G.R. No. 110634. October 06, 1995
RUFINO O. ESLAO, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.
KAPUNAN, J.:
and Associates, was responsible for the design and planning of Phase 1
of the Engineering Building of the Pangasinan State University (PSU) in
1983. Following approval of its request for a supplemental budget for
the construction and extension of the building in December of 1986,
authorities of the University, represented by its President, petitioner
Rufino O. Eslao, entered into a contract for the preparation of
perspective and detailed plans, specifications, bills of materials and
estimates, programs of work and structural designs for the extension.[1] C.T. Serna Consultants was particularly chosen because of its role in the design of the existing building.
Cost
estimates for the extension were pegged at P1 Million (P1,000,000.00),
equal to the agency estimate made by the Regional Office of the Ministry
of Public Works and Highways (now DPWH). During the process of
negotiating the design and specification contract, C.T. Serna
Consultants offered its services for a fee equivalent to 6% of the
amount actually released for the project. However, in a letter
addressed to the firm dated December 18, 1986, petitioner made a
counteroffer equivalent to 3% of the released amount, an offer which the
firm accepted.[2]
The
completed plans and specifications were turned over to the university on
December of 1986. Said plans were subsequently approved by the
Department of Public Works and Highways on March 11, 1987.[3]
On the basis of the approval of the plans and specifications, the
Pangasinan State University prepared Voucher No. 8703204, in the amount
of Thirty Thousand Pesos (P30,000.00), for the payment of the
professional services rendered by the firm.[4]
C .T. Serna Consultants received Twenty Seven Thousand Pesos
(P27,000.00) of the amount released after deduction of the 10%
Withholding Tax.[5]
At
the first quarter of 1987, the Pangasinan State University, with an
approved budget of Two Million Pesos (P2,000,000.00), began construction
of Phase Three of its Engineering Building. As stipulated in the
contract for services entered into between the university and C.T. Serna
Consultants in 1986, the latter also prepared the plans and
specifications for the building, for which it was paid the amount of
Sixty Thousand Pesos (P60,000.00), less 10% withholding tax.[6]
On
March 16, 1988, almost to the year after the last payment was made by
the university to C.T. Serna Consultants, a letter from the Commission
on Audit, signed by Auditor-in-Charge Cornelia M. Espanol, was received
by petitioner, informing him 1) that the COA disallowed the
professional (architectural) fees paid to C.T. Serna Consultants; 2)
that petitioner, C.T. Serna Consultants and Atty. Gil A. Madrid,
Administrative Officer of the university were jointly and severally
liable for the amount paid to the architectural and construction firm;
and that, 3) petitioner, C.T. Serna Consultants and Atty. Madrid were
required to “adopt the necessary measures to enforce settlement
thereof.”[7]
Responding
to the Commission on Audit’s letter of March 16, 1988, petitioner on
March 17, 1988 requested that said disallowance be lifted. He stressed
that: 1) the architectural fee paid to C.T. Serna Consultants was not
disadvantageous to the government; 2) there was lack of material time
for the Ministry of Public Works and Highways to prepare the engineering
papers because the project had to be obligated not later than January
30, 1987; 3) the contract was entered into after a discussion with Mr.
Santos Guiang, the resident auditor who gave his full consent thereto;
and 4) the said architectural fee was for preparation of the plan of
Engineering Building No. 2 in Urdaneta which was part of the 1986
capital outlay but which was subject to very late release by the
Ministry of Budget.[8]
However,
on March 25, 1988, the Commission on Audit, through Auditor-in-Charge
Bonifacio B. Ico, wrote another letter-notice increasing the amount
disallowed to Ninety Thousand Pesos (P90,000.00) by including the first
payment of Thirty Thousand Pesos (P30,000.00) covered by Voucher No.
8703204. The letter likewise included PSU’s Chief Accountant, Ms. Ma
Heda H. Co and its Cashier Ms. Marlene S. Bernabe as among those jointly
and severally liable for the disbursements. Said letter was, however,
returned to Auditor-in-Charge Ico on April 5, 1988 by petitioner with
the information that the disallowance indicated in the March 25, 1988
letter was the subject of a request by the petitioner to the National
Office of the Commission on Audit after the same was disallowed by the
Regional Director, COA Region I.[9]
In returning the letter-notice, petitioner requested that the
disallowance be temporarily shelved pending resolution of the issue by
COA’s national office.[10]
Petitioner, likewise requested for a ruling on the liability of Auditor
Santos Guiang for his earlier concurrence to petitioner’s acceptance of
the contract.[11] The last
request, seeking a ruling on the liability of Auditor Guiang, was the
subject of a separate letter dated April 5, 1988 to the Regional
Director of the Commission on Audit.[12]
On February 9, 1989, the Commission on Audit issued Decision No. 765[13]
clearing Auditor Santos Guiang of any liability, stating that his
concurrence was made three years after the contract for the construction
of the proposed Engineering Building No. 2 was perfected. Following our
decision in G.R. No. 89745 dated April 18, 1991,[14]
petitioner wrote a letter-request dated June 5, 1991 seeking a lifting
of the disallowance of the disbursements covered by Vouchers Nos.
