SC: DPWH must pay firm P5.36M for rehab work

Inquirer file photo

MANILA, Philippines — The Supreme Court has upheld a Court of Appeals decision ordering the Department of Public Works and Highways (DPWH) to pay P5.36 million to a construction company for a rehabilitation project following the eruption of Mt. Pinatubo in 1991.

In a 12-page ruling dated Feb. 12 but made public only recently, the high tribunal’s Second Division rejected the DPWH petition challenging the appellate court’s 2019 ruling and resolution, which required the department to compensate A.D. Gonzales Jr. Construction and Trading Co. Inc. P5.36 million.

The high court also affirmed the imposition of a 6 percent annual interest on the unpaid amount as ordered by a regional trial court (RTC) in San Fernando, Pampanga, on July 17, 2014, until full compensation was made.

Unjust enrichment

“Gonzales Construction should be paid what is due to them; otherwise, this would amount to unjust enrichment to the State at the expense of Gonzales Construction, which this Court cannot countenance,” the Supreme Court said in its decision on G.R. No. 250296, penned by Associate Justice Antonio Kho Jr.

The case was based on the construction firm’s complaint over two contracts it entered into with the DPWH: one for the rehabilitation of the Gumain-Porac Division Channel for P2.7 million and another for the Abacan River cut-off channel in Manggahan Sto. Rosario, Mexico, Pampanga, worth P8.17 million.

Court records showed that after the Mt. Pinatubo eruption in 1991, there was a need to build a cut-off channel at the Abacan River, one of Pampanga’s major waterways that was affected by heavy lahar flow and monsoon rains. To prevent deaths and property damage, the DPWH created a new waterway to manage lahar flow to the Sapang Barangay Guinto area.

Work nearly done

In response to the complaint, the DPWH argued that the contracts were invalid because there was no certification that funds had been properly allocated, as required by Presidential Decree No. 1445, and because the contracts were unsigned by its regional director or the DPWH secretary.

The San Fernando, Pampanga RTC, however, sided with the complainant in 2014 and ordered the DPWH to pay it P5.36 million for the Abacan project, noting that a partial payment of P1.968 million had been made and that 90.61 percent of the work required was completed.

The RTC said the DPWH could not claim noncompliance with funding requirements because higher authorities had ordered the emergency construction of the project without the usual paperwork due to the eruption.

But it ruled that no payment was due for the Gumain project, as there was no evidence of work completed.

In 2019, the appellate court upheld the RTC decision but removed the award for attorney’s fees and costs. It also added an interest rate of 6 percent per annum from the decision’s finality until full payment.

The appeals court cited in its decision the principle of quantum merit, asserting that the government cannot unjustly deny what it owes to contractors after benefiting from their work.