F. F. Mañacop Construction Co., Inc. vs. Court of Appeals

A contractor who renders services to a government agency under a quasi-contractual relation, in the absence of a written contract, may recover the reasonable value of the work on the basis of quantum meruit; and where the trial court has already made a factual finding on the amount reasonably due after scrutinizing the evidence, the settlement of that unliquidated claim is a justiciable question ripe for judicial determination and need not be referred to the Commission on Audit.

F.F. Mañacop Construction Co., Inc. was a contractor already engaged by the Manila International Airport Authority — then the Manila International Airport, later renamed the Ninoy Aquino International Airport (NAIA) — and was at the time fencing the MIAA Engineering compound when the Authority asked it to undertake an additional perimeter fence along the MIA road. The Authority's projects were governed by the statutory regime on public works contracts, which generally requires competitive public bidding but permits negotiated contracts in exceptional cases under Section 4 of P.D. 1594, as amended, and Section 9 of B.P. 132, the Public Works Appropriations Act. Because the project involved the expenditure of public funds, the constitutional duty of the Commission on Audit over such funds supplied the backdrop against which the Authority resisted direct judicial computation of the contractor's claim.

F.F. Mañacop Construction Co., Inc. was already under contract with the Manila International Airport Authority and was in fact fencing the MIAA Engineering compound when the Authority asked it to construct a perimeter fence along the MIA road, running from Asia Overseas, Inc. up to Airscope Development Corporation, for and in consideration of the quoted price of P307,440.00. The fence was intended to prevent would-be squatters from entering the area, and it was this urgency that drove the contractor to begin work immediately.

Sometime in September 1995, petitioner started construction even though the Notice to Proceed had not yet been signed by the general manager of private respondent, Luis Tabuena; the notice had only been initialed by the Authority's Assistant Project Manager, Elpidio L. Mendoza. Work proceeded on that footing until the February 1986 revolution, after which the new general manager of private respondent stopped the construction. By that time 95% of the fence was finished, which petitioner computed to be worth P282,068.00.

Petitioner made repeated demands for payment of what it had completed, but private respondent simply ignored them. After two years of unheeded demands, petitioner brought the matter to court and, in the process, incurred attorney's fees.

In the trial court, the issues were limited to whether petitioner had done works for private respondent and whether those works were authorized. To prove that it had rendered the services, petitioner presented Engr. Angelito Gonzales, who testified that the fence was indeed constructed for private respondent in accordance with the plans therefor (Exh. "C"); photographs of the fence (Exhs. "N" to "N-3") were likewise taken, together with the certification of the supplier as to the materials used by petitioner in constructing the fence and the price thereof. Private respondent, for its part, presented no evidence whatever despite the chances given to it by the trial court, one of which would have consisted of testimony from the Commission on Audit on what should be the expenses involved in the construction of the fence.

After the repeated failure of private respondent to present its evidence, the trial court rendered judgment finding that for the services rendered by petitioner, the latter should be paid P238,501.48 based upon quantum meruit, there being an absence of a written contract between the parties. That amount represented the latest evaluation of the work done, an evaluation made by private respondent itself. The trial court likewise ordered private respondent to pay attorney's fees, there being reason to believe that it acted in bad faith in refusing to comply with petitioner's repeated demands for payment over two long years.

• Issue Raised for the First Time on Appeal: Petitioner argued that the Court of Appeals erred in taking cognizance of the issue of referring the matter to the Commission on Audit to determine the amount due to petitioner by relying on Eslao vs. COA and Royal Trust Co. vs. COA, that issue having been raised for the first time on appeal.
• Refutation of the Assigned Error: Petitioner refuted private respondent's assigned error before the appellate court by pointing out that the question of referral to the Commission on Audit was not one of the issues raised before the trial court.

• Referral to the Commission on Audit: Private respondent, through the Solicitor General, argued that the matter of the amount due to petitioner should be referred to the Commission on Audit, citing the cases of Eslao vs. Commission on Audit and Royal Trust Co. vs. COA.
• Assigned Error on Appeal: On appeal, private respondent assigned as error that the trial court should have referred the computation of what should be paid to petitioner to the Commission on Audit pursuant to what was done in Eslao vs. Commission on Audit, 195 SCRA 730.

