G.R. No. 210936, June 28, 2016
TEODORO B. CRUZ, JR., MELCHOR M. ALONZO, AND WILFREDO P. ALDAY, Petitioners, v. COMMISSION ON AUDIT, Respondents.
D E C I S I O N
This is a Petition for Certiorari1 under Rule 64 of the Rules of Court, assailing Decision No. 2012-1422 and Notice/Resolution3 rendered by the Commission on Audit (COA).
On 27 February 2008, the then Director of the COA Legal and Adjudication Office (LAO)-Corporate, issued Notice of Disallowance No. LRTA 2008-005 (2002) in the amount of US$58,800 as payment to the contractor for the repairs made.12 Held as persons responsible were the following: Atty. Teodoro B. Cruz, Jr., administrator; Atty. Melchor M. Alonzo, manager, Administrative Department; Mr. Wilfredo P. Alday, manager, General Services Division; Atty. Aurora A. Salvana, manager, Legal Division and BAC chairperson; Ms. Evelyn L. Macalino, chief accountant; and Mr. Edgardo P. Castro, Jr., president of TAN-CA International, Inc.13 The grounds for the disallowance are enumerated as follows:chanRoblesvirtualLawlibrary
- No service repair agreement and/or contract was executed by and between the LRTA and the Contractor;
- The payment amounting to US$58,800 was effected on 10 April 2002 without the necessary certification that the traction motor armatures passed the required testing and acceptance requirements by the LRTA Engineering Division. Moreover, the Contractor failed to return the waste materials for the repaired traction motor armatures as provided for in Item No. 2.22 of the Terms of Reference (TOR);
- The recommendation of the LRTA Technical Evaluation Committee to the BAC for the conduct of site visit or ocular inspection of the Contractor's facilities prior to the award and/or during the undertaking of the repair was ignored by the Management; thus putting the LRTA in a disadvantageous position of having no assurance on the capability of the Contractor to undertake the necessary repair works; and,
- The 10 remaining units of traction motor armature are still with the Contractor TAN-CA International, Inc./Yujin Machinery, Ltd. in Korea, as of AOM date.11
Atty. Teodoro B. Cruz, Jr., Atty. Melchor M. Alonzo, and Mr. Wilfredo P. Alday filed their appeal15 with COA claiming as follows:chanRoblesvirtualLawlibrary
- Lack of supporting documents for the payment, in violation of Section 4(6) of Presidential Decree (P.D.) No. 1445;
- Failure of LRTA Management to file legal action against the Contractor for not complying with the terms and conditions stipulated in the TOR;
- Failure of LRTA Management to forfeit the performance bond posted by the Contractor despite the delay in the delivery of the repaired equipment;
- Failure of the Contractor to complete the repair of all traction motor armatures; and
- Payment to the Contractor for the cost of repair of 13 units of traction motor armature when only nine units passed the one-year warranty period.14
1. The payment made was demanded and justified by the attendant circumstances: first, that the 13 units of traction motor armature were already repaired and delivered to LRTA and thoroughly passed the five-month testing period; second, the appellants were never aware that the units delivered must pass the one-year warranty period before payment, as it is unlikely that with such imposition any legitimate contractor/bidder will agree; and third, train operations could be stopped if the payment was not made which could have resulted in greater losses to LRTA;
2. With the successful passing of the nine (9) repaired units of traction motor armature within the one-year warranty period, there can be no question that the same must be paid by LRTA; otherwise, it would unjustly enrich itself at the expense of the appellants. Appellants learned about the failure of the four remaining units to pass the one-year warranty period only from the ND. Moreover, the failure of the four units to pass the one-year warranty period occurred after Appellants Atty. Cruz, Jr. and Atty. Alonzo were separated from the service in December 2003 and August 2003, respectively; and
3. The impugned ND was a result of the re-examination and re-evaluation of the AOM, the issuance of which settled the account. Under Section 52 of P.D. No. 1445, the Commission may motu propio review or open settled accounts at any time before the expiration of three (3) years after the settlement and shall in no case be opened or reviewed after said period. Hence, the ND has already prescribed.16cralawred
WHEREFORE, premises considered, this Commission DENIES the herein appeal and AFFIRMS ND No. LRTA 2008-005 (2002) dated February 27, 2008 disallowing the payment of US$58,800.00 to TAN-CA International, Inc./Yujin Machinery Ltd., for repair of traction motor armatures.in a Resolution19 dated 6 December 2013 received by petitioners on 5 February 2014, the Motion for Reconsideration20 was also denied for lack of merit.21ChanRoblesVirtualawlibrary
The LRTA Management is hereby directed to exert its utmost efforts to demand payment of the liquidated damages as penalty for late delivery in accordance with this Decision and to compel the Contractor to comply with its contractual obligations, or to take appropriate legal action against it to redress the violation of its rights under the TOR. Further, the LRTA Management should demand from the Contractor the return of the 10 traction motor armatures which are still in the hands of the Contractor or the payment of their money value.18cralawred
SECTION 52. Opening and Revision of Settled Accounts. - (1) At any time before the expiration of three years after the settlement of any account by an auditor, the Commission may motu propio review and revise the account or settlement and certify a new balance. For that purpose, it may require any account, vouchers, or other papers connected with the matter to be forwarded to it.However, as correctly pointed out by COA, the issuance of an AOM is just an initiatory step in the investigative audit to determine the propriety of disbursements made. It is the allowance in audit or the issuance of a notice of disallowance that becomes final and executory absent any motion for reconsideration or appeal. In case the notice of disallowance is appealed, it is the decision on appeal that becomes final and executory that would settle the account.
