Bodo vs. Commission on Audit

Government officers who merely took part in or contributed to an unlawful expenditure may be held civilly liable under Section 43 of Book VI of the Administrative Code if their participation was tainted by bad faith or gross negligence; where the disallowed expenditure arises from an irregular or unlawful government contract, their solidary liability may be reduced by the amount due to the recipient under the principle of quantum meruit.

Petitioner Reynaldo A. Bodo was the municipal agriculturist of Barugo, Leyte. The municipality participated in the Department of Agriculture’s Farm Inputs/Farm Implements Program, under which liquid fertilizers were to be distributed to qualified farmer-residents. Procurement by local government units is governed by R.A. No. 9184 and the Administrative Code, while the Commission on Audit exercises post-audit authority over illegal expenditures. The present dispute concerns the civil liability of officers for a disallowed procurement, not the validity of the disallowance itself.

In 2004, the Municipality of Barugo, Leyte directly purchased 3,900 liters of “Fil-Ocean” liquid fertilizers for P1,950,000.00 from Bals Enterprises. The fertilizers were intended for distribution to qualified farmer-residents under the Department of Agriculture’s Farm Inputs/Farm Implements Program. Bals Enterprises allegedly made complete delivery of the fertilizers to the municipality on 20 May 2004.

Reynaldo A. Bodo was Barugo’s municipal agriculturist. In that capacity, he signed the purchase request for the 3,900 liters of Fil-Ocean liquid fertilizers. The purchase request explicitly requested “Fil-Ocean,” a specific brand of liquid fertilizer exclusively supplied by Bals Enterprises. Bodo signed the purchase request after it had already been approved and signed by Mayor Juliana A. Villasin.

On post audit, COA RO No. VIII disallowed the purchase on 5 December 2005 through ND No. 05-131-101 (04) in the amount of P1,950,000.00 for violations of R.A. No. 9184. The ND cited, among others, the absence of a pre-bid conference required under Section 22 of the IRR, the failure to conduct a re-bidding after the first failed bidding in violation of Section 35(a) of the IRR, and the failure to submit bidding documents as required under Section 17, Rule VI of the IRR. The ND named Villasin, municipal accountant Aluino Ala, DA technologist Gil Acuin, and the chairman and members of the BAC as persons liable. All filed requests for exclusion; COA RO No. VIII denied all except that of the BAC, which was excluded after it was found not to have participated in and to have been bypassed by the purchase.

Villasin et al. appealed, but the disallowance was sustained through the COA-LAO, the COA Commission Proper in Decision No. 2009-101, and eventually as to Bodo through Supplemental ND No. 10-001-101 (04) issued on 15 April 2010. COA Decision No. 2009-101 also directed the inclusion of Bodo as one of the persons liable because he signed the purchase request. Bodo’s appeals were denied by COA RO No. VIII and by the COA Commission Proper in Decision No. 2016-316, which affirmed his liability for P1,950,000.00.

Before the Supreme Court, Bodo did not challenge the disallowance itself, only his inclusion as a person liable. The Court found that his signing of the purchase request after Mayor Villasin had already approved it deviated from the usual procedure for processing purchase requisitions under R.A. No. 7160, Sections 359 and 361. The purchase request’s express reference to Fil-Ocean, a brand exclusively supplied by Bals Enterprises, violated regulations prohibiting the use of brand names and revealed a patent bias in favor of that contractor, and Bodo offered no ample explanation for favoring Fil-Ocean. The Court also noted that Bals Enterprises had delivered fertilizers, which Barugo acknowledged through an Inspection and Acceptance Report dated 20 May 2004 and distributed to beneficiary farmers, although a discrepancy existed between the 3,900 liters stated in the report and the 2,284 liters actually distributed.

