G.R. No. 228595 . September 22, 2020.
FORMER MUNICIPAL MAYOR HELEN C. DE CASTRO, TOBY C. GONZALES, JR., DENNIS H. DINO, CARMENCITA S. MORATA AND LIZA L. HOLLON, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Sangguniang Bayan of Bulan, Sorsogon enacted an ordinance authorizing a bond flotation to fund the construction of a public bus terminal and a slaughterhouse. Following public biddings, contracts were awarded to S.R. Baldon Construction and Steven Construction. After payment, the Commission on Audit (COA) conducted a special audit and subsequently issued Notices of Disallowance (NDs) against the payments. The NDs were based on findings of unaccomplished work, overpricing exceeding tolerable limits, liquidated damages for delays, and a critical violation of Republic Act No. 9184 (the Government Procurement Reform Act) for failure to post the procurement opportunities in the Philippine Government Electronic Procurement System (PhilGEPS).
The petitioners, including the municipal mayor, engineer, and Bids and Awards Committee chairman, appealed to the COA Regional Office and later to the COA Commission Proper. The COA Commission Proper affirmed the disallowances but modified the liabilities. It held the contractors liable for the return of the disallowed amounts corresponding to overpricing, deficiencies, and liquidated damages. For the disallowance grounded on the PhilGEPS violation, which rendered the contracts void, the COA held the approving and certifying officers solidarily liable with the contractors for the entire contract sums, finding that their failure to post constituted gross negligence.

ISSUE

Whether the COA gravely abused its discretion in affirming the disallowances and in holding the petitioners solidarily liable for the refund of the contract amounts due to the PhilGEPS posting violation.

RULING

The Supreme Court dismissed the petition and affirmed the COA rulings. On the legal logic, the Court held that the PhilGEPS posting is a mandatory requirement under R.A. No. 9184 and its Implementing Rules. Failure to comply renders the contract void from the beginning. Consequently, payments made under such void contracts are illegal disbursements of public funds subject to disallowance. The Court sustained COA’s finding that the petitioners, as approving and certifying officers, were grossly negligent in this omission. Their failure to utilize available access terminals, as mandated by the rules, precluded a finding of good faith.
Thus, under the doctrine of solutio indebiti and pursuant to Section 38 of the Administrative Code, they were correctly held solidarily liable with the contractors to refund the entire amounts paid. The Court clarified that for the other disallowances (overprice, deficiencies, liquidated damages), only the contractors were liable to return the specific disallowed amounts, as the officers’ liability for those items was not attended by bad faith or gross negligence. The COA’s factual findings and conclusions, including the determination of overpricing and deficiencies, were supported by substantial evidence and thus accorded finality.