of the Solicitor General, contended that E.L. Saniel lost its right to file the Petition for Certiorari for failing to file it within the reglementary period provided under Section 3, Rule 64 of the Revised Rules of Court.
• Quantum Meruit: The COA further contended that E.L. Saniel's reliance on Royal Trust Construction is mistaken, the application of the principle of quantum meruit is unfounded, and its claim for attorney's fees is without basis and unjustified.
• Lack of Prior Approval: Respondent PSTC maintained that the principle of quantum meruit finds no application in the case of E.L. Saniel because the latter failed to obtain prior approval before commencing the additional works.

• Timeliness: Whether the Petition for Certiorari was filed on time.
• Grave Abuse of Discretion / Quantum Meruit: Whether the COA acted with grave abuse of discretion amounting to lack or excess of jurisdiction in denying E.L. Saniel's money claims for the additional works it rendered in the Riprap Project and Rehabilitation Project of the PSTC Limay Office.

• Timeliness: No. The petition was filed beyond the reglementary period. Under Rule 64, Section 3, notice to counsel of record is notice to the client; counsel received COA Resolution No. 2020-294 on September 8, 2020, leaving five days to file, but the petition was filed only on September 20, 2021. The COA issuances had attained finality.
• Grave Abuse of Discretion / Quantum Meruit: No. The COA did not gravely abuse its discretion. Annex "E" of the IRR-A of Republic Act No. 9184 required prior approval and timely notice for Variation Orders; failure constitutes waiver. Quantum meruit did not apply absent clear proof of implied contract or authorization and manifest benefit. Attorney's fees were denied.

