Razalan v. Commission on Audit

EN BANC

[G.R. No. 255366. November 9, 2021.]

TITO G. RAZALAN, petitioner,vs. COMMISSION ON AUDIT REPRESENTED BY THE FOLLOWING: HON. MICHAEL G. AGUINALDO-CHAIRMAN, HON. JOSE A. FABIA-COMMISSIONER; ET AL., respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution datedNOVEMBER 9, 2021, which reads as follows:

"G.R. No. 255366 (Tito G. Razalan v. Commission on Audit Represented by the following: Hon. Michael G. Aguinaldo-Chairman, Hon. Jose A. Fabia-Commissioner; et al.)

RESOLUTION

The Case

This petition for certiorari assails the following dispositions of the Commission on Audit (COA), viz.:

1. Decision No. 2018-212 1 dated January 31, 2018, affirming the Notice of Disallowance (ND) No. 12-001-101 (09) (10), dated September 18, 2012, against the amount of P23,048,230.15, representing the construction cost for the Mayantoc Memorial Park Project; and

2. Resolution2 dated January 31, 2020, denying reconsideration of Decision No. 2018-212.

Antecedents

Acting on the request of Avelino E. Pobre, then a Member of the Sangguniang Bayan (SB) of Mayantoc, Tarlac, COA Audit Team Leader (ATL) Jean M. Daliva and Supervising Auditor (SA) Lualhati C. Abesamis did a comprehensive audit of the Mayantoc Memorial Park Project 3 and consequently came out with their Audit Observation Memorandum (AOM) No. 2011-01 (2010) dated January 11, 2011, noting that: (1) the procurement process was tainted by several deficiencies in violation of Republic Act No. 9184 (RA 9184), the Government Procurement Reform Act, and its Implementing Rules and Regulations (IRR); (2) the required documents for payment of the project cost were incomplete in violation of Section 4 (6) of Presidential Decree No. 1445 (PD 1445); (3) the Mayantoc Memorial Park Project is inoperational and poorly maintained; (4) the municipal engineer did not submit to the COA Technical Information Service the required documents for evaluation and inspection of the project; (5) the Disbursement Vouchers (DVs) for the first and final payments were not submitted to COA for pre-audit in violation of COA Circular No. 2009-006; (6) the DVs for all the payments did not bear the signature of the accountant, aside from the fact that the DVs for the second and final payments also lacked the treasurer's signature; (7) as-built plan for 100% completion was not submitted to the municipality despite full payment of the project; and (8) the warranty security was only 10% of the contract price in violation of RA 9184 and Section 4 of PD 1445.

Consequently, on January 20, 2012, the ATL issued Notice of Suspension (NS) No. 12-001-(10) on the payment to JQG Construction and Supply of P23,048,230.15 representing the cost of construction for the 2009 Mayantoc Memorial Park Project. 4

After the lapse of ninety (90) days and without receiving any explanation from the concerned public officers, the ATL and the SA issued ND No. 12-001-101 (09) (10) 5 dated September 18, 2012, due to (1) non-submission of pertinent documents in relation to the Mayantoc Memorial Park project, (2) non-submission for pre-audit of the final payment of the contract cost in violation of COA Circular No. 2009-002 dated May 18, 2009, and (3) violations of RA 9184 and its IRR, particularly:

a. Section 20.1, IRR of RA 9184 (no pre-procurement conference held);

b. Section 21.1, IRR of RA 9184 (non-posting of the Invitation to Bid (ITB) in the Philippine Government Electronic Procurement System (PHILGEPS) website and in conspicuous places of the municipality for seven (7) calendar days, and non-issuance of certification of the BAC Secretariat to that effect);

c. Section 17.4, IRR of RA 9184 (non-payment of bidding documents by the participating bidders);

d. Section 13, IRR of RA 9184 (failure to invite non-government organization and private groups belonging to sectors or discipline relevant to the subject procurement as observers); and

e. Sections 39.2 and 62.2.3.3, IRR of RA 9184 (underpayment of performance and warranty securities as the winning bidder only paid 10% instead of 30% of the contract price). 6

