Vicencio vs. Villar

A city vice-mayor has no inherent authority to enter into contracts on behalf of the local government unit; authority to contract must be expressly conferred by law or ordinance, and an ordinance granting such authority to a named vice-mayor for a specified period and purpose does not constitute continuing authority for a succeeding vice-mayor. Expenditures made without the requisite authority are the personal liability of the official directly responsible under P.D. 1445, and reliance on the City Legal Officer’s opinion only supports good faith but does not exculpate such official.

Petitioner Arnold D. Vicencio was the City Vice-Mayor of Malabon and, by virtue of that office, the presiding officer of the Sangguniang Panlungsod and head of the Sanggunian Secretariat. The Commission on Audit, represented by respondents Acting Chairperson Reynaldo A. Villar and Commissioner Juanito G. Espino, Jr., exercises general audit power over government funds and property, while respondent Elizabeth S. Zosa was the COA officer involved in the audit of the city’s consultancy disbursements. The controversy implicates the authority of a city vice-mayor to contract under R.A. 7160, the Local Government Code, and the personal liability for illegal expenditures under P.D. 1445, the Government Auditing Code.

On 30 October 2003, the Sangguniang Panlungsod ng Malabon (SPM), presided over by Hon. Benjamin Galauran, then acting Vice-Mayor, adopted City Ordinance No. 15-2003. The ordinance granted authority to City Vice-Mayor Hon. Jay Jay G. Yambao to negotiate and enter into a contract for consultancy services in the Sanggunian Secretariat for a legal consultant, a consultant on education affairs, and a management consultant. It fixed compensation at ₱22,000 each per month, effective upon approval and subject to usual accounting and auditing procedures, and provided that the source of funds for appropriations would cover the period from June to December 2003, authorizing the City Vice Mayor to effect the necessary funding pursuant to Chapter 4, Section 336 of R.A. 7160. On 9 December 2003 and 1 March 2004, the City of Malabon, represented by Galauran, entered into separate Contracts for Consultancy Services with Ms. Jannette O. Vijiga, Mr. Meynardo E. Virtucio, and Mr. Hernando D. Dabalus, collectively the 2003 Consultancy Contracts.

During the May 2004 elections, petitioner Arnold D. Vicencio was elected City Vice-Mayor of Malabon. By virtue of that office, he became Presiding Officer of the SPM and head of the Sanggunian Secretariat. To complement the manpower requirements of the existing Secretariat, petitioner deemed it necessary to hire consultants to augment and upgrade its performance capability for the effective operation of the city’s legislative machinery. On 19 July 2004, petitioner wrote Atty. Danilo T. Diaz, the City Legal Officer, inquiring whether the SPM still needed to ratify a newly entered contract of consultancy services between it and a candidate for a consultancy position under Ordinance No. 15-2003. Atty. Diaz replied on 26 July 2004 that ratification was no longer necessary provided the contract covered precisely the services stipulated in the ordinance, because the ordinance already stated what consultancy services should be secured and ratification would be mere surplusage.

On 21 January 2005, the SPM adopted City Ordinance No. 01-2005, appropriating funds for the local government of Malabon City from January 1 to December 31, 2005, in the total amount of ₱511,070,019. Of this amount, ₱792,000 was earmarked for consultancy services under the Legislative Secretariat. On 1 February 2005, petitioner, representing the City Government of Malabon, entered into Contracts for Consultancy Services with Ms. Jennifer S. Catindig and Atty. Rodolfo C. delos Santos, the 2005 Consultancy Contracts. On 11 February 2005, another Contract for Consultancy Services was entered into between Mr. Marvin T. Amiana and the city government. After signing their contracts, the three consultants rendered consultancy services to the SPM and were correspondingly paid pursuant to their contracts.

On 19 December 2005, Audit Observation Memorandum (AOM) No. 2005-12-019 was issued by Ms. Atenie F. Padilla, Supervising Auditor of the City Auditor’s Office, Malabon City, disallowing ₱384,980 as an improper disbursement. The AOM found that City Ordinance No. 15-2003 specifically authorized former Vice-Mayor Yambao to enter into consultancy contracts covering June to December 2003 only and did not authorize the incumbent City Vice-Mayor to hire consultants for CY 2005; that progress accomplishment reports for the month were not attached to the disbursement vouchers; that there was no information on the method used by the BAC in hiring individual consultants; and that copies of the approved contracts and supporting documents were not submitted to the City Auditor’s Office within five days from execution, contrary to COA Circular No. 76-34.

