Power Sector Assets and Liabilities Management Corporation v. Commission on Audit
NEW DOCTRINEFacts
The Antecedents: The Power Sector Assets and Liabilities Management (PSALM) Corporation requested the concurrences of the Commission on Audit (COA) and the Office of the Government Corporate Counsel (OGCC) to engage Mr. John T. K. Yeap and Atty. Michael B. Tantoco as legal advisors for the privatization of National Power Corporation's (NPC) generation assets and Independent Power Producer (IPP) contracts. PSALM requested action by May 30, 2011, due to urgency. OGCC concurred on May 31, 2011. COA did not respond by the requested date, nor for 41 days thereafter, nor for a total of 110 days until August 29, 2011, when PSALM proceeded with the engagement. COA finally acted on the request on November 6, 2014, denying it for lack of prior approval, citing violations of COA Circulars and a previous denial of a similar request. PSALM's motion for reconsideration was denied. Procedural History: PSALM filed a petition for certiorari under Rule 65 in relation to Rule 64 of the Rules of Court, arguing that the hiring was exempt from COA concurrence and that COA committed grave abuse of discretion due to inordinate delay. The Office of the Solicitor General (OSG) countered that concurrences are mandatory. COA maintained its position. The Petition: PSALM sought affirmative relief, arguing that the hiring was exempt from COA concurrence as it involved advisory services, not court representation, and that the delay by COA constituted grave abuse of discretion. PSALM also argued that the officers acted in good faith and that the consultants should be paid on a quantum meruit basis.
Issue(s)
Whether the required prior concurrence of COA is a form of pre-audit and if imposing it as a prerequisite to the validity of the engagement of a private lawyer is ultra vires. Whether the contracts of engagement are subject to the concurrence requirement under COA Circular Nos. 86-255 and 95-011. Whether COA committed grave abuse of discretion when it acted on PSALM's request for engagement of the legal advisors only after three (3) years following its receipt thereof. Whether the approving PSALM officers are liable for the payment of the advisors' fees.
Ruling
The petition is GRANTED. COA Decision No. 2017-215 dated July 6, 2017 and Resolution-Decision No. 2019-004 dated January 30, 2019 are NULLIFIED. The Commission on Audit is directed to allow payment to Mr. John T. K. Yeap and Atty. Michael B. Tantoco of the total compensation due them.
Ratio Decidendi
On the nature of COA's prior written concurrence and its relation to pre-audit: The Court held that COA's requirement of prior written concurrence for the engagement of private counsel is indeed a form of pre-audit, as it involves an examination of financial transactions before their consumption or payment, specifically to determine the reasonableness of legal fees and ensure compliance with policies. While COA has historically lifted pre-audit for various transactions, it retains the constitutional mandate and discretion to reinstitute it selectively, particularly for the engagement of private legal services, as an exception to general rules. This discretion is not subject to judicial review unless exercised with grave abuse of discretion. The Court found no reason to overturn COA's discretion to require such concurrence, citing jurisprudence that upholds its soundness. On whether the contracts are subject to COA concurrence requirements: The Court affirmed that the contracts of engagement are subject to the concurrence requirement under COA Circular Nos. 86-255 and 95-011. The Court clarified that these circulars apply to all forms of legal services, not just those involving actual court litigation, citing Polloso v. Gangan and Oñate v. COA. The purpose is to prevent the unauthorized and unnecessary disbursement of public funds, aligning with COA's mandate to disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. The Court noted that the recent COA Circular No. 2021-003, which exempts certain engagements, does not apply to the present case due to the amounts involved and the fact that the contracts were already pending review. On COA's grave abuse of discretion due to inordinate delay: The Court found that COA committed grave abuse of discretion by unduly delaying action on PSALM's request for concurrence for over three years. PSALM had specifically requested action by May 30, 2011, due to the urgency of its privatization projects under the Electric Power Industry Reform Act (EPIRA). Despite the OGCC's prompt concurrence, COA's inaction, spanning 110 days initially and then over three years until its denial in 2014, violated PSALM's right to a speedy disposition of its case under Section 16, Article III of the Constitution. The Court rejected COA's justification of a sheer volume of requests, emphasizing that the State has the burden to prove that delays are reasonable, which COA failed to do. This inordinate delay prevented PSALM from securing the required concurrence, thus excusing PSALM's subsequent engagement of the legal advisors. On the liability of approving PSALM officers: The Court ruled that the approving PSALM officers should not be held personally liable for the payment of the legal advisors' fees. The legal advisors had satisfactorily rendered their services, contributing to the government's privatization efforts. The Court reiterated that public officials are liable only for acts done with malice, bad faith, or beyond the scope of their authority. In this case, the officers acted in good faith, prioritizing the government's interest and the mandate of the EPIRA, and were motivated by the desire to accomplish the law's objectives. No bad faith or malice could be imputed to them, and their actions were within the bounds of their duties, especially considering COA's own delay.
Main Doctrine
The Commission on Audit (COA) has the constitutional mandate and discretion to require prior written concurrence for the engagement of private legal services by government agencies, which constitutes a form of pre-audit. While COA has lifted pre-audit in general, it may reinstitute it selectively, especially when an agency's internal control system is inadequate. However, COA's inordinate delay in acting upon such requests, amounting to grave abuse of discretion and violating the right to speedy disposition of cases, may excuse the agency's failure to secure prior concurrence, and the services rendered may be compensated on a quantum meruit basis.