G.R. No.

205389, November 19, 2019

SOCRATES C. FERNANDEZ, IN HIS CAPACITY AS MAYOR OF THE CITY OF

TALISAY, PETITIONER, v. COMMISSION ON AUDIT, RESPONDENT.

DECISION

INTING, J.:

Before the Court is a Petition for Certiorari1 under Rule 64 in relation to Rule 65 of the

Rules of Court seeking to set aside Decision No. 2012-042 2 dated April 23, 2012 and
Resolution (Decision No. 2012-267)3 dated December 28, 2012 of the Commission on
Audit (COA).

The Antecedents
 
The present case involves two contracts entered into by the City Government of Talisay,
Province of Cebu, to wit: 1) the computerization project, which took place in 2002 to
2003, during the term of Eduardo R. Gullas as Mayor of Talisay City; and 2)
the purchase of liquid fertilizers, which took place in 2005 to 2006, during the term of
Socrates C. Fernandez (petitioner) as Mayor of Talisay City.

The computerization project

The City of Talisay, after allegedly conducting a public bidding, awarded its
computerization project to PowerDev Corporation (PowerDev). 4 The project covered the
following areas:
1) Business Licensing, Integration of Real Property Assessment;
2) Personnel Information System;
3) Government Payroll System;
4) Automated Timekeeping System;
5) Project Monitoring System;
6) Building, Electrical and Water Permit Application System;
7) Software Development for Local Civil Registrar Information System;
8) Timekeeping System for Job Order Employees; and
9) Local Area Network.5
However, the Audit Team Leader (ATL) of the COA, Talisay City, questioned the
foregoing project. Having found deficiencies, including lack of the required documents,
the ATL issued Audit Observation Memorandum (AOM) Nos. 2004-001 and 2005-001,
dated December 21, 2004 and February 9, 2005, respectively. 6 As a consequence, the
then Regional Cluster Director (RCD), Regional Legal and Adjudication Office (RLAO),
COA Regional Office No. VII suspended the payments for the project by issuing four
Notices of Suspension (NS), all dated February 27, 2006, to wit:
 1) NS No. 2004-001-100-(2004) L2-06-159-00-008;
2) NS No. 2004-002-100-00-(2004) L2-06-159-00-009;
3) NS No. 2004-003-100-(2004) L2-06-159-00-010; and
4) NS No. 2005-004-100-(2004) L2-06-159-00-011.7
The suspensions matured into disallowances due to non-compliance with the
requirements embodied in the Notices of Suspension. 8 Accordingly, the then RCD,
RLAO, COA Regional Office No. VII issued the following Notices of Disallowance (ND), all
dated April 23, 2007:

1) ND No. 2004-001-100-(2004) L2-07-159-00-006 for P8,500,000.00;9

2) ND No. 2004-002-100-(2004) L2-07-159-00-007 for P613,440.00;10
3) ND No. 2004-003-100-(2004) L2-07-159-00-008 for P10,086,560.00;11 and
4) ND No. 2005-004-100-(2004) L2-07-159-00-009 for P7,788,000.00.12

The purchase of liquid fertilizers

The ATL also questioned the price of 3,333 bottles of liquid fertilizer purchased by the
City of Talisay at P900.00 per liter or a total of P2,999,700.00. 13 The highest price
obtained by the ATL through canvass and actual purchase from Pacifica Agrivet was
P171.00 per liter plus 10% thereof, or P188.10. Thus, the unit overprice was P711.90. 14

As a consequence, the ATL issued AOM No. 06-001 dated November 8,

2006.15 Subsequently, the ATL issued ND No. 2007-002 dated July 23, 2007,
disallowing the amount of P2,372,762.70 (or the unit overprice of P711.90 multiplied by
3,333 units).16

The COA’s Ruling

On account of the audit findings, a special audit team was constituted to conduct an
investigation of the above contracts under the COA Legal and Adjudication Sector (LAS)
Office Order No. 2007-S-009 dated September 10, 2007. 17

Pending review of the Special Investigation Report, the persons held liable under the
five NDs, through counsel, filed an appeal dated December 21, 2007. 18 Aside from
petitioner, the persons named liable under the NDs were the other signatories, the Bids
and Awards Committee (BAC) members, and the payee. Their appeal was addressed to
the Regional Legal and Adjudication Director of COA Regional Office No. VII.
 
