EN BANC

G.R. No. 223762, November 07, 2017

TOMAS N. JOSON III, Petitioner, v. COMMISSION ON AUDIT, Respondent.

DECISION

TIJAM, J.:

Challenged in this Petition for Certiorari1 is the Decision2 dated January 29, 2015 and
Resolution3 dated January 19, 2016 rendered by the Commission on Audit (COA) in Decision
No. 2015-019 denying the Petition for Exclusion from Liability4 filed by Petitioner Tomas N.
Joson III and affirming the Notice of Disallowance ND No. L-09-05-005 (2004-2007)5.

The undisputed facts of the case are as follows:

In 2007, a Special Audit Team (SAT) of the COA conducted a special audit of selected
transactions of the Provincial Government of Nueva Ecija for calendar years 2004-2007. The
SAT found an irregular award made by the province for the construction of the Nueva Ecija
Friendship Hotel to A.V.T. Construction. Thereafter, the SAT issued Notice of Disallowance ND
No. L-09-05-005 (2004-2007) disallowing the payments made to A.V.T. Construction in the total
amount of Php155,036,681.77 on the following grounds:6

1. The construction of the Hotel (Phase-II Hotel and Lobby) with a total contract cost of
P75,970,000.00 was awarded to A.V.T. Construction, an ineligible contractor, without
complying with the eligibility check process, contrary to the provisions of Section 21.27 and 238
of the Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No. 9184;

2. Despite the ineligibility issue, two more contracts costing Php35,037,826.50 and
Php40,890,744.57, representing additional works for the Hotel, were awarded to the same
contractor by way of alternative method of procurement; and

3. The Hotel remains unoperational due to the failure of the contractor to complete the project
and the issuance of a Suspension Order effective July 30, 2007 by the project engineer and the
provincial engineer duly noted by the former Governor.9
The SAT found the members of the Bids and Awards Committee (BAC), the BAC Technical
Working Group (TWG), the provincial accountant, the provincial engineer and herein Petitioner
in his capacity as provincial governor of Nueva Ecija and as head of the procuring entity,
solidarily liable for the disallowed amount. Petitioner was held solidarily liable for entering into
the contract with A.V.T. Construction and for approving the payment vouchers to the latter.

Petitioner appealed the disallowance. However, the Director of the Fraud Audit and Investigation
Office, Legal Services Sector (LSS) of the COA denied the appeal and affirmed the disallowance
in his LSS Decision10 No. 2009-344 dated November 27, 2009. The dispositive portion thereof
reads:
WHEREFORE, premises considered, the instant appeal is denied for lack of merit and ND No.
L-09-5-005 (2004-2007) dated May 14, 2009 in the total amount of P155,036,681.77 is hereby
affirmed.11
Petitioner then filed a petition for exclusion from liability arguing that he should not be held
liable for the disallowed amount since the determination of whether a prospective bidder is
eligible or not is the exclusive responsibility of the BAC and if there is indeed a liability, the
members of the BAC should be held liable since they are the persons directly responsible for the
transaction.

The COA in its Decision No. 2015-01912 denied the petition. The COA found Petitioner liable
for the disallowed amount since he failed to exercise due diligence in the performance of his
duty. Had he done so, Petitioner could have discovered the inadequacies of the contract's
supporting documents and the winning bidder's ineligibility. Being a signatory in the contracts,
Petitioner is presumed to have prior knowledge that the bidding process was tainted with
ineligibility. As such, Petitioner cannot seek refuge from the Arias doctrine. The fallo thereof
reads:
WHEREFORE, in view of the foregoing, the petitions of former Governor Tomas N. Joson III
and of Provincial Accountant Romeo T. Del Mundo, both of the Provincial Government of
Nueva Ecija, for exclusion from liability under Notice of Disallowance No. L-09-05-005 (2004-
2007) dated May 14, 2010 are hereby DENIED. Accordingly, petitioners Joson and Del Mundo,
together with the other persons named liable, shall remain solidarity liable for the subject
disallowance.13
Petitioner filed a motion for reconsideration14 of the COA decision, but the same was denied by
the COA in its Resolution dated January 19, 2016.

