GR 188818; (May, 2011) (Digest)

G.R. No. 188818; May 31, 2011
TOMAS R. OSMEÑA, in his personal capacity and in his capacity as City Mayor of Cebu City, Petitioner, vs. THE COMMISSION ON AUDIT, Respondent.

FACTS

The City of Cebu engaged WT Construction, Inc. (WTCI) and Dakay Construction and Development Company (DCDC) to construct and renovate the Cebu City Sports Complex for the 1994 Palarong Pambansa. Petitioner Tomas R. Osmeña, then city mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) to execute the construction contracts. During construction, Osmeña issued 20 Change/Extra Work Orders to the contractors, amounting to significant percentages of the original contract prices, without a Supplemental Agreement or prior authorization from the Sanggunian. The work proceeded due to the extreme urgency of preparing the venue. After the Palaro, the contractors demanded payment for the extra work. A Sanggunian member sponsored a resolution to authorize Osmeña to execute supplemental agreements, but the Sanggunian refused to pass it. Consequently, the contractors filed collection cases. The Regional Trial Court ordered the City to pay for the extra work and awarded damages, attorney’s fees, and litigation expenses to the contractors. These decisions became final. The Sanggunian later passed appropriation ordinances to satisfy the judgments. During post-audit, the City Auditor disallowed the payment of the damages, attorney’s fees, and litigation expenses, holding Osmeña, the Sanggunian members, and the City Administrator personally liable. The COA Regional Office modified this, absolving the Sanggunian members and declaring Osmeña solely liable, as he ordered the extra work without the required supplemental agreement or Sanggunian authorization. The COA affirmed this disallowance. Osmeña filed a motion for reconsideration, which was denied. He then filed this Petition for Certiorari under Rule 64.

ISSUE

Whether the Commission on Audit correctly held petitioner Tomas R. Osmeña personally liable for the disallowed amounts representing damages, attorney’s fees, and litigation expenses awarded to the construction companies.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Commission on Audit’s Decision and Resolution. The Court held that Osmeña was personally liable for the disallowed amounts. The legal requirements for disbursing public funds, specifically the necessity of a supplemental agreement for extra work exceeding 25% of the original contract price and prior Sanggunian authorization, were not complied with due to Osmeña’s actions. The Court ruled that the damages, attorney’s fees, and litigation expenses awarded by the trial court were direct consequences of the delay in payment, which was caused by Osmeña’s failure to secure the required legal agreements and appropriations before proceeding with the extra work. The Court emphasized that public officials must strictly comply with legal requisites for disbursements, and liability attaches for expenses deemed unnecessary due to such non-compliance. The Sanggunian’s subsequent refusal to appropriate funds was a proper exercise of its discretion and did not excuse Osmeña’s initial failure to follow the law. The Court also found no merit in Osmeña’s procedural arguments regarding the timeliness of his petition, noting that the period to file was counted from the receipt of the COA’s resolution by his office, not from his personal knowledge after a trip abroad.