On June 3, 2009, the Regional Director of COA Regional Office No. VII transmitted the
appeal to the Team Leader of the special investigation team for appropriate action. 19

On April 23, 2012, the COA rendered the assailed Decision No. 2012-042 20 dated April
23, 2012, denying the appeal and affirming the subject disallowances. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, the instant appeal is DENIED for lack of merit. ND
Nos. 2004-001-100-(2004) L2-07-159-00-006 for P8,500,000.00; 2004-002-100-
(2004) L2-07-159-00-007 for P613,440.00; 2004-003-100-(2004) L2-07-159-00-008
for P10,086,560.00; and 2005-004-100-(2004) L2-07-159-00-009 for P7,788,000.00,
all dated April 23, 2007; and ND No. 2007-002 dated July 23, 2007, disallowing the
amount of P2,372,762.70, are hereby AFFIRMED. 21
Aggrieved, the persons liable under the five NDs, through counsel, filed a Motion for
Reconsideration.22 Having found no merit in the Motion for Reconsideration, the COA
denied it with finality in the assailed Resolution (Decision No. 2012-267) 23 dated
December 28, 2012. Accordingly, the COA affirmed Decision No. 2012-042 dated April
23, 2012.

Hence, petitioner filed the instant petition for certiorari in representation of all the
persons named liable in the NDs issued by the COA. Among those so named are former
City Mayor Eduardo R. Gullas, Viluzminda G. Villarante, Emma L. Macuto, Edgar M.
Mabinay, Atty. Aurora Econg, Joan L. Vebar, Audie B. Bacasmas, and Emely S. Cabrera
(collectively, Gullas, et al.).

On November 20, 2018, Gullas, et al., through counsel, filed a Motion for
Severance24 with the Court, praying that the case involving the computerization project
be re-docketed as a separate petition.
 
In the Court’s Resolution25 dated March 19, 2019, the Motion for Severance was denied
for lack of merit. Subsequently, Gullas, et al. filed a Motion for Reconsideration,26 but
this was likewise denied in the Court’s Resolution 27 dated August 6, 2019.

The Issues

The present petition raises the following assignment of errors:

I

RESPONDENT COMMISSION ON AUDIT (COA) DEPRIVED PETITIONER AND THE OTHER

PERSONS NAMED LIABLE IN THE NOTICE OF DISALLOWANCE (ND) [OF] THEIR RIGHT
TO DUE PROCESS WHEN THEIR APPEAL ADDRESSED TO THE DIRECTOR OF THE LEGAL
AND ADJUDICATION SECTOR OF COA REGIONAL OFFICE NO. VII WAS NOT DECIDED
BY SAID OFFICIAL BUT FORWARDED TO THE COMMISSION PROPER.

II

RESPONDENT ERRED IN DISALLOWING THE PAYMENTS MADE BY THE CITY OF TALISAY

TO POWERDEV FOR ITS INFORMATION TECHNOLOGY PROJECT.

III

RESPONDENT ERRED IN HOLDING [HEREIN] PETITIONER AND OTHER PERSONNEL OF

THE CITY OF TALISAY [LIABLE] FOR THE ALLEGED OVERPRICING IN THE PURCHASE OF
LIQUID FERTILIZERS.28
The Court’s Ruling

The petition lacks merit.

The Court finds that petitioner and the other persons held liable under the NDs were
not deprived of due process, and the COA did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the questioned NDs. However,
with respect to the computerization project, the persons held liable thereunder are
relieved of personal liability up to the extent of the benefit that the City of Talisay has
derived from the project.

I. Petitioner and the other persons named in the NDs were not deprived of due process.

Under the then 1997 Revised Rules of Procedure of the COA, 29 an aggrieved party may
appeal from an order or decision or ruling rendered by the Auditor embodied in a
report, memorandum, letter, NDs and charges, Certificate of Settlement and Balances,
to the Director who has jurisdiction over the agency under audit. 30 In turn, the party
aggrieved by a final order or decision of the Director may appeal to the Commission
Proper.31

Pending the resolution of the appeal, which was filed before the Regional Legal and
Adjudication Director in December 2007, the 2009 Revised Rules of Procedure of the
COA (2009 Revised Rules of COA)32 took effect. Under these Rules, the pertinent
provisions on appeal substantially remained the same. Section 1, Rule V of the 2009
Revised Rules of COA states that "an aggrieved party may appeal from the decision of
the Auditor to the Director who has jurisdiction over the agency under audit." In turn,
Section 7, Rule V of the 2009 Revised Rules of COA provides:
Sec. 7. Power of Director on Appeal. - The Director may affirm, reverse, modify or alter
the decision of the Auditor. If the Director reverses, modifies or alters the decision of
the Auditor, the case shall be elevated directly to the Commission Proper for automatic
review of the Directors’ decision. The dispositive portion of the Director’s decision shall
categorically state that the decision is not final and is subject to automatic review by
the CP.
In this case, however, observance of the aforementioned rules of procedure was
impracticable. Here, the investigation of the case was conducted by a special team of
auditors, and this team was headed by Atty. Roy L. Ursal (Ursal), the Regional Director
himself.33 Through LAS Office Order No. 2007-S-009, Director Ursal, Atty. Federico E.
Dinapo, Jr., Atty. Marites E. Banzali, and Ma. Jocelyn N. Merencillo were deputized to
act for and in behalf of the COA in the investigation of the case. 34 Certainly, the direct
referral to the Commission Proper of the decision appealed from, rendered by the
special audit team headed by Director Ursal himself, was appropriate under the
circumstances.