• Grave Abuse of Discretion: Petitioner argued that COA committed grave abuse of discretion in finding him among the persons liable for Barugo’s direct purchase of liquid fertilizers from Bals Enterprises.
• Scope of Liability: Petitioner maintained that since the purchase had been disallowed because of the irregularity in its mode of procurement, only the persons who caused or were involved in such irregularity should be held liable; as the mere signatory of the purchase request, he had no control or participation in the municipality’s decision to procure the Fil-Ocean liquid fertilizers via direct contracting.

• Civil Liability of Requisitioning Officer: Whether COA committed grave abuse of discretion in holding petitioner Reynaldo A. Bodo, as the municipal agriculturist who signed the purchase request, civilly liable for the disallowed purchase of liquid fertilizers.
• Solidary Liability for the Full Disallowed Amount: Whether petitioner and his solidary co-debtors may be held solidarily liable for the entire disallowed amount of P1,950,000.00, or whether their civil liability may be reduced under the principle of quantum meruit.
• Determination of the Proper Amount: Whether the Supreme Court should determine the exact amount of the reduced civil liability or remand the matter to COA.

• Civil Liability of Requisitioning Officer: No. COA did not commit grave abuse of discretion. Under Section 43 of Book VI of the Administrative Code, in relation to Section 38 of Book I, an officer who takes part in an illegal expenditure may be civilly liable if shown to have acted with bad faith or gross negligence; Bodo’s signing of the purchase request after approval and his specification of a brand exclusively supplied by Bals Enterprises showed such bad faith or gross negligence.
• Solidary Liability for the Full Disallowed Amount: No. The solidary liability of officials under Section 43 does not necessarily equal the total expenditure; where the disallowed expenditure arises from an irregular or unlawful government contract, liability may be reduced by the reasonable value of the recipient’s delivery under quantum meruit.
• Determination of the Proper Amount: Remanded to COA. The determination of the exact number of fertilizers delivered and a fair unit price is a technical factual matter that COA is better equipped to undertake; the amount Bals Enterprises is entitled to retain must be deducted from P1,950,000.00, and the difference is the final civil liability.

