Case Summary (A.M. No. RTJ-13-2360)
Filings and Initial Controversy
On June 23, 2022, Topbest filed a Petition for Certiorari under Rule 64 in relation to Rule 65 of the Rules of Court, contesting the January 22, 2019 decision of the COA and a subsequent Notice of Disallowance. Topbest alleged that the respondents acted with grave abuse of discretion in disallowing transactions worth PHP 499,376,515.60 involving contract violations related to government procurement laws.
Contractual Background
In 2016, Topbest entered into an Equipment Lease Agreement (ELA) with the NPO for leasing a printing machine for a total consideration of PHP 49,500,000. The ELA specified that the rental fees would be paid based on the value of the output produced from the leased equipment, with maintenance and operational costs to be borne by the lessor.
Audit and Disallowance
Following an audit conducted by the NPO's Audit Team which noted potential violations of procurement policies, the respondents issued a Notice of Disallowance on January 22, 2019. The audit concluded that Topbest's agreements with the NPO amounted to prohibited subcontracting, violating existing government regulations.
Appeal and COA-NGAS Decision
Topbest appealed the Notice of Disallowance, claiming a lack of due process due to insufficient evidence provided by the Audit Team. However, the COA-NGAS upheld the Notice of Disallowance, emphasizing that the leased agreement was essentially a subcontracting agreement that contravened procurement laws, and maintained that Topbest’s liability must be affirmed.
Procedural Issue
Upon receipt of the COA-NGAS decision on May 24, 2022, Topbest opted to file a petition instead of an appeal to the COA Commission Proper. The central argument was that the time available for filing an appeal was insufficient, asserting that they had only one day to file. However, the respondents countered that Topbest had sufficient time as it was two days before the six-month period expired.
Court's Ruling on the Remedy
The Court stressed that Topbest should have pursued the appropriate administrative remedies under the COA Rules of Procedure before seeking judicial intervention through a Petition for Certiorari. The Court underscored the importance of exhausting administrative remedies and noted that the appeal process remained available to Topbest at the time of its petition.
Grave Abuse of Discretion
The Court further held that Topbest failed to provide substantial evidence demonstrating that the COA acted with grave abuse of discretion. The COA's conclusions were based on extensive records and adequate legal grounds, thereby affirming the validity of the Notice of Disallowance and COA-NGAS decision.
Finality of the Judgment
As the court determined that the COA decision had become final due to the insufficiency of Topbest's petition, the rul
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Background of the Case
- Topbest Printing Corporation (Topbest) filed a Petition for Certiorari challenging the Commission on Audit's (COA) Decision No. 2022-014 and Notice of Disallowance No. 19-001-207542-17 issued on January 22, 2019.
- The dispute arose from Topbest’s lease contract with the National Printing Office (NPO) for a 4 Stations Web/Continuous Form Machine with Collator.
- The Equipment Lease Agreement (ELA) was entered into on June 28, 2016, with a contract price of PHP 49,500,000.00.
- NPO awarded Topbest Lot 2 of the Printing Capacity Augmentation Project Phase I under a joint venture proposal with payment on a per-usage basis via work orders.
- COA Audit Team considered the transactions between NPO and Topbest as subcontracting, which violated Government Procurement Policy Board Resolution No. 05-2010 that prohibits subcontracting by government printers.
Nature of the Contract and Transactions
- The ELA specified lease terms including machine maintenance by the lessor (Topbest) and payment on a rental basis computed on output.
- COA found that actual payments were made on a revenue sharing scheme: 85% of the job orders' total cost to the private printers (including Topbest) and 15% retained by NPO as profit.
- COA concluded the arrangement was a disguised subcontracting agreement rather than a simple lease.
- COA highlighted that 85% payment included rental, labor, raw materials, maintenance, power, and operator costs.
COA Findings and Decision
- Notice of Disallowance issued disallowed PHP 499,376,515.60 concerning transactions with private printers including Topbest from April to December 2017.
- COA-NGAS Cluster 1 affirmed the Notice of Disallowance, holding Topbest liable for PHP 6,039,057.54.
- COA emphasized administrative due process was observed, stating that Topbest was notified and had opportunity to appeal.
- The Commission determined evidence came from both Topbest and NPO’s own records and transactions.
- COA stressed the arrangement violated the prohibition on subcontracting printing services by government entities.
Procedural Aspects and Arguments
- Topbest filed an Appeal Memorandum with the COA Director on August 6, 2019, two days before the six-month deadline from receipt of Notice of Disallowance.
- Upon receiving an adverse COA-NGAS decision, Topbest filed a Petition for Certiorari with the Supreme Court alleging grave abuse of discretion by COA respondents.
- Topbest argued the Notice of Disallowance lacked supporting evidence and that the contract was a bona fide lease (supported by Civil Code Article 1654).
- Further, it claimed ignorance of any illegal acts by NPO and insisted it should not be held liable.
- COA respondents argued Topbest failed to exhaust administrative remedies by not appealing to COA Commission Proper within the prescribed period.