At any rate, it has been ruled time and again that the essence of due process is
the opportunity to be heard.35 In administrative proceedings, the parties are heard
when they are accorded a fair and reasonable opportunity to explain their case or are
given the chance to have the ruling complained of reconsidered. 36 Further, it is settled
that there is no denial of procedural due process where the opportunity to be heard
either through oral arguments or through pleadings is accorded. 37

In this case, petitioner and the other persons named liable in the NDs were accorded
the opportunity to be heard when their appeal was given due course and decided on its
merits by the Commission Proper. They were also able to file a motion for
reconsideration of the denial of their appeal which the Commission Proper likewise duly
considered before ruling to deny it with finality. Evidently, petitioner and all the persons
liable under the NDs were not deprived of due process.

II. The COA did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the questioned NDs.

By grave abuse of discretion is meant such capricious and whimsical exercise of

judgment as is equivalent to lack of jurisdiction.38 The abuse of discretion must be
grave as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility; it must be so patent and gross as to amount to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.39 The burden lies on the petitioner to prove not merely reversible
error, but grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the public respondent issuing the impugned order.40

In this case, the Court finds no grave abuse of discretion on the part of the COA in
issuing the questioned NDs. The oft-repeated rule is that findings of administrative
agencies are accorded not only respect but also finality when the decision or order is
not tainted with unfairness or arbitrariness that would amount to grave abuse of
discretion.41 Here, the COA merely discharged its duties and acted within the bounds of
the law.
A. The COA did not err in disallowing the payments made by the City of Talisay to
PowerDev for its computerization project.
Republic Act No. (RA) 9184 or the "Government Procurement Reform Act" requires that
all procurement shall be done through competitive bidding, except in cases where
resort to alternative methods of procurement may be allowed to promote economy and
efficiency.42 RA 9184 pertinently provides:
ARTICLE IV
COMPETITIVE BIDDING

Sec. 10. Competitive Bidding. - All Procurement shall be done through Competitive
Bidding, except as provided for in Article XVI of this Act.

xxxx

ARTICLE XVI
ALTERNATIVE METHODS OF PROCUREMENT
 
Sec. 48. Alternative Methods. - Subject to the prior approval of the Head of the
Procuring Entity or his duly authorized representative, and whenever justified by the
conditions provided in this Act, the Procuring Entity may, in order to promote economy
and efficiency, resort to any of the following alternative methods of Procurement:
 

(a) Limited Source Bidding, otherwise known as Selective Bidding x x x;

(b) Direct Contracting, otherwise known as Single Source Procurement x x x;
(c) Repeat Order x x x;
 (d) Shopping x x x; or
(e) Negotiated Procurement x x x.
As held by the COA, the investigating team found nothing in the records that would
show that the Software Development Agreements (SDAs) or the project proposals were
executed, approved, and signed by the City Mayor concerned only after there had been
public biddings conducted for the purpose. 43 On the contrary, the investigating team
observed circumstances strongly indicating that public biddings were not actually
conducted for the entire computerization project. Further, the COA noted the
investigating team’s observation that the SDAs and the project proposals, which were
attached to certain disbursement vouchers (DVs), were executed prior to the dates of
the alleged advertisement and bidding. 44 Thus, the COA upheld the investigating team’s
conclusion that the SDAs could not have been the result of the purported bidding.

