G.R. No. 217997 , November 12, 2019
Cristina Catu-Lopez, in her capacity as Department Manager III, Administrative Department, National Tobacco Administration, Petitioner, vs. Commission on Audit, Respondent.

FACTS

The National Tobacco Administration (NTA) Board initiated a housing project for its employees. Petitioner Cristina Catu-Lopez, as Department Manager III and Chairperson of the Housing Committee, was involved in its implementation. After failed public biddings, the project was awarded via a negotiated contract to PMC Construction and Consuelo Builders Corp. (the Developers) under a Joint Venture Agreement approved by the NTA Board on June 17, 1996. The Agreement stipulated, among others, that the Developers would finance the construction, and the NTA would apply for a developmental loan to pay for the land development cost, with sale proceeds to repay the loan.
As the NTA’s application for a loan from the Land Bank of the Philippines was insufficient, the NTA Board resolved on December 6, 1996, to instead apply for a developmental loan from the Philippine National Bank (PNB), converting an existing unused Omnibus Credit Line (OCL). Subsequently, the NTA released a P10,000,000 mobilization fee and a P15,000,000 partial payment to the Developers. To accommodate PNB’s requirements for the loan, the NTA and Developers executed a Supplemental Agreement and an Amendment Agreement, making them co-borrowers and establishing a sinking fund for repayments.
The Commission on Audit (COA) Audit Team, in a 1998 report, found the agreements grossly disadvantageous to the government, noting the NTA assumed additional liabilities. It recommended filing charges. Consequently, COA issued several Notices of Disallowance (NDs). Petitioner was held liable under ND No. 98-09 (JV) for P25,000,000 (covering the P10M mobilization fee and P15M partial payment) and under ND No. 98-013 (JV) for P22,287,361.11 (for interest and charges paid from corporate funds). The Office of the Ombudsman earlier dismissed a related criminal complaint, finding no probable cause and that the project was not grossly disadvantageous.
Petitioner appealed the NDs to the COA Commission Proper. In a Decision dated December 30, 2010, COA modified the disallowances but affirmed petitioner’s liability for the amounts in ND Nos. 98-09 (JV) and 98-013 (JV). Petitioner’s motion for reconsideration was denied in a Resolution dated January 30, 2015. Petitioner then filed this petition for certiorari before the Supreme Court.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowances in ND Nos. 98-09 (JV) and 98-013 (JV) and in holding petitioner Cristina Catu-Lopez liable therefor.

RULING

The Supreme Court GRANTED the petition. The COA’s December 30, 2010 Decision and January 30, 2015 Resolution, insofar as they held petitioner liable, were REVERSED and SET ASIDE.
The Court found that COA committed grave abuse of discretion as there was no sufficient legal and factual basis to hold petitioner personally liable for the disallowed amounts. The Court ruled:
1. On ND No. 98-09 (JV) for P25,000,000 (Mobilization Fee and Partial Payment): The release of these funds was pursuant to the NTA Board’s resolutions. The P10,000,000 mobilization fee, although 25% of the land development cost, was sourced from the Developers’ required initial investment of P9,000,000, effectively negating the fee. The P15,000,000 partial payment was authorized by the Board. Petitioner, as a mere implementing officer, acted in good faith based on these board approvals. She did not have the authority to approve or disapprove the Board’s resolutions and merely performed ministerial duties.
2. On ND No. 98-013 (JV) for P22,287,361.11 (Interest and Charges): The payment of interest and other charges using NTA corporate funds was a consequence of the developmental loan obtained per Board Resolution. The Court noted that the Ombudsman had previously found that under the agreements, such interest payments were chargeable against the Developers. Furthermore, the Court agreed with the Ombudsman’s finding that the housing project was ultimately a profitable investment for NTA, especially after the Philippine Deposit Insurance Corporation bought out the loan, resulting in lower interest rates. Petitioner, again, had no participation in the Board’s decision to secure the loan or in the execution of the supplemental agreements that defined the liability for interest.
The Court emphasized that for a person to be held liable under a notice of disallowance, they must be clearly shown to have participated in the illegal or irregular transaction. Petitioner’s actions were carried out in good faith and in obedience to lawful orders of her superiors and the NTA Board. Therefore, the disallowed amounts could not be charged against her personally.