Corpuz v. Commission on Audit
REITERATIONFacts
1. The Antecedents: The Philippine Rice Research Institute (PhilRice), established by Executive Order No. 1061, is mandated to have the Office of the Government Corporate Counsel (OGCC) as its legal counsel. Due to the OGCC's perceived inability to promptly address PhilRice's legal needs, PhilRice sought to engage private counsel, Atty. Teodoro G. Mendoza, through a Contract for Retainer and Legal Services. This contract, executed without the prior written concurrence of both the OGCC and the Commission on Audit (COA), stipulated monthly retainer fees, court appearance fees, and incentives for Atty. Mendoza. Subsequently, the COA issued Notices of Disallowance (NDs) against payments made to Atty. Mendoza, totaling P209,765.00, for various reasons including excessive fees and disallowed incentives and reimbursements. 2. Procedural History: Following the issuance of the Notices of Disallowance by the COA, the individuals found liable, including the petitioners herein, appealed to the COA Regional Office III (COA-RO3). This appeal was denied, affirming the disallowances. A subsequent review by the COA proper also resulted in a denial of the appeal, upholding the COA-RO3's decision. The petitioners then sought reconsideration from the COA En Banc, which was also denied. This led to the filing of the present petition before the Supreme Court. 3. The Petition: The petitioners filed a Petition for Certiorari under Rule 64, in relation to Rule 65, of the Revised Rules of Court, seeking to reverse the decisions of the COA. They argue that the government would be unjustly enriched if the disallowances were sustained, that the contract and disbursements were fair, reasonable, and compliant with law, and that they acted in good faith. The petition specifically challenges COA Decision No. 2018-370 and Notice No. 2020-014, which affirmed earlier COA rulings disallowing payments made to Atty. Mendoza.
Issue(s)
Whether the Petitioners are liable for the disallowed amounts under Notice of Disallowance No. 14-001-101-(09). Whether the Petitioners are liable for the disallowed amounts under Notice of Disallowance No. 14-002-101-(2013). Whether the Contract for Retainer and Legal Services was executed in accordance with applicable laws, rules, and jurisprudence.
Ruling
The petition is partly meritorious. The Supreme Court modified the decision of the Commission on Audit. Petitioners Mary Grace D. Corpuz, Sophia T. Borja, Leo C. Javier, and Babylinda O. Reyes were absolved from refunding the amount disallowed under Notice of Disallowance No. 14-001-101-(09). In the interest of substantial justice, Conyfel D. Jiao, Eulito U. Bautista, and Ruben B. Miranda, also made liable under the same Notice, were likewise absolved. However, petitioners Babylinda O. Reyes and Caesar Joventino N. Tado remain liable to reimburse the disallowed amount under Notice of Disallowance No. 14-002-101-(2013). The liability of Atty. Ronilo A. Beronio, Atty. Teodoro G. Mendoza, and Eufemio T. Rasco was not affected by this petition. The decision is without prejudice to further proceedings against the then Members of the Board of Trustees of PhilRice.
Ratio Decidendi
On the issue of whether the Petitioners are liable for the disallowed amounts under Notice of Disallowance No. 14-001-101-(09): The Court held that the Subject Contract was not executed in accordance with prevailing law, rules, and jurisprudence because the required concurrences from the OGCC and COA were not secured prior to its execution. However, the Court clarified that liability for such irregular expenditures is personal to the official directly responsible. Applying the ruling in The Law Firm of Laguesma Magsalin Consulta and Gastardo v. Commission on Audit, the Court found that petitioners Corpuz, Borja, Javier, and Reyes had no involvement in the hiring of Atty. Mendoza or the execution of the contract. Their roles were limited to certifying or approving payments. Therefore, they were absolved of liability under ND No. 14-001-101-(09). Similarly, Conyfel D. Jiao, Eulito U. Bautista, and Ruben B. Miranda were absolved in the interest of substantial justice, as they were similarly situated without direct involvement in the hiring. Atty. Ronilo A. Beronio, as Executive Director who executed the contract, was not absolved, as he had the duty to ensure prior concurrences. The Court also noted that Atty. Mendoza, as the payee, remains liable for the disallowed amounts, retaining only what is fair and reasonable as determined by the COA. On the issue of whether the Petitioners are liable for the disallowed amounts under Notice of Disallowance No. 14-002-101-(2013): This disallowance pertained to the reimbursement for Atty. Mendoza's notarial commission fees. The Court found that the Subject Contract did not contain any provision for such reimbursements. Moreover, the contract explicitly stated that the monthly retainer fee was inclusive of fees for his notarial services. Petitioners Reyes and Tado, who were made liable, did not claim good faith and argued that the services were exclusively for PhilRice. The Court rejected this, stating that the remuneration was governed by the contract, which did not provide for reimbursement of notarial commission renewal fees. Therefore, petitioners Reyes and Tado remain liable for this disallowance. On the issue of whether the Contract for Retainer and Legal Services was executed in accordance with applicable laws, rules, and jurisprudence: The Court found that the Subject Contract was not executed in accordance with prevailing law, rules, and jurisprudence. PhilRice, as a government agency with a statutory counsel (OGCC), could only engage external counsel if exceptional or extraordinary circumstances justified it, and only after securing the written conformity of the OGCC and the written concurrence of the COA. In this case, PhilRice sought OGCC's approval, which was granted with a recommendation for COA concurrence. However, PhilRice executed the contract with Atty. Mendoza before obtaining the COA's concurrence. While the COA eventually gave its concurrence, it did so with modifications (reduced fees and deleted incentives), indicating that the original contract terms were not fully accepted. The Court emphasized that the failure to secure both concurrences prior to execution was a procedural defect, rendering the engagement and subsequent disbursements irregular and subject to disallowance at the officers' peril. The Court also noted that the concurrence was sought from the wrong COA office, which may have contributed to the delay.
Main Doctrine
The Supreme Court clarified that government officials who merely certify or approve payments for legal services rendered by external counsel, without being directly involved in the irregular hiring process (i.e., failing to secure prior concurrences from the OGCC and COA), are absolved from personal liability for the disallowed amounts. Liability attaches to those who directly caused the violation, such as the official who executed the contract without the necessary prior approvals. Furthermore, the Court reiterated that the engagement of external counsel requires the prior written concurrence of the OGCC and COA, and failure to obtain these before contract execution renders the engagement irregular and the expenditures subject to disallowance, with personal liability for the responsible officials.