In his petition, petitioner strongly insists that "the bidding process and the
disbursement of the expense for the Information Technology Project of the City of
Talisay were all done in accordance with law and at no disadvantage to the government
whatsoever."45 Quite the contrary, however, he admits in his Memorandum 46 that the
City of Talisay directly contracted with PowerDev. He asserts that "[t]he choice of
directly contracting with PowerDev brought advantages to the City as it expedited the
process, and most importantly is that the desired and much needed automation of its
processes were accomplished in a short period of time". 47 He adds that "by contracting
directly with PowerDev, [he] was able to save time, resources and costs in producing
the much needed automation, complying with the 3rd requirement of the aforesaid rule,
that the 'method chosen promotes economy and efficiency, and that the most
advantageous price for the government is obtained. '"48

Beyond doubt, the COA was correct in concluding that no public biddings were
conducted for the computerization project. Anent the contention that the City of Talisay
validly resorted to direct contracting as an alternative method of procurement, the
Court finds it to be unworthy of consideration. It is evident that such claim is a mere
afterthought. Also, if it was indeed the intention of the City of Talisay to resort to direct
contracting, it remains questionable that all the SDAs and project proposals were
supported by bidding documents, including Advertisement to Bid, Abstract of
Bids/Canvass, TWG Resolutions, and BAC Minutes. 49 These documents were not
necessary in direct contracting as this method of procurement "does not require
elaborate Bidding Documents because the supplier is simply asked to submit a price
quotation or a pro-forma invoice together with the conditions of sale, which offer may
be accepted immediately or after some negotiations." 50 In addition, petitioner has not
clearly shown any of the allowed conditions for direct contracting, to wit:
(a) Procurement of Goods of proprietary nature, which can be obtained only from the
proprietary source, i.e. when patents, trade secrets and copyrights prohibit others from
manufacturing the same item;
(b) When the Procurement of critical components from a specific manufacturer, supplier or
distributor is a condition precedent to hold a contractor to guarantee its project
performance, in accordance with the provisions of his contract; or,
(c) Those sold by an exclusive dealer or manufacturer, which does not have subdealers
selling at lower prices and for which no suitable substitute can be obtained at more
 advantageous terms to the Government.51
The COA also observed the lack of an appropriation ordinance for the realignment of
funds. This contravenes RA 7160 or the "Local Government Code (LGC) of 1991," which
entails the passage of an ordinance in order for a local government to realign its
budget. The pertinent provisions are Sections 336 and 346 thereof, which provide:
Sec. 336. Use of Appropriations Funds and Savings. - Funds shall be available
exclusively for the specific purpose for which they have been appropriated. No
ordinance shall be passed authorizing any transfer of appropriations from one item to
another. However, the local chief executive or the presiding officer of
the sanggunian concerned may, by ordinance, be authorized to augment any item in
the approved annual budget for their respective offices from savings in other items
within the same expense class of their respective appropriations.

Sec. 346. Disbursements of Local Funds and Statement of Accounts. - Disbursement

shall be made in accordance with the ordinance authorizing the annual or supplemental
appropriations without the prior approval of the sanggunian concerned. Within thirty
(30) days after the close of each month, the local accountant shall furnish
the sanggunian with such financial statements as may be prescribed by the COA. In the
case of the year-end statement of accounts, the period shall be sixty (60) days after
the thirty-first (31st) of December.
Petitioner argues that the passage of an ordinance had been rendered moot as the
funds were already realigned and disbursed. Through the Executive Orders
(EOs)52 issued by petitioner and former City Mayor Gullas, funds were taken from the
savings from various items in the city budget and the 20% Development Fund and
transferred to Information Technology Equipment and Software. 53 In view thereof,
petitioner contends that the only proper act that the Sangguniang Panlungsod (SP)
could make was to pass a resolution ratifying the realignment of funds. Thus, he
asserts that the passage of SP Resolution No. 2006-79 for the ratification of the
realignment of funds has the same effect as that of an appropriation ordinance.

In his memorandum, petitioner also avers that the SP, through 3 rd SP Resolution No.
2009-105 and 1st SP Resolution No. 2001-45, granted him and Gullas, respectively, the
authority to represent the City of Talisay "in all contracts and memoranda of agreement
made pursuant to a law or ordinance."54 He argues that by virtue of these Resolutions,
he and Gullas were legally authorized to proceed with the execution of the SDAs.

The foregoing arguments are untenable.

As stated in Section 336 of the LGC, the general rule is that funds shall be available
exclusively for the specific purpose for which they have been appropriated. The
exception to this is when the local chief executive is authorized by ordinance to
augment any item in the approved annual budget from savings in other items within
the same expense class. In other words, Section 336 of the LGC requires an
implementing ordinance so that the local chief executive can augment items in the
annual budget of the local government unit. Thus, the appropriation ordinance of a
given fiscal year must expressly authorize the local chief executive before he can make
augmentations in that particular year, or at the very least, he must be authorized by
ordinance before he can make augmentations. 55
In this case, 3rd SP Resolution No. 2009-105 and 1st SP Resolution No. 2001-45, which
purportedly granted petitioner and Gullas the authority to represent the City of Talisay
in all contracts and memoranda of agreement made pursuant to a law or ordinance, do
not have the force of the required ordinance that must expressly authorize the local
chief executive to make augmentations or realignments in the city budget. Likewise, SP
Resolution No. 2006-79, purportedly ratifying the realignment of funds to finance the
computerization project through the aforesaid EOs issued by petitioner and Gullas, has
no curative effect.

