GR 210571; (September, 2017) (Digest)
G.R. No. 210571. September 19, 2017
ORESTES S. MIRALLES, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.
FACTS
Petitioner Orestes S. Miralles, an officer of the Quedan and Rural Credit Guarantee Corporation (QUEDANCOR), was held personally liable by the Commission on Audit (COA) under two Notices of Disallowance (NDs) for approving loan applications under QUEDANCOR’s Sugar Farm Modernization (SFM) and Food and Agricultural Retail Enterprises (FARE) programs. The loans were later rendered delinquent. The COA, through its Regional Legal Adjudication Office, found that for the FARE Program loans, some borrowers had no viable businesses as required. For the SFM Program loans, the disallowance was based on QUEDANCOR’s failure to collect. The COA Legal Services Sector and the COA Proper affirmed the disallowances, ruling that Miralles was negligent in approving the loans despite deficiencies, leading to the release of government funds.
ISSUE
Whether the COA committed grave abuse of discretion in disallowing the loan transactions and holding Miralles personally liable solely on the basis of the subsequent delinquency of the borrowers.
RULING
Yes. The Supreme Court granted the petition, annulling the COA’s disallowance. The Court held that the COA’s constitutional power to disallow expenditures is limited to transactions that are irregular, unnecessary, excessive, extravagant, illegal, or unconscionable. A disallowance cannot be based merely on the fact that a government loan later became uncollected. The mere occurrence of delinquency, without a showing that the approving officer acted with bad faith, malice, or gross negligence in violating pertinent rules, does not render the transaction irregular or illegal. The Court found that Miralles approved the loans in compliance with existing QUEDANCOR circulars and based on the favorable recommendations of subordinate officers and committees who conducted the requisite credit investigations. There was no evidence that he acted with gross negligence or in violation of established procedures. Consequently, the COA’s disallowance, grounded solely on the loans’ non-collection, was arbitrary and constituted grave abuse of discretion. The COA’s audit power is not a tool to guarantee the collectibility of loans but to ensure the legality and propriety of their grant.