Facts:

The case involves petitioners Janice Day E. Alejandrino and Miriam M. Pasetes, who were former executive officers of the Philippine National Construction Corporation (PNCC), previously known as the Construction and Development Corporation of the Philippines (CDCP). Alejandrino held the position of Senior Vice-President/Head of Human Resources and Administration, while Pasetes served as Vice-President/Acting Treasurer. In 2011, PNCC engaged the legal services of four private lawyers: Eusebio P. Dulatas, Henry Salazar, Stephen Ivan Salinas, and Alex Almario. Subsequently, salaries amounting to P911,580.96 were paid to these lawyers. On August 9, 2012, the Commission on Audit (COA) issued Notice of Disallowance No. 12-004-(2011), stating that the payment was disallowed because it lacked the required written conformity and concurrence from the Office of the Government Corporate Counsel (OGCC) and the COA, violating COA Circular No. 95-011 and Office of the President Memorandum Ci...

Facts:

Background and Corporate Structure

• PNCC, formerly known as the Construction and Development Corporation of the Philippines (CDCP), was originally a private construction firm engaged in general contracting.
• Through a debt-to-equity conversion – notably under LOI No. 1295 issued by President Ferdinand E. Marcos – the government obtained majority control of CDCP, eventually transforming it into PNCC.
• This change was further highlighted by subsequent amendments to its Articles of Incorporation and By-Laws, emphasizing the government’s ownership stake.

Engagement of Private Lawyers and Disbursement of Salaries

• In 2011, PNCC engaged the services of four private lawyers under Contracts of Service.
• The lawyers included Atty. Eusebio P. Dulatas, Atty. Henry Salazar, Atty. Stephen Ivan Salinas, and Atty. Alex Almario.
• Their roles were integrated as part of the PNCC Corporate Legal Division and as Corporate Secretary.
• Salaries amounting to P911,580.96 were paid to these lawyers.
• The hiring was executed without securing the mandatory written conformity from the Office of the Government Corporate Counsel (OGCC) and the written concurrence from the Commission on Audit (COA).

COA Audit and Issuance of Notice of Disallowance

• On August 9, 2012, the COA Audit Team Leader issued Notice of Disallowance No. 12-004-(2011) addressing the irregularities in the hiring and payment process.
• The notice held various corporate officers—among them petitioners Janice Day E. Alejandrino and Miriam M. Pasetes—as well as the lawyer-payees liable for these disallowed salaries.
• Subsequent administrative actions included an appeal by the corporate officers and the filing of a Petition for Review with the COA Director for Corporate Government Sector-Cluster 4.

Procedural Developments and Arguments Presented

• The petitioners argued that:
• PNCC should be considered a government-acquired asset corporation and not a government-owned and controlled corporation (GOCC).
• The management of PNCC possessed inherent authority to hire private lawyers, and their act of hiring was a ministerial function performed in good faith.
• The principle of quantum meruit should apply, protecting them from personal liability since PNCC benefited from the legal services rendered.
• The COA and the Office of the Solicitor General (OSG) countered that:
• Government ownership, as evidenced by majority shareholding, places PNCC within the ambit of a GOCC under the direct supervision of the Office of the President.
• PNCC was required to secure both written conformity from the OGCC and the COA’s concurrence before engaging private legal counsel.

Relevant Circulars and Legal Provisions

• COA Circular No. 95-011 mandated that government agencies (including GOCCs) should not utilize public funds for private legal services without prior written approval.
• OP-MC No. 9 similarly required that legal matters involving GOCCs be handled exclusively by the OGCC unless exceptional circumstances warranted otherwise.
• These mandates formed the basis for the COA’s disallowance of the payment for the private legal services in question.

Issue:

Jurisdiction of the COA over PNCC

• Whether PNCC, despite being organized under the Corporation Code, qualifies as a GOCC subject to the COA’s audit authority given the government’s majority shareholding.

Validity and Regularity of Hiring Private Lawyers

• Whether PNCC’s hiring of private lawyers without securing the requisite written conformity from the OGCC and the COA’s written concurrence constitutes an irregular expenditure of public funds.

Personal Liability of PNCC Corporate Officers

• Whether petitioners (the corporate officers) should be held personally liable for the disallowed amount even though the lawyers rendered their services in good faith and benefited PNCC.
• Whether the application of the principle of quantum meruit exempts the officers from refunding the disallowed amount.

Determination of Appropriate Remedies and Modifications

• Whether the COA’s decisions regarding the disallowance of salaries and subsequent modifications (exempting the lawyer-payees from refund) are justified and sound from a legal standpoint.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)