Then Mayantoc Mayor Tito G. Razalan (Razalan) and Bids and Awards Committee (BAC) members Rodolfo Corpuz, Nilda L. Salazar (Salazar), Florence B. Bueno, Marilene S. Bedania, and Juan M. Bala were held liable for their respective participations in the transaction: 7

 

Name	Position/Designation	Nature of Participation
Tito G. Razalan	Former Mayor/Head of the Procuring Entity (HOPE)	For approving the pertinent Disbursement Vouchers (DV)
Rodolfo Corpuz	Former Municipal Engineer/BAC Chairman	For declaring JQG Construction and Supply as the Lowest Calculated and Responsive Bidder (LCRB) for the construction of Mayantoc Memorial Park despite the noted deficiencies
Nilda L. Salazar	Municipal Treasurer/BAC Member
Florence B. Bueno	Municipal Budget Officer/BAC Member
Marilene S. Bedania	Municipal Administrative Officer II/BAC
Juan M. Bala	Municipal Agriculturist (retired)/BAC Member

 

On March 15, 2013, Razalan and the BAC separately filed their appeals before the COA Regional Office No. III (RO III).

Ruling of the COA-Regional Office No. III

By Decision No. 2014-36 8 dated May 16, 2014, Ma. Mileguas N. Leyno, COA Regional Director (RD) for RO III, affirmed. She ruled that although Razalan and the BAC belatedly submitted documents to refute the ND, the noted deficiencies in the documents still existed per evaluation of the COA RO III Technical and Information Technology Services. 9

She also cited the report of the COA Fraud Audit Office which further affirmed the adverse findings of her audit team, and recommended the indictment of Razalan and the BAC members for violation of Republic Act No. 3019 and RA 9184. 10

Consequently, Razalan and the BAC jointly filed a Petition for Review on Certiorari with the COA Proper on July 3, 2014.

Ruling of the COA Proper

Under Decision No. 2018-212 11 dated January 31, 2018, the COA Proper likewise affirmed. It ruled that due to incomplete documentation, the COA audit team was deprived of making a complete determination and evaluation of the propriety and cost reasonableness of the subject transaction. Razalan and the BAC members also failed to comply with COA Circular No. 2009-001 dated February 12, 2009, requiring them to furnish the COA with a copy of the perfected contract and purchase order within five (5) days from its approval, together with all the supporting documents. 12

The COA Proper likewise found that the BAC members were remiss in their duty to verify the Approved Budget of the Contract (ABC) and how the costing was arrived at. Too, they failed to ensure compliance by the procuring entity with the procurement laws and rules. 13

As for Razalan, he was found liable for approving payment for the project despite incomplete supporting documents and notwithstanding that the transaction was entered into in violation of the procurement laws and rules and regulations. Being the head of the procuring agency, he failed to properly manage the resources of the municipality in violation of Sections 2 and 4 (4) of PD 1445. 14

Razalan received a copy of the COA Decision on February 4, 2019, and BAC member Salazar, on February 18, 2019. They filed their respective motions for reconsideration on February 26, 2019, and March 5, 2019. 15

On January 31, 2020, the COA Proper denied the twin motions for reconsideration and affirmed with finality the COA Decision No. 2018-212 dated January 31, 2018. 16 It reiterated that Razalan was negligent in the discharge of his duty as HOPE when he approved and signed the procurement documents despite non-compliance with the posting requirement of the bidding opportunity under Sec. 21.2.1 of the IRR of RA 9184. Too, he signed the disbursement vouchers even in the absence of the certification of the municipal accountant on the completeness of supporting documents. He cannot rely on Arias v. Sandiganbayan17 (Arias) to escape liability since the acts he committed were discretionary and not simply ministerial.

