G.R. No. 244461 , September 28, 2021
PNOC – EXPLORATION CORPORATION, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

In 2009, PNOC-Exploration Corporation (PNOC-EC) purchased steam coal from Wilson International Trading Private Limited. A dispute arose, and Wilson initiated arbitration proceedings in Singapore under the International Chamber of Commerce (ICC) Rules. PNOC-EC received the notice of request for arbitration on February 1, 2010, giving it until March 2, 2010, to file an answer and comment on the nominated arbitrator. Due to the urgent need for specialized international arbitration counsel experienced in ICC rules, English law, and Singapore practice, PNOC-EC sought a private law firm. On February 15, 2010, the Office of the Government Corporate Counsel (OGCC) gave its “authority in principle” subject to review and supervision. PNOC-EC selected Baker Botts LLP, and the OGCC approved the engagement on March 12, 2010. The arbitration resulted in an award in favor of PNOC-EC on October 4, 2011.
A COA auditor subsequently found that PNOC-EC failed to secure the COA’s prior written concurrence for engaging private legal services, as required by COA Circular No. 86-255 and COA Circular No. 95-011. This led to the issuance of a Notice of Suspension for the legal fees paid to Baker Botts totaling P42,717,188.41. PNOC-EC then filed a post facto request for COA’s written concurrence on June 7, 2011. This request was denied by the COA Legal Retainer Review (LRR No. 2012-091) because it was made more than a year after the hiring, contrary to the requirement that concurrence be secured prior to engagement. The COA Proper affirmed this denial in Decision No. 2015-281 and a subsequent Resolution dated November 26, 2018. PNOC-EC filed the present petition, citing the urgency of the situation and arguing that the government benefited from the services.

ISSUE

Whether the Commission on Audit gravely abused its discretion in affirming the denial of PNOC-EC’s post facto request for written concurrence in the engagement of a private counsel and in affirming the suspension of the legal fees paid.

RULING

The Supreme Court ruled that the Commission on Audit did not commit grave abuse of discretion. The Court upheld the COA’s application of its circulars, which require the prior written concurrence of the COA for the hiring of private lawyers by government agencies in exceptional circumstances, in addition to the written conformity of the OGCC. The Court noted that these regulations are presumed valid and have been consistently sustained. While the Court acknowledged the urgency faced by PNOC-EC, it emphasized that compliance with the prior concurrence requirement was not impossible. The Court also noted that a subsequent COA Circular No. 2021-003, which took effect after the transactions in question, now exempts certain engagements from the prior written concurrence requirement under specific conditions, but this new rule does not apply retroactively.
However, the Court applied the principle of quantum meruit. It found that the legal services were necessary, justified under exceptional circumstances, and beneficial to the government, as evidenced by the favorable arbitration award. The engagement also had the prior approval of the OGCC. Therefore, while the disbursement was technically irregular for lacking prior COA concurrence, the Court ruled that the payment for services actually rendered and beneficial to the government should be allowed based on quantum meruit. The approving officers and the private counsel, who acted in good faith, should not be held liable. The COA’s disallowance was set aside, and the payments to Baker Botts LLP were deemed not disallowable.