Hence this Petition raising the following issues:

II. WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE

Petitioner alleged that the COA gravely abused its discretion in holding him personally liable for
the disallowed amount. He claimed that the BAC has the responsibility to check and determine
the eligibility of the prospective bidders. Thus, petitioner, as head of the procuring entity and the
local chief executive, has the right to reasonably rely on the faithful performance by the BAC of
its duties. Petitioner further claimed that there was no reason for him to be particularly cautious
and probe every step in the bidding process. As head of the procuring entity, he had to rely to a
reasonable extent on the good faith of his subordinates in the regular performance of their duties.
Finally, petitioner argued that his alleged prior knowledge of the incompleteness of documents
and the ineligibility of A.V.T. Construction was merely presumed by the BAC through his
signature on the contracts.

On the other hand, respondent argued that petitioner failed to exercise the necessary due
diligence in the performance of his duty relative to the award of the contract. Had he done so,
petitioner could have discovered the glaring inadequacies of the contract's supporting documents
and the winning bidder's ineligibility. Being the signatory in the contracts, he had every
opportunity to examine the supporting documents. Thus, petitioner is presumed to have prior
knowledge that the bidding process was tainted with irregularity due to non-compliance with the
eligibility requirements in R.A. No. 9184. As such, petitioner cannot invoke the doctrine laid
down in Amado C. Arias v. The Sandiganbayan.16

The petition is granted.

The COA found the petitioner liable under Section 19 of the Manual on Certificate of Settlement
and Balances, which provides:
19.1 The liability of public officers and other persons for audit disallowances shall be determined
on the basis of: (a) the nature of the disallowance; (b) the duties, responsibilities or obligations
of the officers/persons concerned; (c) the extent of their participation or involvement in the
disallowed transaction; and (d) the amount of losses or damages suffered by the government
thereby. x x x
x x x x

19.1.2 Public officers who certify to the necessity, legality and availability of funds/budgetary
allotments, adequacy of documents, etc. involving the expenditure of funds or uses of
government property shall be liable according to their respective certifications.

19.1.3 Public officers who approve or authorize transactions involving the expenditure of
government funds and uses of government properties shall be liable for all losses arising out of
their negligence or failure to exercise the diligence of a good father of a family.
Related to the foregoing is Section 103 of the Presidential Decree (P.D.) No. 1445 or the
Government Auditing Code of the Philippines, which states that:
SECTION 103. General liability for unlawful expenditures. 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.
Under this provision, an official or employee shall be personally liable for unauthorized
expenditures if the following requisites are present, to wit: (a) there must be an expenditure of
government funds or use of government property; (b) the expenditure is in violation of law or
regulation; and (c) the official is found directly responsible therefor.17

Here, petitioner was held liable because he failed to exercise due diligence in the performance of
his duty relative to the award of the contract. By his signature in the award of the contract to
A.V.T. Construction and the contract itself, the COA held that petitioner is presumed to have
prior knowledge that the bidding process was tainted with irregularity due to the ineligibility of
A.V.T. Construction. As head of the procuring entity and the former governor of Nueva Ecija,
the COA maintained that petitioner has a duty to ensure that all the requirements are met and
complied with before entering into a contract with A.V.T. Construction.

This Court already discussed the general policy of the Court m sustaining the decisions of
administrative agencies as in the case of Filomena G. Delos Santos, et. al., v. Commission on
Audit18 that:
At the outset, it must be emphasized that the COA is endowed with enough latitude to determine,
prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable
expenditures of government funds. It is tasked to be vigilant and conscientious in safeguarding
the proper use of the government's, and ultimately the people's, property. The exercise of its
general audit power is among the constitutional mechanisms that gives life to the check and
balance system inherent in our form of government.

