Philippine Airlines, Inc. v. Commission on Audit and Petron Corporation
REITERATIONFacts
The Antecedents: Petitioner Philippine Airlines, Inc. (PAL), a government-owned or controlled corporation at the time, adopted a system of bidding out its fuel requirements under a multiple supplier set-up, awarding contracts to the lowest and second lowest bidders. Respondent Commission on Audit (COA), citing Department Order No. 19, s. 1974, COA Office Memorandum No. 498, and COA Circular No. 78-84, advised PAL to desist from bidding and procure its petroleum product requirements solely from Petron Corporation (Petron). Procedural History: PAL sought reconsideration, arguing that Department Order No. 19 should not apply to it and that competitive bidding ensured the best price. COA denied the reconsideration, stating that the order applied to government-owned or controlled corporations, including subsidiaries, and suggested PAL negotiate with Petron. PAL's final appeal was denied by COA Decision No. 1127, which was assailed by PAL in a special civil action for certiorari and prohibition. The Petition: PAL alleged that COA committed grave abuse of discretion amounting to excess or lack of jurisdiction in holding that Department Order No. 19 applied to PAL, in extending its application to PAL, and that the order constituted an arbitrary, capricious, and whimsical regulation depriving PAL of its rights under substantive due process.
Issue(s)
Whether the Commission on Audit committed grave abuse of discretion amounting to excess or lack of jurisdiction in holding that Department Order No. 19 of the defunct Department of General Services applies to Philippine Airlines, Inc., considering PAL's arguments against its application. Whether, assuming the order was intended to cover PAL, the Commission on Audit gravely abused its discretion in not exempting PAL from the strict application of Department Order No. 19, potentially depriving Petitioner of its rights under the constitutional guarantee of substantive due process. Whether the issues raised in the petition have been rendered moot and academic due to the change in PAL's ownership structure.
Ruling
The petition is DISMISSED for being moot and academic. No pronouncement as to costs.
Ratio Decidendi
On the applicability of Department Order No. 19 to PAL: The Court acknowledged that COA, through Memorandum No. 88-565, effectively adopted Department Order No. 19 as its own, expanding its coverage to government-owned or controlled corporations. As PAL was majority-owned by the Government Service Insurance System (GSIS) at the time, it fell under the definition of a "government agency" or "agency of the government" as defined in the Revised Administrative Code of 1987, and thus was subject to COA's audit jurisdiction and the regulations it adopted. On the alleged grave abuse of discretion by COA: The Court found that while COA was correct in ruling that Department Order No. 19 applied to PAL as a government agency, it gravely abused its discretion in not exempting PAL from its strict application. PAL presented meritorious reasons, including potential financial losses of P34,055,377.00 if compelled to purchase all fuel from Petron, and the risk to the regularity of its services due to reliance on a single supplier. These reasons, which included the potential for irregular, excessive, or unconscionable expenditures, outweighed the policy of preference for government resources. On the issue of mootness: The Court noted that during the pendency of the petition, PAL's shares were bidded out, and PR Holdings, a private corporation, acquired a majority of its outstanding stocks. Consequently, PAL ceased to be a government-owned or controlled corporation and was no longer under COA's audit jurisdiction, rendering the issues raised in the petition moot and academic.
Main Doctrine
While the Commission on Audit (COA) correctly ruled that Department Order No. 19 applied to Philippine Airlines, Inc. (PAL) as a government-owned or controlled corporation at the time, it gravely abused its discretion in not exempting PAL from its strict application when compelling reasons of practicability and potential financial loss were demonstrated. However, due to PAL's subsequent privatization, the case became moot and academic.