EN BANC
[ G.R. No. 218461, September 14, 2021 ]
ILDEFONSO T. PATDU, JR., PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.
D E C I S I O N
LOPEZ, J., J.:
Before the Court is a Petition for Certiorari1 filed under Rule 64, in relation to Rule 65, of the Rules of Court assailing the December 13, 2010 Decision2 and the April 6, 2015 Resolution3 of respondent Commission on Audit (COA).
FACTUAL ANTECEDENTS
In 1992, the Government of the Republic of the Philippines, through the then Department of Transportation and Communications (DOTC), internationally bid out the construction of the Davao Fishing Port Complex under the National Fishing Development Program (project).4 The undertaking is of the nature of a foreign-assisted project,5 being funded by the Overseas Economic Cooperation Fund (OECF),6 a funding institution in Japan, under the 17th Yen Credit Package (PH-126).7
Three proponents submitted their bids, namely: (i) Hanil Development Company; (ii) the consortium of C. Itoh, F.F. Cruz and DMC; and (iii) the joint venture of Engineering Equipment, Inc. and J.E. Manalo (EEI/Manalo Joint Venture).8
The EEI/Manalo Joint Venture offered the lowest bid at P347,000,005.00.9 Hence, on December 7, 1992, the Pre-Qualification, Bids and Awards Committee of the DOTC recommended that the contract for the project be awarded to the EEI/Manalo Joint Venture.10 Subsequently, the DOTC and the EEI/Manalo Joint Venture executed a construction contract dated April 20, 1993, entitled "Construction of Davao Fishing Port Complex for the Nationwide Fishing Ports Development Program (Fishing Ports Package II)" (Construction Contract), with DOTC as project owner and EEI/Manalo Joint Venture as project contractor therein.11 Under the Construction Contract, EEI/Manalo Joint Venture was obligated to execute, complete and maintain construction works related to the project.12
During the period of the Construction Contract, the EEI/Manalo Joint Venture offered to construct the relevant construction works within a shorter period, from 1,096 days as stipulated in the bidding documents to a period of 910 days.13 In consideration for the early completion of the project, DOTC agreed to pay EEI/Manalo Joint Venture an early completion incentive bonus in the amount of P35,445,070.35 (Incentive Bonus).14
During construction, the DOTC issued several variation orders, amounting to P7,450,855.91 (Variation Orders).15 The only Variation Orders at issue in this petition are the following: (i) Variation Order No. 5, which sought to change the original design of the preparation/landing wharf; (ii) Variation Order No. 7, which sought to change the design of the pavement and landscaping, and construction of certain parts of the drainage/sewerage system, fresh water supply, and masonry works; and (iii) Variation Order No. 8, which sought to change the quantity and materials of parts of the drainage system, fresh water supply, wharf, and breakwater.16 Petitioner, as the project engineer, was responsible for reviewing the amounts as stated under Variation Order Nos. 5, 7 and 8.17
On June 18, 1997, the COA Auditor assigned to DOTC issued a Notice of Disallowance (ND) No. 97-011-102 (DOTC) (95), disallowing P53,951,955.03 of the project.18 The disallowance stemmed from the findings of COA's Special Task Force on Flagship Projects (STFFP), which determined that the project's actual cost of P354,450,860.91 manifestly exceeded COA's estimated cost of the project that amounted to P300,498,905.88.
Pursuant to the mandate given to COA to review and evaluate contracts, and to inspect and appraise infrastructure projects,19 it issued Resolution No. 91-052 dated September 17, 1991, which requires an auditorial review and evaluation of infrastructure contracts awarded as a result of public bidding, to determine its regularity and the reasonableness of the contract price. More specifically, Section 5 of the Resolution provides that "[f]or purposes of determining the reasonableness of the contract price as a technical aspect of the review and evaluation process, the Approved Agency Estimate (AAE) shall serve as a reference value for the formulation of the COA cost estimate." Section 7 provides that "[t]he total contract price should be equal to or less than the total COA estimate plus ten percent (10%) in order to sustain a finding of reasonableness, otherwise, the contract price will be deemed excessive."
