G.R. No. 205389 , November 19, 2019
Socrates C. Fernandez, in his capacity as Mayor of the City of Talisay, Petitioner, vs. Commission on Audit, Respondent.

FACTS

The case involves two contracts entered into by the City Government of Talisay, Cebu. The first was a computerization project awarded to PowerDev Corporation in 2002-2003 during the term of Mayor Eduardo R. Gullas. The second was the purchase of liquid fertilizers in 2005-2006 during the term of petitioner Mayor Socrates C. Fernandez. The COA Audit Team Leader questioned both transactions. For the computerization project, four Notices of Disallowance (NDs) were issued due to deficiencies, including lack of required documents, totaling P26,988,000.00. For the fertilizer purchase, an ND was issued for P2,372,762.70 due to overpricing, as the price paid (P900.00 per liter) was significantly higher than the canvassed price (P188.10 per liter). The persons held liable under the NDs, including petitioner and former Mayor Gullas, filed an appeal with the COA Regional Office. The appeal was forwarded to and decided by the COA Commission Proper, which denied it and affirmed the disallowances. Petitioner filed this Petition for Certiorari, arguing denial of due process and error in the disallowances.

ISSUE

1. Whether petitioner and the other persons named in the NDs were deprived of due process when their appeal addressed to the Regional Director was forwarded to and decided by the COA Commission Proper.
2. Whether the COA committed grave abuse of discretion in disallowing the payments for the computerization project.
3. Whether the COA committed grave abuse of discretion in holding petitioner and other city personnel liable for the alleged overpricing in the purchase of liquid fertilizers.

RULING

1. No, there was no deprivation of due process. The essence of due process is the opportunity to be heard. Petitioner and the others were accorded this opportunity when their appeal was given due course and decided on its merits by the Commission Proper, and they were able to file a motion for reconsideration. The direct referral to the Commission Proper was appropriate as the special audit team that conducted the investigation was headed by the Regional Director himself, making observance of the usual appeal procedure impracticable.
2. No, the COA did not commit grave abuse of discretion in disallowing the payments for the computerization project. The disallowance was based on valid grounds, including the city’s failure to present crucial bidding documents like the Abstract of Bids, BAC Resolution recommending award, and the Notice of Award, which are required under Republic Act No. 9184 (the Government Procurement Reform Act). The city also failed to justify the necessity of the fund realignments used for the project. However, applying the principle of quantum meruit, the persons held liable under the NDs for the computerization project are relieved of personal liability up to the extent of the benefit the City of Talisay derived from the project, as the software and hardware were reportedly used by the city for several years.
3. No, the COA did not commit grave abuse of discretion in holding petitioner and others liable for the overpriced fertilizer purchase. The finding of overpricing was based on a valid price canvass. Petitioner, as the approving authority, and the other city personnel involved did not exercise the diligence required of public officers in the procurement process. They are therefore solidarily liable for the disallowed amount. The defense of good faith is unavailing as they failed to exercise due diligence in ensuring the reasonableness of the price.