• Timeliness: Under Rule 64, Section 3 of the Rules of Court, a party may file a petition for certiorari within 30 days from notice of the COA's judgment. The filing of a motion for reconsideration or new trial interrupts the period; when the motion is denied, the aggrieved party may file the petition within the remaining period, which shall not be less than five days in any event, reckoned from the notice of denial. The petition must show when the notice of the assailed judgment, order, or resolution was received, when the motion for reconsideration was filed, and when the notice of its denial was received. E.L. Saniel was served a copy of COA Decision No. 2016-397 on January 30, 2017, as shown in the Commission Secretariat Certificate of Service No. 397-16 dated December 27, 2016, and it failed to state the material date showing when it received the Decision in its Motion for Reconsideration. On this score alone, the COA could have denied the Motion for Reconsideration for being filed out of time, but it ruled on the merits in the interest of substantial justice. E.L. Saniel had five days from the notice of denial of the motion for reconsideration to file the petition for certiorari. Case law instructs that when a litigant is represented by counsel, notice to counsel serves as notice to the litigant; in the absence of a notice of withdrawal or substitution of counsel, the court will rightly assume that the counsel of record continues to represent their client. Receipt of notice by the counsel of record is the reckoning point of the reglementary period. E.L. Saniel's period to file the present Petition commenced upon receipt by its counsel of record, Atty. Ernesto P. Tabao, of COA Resolution No. 2020-294. While the administration of justice and access to legal remedies were severely disrupted by the lockdowns during the COVID-19 pandemic, the Court found no compelling reason to justify relaxation of the rules. The Philippine Postal Corporation Registry Return Receipt showed that Atty. Tabao received the assailed Resolution on September 8, 2020. With only five days remaining to file under Rule 64, Section 3, the Petition for Certiorari was belatedly filed on September 20, 2021, and the assailed COA issuances had already attained finality. E.L. Saniel overlooked procedural rules more than once, and the procedural lapses alone warranted outright dismissal. The Court has always tried to maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant be given the full opportunity for the just and proper disposition of his cause, but the invocation of substantial justice is not a magical incantation that will automatically compel the Court to suspend procedural rules. With the delayed filing, the challenged COA Decision had already attained finality and could no longer be reviewed; when a decision becomes final and executory, the court loses jurisdiction over the case and not even an appellate court will have the power to review the said judgment.
• Grave Abuse of Discretion / Quantum Meruit: The dismissal of the Petition was likewise warranted for lack of merit. The scope of the Court's jurisdiction in a petition for certiorari under Rule 64, in relation to Rule 65, is limited to errors of jurisdiction; E.L. Saniel had to show that the COA acted with grave abuse of discretion amounting to lack or excess of jurisdiction in denying its money claims. Grave abuse of discretion has been defined as a whimsical, arbitrary, or capricious exercise of power that amounts to an evasion or refusal to perform a positive duty enjoined by law or to act at all in contemplation of law. In determining its existence, the Court looks into whether the act involved was done contrary to the Constitution, the law, or jurisprudence, or whether it was executed whimsically, capriciously, or arbitrarily out of malice, ill will, or personal bias. Unless firmly established, the Court would not interfere with the COA's decision. Here, the COA did not err, much less act with grave abuse of discretion, when it denied E.L. Saniel's money claims. Annex "E" of the IRR-A of Republic Act No. 9184 provides that Variation Orders may be issued by the procuring entity in exceptional cases where it is urgently necessary to complete the original scope of work, but such must not exceed 20% of the original contract price. In claiming for any Variation Order, a notice should first be given to the head of the procuring entity or the duly authorized representative within seven calendar days after the commencement of additional works or within 28 calendar days after the circumstances or reasons for justifying a claim for extra cost shall have occurred; failure to timely provide notices constitutes a waiver for any claim against the procuring entity. Under no circumstances shall a contractor proceed to commence work under any Variation Order unless it has been approved by the head of the procuring entity or the duly authorized representative. As an exception, the Court has allowed money claims for construction contracts entered into by the government, even when the contracts were considered void due to technical reasons, provided the contractor shows performance of its obligation under the contract. However, in each of the cases cited by E.L. Saniel, there was either an express approval or an implied authorization through subsequent acts from the procuring entity, despite the procedural defects and incomplete documentation. In F.L. Hong Architects and Associates vs. Armed Forces of the Philippines, the Court pronounced that in cases where relief was granted on the basis of quantum meruit, the knowledge and consent of the contracting office or agency for the subject works were clearly established, and actual work and delivery of results were likewise acknowledged by the parties or at least clear from the case records. In EPG Construction Co. vs. Hon. Vigilar, the Court allowed a contractor to recover for additional constructions in a public works housing project notwithstanding the absence of supplemental contracts and appropriate funding, under an implied contract recognized by the Department of Public Works and Highways Assistant Secretary for Legal Services. Unlike those circumstances, a clear justification for the application of quantum meruit was wanting. At the very least, E.L. Saniel should have shown sufficient evidence of an implied contract with PSTC for the additional works, its completion and delivery of the subject thereof, and the manifest benefit to PSTC or the public of the alleged services. E.L. Saniel failed in this regard. It was undisputed that PSTC was only notified of the additional works when it received E.L. Saniel's letter-request on June 6, 2011, or five months after the completion of the projects. E.L. Saniel unilaterally decided to proceed with the additional works, at 179% more than the original contract price of the Riprap Project, without notifying PSTC, which was a gross violation of Annex "E" of the IRR-A of Republic Act No. 9184. Section 17.7 of the IRR-A of Republic Act No. 9184 likewise made the bidder responsible for examining the bidding documents, acknowledging all conditions affecting contract implementation, and determining the nature and condition of the terrain and other factors affecting cost, duration, and execution; by submitting its bid, the bidder was deemed to have inspected the site and determined the general characteristics of the contract works and conditions. E.L. Saniel could not claim ignorance of the actual physical condition of the terrain until the construction of the project commenced. Where government contracts are involved, an award on the basis of quantum meruit should always be treated as a mere exception to the general rule requiring the full satisfaction of legal requirements, including documentation and appropriations; it can only be justified by the demands of substantial justice and equity, founded on the rule that no one shall unjustly enrich himself at the expense of another. In Movertrade Corp. vs. Commission on Audit, the Court ruled that the COA did not gravely abuse its discretion when it denied money claims representing additional dredging works due to lack of approval from the project engineer or head of the procuring entity, in violation of the contract agreement. Thus, the COA did not act with grave abuse of discretion when it denied E.L. Saniel's money claims due to its failure to secure prior approval of the additional works, a gross violation of Annex "E" of the IRR-A of Republic Act No. 9184. Accordingly, E.L. Saniel's prayer for attorney's fees was denied.