Accordingly, upon the STFFP's determination that the project was in excess of P53,951,955.03 over the COA estimated cost (Excess Project Cost), the COA Auditor disallowed such excess amount.20
On December 12, 1997, the DOTC requested the Office of the COA Chairman to lift ND No. 97-011-102 (DOTC) (95) dated June 18, 1997.21 The COA Chairman referred the DOTC request to the COA Auditor for appropriate action which the COA Auditor treated the request as a request for reconsideration.22
With respect to the incentive bonus, the COA Auditor determined on May 28, 1998 that the amount of P35,445,070.35 is excessive, and reduced the same to P20,129,354.80.23 Hence, the COA Auditor disallowed the excess of P15,315,715.55 of the incentive bonus through ND No. 98-004-102 (DOTC) (96).24
On July 14, 1999, DOTC filed a motion to dismiss25 with the Office of the COA Chairman on the ground that foreign-assisted projects of the government are exempt from the requirement of auditorial review as provided in the September 17, 1991 COA Resolution that formed the basis of the COA disallowance. The DOTC cited the exempting clause in the Implementing Rules and Regulations (IRR) of Presidential Decree (P.D.) No. 1594, which provides:
The above notwithstanding, nothing in these implementing rules and regulations shall negate any existing and future commitments with respect to the bidding, award and execution of contracts financed partly or wholly with funds from international financial institutions, as well as from bilateral and other similar sources.26
The DOTC then stated that the above exempting clause excluded foreign-assisted projects from P.D. No. 1594 and its IRR. Hence, the September 17, 1991 COA Resolution, which lays down the rule on the reasonableness of the project cost of a contract pursuant to P.D. No. 1594 and its IRR, is not applicable.27
On January 31, 2000, the COA Auditor issued a letter entitled "41 Indorsement"28 to the Director of National Government Audit Office (NGAO) II, recommending the lifting of ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 on the ground that the project is a foreign-assisted or Official Development Assistance (ODA)-funded project of the Philippine Government, and therefore, Philippine procurement law and procedure, specifically P.D. No. 1594 and its IRR, is not applicable.29 The COA Auditor relied on the clarification issued by the Secretary of Justice in his Opinion30 dated April 21, 1987 that the exempting clause in the IRR of P.D. No. 1594 effectively excluded foreign-assisted projects from the coverage of P.D. No. 1594 and its IRR, especially on the designation of ceiling in the amounts of contracts.
On July 19, 2001, the NGAO II Director issued a letter entitled "5th Indorsement"31 to the COA Auditor, sustaining the lifting of ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 based on the ground raised by the COA Auditor in the 4th Indorsement dated January 31, 2000.
On November 14, 2002, the DOTC requested the lifting of ND No. 98-004-102 (DOTC) (96) dated May 28, 1998 with the COA Auditor,32 based on the same position taken by the NGAO II Director in the 5th Indorsement that was issued in ND No. 97-011-102 (DOTC) (95). The matter was then raised to the COA's Legal and Adjudication Office.
The COA's Legal and Adjudication Office denied the request for the lifting of ND No. 98-004-102 (DOTC) (96) dated May 28, 1998 in LAO-N Decision No. 2005-039 dated January 27, 2005 and LAO-N Resolution No. 2005-039A dated November 24, 2005, on the ground that P.D. No. 1594 and its IRR are applicable to the project and that, therefore, the notice of disallowance should be sustained.33 The Legal and Adjudication Office found that the Construction Contract incorporated the content of the bidding documents for the project, and the bidding documents state that P.D. No. 1594 and its IRR shall be applicable.34
DOTC appealed LAO-N Decision No. 2005-039 dated January 27, 2005 and LAO-N Resolution No. 2005-039A dated November 24, 2005 to the COA Proper (COA-CP).