As for Salazar, the COA ruled she should be held liable for the failure of the BAC to comply with the PHILGEPS posting requirement under Sections 8 and 21 of RA 9184. Delegating this task to the BAC Secretariat did not excuse the BAC from liability.

Only Razalan now seeks affirmative relief from the Court.

The Present Petition

He charges the COA Proper with grave abuse of discretion for disallowing the payment of the construction cost for the Mayantoc Memorial Park Project despite its completion and acceptance; and most especially its beneficial use and enjoyment by the municipality and its constituents. 18

He asserts that based on the Arias doctrine, he should not be held liable for approving the questioned DVs and check since the same had already been thoroughly scrutinized by the municipal treasurer, municipal accountant, municipal engineer, and the BAC itself, respectively. Besides, just because he was the HOPE did not automatically make him liable for the disallowed amount. 19

Too, citing Joson v. COA, 20 he insists that the beneficial use and enjoyment which the municipality and its constituents derive from the Mayantoc Memorial Park Project should altogether absolve him from any liability.

In its Comment, the Office of the Solicitor General (OSG) seeks to dismiss the petition for having been filed out of time and in view of its failure to show that the assailed COA decision and resolution are tainted with grave abuse of discretion. COA has aptly demonstrated that Razalan was grossly negligent in discharging his functions as the HOPE when he signed the DVs even though there was no certification from the municipal accountant that the supporting documents were complete. 21 He cannot invoke good faith because again as the HOPE, he is presumed to be acquainted with — and, in fact, duty-bound — to have full knowledge of the rules and regulations governing the local government's procurement activities. 22 Lastly, the subject disallowance and his consequent liability cannot be outweighed by the concept of unjust enrichment vis-à-vis the beneficial use and enjoyment being derived by the municipality and its residents from the Mayantoc Memorial Park Project. 23

Issues

I

Was the petition timely filed?

II

Did the COA commit grave abuse of discretion in finding Razalan liable for the disallowed transaction?

Ruling

The petition was filed out of time.

Section 3 of Rule 64 of the Rules of Court provides:

Section 3. Time to file petition. — The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial.

Accordingly, a petition for certiorari shall be filed within thirty (30) days reckoned from notice of the COA judgment or final order or resolution sought to be reviewed with the intervening period used for the resolution of a motion for reconsideration to be deducted from the 30-day period. 24

Here, Razalan himself admitted that he received the assailed COA Decision on February 4, 2019. He moved for its reconsideration on February 26, 2019 or twenty-two (22) days later. When he received a copy of the assailed COA Resolution denying his motion for reconsideration on January 23, 2021, he only had eight (8) days remaining or until January 31, 2019, within which to file his petition. As it was though, Razalan filed the present petition only on February 8, 2021 or eight (8) days beyond the thirty (30)-day reglementary period. 25

Should we now dismiss the petition outright because it was filed out of time?

In many cases, the Court emphasized that procedural rules should be treated with utmost respect and due regard since they are designed precisely to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. 26 The Court,·however, recognizes that there are certain exceptions allowing a liberal application of the procedural rules. Among these exceptions are (a) where matters of life, liberty, honor or property are involved; (b) the existence of special or compelling circumstances; (c) the appeal or petition is meritorious; (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (e) lack of any showing that the review sought is merely frivolous and dilatory; and, (f) the other party will not be unjustly prejudiced by the liberal application of the rules. 27 Indeed, the Court has always tried to maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant should be given the full opportunity for the just disposition of his cause. 28

In De Castro v. Commission on Audit, 29 the Court resolved the case on the merits despite the fact that the petition was filed ten (10) days late. The Court considered the merits of the case and took cognizance of the petition as it involved disallowances amounting to more than P30 Million. Too, in The Law Firm of Laguesma Magsalin Consulta and Gastardo v. COA, 30 the petition was filed eighteen (18) days beyond the prescriptive period, and yet, the Court took cognizance thereof and resolved it on the merits after considering that the service provider should be justly compensated, albeit with due regard to the duty of the COA to prevent unauthorized disbursement of public funds.

