Corpuz vs. Commission on Audit

Government officers who did not participate in the hiring of external counsel cannot be held personally liable for disallowed payments under a contract for legal services executed without prior concurrence of the OGCC and COA; only the officer who hired such counsel without the required concurrence bears personal liability under Section 103 of the Government Auditing Code.

PhilRice was created under Executive Order No. 1061, as amended, which designates the Office of the Government Corporate Counsel (OGCC) as its statutory legal counsel under Section 14 of its Charter. Despite this, PhilRice is not precluded from engaging external counsel, provided it secures the written conformity of the OGCC and the written concurrence of the COA before hiring private lawyers, pursuant to COA Circular No. 95-11. This requirement serves to curtail the unauthorized and unnecessary disbursement of public funds for private legal services, in line with the COA's constitutional mandate under Section 2-2, Article IX-D of the Constitution.

PhilRice, a government entity created under Executive Order No. 1061, as amended, had the OGCC as its statutory counsel under Section 14 of its Charter. Because the OGCC could not promptly attend to PhilRice's legal concerns across its Central Office in Nueva Ecija and other Luzon branches, then Executive Director Atty. Ronilo A. Beronio sought the OGCC's approval of a draft Contract for Retainer and Legal Services with Atty. Teodoro G. Mendoza. The OGCC, in Contract Review No. 37, series of 2009, dated January 23, 2009, found the draft contract "generally in order" but advised that the written concurrence of the COA be obtained pursuant to Section 3 of Memorandum Circular No. 9, dated August 27, 1998.

In compliance, Atty. Beronio, acting for PhilRice, sent a letter dated February 11, 2009 to Mr. Antonio S. Samaniego, State Auditor IV, seeking the COA's concurrence on the draft contract. No immediate response was given by Samaniego. Notwithstanding the lack of COA concurrence, PhilRice, through Atty. Beronio, executed the undated Subject Contract with Atty. Mendoza on March 4, 2009. The contract was to run from January 1, 2009 to December 31, 2009, and provided for a monthly retainer fee of ₱20,000, a court appearance fee of ₱2,000, reimbursement for transportation and meal expenses for out-of-province hearings, and incentives, while expressly disclaiming any employer-employee relationship. Notably, the concurrence of the COA was sought from the wrong office—Auditor Samaniego of the COA Resident Office in PhilRice rather than the Office of the General Counsel, as required under the 2009 Revised Rules of Procedure of the COA.

During the course of the engagement, the following sums were paid to Atty. Mendoza: ₱240,000 in legal retainer fees, ₱16,000 in court appearance fees, ₱42,500 in incentives, ₱37,250 for legal services including contract review and notarization of OPAPA documents, and ₱2,015 as reimbursement for renewal of notarial commission fees, totaling ₱337,765. Months after the contract's execution, the COA issued Legal Retainer Review No. 2009-116 dated December 4, 2009, concurring in the contract but directing that the monthly retainer fee be reduced to ₱10,000 and the appearance fee to ₱1,000, as the stipulated amounts appeared excessive compared to similar contracts submitted to the Commission for concurrence. The COA likewise ordered the deletion of the entitlement to incentives, as the contract did not create an employer-employee relationship. No motion for reconsideration or appeal was filed from this Legal Retainer Review.

Pursuant to the Legal Retainer Review, COA State Auditor III Merlita M. Carlos and Supervising Auditor Danilo M. Lagason issued Notices of Disallowance Nos. 14-001-101-(09) and 14-002-101-(2013), both dated January 6, 2014, disallowing a total of ₱209,765. Notice of Disallowance No. 14-001-101-(09) disallowed half the legal retainer fees and court appearance fees, the entire sum of incentives, and the fees for OPAPA-related legal services. Notice of Disallowance No. 14-002-101-(2013) disallowed the reimbursement for notarial commission renewal fees. The notices made various PhilRice officers liable, including the petitioners: Mary Grace D. Corpuz as Accountant IV for certifying completeness of supporting documents in at least thirteen disbursements; Babylinda O. Reyes as Accountant III for certifying in at least six transactions; Sophia T. Borja as Head of the Administrative Division for approving payment in at least three disbursements; Leo C. Javier as Chief SRS for approving payment in at least two disbursements; and Caesar Joventino M. Tado as Chief SRS for approving payment for the reimbursement of notarial commission fees. None of these petitioners had authority to enter into or execute the Subject Contract; such authority lay with the Board of Trustees and the Executive Director.