Ruling of the COA-CP
In Decision No. 2010-13335 dated December 13, 2010, the COA-CP denied the appeal of the DOTC, and affirmed ND No. 98-004-102 (DOTC) (96) dated May 28, 1998.36 In addition, the COA in the same appeal also set aside the 5th Indorsement dated July 19, 2001 of the NGAO II Director and reinstated ND No. 97-011-102 (DOTC) (95) dated June 18, 1997. The dispositive portion of the December 13, 2010 COA-CP Decision reads:
WHEREFORE, premises considered, the herein appeal is DENIED. Accordingly, LAO-N Decision No. 2005-039 and LAO-N Resolution No. 2005-039A denying the request to lift ND No. 98-004-102 (DOTC) (96) are hereby AFFIRMED. Likewise, the 5th Indorsement dated July 19, 2001 of the Director of then NGAO II lifting ND No. 97-011-102 (DOTC) (95) is hereby SET ASIDE. The decision of the DOTC Department Auditor disallowing the project cost difference/excess is hereby REINSTATED.37
In the said Decision, the COA-CP found that the parties themselves voluntarily agreed on the applicability of P.D. No. 1594. Volume 1 of the Bid and Contract Documents which provides that "[t]he provisions of Presidential Decree No. 1594, and its implementing rules and regulations, and other relevant laws and employer regulations shall apply to this bidding and any contract based thereon."38 The NGAO II Director therefore erroneously lifted ND No. 97-011-102 (DOTC) (95) dated June 18, 1997.
DOTC filed a motion for reconsideration from Decision No. 2010-133 dated December 13, 2010,39 which the COA denied in Resolution No. 2015-13540 dated April 6, 2015.
Petitioner Ildefonso Patdu, Jr. (Petitioner), who was held civilly liable under ND No. 97-011-102 (DOTC) (95), thereafter filed the instant petition to assail the December 13, 2010 Decision and April 6, 2015 Resolution of the COA.
ISSUES
I.
Whether the decision of the NGAO II Director to lift and set aside ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 had attained finality, and hence, had become immutable and unalterable
II.
Whether ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 and ND No. 98-004-102 (DOTC) (96) should be lifted and set aside
III.
Whether the petitioner should be held liable for the audit disallowance arising from Variation Order Nos. 5, 7 and 8
COURT'S RULING
At the outset, it must be clarified that the assailed Decision dated December 13, 2010 and the Resolution dated April 6, 2015 rendered by the COA involved two notices of disallowance. Nevertheless, as petitioner was held civilly liable only under ND No. 97-011-102 (DOTC) (95), the resolution of this case shall be limited to the said notice of disallowance. With the two notices of disallowance involving different parties, and without any pronouncement on the liability of petitioner in ND No. 98-004-102 (DOTC) (96), this is not the proper forum for him to assail the COA Decision and Resolution insofar as the latter notice of disallowance is concerned. In the absence of a direct injury suffered by petitioner, he clearly lacks the legal standing to assail the affirmance of ND No. 98-004-102 (DOTC) (96) in this petition.
Finality of Lifting of a COA Notice of
Disallowance by the COA Director
Petitioner postulates that the lifting of ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 by the NGAO II Director in the 5th Indorsement had attained finality and hence, has become immutable and unalterable.41 Consequently, the COA-CP may no longer reverse and set aside, after almost ten (10) years, the lifting of ND No. 97-011-102 (DOTC) (95) dated June 18, 1997.42 To support its contention, petitioner cites the doctrine of finality or immutability of judgments.43
On the other hand, respondent insists that the NGAO II Director did not elevate the decision for review, and that the State cannot be put in estoppel by the mistakes or errors of its officials or agents.44 Thus, the NGAO II Director's decision did not attain finality.45
We uphold the arguments raised by the petitioner.
In Civil Service Commission v. Moralde,46 We held that:
[t]he doctrine of immutability of judgments applies as much to decisions of agencies exercising quasi-judicial powers as they do to judicial decisions. Jurisprudence is categorical: 'the principle of conclusiveness of prior adjudications is not confined in its operation to the judgments of what are ordinarily known as courts, but extends to all bodies upon which judicial powers had been conferred.'
Moreover, the related doctrine of res judicata, which bars a subsequent action when a former identical action has already lapsed into finality, equally applies to decisions rendered by quasi-judicial bodies.47
The exercise of quasi-judicial powers by administrative officers or bodies involves the investigation of facts or ascertainment of the existence of facts, holding of hearings, weighing of evidence, and drawing conclusions from them as basis for official action and exercise of discretion in a judicial nature.48 In this case, the proceeding before the NGAO II Director was in the exercise of quasi-judicial functions as it involves the investigation of facts concerning (i) the expenditure of funds intended for a government project; (ii) ruling on appeal whether such expenditure is illegal, irregular, unnecessary, excessive, extravagant or unconscionable; and (iii) deciding on appeal whether to disallow such expenditure. Hence, the doctrine of immutability of judgments applies to the decision of the NGAO II Director.