Here, eight (8) days does not amount to unreasonable delay. But much more than this, we ought to consider the hefty amount involved and the fact that the municipality and its constituents have actually benefited and continuously benefit from the construction of the Mayantoc Memorial Park Project.

Verily, therefore, in the higher interest of substantial justice, we take cognizance of the petition and resolve it on the merits.

Propriety of the Disallowance

The Constitution has made the COA the guardian of public funds, vesting it with broad powers over all accounts pertaining to government revenue and expenditures and the uses of public funds and property, including the exclusive authority to define the scope of its audit and examination, establish the techniques and methods for such review, and promulgate accounting and auditing rules and regulations. 31 Thus, only when the COA has clearly acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or in excess of its jurisdiction has the Court reversed the COA's decisions or resolutions. 32 For this purpose, grave abuse of discretion means that there is on the part of the COA an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, such as when the assailed decision or resolution rendered is not based on law and the evidence, but on caprice, whim and despotism. 33

Here, the COA was correct in finding Razalan negligent in the discharge of his functions both as the HOPE and as the head of the agency when he approved the award of and payment for the Mayantoc Memorial Park project.

For one, he ignored the conspicuous absence on record of any proof that the invitation to bid was posted on the PHILGEPS website as ordained by Sections 8 and 21 of RA 9184, viz.:

SEC. 8. Procurement by Electronic Means. — To promote transparency and efficiency, information and communications technology shall be utilized in the conduct of procurement procedures. Accordingly, there shall be a single portal that shall serve as the primary source of information on all government procurement. The G-EPS shall serve as the primary and definitive source of information on government procurement. Further, the GPPB is authorized to approve changes in the procurement process to adapt to improvements in modern technology, provided that such modifications are consistent with the provisions of Section 3 of this Act.

xxx xxx xxx

SEC. 21. Advertising and Contents of the Invitation to Bid. — In line with the principle of transparency and competitiveness, all Invitations to Bid for contracts under competitive bidding shall be advertised by the Procuring Entity in such manner and for such length of time as may be necessary under the circumstances, in order to ensure the widest possible dissemination thereof, such as, but not limited to, posting in the Procuring Entity's premises, in newspapers of general circulation, the G-EPS and the website of the Procuring Entity, if available. The details and mechanics of implementation shall be provided in the IRR to be promulgated under this Act.

xxx xxx xxx

Although compliance with the posting requirement is primarily the responsibility of the BAC, Razalan, as the HOPE, had the concomitant responsibility to ensure that before he signed and approved the award and payment, the required posting, among others, was complied with. After all, as the HOPE, Section 41 of RA 9184 grants him the discretionary power to reject any and all bids, declare a failure of bidding, or not award the contract under certain conditions, viz.:

Sec. 41. Reservation Clause. — The Head of the Agency reserves the right to reject any and all Bids, declare a failure of bidding, or not award the contract in the following situations:

xxx xxx xxx

(b) If the BAC is found to have failed in following the prescribed bidding procedures; x x x

In Sanson v. Barrios, 34 the Court distinguished discretionary function from ministerial function, viz.:

x x x Discretion, when applied to public functionaries, means a power or right conferred upon them by law of acting officially, under certain circumstances, according to the dictates of their own judgments and consciences, uncontrolled by the judgments or consciences of others. A purely ministerial act or duty, in contradistinction to a discretional act, is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of legal authority, without regard to or the exercise of his own judgment, upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer, and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor judgment x x x (Emphases added)

xxx xxx xxx

For another, although the required certification on the completeness of the supporting documents, as mandated by Section 74 of the Government Accounting Manual for Local Government Units, was also lacking, Razalan still approved the award and payment therefor.

