G.R. No. 242925, November 10, 2020,
♦ Decision, Gaerlan, [J]
♦ Concurring Opinion, Perlas-Bernabe, [J]
♦ Concurring Opinion, Caguioa, [J]

[ G.R. No. 242925, November 10, 2020 ]

NAOMI K. TORRETA AND JAIME M. LOPEZ, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

CONCURRING OPINION

CAGUIOA, J.:

I concur with the disposition of the ponencia which held the officers who acted with gross negligence as solidarity liable for the disallowance, and limiting the liability to the loss incurred by the government in the transaction by deducting the value of the animals repossessed by the National Dairy Authority (NDA) or returned by the project beneficiary HapiCows@Tropical Dairy Farm, Inc. (HapiCows).

Thus, I limit my Concurring Opinion on the question of the applicability of the Rules of Return in Madera v. COA1 (Madera) to government contracts.

I respectfully submit that, save for Rule 2(d), the Rules of Return may be made to apply to disallowances in general-including personnel benefits disallowances AND government contracts. The Madera Rules can be made to apply to government contracts in general, for the following reasons:

1. Rules 2(a) and 2(b) are based on Sections 38 and 43 of the Administrative Code of 1987, which apply to disallowances in general;

2. Precisely because Rule 2(c) is but an express adoption in personnel benefits disallowances of the application of the principles of solutio indebiti and unjust enrichment -and inevitably, quantum meruit - in disallowances relating to infrastructure contracts and contracts for services.

In Madera, the Court promulgated the Rules on Return, thus:

E. The Rules on Return

In view of the foregoing discussion, the Court pronounces:

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 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. Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are, pursuant to Section 43 of the Administrative Code of 1987, solidarity liable to return only the net disallowed amount which, as discussed herein, excludes amounts excused under the following sections 2c and 2d.

c. Recipients - whether approving or certifying officers or mere passive recipients - are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered.

d. The Court may likewise excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a case to case basis.2

In my Concurring Opinion in Abellanosa v. COA,3 I have already clarified how the entire rubric was structured, and how the application of solutio indebiti and unjust enrichment in Rule 2(c) had been distilled from jurisprudence dealing with government contracts. To reiterate:

Essence of recalibration by the Rules in Madera

At its core, and as exhaustively discussed during the deliberations of Madera, its animating spirit is (1) the return to the proper recognition of the liability for unlawful expenditures as a single solidary obligation,4 of officers and payees and (2) an appeal to a more predictable application of solutio indebiti across disallowance cases.

x x x x

In the same manner that contractors in disallowances involving infrastructure or service contracts are allowed to retain amounts representing reasonable compensation for services rendered on the basis of quantum meruit, excuse under Rule 2c was intended to recognize situations where payees may be allowed to retain the amounts they received if there is legal basis for the grant of the benefit, and they are entitled to said amounts for having rendered actual services for which the said benefits were given. To do otherwise would sanction unjust enrichment. x x x

In Madera, the Court held:

To be sure, the application of the principles of unjust enrichment and solutio indebiti in disallowed benefits does not contravene the law on the general liability for unlawful expenditures. In fact, these principles are consistently applied in government infrastructure or procurement cases which recognized that a payee contractor or approving and/or certifying officers cannot be made to shoulder the cost of a correctly disallowed transaction when it will unjustly enrich the government and the public who accepted the benefits of the project.5

The import of Rule 2c is it exempts payees from return when there are legal and factual bases to retain (i.e., that the disallowed benefit was authorized by law, and the payee can show that he rendered actual service so as to be entitled to the said benefit).

To clarify, each Rule in Madera covers distinct situations:

1. Rule 2a provides for no liability for officers acting in good faith, in regular performance of official functions, and with the diligence of a good father of a family.

2. Rule 2b treats of the solidary liability of officers who are clearly shown to have acted in bad faith, malice, or gross negligence.

3. Rule 2c provides the general rule that payees must return based on solutio indebiti, EXCEPT if the return will sanction unjust enrichment.