• Quantum Meruit in Government Contracts — Quantum meruit allows recovery for services rendered even without formal documents, but where government contracts are involved, an award on this basis is a mere exception to the general rule requiring full satisfaction of legal requirements, including documentation and appropriations. It can only be justified by substantial justice and equity, founded on the rule that no one shall unjustly enrich himself at the expense of another. The Court applied this doctrine by denying recovery because E.L. Saniel failed to show an implied contract with PSTC, completion and delivery of the additional works, and manifest benefit to PSTC or the public, and because there was no express approval or implied authorization from the procuring entity.
• Variation Orders under Annex "E" of the IRR-A of Republic Act No. 9184 — Variation Orders may be issued by the procuring entity in exceptional cases where urgently necessary to complete the original scope of work, but must not exceed 20% of the original contract price. A notice must first be given to the head of the procuring entity or duly authorized representative within seven calendar days after the commencement of additional works or within 28 calendar days after the circumstances or reasons justifying a claim for extra cost shall have occurred; failure to timely provide notices constitutes a waiver of any claim against the procuring entity. Under no circumstances shall a contractor proceed to commence work under any Variation Order unless it has been approved by the head of the procuring entity or duly authorized representative. The Court applied this doctrine because E.L. Saniel proceeded with additional works without prior approval and notified PSTC only five months after project completion.
• Notice to Counsel as Notice to Client — When a litigant is represented by counsel, notice to counsel serves as notice to the litigant. In the absence of a notice of withdrawal or substitution of counsel, the court will rightly assume that the counsel of record continues to represent the client. Receipt of notice by the counsel of record is the reckoning point of the reglementary period. The Court applied this doctrine to hold that E.L. Saniel's period to file the petition commenced upon receipt by its counsel of record of COA Resolution No. 2020-294 on September 8, 2020.
• Grave Abuse of Discretion — Grave abuse of discretion is a whimsical, arbitrary, or capricious exercise of power that amounts to an evasion or refusal to perform a positive duty enjoined by law or to act at all in contemplation of law. The Court looks into whether the act was done contrary to the Constitution, the law, or jurisprudence, or whether it was executed whimsically, capriciously, or arbitrarily out of malice, ill will, or personal bias. The Court applied this doctrine by finding that the COA did not gravely abuse its discretion in denying the money claims.
• Finality of Judgment — When a decision becomes final and executory, the court loses jurisdiction over the case, and not even an appellate court will have the power to review the judgment. The Court applied this doctrine because the delayed filing of the petition meant the challenged COA Decision had already attained finality.
• Bidder's Responsibility and Site Inspection — Under Section 17.7 of the IRR-A of Republic Act No. 9184, a prospective or eligible bidder is responsible for examining all bidding documents, acknowledging all conditions affecting contract implementation, and determining the nature and condition of the terrain and other factors affecting cost, duration, and execution. By submitting its bid, the bidder is deemed to have inspected the site and determined the general characteristics of the contract works and conditions. The Court applied this doctrine to hold that E.L. Saniel could not claim ignorance of the actual physical condition of the terrain until construction commenced.

• "In cases where the Supreme Court granted relief on the basis of quantum meruit; the knowledge and consent of the contracting office or agency for the subject works were clearly established. Actual work and delivery of results were likewise acknowledged by the parties, or at least clear from the case records." — Quoted by the Court from F.L. Hong Architects and Associates vs. Armed Forces of the Philippines, this passage states the requisites for quantum meruit relief in government contracts and was used to distinguish the cited jurisprudence from E.L. Saniel's case.
• 'It is undisputed that PSTC was only notified of the additional works when it received E.L. Saniel's letter-request on June 6, 2011, or five months after the completion of the projects. Evidently, E.L. Saniel unilaterally decided to proceed with the additional works, let alone at 179% more than the original contract price of the Riprap Project, without notifying PSTC, which is a gross violation of Annex "E" of IRR-A of Republic Act No. 9184.' — This passage supplies the factual basis for denying quantum meruit and for finding a gross violation of the Variation Order requirements.
• "The Court emphasizes that where government contracts are involved, an award on the basis of quantum meruit should always be treated as a mere exception to the general rule that requires the full satisfaction of legal requirements, including documentation and appropriations. It can only be justified by the demands of substantial justice and equity, founded on the rule that no one shall unjustly enrich himself at the expense of another." — This is the Court's canonical formulation of the quantum meruit doctrine in government contracts and explains why the exception did not apply to E.L. Saniel.
• "Case law instructs that when a litigant is represented by counsel, notice to counsel serves as notice to the litigant. In the absence of a notice of withdrawal or substitution of counsel, the court will rightly assume that the counsel of record continues to represent their client. This is so because notice to counsel is an effective notice to the client, while notice to the client and not their counsel is not notice in law. Receipt of notice by the counsel of record is the reckoning point of the reglementary period." — This passage states the rule on notice to counsel that the Court used to hold that E.L. Saniel's petition was filed out of time.