• Unjust Enrichment: Petitioners argued that the government would be unjustly enriched should the Notices of Disallowance be sustained, as PhilRice had benefited from the legal services rendered by Atty. Mendoza.
• Fairness and Reasonableness: Petitioners maintained that the Subject Contract and all disbursements were fair and reasonable under the circumstances and compliant with applicable law, rules, and jurisprudence.
• Good Faith: Petitioners asserted that they acted in good faith in disbursing the amounts paid to Atty. Mendoza.
• Deemed Approval: Petitioners interposed that the COA's concurrence should have been deemed given considering the latter's supposedly inordinate delay in acting on the request for concurrence.
• Notarial Services Exclusively for PhilRice: Petitioners Reyes and Tado argued that the disallowance of the reimbursement for notarial commission renewal was improper because Atty. Mendoza's notarial services were "exclusively" for PhilRice.

• Validity of Contract Execution: Whether the Subject Contract was validly executed despite the failure to secure prior concurrence from both the OGCC and the COA.
• Finality of Legal Retainer Review No. 2009-116: Whether the petitioners could still question the COA's Legal Retainer Review No. 2009-116 dated December 4, 2009, which reduced the fees stipulated in the Subject Contract.
• Deemed Approval: Whether the COA's concurrence should be deemed given due to inordinate delay in acting on the request.
• Liability under ND No. 14-001-101-(09): Whether the petitioners, who were not involved in the hiring of Atty. Mendoza, may be held personally liable for the disallowed amounts under Notice of Disallowance No. 14-001-101-(09).
• Liability under ND No. 14-002-101-(2013): Whether petitioners Corpuz and Tado are liable for the disallowed reimbursement of notarial commission renewal fees under Notice of Disallowance No. 14-002-101-(2013).

• Validity of Contract Execution: No. The Subject Contract was not entered into in accordance with prevailing law, rules, and jurisprudence, as both the OGCC and COA concurrence were not secured prior to its execution on March 4, 2009, in violation of COA Circular No. 95-11.
• Finality of Legal Retainer Review No. 2009-116: No. Having failed to file a motion for reconsideration or appeal from Legal Retainer Review No. 2009-116 with the COA proper, as required under Sections 1 and 3, Rule VIII of the 2009 Revised Rules of Procedure of the COA, the petitioners are barred from attacking the same.
• Deemed Approval: No. The applicable law at the time, R.A. No. 9485 or the Anti-Red Tape Act of 2007, does not contain a "deemed approved" provision upon the lapse of a certain period.
• Liability under ND No. 14-001-101-(09): No, as to petitioners Corpuz, Borja, Javier, and Reyes. The violation of the concurrence requirement is the personal liability of the officer who hired the external counsel; officers who merely processed disbursements without involvement in the hiring were absolved.
• Liability under ND No. 14-002-101-(2013): Yes, as to petitioners Corpuz and Tado. The Subject Contract's monthly retainer fee was all-inclusive and already incorporated all expenses connected with the performance of services, including notarial services and the renewal of notarial commission.

• Validity of Contract Execution: Under the PhilRice Charter, the OGCC serves as its statutory counsel. While PhilRice is not precluded from engaging external counsel, COA Circular No. 95-11 requires that before such engagement, the responsible officers must secure both the written conformity of the OGCC and the written concurrence of the COA, to curtail unauthorized and unnecessary disbursement of public funds. In this case, the responsible officers sought the concurrence of both offices but executed the Subject Contract on March 4, 2009 without having received the COA's concurrence, which was issued only nine months later via Legal Retainer Review No. 2009-116 dated December 4, 2009. The OGCC gave its concurrence near-immediately, but both concurrences were not secured prior to execution. The defect was only partly cured by the COA's eventual approval, because the COA directed modifications—reducing the fees and deleting the incentive provision—which meant the contract as executed was not fully approved.