It must also be emphasized that the power of the local chief executive to augment
items under Section 336 of the LGC is a mere exception to the general rule that funds
shall be available exclusively for the specific purpose for which they have been
appropriated. "Exceptions are strictly construed and apply only so far as their language
fairly warrants, with all doubts being resolved in favor of the general proviso rather
than the exception."56 Being an exception to the general rule, an augmentation or
realignment must strictly comply with all the requirements for its validity. One such
requirement is that the local chief executive must be authorized by an ordinance.

While ordinances are laws and possess a general and permanent character, resolutions
are mere declarations of the sentiment or opinion of a lawmaking body on a specific
matter and are temporary in nature.57 As opposed to ordinances, a resolution cannot
confer rights and no rights can be inferred therefrom. 58

In view thereof, ND No. 2004-001-100-(2004) L2-07-159-00-006 in the amount of

P8,500,000.00, ND No. 2004-002-100-(2004) L2-07-159-00-007 in the amount of
P613,440.00, ND No. 2004-003-100-(2004) L2-07-159-00-008 in the amount of
P10,086,560.00, and ND No. 2005-004-100-(2004) L2-07-159-00-009 in the amount of
P7,788,000.00, all dated April 23, 2007, covering the disallowed disbursements for the
computerization project, should be upheld.

B. The COA also did not err in disallowing the overprice in the purchase of liquid
fertilizers.

As found by the COA, the investigation of the special audit team revealed irregularities
attending the bidding process. Thus:
1. The City of Talisay submitted two (2) different sets of BAC Minutes for the
same BAC meeting allegedly held on 16 December 2005.

The first BAC Minutes [dated December 16, 2005], which was attached to support DV
No. [sic] DV No. 300-0512-2510 for the payment to Gracias Industries does not include
in the listing of the lowest bidders, the name Gracias Industries. Instead, it lists as
lowest bidder for liquid fertilizer Joseth Trading. This is the last entry of bidders on the
second page and signed by Geralie P. Alob, the designated recorder of the BAC
meeting.

Subsequently, the City of Talisay submitted a folder of documents in support of its

defense against the disallowance. This time, it submitted another BAC Minutes [likewise
dated December 16, 2005], but instead of Joseth Trading as the lowest bidder recorded
therein, it was Gracias Industries already. Also, this time, the lowest bidder for the
liquid fertilizer is not anymore the last entry of the BAC minutes, but an additional five
(5) entries of lowest bidders for different products and services were included, which
did not appear in the BAC minutes attached to the DV.

The team hereby puts in issue the authenticity of the said two BAC Minutes. This
discrepancy, if not satisfactorily explained by the City of Talisay, including its
Designated Recorder of the BAC meeting, raises serious doubt as to the authenticity of
these particular bidding documents and of the alleged bidding itself. 59
Petitioner argues that the foregoing finding is terribly flawed because it is not duly
supported by evidence and it failed to properly consider the facts surrounding the
purchase. He asserts that it was the Department of Agriculture (DA), which approached
the City of Talisay and informed it that there was an on-going government project on
the distribution of fertilizers to qualified beneficiaries, and that the funds therefor were
already available. He adds that all that the City of Talisay had to do was to identify
potential beneficiaries and conduct a bidding for the potential suppliers.

Petitioner also asserts that neither he nor any personnel from the City of Talisay was
informed of and witnessed the alleged testing conducted by the COA Technical Services
Offices, which concluded that the price of the liquid fertilizers purchased was bloated
and that the contents thereof were not within the specified label in the bottle.

Further, petitioner denies the COA’s claim that there were two sets of minutes of the
December 16, 2005 BAC meeting. He asserts that the minutes of the BAC meeting
which was submitted on December 21, 2007 to the Regional Director of COA Regional
Office No. VII was the complete minutes of the BAC meeting held on December 16,
2005. Thus, he claims that the minutes attached to DV No. 300-0512-2510 was an
incomplete one; and as borne out by the complete minutes, Gracias Industries who
participated in the bidding and offered the lowest bid was awarded the contract.