Further, the manner by which a ruling attains finality depends on the peculiar relevant law and/or rules of procedure governing the proceeding before the adjudicating body. For proceedings before the COA, a ruling attains finality in accordance with Section 6, Rule V of the COA Revised Rules of Procedure, which provides:
SECTION 6. Power of Director on Appeal. - The Director may reverse, modify, alter, or affirm the decision or ruling of the Auditor. However, should the Director render a decision reversing, modifying or altering the decision or ruling of the Auditor, the Director shall, within ten (10) days, certify the case and elevate the entire record to the Commission Proper for review and approval.
Based on this provision, it is only in cases where the NGAO II Director reverses, modifies, or alters the decision or ruling of the Auditor that the decision should be elevated to the COA-CP for automatic review. Conversely, when the NGAO II Director affirms or sustains the ruling of the Auditor, further elevation and review are unnecessary. Thus, as pointed out by Senior Associate Justice Estela Perlas-Bernabe (Justice Perlas-Bernabe) during the deliberations of this case, the affirmance, when not anymore appealed by an aggrieved party in accordance with the COA rules, will simply lapse into finality. The reason for the automatic review provision is palpable: the COA-CP is tasked to resolve the seeming conflict between the Auditor's and the Director's rulings to arrive at a proper conclusion on an audit case. However, if no conflict exists, then there is no need for the COA-CP to automatically review the matter since both the Auditor and Director are already in agreement.
In this case, the Auditor lifted the original disallowance, and this decision was sustained by the NGAO II Director. Thus, in the final analysis, both the Auditor and Director were in agreement on the lifting of the disallowance, which negates the application of Section 6, Rule V of the 1997 COA Rules of Procedure.
The EEI/Manalo Joint Venture, as one of the persons held liable for the disallowed amount, wrote the Letter dated December 12, 1997 to the COA Auditor assailing the issuance of ND No. 97-011-102 (DOTC) (95). Treating the letter as a request for reconsideration, the COA Auditor eventually recommended the total lifting of the disallowance through a 4th Indorsement dated January 31, 2000. In turn, this recommendation was sustained in full by the NGAO II Director in a 5th Indorsement dated July 19, 2001.49
Given that the NGAO II Director decided to sustain the lifting of the disallowance, petitioner correctly pointed out that the elevation of the NGAO II Director's ruling to the COA-CP was not required under Section 6, Rule V of the 1997 COA Rules of Procedure. Hence, since the NGAO II Director's decision to sustain the Auditor's recommended lifting of disallowance was not anymore subjected to an appeal, the same had already lapsed into finality. As such, the conditions for the automatic review provision under the COA Rules was not validly met. Consequently, COA gravely abused its discretion in reinstating the same.
Likewise, We share the observation of Justice Perlas-Bernabe that the COA's reinstatement of the notice of disallowance came after the lapse of an inordinate period of almost ten (10) years. While the decision of the NGAO II Director was issued on July 19, 2001, the reinstatement of the COA was made only on December 13, 2010. Undoubtedly, it would be clearly unjust to resurrect a money claim against petitioner when an unreasonable length of time had already passed.
Accordingly, We rule that the lifting of ND No. 97-011-102 (DOTC) (95) dated June 18, 1997 by the NGAO II Director in the 5th Indorsement is final, immutable and unalterable. As such, COA should not have included the said notice of disallowance when it resolved the appeal of DOTC concerning the disallowance covered by ND No. 98-004-102 (DOTC) (96). Simply because the resolution of the two notices of disallowance was premised on the same issue concerning the interpretation of the applicability of P.D. No. 1594 to foreign-assisted projects, should not authorize the automatic application of a later issuance now carrying a different interpretation, to reverse a previous issuance. This is especially true in this case when the previous issuance involving ND No. 97-011-102 (DOTC) (95), with petitioner relying on the NGAO II Director's ruling that P.D. No. 1594 is not applicable to foreign-assisted projects, has already attained finality. Considerations of due process dictates that petitioner should not be hailed back to a proceeding that has already absolved him of liability because of a sudden change in the interpretation of a law, more so, when made in a proceeding involving a different notice of disallowance. As held in Social Security System v. Isip:50
When a final judgment is executory, it becomes immutable and unalterable. It may no longer be modified in any respect either by the court which rendered it or even by this Court. The doctrine is founded on considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become final at some definite point in time.