(2) When any settled account appears to be tainted with fraud, collusion, or error calculation, or when new and material evidence is discovered, the Commission may, within three years after the original settlement, open the account, and after a reasonable time for reply or appearance of the party concerned, may certify thereon a new balance. An auditor may exercise the same power with respect to settled accounts pertaining to the agencies under his audit jurisdiction.
(3) Accounts once finally settled shall in no case be opened or reviewed except as herein provided.cralawred
[T]he issuance of the AOM is just an initiatory step in the investigative audit being conducted by Andal as Provincial State Auditor to determine the propriety of the disbursements made by the Municipal Government of Laguna. That the issuance of an AOM can be regarded as just an initiatory step in the investigative audit is evident from COA Memorandum No. 2002-053 dated 26 August 2002. A perusal of COA Memorandum No. 2002-053, particularly Roman Numeral III, Letter A, paragraphs 1 to 5 and 9, reveals that any finding or observation by the Auditor stated in the AOM is not yet conclusive, as the comment/justification25 of the head of office or his duly authorized representative is still necessary before the Auditor can make any conclusion. The Auditor may give due course or find the comment/justification to be without merit but in either case, the Auditor shall clearly state the reason for the conclusion reached and recommendation made. Subsequent thereto, the Auditor shall transmit the AOM, together with the comment or justification of the Auditee and the former's recommendation to the Director, Legal and Adjudication Office (DLAO), for the sector concerned in Metro Manila and/or the Regional Legal and Adjudication Cluster Director (RLACD) in the case of regions. The transmittal shall be coursed through the Cluster Director concerned and the Regional Cluster Director, as the case may be, for their own comment and recommendation. The DLAO for the sector concerned in the Central Office and the RLACD shall make the necessary evaluation of the records transmitted with the AOM. When, on the basis thereof, he finds that the transaction should be suspended or disallowed, he will then issue the corresponding Notice of Suspension (NS), Notice of Disallowance (ND) or Notice of Charge (NC), as the case may be, furnishing a copy thereof to the Cluster Director. Otherwise, the Director may dispatch a team to conduct further investigation work to justify the contemplated action. If after in-depth investigation, the DLAO for each sector in Metro Manila and the RLACD for the regions find that the issuance of the NS, ND, and NC is warranted, he shall issue the same and transmit such NS, ND or NC, as the case may be, to the agency head and other persons found liable therefor.Finally, petitioners - specifically petitioner Cruz, who claims to have relied only on his subordinates - bewail the ruling finding them liable as the final approving authority. We find this argument meritorious.
From the foregoing, it is beyond doubt that the issuance of an AOM is, indeed, an initial step in the conduct of an investigative audit considering that after its issuance there are still several steps to be conducted before a final conclusion can be made or before the proper action can be had against the Auditee. There is, therefore, no basis for petitioner Corales' claim that his comment thereon would be a mere formality. Further, even though the AOM issued to petitioner Corales already contained a recommendation for the issuance of a Notice of Disallowance, still, it cannot be argued that his comment/reply to the AOM would be a futile act since no Notice of Disallowance was yet issued. Again, the records are bereft of any evidence showing that Andal has already taken any affirmative action against petitioner Corales after the issuance of the AOM.41cralawred
Meanwhile, COA Decision No. 2012-142 dated 13 September 2012 makes no mention of the liability of the persons listed as responsible for the amount disallowed. The Decision merely states as follows:chanRoblesvirtualLawlibrary
Reference PAYEE AMOUNT
PERSONS RESPONSIBLE Check No. CV No./Date Letter of Credit No. DC 202093F TANCA INT'L. INC/YUJIN (KOREA) US$ 58,800.00 (P3,025,104.40) Atty. T. B. Cruz Jr.
-For being the approving officer and conforme on the drawdown of U.S. $58,800.00.
Atty. M. M. Alonzo
Mr. W.P. Alday
-Initialed under the administrator's name in the Conforme Letter on the drawdown of U.S.$58,800.00.
Atty. A.A. Salvana
-Recommended the award of repair of traction Motors Armatures to TANCA INT'L INC.,/YUJIN (KOREA) WITHOUT EXPECTING A Service Repair Agreement.