On 12 May 2006, respondent Elizabeth S. Zosa issued Notice of Disallowance (ND) No. 06-009-101 (05), containing the result of the evaluation of the AOM. The persons held liable for the disallowed amount were petitioner, in his capacity as City Vice-Mayor, for certifying that the expenses or cash advances were necessary, lawful, and incurred under his direct supervision and for approving the transaction; Mr. Eustaquio M. Angeles, in his capacity as Officer-in-Charge, City Accountant, for certifying to the completeness and propriety of the supporting documents; and Ms. Catindig, Atty. Delos Santos, and Mr. Amiana as payees. They were directed to settle the disallowance immediately, and pursuant to Sections 48, 50, and 51 of P.D. 1445, the parties found liable had six months within which to appeal. The disallowance was anchored on the findings that there was no authority for the incumbent City Vice-Mayor to hire consultants for CY 2005, that Ordinance No. 15-2003 authorized former Vice-Mayor Yambao for June to December 2003 only, that there were no Progress Accomplishment Reports, and that there was no information on the BAC method of hiring. On 22 June 2006, the SPM wrote Ms. Padilla informing her that the three consultants hired by petitioner rendered services covering January to December 2005 and that, in its view, the hiring and the services rendered were in good faith.

• Authority under Ordinance No. 15-2003: Petitioner contended that he had authority to enter into the consultancy contracts pursuant to Ordinance No. 15-2003. He argued that the ordinance authorized the Office of the Vice-Mayor, not Vice-Mayor Yambao in particular, and noted that Hon. Vice-Mayor Benjamin C. Galauran, who was acting Vice-Mayor at the time, had entered into the 2003 Consultancy Contracts.
• Ambiguity and Legislative Intent: Petitioner maintained that the ordinance was ambiguous and that its provisions had to be interpreted by looking into the intent of the law. He argued that there was no indication from the preamble or the minutes of the SPM meeting that the ordinance was designed to empower only Vice-Mayor Yambao or to limit the power to hire for June to December 2003 only. He also manifested that the Ombudsman had dismissed the administrative and criminal complaints for violation of R.A. 6713 and for Usurpation of Authority over the same transactions, with the Ombudsman holding that, while Ordinance No. 15-2003 specifically mentioned Vice-Mayor Yambao, the intent in passing the law may not be ignored and that the city council intended to authorize the Office of the Vice-Mayor to enter into consultancy contracts.
• Substantial Justice and Equity: Petitioner argued that the ends of substantial justice and equity would be better served by allowing the disbursement for consultancy services that had already been rendered.

• Lack of Authority and Void Contracts: Respondents averred that Ordinance No. 15-2003 specifically authorized the expenditure of funds for the compensation of consultants only from June to December 2003. Thus, the contracts for consultancy entered into in 2005 were contrary to the ordinance cited and were therefore void for being unauthorized and bereft of any legal basis.
• No Room for Interpretation: Respondents argued that there was no room for interpretation of the ordinance because it was clear and, additionally, actually contained no preamble.
• Circumvention of COA Rules: Respondents contended that to allow the disbursement of public funds to pay for the services of the consultants, despite the absence of authority for the same, would allow a circumvention of the applicable COA rules and circulars.

• Verification: Whether the petition should be dismissed outright for having a verification based on petitioner’s own personal knowledge and belief rather than on personal knowledge or authentic records as required by Section 4, Rule 7 of the Rules of Court.
• Authority to Contract: Whether petitioner, as incumbent City Vice-Mayor, had authority under Ordinance No. 15-2003 or R.A. 7160 to enter into the 2005 consultancy contracts on behalf of the City of Malabon.
• Personal Liability: Whether petitioner is personally liable under P.D. 1445 for the disallowed disbursement notwithstanding his reliance on the City Legal Officer’s opinion.
• Grave Abuse of Discretion: Whether the COA committed grave abuse of discretion in affirming the disallowance of the disbursements for consultancy services.

• Verification: Yes, the verification was defective. Section 4, Rule 7 treats a verification based on “knowledge, information and belief” as an unsigned pleading, and a verification based merely on knowledge and belief produces no legal effect, subject to the court’s discretion to allow the deficiency to be remedied. The Court nevertheless proceeded to the merits.
• Authority to Contract: No. A city vice-mayor has no inherent authority to contract for the local government unit; such authority must be conferred by law or ordinance. Ordinance No. 15-2003 authorized only Vice-Mayor Yambao and covered only June to December 2003.
• Personal Liability: Yes. Under Section 103 of P.D. 1445, an official directly responsible for an expenditure made in violation of law is personally liable. Reliance on the City Legal Officer’s opinion only supports good faith; it does not exculpate petitioner.
• Grave Abuse of Discretion: No. The COA acted within its constitutional audit power and in accordance with its mandate to protect government funds; the disallowance rested on the lack of authority for the 2005 contracts.