Hence, the COA-CP is precluded from issuing Decision No. 2010-133 dated December 13, 2010 and Resolution No. 2015-135 dated April 6, 2015, insofar as it reinstated and affirmed ND No. 97-011-102 (DOTC) (95) dated June 18, 1997.
There is no malice, bad faith or
negligence in the issuance of
Variation Order Nos. 5, 7 and 8
We hasten to point out that while main reason for the issuance of the two notices of disallowance concerns the interpretation of the applicability of P.D. No. 1594 to foreign-assisted projects, we must exercise judicial restraint in issuing a ruling thereon, for two reasons: Firstly, the interpretation given by the COA NGAO Director II has already attained finality insofar as ND No. 97-011-102 (DOTC) (95) is concerned. This already constitutes the law of the case and could no longer be the subject of an appeal. Secondly, we could not rule on the different interpretation subsequently adopted by the COA in ND No. 98-004-102 (DOTC) (96) considering that the instant case was brought by petitioner, whose legal standing in court extends only insofar as ND No. 97-011-102 (DOTC) (95) is concerned.
Nonetheless, even if We examine the assailed COA Decision and Resolution concerning ND No. 97-011-102 (DOTC) (95) and apply the provisions of P.D. No. 1594, petitioner would still be absolved from liability. During the construction of the project, the DOTC issued Variation Orders in the total amount of P7,450,855.91.51 This increased the total actual amount of the project,52 as follows:
Original Project Cost
Add: Cost on Variation Orders |
P347,000,005
7,450,855
|
| Total Project Cost |
P354,450,860 |
The COA only allowed a project cost of P300,498,905.87. Thus, the Excess Project Cost, as per COA's finding, is P53,951,954.13,53 computed as follows:
Total Project Cost
Add: COA-Allowed Project Cost |
P354,450,860.00
300,498,905.87
|
| Excess Project Cost |
P53,951,954.13 |
It must be pointed out that the excess on the cost of the Variation Orders is only a portion of the aforementioned Excess Project Cost. With specific reference to the Variation Orders, the COA found that these are excessive by an amount of P5,210,744.29,54 computed as follows:
Cost on Variation Orders
Less: COA-Allowed Cost on Variation Orders |
P7,450,855.00
2,240,110.71
|
| Excess Cost on Variation Orders |
P5,210,744.29 |
The Variation Orders found to be in excess of the COA-allowed cost are as follows: (i) Variation Order No. 5, which sought to change the original design of the preparation/landing wharf; (ii) Variation Order No. 7, which sought to change the design of the pavement and landscaping, and construction of certain parts of the drainage/sewerage system, fresh water supply, and masonry works; and (iii) Variation Order No. 8, which sought to change the quantity and materials of parts of the drainage system, fresh water supply, wharf, and breakwater.55 The other Variation Orders were not raised in issue in this petition.
Here, petitioner, as the project engineer, was responsible for reviewing the amounts of variation orders in Variation Order Nos. 5, 7 and 8. We quote the April 6, 2015 COA Resolution, thus:
It can be gleaned from the above computation that the amounts of the variation orders reviewed by Mr. Patdu as Project Engineer were part of the total project cost, a portion of which was found excessive and disallowed in audit. Mr. Patdu failed to diligently review the variation orders which resulted in the overpricing of the project[.] However, his liability shall only be on the excess costs for the variation orders he reviewed, in the total amount of [P]5,210,744.29.56
Petitioner explains that Variation Order Nos. 5, 7 and 8, which he reviewed as the Project Engineer of the project, were necessary and are reasonable.57
We agree.