Corollary thereto, it is the general policy of the Court to sustain the decisions of administrative
authorities, especially one which is constitutionally-created, such as the COA, not only on the
basis of the doctrine of separation of powers but also for their presumed expertise in the laws
they are entrusted to enforce. Findings of administrative agencies are accorded not only respect
but also finality when the decision and order are not tainted with unfairness or arbitrariness that
would amount to grave abuse of discretion. It is only when the COA has acted without or in
excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, that this Court entertains a petition questioning its rulings. x x x.19
However, We are reminded that said general policy should not be applied in a straitjacket as
there are instances wherein the decisions of these agencies should be reviewed by this Court.
One of those instances is when the administrative agency committed grave abuse of discretion,
as in this case. There is grave abuse of discretion 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. 20 In
this case, the COA committed grave abuse of discretion in holding petitioner liable for the
disallowed amount.

Petitioner as the governor of Nueva Ecija and head of the procuring entity pursuant to its duty
provided in Section 37.2.121 of the Implementing Rules and Regulations of R.A. No. 9184,
approved the recommendation of the BAC to award the contract to A.V.T. Construction
following their evaluation of all the documents submitted by the latter. Corollarily, petitioner
awarded the contract to A.V.T. Construction and signed the same in behalf of the local
government of Nueva Ecija.

The payments to A.V.T. Construction was disallowed by COA for the reason that the pre-
qualification or eligibility checklist using the "pass/fail" criteria, the Net Financial Contracting
Capacity (NFCC), and Technical Eligibility documents are missing.

It is well to note that the missing documents, the eligibility checklist using the pass/fail criteria, 22
the NFCC23 and the technical eligibility documents, pertain to the pre-qualification stage of the
bidding process. Under R.A. No. 9184, the determination of whether a prospective bidder is
eligible or not falls on the BAC. The BAC sets out to determine the eligibility of the prospective
bidders based on their compliance with the eligibility requirements set forth in the Invitation to
Bid and their submission of the legal, technical and financial documents required under Sec.
23.6, Rule VIII of the Implementing Rules and Regulations of R.A. No. 9184.24

Thus, the presence of the eligibility checklist, the NFCC and the technical eligibility documents
are the obligations and duties of the BAC. The absence of such documents are the direct
responsibility of the BAC. Petitioner had no hand in the preparation of the same. He cannot
therefore be held liable for its absence.

Yet, the COA heId.petitioner liable because of his award of the contract to A.V.T. Construction.
The COA relied on Escara v. People,25 where this Court held that the doctrine in Arias vs.
Sandiganbayan26 is unavailing due to Escara's foreknowledge of an infirmity in the contract,
thus:
We agree with the Sandiganbayan that Arias and Magsuci find no application to the instant case,
thus:

The above defense of Escara cannot exonerate him from criminal liability. It is true that in the
cases of Arias vs. Sandiganbayan (180 SCRA 309) and Magsuci vs. Sandiganbayan (240 SCRA
13), the Supreme Court rejected the theory of criminal liability where the head of office, in
discharging his official duties, relied in good faith on the acts of his subordinate. The High
Tribunal ruled that there should be other grounds than the mere signature or approval appearing
on a voucher to sustain a conspiracy charge and conviction. In this case, however, accused
Escara had foreknowledge of the irregularity attendant in the delivery of the lumber supplied by
Guadines. In his letter (Exhibit "I") dated January 23, 1993 addressed to Engineer Bert Nierva, of
the Provincial Engineering Office of Quezon, he acknowledged that the materials intended for
the construction of the Navotas Bridge had been confiscated by the DENR officials. Such
foreknowledge should have put him on alert and prompted him, at the very least, to make
inquiries into the transaction and to verify whether Guadines had already rectified or submitted
the proper legal documents to recover the ownership of the confiscated lumber from the DENR.
This he did not do. Instead, he immediately signed the Inspection Report (Exhibits "F" and "38-
B") and Disbursement Voucher (Exhibits "D" and "11") and looked the other way, thus, ignoring
the fact that the lumber he was authorizing payment for had already been confiscated in favor of
the government.27
Here, COA alleged that petitioner is presumed to know the infirmity of the contract. The COA in
its Decision dated January 29, 2015 reasoned that:
In this case, Governor Joson himself was the signatory in the contracts executed prior to the
approval of payments. He had the opportunity to examine the supporting documents even before
entering into the contracts. He should not have approved the award and signed the contracts due
to the absence of the eligibility documents. And because he was the one who signed the contract
on behalf of the province, he is presumed to have prior knowledge that the bidding process was
tainted with irregularity due to the absence of complete documents. Thus, Governor Joson cannot
seek protection from the Arias doctrine.28
However, in the landmark case of Arias v. Sandiganbayan,29 this Court held that the head of the
office or agency can rely to a reasonable extent on the good faith of their subordinates, thus:
We would be setting a bad precedent if a head of office plagued by all too common
problems-dishonest or negligent subordinates, overwork, multiple assignments or positions,
or plain incompetence-is suddenly swept into a conspiracy conviction simply because he did
not personally examine every single detail, painstakingly trace every step from inception,
and investigate the motives of every person involved in a transaction before affixing, his
signature as the final approving authority.