• Issue Raised for the First Time on Appeal: Whether the Court of Appeals erred in taking cognizance of, and ruling upon, the issue of referring the computation of the amount due to petitioner to the Commission on Audit although that issue was raised for the first time on appeal.
• Entitlement to Payment: Whether petitioner is entitled to payment for the construction it rendered for private respondent.
• Basis of Recovery — Quantum Meruit: Whether petitioner should be paid on the basis of quantum meruit.
• Referral to the Commission on Audit: Whether the determination of the exact amount due to petitioner must be referred to the Commission on Audit as was done in Eslao vs. Commission on Audit and Royal Trust Co. vs. COA.
• Attorney's Fees: Whether the award of attorney's fees in favor of petitioner is proper.

• Issue Raised for the First Time on Appeal: The issue may nonetheless be considered. Well-recognized jurisprudence precludes raising an issue only for the first time on appeal, but the question of reference is closely related to the determination of how much is exactly due to petitioner, and the case involves the disposition of public funds and the Commission on Audit's constitutional duty, which should not be defeated by mere technicalities of procedure.
• Entitlement to Payment: Yes. Petitioner is entitled to payment for the construction it made, the same having arisen from a quasi-contractual relation created between petitioner and private respondent.
• Basis of Recovery — Quantum Meruit: Yes. Recovery is measured by quantum meruit, the quasi-contract being neither fraudulent nor mala in se, the project having been covered by a specific appropriation, and the claim being clearly supported by equity.
• Referral to the Commission on Audit: No. Referral to the Commission on Audit is unnecessary because the lower court had already made a factual finding on the amount reasonably due to petitioner and had scrutinized the evidence to sustain the claim; quantum meruit recovery is an unliquidated claim requiring the application of judgment and discretion.
• Attorney's Fees: Yes. The award is premised on the uncontroverted factual finding of the lower court, affirmed by the appellate court, that private respondent acted in bad faith in refusing payment to petitioner.

• Issue Raised for the First Time on Appeal: Well-recognized jurisprudence precludes the raising of an issue only for the first time on appeal, it being offensive to the basic rules of fair play and justice to allow a party to raise a question not ventilated before the court a quo. There was no dispute that the issue of whether the matter should be referred to the Commission on Audit was not raised in the lower court, so that technically the respondent court should not have taken cognizance of the same. The Court nevertheless held that, considering that the issue of reference is a matter closely related to the determination of the question of how much is exactly due to petitioner, the court may consider the former issue for a just and complete resolution of the case. It added that the present case involves the disposition of public funds and calls for the performance of a constitutional duty of the Commission on Audit, which should not be defeated by mere technicalities of procedure.

• Entitlement to Payment: It was not disputed that petitioner is entitled to payment for the construction it made, which arose from a quasi-contractual relation created between petitioner and private respondent. The trial court had found, on the testimony of Engr. Angelito Gonzales, the plans (Exh. "C"), the photographs (Exhs. "N" to "N-3"), and the supplier's certification as to materials and price, that the fence had in fact been constructed for private respondent, while private respondent presented no evidence whatever despite the opportunities given to it.

• Basis of Recovery — Quantum Meruit: The question of whether petitioner should be paid based on quantum meruit was answered in the affirmative in Eslao, and the Court found no reason to depart from that ruling in view of the following circumstances: (a) the instant quasi-contract is neither fraudulent nor mala in se; (b) the project was already covered by a specific appropriation, in the amount of P313,325.28 for the reinforcement of the fence; (c) as in private contracts, the facts show that an implied obligation to pay would be imposed upon the government; (d) the property or benefit is not ultra vires, that is, it can be the proper subject of an express contract and is within the contractual powers of the public body; (e) the case falls within the exemption from the mandatory procedure of public bidding, which is dispensed with on the ground of public necessity or when time is of the essence, considering that the subject project was contiguous to an ongoing project performed by petitioner and there is no proof of any unsatisfactory performance or negative slippage; (f) the contractor substantially complied, being 95% complete, in good faith with its obligation, and no intentional departure from the specifications was alleged; (g) petitioner's claim is clearly supported by equity, private respondent reaping benefits from the fence and wire placed by petitioner; (h) there is no proof of any collusion among the parties involved; and (i) the payment is limited to the actual cost chargeable against funds authorized and certified for the purpose. Taken together, all these circumstances negate fraud and collusion.

