Case Summary (G.R. No. 167219)
Key Dates
Loan releases: December 10–22, 1993
COA post‐audit disallowance: December 27, 1996 (CSB No. 95-005) and 1996 Notices Nos. 96-014 to 96-019
Ombudsman dismissal: February 23, 1999
COA Regional decision: August 29, 1997 (Decision No. 97-001); February 18, 1998 (Decision No. 98-005)
COA Commission Proper decision: July 17, 2003 (Decision No. 2003-107)
COA denial of reconsideration: December 7, 2004 (Resolution No. 2004-046)
Supreme Court decision: February 8, 2011
Context and Applicable Law
– The 1987 Constitution’s mandate for COA to audit government funds under PD 1445 (State Audit Code)
– Land Bank Charter (Rep. Act No. 3844, as amended by PD 251) and its Manual on FOG Lending Operations
– PD 1445, Section 88: prohibits advance payments for undelivered supplies or services without certification of delivery and inspection
– COA’s rules on finality of disallowances and its jurisdiction to compromise claims
Factual Background
Land Bank’s cattle‐financing program granted six loans totaling ₱3,375,775 to four cooperatives, with ₱3,115,000 paid directly in advance to Remad as cattle supplier. Cooperatives had executed “Cattle-Breeding and Buy-Back Marketing Agreements” but none of these loan contracts expressly authorized prepayment. Remad failed to deliver due to a foot-and-mouth disease outbreak.
Procedural History
- Land Bank Auditor disallowed ₱3,115,000 (Dec. 1996) for non-delivery and advance payment in violation of bank policy and PD 1445.
- Petitioners appealed to COA Regional Office IX, which affirmed disallowance (Aug. 1997; Feb. 1998). No further appeal was timely filed to COA Commission Proper, rendering the regional decision final and executory.
- Petitioners separately faced an Ombudsman complaint for malfeasance but were absolved on Feb. 23, 1999 for lack of evidence.
- Petitioners then sought relief from COA Commission Proper, which on July 17, 2003 (Decision No. 2003-107) and Dec. 7, 2004 (Resolution No. 2004-046) affirmed the disallowance and upheld personal liability, allowing petitioners to seek reimbursement from Remad.
Issues
- Whether COA committed grave abuse of discretion by disallowing the advance payments under PD 1445, Section 88.
- Whether petitioners can be held administratively liable despite Ombudsman’s dismissal and Bangko Sentral ng Pilipinas’ write-off of the loans.
Court’s Legal Analysis
– Jurisdiction and Finality: COA’s regional decision became final and executory for failure to appeal, and COA properly addressed petitioners’ belated appeal on the merits.
– Advance Payment Scheme: The COA found no provision in the loan contracts or CFPs authorizing prepayment. Petitioners failed to produce any documentary basis for such a scheme. Bank policy mandated payment only upon delivery and official acceptance, consistent with the Manual on FOG Lending Operations and PD 1445, Section 88.
– Findings of Fact: COA’s fact‐finding is accorded deference when supported by substantial evidence. Petitioners did not attach the alleged Land Bank memoranda justifying prepayment; hence, COA could not credit their claim of a sanctioned prepayment practice.
– Ombudsman Dismissal: The criminal case dismissal for lack of evidence does not bar civil or administ
Case Syllabus (G.R. No. 167219)
Facts of the Case
- Land Bank of the Philippines (Land Bank), Ipil Branch, operated a cattle-financing program granting loans to cooperatives.
- Applicants submitted a standard Credit Facility Proposal (CFP) form provided by Land Bank’s main office, per the Field Operations Manual.
- The CFP required a Memorandum of Agreement (MOA) between each cooperative and the supplier, Remad Livestock Corporation (REMAD), covering stock inventory levels, breed and health specifications, buy-back arrangements, technology transfer, visits, and replacements.
- Four cooperatives (RT Lim RMC, BARBEMCO, Tungawan PFMPC, SIFAMCO) received six loans in December 1993 totaling ₱3,375,775.00; ₱3,115,000.00 was paid directly to REMAD as advance for livestock.
- REMAD failed to deliver cattle on the agreed dates, prompting a post-audit disallowance by the Land Bank auditor under CSB No. 95-005 and Notices of Disallowance Nos. 96-014 to 96-019.
CFP Deficiencies and Policy Violations
- Auditor found CFP terms allowing prepayments without protection of Land Bank’s interests and absent in the bank-supplier contract.
- Such prepayment deviated from the Manual on FOG Lending Operations, which mandates release upon presentation of delivery/reimbursement documents and inspection.
- Section 88, P.D. 1445 (State Audit Code), prohibits advance payments for undelivered goods or services without presidential approval and certification of delivery and acceptance.
- Auditor concluded that advanced payment to REMAD violated bank policy and COA rules, warranting disallowance.
Proceedings Before the Ombudsman and COA Regional Office
- Auditor held six Ipil Branch employees (including petitioners) personally liable for ₱3,115,000.00.
- COA Regional Office No. IX filed criminal complaints before the Office of the Ombudsman for gross negligence and violation of RA 3019.
- Petitioners’ joint motion for reconsideration and appeal to the COA Regional Directo