866 Phil. 188; 117 OG No. 8, 2189 (February 22, 2021)
CARANDANG, J.:
They filed an Appeal Memorandum[9] with the COA Director for Corporate Government Sector (COA-CGS) - Cluster 4 assailing the Notice of Disallowance. They argued that the COA Audit Team Leader, Cecilia Chan, erred when it assumed that PNCC is under the full audit authority of COA. They asserted that since PNCC is a corporation created in accordance with the general corporation law, it remains a private corporation notwithstanding that majority of its stocks are owned by the National Government by virtue of the debt-to-equity conversion. They asserted that PNCC is a government-acquired asset corporation and not a government-owned and controlled corporation, thus, the COA acted with grave abuse of discretion in disallowing in audit the payment of salaries to three lawyers of the PNCC Corporate Legal Division and one lawyer as corporate secretary. They maintain that the hiring of said lawyers and the payment of salaries under the service contracts was within the power and authority of the management of PNCC.
Name Position/Designation Participation Rainer B. Butalid Chairman Authorized/approved the payment Luis F. Sison President and Chief Executive Officer Signed the contract and authorized/approved the payment Janice Day E. Alejandrino Senior Vice-President/Head, Human Resources and Administration Approved the payment, facilitated and coordinated the timely acquisition, development, and administration of human resources and managed the delivery of personnel services to ensure work excellence and productivity Miriam M. Pasetes Vice-President/Acting Treasurer Authorized/approved the payment, certified and approved the check voucher, and certified the availability of funds Susan R. Vales Assistant Vice- President/Head, Controllership Division Approved the payment, and certified and approved the check voucher Anatalia C. Cardova Head, Funds Management Department Certified that fund is available Alex G Almario Senior Adviser to the Office of the Chairman Payee Eusebio P. Dulatas, Jr. Head, Corporate Legal Payee Henry B. Salazar Legal Officer Payee Stephen Ivan M. Salinas Legal Officer Payee
WHEREFORE, premises considered, the Petition for Review of Atty. Henry B. Salazar, et al., all of the Philippine National Construction Corporation (PNCC), is hereby PARTLY GRANTED. Accordingly, Commission on Audit Corporate Government Sector-Cluster 4 Decision No. 2014-06 dated August 29, 2014 which affirmed Notice of Disallowance (ND) No. 12-004-(2011) dated August 9, 2012, on the payments made by PNCC to private lawyers under Contracts of Service for calendar year 2011 in the total amount of P911,580.96, is hereby AFFIRMED, but the payees are no longer required to refund the amounts they received. The other persons named liable under the ND shall continue to be liable for the total amount of P911,580.96.[15]The COA held that PNCC is a GOCC under the direct supervision of the Office of the President. Thus, being a GOCC, PNCC is under the audit jurisdiction of the COA. The COA cited the case of Feliciano v. Commission on Audit,[16] where the Court held that the COA's audit jurisdiction extends not only to government "agencies or instrumentalities," but also to "government-owned and controlled corporations with original charters" as well as "other government-owned or controlled corporations" without original charters. As to the validity of the hiring of lawyers by PNCC under the Contracts of Service, the COA held that the payment of legal services based on individual contracts of service is irregular in the absence of the required written conformity and acquiescence of the Government Corporate Counsel and the written concurrence of the COA.
1. PNCC is a government-owned and controlled corporation and hence falls under COA's audit jurisdiction;Petitioners contend that COA has acted without or in excess of its jurisdiction or with grave abuse of discretion in holding that PNCC is a GOCC and is under COA's audit jurisdiction. They cited the case of Philippine National Construction Corp. v. Pabion[19] where the court held that PNCC is a government acquired asset corporation, and therefore not a GOCC.[20] Petitioners assert that since PNCC is a corporation created in accordance with the general corporation law, it is essentially a private corporation notwithstanding the government's interest therein as a result of the debt-to-equity of its loans with various government financial institution by operation of Letter of Instruction (LOI) No. 1295.[21] Petitioners further assail the ruling that petitioners and the other PNCC officers are liable for the payment made to lawyers hired by PNCC which were disallowed by the COA.
