Daraga Press, Inc. vs. Commission on Audit

Absent a clear showing of grave abuse of discretion, the COA’s factual findings denying a money claim must be accorded great respect and finality; DPI’s claim failed for lack of substantial evidence of actual delivery and lack of appropriation, and quantum meruit did not apply.

DPI is a private corporation that sought payment from DepEd-ARMM for textbooks it claimed to have delivered. DepEd-ARMM is a government agency, while the COA is the constitutional body with jurisdiction over money claims against government agencies and instrumentalities under Section 26 of PD 1445. Section 19 of RA 9401 authorizes the DBM to approve payment of valid prior years unbooked obligations certified by the COA.

On November 15, 2007, then DBM Secretary Rolando G. Andaya, Jr., pursuant to Section 19 of Republic Act No. 9401, requested the COA to validate and evaluate the request of then ARMM Regional Governor Nur Misuari for the release of funds to cover the region’s alleged unpaid obligation to DPI for textbooks delivered in 1998. The COA responded by issuing Local Government Sector Office Order No. 2007-058 dated December 7, 2007, which created a team of auditors to validate and evaluate the alleged unpaid obligation. On April 29, 2008, Assistant Commissioner Gloria S. Cornejo of the LGS issued a Memorandum expressing serious doubts on the validity of the obligation because the actual receipt of the subject textbooks could not be ascertained. On September 22, 2008, DPI filed with the COA a money claim for the payment of textbooks it allegedly delivered on July 3, 1998 to DepEd-ARMM, formerly the Department of Education, Culture and Sports-ARMM. Pursuant to a directive of the Commission Proper, the Fraud Audit and Investigation Office, Legal Services Sector conducted further validation of DPI’s money claim, which yielded the same result and corroborated the initial observations and findings of the audit team.

The COA denied the money claim because it found no convincing proof that the textbooks were delivered. It noted that there was no showing that the Supply Officer actually inspected and received the delivery; that the receipt, acceptance, and inspection of the alleged deliveries were done by the DECS-ARMM Regional Secretary, who also approved the Requisition and Issue Voucher and recommended the approval of the Purchase Order, violating the rules on internal control on segregation of duties and responsibilities; and that the audited Final Trial Balances of DECS-ARMM and the audited Financial Statements of DPI did not reflect any transaction in the amount of ₱63,638,032.00. The COA also pointed to discrepancies, inconsistencies, and inaccuracies in the documents: three copies of PO No. 075-PTB all dated June 15, 1998 addressed to DPI, with amounts of ₱63,638,750.00, ₱63,638,975.00, and ₱63,638,032.00, received undated by White Orchids Printing and Publishing and DPI, and without any indication of the mode of procurement and the place and date of delivery; two sets of Sales Invoice Nos. 5806 and 5808 and two sets of Delivery Receipt Nos. 5206 and 5207, all dated July 3, 1998, bearing similar serial numbers but with different signatories on the received portion, indicating possible falsification of public documents; two Certifications purportedly issued by Sulpicio Lines that differed as to the date of delivery and receipt; five contradicting reports on receipt and acceptance of deliveries and three sets of Inspection Reports by the Regional Secretary of ARMM; and figures in the PO, DR, Memorandum Receipts, and Certification and Affidavit of Supply Officer that differed.

The LSS-FAIO Report No. 2010-001 detailed these matters. It noted that the first set of Sales Invoices and Delivery Receipts was signed on the received portion by the DECS-ARMM Regional Secretary, while the second set was signed by Supply Officer I. DPI’s owner explained in a letter dated November 26, 2009 that the then DECS-ARMM informed his office that the Sales Invoices and Delivery Receipts signed by the Regional Secretary were not in accordance with their practice that the Supply Officer should sign these documents, so another set was signed by Supply Officer I. In the Petition, however, DPI’s counsel gave a different explanation: that two representatives or responsible officers of the agency worked together to receive the textbooks, with one officer signing the first copy of the Delivery Receipt and the other signing the second copy. The report also noted that the two Sulpicio Lines Certifications, both dated September 8, 1999, bore different delivery and receipt dates of June 23, 1998 and July 2, 1998, and that these dates did not agree with the bills of lading dated June 25, 1998 and June 29, 1998, which described the books as supplementary books and reference materials and not textbooks. It further noted a Certification dated December 15, 1998 under the letterhead of the Department of Education, which was renamed only in 2001 instead of DECS, indicating that it was antedated. The report found different quantities of books in the PO, Delivery Receipts, Memorandum Receipts and Invoice Receipts, and the Certification and Affidavit of Supply Officer II, and that none of the receipt and acceptance of deliveries was witnessed by any COA Auditor or Technical Audit Specialist.