• Finality of Legal Retainer Review No. 2009-116: Under Sections 1 and 3, Rule VIII of the 2009 Revised Rules of Procedure of the COA, the COA proper has original jurisdiction over requests for concurrence in the hiring of legal retainers, and a motion for reconsideration or appeal from the Office of the General Counsel's resolution thereon is cognizable by the Commission Proper. The petitioners' arguments on the fairness and reasonableness of the professional fees constituted an indirect attack on the Legal Retainer Review No. 2009-116, which reduced the fees as excessive. Because PhilRice, its responsible officers, and the petitioners interposed no motion for reconsideration or appeal from that Review, they signaled their agreement to its terms. Having passed on the opportunity to question it, it was too late for the petitioners to attack the same before the Supreme Court.

• Deemed Approval: The petitioners argued that the COA's concurrence should have been deemed given due to the latter's inordinate delay. However, at the time the Subject Contract was executed, the applicable law was R.A. No. 9485 or the Anti-Red Tape Act of 2007, which does not contain a "deemed approved" provision upon the lapse of a specified number of days. Accordingly, the COA's failure to act promptly could not operate as a deemed approval. Moreover, the delay may have been partly attributable to the petitioners themselves, as the concurrence was sought from the wrong COA office—the COA Resident Office through Auditor Samaniego rather than the Office of the General Counsel, as required under the 2009 Revised Rules of Procedure.

• Liability under ND No. 14-001-101-(09): In The Law Firm of Laguesma Magsalin Consulta and Gastardo vs. Commission on Audit, the Court held that the violation of the pertinent law, rules, and regulations on the engagement of external counsel is the personal liability of the officer who hired such external counsel. This finds support in Section 103 of the Government Auditing Code, which provides that expenditures of government funds in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. Under the PhilRice Charter, the authority to enter into contracts lies with the Board of Trustees and the Executive Director, who executes contracts at the behest of the Board. The petitioners Corpuz, Borja, Javier, Tado, and Reyes had no involvement in the hiring of Atty. Mendoza and were not vested with authority to enter or execute the Subject Contract. Accordingly, they were absolved from liability. The same rationale applied to Conyfel D. Jiao, Eulito U. Bautista, and Ruben B. Miranda, who were similarly situated. Atty. Beronio, as Executive Director who executed the contract without securing prior concurrence, remained personally liable. The decision was without prejudice to further proceedings against the members of the Board of Trustees, who may have authorized Atty. Beronio to enter into the contract. As for Atty. Mendoza, he should rightfully be compensated for services rendered, but only at the fair and reasonable rates fixed by the COA—₱10,000 monthly retainer and ₱1,000 appearance fee—since the COA had characterized the original fees as excessive and that determination had become final.

• Liability under ND No. 14-002-101-(2013): This Notice of Disallowance pertained to the reimbursement of ₱2,015 for the renewal of Atty. Mendoza's notarial commission. Petitioners Reyes and Tado did not claim good faith; instead, they argued the disallowance was improper because the notarial services were "exclusively" for PhilRice. This contention was without merit. The Subject Contract did not contain any provision on reimbursements for the renewal of notarial commission. The monthly retainer fee was "all-inclusive and already incorporates all the expenses in connection with the performance of the services required of Atty. Mendoza," and specifically included "fees for his notarial services." This must be taken to mean inclusive of the fees incurred in securing and renewing the notarial commission. Accordingly, the reimbursement was properly disallowed, and petitioners Corpuz and Tado remained liable.

• Personal liability for unlawful expenditures — Under Section 103 of the Government Auditing Code of the Philippines, expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. Applied in this case, only the Executive Director who hired external counsel without the required prior concurrence of the OGCC and COA was held personally liable; officers who merely certified or approved disbursements, without involvement in the hiring decision, were absolved.

• Prior concurrence requirement for hiring private legal counsel — Under COA Circular No. 95-11, a government agency provided by law with a legal officer or office may not hire private lawyers for a fee chargeable against public funds unless exceptional or extraordinary circumstances obtain, and the written conformity of the Solicitor General or Government Corporate Counsel and the written concurrence of the COA are first secured. The purpose is to curtail unauthorized and unnecessary disbursement of public funds for private legal services, in line with the COA's constitutional mandate. The concurrence of both offices must be obtained before the engagement; execution of the contract without prior concurrence is at the responsible officers' own peril.

• Finality of unappealed COA issuances — Under the 2009 Revised Rules of Procedure of the COA, the COA proper has original jurisdiction over requests for concurrence in the hiring of legal retainers, and a motion for reconsideration or appeal from the Office of the General Counsel's resolution is cognizable by the Commission Proper. Failure to question a COA issuance—such as a Legal Retainer Review reducing fees—within the prescribed procedural avenue renders it final and precludes indirect attack in subsequent proceedings.

