G.R. No. 247924 , November 16, 2021
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT (PSALM) CORPORATION, REPRESENTED BY IRENE JOY BESIDO-GARCIA, IN HER CAPACITY AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF PSALM, AND IN BEHALF OF THE CONCERNED AND AFFECTED OFFICERS AND EMPLOYEES OF PSALM, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

On May 9, 2011, the Power Sector Assets and Liabilities Management (PSALM) Corporation requested the concurrence of the Commission on Audit (COA) and the Office of the Government Corporate Counsel (OGCC) to engage Mr. John T. K. Yeap as an international legal advisor and Atty. Michael B. Tantoco as a Philippine legal advisor for its privatization projects. The engagement was for six months, with specified professional fees and scopes of services that were advisory in nature and did not involve court representation. PSALM requested action by May 30, 2011, citing urgency. The OGCC granted its concurrence on May 31, 2011. COA did not respond by the requested date. PSALM waited for a total of 110 days (from May 13 to August 29, 2011) without receiving COA’s concurrence and then proceeded to engage the consultants effective August 29, 2011. COA finally acted on the request on November 6, 2014, denying it through Legal Retainer Review No. 2014-174, citing PSALM’s violation of COA rules requiring prior approval and referencing a prior similar denial in COA Decision No. 2014-136. PSALM’s motion for reconsideration was denied by COA Decision No. 2017-215 dated July 6, 2017, and COA Resolution-Decision No. 2019-004 dated January 30, 2019. COA ruled that its prior concurrence was mandatory even for advisory services and, citing Polloso v. Gangan, denied payment on a quantum meruit basis, holding that the approving officers should pay.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in denying PSALM’s request for concurrence to the engagement of legal advisors and in disallowing the related payments.

RULING

The Supreme Court GRANTED the petition and REVERSED and SET ASIDE the Commission on Audit’s Decision No. 2017-215 and Resolution-Decision No. 2019-004. The Court held that COA committed grave abuse of discretion. The legal services contracted were highly technical, specialized, and advisory in nature, pertaining to international and Philippine law aspects of complex privatization transactions mandated by the Electric Power Industry Reform Act (EPIRA). These services were not for court litigation and were beyond the expertise of the OGCC. The Court distinguished this case from Oñate v. COA, noting the non-adversarial and specialized character of the services. PSALM’s officers acted in good faith and in the urgent pursuit of a critical national mandate. The 110-day delay by COA in responding to the request was unreasonable and would have severely hampered a time-sensitive government program. Under the principles of quantum meruit and unjust enrichment, the consultants, who had fully rendered successful services leading to the privatization of about 70% of NPC’s generation assets, are entitled to retain the compensation paid. The approving officers are not held personally liable. The Court emphasized that government auditors must consider the distinct context and exigencies of a government-owned and -controlled corporation’s specialized operations.