The COA also found that there was no appropriation for the purchase of the subject textbooks. The Special Allotment Release Order in the amount of ₱63,638,750.00, upon which DPI anchored its claim, pertained to the payment of personal services or salaries of teachers, not for the purchase of textbooks. Assistant Commissioner Cornejo’s Memorandum stated that SARO No. B-98-03383 dated October 10, 1998 was released by the DBM for payment of salaries and compensation benefits of 490 Teacher I positions, without the corresponding Notice of Cash Allocation; that the DBM issued two Notices of Cash Allocation, one of which was transferred to DECS-ARMM for payment of salaries while the other was reverted to the Bureau of Treasury on December 31, 1999; and that only one accounts payable was recorded in the Office of the Secretary books chargeable against the SARO to cover payment of personal services only. Because actual delivery of the textbooks was not established, the COA ruled that the equitable principle of quantum meruit could not be applied.

DPI moved for reconsideration, but the COA denied it in its Resolution dated December 29, 2011. DPI then filed the present Petition, attaching letters and certifications from former ARMM Governors and high-ranking officials of the DepEd Central Office, as well as a Certification purportedly issued by COA Auditor Dagaranao Saripada. Saripada later denied executing the undated Certification and stated that at the time the transaction transpired in 1998, he was not yet the Unit Head of the said Department. The COA’s findings and recommendations in the Memorandum dated April 29, 2008 and the LSS-FAIO Report No. 2010-001 were arrived at after an exhaustive and extensive investigation conducted by the auditors.

• Grave Abuse of Discretion: Petitioner argued that the COA committed grave abuse of discretion in denying the money claim solely on sheer doubt.
• Availability of Funds: Petitioner claimed that there were funds available for the procurement of the subject textbooks but they were inadvertently reverted to the National Treasury because the amount was twice obligated under Personal Service.
• Documentary Evidence and Minor Errors: Petitioner contended that despite typographical errors and minor inconsistencies in the documents, it was still able to prove its entitlement to the money claim; it insisted that the letters and certifications from former ARMM Governors and high-ranking officials of the DepEd Central Office, as well as the Certification issued by COA Auditor Dagaranao Saripada, all validate its money claim.
• Quantum Meruit: Petitioner asserted that even if there was a breach of standard government procedure, it could still recover the reasonable value of the subject textbooks under the principle of quantum meruit.

• No Grave Abuse of Discretion: Respondents argued through the Office of the Solicitor General that the COA committed no grave abuse of discretion in denying the money claim because the denial is supported by the evidence on record.
• No Proof of Delivery: Respondents maintained that there is no credible evidence to show that the subject textbooks were delivered.
• Quantum Meruit: Respondents argued that without any proof of delivery, there is no basis for DPI to recover even under the principle of quantum meruit.

• Grave Abuse of Discretion: Whether the COA committed grave abuse of discretion in denying DPI’s money claim.

• Grave Abuse of Discretion: No. The COA’s denial was supported by evidence; DPI failed to prove actual delivery by substantial evidence, no appropriation existed for textbooks, and quantum meruit did not apply.

• Grave Abuse of Discretion: The SC applied the rule that COA decisions and resolutions may be reviewed and nullified only on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion exists when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, as when the judgment rendered is not based on law and evidence but on caprice, whim, and despotism. The SC found no such abuse because the COA’s denial was supported by the evidence on record, and DPI failed to show that the COA acted capriciously or arbitrarily in doubting and disregarding DPI’s documentary evidence.
• Inconsistencies and lack of proof of delivery: DPI had the burden to show by substantial evidence that it was entitled to the money claim, which required proof of actual delivery of the textbooks. The LSS-FAIO Report No. 2010-001 found three POs with the same number but different amounts and undated receipts; two sets of SIs and DRs with similar serial numbers but different signatories, indicating possible falsification; two Sulpicio Lines certifications with different delivery and receipt dates that did not match the bills of lading; five contradicting reports on receipt and acceptance and three sets of inspection reports; and different quantities of books in the PO, DRs, MRs/IRs, and Supply Officer certifications. The receipt and acceptance of deliveries were not witnessed by COA auditors or Technical Audit Specialists. These inconsistencies, discrepancies, and inaccuracies meant DPI’s documentary evidence could hardly be considered substantial evidence.
• No appropriation: The SARO in the amount of ₱63,638,750.00, upon which DPI anchored its claim, pertained to personal services or salaries of teachers, not the purchase of textbooks. The SC cited Section 29(1), Article VI of the 1987 Constitution, which provides that no money shall be paid out of the Treasury except in pursuance of an appropriation made by law. Since there was no appropriation for the purchase of the textbooks, the COA had reason to deny the money claim.
• Letters and certifications: The letters and certifications from high-ranking officials did not prove actual delivery because the persons who signed them were not present during the delivery nor privy to the transaction. COA Auditor Dagaranao Saripada denied executing the undated Certification and stated that he was not yet the Unit Head in 1998. These letters and certifications could not outweigh the COA’s findings and recommendations, which were arrived at after an exhaustive and extensive investigation.
• Quantum meruit: The principle of quantum meruit allows a party to recover as much as he reasonably deserves, but it presupposes that an actual delivery of the goods has been made. DPI failed to present convincing evidence to prove actual delivery of the textbooks, so the principle could not be applied.
• Finality of COA findings: Absent grave abuse of discretion, the COA’s factual findings, which are supported by the evidence on record, must be accorded great respect and finality. The COA, as the authorized agency to adjudicate money claims against government agencies and instrumentalities under Section 26 of PD 1445, has acquired special knowledge and expertise in matters falling under its specialized jurisdiction. The general policy is to sustain the decisions of administrative authorities, especially the COA, absent unfairness or arbitrariness amounting to grave abuse of discretion.

