CITY OF QUEZON, petitioner vs.

LEXBER INCORPORATED, respondent

G.R. No. 141616, March 15, 2001
FACTS :
LEXBER INC. owned a parcel of land of 26,010 sq.m. located in
Antipolo. It was offered and persuaded to have it used as a garbage dumping site
by Quezon City and other Metro Manila Cities or municipalities authorized by the
latter for 5 years from Jan.1991 to Dec. 1995.
August 27, 1990 a Tri-Partite MOA was drawn among Quezon City,
represented by Mayor Brigido Simon, Jr., Lexber Inc. and Mun. of Antipolo. Part of
the Agreement was that Lexber Inc. shall be hired as the exclusive supplier of
manpower, heavy equipment and engineering services for the dumpsite and shall
also have the right of furst refusal for con tracting such services.
September 10, 1990 first negotiated contract between Quezon City
represented by Mayor Simon and Lexber Inc. for Lexber to construct the necessary
infrastructure at the dumpsite, designated as the Q.C. Sanitary Landfill for a
contract price of P4,381,069.00. Construction of said infrastructure was completed
on November 25, 1991 and contract price was paid by Q.C.
November 8, 1990, second negotiated contract was entered into between
Lexber and Q.C. where it was agreed that Lexber shall provided maintenance
services in the form of manpower, equipment and engineering operations for the
dumpsite for P1,536,796.00 monthly. It was also agreed that Q.C. shall pay Lebster
a reduced fee of 50% of the monthly con tract price or P768,493 if Q,C. fails to
dump the agreed volume of 54,000 cu.m. of garbage fcor any given month.
December 11, 1991 Lexber was notified to commence maintenance and
dumping operations at the site starting on Dec. 15, 1991 by Q.C. thru the City
Engineer Alfredo Macapugay, Proj. Manager Rene Lazaro, and Mayor Simon.
Q.C. immediately commenced dumping garbage on the landfill site
continuously from December 1991 until May 1992. Thereafter, it ceased to dump
garbage on the site without notice to Lexber. Lexber claimed that even if the
dumpsite remain unused, it was entitled to payment for its services as stipulated in
the second negotiated contract.
December 12, 1992 Lexbers counsel sent a demand letter to Q.C.
demanding payment of at least 50% of its services under the said contact
amounting to P9,989,174.00. Because of the idle state of the dumpsite for more
than a year, Lexber also sought a clarification from Q.C. regarding its intention on
the dumpsite project, considering the waste of equipment and manpower in the
meantime, and its loss of opportunity for the property.
`This time, Q.C. is acting thru Mayor Ismael Mathay, Jr. who succeeded Mayor
Simon in the interim, denied any liability under the contract on the ground that it
was invalid and unenforceable. Accordidng to Mayor Mathay, the contract was
signed only by Mayor Simon and was not approved nor ratified by the City Council
and it lacked the required budget appropriation.
Feb. 21, 1994, Lexber filed a complaint for Breach of Contract, Specific
Performance or Rescission of Contract and Damages against Q.C. at the Q.C. RTC
Jan. 26, 1998 RTC rendered judgment in favor of Lexber ordering Q.C . to pay
P768,493 per month starting Dec. 15, 1991 until Dec. 15, 1995 with legal interest
starting Dec. 16, 1992 until Q.C. finally pays the entire amount. and ordering
defendant Q.C. to pay costs of suit.

Q.C. appealed to the C.A. but it affirmed the RTC decision in toto. Its Motion
for Reconsideration was also denied.
Jan. 26, 2000 Q.C. petitioned the Supreme Court for review on certiorari
assailing the Oct. 18, 1999 decision of the C.A.
ISSUES :
1. Was the second negotiated contract null and void ab initio because its
execution was done in violation of existing laws, more particularly Sections
85, 86 and 87 of P.D. 1445 and Section 177(b) of B.P. 337?
2. Do subsequent acts of Q.C. petitioner constituted a ratification of the subject
negotiated contract notwithstanding the lack of appropriation?
RULING :
1. The very same P.D. 1445 which is the cornerstone of petitioners arguments
does not provide that the absence of an appropriation law ipso facto makes a
contract entered into by a local government unit null and void. Section 84 of
the statute specifically provides: Revenue funds shall not be paid out of any
public treasury or depository except in pursuance of an appropriation law or
other specific statutory authority. (underscoring ours)
Consequently, public funds may be disbursed not only pursuant to an
appropriation law, but also in pursuance of other specific authority, i.e.,
section 84 of PD 1445. Thus, when a contract is entered into by a city mayor
pursuant to specific statutory authority, the law, i.e., PD 1445 allows the
disbursement of funds from any public treasury or depository therefor. It can
thus be plainly seen that the law invoked by petitioner QUEZON City itself
provides that an appropriation law is not the only authority upon which public
funds shall be disbursed.
Furthermore, then Mayor Simon did not enter into the subject contract
without legal authority. He was so authorized under BP 337, the Local
Government Code of 1993. We note that while the subsequent Local
government Code of 1991, which took effect after the execution of the
subject contract, provides that the mayuaors representation must be upon
authority of the sangguniang panlungsod or pursuant to law or ordinance,
there was no such qualification under the old code. `
Therefore, we find no cogent reason to disturb the conclusions of the trial
court as affirmed by the Court of Appeals in this regard. It is clear that the
second negotiated contract was entered in to Mayor Brigido Simon, Jr.
pursuant to law or specific statutory authority as required by P.D. No. 1445.
There is also no merit in petitioners claim that there was no appropriation
therefor, for it is evident that even as early as April 4, 1991, funds which were
certified to as available had been allocated for use in the first few months
operation of the sanitary landfill. The problem arose only because the new
administration unjustifiably refused to abide by the stipulations in the second
negotiated contract. hence, petitioners arguments on this issue fail to
convince this Court that the second negotiated contract was null and void ab
initio for lack of prior appropriation or authority on the part of Mayor Brigido
Simon, Jr.
2. When appellant City government after the construction by the appellee of
the dumpsite structure in accordance with the contract plans and
specifications started to dump garbage collected in the City and

consequently paid the appellee for the services rendered, such acts produce
and constitute a ratification and approval of the negotiated contract and
necessarily should imply its waiver of the right to assail the contracts
enforceability.
Be that as it may, it cannot be denied that there was constructive ratification
on the part of petitioner.
The records also reveal that petitioner issued Disbursement Vouchers of
various amounts covering the period between March 1, 1992 to April 30,
1992 for the services rendered by the Mud Regal Group Inc. to haul garbage
to the sanitary landfill. The said disbursement vouchers were passed in audit
and duly approved and paid by petitioner. These are facts and circumstances
on record which led the trial court, the appellate court and this Court to affirm
the conclusion that petitioner had actually ratified the subject contract.