Case Summary (G.R. No. 95398)
Applicable Law
The case revolves around the provisions outlined in Letter of Instruction (LOI) No. 968 and the Government Auditing Code of the Philippines (PD 1445), particularly Sections 85 and 86. LOI 968 mandates that all contracts for capital projects require the chief accountant’s signature as a witness, with contracts executed without such a signature being considered null and void.
Facts of the Case
The construction contract was approved by Onofre D. Corpuz, then Minister of Education, Culture, and Sports. Despite the issuance of a Certificate of Availability of Funds by Pablo Narido, the chief accountant, he failed to sign the contract as a witness. The contractor sought an additional charge due to escalated construction costs, leading to a total payment of P515,305.60, surpassing the original contract amount. Following the project's cessation due to the contractor's inability to continue, COA subsequently questioned the payments made.
Initial Decision by COA
In an audit, the COA identified that the lack of the chief accountant’s signature rendered the contract null and void, holding Melchor personally responsible for the entire amount disbursed. Melchor sought reconsideration, arguing substantial compliance with the intent of the law through the issuance of the Certificate of Availability of Funds.
Court's Findings on Contract Validity
Upon review, the Court recognized the efforts made by Melchor to comply with legal requirements, noting that the Certificate served a crucial role in ensuring fund availability absent the signature. The Court refuted the notion that the absence of the accountant's signature alone invalidated the contract, emphasizing that the contract still fulfilled the purpose of ensuring funds were available for the project.
Rationale Against Personal Liability
The Court drew parallels to previous rulings, including Royal Trust Corporation v. Commission on Audit, establishing that when a government official acts under statutory authorization, liability may not attach merely due to contractual deficiencies, particularly when substantial benefits had already been conferred. The preservation of the judicial intent and spirit of LOI 968 was highlighted to avoid unjust enrichment of the government at Melchor’s expense.
Disallowance of Extra Work Payment
Regarding the additional P172,003.26 paid for extra work beyond the original contract, the Court concurred with COA that the absence of a supplemental agreement, as stipulated by the implementing rules of PD 1594, rendered t
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Case Citation
- 277 Phil. 801 EN BANC [G.R. No. 95398. August 16, 1991]
Parties Involved
- Petitioner: Mario R. Melchor, in his capacity as Vocational School Administrator of Alangalang Agro-Industrial School, Leyte.
- Respondent: Commission on Audit (COA).
Background and Facts of the Case
- On July 15, 1983, petitioner Melchor entered into a contract with Cebu Diamond Construction for the construction of Phase I of the Home Technology Building at a cost of P488,000.
- Pablo Narido, the chief accountant, issued a Certificate of Availability of Funds but failed to sign the contract as a witness, violating Section 1 of Letter of Instruction (LOI) No. 968.
- The Minister of Education, Culture and Sports approved the contract.
- During construction, the contractor requested an additional charge of P73,000 due to increased labor and material costs. Melchor referred this request to the Regional Director of the Ministry of Education for approval.
- The contractor was granted extensions but eventually ceased work on April 10, 1984, having completed only 61% of the project, valued at P344,430.88.
- By September 13, 1984, the contractor had been paid a total of P515,305.60, which included overpayment for the completed work and additional expenses.
- COA disallowed the payment due to the contract being null and void because the chief accountant did not sign as a witness.
Legal Issues Presented
- Whether Melchor should be held personally liable for the amount of P515,305.60 paid to the contractor, given the alleged nullity of the contrac