• Referral to the Commission on Audit: The Solicitor General's argument, citing Eslao and Royal Trust, that the matter should be referred to the Commission on Audit was held to be without merit. Quantum meruit allows recovery of the reasonable value regardless of any agreement as to value, entitling the party to "as much as he, reasonably deserves," as distinguished from quantum valebant, or "as much as what is reasonably worth." Unliquidated claims present a justiciable question ripe for judicial determination which is beyond the powers of the Commission on Audit to adjudicate. Recovery based on quantum meruit is in the nature of such a claim because its settlement requires the application of judgment and discretion and cannot be adjusted by simple arithmetical processes. In Eslao and Royal Trust, the Court found it necessary to refer to the Commission on Audit the task of determining the total compensation due to the claimants considering that the matter of the exact amount was not at issue and the determination thereof involved a review of the factual findings and the evidence in support thereof. In this case, by contrast, the lower court had already made a factual finding on the amount reasonably due to petitioner and had scrutinized the evidence to sustain the claim. Nothing in the cited cases implies that only the Commission on Audit can determine the specific amount due to a contractor guided by the equitable principle of quantum meruit, and as our courts are both courts of law and equity, they are not powerless to determine a factual matter in accordance with both standards.

• Attorney's Fees: The award of attorney's fees is premised on the uncontroverted factual finding of the lower court, as affirmed by the respondent appellate court, that private respondent acted in bad faith in refusing payment to petitioner. Such factual findings are not only accorded great weight but finality as well, since they are supported by substantial evidence. No reason appeared in the case that would justify a departure from that doctrine.

• Quantum meruit — Quantum meruit allows recovery of the reasonable value of services rendered regardless of any agreement as to value; it entitles the party to "as much as he, reasonably deserves." The Court applied the principle to a contractor that had substantially completed 95% of a perimeter fence for a government agency under a quasi-contractual relation, holding that the absence of a written contract did not bar recovery of the reasonable value of the work actually performed and accepted.
• Quantum meruit distinguished from quantum valebant — Quantum meruit entitles a party to "as much as he, reasonably deserves," as distinguished from quantum valebant, which entitles him to "as much as what is reasonably worth." The distinction was drawn to characterize the measure of recovery in the absence of any agreement on value.
• Unliquidated claims are justiciable and beyond the adjudicatory power of the Commission on Audit — Unliquidated claims present a justiciable question ripe for judicial determination which is beyond the powers of the Commission on Audit to adjudicate. Recovery based on quantum meruit is in the nature of such a claim because its settlement requires the application of judgment and discretion and cannot be adjusted by simple arithmetical processes. The Court accordingly declined to refer the computation to the Commission on Audit where the trial court had already made a factual finding on the amount reasonably due.
• Raising an issue for the first time on appeal — Well-recognized jurisprudence precludes raising an issue only for the first time on appeal, as it would be offensive to the basic rules of fair play and justice to allow a party to raise a question not ventilated before the court a quo. The rule, however, yields where the issue is closely related to the determination of a question already before the court and necessary for a just and complete resolution of the case, and where the case involves the disposition of public funds and the constitutional duty of the Commission on Audit, which should not be defeated by mere technicalities of procedure.
• Finality of factual findings supported by substantial evidence — Factual findings of the lower court that are supported by substantial evidence are not only accorded great weight but finality as well. The Court applied this doctrine to sustain the award of attorney's fees, which rested on the uncontroverted finding that private respondent acted in bad faith in refusing payment for two years.
• Recovery on quasi-contract against the government and the exceptions to mandatory public bidding — Where a contractor renders services to a government agency without a written contract, an implied obligation to pay is imposed upon the government as in private contracts, provided the following circumstances concur: (a) the quasi-contract is neither fraudulent nor mala in se; (b) the project is covered by a specific appropriation; (c) an implied obligation to pay would be imposed upon the government; (d) the property or benefit is not ultra vires and is within the contractual powers of the public body; (e) the case falls within the exemptions from mandatory public bidding, namely, public necessity or urgency and the situation where time is of the essence, or where the subject project is adjacent or contiguous to an ongoing project that could be economically prosecuted by the same contractor at the same unit prices and contract conditions, less mobilization cost, provided the contractor has no negative slippage and has demonstrated satisfactory performance; (f) the contractor substantially complied in good faith with its obligation and no intentional departure from the specifications is alleged; (g) the claim is clearly supported by equity; (h) there is no proof of collusion among the parties; and (i) payment is limited to the actual cost chargeable against funds authorized and certified for the purpose. All these circumstances, taken together, negate fraud and collusion.

