G.R. No. 223762, November 07, 2017 documents and the winning bidder's ineligibility.

Being a
TOMAS N. JOSON III, Petitioner, v. COMMISSION ON signatory in the contracts, Petitioner is presumed to have
AUDIT, Respondent. prior knowledge that the bidding process was tainted with
ineligibility. As such, Petitioner cannot seek refuge from the
DECISION Arias doctrine. The fallo thereof reads:
WHEREFORE, in view of the foregoing, the petitions of
TIJAM, J.: former Governor Tomas N. Joson III and of Provincial
Accountant Romeo T. Del Mundo, both of the Provincial
Challenged in this Petition for Certiorari1 is the Decision2 Government of Nueva Ecija, for exclusion from liability
dated January 29, 2015 and Resolution3 dated January 19, under Notice of Disallowance No. L-09-05-005 (2004-2007)
2016 rendered by the Commission on Audit (COA) in dated May 14, 2010 are hereby DENIED. Accordingly,
Decision No. 2015-019 denying the Petition for Exclusion petitioners Joson and Del Mundo, together with the other
from Liability4 filed by Petitioner Tomas N. Joson III and persons named liable, shall remain solidarity liable for the
affirming the Notice of Disallowance ND No. L-09-05-005 subject disallowance.13
(2004-2007)5. Petitioner filed a motion for reconsideration14 of the COA
decision, but the same was denied by the COA in its
The undisputed facts of the case are as follows: Resolution dated January 19, 2016.

In 2007, a Special Audit Team (SAT) of the COA conducted a Hence this Petition raising the following issues:
special audit of selected transactions of the Provincial I. WHETHER RESPONDENT COMMISSION ON AUDIT
Government of Nueva Ecija for calendar years 2004-2007. COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
The SAT found an irregular award made by the province for TO LACK OR EXCESS OF JURISDICTION WHEN IT HELD
the construction of the Nueva Ecija Friendship Hotel to THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE
A.V.T. Construction. Thereafter, the SAT issued Notice of IN THE PERFORMANCE OF HIS DUTY RELATIVE TO THE
Disallowance ND No. L-09-05-005 (2004-2007) disallowing AWARD OF THE CONTRACT.
the payments made to A.V.T. Construction in the total
amount of Php155,036,681.77 on the following grounds:6 II. WHETHER RESPONDENT COMMISSION ON AUDIT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
1. The construction of the Hotel (Phase-II Hotel and Lobby) TO LACK OR EXCESS OF JURISDICTION WHEN IT
with a total contract cost of P75,970,000.00 was awarded to COMPLETELY DISREGARDED THE FACT THAT THE
A.V.T. Construction, an ineligible contractor, without PROJECT WAS COMPLETED, ACCEPTED, AND NOW BEING
complying with the eligibility check process, contrary to the UTILIZED BY THE PROVINCIAL GOVERNMENT.15
provisions of Section 21.27 and 238 of the Implementing Ultimately, the issue to be resolved in this case is whether
Rules and Regulations (IRR) of Republic Act (R.A.) No. 9184; the COA gravely abused its discretion in holding petitioner
personally liable for the disallowed amount of
2. Despite the ineligibility issue, two more contracts costing Php155,036,681.77.
Php35,037,826.50 and Php40,890,744.57, representing
additional works for the Hotel, were awarded to the same Petitioner alleged that the COA gravely abused its discretion
contractor by way of alternative method of procurement; in holding him personally liable for the disallowed amount.
and He claimed that the BAC has the responsibility to check and
determine the eligibility of the prospective bidders. Thus,
3. The Hotel remains unoperational due to the failure of the petitioner, as head of the procuring entity and the local chief
contractor to complete the project and the issuance of a executive, has the right to reasonably rely on the faithful
Suspension Order effective July 30, 2007 by the project performance by the BAC of its duties. Petitioner further
engineer and the provincial engineer duly noted by the claimed that there was no reason for him to be particularly
former Governor.9 cautious and probe every step in the bidding process. As
The SAT found the members of the Bids and Awards head of the procuring entity, he had to rely to a reasonable
Committee (BAC), the BAC Technical Working Group extent on the good faith of his subordinates in the regular
(TWG), the provincial accountant, the provincial engineer performance of their duties. Finally, petitioner argued that
and herein Petitioner in his capacity as provincial governor his alleged prior knowledge of the incompleteness of
of Nueva Ecija and as head of the procuring entity, solidarily documents and the ineligibility of A.V.T. Construction was
liable for the disallowed amount. Petitioner was held merely presumed by the BAC through his signature on the
solidarily liable for entering into the contract with A.V.T. contracts.
