G.R. No. 253777 . November 23, 2021
MARY GRACE D. CORPUZ, SOPHIA T. BORJA, LEO C. JAVIER, CAESAR JOVENTINO M. TADO, AND BABYLINDA O. REYES, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Philippine Rice Research Institute (PhilRice), created under Executive Order No. 1061, is legally represented by the Office of the Government Corporate Counsel (OGCC). Due to the OGCC’s inability to promptly attend to PhilRice’s legal needs in Luzon, PhilRice’s Executive Director, Atty. Ronilo A. Beronio, sought OGCC approval for a draft Contract for Retainer and Legal Services with a private lawyer, Atty. Teodoro G. Mendoza. The OGCC, in its Contract Review dated January 23, 2009, found the draft generally in order but advised PhilRice to secure the written concurrence of the Commission on Audit (COA) pursuant to Memorandum Circular No. 9, series of 1998.
Through a letter dated February 11, 2009, Atty. Beronio sought COA’s concurrence on the contract. Despite receiving no immediate response from COA, PhilRice executed the undated contract with Atty. Mendoza on March 4, 2009, effective from January 1 to December 31, 2009. The contract stipulated a monthly retainer fee of P20,000.00, a court appearance fee of P2,000.00, entitlement to incentives, and reimbursement for expenses, subject to government auditing rules.
Subsequently, PhilRice paid Atty. Mendoza a total of P337,765.00, covering retainer fees, court appearances, incentives, legal services for OPAPA documents, and reimbursement for notarial commission renewal.
Months later, on December 4, 2009, COA issued Legal Retainer Review No. 2009-116, concurring with the contract but reducing the monthly retainer fee to P10,000.00 and the appearance fee to P1,000.00, and deleting the entitlement to incentives. Citing this review, COA auditors issued Notices of Disallowance (NDs) dated January 6, 2014, disallowing a total of P209,765.00. The disallowances covered: half of the retainer and appearance fees (P128,000.00), the entire amount of incentives and legal services for OPAPA documents (P79,750.00), and the reimbursement for notarial commission fees (P2,015.00). The petitioners, who were PhilRice officers involved in certifying, approving, or processing the payments, were held liable under the NDs.
The petitioners appealed to the COA Regional Office III and later to the COA Proper, but both appeals were denied. Their motion for reconsideration was also denied by the COA En Banc.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the payments made to Atty. Teodoro G. Mendoza under the retainer contract.

RULING

No, the Commission on Audit did not commit grave abuse of discretion. The petition was denied, and the assailed COA Decision and Notice were affirmed.
The COA’s power to disallow expenditures that are illegal, irregular, excessive, extravagant, or unconscionable is well-settled. In this case, the disallowance was proper because PhilRice entered into and implemented the contract without the prior written concurrence of COA, as required by Memorandum Circular No. 9, series of 1998, and COA Circular No. 86-255, as amended. The contract was executed on March 4, 2009, but COA’s concurrence, which also imposed modifications, was only issued on December 4, 2009. Therefore, payments made pursuant to the original, unconcurred terms were correctly disallowed.
The petitioners’ argument that the contract was fair and reasonable is immaterial. The lack of prior COA concurrence rendered the disbursements irregular per se. The COA’s subsequent review, which reduced the fees and deleted the incentive clause, established the allowable rates. Consequently, payments exceeding these rates were excessive and properly disallowed.
Regarding the petitioners’ liability, all approving and certifying officers are presumed to have acted in good faith. However, they are liable for the disallowed amounts because they certified and approved the payments based on a contract that lacked the requisite prior COA concurrence. The payee, Atty. Mendoza, is liable to return the disallowed amounts he received, as there was no showing that the payments constituted legitimate compensation for actual services rendered under a validly concurred contract. The defense of good faith does not excuse them from the obligation to refund, as the disbursements were made pursuant to a contract that was not yet valid for implementation due to the absence of COA’s prior concurrence.