G.R. No. 188818 - Osmena vs. Commission on Audit

Case Digest (G.R. No. 188818)
Standard Advanced

Facts:

Background of the 1994 Palaro and Construction Projects

The City of Cebu was selected to host the 1994 Palarong Pambansa (Palaro).
In preparation for the games, the City engaged two construction companies:

WT Construction, Inc. (WTCI) for part of the sports complex construction.
Dakay Construction and Development Company (DCDC) for renovations and extra works.

Tomas R. Osmeña, in his personal capacity as well as his capacity as City Mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) to represent the City in executing the construction contracts.

Issuance of Change/Extra Work Orders

During the construction process, Osmeña issued a total of 20 Change/Extra Work Orders.

These orders amounted to ₱35,418,142.42 for WTCI—equivalent to approximately 83% of the original contract price.
For DCDC, the extra orders amounted to ₱15,744,525.24—about 31% of the original contract price.

The extra work orders were executed without:

Any supplemental agreement to cover the additional work.
Prior authorization from the Sanggunian, even though a resolution was later attempted by Councilor Augustus Young.

Despite the lack of proper supplemental agreements or sufficient authorization, the extra work orders were implemented due to the "extreme urgency and need" to complete the sports complex for the Palaro.

Resulting Collection Cases and Judicial Decisions

After the Palaro, as the sports complex was in use, WTCI and DCDC sought payment for the extra work performed.
The failure to appropriate funds (due to the non-passage of a supplementary ordinance by the Sanggunian) led the contractors to file collection cases against the City before the Regional Trial Court (RTC) of Cebu City.
The RTC ruled in favor of the contractors by finding merit in their claims and awarding:

Damages, attorney’s fees, and litigation expenses amounting to ₱2,514,255.40 for WTCI.
Similar awards of ₱102,015.00 for DCDC.

The decisions of the RTC were affirmed on appeal (with modifications as to the amounts) and became final.

Audit Findings and COA's Disallowance

During the post-audit process, the City Auditor issued two notices disallowing the payment of:

Litigations expenses.
Damages.
Attorney’s fees granted in the RTC rulings.

The City Auditor held not only the Sanggunian members and the City Administrator but particularly Osmeña personally liable for the sums awarded, reasoning that:

The extra work orders were unauthorized as they lacked the necessary supplemental agreements and Sanggunian approval.
Such unapproved and extra disbursements amounted to unnecessary expenses and thus should be charged against Osmeña’s personal liability under law.

COA’s Subsequent Decisions and Procedural Developments

The COA Regional Office, through its 2nd Indorsement dated April 30, 2003, modified the initial disallowance:

The members of the Sanggunian were absolved of liability.
The decision declared that the damages and additional costs should be imposed solely on Osmeña.

The COA’s National Director for Legal and Adjudication later sustained this position in a decision dated January 16, 2004.
On May 6, 2008, COA reaffirmed the disallowance through its Decision, and after a subsequent motion for reconsideration, a Resolution dated June 8, 2009, denied Osmeña’s motion.
Osmeña, after recovering from cancer surgery and returning from the United States on July 15, 2009, filed the petition for certiorari under Rule 64 on July 27, 2009 challenging the COA’s Decision and Resolution.

Petition for Certiorari and Osmeña’s Arguments

Osmeña filed a petition for certiorari under Rule 64 of the Rules of Court to reverse the COA’s rulings.
He argued that the computation of the filing period should begin on July 15, 2009—the date he returned to office and was effectively aware of the COA’s final denial—rather than from the earlier receipt of the COA Resolution on June 29, 2009.
He contended that, given the personal nature of the imposition of liabilities upon him and due to his medical condition, extra time was necessary to secure private counsel and prepare his appeal.
Osmeña further justified the immediate execution of the extra work orders because of the urgency to complete the sports complex for the Palaro, noting that the City ultimately benefitted from the use of the complex.

Issues:

Timeliness of Filing the Certiorari Petition

Whether the 30-day period for filing a petition for certiorari under Rule 64 should be computed from:

The date of receipt of the COA’s Resolution (June 29, 2009), or
The date Osmeña returned to office and was effectively notified (July 15, 2009)

The implications of Osmeña’s delayed filing due to his medical condition and the interruption caused by his motion for reconsideration.

Personal Liability for Unauthorized Expenditures

Whether Osmeña should be held personally liable under Section 103 of PD 1445 for the disallowed expenses related to:

Damages,
Attorney’s fees, and
Litigation expenses resulting from the extra work orders.

The role of the lack of a supplemental agreement and absence of Sanggunian’s prior approval in establishing personal liability.

Justification and Ratification of the Change/Extra Work Orders

Whether the extra work orders, despite their non-compliance with the usual legal requirements (i.e., supplemental agreement or prior Sanggunian authorization), were necessary due to:

The extreme urgency of preparing the sports complex for the Palaro, and
The tacit approval evidenced by actions of other City officials and committees (e.g., PBAC deliberations).

The issue of whether the eventual enactment of appropriation ordinances by the Sanggunian serves as ratification of the extra work orders.

Ruling:

(Subscriber-Only)

Ratio:

(Subscriber-Only)

Doctrine:

(Subscriber-Only)

Unlock Full Case Digest

Case Digest (G.R. No. 188818) Concise

Facts:

Case Digest (G.R. No. 188818) Standard Advanced

Facts:

Issues:

Ruling:

Ratio:

Doctrine:

Case Digest (G.R. No. 188818)
Concise

Case Digest (G.R. No. 188818)
Standard Advanced