Additionally, petitioner argues that the matter of whether the price of the lowest bidder
is higher than the price of other suppliers in the market who did not participate in the
bidding is already beyond the scope of responsibility of the BAC. Hence, petitioner
maintains that the members of the BAC of the City of Talisay and other personnel who
participated in the transaction cannot be held liable for the alleged overpricing
especially in the absence of any proof or evidence of wrongdoing on the part of the
BAC.

The Court is not persuaded.

At this juncture, it bears to emphasize that the findings of fact of administrative

agencies are generally accorded great respect, if not finality, by the courts. 60 Such
findings must be respected as long as they are supported by substantial evidence, even
if such evidence is not overwhelming or even preponderant. 61 By reason of their special
knowledge and expertise over matters falling under their jurisdiction, administrative
agencies are in a better position to pass judgment thereon. 62

In Delos Santos, et al. v. Commission on Audit,63 the Court declared:

At the outset, it must be emphasized that the CoA is endowed with enough latitude to
determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or
unconscionable expenditures of government funds. It is tasked to be vigilant and
conscientious in safeguarding the proper use of the government’s, and ultimately the
people’s, property. The exercise of its general audit power is among the constitutional
mechanisms that gives life to the check and balance system inherent in our form of
government.

Corollary thereto, it is the general policy of the Court to sustain the decisions of
administrative authorities, especially one which is constitutionally-created, such as the
CoA, not only on the basis of the doctrine of separation of powers but also for their
presumed expertise in the laws they are entrusted to enforce. Findings of
administrative agencies are accorded not only respect but also finality when the
decision and order are not tainted with unfairness or arbitrariness that would amount to
grave abuse of discretion. It is only when the CoA has acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, that this Court entertains a petition questioning its rulings. x x x 64
In this case, the COA cannot be faulted for upholding the disallowance of the amount
representing the overprice in the purchase of the liquid fertilizers as its special audit
team merely based its reports and recommendations on the discrepancies found in the
bidding documents submitted by petitioner. Besides, regardless of whether the City of
Talisay was indeed merely acting under the direction of the DA, and of whether the
bidding documents submitted by petitioner were authentic, it cannot be denied that
there was irresponsibility and lack of prudence on the part of the City of Talisay when it
neglected to determine the prevailing price of the liquid fertilizer. It patently took the
risk of not getting the most advantageous price for the government.

As found by the COA, the lowest price per liter of the liquid fertilizer, as offered in the
alleged bidding and purchased by the City of Talisay, was P900.00. On the other hand,
the highest selling price per liter, obtained by the ATL through canvass and actual
purchase from Pacifica Agrivet, was P171.00 per liter plus 10% thereof, or P188.10.
Hence, there appears a considerably huge unit overprice of P711.90, which the Court
cannot brush aside.

It is a declared policy of the State that "all resources of the government shall be
managed, expended or utilized in accordance with law and regulations, and
safeguarded against loss or wastage through illegal or improper disposition, with a view
to ensuring efficiency, economy and effectiveness in the operations of
government."65 Corollary thereto, RA 9184 requires that the procuring entity shall, in all
instances, ensure that the approved budget for the contract reflects the most
advantageous prevailing price for the government. 66 Apparently, the City of Talisay
failed in abiding by the mandate of the law.

Consequently, ND No. 2007-002 dated July 23, 2007, disallowing the overprice in the
purchase of liquid fertilizers in the amount of P2,372,762.70, should be sustained.

III. Good faith as a defense to avoid liability is unavailing under the circumstances;
however, the liability of the persons held accountable under the computerization project
shall be reduced inasmuch as the City of Talisay has derived benefits from the software
and equipment installed by PowerDev.

As a rule, public officials are entitled to the presumption of good faith in the discharge
of official duties.67 Good faith is a state of mind which denotes "honesty of intention,
and freedom from knowledge of circumstances which ought to put the holder upon
inquiry; an honest intention to abstain from taking any unconscientious advantage of
another, even through technicalities of law, together with absence of all information,
notice, or benefit or belief of facts which render transaction unconscientious." 68

The lack of any showing of bad faith or malice also gives rise to a presumption of
regularity in the performance of official duties. 69 However, this presumption fails in the
presence of an explicit rule that was violated. 70

Section 103 of Presidential Decree No. 1445 declares that expenditures of government
funds or uses of government property in violation of law or regulations shall be a
personal liability of the official or employee found to be directly responsible therefor.
The public official’s personal liability arises only if the expenditure of government funds
was made in violation of law.71

In this case, in view of violations of the LGC and RA 9184, the presumption of good
faith in the discharge of official duties in favor of petitioner and the other persons liable
under the assailed NDs fails. Hence, they should be held personally liable for the
disallowed amounts.