2. PNCC's hiring of lawyers and payment of their salaries are subject to COA audit and the hired lawyers are not organic personnel of PNCC;
3. The principle of quantum meruit is not applicable in this case; and
4. The PNCC officers held liable for the disallowed transaction were not in good faith in hiring and paying the lawyers.
(a) Government-owned and/or controlled corporation, hereinafter referred to as GOCC or government corporation, is a corporation which is created by special law or organized under the corporation code in which the government, directly or indirectly, has ownership of the majority of the capital or has voting control; provided that an acquired asset corporation as defined in the next paragraph shall be not be considered as GOCC or Government corporation;A GOCC is defined under EO 292 (Administrative Code) and Republic Act No. 10149 or the GOCC Governance Act of 2011, as follows:
(b) Acquired asset corporation is a corporation which is under private ownership, the voting or outstanding shares of which (i) were conveyed to the government or to a government agency, instrumentality or corporation in satisfaction of debts whether by foreclosure or otherwise, or (ii) were duly acquired in by the government through final judgment in a sequestration proceeding; (2) which is a subsidiary of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by law or by enunciated policy is required to be disposed of to private ownership within a specified period of time. (Emphasis ours)
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock.[24]While the Court recognized PNCC's nature as an acquired asset corporation in the case of Pabion, it also stated therein that PNCC may be also deemed as a GOCC under the Administrative Code.[25] In a more recent decision, this Court has settled the issue of PNCC's character as a government-owned and controlled corporation in the case of Strategic Alliance v. Radstock Securities,[26] when it ruled that:
The PNCC is not just like any other private corporation precisely because it is not a private corporation' but indisputably a government owned corporation. Neither is PNCC "an autonomous entity" considering that PNCC is under the Department of Trade and Industry; over which the President exercises control. To claim that PNCC is an "autonomous entity" is to say that it is a lost command in the Executive branch, a concept that violates the President's constitutional power or control over the entire Executive branch of government. (Emphasis ours)In the aforementioned case, the Court emphasized that PNCC is 90.3% owned by the government and could not be considered an autonomous entity just because it was incorporated under the Corporation Code. This Court sees no cogent reason to deviate from this ruling which has exhaustively discussed PNCC's nature as a government-owned corporation.
1. The government, or any of its subdivisions, agencies and instrumentalities;Moreover, in Feliciano v. COA,[27] the Court stressed that the determining factor for COA's exercise of audit jurisdiction is government ownership or control, to quote:
2. GOCCs with original charters;
3. GOCCs without original charters;
4. Constitutional bodies, commissions and offices that have been granted fiscal autonomy under the Constitution; and
5. Non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to the COA for audit as a condition of subsidy or equity.
The Constitution vests in the COA audit jurisdiction over 'government-owned and controlled corporations with original charters' as well as 'government-owned or controlled corporations' without original charters. GOCCs with original charters are subject to COA pre-audit, while GOCCs without original charters are subject to COA post-audit. GOCCs without original charters refer to corporations created under the Corporation Code but are owned and controlled by the government. The nature or purpose or the corporation is not material in determining COA's audit jurisdiction. Neither is the manner of creation or a corporation, whether under a general or special law.[28] (Emphasis ours).Based on the foregoing, we rule that PNCC is a GOCC without original charter but under the audit jurisdiction of COA. We now proceed to determine whether COA committed grave abuse of discretion in issuing the Notice of Disallowance of salaries paid to lawyers hired by PNCC.
Sec. 10. Office of the Government Corporate Counsel. - The Office of Government Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or controlled corporations, their subsidiaries, other corporate off-springs and government acquired assert corporations and shall exercise control and supervision over all legal departments or divisions maintained separately and such powers and functions as are now or may hereafter be provided by law. In the exercise of such control and supervision, the Government Corporate Counsel shall promulgate rules and regulations to effectively implement the objectives of this Office. (Emphasis ours)However, the COA and the Office of the President have issued circulars providing for certain exceptions to the general rule.
