Case Summary (G.R. No. 257427)
Antecedent Facts
Cruz and Alonzo served respectively as the administrator and administrative department manager of the LRTA, while Alday was the General Services Division Manager. The LRTA's Bids and Awards Committee (BAC) awarded a contract for the repair of 23 units of traction motor armatures to TAN-CA International, Inc./Yujin Machinery, Ltd. at a total cost of US$94,800, despite the absence of a formal service repair agreement. The goods were sent to South Korea for repair, but of the 23 units, only 13 were returned, with several being rejected for various reasons.
Audit Findings and Notice of Disallowance
Following a post-audit by the COA, Audit Observation Memorandum No. 2003-001 was issued highlighting serious issues, including the absence of a service repair agreement, premature payment without certification of acceptance from the Engineering Division, and the contractor’s failure to comply with terms on the return of waste materials and the complete repair of the motors. On February 27, 2008, COA issued Notice of Disallowance No. LRTA 2008-005 (2002), disallowing the US$58,800 payment to the contractor, citing a lack of supporting documents and other compliance failures.
Petitioners' Appeal and COA's Ruling
The petitioners appealed the Notice of Disallowance, arguing that the payment was warranted as the repaired units passed a testing phase and claiming a lack of awareness regarding the necessity of a one-year warranty period before payment. They also contended that the disallowance was arbitrary and that their actions were justified, given the urgency of maintaining train operations to avoid greater losses.
COA's Confirmation of Disallowance
In Decision No. 2012-142, COA denied the appeal and upheld the disallowance. The Commission held that the petitioners failed to sufficiently address the audit findings, emphasizing the indivisible nature of the repair contract and the irregularities associated with the payment. COA directed the LRTA Management to take legal action against the contractor or compel compliance with the contractual obligations, including the return of the remaining 10 unrepaired units.
Petition for Certiorari and Respondent's Argument
The petitioners subsequently filed a Petition for Certiorari with the Supreme Court alleging grave abuse of discretion by COA. They asserted that the disallowance was unwarranted and that they acted in good faith. The respondent defended its position, emphasizing that the petitioners had not adequately resolved the issues raised in the AOM and that they were not privy to the contractor's non-compliance, thus justifying the disallowance
...continue readingCase Syllabus (G.R. No. 257427)
Introduction
- The case involves a Petition for Certiorari under Rule 64 of the Rules of Court.
- Petitioners are Teodoro B. Cruz, Jr., Melchor M. Alonzo (former employees of the Light Rail Transit Authority - LRTA), and Wilfredo P. Alday (current General Services Division Manager).
- The petition challenges Decision No. 2012-142 and Notice/Resolution rendered by the Commission on Audit (COA) regarding disallowed payments for contract services.
Antecedent Facts
- The LRTA awarded a contract for the repair of 23 units of traction motor armatures to TAN-CA International Inc./Yujin Machinery Ltd. at a cost of US$94,800.
- There was no formal service repair agreement executed.
- The units were sent to South Korea for repair under a Letter of Credit from the Land Bank of the Philippines, with only 13 units being repaired and returned.
- Out of the 13 repaired units, three were rejected by the LRTA Engineering Division, while 10 units remained in Korea.
Findings of the Auditor
- An Audit Observation Memorandum (AOM) noted:
- No service repair agreement was executed.
- Payment of US$58,800 was made without the necessary acceptance certification.
- The contractor failed to return waste materials as stipulated in the Terms of Reference (TOR).
- LRTA management ignored recommendations for an ocular inspection of the contractor’s facilities.
Notice of Disallowance
- On February 27, 2008, COA issued Notice of Disallow