In Verceles, Jr. v. COA,72 Leandro B, Verceles, Jr. (Verceles), who was then the
Provincial Governor of Catanduanes, was found personally liable because his acts of:
(1) making augmentations without prior authority; and (2) entering into a contract on
behalf of the province without requisite authority were in violation of the LGC. 73 The
Court held that Verceles’ reliance on, among others, the opinion of the Department of
Interior and Local Government, could not exculpate him from his personal liability. 74 It
declared that Section 336 of the LGC and Section 26 of the Province’s appropriation
ordinance in CY 2002, in clear and precise language, required the authority from
the Sangguniang Panlalawigan before the governor could make augmentations or
realignments of funds.75

In the instant case, Atty. Aurora Econg, the City Legal Officer of Talisay, erroneously
construed Sections 336 and 346 of the LGC by contending that the augmentation or
realignment of the city budget may be done through the City Mayor’s mere issuance of
an EO.76 As in the aforementioned case of Verceles, reliance on such erroneous
construction should similarly not absolve the persons held liable under the NDs relating
to the computerization project. Moreover, there was violation of RA 9184, specifically
Section 10, Article IV in relation to Article XVI thereof, in view of the failure to conduct
the required competitive bidding or the failure to show circumstances justifying the
resort to any of the alternative methods of procurement. Evidently, the patent
violations of the LGC and of the procurement requirements under RA 9184 negated the
presumptions of good faith and regularity in the performance of official duties in favor
of petitioner and the other persons liable under the NDs.

As to the purchase of liquid fertilizers, good faith is likewise absent considering that the
City of Talisay disregarded Section 36, Article X of RA 9184 by neglecting to obtain the
most advantageous price for the government. The alleged lowest price of ?900 per unit
as offered in the alleged bidding is remarkably excessive and unreasonable considering
that the highest price obtained through canvass and actual purchase by the ATL from
Pacifica Agrivet was only ?188.10 per unit. Further, the Court notes the COA’s finding of
irregularity with respect to the bidding documents submitted by petitioner which raise
doubts as to their authenticity as well as the authenticity of the bidding itself. In this
regard, the Court finds that petitioner and the other persons named liable for the
overpriced liquid fertilizers were not in good faith while discharging their official duties.
 
It is worthy to note the ruling in Joson III v. COA,77 where Tomas N. Joson III (Joson)
assailed the denial by the COA of his petition for exclusion from liability for the
disallowed amount. The Court pronounced that Joson, being the head of the procuring
entity and the Governor of Nueva Ecija, is not automatically the party ultimately liable
for the disallowed amount. It declared that he cannot be held liable simply because he
was the final approving authority of the transaction in question and that the
employees/officers who processed the same were under his supervision. Thus:
The payments to A.V.T. Construction was disallowed by COA for the reason that the
pre-qualification or eligibility checklist using the “pass/fail” criteria, the Net Financial
Contracting Capacity (NFCC), and Technical Eligibility documents are missing.

It is well to note that the missing documents, the eligibility checklist using the pass/fail
criteria, the NFCC and the technical eligibility documents, pertain to the pre-
qualification stage of the bidding process.

Under R.A. No. 9184, the determination of whether a prospective bidder is eligible or
not falls on the BAC. The BAC sets out to determine the eligibility of the prospective
bidders based on their compliance with the eligibility requirements set forth in the
Invitation to Bid and their submission of the legal, technical and financial documents
required under Sec. 23.6, Rule VIII of the Implementing Rules and Regulations of R.A.
No. 9184.

Thus, the presence of the eligibility checklist, the NFCC and the technical eligibility
documents are the obligations and duties of the BAC. The absence of such documents
are the direct responsibility of the BAC. Petitioner had no hand in the preparation of the
same. He cannot therefore be held liable for its absence. 78
Under the circumstances of the present case, however, the Court is not inclined to
apply the same ruling. Petitioner herein does not pray for exclusion from personal
liability. In fact, he filed the instant petition in representation of all the persons named
liable in the NDs. Moreover, he does not claim that he has no prior knowledge regarding
the conduct of the bidding processes. Accordingly, the Court holds him and the other
persons named in the NDs accountable for the disallowed amounts. Public officials who
are directly responsible for, or participated in making the illegal expenditures, as well as
those who actually received the amounts therefrom shall be solidarily liable for their
reimbursement.79

However, the Court cannot dismiss the fact that PowerDev had already done a
substantial amount of work in relation to the computerization project, which ultimately
redounded to the benefit of the city government. As manifested by petitioner, almost all
of the systems installed by PowerDev are still fully operational and are being used by
the City of Talisay;80 others were operational for a certain period of time, but were
discontinued in view of the suspension notice, resulting in the breakdown of the
software programs.81