In sum, his negligence was not just based on one but on two patent deficiencies which are both matters of record. Thus, the crucial question is "how could he have relied in good faith on the two aforesaid documents that did not even form part of the records forwarded him by his subordinates and the BAC itself?" Obviously, he ignored these patent deficiencies as he simply approved the award and payment to the winning bidder.

In Lihaylihay v. People, 35 citing Cruz vs. Sandiganbayan, 36 the Court emphasized that when the documents in question bore irregularities too evident to ignore, the Arias doctrine cannot apply. For such an irregularity should have prompted the public officer to examine further the documents with some degree of circumspection before affixing his or her signature thereto.

Extent of Mayor Razalan's liability

In determining whether a certifying, approving, and authorizing officer is liable for the disapproved disbursement, we are guided by the guidelines on return of disallowed amounts in cases involving unlawful/irregular government contracts in Torreta v. Commission on Audit, 37 (Torreta) citing the concurring opinion of Senior Associate Justice Estela Perlas-Bernabe, viz.:

1. If a Notice of Disallowance is set aside by the Court, no return shall be required from any of the persons held liable therein.

2. If a Notice of Disallowance is upheld, the rules on return are as follows:

a. Approving and certifying officers who acted in good faith, in the regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987.

b. Pursuant to Section 43 of the Administrative Code of 1987, approving and certifying officers who are clearly shown to have acted with bad faith, malice, or gross negligence, are solidarily liable together with the recipients for the return of the disallowed amount.

c. The civil liability for the disallowed amount may be reduced by the amounts due to the recipient based on the application of the principle of quantum meruit on a case to case basis.

d. These rules are without prejudice to the application of the more specific provisions of law, COA rules and regulations, and accounting principles depending on the nature of the government contract involved.

xxx xxx xxx

Sections 38 and 39, Chapter 9, Book I, of the Administrative Code 38 expressly state that a public officer may only be held civilly liable for acts done in the performance of his or her official duty upon a clear showing that he or she performed such duty with bad faith, malice, or gross negligence. Section 43, Chapter 5, Book VI of the Administrative Code 39 further underscores that guilty officers are jointly and solidarily liable for the disallowed amounts. Too, under Section 103 of the Government Auditing Code of the Philippines, 40 unlawful expenditures shall be the personal liability of an official or employee found to be responsible for it.

As a rule, public officials are entitled to the presumption of good faith in the discharge of official duties. 41 Good faith is a state of mind denoting 'honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even though technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.' 42

The lack of any showing of bad faith or malice also gives rise to a presumption of regularity in the performance of official duties. This presumption, however, does not apply when an explicit rule was violated, 43 as in this case.

Here, Razalan, together with the BAC, are jointly and severally liable for the disallowed amount, owing to their bad faith in relation to their approval of the Mayantoc Memorial Park Project. Even then, the guidelines on return in Torreta state that the civil liability for the disallowed amount may be reduced by the amounts due to the recipient based on the application of the principle of quantum meruit. In this case, the amount due to the recipient is still undetermined for the COA was not able to scrutinize the propriety and reasonableness of the transaction costs due to lack of submitted documents. Thus, the case should be remanded to the COA in order to determine the amount which the payee/contractor may be allowed to retain commensurate to the actual use and enjoyment derived by the Municipality and its constituents from the construction of the Mayantoc Memorial Park Project.

In Fernandez v. COA, 44 the Court pronounced that despite violations in the public bidding of the computerization project of the City of Talisay which resulted in its disallowance, personal liability should not attach to the persons named liable under the NDs up to the extent of the benefit that the government of the City of Talisay has actually derived from the project.

It is understood, however, that the remand to COA is without prejudice to the filing of appropriate administrative cases against Razalan and the BAC for violations of the procurement law and its implementing rules and regulations.

ACCORDINGLY, the Decision No. 2018-212 dated January 31, 2018 and Resolution dated January 31, 2020 of the Commission on Audit — Commission Proper are AFFIRMED with MODIFICATION.

