THE MUNICIPALITY OF HAGONOY, BULACAN vs. JUDGE SIMEON P. DUMDUM, JR.

G.R. No. 168289 March 22, 2010

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 Chaos 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 Municipalitys 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 courts order.

ISSUE: W/N 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 claimants 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 AND ASSOCIATES

G.R. Nos. 151373-74 November 17, 2005

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 or not 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 states 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 meruit.
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 meruit 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 states
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)
In light of the foregoing discussions, addressing the question of jurisdiction and other collateral
issues raised in the petition is rendered unnecessary.