x x x x

We can, in retrospect, argue that Arias should have probed records, inspected documents,
received procedures, and questioned persons. It is doubtful if any auditor for a fairly sized office
could personally do all these things in all vouchers presented for his signature. The Court would
be asking for the impossible. All heads of offices have to rely to a reasonable extent on their
subordinates and on the good faith of those prepare bids, purchase supplies, or enter into
negotiations. If a department secretary entertains important visitors, the auditor is not ordinarily
expected to call the restaurant about the amount of the bill, question each guest whether he was
present at the luncheon, inquire whether the correct amount of food was served, and otherwise
personally look into the reimbursement voucher's accuracy, propriety, and sufficiency. There has
to be some added reason why he should examine each voucher in such detail. Any executive
head of even small government agencies or commissions can attest to the volume of papers that
must be signed. There are hundreds of documents, letters, memoranda, vouchers, and supporting
papers that routinely pass through his hands. The number in bigger offices or departments is even
more appalling.

There should be other grounds than the mere signature or approval appearing on a
voucher to sustain a conspiracy charge and conviction.30 (Emphasis Ours)
In this case, We hold that petitioner can invoke the protective mantle of the doctrine laid down in
Arias. The COA merely presumed petitioner's foreknowledge of the infirmity of the contract on
the latter's signature. Unlike in Escara where the latter acknowledged in a letter that the materials
intended for the construction of the Navotas Bridge had been confiscated by the Department of
Environment and Natural Resources (DENR). Thus, Escara should have inquired into the
transaction and to verify the ownership of the lumber materials. In the present case, other than
the mere signature of the petitioner, no other evidence was presented by the COA to show that
petitioner had actual prior knowledge of the ineligibility of A.V.T. Construction. Nothing
appears on record that would prompt petitioner to thoroughly review and go over every
document submitted by A.V.T. Construction, considering that they were already evaluated and
scrutinized by the BAC.

The fact that petitioner is the head of the procuring entity and the governor of Nueva Ecija does
not automatically make him the party ultimately liable for the disallowed amount. He cannot be
held liable simply because he was the final approving authority of the transaction in question and
that the employees/officers who processed the same were under his supervision.31

As this Court held in the case of Ramon Albert v. Celso D. Gangan, et. al.:32
We have consistently held that every person who signs or initials documents in the course
of transit through standard operating procedures does not automatically become a
conspirator in a crime which transpired at a stage where he had no participation. His
knowledge of the conspiracy and his active and knowing participation therein must be proved by
positive evidence. The fact that such officer signs or initials a voucher as it is going the rounds
does not necessarily follow that the said person becomes part of a conspiracy in an illegal
scheme. The guilt beyond reasonable doubt of each supposed conspirator must be established.33
(Emphasis Ours)
Petitioner, being the head of the procuring entity in addition to his duties as the governor of
Nueva Ecija, is responsible for the whole province. With the amount of paperwork that normally
passes through in his office and the numerous documents he has to sign, it would be
counterproductive to require petitioner to specifically and meticulously examine each and every
document that passes his office. Thus, petitioner has the right to rely to a reasonable extent on
the good faith of his subordinates.