• "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." — This passage from COA Circular No. 95-11, as quoted in the decision, states the controlling rule on the prior concurrence requirement for hiring private legal counsel by government agencies.

• "the fee of the lawyer who rendered legal service to the government in lieu of the OSG or the OGCC is the personal liability of the government official who hired his services without the prior written conformity of the OSG or the OGCC, as the case may be." — This quotation from Gumaru vs. Quirino State College, as cited in the decision, articulates the doctrine that liability for unlawful disbursement of public funds for private legal services attaches personally to the official who hired counsel without the required concurrence, not to officers who merely processed the disbursements.

• "in entering the Subject Contract before both the OGCC and COA concurrence were secured, and disbursing funds in relation thereto, the responsible officers of PhilRice did so at their own peril." — This passage captures the Court's holding that execution of a government contract for legal services without prior concurrence from both the OGCC and COA is undertaken at the responsible officers' own risk, notwithstanding eventual approval.

• The Law Firm of Laguesma Magsalin Consulta and Gastardo vs. Commission on Audit, 750 Phil 258 (2015) — Controlling precedent. The Court held that the violation of the rules on engagement of external counsel is the personal liability of the officer who hired such counsel. This gap-filling rationale was applied to absolve PhilRice officers who had no involvement in the hiring decision.
• Gumaru vs. Quirino State College — Followed. Cited as support for the rule that the fee of a lawyer who rendered legal service to the government in lieu of the OSG or OGCC is the personal liability of the government official who hired such services without prior written conformity.
• Dr. Oñate vs. Commission on Audit, 789 Phil 260 (2016) — Followed. Cited for the proposition that the purpose of the concurrence requirement is to curtail unauthorized and unnecessary disbursement of public funds to private lawyers.
• Almodovar vs. Pulido-Tan, 773 Phil 165 (2015) — Followed. Cited for the rule that prior concurrence must be secured before engaging external counsel, the rule being absolute and categorical.
• Torreta vs. Commission on Audit, G.R. No. 242925, November 10, 2020 — Followed. Cited regarding the principle that a lawyer who rendered services to the government should be compensated at fair and reasonable rates.
• Atty. Orocio vs. Anguluan, 597 Phil 524 (2009) — Followed. Cited alongside Torreta for the same principle of fair and reasonable compensation.

• Section 14, Executive Order No. 1061 (PhilRice Charter), as amended — Designates the OGCC as PhilRice's statutory legal counsel. The Court relied on this provision to establish that PhilRice had a legal office provided by law, triggering the concurrence requirement under COA Circular No. 95-11 before external counsel could be engaged.
• COA Circular No. 95-11, dated December 4, 1995 — Prohibits the use of public funds for payment of private legal counsel unless exceptional or extraordinary circumstances obtain, and requires the written conformity of the Solicitor General or Government Corporate Counsel and the written concurrence of the COA before hiring. The Court found that PhilRice's responsible officers violated this circular by executing the Subject Contract without prior COA concurrence.
• Section 103, Government Auditing Code of the Philippines (P.D. No. 1445) — Provides that expenditures of government funds in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible. The Court applied this provision to hold Atty. Beronio personally liable while absolving officers who were not directly responsible for the hiring.
• Sections 1 and 3, Rule VIII, 2009 Revised Rules of Procedure of the COA — Vests the COA proper with original jurisdiction over requests for concurrence in the hiring of legal retainers, and provides that a motion for reconsideration or appeal from the Office of the General Counsel's resolution is cognizable by the Commission Proper. The Court applied these provisions to hold that the petitioners could no longer question Legal Retainer Review No. 2009-116, having failed to appeal it.
• R.A. No. 9485 (Anti-Red Tape Act of 2007) — The applicable law at the time of the contract's execution. The Court noted that this law does not contain a "deemed approved" provision, rejecting the petitioners' argument that the COA's concurrence should be deemed given due to inordinate delay.
• Section 2-2, Article IX-D, 1987 Constitution — Vests the COA with exclusive authority to promulgate accounting and auditing rules and regulations, including for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, and unconscionable expenditures. The Court cited this as the constitutional basis for the concurrence requirement.

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