The case is REMANDED to the Commission on Audit for the computation of the amounts equivalent to the actual benefit derived by the Municipality of Mayantoc and its constituents from the Mayantoc Memorial Park Project, without prejudice to their administrative liability for violations of the provisions of Republic Act No. 9184 and its Implementing Rules and Regulations. Any amount in excess of the reasonable cost shall be the personal solidary liability of the accountable persons, including petitioner former Mayor Tito G. Razalan." (26)

By authority of the Court:

(SGD.) MARIFE M. LOMIBAO-CUEVAS

Clerk of Court

 

Footnotes

1.Rollo, p. 32-43.

2.Id. at 57-64.

3.Id. at 10.

4.Id. at 33.

5.Id. at 99-102.

6.Id. at 33-35.

7.Id. at 35.

8.Id. at 89-94.

9.Id. at 35.

10.Id. at 36.

11.Id. at 32-43.

12.Id. at 39.

13.Id. at 40.

14.Id. at 41-42.

15.Id. at 11.

16. Penned by COA Chairperson Michael G. Aguinaldo and concurred in by COA Commissioners Jose A. Fabia and Roland Pondoc, id. at 57-64.

17. 259 Phil. 794-819 (1989).

18.Id. at 12.

19.Id. at 23.

20. 820 Phil. 485-505 (2017).

21.Id. at 155.

22.Id. at 156.

23.Id. at 157.

24. See Pates v. Commission on Elections, 609 Phil. 260, 266 (2009).

25.Rollo, p. 153.

26. See Osmeña v. COA, 665 Phil. 116, 124 (2011).

27. See De Castro v. Commission on Audit, G.R. No. 228595, September 22, 2020, citing The Law Firm Laguesma Magsalin Consulta and Gastardo v. COA, 750 Phil. 258, 274-275 (2015).

28. See Angeles v. Commission on Audit, G.R. No. 228795, December 1, 2020.

29.Supra note 25.

30. 750 Phil. 258, 274 (2015).

31. See Sanchez v. COA, 575 Phil. 428, 434-435 (2008).

32. See Miralles, v. COA, 818 Phil. 380, 389 (2017).

33.Id. at 389-390.

34. 63 Phil. 198, 203 (1936).

35. 715 Phil. 722, 731 (2013).

36. 504 Phil. 321, 337 (2005).

37. G.R. No. 242925, November 10, 2020.

38.Section 38. Liability of Superior Officers. —

1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross negligence.

2) Any public officer who, without just cause, neglects to perform a duty within a period fixed by law or regulation, or within a reasonable period if none is fixed, shall be liable for damages to the private party concerned without prejudice to such other liability as may be prescribed by law.

3) A head of a department or a superior officer shall not be civilly liable for the wrongful acts, omissions of duty, negligence, or misfeasance of his subordinates, unless he has actually authorized by written order the specific act or misconduct complained of.

Section 39. Liability of Subordinate Officers. — No subordinate officer or employee shall be civilly liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or negligent acts done by him which are contrary to law, morals, public policy, and good customs even if he acted under orders or instructions of his superiors.

39.SECTION 43. Liability for Illegal Expenditures. —

Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.

Any official or employee of the Government knowingly incurring any obligation, or authorizing any expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the service, after due notice and hearing by the duly authorized appointing official. If the appointing official is other than the President and should he fail to remove such official or employee, the President may exercise the power of removal.

40. Presidential Decree (PD) No. 1445; published on August 7, 1978.

SECTION 103. General liability for unlawful expenditures. —

Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.

41. See Fernandez v. COA, G.R. No. 205389, November 19, 2019.

42.Castro v. COA, G.R. No. 233499 (Notice), February 26, 2019.

43. See Sambo, et al. v. COA, 811 Phil. 344, 357 (2017).

44. G.R. No. 205389, November 19, 2019.