Construction and for approving the payment vouchers to
the latter. On the other hand, respondent argued that petitioner failed
to exercise the necessary due diligence in the performance
Petitioner appealed the disallowance. However, the of his duty relative to the award of the contract. Had he done
Director of the Fraud Audit and Investigation Office, Legal so, petitioner could have discovered the glaring
Services Sector (LSS) of the COA denied the appeal and inadequacies of the contract's supporting documents and
affirmed the disallowance in his LSS Decision10 No. 2009- the winning bidder's ineligibility. Being the signatory in the
344 dated November 27, 2009. The dispositive portion contracts, he had every opportunity to examine the
thereof reads: supporting documents. Thus, petitioner is presumed to
WHEREFORE, premises considered, the instant appeal is have prior knowledge that the bidding process was tainted
denied for lack of merit and ND No. L-09-5-005 (2004- with irregularity due to non-compliance with the eligibility
2007) dated May 14, 2009 in the total amount of requirements in R.A. No. 9184. As such, petitioner cannot
P155,036,681.77 is hereby affirmed.11 invoke the doctrine laid down in Amado C. Arias v. The
Petitioner then filed a petition for exclusion from liability Sandiganbayan.16
arguing that he should not be held liable for the disallowed
amount since the determination of whether a prospective The petition is granted.
bidder is eligible or not is the exclusive responsibility of the
BAC and if there is indeed a liability, the members of the The COA found the petitioner liable under Section 19 of the
BAC should be held liable since they are the persons directly Manual on Certificate of Settlement and Balances, which
responsible for the transaction. provides:
19.1 The liability of public officers and other persons for
The COA in its Decision No. 2015-01912 denied the petition. audit disallowances shall be determined on the basis of: (a)
The COA found Petitioner liable for the disallowed amount the nature of the disallowance; (b) the duties,
since he failed to exercise due diligence in the performance responsibilities or obligations of the officers/persons
of his duty. Had he done so, Petitioner could have concerned; (c) the extent of their participation or
discovered the inadequacies of the contract's supporting involvement in the disallowed transaction; and (d) the
amount of losses or damages suffered by the government of law as when the judgment rendered is not based on law
thereby. x x x and evidence but on caprice, whim, and despotism.20 In this
xxxx case, the COA committed grave abuse of discretion in
holding petitioner liable for the disallowed amount.
19.1.2 Public officers who certify to the necessity, legality
and availability of funds/budgetary allotments, adequacy of Petitioner as the governor of Nueva Ecija and head of the
documents, etc. involving the expenditure of funds or uses procuring entity pursuant to its duty provided in Section
of government property shall be liable according to their 37.2.121 of the Implementing Rules and Regulations of R.A.
respective certifications. No. 9184, approved the recommendation of the BAC to
award the contract to A.V.T. Construction following their
19.1.3 Public officers who approve or authorize evaluation of all the documents submitted by the latter.
transactions involving the expenditure of government Corollarily, petitioner awarded the contract to A.V.T.
funds and uses of government properties shall be liable for Construction and signed the same in behalf of the local
all losses arising out of their negligence or failure to exercise government of Nueva Ecija.
the diligence of a good father of a family.
Related to the foregoing is Section 103 of the Presidential The payments to A.V.T. Construction was disallowed by
Decree (P.D.) No. 1445 or the Government Auditing Code of COA for the reason that the pre-qualification or eligibility
the Philippines, which states that: checklist using the "pass/fail" criteria, the Net Financial
SECTION 103. General liability for unlawful expenditures.- Contracting Capacity (NFCC), and Technical Eligibility
Expenditures of government funds or uses of government documents are missing.
property in violation of law or regulations shall be a
personal liability of the official or employee found to be It is well to note that the missing documents, the eligibility
directly responsible therefor. checklist using the pass/fail criteria,22 the NFCC23 and the
Under this provision, an official or employee shall be technical eligibility documents, pertain to the pre-
personally liable for unauthorized expenditures if the qualification stage of the bidding process. Under R.A. No.
following requisites are present, to wit: (a) there must be an 9184, the determination of whether a prospective bidder is
expenditure of government funds or use of government eligible or not falls on the BAC. The BAC sets out to
property; (b) the expenditure is in violation of law or determine the eligibility of the prospective bidders based
regulation; and (c) the official is found directly responsible on their compliance with the eligibility requirements set
therefor.17 forth in the Invitation to Bid and their submission of the
legal, technical and financial documents required under Sec.