It bears pointing out that variation orders per se in government infrastructure contracts are not automatically invalid. In the IRR of P.D. No. 1594, variation orders involve the "increase/decrease in quantities or reclassification of items [x x x] usually due to change of plans, design or alignment to suit actual field conditions, or as a result of great disparity between the preconstruction plans used for purposes of bidding and the 'as staked plans' or construction drawings prepared after a joint survey by the contractor and the government after award of the contract."58 The IRR of P.D. No. 1954 provides detailed requirements and standards for the execution, implementation, and payment of variation orders. Relevantly, this provision on variation orders has been reiterated in the 2016 Revised Implementing Rules and Regulations of the Government Procurement Reform Act, which recognizes variation orders as:
x x x those orders issued by the procuring entity to cover any increase/decrease in quantities, including the introduction of new work items that are not included in the original contract or reclassification of work items that are either due to change of plans, design or alignment to suit actual field conditions resulting in disparity between the preconstruction plans used for purposes of bidding and the 'as staked plans' or construction drawings prepared after a joint survey by the contractor and the Government after award of the contract, provided that the cumulative amount of the positive or additive Variation Order does not exceed ten percent (10%) of the original contract price.59
In short, variation orders are necessary adjustments to construction projects, and as long as they are within the general scope of the project and are compliant with the relevant audit and procurement rules, they are permissible.
In this case, the variation orders at issue sought to introduce adjustments to construction works relating to the fishing port, specifically adjustments in the design of the preparation/landing wharf, the design of the pavement and landscaping, construction of certain parts of the drainage/sewerage system, fresh water supply, and masonry works, and change in the quantity and materials of parts of the drainage system, fresh water supply, wharf, and breakwater. The relevance of these additional adjustments to the project is not in question. The respondent likewise did not dispute that these adjustments are within the general scope of the project. What is merely at issue is the excess cost of such variation orders, based on the COA estimate of the appropriate and justifiable cost of such orders.
In this case, petitioner justified the necessity of issuing the Variation Orders, as follows:
6.46.1. Variation Order No. 5 Mobilization / Demobilization cost for dredging equipment was included in the aforementioned variation order because there is a new item of work, dredging, which is not included in the original contract and there is a need to bring in said equipment to the project site, hence the cost of mobilization/demobilization.
6.46.2. Variation Order No. 7 - The original contract calls for the use of Concrete Asphalt for Roadway and Parking Area. Due to the absence of supply of concrete asphalt in the area, the Contractor in his desire not to delay the project, offered to use PCCP instead at the same cost as Concrete Asphalt. The said substitution resulted to an increase in the thickness of the pavement and a decrease in the thickness of the sub-base. This offsetting resulted to a cost difference of P10,902,431.33 in favour of the government.
6.46.3. Variation Order No. 7E - Construction of Deepwell, the cost of deepwell for Variation Order No. 3 cannot be adopted because they vary in depth. Deepwell for V.O. #3 is 42 meters deep, while for V.O. #7E, it is 75 meters deep.
6.46.4. Variation Order No. 8 - The discrepancy between the quantity take-off and the B0Q resulted to an overestimate of quantities in V.O. No. 8, however, this [sic] quantities were rectified in the Final Quantification.60
Notably, these justifications were favorably considered by the Auditor when he recommended the lifting of (ND) No. 97-011-102 (DOTC) (95).61
With respect to the civil liability imposed for the excess cost of the variation orders, Sections 38[62 and 4363 of the Administrative Code,64 as interpreted in prevailing case law,65 provides that the civil liability of approving/authorizing public officers for disallowances issued by the COA will only arise upon a clear showing of bad faith, malice, or gross negligence. Otherwise, such officers are presumed to have acted within the regular performance of their official functions and in good faith, and hence, are not accountable for the return of disallowed amounts.
In disallowances involving unlawful or irregular government contracts, the parameters on determining the civil liability of approving/authorizing officers are reflected under Rules 2 (a) and (b) of the recently established guidelines in Torreta v. Commission on Audit:66
Accordingly, we hereby adopt the proposed guidelines on return of disallowed amounts in cases involving unlawful/irregular government contracts submitted by herein Justice Perlas-Bernabe, to wit:
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.ℒαwρhi৷
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 the 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. Pursuant to Section 43 of the Administrative Code of 1987, approving and certifying officers who are clearly shown to have acted with bad faith, malice, or gross negligence, are solidarily liable together with the recipients for the return of the disallowed amount.
c. The civil liability for the disallowed amount may be reduced by the amounts due to the recipient based on the application of the principle of quantum meruit on a case to case basis.
d. These rules are without prejudice to the application of the more specific provisions of law, COA rules and regulations, and accounting principles depending on the nature of the government contract involved.67
Herein, as pointed by Justice Perlas-Bernabe, during the deliberations of this case, apart from the statement that "[petitioner] failed to diligently review VO Nos. 5, 7, and 8 which resulted in the overpricing of the project as computed by the [COA-STFFP]," there was nothing in COA's ruling that specifies any acts or omissions of petitioner amounting to bad faith, malice, or gross negligence relative to his participation on the project.68 Indeed, in Daplas v. Department of Finance,69 We ruled that "[a]n act done in good faith, which constitutes only an error of judgment and for no ulterior motives and/or purposes [x x x] is merely Simple Negligence." Accordingly, the lack of specific factual determination on the petitioner's bad faith, malice, or gross negligence is fatal to the COA's finding of his civil liability.