4. Rule 2d treats of situations that would otherwise be covered by the general rule in Rule 2c save for the unique circumstances in the case that would prompt the exercise of the Court's discretion to excuse the return on a case-to-case basis.6

I have not encountered an application of Rule 2(d) in favor of contractors, for which reason, I can concede that Rule 2(d) - which was really intended to cover instances where the Court would opt to extend compassionate justice to government employees - is not entirely translatable to disallowances not involving personnel benefits.

That said, in appropriate cases, there is nothing that prevents the Court from applying Rules 2(a), 2(b) and 2(c) to government contracts.ℒαwρhi৷ I agree therefore with the ponente that in this case, Rule 2(b) squarely applies to NDA officers who were found to have acted with gross negligence.

In this regard, the application of solutio indebiti in personnel benefits disallowances is not materially different from its application in government contracts to foreclose the application of the Rules in Madera.

To stress, Rule 2(c), only intended to cover "true" solutio indebiti cases, such that cases where a refund would result in unjust enrichment in favor of the government, no recovery on an otherwise proper disallowance will be allowed. Again, under this conception of Rule 2(c), the application of quantum meruit is obviously built in and cannot but come into play. The determination of the amount which was unduly received by a payee - whether a government employee or a contractor - and the amount of recovery which will result in unjust enrichment in favor of the government will necessarily entail the determination of the reasonable value of the services rendered or goods delivered, which is quantum meruit.

This inevitable interplay between the principles of solutio indebiti, unjust enrichment, and quantum meruit, is illustrated in the case of Eslao v. Commission on Audit,7 also cited in Madera, thus:

The Court finds and so holds that petitioner entered into the two contracts in good faith for the good and interest of the university and the government. As it is, the two projects are now 95% complete. The buildings are now being used by the university. On the basis of quantum meruit the contractor should be allowed to recover for the work accomplished.

In Royal Trust Construction vs. COA, a case involving the widening and deepening of the Betis River in Pampanga at the urgent request of the local officials and with the knowledge and consent of the Ministry of Public Works, even without a written contract and the covering appropriation, the project was undertaken to prevent the overflowing of the neighboring areas and to irrigate the adjacent farmlands. The contractor sought compensation for the completed portion in the sum of over P1 million. While the payment was favorably recommended by the Ministry of Public Works, it was denied by the respondent COA on the ground of violation of mandatory legal provisions as the existence of corresponding appropriations covering the contract cost. Under COA Res. No. 36-58 dated November 15, 1986 its existing policy is to allow recovery from covering contracts on the basis of quantum meruit if there is delay in the accomplishment of the required certificate of availability of funds to support a contract.

In said case, the Solicitor General agreed with the respondent COA but in the present case he agrees with petitioner.

Thus, this Court held therein -

"The work done by it was impliedly authorized and later expressly acknowledged by the Ministry of Public Works, which has twice recommended favorable action on the petitioner's request for payment. Despite the admitted absence of a specific covering appropriation as required under COA Resolution No. 36-58, the petitioner may nevertheless be compensated for the services rendered by it, concededly for the public benefit, from the general fund alloted by law to the Betis River project. Substantial compliance with the said resolution, in view of the circumstances of this case, should suffice. The Court also feels that the remedy suggested by the respondent, to wit, the filing of a complaint in court for recovery of the compensation claimed, would entail additional expense, inconvenience and delay which in fairness should not be imposed on the petitioner.

Accordingly, in the interest of substantial justice and equity, the respondent Commission on Audit is DIRECTED to determine on a quantum meruit basis the total compensation due to the petitioner for the services rendered by it in the channel improvement of the Betis River in Pampanga and to allow the payment thereof immediately upon completion of the said determination."

In the present case, the Court finds that the contractor should be duly compensated for services rendered, which were for the benefit of the general public. To deny the payment to the contractor of the two buildings which are almost fully completed and presently occupied by the university would be to allow the government to unjustly enrich itself at the expense of another. Justice and equity demand compensation on the basis of quantum meruit.