Here, petitioner was held liable because he failed to exercise 23.6, Rule VIII of the Implementing Rules and Regulations
due diligence in the performance of his duty relative to the of R.A. No. 9184.24
award of the contract. By his signature in the award of the
contract to A.V.T. Construction and the contract itself, the Thus, the presence of the eligibility checklist, the NFCC and
COA held that petitioner is presumed to have prior the technical eligibility documents are the obligations and
knowledge that the bidding process was tainted with duties of the BAC. The absence of such documents are the
irregularity due to the ineligibility of A.V.T. Construction. As direct responsibility of the BAC. Petitioner had no hand in
head of the procuring entity and the former governor of the preparation of the same. He cannot therefore be held
Nueva Ecija, the COA maintained that petitioner has a duty liable for its absence.
to ensure that all the requirements are met and complied
with before entering into a contract with A.V.T. Yet, the COA heId.petitioner liable because of his award of
Construction. the contract to A.V.T. Construction. The COA relied on
Escara v. People,25 where this Court held that the doctrine
This Court already discussed the general policy of the Court in Arias vs. Sandiganbayan26 is unavailing due to Escara's
m sustaining the decisions of administrative agencies as in foreknowledge of an infirmity in the contract, thus:
the case of Filomena G. Delos Santos, et. al., v. Commission We agree with the Sandiganbayan that Arias and Magsuci
on Audit18 that: find no application to the instant case, thus:
At the outset, it must be emphasized that the COA is
endowed with enough latitude to determine, prevent, and The above defense of Escara cannot exonerate him from
disallow irregular, unnecessary, excessive, extravagant or criminal liability. It is true that in the cases of Arias vs.
unconscionable expenditures of government funds. It is Sandiganbayan (180 SCRA 309) and Magsuci vs.
tasked to be vigilant and conscientious in safeguarding the Sandiganbayan (240 SCRA 13), the Supreme Court rejected
proper use of the government's, and ultimately the people's, the theory of criminal liability where the head of office, in
property. The exercise of its general audit power is among discharging his official duties, relied in good faith on the acts
the constitutional mechanisms that gives life to the check of his subordinate. The High Tribunal ruled that there
and balance system inherent in our form of government. should be other grounds than the mere signature or
approval appearing on a voucher to sustain a conspiracy
Corollary thereto, it is the general policy of the Court to charge and conviction. In this case, however, accused Escara
sustain the decisions of administrative authorities, had foreknowledge of the irregularity attendant in the
especially one which is constitutionally-created, such as the delivery of the lumber supplied by Guadines. In his letter
COA, not only on the basis of the doctrine of separation of (Exhibit "I") dated January 23, 1993 addressed to Engineer
powers but also for their presumed expertise in the laws Bert Nierva, of the Provincial Engineering Office of Quezon,
they are entrusted to enforce. Findings of administrative he acknowledged that the materials intended for the
agencies are accorded not only respect but also finality construction of the Navotas Bridge had been confiscated by
when the decision and order are not tainted with unfairness the DENR officials. Such foreknowledge should have put
or arbitrariness that would amount to grave abuse of him on alert and prompted him, at the very least, to make
discretion. It is only when the COA has acted without or in inquiries into the transaction and to verify whether
excess of jurisdiction, or with grave abuse of discretion Guadines had already rectified or submitted the proper
amounting to lack or excess of jurisdiction, that this Court legal documents to recover the ownership of the
entertains a petition questioning its rulings. x x x.19 confiscated lumber from the DENR. This he did not do.
However, We are reminded that said general policy should Instead, he immediately signed the Inspection Report
not be applied in a straitjacket as there are instances (Exhibits "F" and "38-B") and Disbursement Voucher
wherein the decisions of these agencies should be reviewed (Exhibits "D" and "11") and looked the other way, thus,
by this Court. One of those instances is when the ignoring the fact that the lumber he was authorizing
administrative agency committed grave abuse of discretion, payment for had already been confiscated in favor of the
as in this case. There is grave abuse of discretion when there government.27
is an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act in contemplation
Here, COA alleged that petitioner is presumed to know the final approving authority of the transaction in question and
infirmity of the contract. The COA in its Decision dated that the employees/officers who processed the same were
January 29, 2015 reasoned that: under his supervision.31
In this case, Governor Joson himself was the signatory in the
contracts executed prior to the approval of payments. He As this Court held in the case of Ramon Albert v. Celso D.
had the opportunity to examine the supporting documents Gangan, et. al.:32
even before entering into the contracts. He should not have We have consistently held that every person who signs or
approved the award and signed the contracts due to the initials documents in the course of transit through standard
absence of the eligibility documents. And because he was operating procedures does not automatically become a
the one who signed the contract on behalf of the province, conspirator in a crime which transpired at a stage where he
he is presumed to have prior knowledge that the bidding had no participation. His knowledge of the conspiracy and
process was tainted with irregularity due to the absence of his active and knowing participation therein must be
complete documents. Thus, Governor Joson cannot seek proved by positive evidence. The fact that such officer signs
protection from the Arias doctrine.28 or initials a voucher as it is going the rounds does not
However, in the landmark case of Arias v. Sandiganbayan,29 necessarily follow that the said person becomes part of a
this Court held that the head of the office or agency can rely conspiracy in an illegal scheme. The guilt beyond
to a reasonable extent on the good faith of their reasonable doubt of each supposed conspirator must be
subordinates, thus: established.33 (Emphasis Ours)
We would be setting a bad precedent if a head of office Petitioner, being the head of the procuring entity in addition
plagued by all too common problems-dishonest or to his duties as the governor of Nueva Ecija, is responsible
negligent subordinates, overwork, multiple assignments or for the whole province. With the amount of paperwork that
positions, or plain incompetence-is suddenly swept into a normally passes through in his office and the numerous
conspiracy conviction simply because he did not personally documents he has to sign, it would be counterproductive to
examine every single detail, painstakingly trace every step require petitioner to specifically and meticulously examine
from inception, and investigate the motives of every person each and every document that passes his office. Thus,
involved in a transaction before affixing, his signature as the petitioner has the right to rely to a reasonable extent on the
final approving authority. good faith of his subordinates.