• Civil Liability of Requisitioning Officer: The Court noted that petitioner did not challenge the disallowance itself, only his inclusion as a person liable; thus, the COA’s disallowance and its factual findings underpinning the same were already settled. Section 43 of Book VI of the Administrative Code provides that every expenditure or obligation incurred in violation of the Code or appropriations law is void, and every payment made in violation is illegal; every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment is jointly and severally liable to the Government for the full amount paid or received. Section 38 of Book I provides that a public officer shall not be civilly liable for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence. Section 39 of Book I makes a subordinate officer liable for willful or negligent acts contrary to law, morals, public policy, and good customs even if done under orders or instructions of superiors. The Madera Rules of Return, Rules 2a and 2b, provide that approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of a family are not civilly liable to return, while those clearly shown to have acted with bad faith, malice, or gross negligence are solidarily liable to return only the net disallowed amount, which excludes amounts excused under sections 2c and 2d. Petitioner’s participation in the disallowed transaction was undisputed: as head of the municipal agriculture office, he signed the purchase request for the 3,900 liters of Fil-Ocean liquid fertilizers and acted as the requisitioning officer. The preparation and signing of a purchase request is not a mere mechanical act. Under R.A. No. 7160, Sections 359 and 361, a purchase request for goods or supplies must be prepared by the head of office or department needing the supplies, who must certify their necessity for official use and specify the project or activity where they will be used; the head must also identify the requested goods by their technical description, and the use of brand names is prohibited under R.A. No. 9184, Section 18. A purchase request sets into motion procurement proceedings, and the approved purchase request, together with certifications from the local budget officer, accountant, and treasurer, is forwarded to the local BAC. Petitioner therefore was not a total stranger to the disallowed transaction; the purchase request he signed provided documentary support and impetus—and, to an extent, the appearance of legitimacy—to the sham bidding conducted by Villasin et al. and the eventual award to Bals Enterprises. He may not have been involved in the bidding and award, but he partly enabled those who were. His civil liability, however, was not predicated on participation alone; it had to be tainted with gross negligence, if not bad faith. The Court found such gross negligence or bad faith from two circumstances: first, he signed the purchase request after it was already approved and signed by Villasin, a red flag that deviated from the usual procedure under Sections 359 and 361 of R.A. No. 7160; second, the purchase request explicitly requested Fil-Ocean, a specific brand exclusively supplied by Bals Enterprises, violating regulations prohibiting brand names and revealing a patent bias in favor of a particular contractor, with no ample explanation from petitioner. The confluence of these circumstances foreclosed any possibility of good faith; petitioner knew or should have been apprised of Villasin et al.’s intent to unduly favor Bals Enterprises, and his signing amid those circumstances showed utter nonchalance or consent. He was thus civilly liable under Section 43 of Book VI in relation to Section 38 of Book I.
• Solidary Liability for the Full Disallowed Amount: COA held petitioner solidarily liable with Villasin et al. for the entire disallowed amount of P1,950,000.00, the sum paid by Barugo to Bals Enterprises under their ill-fated contract. The Court disagreed. The solidary liability of government officials who approved or took part in the illegal expenditure of public funds under Section 43 does not necessarily equate to the total amount of the expenditure. In Torreta vs. COA, the Court held that where the disallowed expenditure consists of payments arising from irregular or unlawful government contracts—such as the case here—the solidary liability of the officials may be reduced based on the principle of quantum meruit. The guidelines adopted in Torreta provide: if a Notice of Disallowance is set aside, no return shall be required; if upheld, approving and certifying officers who acted in good faith are not civilly liable, while those clearly shown to have acted with bad faith, malice, or gross negligence are solidarily liable together with the recipients for the return of the disallowed amount; the civil liability for the disallowed amount may be reduced by the amounts due to the recipient based on quantum meruit on a case-to-case basis; and these rules are without prejudice to more specific provisions of law, COA rules and regulations, and accounting principles. Quantum meruit literally means “as much as he deserves.” Under this principle, a person may recover the reasonable value of the thing he delivered or the service he rendered, and the principle prevents undue enrichment based on the equitable postulate that it is unjust for a person to retain a benefit without paying for it. It is predicated on equity. In Geronimo vs. COA, recovery on the basis of quantum meruit was allowed despite the invalidity or absence of a written contract between the contractor and the government agency. The Court found that quantum meruit may operate to reduce the civil liability of petitioner and of Villasin et al. for the disallowed transaction, but left to COA the final determination of how much such liability could be reduced due to the Court’s limitations as a court of law. Bals Enterprises had already made delivery of liquid fertilizers under its contract with Barugo; the municipality acknowledged such delivery through an Inspection and Acceptance Report dated 20 May 2004 and distributed the fertilizers to beneficiary farmers. Barugo therefore benefited from the fertilizers, and quantum meruit applied. Despite the invalidity of its contract with Barugo, Bals Enterprises was entitled to retain the reasonable value of its deliveries. The determination of such value is factual and requires an inquiry into the exact number of liquid fertilizers delivered by Bals Enterprises and the setting of a fair and reasonable unit price for each liter, which may or may not be consistent with the unit price stated in the contract; this is a technical determination that COA is more equipped to undertake. The total sum Bals Enterprises is entitled to retain, as determined by COA, should be deducted from the disallowed amount of P1,950,000.00, and the difference is the final civil liability of petitioner and his solidary co-debtors. The Court also noted a discrepancy: while the Inspection and Acceptance Report attested that Bals Enterprises made complete delivery of all 3,900 liters, there was an indication that the report may not be accurate on its face, because one of the reasons for disallowance was a discrepancy between the amount delivered as stated in the report (3,900 liters) and the amount actually distributed by Barugo (2,284 liters), which was never fully explained in any of the COA decisions, leaving a lingering doubt as to the report’s accuracy. The reduction of liability may inure to the benefit of Villasin et al. despite their not being parties to the petition, because the liabilities of petitioner and Villasin et al. are so intricately related that the former cannot be determined without affecting the latter; the Court applied by analogy the rules on the effect of an appellate judgment when not all parties to the original judgment appealed, as articulated in Government vs. Tizon, 127 Phil. 607 (1967).
• Determination of the Proper Amount: The Court left the final determination of the proper amount to COA, which was directed to determine the proper amount of civil liability of petitioner Reynaldo A. Bodo under ND No. 10-001-101 (04), and of Juliana A. Villasin, Aluino O. Ala, and Gil Acuin under ND No. 05-131-101 (04), with dispatch and in accordance with the decision.