8703204 and 8706430 in view of this Court’s April 8, 1991 decision
overturning COA’s disallowance of the construction costs of the
building. In a second indorsement addressed to the Chairman of the
Commission on Audit dated July 19, 1991, Auditor Ico recommended denial
of petitioner’s letter-request. On April 15, 1993, the Commission on
Audit denied petitioner’s request, hence, the instant petition.
In
lieu of Comment because he took the side of petitioner, the Solicitor
General submitted a Manifestation and Motion urging that the vouchers
subject of the instant controversy be allowed in audit. Consequently,
the public respondent filed its own Comment wherein it asserts its
constitutionally mandated duty to promulgate and implement “accounting
and auditing rules and regulations including those for the prevention
and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and
properties,”[15] and urges the
disallowance of the vouchers in question, for being made in violation
of COA Circular No. 82-191, dated July 5, 1992, equivalent to — in the
public respondent’s words — “a palpable display of defiance against the
mandate of the Constitution to which the public respondent is duty
bound to uphold and protect.”[16]
The pertinent portion of said circular states:
This
commission believes that the present practice of stating the fees for
architectural, engineering design, and similar professional services in
terms of percent of the Project Cost is inconsistent with our national
goal of economy in fiscal operations because the percentage fee
motivates the architect/designer to design a project so as to maximize
its cost since his fee will be computed as a direct proportion to the
resulting project cost.
The settlement of percentage fees has
often been the subject of disagreement between the contractor and the
government especially in contracts where the definition of the project
cost is so broad to allow inclusion into the computation the costs of
equipment as package type air-conditioning, hospital, kitchen and
laundry equipment and other similar equipment which were not covered by
the architect’s/designer’s services.
In order to prevent and
avoid these effects which are detrimental to the government’s interests
contracts for architectural, engineering design, and similar
professional services should invariably specify the fees in monetary or
peso amount. The fee may be computed as a percent of the estimated
project cost in accordance with the schedule of rates in the Architects’
National Code or similar accepted schedule of rates for professional
services, but the amount should then be stipulated in pesos in the
contract.[17]
The
public respondent’s contentions are untenable. While finding that
respondent Commission’s rulings on the disbursements made by petitioner
on the main construction contract were “not without cogent basis,” in Eslao vs Commission on Audit, G.R. No. 8975[18]
we nonetheless upheld petitioner’s disbursements therein valid for
several reasons. First, petitioner secured the construction contracts
in question in good faith and for the benefit of the university.[19]
Second, the construction of the buildings in question ultimately
redounded to the benefit of the government. Finally, the project, at
that time was already 95% complete, and we allowed recovery by the
contractor on the basis of quantum meruit.[20]
Although the contracts subject of the instant controversy involve a
different aspect of the project, we find no reason to deviate from our
earlier holding. The fact that the design contract and the construction
contract involve different sets of accounting and auditing rules cannot
be utilized as reason to altogether ignore the overwhelming evidence of
the good faith exhibited by petitioner not only in respect to the
construction of the latter phases of the engineering building but also
in procuring the best terms possible for the building’s design. It was
logical, given the time constraints, that the original design contractor
be utilized for the plans for the extensions of the engineering
building. Nothing in the design and planning contracts eventually drawn
by the university and C.T. Serna could be characterized as unnecessary,
extravagant, irregular, unconscionable or excessive. The amounts covered
by Vouchers No. 8703204 and 8706340 were, at P30,000.00 and P60,000.00
respectively, well within — if not way below — the amounts of
P80,000.000 and P120,000.00, if the usual trade practice of charging an
average of 8% of the value of the construction or amount released were
followed. Furthermore, a reasonable construction of Circular No.
82-191, which belongs to the class of audit rules and regulations
designed to implement COA’s constitutional mandate to stem “unnecessary,
excessive, extravagant or unconscionable expenditures”[21]
would reveal nothing which would absolutely disallow the pegging of the
amount involved in such contracts at a reasonable value consistent with
established trade practices because even the said circular allows
computation of the fee on the basis of “estimated project cost” provided
that the said computation could be expressed in a sum certain and were
based on values consistent with the values proposed by the National Code
for Architect’s Services. As stated earlier, the payments made to
C.T. Serna Consultants — based on 3% of the amount released — were way
below the 8% floor recommended by the National Code of Architect’s
Services, and was a compromise amount, agreed upon by the parties, which
was below the 6% (of amount released) originally proposed by the design
firm. From all indications, the government clearly emerged the winner
in the contract in question.
We are aware of the fact that the
practice of pegging the contract value on the basis of the amount
released could lead to a pernicious practice of bloating the value of
the amount released by including other costs, such as cost of equipment
in the latter. However, there is no allegation, much less proof, here
that the project costs were “so broad as to include into the
computation” other costs not covered by the designer’s/architect’s
services. In fact, while the exact peso value was not expressed or
specified in the contract, it was definitely capable of being expressed
or stipulated in a sum certain. Even within the parameters of Circular
82-191, which do not absolutely proscribe the method of computation
utilized by petitioner and C.T. Serna Consultants in the assailed
design contract, the expenditures were hardly irregular, unnecessary,
extravagant nor unconscionable. Moreover, the contract in question was
first impliedly authorized by the Ministry of Public Works when it
approved, on March 11, 1987,[22]
the details and plans of the extensions prepared by C.T. Serna
Associates and by later expressly, by COA’s auditor Mr. Santos Guiang.
