G.R. No. 242925, November 10, 2020
NAOMI K. TORRETA AND JAIME M. LOPEZ, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

Petitioners Naomi K. Torreta and Jaime M. Lopez, officers of the National Dairy Authority (NDA), were held liable by the Commission on Audit (COA) for the irregular dispersal of 150 dairy cows valued at P17,316,000.00 to HapiCows@Tropical Dairy Farm, Inc. under NDA’s Dairy Multiplier Farm Program in 2009. COA’s post-audit revealed deficiencies in the transaction, including a lack of proper technical evaluation and supporting documents for HapiCows’ accreditation, and non-compliance with prescribed animal husbandry standards, leading to high mortality and abortion rates among the dispersed animals. Consequently, COA issued a Notice of Disallowance, holding petitioners, as signatories to the Memorandum of Agreement, solidarily liable for the total amount.
Petitioners appealed, arguing they acted in good faith and within their official functions. They contended that HapiCows was pre-qualified and that the deficiencies noted by COA pertained to post-dispersal farm management failures, for which they should not be held accountable. The COA Corporate Government Sector and, subsequently, the COA Commission Proper denied their appeals, affirming the disallowance and their liability. The COA ruled that the dispersal was attended by irregularities from the outset, violating established rules and procedures.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance and in holding petitioners solidarily liable for the transaction.

RULING

The Supreme Court dismissed the petition and affirmed the COA’s decisions. The Court found no grave abuse of discretion, as the COA’s findings were supported by substantial evidence. The legal logic rests on the constitutional mandate and broad authority of the COA to examine and audit government expenditures to prevent irregular, unnecessary, excessive, or extravagant uses of public funds. The transaction was properly disallowed because it violated pertinent rules, including the requirement for a thorough technical evaluation and accreditation before dispersal, as stipulated in NDA’s own program guidelines and under Presidential Decree No. 1445.
On the issue of liability, the Court upheld the solidary liability of the approving and certifying officers, including petitioners. The principle of quantum meruit or unjust enrichment does not apply to excuse liability for an illegal or void contract entered into by the government. Good faith is not a valid defense against the return of disallowed amounts when the disbursement was made contrary to law. The Court emphasized that public officers are required to exercise due diligence in the performance of their duties, and their signatures on the agreement constituted an attestation to the regularity and completeness of the transaction’s supporting documents. Since these documents were deficient, petitioners failed in their duty, warranting their solidary liability for the loss of public funds.