MUNICIPALITY OF HAGONOY vs. DUMDUM, JR.

G.R. No. 168289

March 22, 2010,
Peralta, J:

FACTS: A complaint was filed by Lim Chao against the Municipality of Hagonoy, Bulacan for collection of sum of
money and damages. The complaint alleged that a contract was entered into by Lim Chao and the Municipality for
the delivery of motor vehicles, which supposedly were needed to carry out certain developmental undertakings in
the municipality. Lim Chao then delivered to the Municipality of Hagonoy 21 motor vehicles amounting to P5,
820,000.00. However, despite having made several deliveries, the Municipality allegedly did not heed Lim Chao’s
claim for payment. Thus, she filed a complaint for full payment of the said amount, with interest and damages and
prayed for the issuance of a writ of preliminary attachment against the Municipality. The trial court issued the Writ
of Preliminary Attachment directing the sheriff "to attach the estate, real and personal properties" of the
Municipality.

The Municipality filed a Motion to Dismiss on the ground that the claim on which the action had been
brought was unenforceable under the statute of frauds, pointing out that there was no written contract or document
that would evince the supposed agreement they entered into with respondent. It also filed a Motion to dissolve
and/or Discharge the Writ of Preliminary Attachment already issued, invoking, among others, immunity of the state
from suit. The Municipality argued that as a municipal corporation, it is immune from suit, and that its properties
are by law exempt from execution and garnishment. Lim Chao on her part, counters that, the Municipality’s claim
of immunity from suit is negated by the Local Government Code, which vests municipal corporations with the power
to sue and be sued. The Court of Appeals affirmed the trial court’s order.

ISSUE: Whether the issuance of the Writ of Preliminary Attachment against the Municipality of Hagonoy is valid.

HELD: No. The universal rule is that where the State gives its consent to be sued by private parties either by general
or special law, it may limit claimant’s action "only up to the completion of proceedings anterior to the stage of
execution" and that the power of the Courts ends when the judgment is rendered. Since government funds and
properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must be covered by the corresponding appropriations
as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific objects.
DEPARTMENT OF HEALTH VS. CANCHELA
G.R. Nos. 151373-74
November 17, 2005
CARPIO-MORALES, J.:

FACTS: The DOH entered into three owner –consultant agreements with the private respondents covering
infrastructure projects for the Baguio General Hospital and Medical Center (BGHMC), the Batangas Regional Hospital
and the Corazon L. Montelibano Memorial regional Hospital in Bacolod City.

The agreements for the three (3) projects are almost identical. This requires the private respondents to
prepare: detailed architectural and engineering design plans; technical specifications and detailed estimates of cost
of construction of the hospital, including the preparation of bid documents and requirements; and construction
supervision until completion of hand-over and issuance of final certificate.

While the Agreements were witnessed by the respective Chief Accountants of the hospitals and were duly
approved by the Department of Health, the former did not issue corresponding certificates of availability of funds
to cover the professional or consultancy fees.

The DOH through is authorized representative, wrote separate letters to the respective chiefs of hospitals
confirming the acceptance of private respondents’ complete Contract or Bid Documents for each project and
RECOMMENDED THE PAYMENT OF 7.5% OF THE PROJECT ALLOCATION TO PRIVATE RESPONDENTS AS
CONSULTANCY FEES.

During the construction of the projects, various deficiencies in the performance of the agreed scope of
private respondents’ work were allegedly discovered which were not communicated to the private respondents.
Due to such alleged deficiencies, petitioner withheld payment of the consultancy fees due to private respondent.
Neither did petitioner return the documents, plans, specifications and estimates submitted by private respondents.

Considering the refusal of the DOH to pay said fees despite repeated demands, the private respondents
submitted the dispute to the Construction Industry Arbitration Commission (CIAC).

After the presentation of evidence by both parties, the Arbitrator issued his decision dated March 30, 1999
sentencing the DOH to pay the private respondents to pay P3, 492,713.00 for services performed and completed for
and accepted by DOH. The said amount shall earn interest at 6% per annum from the date of the award until the
decision becomes final. Thereafter, the principal and the interest accrued as of such time shall earn interest at 12%
per annum.

The DOH filed a Petition for Review under Rule 43 before the Court of Appeals but was dismissed for being
filed out of time. As such, on motion of the private respondents, the Arbitrator issued a Writ of Execution.

ISSUE: Whether the CIAC has jurisdiction to entertain the suit considering that the Agreements, being to promote
the health and well-being of the citizens, is in furtherance of the state’s sovereign and governmental power and
therefore, IMMUNE FROM SUIT.

HELD: In their Memorandum before the Supreme Court, the DOH, for the first time, raised the nullity of the three
(3) agreements from the very beginning for failure to include therein a certification of availability of funds which is
required under existing laws, particularly the Auditing Code of the Philippines, PD 1445. As such, the fees of the
private respondents shall not be based on the project fund allocation but on the basis of reasonable value or on the
principle of quantum merit.
 While the agreement is indeed void ab initio for violation of existing laws, the DOH is liable to pay the
private respondents their consultancy services based on quantum merit to be determined by the Commission on
Audit.

The invocation of immunity from suit is without merit. This is so because the government has already
received and accepted the benefits rendered. To refuse payment as a result of the state’s immunity from suit would
be to allow the government to unjustly enrich itself at the expense of another. (Citing Eslao vs. COA, 195 SCRA 730)