Mere signature of the petitioner in the award of the contract and the contract itself without
anything more cannot be considered as a presumption of liability. It should be recalled that mere
signature does not result to a liability of the official involved without any showing of irregularity
on the document's face such that a detailed examination would be warranted.34 Liability depends
upon the wrong committed and not solely by reason of being the head of a government agency. 35

The COA further held that petitioner failed to exercise due diligence because under Section
37.2.3 of the Implementing Rules of R.A. No. 9184, the eligibility requirements are part of the
contract. In failing to examine the supporting documents of the contract before he signed the
same, petitioner can be held equally liable with the BAC.

Under the Implementing Rules and Regulations of R.A. No. 9184 in Section 37.2.3, the
following shall form part of the contract:
37.2.3. The following documents shall form part of the contract:

a) Contract Agreement;
b) Conditions of Contract;
c) Drawings/Plans, if applicable;
d) Specifications, if applicable;
e) Invitation to Apply for Eligibility and to Bid;
f) Bidding Documents;
g) Addenda and/or Supplemental/Bid Bulletins, if any;
h) Bid form including all the documents/statements contained in the winning bidder's two
bidding envelopes, as annexes;
i) Eligibility requirements, documents and/or statements;
i) Performance Security;
k) Credit Line issued by a licensed bank in accordance with the provisions of this IRR-A, if
applicable;
l) Notice of Award of Contract and winning bidder's "Conforme" thereto; and
m) Other contract documents that may be required by existing laws and/or the procuring entity
concerned. (Emphasis Ours)
However, the said provision does not provide that the head of the procuring entity, in this case,
petitioner Governor Joson III, must ensure that each of the above-mentioned documents should
be present in the contract before he signs the same on behalf of the local government of Nueva
Ecija. What the provision merely provides is that the said documents form part of the contract.
The said provision does not mention any direct responsibility on the part of the head of the
procuring entity to ensure that the said documents are attached in the contract before signing the
same. In fact, in Section 37.2.436 of the IRR, there is no mention of eligibility documents to
facilitate the approval of the contract by the head of the procuring entity.

Assuming that petitioner Joson III committed a mistake in not ensuring that the eligibility
documents were attached to the contract, it is settled that mistakes committed by a public officer
are not actionable absent any clear showing that they were motivated by malice or gross
negligence amounting to bad faith.37 In this case, there is no showing that petitioner Joson III
was motivated by malice or gross negligence amounting to bad faith in failing to ensure that the
eligibility documents of A.V.T. Construction were not attached to the contract. In fact, there was
even no evidence that petitioner was aware that A.V.T. Construction was ineligible due to the
absence of the pre-qualification or eligibility checklist using the "pass/fail" criteria, the NFCC
and the Technical eligibility documents. Good faith is always presumed. Here, the COA failed to
overcome the presumption of good faith.

Further, it would be unjust to let petitioner shoulder the disallowed amount not only because
petitioner was not the one directly responsible for the absence of the eligibility documents of
A.V.T. Construction, but also because the government had already received and accepted
benefits from the utilization of the hotel specially when there is no showing that petitioner was
ill-motivated or that he had personally profited from the transaction.38 Here, the Nueva Ecija
Friendship Hotel, now named Sierra Madre Suites, is fully functional and in operation. It now
operates as one of the provincial government's economic enterprises.40 It is therefore unjust
enrichment to the prejudice of the petitioner to make him personally liable for the disallowed
amount considering that the hotel is being enjoyed and ulitized by the provincial government.

WHEREFORE, the instant Petition for Certiorari is GRANTED. The Decision dated January
29, 2015 and Resolution dated January 19, 2016 rendered by the Commission on Audit (COA) in
Decision No. 2015-019 are hereby REVERSED and SET ASIDE insofar as it held petitioner
Tomas N. Joson III solidarily liable for the amount of the disallowance.

SO ORDERED.

Sereno, C. J., Carpio, Peralta, Bersamin, Leonen, Caguioa, Martires, Reyes, Jr., and Gesmundo,
JJ., concur.
Velasco, Jr., J., on official leave.
Leonardo-De Castro, J., on official leave.
Del Castillo, J., on official leave.
Perlas-Bernabe, J., on official leave.
Jardeleza, J., on leave.