• Verification: The Verification and Certification attached to the Petition stated that the contents were true and correct of petitioner’s own personal knowledge and belief and based on authentic records and/or documents. Section 4, Rule 7 provides that a pleading required to be verified which contains a verification based on “information and belief” or “knowledge, information and belief” shall be treated as an unsigned pleading. A pleading in which the verification is based merely on the party’s knowledge and belief produces no legal effect, subject to the discretion of the court to allow the deficiency to be remedied. The Court noted this procedural flaw should merit outright dismissal, but proceeded to resolve the merits, citing Negros Oriental Planters Association, Inc. (NOPA) vs. Presiding Judge of RTC-Negros Occidental, Br. 52, Bacolod City.
• Authority to Contract: Section 456 of R.A. 7160 enumerates the powers and duties of a city vice-mayor. It does not include inherent authority to enter into contracts on behalf of the local government unit, unlike that provided for the city mayor. Thus, the authority of the vice-mayor to enter into contracts on behalf of the city was strictly circumscribed by the ordinance granting it. Ordinance No. 15-2003 specifically authorized Vice-Mayor Yambao to enter into contracts for consultancy services. Because this is not a power or duty given under the law to the Office of the Vice-Mayor, the ordinance cannot be construed as a “continuing authority” for any person who enters the Office of the Vice-Mayor to enter into subsequent, albeit similar, contracts. The ordinance authorized the then City Vice-Mayor to enter into consultancy contracts in specific areas of concern, fixed compensation at ₱22,000 each per month, and limited the source of funds to appropriations covering June to December 2003. It was clear and precise and left no room for interpretation. The limitation of appropriations to the savings for June to December 2003 was an additional limitation on the power granted to Vice-Mayor Yambao, and the fact that any later consultancy contract would necessarily require further appropriations from the city council strengthened the conclusion that the power granted was limited in scope. Hence, petitioner was without authority to enter into the 2005 Consultancy Contracts. Where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. Interpretation is resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice. No reason existed to depart from this rule, since the subject ordinance was not at all impossible, absurd, or unjust. The Court cited National Federation of Labor vs. National Labor Relations Commission and Municipality of Paranaque vs. V.M. Really Corporation.
• Personal Liability: Section 103 of P.D. 1445 declares that 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. The public official’s personal liability arises only if the expenditure of government funds was made in violation of law. Petitioner’s act of entering into a contract on behalf of the local government unit without the requisite authority therefor was in violation of the Local Government Code. While petitioner may have relied on the opinion of the City Legal Officer, such reliance only serves to buttress his good faith. It does not, however, exculpate him from his personal liability under P.D. 1445.
• Grave Abuse of Discretion: The COA’s assailed Decision was made in faithful compliance with its mandate and in judicious exercise of its general audit power as conferred on it by the Constitution. The COA was merely fulfilling its mandate in observing the policy that government funds and property should be fully protected and conserved, and that irregular, unnecessary, excessive, or extravagant expenditures or uses of such funds and property should be prevented. Thus, no grave abuse of discretion may be imputed to the COA. The Court cited Veloso vs. Commission on Audit.

• No inherent contracting authority of a city vice-mayor — Under Section 456 of R.A. 7160, the city vice-mayor’s powers are enumerated and do not include inherent authority to enter into contracts on behalf of the local government unit; unlike the city mayor, the vice-mayor may contract only when authorized by law or ordinance. The Court applied this by holding that petitioner could not rely on his office alone to enter into the 2005 consultancy contracts.
• Strict construction of delegated contracting authority — An ordinance granting authority to a named vice-mayor for a specified purpose and period is not a “continuing authority” for a succeeding vice-mayor. The Court found that Ordinance No. 15-2003 authorized only Vice-Mayor Yambao and covered only June to December 2003, so it could not support the 2005 contracts.
• Literal interpretation of clear statutes and ordinances — Where the words of a statute are clear, plain, and free from ambiguity, they must be given their literal meaning and applied without attempted interpretation; interpretation is resorted to only where literal interpretation would be impossible, absurd, or unjust. The Court applied this to Ordinance No. 15-2003, finding no ambiguity.
• Personal liability for illegal expenditures under P.D. 1445 — Section 103 of P.D. 1445 makes an official or employee directly responsible for an expenditure of government funds in violation of law or regulations personally liable. The Court held petitioner personally liable because he entered into the contracts without requisite authority; reliance on the City Legal Officer’s opinion only supported good faith but did not exculpate him.
• COA’s general audit power and grave abuse of discretion — The COA has constitutional general audit power and a mandate to protect and conserve government funds and prevent irregular, unnecessary, excessive, or extravagant expenditures. Its disallowance, based on lack of authority, was a faithful exercise of that mandate and not grave abuse of discretion.
• Verification requirement under Section 4, Rule 7 — A pleading required to be verified that contains a verification based on “information and belief” or “knowledge, information and belief” is treated as unsigned; a verification based merely on the party’s knowledge and belief produces no legal effect, subject to the court’s discretion to allow the deficiency to be remedied. The Court noted the petition’s verification was defective but proceeded to the merits.