Evelyn L. Macalino - Chief Accountant TANCA INT'L. INC./YUJIN (KOREA)
-For being the payee to the repair service.
The LRTA management should direct its efforts to compel the Contractor to either repair the remaining units still in Korea or return them at the latter's expense as stipulated under Item No. 2.3.1 of the TOR, with penalty in either case, as provided under Item No. 8.1 thereof.42cralawredFurthermore, We note that the dispositive portion does not mention the personal liability of the officers:chanRoblesvirtualLawlibrary
The LRTA Management is hereby directed to exert its utmost efforts to demand payment of the liquidated damages as penalty for late delivery in accordance with this Decision and to compel the Contractor to comply with its contractual obligations, or to take appropriate legal action against it to redress the violation of its rights under the TOR. Further, the LRTA Management should demand from the Contractor the return of the 10 traction motor armatures which are still in the hands of the Contractor or the payment of their money value.43cralawredMore important, We also note the actions of petitioners relative to the disallowance. At the time of payment, they were not aware of the defects in the repair. When they finally became aware of the default of the contractor, they demanded compliance and required the latter to deliver the unrepaired traction motor armatures and corresponding waste materials. These demands were made through (a) a letter dated 27 November 2002 signed by petitioner Cruz, and addressed to Yujin Machineries, Inc. through TAN-CA International, Inc.; (b) a letter dated 3 December 2002 signed by petitioner Alday, and addressed to TAN-CA International, Inc.; and (c) a letter dated 24 April 2003 signed by petitioner Alday, and addressed to Yujin Machineries.44 And when these letters proved futile, petitioners referred the matter to the LRTA legal department for appropriate action through letter signed by petitioner Alday, and addressed to Atty. Saldana.45ChanRoblesVirtualawlibrary
We would be setting a bad precedent if a head of office plagued by all too common problems-dishonest or negligent subordinates, overwork, multiple assignments or positions, or plain incompetence is suddenly swept into a conspiracy conviction simply because he did not personally examine every single detail, painstakingly trace every step from inception, and investigate the motives of every person involved in a transaction before affixing, his signature as the final approving authority.WHEREFORE, the assailed Commission on Audit Decision No. 2012-142 dated 13 September 2012 and Notice/Resolution dated 6 December 2013 are hereby AFFIRMED with the pronouncement that petitioners Cruz, Alday and Alonzo are not personally liable for the disallowed amount.
There appears to be no question from the records that documents used in the negotiated sale were falsified. A key tax declaration had a typewritten number instead of being machine-numbered. The registration stampmark was antedated and the land reclassified as residential instead of ricefield. But were the petitioners guilty of conspiracy in the falsification and the subsequent charge of causing undue in injury and damage to the Government?
We can, in retrospect, argue that Arias should have probed records, inspected documents, received procedures, and questioned persons. It is doubtful if any auditor for a fairly sized office could personally do all these things in all vouchers presented for his signature. The Court would be asking for the impossible. All heads of offices have to rely to a reasonable extent 'on their subordinates and on the good faith of those prepare bids, purchase supplies, or enter into negotiations. If a department secretary entertains important visitors, the auditor is not ordinarily expected to call the restaurant about the amount of the bill, question each guest whether he was present at the luncheon, inquire whether the correct amount of food was served and otherwise personally look into the reimbursement voucher's accuracy, propriety, and sufficiency. There has to be some added reason why he should examine each voucher in such detail. Any executive head of even small government agencies or commissions can attest to the volume of papers that must be signed. There are hundreds of document, letters and supporting paper that routinely pass through his hands. The number in bigger offices or departments is even more appalling.47cralawred
1Rollo, pp. 3-20.
2 Id. at 21-26; dated 13 September 2012 and issued by Chairperson Ma. Gracia M. Pulido-Tan and Commissioners Juanito G. Espino, Jr. and Heidi L. Mendoza.
3 Id. at 27-28; dated 6 December 2013.
4 Also referred to as TANCA in the records.
5 Id. at 21.
11 Id. at 21-22.
12 Id. at 22.
14 Id. at 22-23.
15 Id. at 29-38.
16 Id. at 23.
17 Id. at 21-26.
18 Id. at 25.
19 Id. at 27-28.
20 Id. at 39-46.
21 Id. at 4.
22 Id. at 6-9.
23 Id. at 63-66; 68-71; 73-76.
24 Id. at 78-93.chanrobleslaw
25 Id. at 82.
26 Id. at 84.
27 Id. at 85.
28 Id. at 89.
29 Id. at 86.
30 Id. at 86-87.
32 Id. at 87-88.
33 Id. at 95-107.
34 Id. at 97.
35 Id. at 98.
37 269 Phil. 794 (1989).
38Rollo, p. 99.
39 Id. at 99-100.
40 G.R. No. 186613, 27 August 2013, 703 SCRA 623.
42 Id. at 25.
44 Id. at 99.
45 Id. at 100.
46 259 Phil. 794 (1989).