REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner, vs. CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent.; G.R. No. 158253 March 2, 2007

TOPIC:

UNJUST ENRICHMENT

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

The same applies to GOVERNMENT.

Nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of another’s injury) 

RATIONALE / GIST:

Article 22, NCC was formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice. The rules thereon apply equally well to the Government. Since respondent had rendered services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust enrichment is not allowed by law.             In this case, the respondent undertook works for the government, made advances for the purchase of materials and payment for labor costs. The State however refused to pay on the ground that it had an expired license at the time of the execution of the contract. Despite the same, it is entitled to be paid for completed projects.

FACTS:

1. Pampanga District Engineer issued and duly published an "Invitation to Bid" dated  January 27, 1992.

2. Respondent CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, was pre-qualified and won the bid over 2 other contractors for submitting the lowest bid.

3. Contract involves concreting of Sitio 5 Bahay Pare. The Contract Agreement was executed between respondent and petitioner on November 4, 1992.

4. Notice to Proceed was issued by District Engineer Rafael S. Ponio on  September 25, 1992. Accordingly, respondent undertook the works, made advances for the purchase of the materials and payment for labor costs.

5. October 29, 1992,  the Office of the District Engineer issued Certificates of Final Inspection and Final Acceptance after the project was found to be 100% completed in accordance with the approved plans and specifications.

6. Thereafter, respondent requested for payment. DPWH prepared the Disbursement Voucher for the petitioner. However, the payment was withheld after COA disappoved the release of funds on the ground that the contractor's license of respondent had expired at the time of the execution of contract. 

7. In a July 04, 1994 Letter, the District Engineer requested clarification from DPWH Legal Department on whether Carwin construction should be paid for works accomplished despite the expired licensed.

8. Legal Department Director Mejia recommended that payment should be made to Carwin Constrction and reiterated that since RA 4566 (Contractor's License Law) does not provide that a contract entered into after the license has expired is void and there is no law which expressly prohibits or declares void such contract, the contract is enforceable and payment may be paid, without prejudice to any appropriate administrative liability action that may be imposed on the contractor and the government officials or employees concerned.

9. Despite the recommendation, no payment was made.

10. Respondent filed the complaint for Specific Performance and Damages against petitioner before the RTC.

11. Petitioner, thru OSG filed a motion to dismiss on the ground that there is no cause of action and the RTC had no jurisdiction.

11. RTC favored respondent and ordered he be paid P457,000.00 plus 12% interest from demand until fully paid.

12. Herein Plaintiff appealed. CA the decision is affirmed with a modification of interest from 12% to 6 % per annum computed from June 21, 1995.

ISSUE:

W/N the payment for services rendered in accordance with a contract entered into by a contractor with an expired license is demandable. 

HELD:

YES. Contracts entered into under such circumstances are still considered VALID. Thus, the payment for services rendered by a contractor with an expired license is still demandable.

R.A. No. 4566 (Contractors' License Law) SEC. 35. explicitly provides:

Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied)

The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void contracts entered into by a contractor whose license had already expired. Still, such contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for the projects he completed. Such payment, however, is without prejudice to the payment of the fine prescribed under the law.

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as "basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice." The rules thereon apply equally well to the Government. Since respondent had rendered services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust enrichment is not allowed by law.