• "Well-recognized jurisprudence precludes raising an issue only for the first time on appeal, as it would be offensive to the basic rules of fair play and justice to allow private respondent to raise a question not ventilated before the court a quo." — This states the general procedural rule that the Court acknowledged the Court of Appeals had technically violated, before holding that the closely related issue of referral to the Commission on Audit could nonetheless be considered for a just and complete resolution of the case.
• "Quantum meruit allows recovery of the reasonable value regardless of any agreement as to value. It entitles the party to 'as much as he, reasonably deserves,' as distinguished from quantum valebant or to 'as much as what is reasonably worth.'" — This is the Court's canonical formulation of the measure of recovery applied to the contractor's claim, and the source of the frequently cited distinction between quantum meruit and quantum valebant.
• "Unliquidated claims present a justiciable question ripe for judicial determination which is beyond the powers of the COA to adjudicate." — This is the ratio decidendi on the jurisdictional question, explaining why the trial court's factual determination of the amount due need not be referred to the Commission on Audit.
• "As our courts are both courts of law and equity, they are not powerless to determine a factual matter in accordance with both standards." — This passage articulates the equitable foundation for judicial determination of the amount due under quantum meruit, and is the Court's answer to the argument that only the Commission on Audit may fix the contractor's compensation.

• Eslao vs. Commission on Audit, 195 SCRA 730 (1991) — The controlling precedent on the availability of quantum meruit as the measure of recovery for a contractor who has rendered services to the government without a written contract; the Court followed its ruling on entitlement but distinguished it on the question of referral to the Commission on Audit, holding that referral was unnecessary where the trial court had already made a factual finding on the amount reasonably due.
• Royal Trust Co. vs. COA, G.R. No. 84202, November 23, 1988 — Cited by private respondent and the Solicitor General, together with Eslao, as authority for referring the computation of the amount due to the Commission on Audit; distinguished on the ground that in that case the exact amount was not at issue and its determination required a review of factual findings and supporting evidence.
• Garrido vs. CA, 236 SCRA 450 (1994) — Cited as authority that a court may consider an issue raised for the first time on appeal where it is closely related to the question already before the court and necessary for a just and complete resolution of the case.
• Manila Bay Club vs. CA, [resolution] 249 SCRA 303 (1995) — Cited for the rule precluding the raising of an issue for the first time on appeal.
• Phil. Operations, Inc. vs. Auditor-General, 94 Phil. 868 (1954) — Cited for the proposition that unliquidated claims present a justiciable question ripe for judicial determination beyond the powers of the Commission on Audit to adjudicate.
• Rivera vs. Municipality of Malolos, 102 Phil. 285, 291 (1957) — Cited in support of the circumstances negating fraud and collusion in the award of a contract to a contractor who has rendered services to a government entity.
• Far East Bank vs. CA, G.R. No. 123569, April 1, 1996 — Cited, together with other cases, for the doctrine that factual findings supported by substantial evidence are accorded great weight and finality, which sustained the award of attorney's fees.

• Section 9, B.P. 132 (Public Works Appropriations Act) — Provides that, pursuant to the general policy of undertaking projects by contract after public bidding, no project covered by appropriations in the Act shall be prosecuted by negotiated contract except, among others, in case of urgent necessity or emergency or danger to life and property, provided that no negative slippage exceeding ten per centum (10%) is incurred by the contractor in any of his ongoing projects and that the additional work is within his contracting capabilities. The Court relied on this provision in holding that the project fell within the exemption from mandatory public bidding on the ground of public necessity.
• Section 4, P.D. 1594, as amended — Provides that construction projects shall generally be undertaken by contract after competitive public bidding, and that projects may be undertaken by administration, force account, or negotiated contract only in exceptional cases where time is of the essence, or where there is a lack of qualified bidders or contractors, or where there is conclusive evidence that greater economy and efficiency would be achieved through such an arrangement. The Court cited this provision in finding that the urgency of the fence construction brought the case within the exception.
• IB 10.4.2, Implementing Rules and Regulations of P.D. 1594, as amended — Provides that a negotiated contract may be entered into where the subject project is adjacent or contiguous to an ongoing project and could be economically prosecuted by the same contractor, in which case direct negotiation may be undertaken with the said contractor at the same unit prices and contract conditions, less mobilization cost, provided that he has no negative slippage and has demonstrated a satisfactory performance. The Court cited this provision in finding that the subject project was contiguous to an ongoing project performed by petitioner and that there was no proof of unsatisfactory performance or negative slippage.

Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.