• Civil Liability for Illegal Expenditures — Under Section 43 of Book VI of the Administrative Code, every expenditure or obligation incurred in violation of the Code or appropriations law is void, and every official or employee who authorizes or makes the illegal payment, takes part therein, or receives the payment is jointly and severally liable to the Government for the full amount paid or received. This liability is qualified by Sections 38 and 39 of Book I, which require a clear showing of bad faith, malice, or gross negligence for a public officer to be civilly liable, and make subordinate officers liable for willful or negligent acts contrary to law even if done under orders. The Court applied this framework to hold Bodo civilly liable as a requisitioning officer who took part in the disallowed transaction through gross negligence or bad faith.
• Madera Rules of Return — In cases involving disallowed expenditures, approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of a family are not civilly liable to return. Those clearly shown to have acted with bad faith, malice, or gross negligence are solidarily liable to return only the net disallowed amount, which excludes amounts excused under the rules on quantum meruit and more specific provisions. The Court cited these rules in assessing Bodo’s liability.
• Quantum Meruit in Disallowed Government Contracts — Where a disallowed expenditure consists of payments arising from an irregular or unlawful government contract, the solidary liability of liable officials may be reduced based on quantum meruit, which means “as much as he deserves.” The recipient may recover the reasonable value of the thing delivered or service rendered, to prevent undue enrichment, even if the contract is invalid or absent. The Court applied this because Bals Enterprises delivered fertilizers that Barugo accepted and distributed, and remanded to COA the determination of the exact number delivered and a fair unit price.
• Requisitioning Officer’s Duty and Brand-Name Prohibition — The preparation and signing of a purchase request is not a mere mechanical act. Under R.A. No. 7160, Sections 359 and 361, the head of office or department needing supplies must prepare the requisition, certify its necessity for official use, and specify the project or activity where the supplies will be used; under R.A. No. 9184, Section 18, the goods must be identified by technical description, and the use of brand names is prohibited. The Court used these duties to find Bodo grossly negligent or in bad faith for signing a purchase request after approval and for specifying Fil-Ocean, a brand exclusively supplied by Bals Enterprises.
• Effect on Non-Appealing Solidary Co-Debtors — A reduction of civil liability may inure to the benefit of solidary co-debtors who did not appeal, where their liabilities are so intricately related that the liability of one cannot be determined without affecting the others. The Court applied by analogy the rules on the effect of an appellate judgment when not all parties to the original judgment appealed, as articulated in Government vs. Tizon, 127 Phil. 607 (1967).

• "Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received." — This is the statutory basis under Section 43 of Book VI of the Administrative Code for the civil liability of officers who take part in an illegal expenditure; the Court used it to hold Bodo liable despite his not being the authorizing officer.
• "The preparation and signing of a purchase request, as a prelude to government procurement, is not a mere mechanical act." — The Court used this formulation to explain why Bodo’s act of signing the purchase request was a contributory and legally significant participation in the disallowed transaction, not a trivial or merely clerical function.
• "The confluence of the above circumstances forecloses any possibility that the latter acted in good faith when he signed the purchase request." — This states the Court’s finding of gross negligence or bad faith based on Bodo’s signing of the purchase request after Mayor Villasin’s approval and the request’s express specification of Fil-Ocean, a brand exclusively supplied by Bals Enterprises.
• "The solidary liability of government officials who approved or took part in the illegal expenditure of public funds, pursuant to Section 43 of Book VI of the 1987 Administrative Code, does not necessarily equate to the total amount of the expenditure." — This is the ratio decidendi for the Court’s ruling that the COA’s fixed solidary liability for the full P1,950,000.00 was inaccurate and that the amount may be reduced under quantum meruit.