• Royal Trust Construction vs. Commission on Audit, G.R. No. 84202, November 23, 1988 [Unsigned Resolution, En Banc] — Cited by E.L. Saniel for the application of quantum meruit; the Court distinguished its application because the cited jurisprudence involved express approval or implied authorization from the procuring entity, which was absent in this case.
• F.L. Hong Architects and Associates vs. Armed Forces of the Philippines, G.R. No. 214245, September 19, 2017 [Notice, En Banc] — Quoted for the rule that quantum meruit relief requires the knowledge and consent of the contracting office or agency and actual work and delivery of results acknowledged by the parties or clear from the records.
• RG Cabrera Corporation, Inc. vs. Department of Public Works and Highways and Commission on Audit, 894 Phil. 734, 745 (2021) — Cited for the exception allowing money claims for construction contracts even when void for technical reasons, provided the contractor shows performance of its obligation; distinguished because there was no approval or implied authorization from the procuring entity.
• Movertrade Corp. vs. Commission on Audit, 913 Phil. 615, 624 (2021) — Relied upon to hold that the COA did not gravely abuse its discretion in denying money claims for additional dredging works due to lack of approval from the project engineer or head of the procuring entity.
• Angeles vs. Commission on Audit, 891 Phil. 44, 47-48 (2020) — Cited for the Rule 64 requirement to state material dates and for the reckoning of the reglementary period for filing a petition for certiorari.
• Dr. Mendez vs. Honorable Justice Sorongon, G.R. No. 248379, June 26, 2023 [Notice] — Cited for the rule that notice to counsel is notice to the client and that receipt by counsel of record is the reckoning point of the reglementary period.
• Macawiag vs. Judge Balindong, 533 Phil. 735, 747 (2006) — Cited for the doctrine that when a decision becomes final and executory, the court loses jurisdiction and not even an appellate court may review the judgment.
• Agravante vs. Commission on Elections, G.R. No. 264029, August 8, 2023 — Cited for the definition and test of grave abuse of discretion.
• Ng Ching Ting vs. Philippine Business Bank, Inc., 835 Phil. 965, 977 (2018) — Cited for the proposition that the invocation of substantial justice is not a magical incantation that will automatically compel the Court to suspend procedural rules.

• Rule 64, Section 3, Rules of Court — A petition for certiorari must be filed within 30 days from notice of the judgment, order, or resolution; the filing of a motion for reconsideration interrupts the period, and if the motion is denied, the petition may be filed within the remaining period, which shall not be less than five days from notice of denial. The Court applied this provision to hold that E.L. Saniel's petition was filed out of time.
• Rule 64 in relation to Rule 65, Rules of Court — The petition for certiorari is limited to errors of jurisdiction, requiring a showing of grave abuse of discretion amounting to lack or excess of jurisdiction. The Court applied this provision in reviewing the COA's denial of the money claims.
• Rule VIII, Section 2, 2009 COA Revised Rules of Procedure — A money claim against the government shall be filed directly with the Commission Secretary, and the PSTC Disposal Committee directed suppliers and contractors to file their money claims with the COA under this rule. This provision governed the filing of E.L. Saniel's money claim.
• Rule X, Section 9, 2009 Revised Rules of Procedure of the COA — This provision governs the finality of COA decisions. The COA invoked it in issuing the Notice of Finality of Decision, and the Court applied the finality principle in dismissing the petition.
• Annex "E", IRR-A of Republic Act No. 9184 — Titled "Contract Implementation Guidelines for the Procurement of Infrastructure Projects," it provides that Variation Orders may be issued in exceptional cases where urgently necessary to complete the original scope of work, but must not exceed 20% of the original contract price; notice must be given within seven calendar days after commencement of additional works or within 28 calendar days after the circumstances justifying a claim for extra cost; failure to timely provide notices constitutes waiver; and no contractor may commence work under any Variation Order without approval by the head of the procuring entity or duly authorized representative. The Court applied this provision to deny E.L. Saniel's claim.
• Section 3.2, Annex "E", IRR-A of Republic Act No. 9184 — This provision allows the procuring entity's representative or Project Engineer, subject to availability of funds and delegated authority, to allow immediate start of work under a Change Order or Extra Work Order in an emergency where prosecution of the work is urgent to avoid detriment to public service or damage to life and/or property, or when time is of the essence. E.L. Saniel invoked this exception, but the Court found no clear justification for its application.
• Section 17.7, IRR-A of Republic Act No. 9184 — This provision makes the prospective or eligible bidder responsible for examining all bidding documents, acknowledging all conditions affecting contract implementation, and determining the nature and condition of the terrain and other factors affecting cost, duration, and execution. By submitting its bid, the bidder is deemed to have inspected the site and determined the general characteristics of the contract works and conditions. The Court applied this provision to hold that E.L. Saniel could not claim ignorance of the terrain.
• Republic Act No. 9184 — Titled "An Act Providing for the Modernization, Standardization and Regulation of the Procurement Activities of the Government and for Other Purposes," approved on January 10, 2003 and effective on January 26, 2003. Its IRR-A and Annex "E" supplied the mandatory requirements for Variation Orders that E.L. Saniel failed to comply with.

Gesmundo, C.J.; Leonen, SAJ.; Caguioa; Hernando; Lazaro-Javier; Zalameda; M. Lopez; Gaerlan; Rosario; J. Lopez; Dimaampao; Marquez; and Kho, Jr., JJ., concurred. Singh, J., was on official leave.