• Grave abuse of discretion — Defined as evasion of a positive duty or virtual refusal to perform a duty enjoined by law or to act in contemplation of law, as when the judgment rendered is not based on law and evidence but on caprice, whim, and despotism. The SC applied it to COA decisions, which may be reviewed and nullified only on this ground; it found none because the COA’s denial was supported by evidence.
• Substantial evidence — Evidence that a reasonable mind might accept as adequate to support a conclusion. The claimant has the burden to prove its money claim by substantial evidence. The SC held DPI’s documentary evidence, riddled with inconsistencies, discrepancies, and inaccuracies, was not substantial.
• Quantum meruit — Allows a party to recover as much as he reasonably deserves. It presupposes actual delivery of the goods. The SC held it did not apply because DPI failed to prove actual delivery of the textbooks.
• Finality of COA factual findings — Absent a clear showing of grave abuse of discretion, the factual findings of the COA must be accorded great respect and finality. The COA has special knowledge and expertise under Section 26 of PD 1445 in adjudicating money claims against government agencies. The SC applied this because the COA’s findings were supported by evidence.
• Appropriation requirement — Under Section 29(1), Article VI of the 1987 Constitution, no money shall be paid out of the Treasury except in pursuance of an appropriation made by law. The SC applied this because the SARO relied upon by DPI was for salaries, not textbooks, so there was no appropriation for the purchase.
• Internal control on segregation of duties — Receipt, acceptance, and inspection of deliveries in government are normally the responsibility of the Administrative, Supply, or Property Officer; having the DECS-ARMM Regional Secretary receive the books while also approving the RIV and recommending approval of the PO violated internal control on segregation of duties and functions. The SC cited this as part of the COA’s findings supporting denial.

• "Absent a clear showing of grave abuse of discretion, the factual findings of the Commission on Audit (COA) must be accorded great respect and finality." — This states the standard of review and the finality accorded to COA factual findings.
• "Grave abuse of discretion exists when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim, and despotism." — This defines grave abuse of discretion, the only ground for reviewing COA decisions.
• "The principle of quantum meruit allows a party to recover 'as much as he reasonably deserves.'" — This defines quantum meruit, which the SC held presupposes actual delivery and did not apply here.
• "Since there was no appropriation for the purchase of the subject textbooks, the respondent COA had reason to deny the money claim as Section 29(1), Article VI of the 1987 Constitution provides that: "No money shall be paid out of the Treasury except in pursuance of an appropriation made by law."" — This connects the lack of appropriation for textbooks to the constitutional requirement for payment out of the Treasury.

• Director Villanueva vs. Commission on Audit, 493 Phil. 887, 906 (2005) — Cited at the outset to support the rule that COA factual findings are accorded great respect and finality absent grave abuse of discretion.
• Delos Santos vs. Commission on Audit, G.R. No. 198457, August 13, 2013, 703 SCRA 501, 513, citing Veloso vs. Commission on Audit, 672 Phil. 419 (2011) — Cited for the definition of grave abuse of discretion.
• Suarez vs. Commission on Audit, 355 Phil. 527, 539 (1998) — Cited for the definition of substantial evidence as evidence a reasonable mind might accept as adequate to support a conclusion.
• F.F. Mañacop Construction Co., Inc. vs. Court of Appeals, 334 Phil. 208, 214 (1997) — Cited for the principle of quantum meruit as allowing recovery of as much as a party reasonably deserves.
• Yap vs. Commission on Audit, 633 Phil. 174, 195 (2010) — Cited for the general policy of sustaining decisions of administrative authorities, especially the COA, absent unfairness or arbitrariness amounting to grave abuse of discretion.

• Section 19, Republic Act No. 9401 — Authorizes the DBM to approve payment of valid prior years unbooked obligations as certified by the COA. The DBM Secretary invoked this in requesting the COA to validate and evaluate ARMM’s request for release of funds.
• Section 26, Presidential Decree No. 1445 — Defines the COA’s general jurisdiction, including audit and settlement of debts and claims due from or owing to the Government or its subdivisions, agencies, and instrumentalities. The SC relied on this to recognize the COA’s authority and expertise in adjudicating money claims.
• Section 29(1), Article VI, 1987 Constitution — Provides that no money shall be paid out of the Treasury except in pursuance of an appropriation made by law. The SC applied this because the SARO relied upon by DPI was for salaries, not textbooks, so there was no appropriation for the purchase.