Below is the alleged summary of the status82 of the software and equipment installed by
PowerDev in the different departments of the City of Talisay:
 Software Status
   
1. Tricycle Franchise - Completely installed and fully operational until the present
System (City Permits and
Licensing Section)
2. Real Property Tax - Completely installed but no longer used as of the present due to
Assessment System (City the introduction of the new assessment manual when Talisay
Assessor[’]s Office) used the new PIN (Property Index No.) replacing the PIN used
when Talisay was still a municipality.
- Completely installed and operational until the present except
for the programs on Service Records and Leave Benefits and
3. Personnel Information Privileges.
System (Human Resource
Division)
4. Automated Timekeeping - Completely installed and fully operational until the present
System (Human Resource
Division)
5. Hardware and Software - Completely installed and fully operational until the present
for Timekeeping for Job
Order Employees (Human
Resource Division)
6. Government Payroll - Completely installed and fully operational until the present
System (Accounting Office)
7. Project Monitoring - Completely installed and was operational for a certain period of
System (Office of the City time but no longer operational as of the present due to the lack of
Engineer) software modifications, repair, maintenance and upgrading
8. Building, Electrical and - Completely installed and was operational for a certain period
Water Permit Application but no longer operational as of the present due to the significant
System (Office of the City updates in the National Building Code (P.D. 1096), lack of
Engineer) software modifications, repair, maintenance and upgrading.
9. Local Civil Registrar - Completely installed and was in the process of revision and
Information System upgrading to conform to the updates of printing and annotations
but was halted due to the termination of the agreement with [the]
contractor. System is still running until the present but is used
only for queries and verification of birth records.
10. Local Area Network - Completely installed and fully operational until the present.
(LAN) Installation and Only four departments are using the LAN as of the present, these
Cabling are: City Assessor’s Office and City Treasurer’s Office; and
Human Resource Division and Accounting Office.
11. E-Procurement System - Completely installed and full[y] operational until the year
(General Services Office) 2009. No longer used as of the present due to lack of repair,
maintenance and upgrading.83
Unarguably, the local government of the City of Talisay and the citizens therein
benefited from the computerization project. In the interest of substantial justice and
equity, and in conformity with the principle of quantum meruit, PowerDev should be
compensated for the use of its resources up to the extent of the actual work it
performed and services it rendered. Otherwise, the government would be unjustly
enriched at the expense of PowerDev.

Under the principle of quantum meruit, in an action for work and labor, payment shall
be made in the amount reasonably deserved, as it is unjust for a person to retain any
benefit without paying for it.84 To deny PowerDev of compensation for the use of its
equipment and services would be tantamount to injustice, which the Court cannot
countenance. Accordingly, while the lack of the required ordinance and the failure to
observe the proper procedure for the public bidding necessitated the disallowance of
the payments for the computerization project, personal liability should not attach to
petitioner and the other persons named liable under the NDs up to the extent of the
benefit that the government of the City of Talisay has derived from the project.

WHEREFORE, the petition for certiorari is DISMISSED. Decision No. 2012-042 dated

April 23, 2012 and Resolution (Decision No. 2012-267) dated December 28, 2012 of the
Commission on Audit are AFFIRMED. Thus:
 
1) ND No. 2007-002 dated July 23, 2007 disallowing the overprice of P2,372,762.70 in the
purchase of liquid fertilizers is AFFIRMED.
2) ND No. 2004-001-100-(2004) L2-07-159-00-006 of P8,500,000.00, ND No. 2004-002-
100-(2004) L2-07-159-00-007 of P613,440.00, ND No. 2004-003-100-(2004) L2-07-159-
00-008 of P10,086,560.00, and ND No. 2005-004-100-(2004) L2-07-159-00-009 of
P7,788,000.00, all dated April 23, 2007, disallowing the payments for the computerization
project, are also AFFIRMED.

However, the Commission on Audit is hereby DIRECTED to determine and ascertain

with dispatch, on a quantum meruit basis, the total compensation due to PowerDev
Corporation for the software and equipment it installed in the different departments of
the City of Talisay which redounded to the benefit of the local government. Based on
such determination by the Commission on Audit, PowerDev Corporation is DIRECTED to
return the difference between the total amount it received from the City of Talisay and
the quantum meruit price, if any.

This pronouncement is without prejudice to the filing of appropriate administrative or

criminal charges against the officials responsible for the illegal disbursements.

SO ORDERED.