The Supreme Court dismissed a petition challenging rulings of the Commission on Audit-Commission Proper (COA Proper) and affirmed the disallowances of payments made by the Bureau of Customs (BOC) to its contractor, Lotrim Construction, Inc. (Lotrim), for the expansion of the Administration Building of the BOC Port of Davao. The Court upheld COA Proper's holding finding Lotrim liable to return the BOC's overpayment amounting to PHP 408,859.16.
The Case
In 2012, the BOC, through its deputy commissioner and chairman of the Bids and Awards Committee, Atty. Juan Lorenzo T. Tañada, issued an Invitation to Bid, informing prospective bidders that PHP 20,000,000.00 was appropriated in the General Appropriations Act of 2012 as the Approved Budget for the Contract for the expansion of the Project.
In the public bidding conducted on December 20, 2012, Lotrim was declared as the bidder with the Lowest Calculated and Responsive Bid in the amount of PHP 17,203,203.18. The Notice of Award was issued to Lotrim on February 18, 2013. On March 15, 2013, the Contract of Agreement was entered into by the BOC, represented by Commissioner Rozzano Rufino B. Biazon, and Lotrim, represented by its president, Engineer Odilon L. Gaviola, at an agreed contract price of PHP 17,203,203.18. On March 22, 2013, the BOC issued a Notice to Proceed, received by Lotrim on April 2, 2013.
On April 12, 2013, the BOC disbursed PHP 2,419,200.45 to Lotrim as the 15% advance payment. On June 17, 2013, the BOC paid PHP 3,828,184.10 as the first partial payment for the work accomplished.
On July 12, 2013, COA issued Notice of Disallowance No. 2013-001-101-(13) disallowing the 15% advance payment. On January 22, 2014, COA issued Notice of Disallowance No. 2014-001-101(13) disallowing the first partial payment of PHP 3,828,184.10, based on similar grounds. The COA Technical and Information Technology Services inspected the Project and reported that works performed amounted only to PHP 6,347,826.73, contrary to Lotrim's reported accomplishment of PHP 13,878,362.71.
On October 7, 2015, the COA Cluster Director of NGS-Cluster 2 granted Lotrim's appeals and lifted the 2013 and 2014 NDs, granting Lotrim's prayer to be entitled to payment under the principle of quantum meruit. The case was elevated to COA Proper on automatic review. COA Proper disapproved the lifting of the NDs, affirmed both NDs, and held all persons named liable thereunder liable for the entire disallowed amounts, while approving the reduction of Lotrim's liability to PHP 408,859.16.
The Issue
The Court addressed whether the petitioners could invoke the jurisdiction of the Construction Industry Arbitration Commission (CIAC) at a late stage, and whether COA acted with grave abuse of discretion in holding the petitioners liable for the overpaid amount.
The Ruling
The Court held that while the CIAC generally has jurisdiction over construction disputes subject to arbitration, such jurisdiction is not absolute and may be waived by the party's conduct. It found the petitioners' failure to timely invoke CIAC jurisdiction, coupled with their voluntary and active participation in the COA proceedings, effectively barred them from later invoking arbitration. The petitioners were estopped from asserting CIAC jurisdiction at that stage.
The Court found no showing of grave abuse of discretion amounting to lack or excess of jurisdiction on the part of COA in holding the petitioners liable for the overpaid amount, and upheld COA's determination.
The dispositive portion states: "ACCORDINGLY, the Petition is DISMISSED. The January 30, 2018 Decision No. 2018-204 and the January 28, 2022 Resolution No. 2022-010 of the Commission on Audit are AFFIRMED." The Court further directed the Commission on Audit to implement the assailed rulings and to take the appropriate measures for the collection of the amounts found to have been overpaid to petitioner Lotrim Construction, Inc., consistent with the principle of quantum meruit and subject to applicable laws, rules, and regulations.
By the Numbers
- Approved Budget for the Contract: PHP 20,000,000.00 (GAA 2012)
- Contract price / Lotrim's bid: PHP 17,203,203.18
- 15% advance payment (April 12, 2013): PHP 2,419,200.45
- First partial payment (June 17, 2013): PHP 3,828,184.10
- Lotrim's reported accomplishment: PHP 13,878,362.71
- COA Inspection Report actual accomplishment: PHP 6,347,826.73 (36.90%)
- Reduced liability of Lotrim: PHP 408,859.16
- Public bidding: December 20, 2012; Notice of Award: February 18, 2013
The Court's Reasoning
The Court explained that the principle of quantum meruit, grounded in fairness and equity, is designed to protect private contractors who have rendered services or delivered goods to the government by ensuring they are compensated for the reasonable value of their work, and by preventing the State from being unjustly enriched. The Court stated this equitable doctrine cannot be distorted into a shield for contractors to retain payments in excess of what is legally or contractually due, noting that its equitable nature cuts both ways: while it obliges the government to pay for benefits actually received, it likewise safeguards public funds by allowing the recovery of overpayments.
The Court recognized the expertise of COA in determining the amount due to or due from the petitioners on the basis of quantum meruit, adding that factual findings of administrative agencies are generally respected and even afforded finality. It held that only when COA has clearly acted without or in excess of its jurisdiction, or with grave abuse of discretion, has the Court reversed its decisions. Finding COA's findings supported by substantial evidence and rendered pursuant to its specialized expertise, the Court affirmed the liability of the petitioners for the return of the overpayment.
Source: Supreme Court Decision in G.R. No. 270295.
This report summarizes a public Supreme Court decision and is not legal advice.