xxxx Mere signature of the petitioner in the award of the contract

and the contract itself without anything more cannot be
We can, in retrospect, argue that Arias should have probed considered as a presumption of liability. It should be
records, inspected documents, received procedures, and recalled that mere signature does not result to a liability of
questioned persons. It is doubtful if any auditor for a fairly the official involved without any showing of irregularity on
sized office could personally do all these things in all the document's face such that a detailed examination would
vouchers presented for his signature. The Court would be be warranted.34 Liability depends upon the wrong
asking for the impossible. All heads of offices have to rely to committed and not solely by reason of being the head of a
a reasonable extent on their subordinates and on the good government agency.35
faith of those prepare bids, purchase supplies, or enter into
negotiations. If a department secretary entertains The COA further held that petitioner failed to exercise due
important visitors, the auditor is not ordinarily expected to diligence because under Section 37.2.3 of the Implementing
call the restaurant about the amount of the bill, question Rules of R.A. No. 9184, the eligibility requirements are part
each guest whether he was present at the luncheon, inquire of the contract. In failing to examine the supporting
whether the correct amount of food was served, and documents of the contract before he signed the same,
otherwise personally look into the reimbursement petitioner can be held equally liable with the BAC.
voucher's accuracy, propriety, and sufficiency. There has to
be some added reason why he should examine each voucher Under the Implementing Rules and Regulations of R.A. No.
in such detail. Any executive head of even small government 9184 in Section 37.2.3, the following shall form part of the
agencies or commissions can attest to the volume of papers contract:
that must be signed. There are hundreds of documents, 37.2.3. The following documents shall form part of the
letters, memoranda, vouchers, and supporting papers that contract:
routinely pass through his hands. The number in bigger
offices or departments is even more appalling. a) Contract Agreement;
b) Conditions of Contract;
There should be other grounds than the mere signature or c) Drawings/Plans, if applicable;
approval appearing on a voucher to sustain a conspiracy d) Specifications, if applicable;
charge and conviction.30 (Emphasis Ours) e) Invitation to Apply for Eligibility and to Bid;
In this case, We hold that petitioner can invoke the f) Bidding Documents;
protective mantle of the doctrine laid down in Arias. The g) Addenda and/or Supplemental/Bid Bulletins, if any;
COA merely presumed petitioner's foreknowledge of the h) Bid form including all the documents/statements
infirmity of the contract on the latter's signature. Unlike in contained in the winning bidder's two bidding envelopes, as
Escara where the latter acknowledged in a letter that the annexes;
materials intended for the construction of the Navotas i) Eligibility requirements, documents and/or statements;
Bridge had been confiscated by the Department of i) Performance Security;
Environment and Natural Resources (DENR). Thus, Escara k) Credit Line issued by a licensed bank in accordance with
should have inquired into the transaction and to verify the the provisions of this IRR-A, if applicable;
ownership of the lumber materials. In the present case, l) Notice of Award of Contract and winning bidder's
other than the mere signature of the petitioner, no other "Conforme" thereto; and
evidence was presented by the COA to show that petitioner m) Other contract documents that may be required by
had actual prior knowledge of the ineligibility of A.V.T. existing laws and/or the procuring entity concerned.
Construction. Nothing appears on record that would (Emphasis Ours)
prompt petitioner to thoroughly review and go over every However, the said provision does not provide that the head
document submitted by A.V.T. Construction, considering of the procuring entity, in this case, petitioner Governor
that they were already evaluated and scrutinized by the Joson III, must ensure that each of the above-mentioned
BAC. documents should be present in the contract before he signs
the same on behalf of the local government of Nueva Ecija.
The fact that petitioner is the head of the procuring entity What the provision merely provides is that the said
and the governor of Nueva Ecija does not automatically documents form part of the contract. The said provision
make him the party ultimately liable for the disallowed does not mention any direct responsibility on the part of the
amount. He cannot be held liable simply because he was 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.