Moreover, petitioner justified the necessity of the Variation Orders by identifying the technical adjustments and rectifications made during the course of the project, which resulted in additional project costs.70 These were not rebutted by the respondent in its Comment.
Perforce, in view of the foregoing, petitioner's civil liability in ND No. 97-011-102 (DOTC) (95) should not be reinstated.1a⍵⍴h!1
ACCORDINGLY, the instant petition is PARTIALLY GRANTED. The December 13, 2010 Decision and April 6, 2015 Resolution No. 2015-135 of the Commission on Audit are REVERSED and SET ASIDE insofar as ND No. 97-011-102 (DOTC) (95) is concerned. Notice of Disallowance No. 97-011-102 (DOTC) (95) is hereby LIFTED.
SO ORDERED.
Gesmundo, C. J., Leonen, Caguioa, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, M. Lopez, Gaerlan, and Rosario, JJ., concur.
Perlas-Bernabe, J., Please see Concurring Opinion.
Footnotes
1 Rollo, pp. 3-24.
2 Penned by Chairman Reynaldo A. Villar, with Commissioners Juanito G. Espino, Jr. and Evelyn R. San Buenaventura, concurring; id. at 28-35.
3 Id. at 36-43.
4 Id. at 5.
5 Id.
6 Id.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id. at 66-69.
12 Id.
13 Id. at 5.
14 Id. at 7.
15 Id. at 5.
16 Id. at 6.
17 Id. at 41.
18 Id. at 70.
19 See Section 7(6), Chapter 3, Subtitle B, Title I, Book V, Administrative Code of 1987.
20 Id.
21 Id. at 83-97.
22 Id. at 97-100.
23 Id.
24 Id.
25 Id. at 88.
26 Second paragraph, clause 1, Section VI of the IRR of P.D. No. 1594.
27 Supra.
28 Rollo, p. 7.
29 Id.
30 Id. at 90-91.
31 Id. at 92-94.
32 Id. at 95-96.
33 Id.
34 Id. at 99-100.
35 Id. at 28-34.
36 Id. at 34.
37 Id.
38 Id. at 32.
39 Id. at 44-61.
40 Id. at 36-43.
41 Id. at 10-15.
42 Id.
43 Id.
44 Id. at 8-13.
45 Id.
46 838 Phil. 840, 856 (2018).
47 Brillantes v. Castro, 99 Phil. 497, 503 (1956).
48 The Special Audit Team, Commission on Audit v. Court of Appeals and Government Service Insurance System, 709 Phil. 167, 183 (2013).
49 Rollo, p. 93.
50 549 Phil. 112, 116 (2007).
51 Rollo, p. 5.
52 Id. at 41.
53 Id.
54 Id.
55 Id. at 6.
56 Id. at 41.
57 Id. at 15-23.
58 Section III.CI.l.l, IRR of P.D. No. 1594.
59 Annex E (Contract Implementation Guidelines for the Procurement of Infrastructure Projects), 2016 Revised Implementing Rules and Regulations of the Government Procurement Reform Act.
60 Rollo, p. 22 (citing the letter dated December 12, 1997).
61 Id. at 43.
62 Section 38. Liability of Superior Officers. - (1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross
63 Section 43. Liability for Illegal Expenditures. - expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.
64 Executive Order No. entitled "Instituting the 'Administrative Code of 1987'" (August 3, 1988).
65 See Madera v. Commission on Audit, G.R. No. 244128, September 8, 2020.
66 G.R. No. 242925, November 10, 2020.
67 Id., emphases supplied.
68 Reflections, p. 11.
69 808 Phil. 763, 774 (2017).
70 Rollo, p. 30.
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