SC: Former Laguna Governor and Officials Liable for Over Php118Million Worth of Disallowed Transactions; Laguna Provincial Accountant Escapes Liability for Non-Participation

April 3, 2019

The Supreme Court en banc through the 21-page ponencia of Justice Marvic M.V.F. Leonen recently affirmed with modification the Commission on Audit (COA) decision dated April 17, 2011 and resolution dated May 6, 2014, which in effect disallowed the Provincial Government of Laguna’s purchase of medicines, medical and dental supplies, and equipment (medical items) totalling Php118,039,493.46. “This Court finds no basis to conclude that the amount of Php118,039,493.46 constitutes the reasonable value for the purchased goods,” it declared.

The Court also denied the Petition for Certiorari filed by then Laguna Governor Teresita S. Lazaro, and the other officials from Laguna: Provincial Administrator and Bids and Awards Committee Chairman Dennis S. Lazaro, Provincial Budget Officer and Bids and Awards Committee Vice Chairman Marieta V. Jara, Provincial Attorney Antonio P. Relova, Provincial Engineer Gilberto R. Mondez, General Services Office Officer-in-Charge Pablo V. Del Mundo, Jr., and Provincial Health Officer II Alsaneo F. Lagos; while it partially granted a separate Petition for Certiorari filed by the Officer-in-Charge of the Office of the Provincial Accountant, Evelyn T. Villanueva.

The Court held Villanueva not liable for the disallowed transactions that were completed prior to her designation as Officer-in-Charge of the Office of the Provincial Accountant. The Court also ordered the cases remanded to the COA, which was directed to determine which of the disallowed transactions occurred prior to July 5, 2005, for which Villanueva is not liable.

This case stemmed from alleged irregularities in the 2004 and 2005 procurement by the Provincial Government of Laguna of said medical items in the total amount of Php118,039,493.46. COA Regional Office No. IV’s audit team issued two Audit Observation Memoranda, noting that in the 2004 and 2005 procurement of these medical items: (1) no public bidding had been conducted; (2) purchase requests had made reference to brand names; and (3) there had been splitting of purchase requests and purchase orders.

On December 27, 2006, the Regional Cluster Director issued a Notice of Disallowance, which held liable for the 2004 and 2005 procurement Governor Lazaro, Villanueva, D. Lazaro, Lagos, Jara, Relova, Mondez, and Del Mundo. The Notice indicated that (1) the medical items were purchased without public bidding, and (2) reference to the brand names were made in the procurement documents to justify resort to exclusive distributorship, contrary to Section 18 of Republic Act No. (RA) 9184 (Government Procurement Reform Act).

Upon automatic review on August 17, 2011, COA disapproved the March 19, 2010 Decision of the Regional Office, which granted the appeal filed by Governor Lazaro and the rest of the persons liable. It held that the disallowance was proper, and petitioners should be held liable for Php118,039,493.46.

Petitioners Governor Lazaro, et al. and Villanueva separately filed Petitions for Certiorari docketed as G.R. Nos. 213323 and 213324, respectively, which the Court then consolidated on August 5, 2014.

The Court held that the petitioners failed to show that COA committed grave abuse of discretion in disallowing the expenditures covered by the Notice of Disallowance.

Petitioners Governor Lazaro, et al. cited the case of National Center for Mental Health Management (333 Phil 222) in arguing that there are exceptions to the prohibition against referring to brand names under RA 9184. The Court, however, noted the cited case was decided in 1996, while RA 9184 was enacted later in 2003. “Exceptions to the prohibition against reference to brand names in RA 9184 could not have been laid out years before the statute’s enactment.” The law was even patently clear, with no exceptions: “[r]eferences to brand names shall not be allowed.”

On the quantum meruit argument of petitioners Governor Lazaro, et al. the Court found that the latter plainly violated the law requiring procurement to undergo competitive bidding. In doing so, they also violated the law prohibiting reference to brand names. Thus, even if the principle of quantum meruit could be applied, petitioners Governor Lazaro, et al. failed to establish the factual basis for its application.

The Court further noted COA’s observation that some of the goods purchased were not sold by an exclusive dealer or manufacturer. “These circumstances and observations show that many of the items purchased without bidding could have been purchased at a lower cost.”

The Court underscored that petitioners Governor Lazaro, et al. failed to support their claim that they relied on the expertise of the Therapeutics Committees, which they allege to have recommended the chosen brand names. Petitioners Governor Lazaro, et al. attached copies of Certifications/Justifications of the Therapeutics Committee of different Laguna hospitals, but the Court found these to be hardly persuasive and even ruled that the Certifications were not issued by the Committee. “Petitioners Governor Lazaro, et al.’s submissions do not clearly allege and establish the sequence of events such as when and how the Therapeutics Committees made the recommendations, and when how petitioners responded to them. These circumstances are vital in establishing petitioners’ frame of mind and good faith.”

The Court also took into account COA’s observations that (1) the Therapeutics Committee did not refer to any clinical study to support the claims in the Certifications/Justifications; and (2) these Certifications/Justifications were merely recommendatory, where the language of RA 9184 is mandatory. “It is not this Court’s duty to construe their incomplete submissions and vague narrations to determine merit in their assertions.” The Court held that petitioners Governor Lazaro, et al. were unable to fulfil their burden, and thus, their claims must be rejected.

Villanueva, meanwhile, argued that she did not participate in the transactions prior to July 5, 2005, since she was then an Accountant IV responsible only for preparing financial reports and bank reconciliations, and should thus not be held liable for disallowed transactions. The Court ruled in her favor, finding that she was not a signatory to any document relating to disbursements and purchases made by the Provincial Government of Laguna prior to her designation as Officer-in-Charge on July 5, 2005.

The Court, however, pointed out that the disallowed transactions which occurred before her designation is a question of fact that the Court has no evidentiary basis to determine and thus remanded the case to COA to properly determine the matter.