Accordingly and pursuant to this Commission's exclusive authority to promulgate accounting and auditing rules and regulations, including for the prevention and disallowance of irregular, unnecessary, excessive and/or unconscionable expenditure or uses of public funds and property (Sec. 2-2, Art. IX-D, Constitution), public funds shall not be utilized for payment of the services of a private legal counsel or law firm to represent government agencies in court or to render legal services for them. In the event that such legal services cannot be avoided or is justified under extraordinary or exceptional circumstances, the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be, and the written concurrence of the Commission on Audit shall first be secured before the hiring or employment of a private lawyer or law firm. (Emphasis ours)The purpose of the circular is to curtail the unauthorized and unnecessary disbursement of public funds to private lawyers for services rendered to the government, which is in line with the COA's constitutional mandate to promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures or uses of government funds and properties.[30]
Section 1. All legal matters pertaining to government-owned or controlled corporations (GOCCs), their subsidiaries, other corporate offsprings and government acquired asset corporations shall be exclusively referred to and handled by the Office of the Government Corporate Counsel (OGCC)In Phividec Industrial Authority v. Capitol Steel Corporation,[31] there are three indispensable conditions before a GOCC can hire a private lawyer: (1) private counsel can only be hired in exceptional cases; (2) the GOCC must first secure the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be; and (3) the written concurrence of the COA must also be secured.[32]
x x x x
Section 3. GOCCs are likewise enjoined to refrain from hiring private lawyers or law firms to handle their cases and legal matters. But in exceptional cases, the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be, and the written concurrence of the Commission on Audit shall first be secured before the hiring or employment of a private lawyer or law firm. (Emphasis ours)
Section 16. Determination of Persons Responsible/Liable -In the case of MWSS v. COA and Uy v. MWSS and COA,[37] We held that although petitioners were officers of MWSS, they had nothing to do with policy-making or. decision-making for the MWSS, and were merely involved in its day-to-day operations. Therein, the petitioners who were department/division. managers, Officer-in-Charge Personnel and Administrative Services and the Chief of Controllership and Accounting Section were not held personally liable for the disallowed amounts, to quote:
16.1 The Liability of public officers and other persons for audit disallowances/charges shall be determined on the basis of(a) the nature of the disallowance/charge; (b) the duties and responsibilities or obligations of officers/employees concerned; (c) the extent of their participation in the disallowed/charged transaction; and (d) the amount of damage or loss to the government.
16.2 The Liability for audit charges shall be measured by the individual participation and involvement of public officers whose duties require appraisal/assessment/collection of government revenues and receipts in the charged transaction.
The COA has not proved or shown that the petitioners, among others, were the approving officers contemplated by law to be personally liable to refund the illegal disbursements in the MWSS. While it is true that there was no distinct and specific definition as to who were the particular approving officers as well as the respective extent of their participation in the process of determining their liabilities for the refund of the disallowed amounts, we can conclude from the fiscal operation and administration of the MWSS how the process went when it granted and paid out the benefits to its personnel.We note that in this case, petitioners' participation in the disallowed transactions were done while performing their ministerial duties as Head of Human Resources and Administration, and Acting Treasurer, respectively. Petitioner Alejandrino's main function is the administration of human resources and personnel services, while petitioner Pasetes certified and approved the check voucher and certified the availability of funds as the acting treasurer. It has not been shown that petitioners acted in bad faith as they were merely performing their official duties in approving the payment of the lawyers under the directive of PNCC's executive officers. Petitioners, although officers of PNCC, could not be held personally liable for the disallowed amounts as they were not involved in policy-making or decision-making concerning the hiring and engagement of the private lawyers and were only performing assigned duties which can be considered as ministerial.