WHEREFORE, the petition is GRANTED. The questioned decision of the respondent COA dated February 16, 1989 and its resolution dated August 2, 1989 are hereby REVERSED AND SET ASIDE. The respondent COA is directed to determine on a quantum meruit basis the total compensation due to the contractor for the completed portion of these two projects and to allow the payment thereof immediately upon the completion of said determination. No costs.8 (Emphasis, underscoring and italics supplied; citations omitted.)

Adopted into a disallowance case, the Court explained in Melchor v. Commission on Audit:9

As previously discussed, it would be unjust to order the petitioner to shoulder the expenditure when the government had already received and accepted benefits from the utilization of the building.

x x x x

In a more recent case, Dr. Rufino O. Eslao v. Commission on Audit, G.R. No. 89745, April 8, 1991, the Court directed payment to the contractor on a quantum meruit basis despite the petitioner's failure to undertake a public bidding. In that case, the Court held that "to deny payment to the contractor of the two buildings which are almost fully completed and presently occupied by the university would be to allow the government to unjustly enrich itself at the expense of another."

x x x x

Although the two cases mentioned above contemplated a situation where it is the contractor who is seeking recovery, we find that the principle of payment by quantum meruit likewise applies to this case where the contractor had already been paid and the government is seeking reimbursement from the public official who heads the school. If after COA determines the value of the extra works computed on the basis of quantum meruit, it finds that the petitioner made an excess or improper payment for these extra works, then petitioner Melchor shall be liable only for such excess payment.10 (Emphasis supplied)

This compensation on the basis of quantum meruit applies whether a government employee or contractor rendered the service. The only difference is that the reasonable compensation for the work performed or goods delivered by a contractor is determined by the Commission on Audit (COA), while the reasonable compensation for a government employee is inescapably limited to compensation authorized by law which includes: (i) basic pay in the form of salaries and wages; (ii) other fixed compensation in the form of fringe benefits authorized by law; (iii) variable compensation (e.g., honoraria or overtime pay) within the amounts authorized by law despite the procedural mistakes that might have been committed by approving and certifying officers.11 These separate parameters for personnel benefits were set in Abellanosa v. COA.

Thus, I believe that there is no cause to limit the application of the Rules in Madera - which I had hoped would serve as a blueprint to examining disallowances in general - to only personnel benefits disallowances. Nevertheless, I submit to the collective wisdom of the banc.

Proceeding now to the case of Torreta, the proper amount of the liability in this case only requires the determination of the difference between the value of the animals dispersed by NDA to the farm partner HapiCows and the value of the animals that have been returned. In other words, the disposition needs only to order COA to determine the balance in what is essentially a loan of agricultural assets as the proper amount of disallowance.

Accordingly, I vote to DISMISS the petition.



Footnotes

1 G.R. No. 244128. September 8, 2020.

2 Id. at 35-36.

3 G.R. No. 185806, November 17, 2020.

4 Such that retention by payees of the disallowed personnel benefits extinguishes the obligation of officers solidarily liable.

5 Madera v. COA, supra note 1, at 27. The citation for the quoted portion reads: See Melchor v. Commission on Audit, G.R. No. 95398, August 16, 1991, 200 SCRA 704, 714, citing Eslao v. Commission on Audit, G.R. No. 89745, April 8, 1991, 195 SCRA 730, 739. This case applies the same principle of unjust enrichment in cases where the contractor seeks payment to this case where reimbursement is sought from the official concerned; see also Andres v. Commission on Audit, G.R. No. 94476, September 26, 1991, 201 SCRA 780.

6 Concurring Opinion, Abellanosa v. COA, supra note 3, at 2-3.

7 Supra note 5.

8 Id. at 738-739.

9 Supra note 5.

10 Id. at 713-714.

11 See Manual on Position Classification and Compensation, Chapter 3, Total Compensation Chart, p. 3-3.


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