G.R. No. 185544 January 13, 2015
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND GASTARDO, Petitioner, vs. THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and JUANITO G. ESPINO, JR. in their capacities as Chairman and Commissioner, respectively, Respondents.

FACTS

Clark Development Corporation (CDC), a government-owned and controlled corporation, engaged the legal services of the petitioner law firm in 2001 for labor cases. CDC sought approval from the Office of the Government Corporate Counsel (OGCC). The OGCC initially denied the request but later, on May 20, 2002, through Government Corporate Counsel Amado D. Valdez, reconsidered and approved the engagement, furnishing a pro-forma retainership contract. The law firm commenced rendering services while CDC had yet to secure final OGCC authorization or Commission on Audit (COA) concurrence for the contract. CDC’s Board approved the engagement in 2002 and assigned more cases in 2003. On July 13, 2005, CDC requested COA concurrence for the retainership contract. COA required final OGCC approval first. On December 22, 2005, Government Corporate Counsel Agnes VST Devanadera denied final approval because CDC adopted the law firm’s payment proposals without informing OGCC, but ruled the firm was entitled to payment on quantum meruit subject to board approval and audit rules. COA, via a “Third Indorsement” dated November 9, 2006, denied CDC’s request for clearance due to lack of prior written COA concurrence and final OGCC approval, noting the request was made three years after engagement. The COA, in a decision dated September 27, 2007, and a resolution dated November 5, 2008, disallowed the payment, ruling CDC violated relevant circulars by engaging the firm without final approvals and that the liability for payment was personal to the officials involved, not the government.

ISSUE

The primordial issue is whether the Commission on Audit erred in disallowing the payment of legal fees to the petitioner law firm. This involves resolving procedural issues on the timeliness of the petition and the petitioner’s standing as a real party-in-interest, and substantive issues on whether COA correctly denied the request for clearance, correctly applied precedent, and correctly ruled that payment cannot be based on quantum meruit and is a personal liability of CDC officials.

RULING

The Supreme Court denied the petition. Procedurally, the petition for certiorari was filed out of time, as it was filed beyond the 30-day reglementary period from receipt of the COA resolution. On the substantive issues, the Court upheld the COA’s disallowance. The engagement of private counsel by a government entity requires the prior written concurrence of the COA and the approval of the OGCC, as mandated by COA Circular No. 86-255 and related issuances. CDC violated these rules by engaging the law firm’s services without securing the required final approvals. The May 20, 2002 letter from the OGCC was not a final approval but a conditional one, and CDC failed to submit a signed contract for final OGCC approval. The COA correctly applied the rulings in Polloso v. Gangan and PHIVIDEC Industrial Authority v. Capitol Steel Corporation, which emphasize the indispensability of these prior approvals. Consequently, the disallowed payment for the unauthorized legal services is the personal liability of the responsible CDC officials under Section 103 of the Government Auditing Code, and the principle of quantum meruit cannot be invoked to justify payment from government funds.