G.R. No. L-17908 - GPPB

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The second cause of action is against the Associated Insurance Company, Inc., by virtue of asurety bond posted by it together with the contractor as co-principal, to guarantee payment ofwages of laborers in the construction of the National Orthopedic Hospital.The third cause of action is against herein petitioners Buendia, Ignacio and Ilustre, seeking tohold them solidarily liable with the other defendants on the ground that they opposed paymentto the plaintiffs from the redemption fund withheld by the Bureau of Public Works precisely toanswer for unpaid wages of laborers according to the contract with Juan Sumerariz. It is alsoalleged that these defendants, now petitioners, were negligent in approving the surety bondreferred to in the second cause of action, which bond, according to the Associated InsuranceCo., Inc. was not binding upon it because it had been signed without authority by its supposedagent, the Royal Underwriters Co., Inc..The prayer in all the three causes of action is that all the defendants be ordered, jointly andseverally, to pay plaintiffs the sum of P16,382.36, plus 15% thereof as attorney's fees, andcosts.In his answer to the complaint Sumerariz admitted some allegations and denied others, and atthe same time filed a cross-claim against defendants Julian A. Buendia, Jose Ignacio andFederico Ilustre, now petitioners, alleging in substance that the contract for the construction ofthe National Orthopedic Hospital in Quezon City was for the price of P1,183,290.00, the work tobe done within 400 calendar days, excluding Sundays and holidays; that the cross-claimantstarted to work on the project and was ahead of schedule when, in March 1957, the said crossdefendants,as Director, Project Engineering and Constructing Architect, respectively, of theBureau of Public Works, started harassing him by arbitrary and unreasonable actions (specifiedin the cross-claim) calculated to impede him from fulfillment the contract; that on June 14,1957, upon their recommendation the Secretary of Public Works, who was thereafter made aparty in the amended cross-claim, rescinded the construction contract; that in making suchrecommendation the cross-defendants acted arbitrarily, with grave abuse and against the law,and in violation of the contract with the cross-claimant; that as a result he suffered actualdamages in the sum of P244,132.68 and loss of expected profits in the sum of P148,329.00; andthat because of the refusal of the cross-defendants to pay the plaintiffs' claim for unpaid wagesout of the retention fund withheld by the Bureau of Public Works the cross-claimant also stoodto suffer damages in the amount of such claim.To the cross-claim herein petitioners filed their answer. Thereafter they moved to dismiss boththe complaint and the cross-claim against them on two grounds: (1) that the said complaint andcross-claim do not state a cause of action; and (2) that the Court of First Instance of Manila isnot the court of proper venue. Opposition to the motion was filed by the plaintiffs, after whichthe motion to dismiss was denied for lack of merit, as was also the motion for reconsiderationsubsequently presented.In the instant petition for prohibition it is contended by petitioners that the complaint andcross-claim do not state facts sufficient to constitute a cause of action in view of Section 52 of
the "General Conditions" in the contract for the construction of the National OrthopedicHospital, which reads as follows:. . . In the event that the total expenditures of the Government on completion of thework, including all charges against the project prior to the recission of the contract arenot in excess of the contract price, then the difference between the said totalexpenditures of the Government and the contract price may be applied to settle claimsfiled under paragraph thirty seven (37), and the balance if any may be paid to thecontractor, but no amount in excess of the combined value of the unpaid completedwork, retained percentage and usable materials taken over by the Government at thetime of the rescission of the contract shall be so paid, nor shall any claim for prospectiveprofits on the work done after rescission of the contract, be considered or allowed.Under the foregoing stipulation, it is argued, no action on the contract may be commenceduntil after the construction is completed. It is doubtful, at least, whether or not the claims oflaborers for unpaid wages, directed against the retention fund in the hands of the defendantPublic Works officials, are within the contemplation of the stipulation of the contractaforequoted. This stipulation refers to the final liquidation between the Government and thecontractor — assuming that the contract has been rescinded — but does not prohibit paymentof laborers' claims for wages in the meantime, especially where, as in this case, such claimshave already been adjudicated favorably by Regional Office <strong>No</strong>. 3 of the Department of Labor.In any event, as far as the complaint against herein petitioners is concerned the grounds reliedupon in their motion to dismiss is at best, not indubitable. The order denying such motion ismerely interlocutory, and unless it constituted clearly a grave abuse of discretion or was issuedwithout or in excess of jurisdiction the error, if any, should be corrected by appeal in due time,after trial and judgment on the merits, and not by the extraordinary writ of prohibition.The same observation holds true concerning the cross-claim of respondent Sumerariz, which isfor damages allegedly suffered by him as a result of the unjustified rescission of the contract bypetitioners. If there is any liability at all for such damages on the part of herein petitioners, thedetermination thereof need not await the completion of the construction project.The second ground for the petition has reference to the venue of the action, which according topetitioners should be in Quezon City in view of section 1 of Act <strong>No</strong>. 3688 entitled "An Act forthe Protection of Persons Furnishing Materials and Labor for the Construction of Public Works,"which states as follows:. . . If no suit should be brought by the Government of the Philippines Islands within six monthsfrom the completion and final settlement of said contract, or if the Government expresslywaives its right to institute action on the penal bond, then the person or persons supplying thecontractor with labor and materials shall, upon application therefor, and furnishing affidavits tothe department under the direction of which said work has been prosecuted, that labor ormaterials for prosecution of such work have been supplied by him or them, and payment forwhich has not bee made, be furnished with a certified copy of said contract and bond, upon
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G.R. No. L-17908 - GPPB

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