Collado v. Villar
REITERATIONFacts
The Antecedents: In 1988, the Philippine Science High School (PSHS) contracted N.C. Roxas, Inc. for the construction of its Mindanao Campus Building Complex. The contractor incurred significant delays. Emerita A. Collado (Collado), as Supply Officer, computed liquidated damages by deducting 1/10 of 1% of the value of each progress billing claim. However, the Commission on Audit (COA) Auditor later discovered that the formula used was erroneous. Under the Implementing Rules and Regulations (IRR) of Presidential Decree No. (P.D.) 1594, the correct formula should have been 1/10 of 1% of the total contract cost minus the value of completed portions. This error resulted in an under-deduction of liquidated damages amounting to P2,148,019.86, effectively causing an overpayment to the contractor. Procedural History: In 1998, the Commission on Audit (COA) Auditor issued Notices of Disallowance (ND) for the overpayment, holding Collado solidarily liable with the contractor and other officers. The COA National Government Audit Office I (COA-NGAO) affirmed the disallowance but capped the damages at 15% of the contract price. The COA Commission Proper (COA-CP) affirmed this in its 2002 Decision. Collado filed a 'Petition for Review' with the COA-CP, which the COA-CP treated as a first motion for reconsideration and denied in its 2008 Decision. Collado filed subsequent letters for reconsideration, which the COA Legal Services Sector-Adjudication and Legal Services (LSS-ALS) rejected as prohibited second motions for reconsideration under the 1997 Revised Rules of Procedure of the COA (1997 COA Rules). The Petition: Collado filed a Petition for Certiorari under Rule 64 in relation to Rule 65 with the Supreme Court (SC). She argued that the Commission on Audit (COA) committed grave abuse of discretion in treating her 'Petition for Review' as a first motion for reconsideration and in holding her solidarily liable for the erroneous computation, asserting she acted in good faith and relied on the scrutiny of other internal and external auditors who passed the vouchers for eight years.
Issue(s)
Whether the Commission on Audit (COA) committed grave abuse of discretion in treating the Petition for Review as a first motion for reconsideration, thereby rendering subsequent filings as prohibited second motions; and whether the Supreme Court should relax procedural rules in this case. Whether the petitioner, as a certifying officer, is solidarily liable for the disallowed amounts resulting from the erroneous computation of liquidated damages, considering the 'Rules on Return' from Madera v. COA and the principles of good faith and solutio indebiti.
Ruling
The Petition is GRANTED IN PART. The Commission on Audit-Commission Proper (COA-CP) Decision No. 2008-048 is AFFIRMED with MODIFICATION. Petitioner Emerita A. Collado is excused from solidary liability to return the total amount of the under-deducted liquidated damages. The Commission on Audit (COA) is DIRECTED to institute the necessary claims against N.C. Roxas, Inc.
Ratio Decidendi
On Issue 1: The Supreme Court (SC) held that the Commission on Audit (COA) correctly treated the 'Petition for Review' as a motion for reconsideration. Under the 1997 Revised Rules of Procedure of the COA (1997 COA Rules), a 'petition for review' is the proper mode of appeal from a Director to the Commission Proper (CP). Since Collado filed her 'Petition for Review' with the CP—the same body that rendered the 2002 Decision—it was functionally a motion for reconsideration. Consequently, her subsequent letter dated June 10, 2008, was a prohibited second motion for reconsideration under Section 13, Rule IX of the 1997 COA Rules. While this meant the Petition for Certiorari was technically filed out of time, the Court chose to relax the procedural rules to serve substantial justice, as the case involved the property rights of a public officer and an honest mistake in procedural interpretation. On Issue 2: On the substantive merits, the Court affirmed that the Commission on Audit (COA) correctly applied the formula for liquidated damages under Presidential Decree No. (P.D.) 1594. However, applying the 'Rules on Return' from Madera v. COA, the Court found that Collado should be excused from solidary liability. Under the Administrative Code of 1987, certifying officers are only civilly liable if they acted with bad faith, malice, or gross negligence. The Court found no evidence of such, noting that Collado did not benefit from the overpayment and her error was a mere misinterpretation of a complex formula. Furthermore, she demonstrated good faith by relying on the fact that the vouchers passed through multiple levels of pre-audit and post-audit for eight years without any Audit Observation Memorandum (AOM). While the contractor, N.C. Roxas, Inc., remains liable under the principle of solutio indebiti (Article 2154, Civil Code), Collado is not solidarily liable.
Main Doctrine
Public officers are not civilly liable for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence. Under the 'Rules on Return' established in Madera v. Commission on Audit (COA), 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 a family are not civilly liable to return disallowed amounts. Good faith is characterized by the absence of dishonest purpose, moral obliquity, or conscious doing of a wrong.