• Madera vs. COA, G.R. No. 244128, 8 September 2020 — The Court cited this as the source of the Madera Rules of Return governing civil liability of approving and certifying officers in disallowed expenditures, including the rule that bad faith, malice, or gross negligence makes them solidarily liable only for the net disallowed amount.
• Torreta vs. COA, G.R. No. 242925, 10 November 2020 — The Court relied on this for the guidelines on return of disallowed amounts in cases involving unlawful or irregular government contracts and for the application of quantum meruit to reduce solidary liability.
• Geronimo vs. COA — Cited in Torreta for the rule that recovery on quantum meruit was allowed despite the invalidity or absence of a written contract between the contractor and the government agency; the provided text does not supply a citation.
• Government vs. Tizon, 127 Phil. 607 (1967) — The Court applied by analogy the rules on the effect of an appellate judgment when not all parties to the original judgment appealed, to allow the reduction of liability to inure to the benefit of Bodo’s solidary co-debtors despite their not being parties to the petition.

• Section 43, Book VI, Administrative Code of 1987 (E.O. No. 292) — Declares illegal expenditures void and makes every official or employee who authorizes or makes the illegal payment, takes part therein, or receives the payment jointly and severally liable to the Government for the full amount paid or received. The Court applied it to Bodo as a requisitioning officer who took part in the disallowed transaction.
• Section 38, Book I, Administrative Code of 1987 — Provides that a public officer is not civilly liable for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence. The Court used this to require bad faith or gross negligence before imposing civil liability on Bodo.
• Section 39, Book I, Administrative Code of 1987 — Makes a subordinate officer liable for willful or negligent acts contrary to law, morals, public policy, and good customs even if done under orders or instructions of superiors. Cited in the interplay of provisions on civil liability.
• Sections 359 and 361, R.A. No. 7160 (Local Government Code) — Require requisitions to be prepared by the head of office or department needing the supplies, who must certify their necessity for official use and specify the project or activity where the supplies will be used; approval by the head of office or department with administrative control of the appropriation is generally sufficient. The Court found Bodo’s signing of the purchase request after Mayor Villasin’s approval deviated from this procedure.
• Section 18, R.A. No. 9184 — Requires goods to be identified by technical description and prohibits the use of brand names in procurement. The Court found the purchase request’s express reference to Fil-Ocean violated this provision and revealed bias for Bals Enterprises.
• Section 50, R.A. No. 9184 — Sets the conditions for direct contracting. The COA found none of the conditions were established, so Barugo’s resort to direct contracting lacked factual basis; the Court treated the disallowance as settled because Bodo did not challenge it.
• Section 24, COA Circular No. 92-386 — Requires the description and specification of supplies or property in a requisition to include only the technical specifications that will fill and satisfy the requisitioner’s needs. The Court cited this in relation to the irregularity of specifying Fil-Ocean.
• Section 103, Presidential Decree No. 1445 — Provides that expenditures of government funds or uses of government property in violation of law or regulations are the personal liability of the official or employee found directly responsible. Cited in support of the general liability for unlawful expenditures.

Gesmundo, C.J.; Perlas-Bernabe, J.; Caguioa, J.; Hernando, J.; Carandang, J.; Lazaro-Javier, J.; Inting, J.; Zalameda, J.; M. Lopez, J.; Gaerlan, J.; J. Lopez, J.; and Dimaampao, J., concurred. Leonen, J., was on official leave.