In
fine we agree with the Solicitor General’s submission that the vouchers
in question should be allowed in audit. As he states:
At this
point in time, phases 2 and 3 of Engineering Building 2 of the
Pangasinan State University has long been completed. It is now being
used by the university for classrooms and teaching purposes. The
university, the studentry and the government has benefitted and is
benefitting from its construction.
In allowing the payment of the
construction cost of the Engineering Building No. 2 (which was earlier
disallowed by COA), this Court found and held that petitioner acted in
good faith in entering into contracts with the construction companies
for the good and interest of the university and the government.
Considering
the foregoing, there is no justifiable reason why the professional fees
of C.T. Serna Consultants should not be compensated for its
architectural services consisting in the drawing of the perspective
plan, design, estimates and specifications for phases 2 and 3 of said
Engineering Building No. 2. After all, as constructed, Engineering
Building No. 2 conformed to such architectural design, plan etc.
prepared by C.T. Serna Consultants.
Following the ruling in the
earlier case, since the services of C.T. Serna Consultants redounded to
the benefit of the general public, it should be compensated because to
deny the payment to the contractor x x x would be to allow the
government to unjustly enrich itself at the expense of another. Justice
and equity demand compensation.”[23]
In
the instant case, the Court finds that the expenditures in question
were plainly for the benefit of the university, the government and the
public. Nothing in the circumstances of the case at bench even remotely
suggests that the disbursements were irregular or excessive,
unnecessary or unconscionable. As equity and justice follow law,
allowing the public respondent’s rigid and unbending interpretation of
its circular would amount to sanctioning unjust enrichment on the part
of the government at the expense of its well-meaning public servants and
in defiance of the purpose and intent of the fundamental law.
Finally,
there is no question that the disallowances involving the construction
cost and the cost of design are intimately related, although both
involve different contracts subject to different audit rules. Believing
in good faith that the disallowances were connected to each other,
petitioner requested that the disallowance on the design contract be
temporarily shelved until questions involving the construction cost were
resolved with finality.[24]
This request was never answered by respondent. Given this Court’s
eventual decision in G.R. No. 89745, petitioner had every reason to
either assume that his request was not denied or was still pending. The
fact of the matter is that prior to respondent’s last denial of
petitioner’s request to lift the disallowance of the design cost of
April 15, 1993, respondent had made no definitive ruling on the matter,
except to exonerate (its) Auditor Santos Guiang in COA Decision No. 765
dated February 9, 1989.[25] Said decision never resolved the question of the design cost’s disallowance, hence, petitioner’s action never prescribed.
WHEREFORE, PREMISES
CONSIDERED, the instant petition is GRANTED. The decision of respondent
Commission on Audit dated April 15, 1993 is REVERSED and SET ASIDE, and
said Commission is directed to pass in audit the amounts covered by
Vouchers Nos. 8703204 and 8706430.
SO ORDERED.
Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Puno, Vitug, Mendoza, Francisco, and Hermosisima, Jr., JJ., concur.
Narvasa, C.J., and Melo, J., on leave.
[1] Rollo, p. 14., See, Contract, Rollo, p. 39.
[2] Rollo, p. 37, Annex “B.”
[3] Eslao v Commission on Audit, G.R. No. 89745, April 8, 1991; 195 SCRA 730, 732 (1995).
[4] Rollo, p. 41.
[5] Id.
[6] Rollo, p. 42, Voucher No. 8706430.
[7] Rollo, p. 43.
[8] Rollo, pp. 44-45.
[9] Rollo, p. 47.
[10] Id.
[11] Id.
[12] Rollo, p. 48, Annex “K.”
[13] Rollo, p. 49, Annex “L.”
[14] The COA’s disallowance of the construction cost of the building was the subject of a parallel controversy in Eslao v. COA,
G.R. No. 89745, promulgated by this Court on April 18, 1991, 195 SCRA
730 (1991). There we held that the “petitioner entered into the two
contracts in good faith and for the good of the university”, and on the
basis of quantum meruit, allowed recovery by the contractor of the costs of construction. Id at 739.
[15] CONST., art. IX-D, sec. 2(1). cited in public respondent’s Memorandum, Rollo, p. 106.
[16] Rollo, p. 108.
[17] Rollo, pp. 119-120, cited in public respondent’s Memorandum, Id, at 108.
[18] Eslao, supra, note 3 at 737.
[19] Id.
[20] Id., at 738.
[21] Supra, note 14.
[22] Supra, note 3 at 732.
[23] Rollo, pp. 95-96.
[24] Rollo, p. 48, Annex “K.”
[25] See, Annex “L,” supra, note 13.