• "Under this provision, therefore, there is no inherent authority on the part of the city vice-mayor to enter into contracts on behalf of the local government unit, unlike that provided for the city mayor." — This states the core rule on the absence of inherent contracting authority of a city vice-mayor under Section 456 of R.A. 7160.
• "As this is not a power or duty given under the law to the Office of the Vice-Mayor, Ordinance No. 15-2003 cannot be construed as a "continuing authority" for any person who enters the Office of the Vice-Mayor to enter into subsequent, albeit similar, contracts." — This explains why the ordinance could not authorize petitioner’s 2005 consultancy contracts despite his having succeeded to the Office of the Vice-Mayor.
• "Where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation." — This is the canonical formulation of the literal-interpretation rule applied to Ordinance No. 15-2003.
• "While petitioner may have relied on the opinion of the City Legal Officer, such reliance only serves to buttress his good faith. It does not, however, exculpate him from his personal liability under P.D. 1445." — This defines the limited effect of reliance on a legal officer’s opinion and preserves personal liability under the Government Auditing Code.

• Negros Oriental Planters Association, Inc. (NOPA) vs. Presiding Judge of RTC-Negros Occidental, Br. 52, Bacolod City, G.R. No. 179878, 24 December 2008, 575 SCRA 575 — Cited in support of the rule that a verification based on knowledge and belief produces no legal effect and the pleading is treated as unsigned, subject to the court’s discretion to allow the deficiency to be remedied.
• National Federation of Labor vs. National Labor Relations Commission, 383 Phil. 910 (2000) — Cited for the rule that where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.
• Municipality of Paranaque vs. V.M. Really Corporation, 354 Phil. 684 (1998) — Cited for the rule that interpretation is resorted to only where a literal interpretation would be impossible or absurd or would lead to an injustice.
• Veloso vs. Commission on Audit, G.R. No. 193677, 6 September 2011, 656 SCRA 767 — Cited in relation to the COA’s general audit power and mandate to protect and conserve government funds and prevent irregular, unnecessary, excessive, or extravagant expenditures.

• Section 4, Rule 7, Rules of Court — A pleading required to be verified which contains a verification based on “information and belief” or “knowledge, information and belief” shall be treated as an unsigned pleading. A verification based merely on knowledge and belief produces no legal effect, subject to the court’s discretion to allow the deficiency to be remedied. The Court applied this to note the petition’s defective verification.
• Section 456, R.A. 7160 (Local Government Code) — Enumerates the powers and duties of the city vice-mayor and does not include inherent authority to enter into contracts on behalf of the local government unit. The Court used this to hold that petitioner’s contracting authority had to be expressly granted by ordinance. Section 456(b)(1)(vi) provides that the city mayor shall represent the city in all its business transactions and sign contracts upon authority of the sangguniang panlungsod or pursuant to law or ordinance.
• Section 103, P.D. 1445 (Government Auditing Code) — 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. The Court applied this to hold petitioner personally liable.
• Sections 48, 50, and 51, P.D. 1445 — Provided the parties found liable a period of six months within which to file an appeal from the disallowance. Petitioner availed of the appeal process.
• COA Circular No. 76-34 — Required copies of approved contracts and supporting documents to be submitted to the City Auditor’s Office within five days from execution for review and evaluation. The AOM cited noncompliance as a finding.
• Constitution (general audit power of the Commission on Audit) — The decision refers to the COA’s general audit power as conferred by the Constitution; the COA acted within that mandate.

Antonio T. Carpio, Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Arturo D. Brion, Diosdado M. Peralta, Lucas P. Bersamin, Mariano C. Del Castillo, Roberto A. Abad, Martin S. Villarama, Jr., Jose Portugal Perez, Jose Catral Mendoza, Bienvenido L. Reyes, and Estela M. Perlas-Bernabe. Lucas P. Bersamin and Roberto A. Abad are marked with an asterisk and indicated as on leave.