128. Lazaro v. Commission on Audit, G.R. No.

213323, January 22, 2019

 This case is about COA’s disallowance of the Provincial Government of Laguna's purchase of medicines, medical and
dental supplies, and equipment (medical items) in the total amount of P118,039,493.46.
 As reported in a December 3, 2004 article of the Philippine Daily Inquirer, the Regional Director of the Regional Office
created an audit team to conduct a preliminary fact-finding audit and investigation of irregularities in the purchase of
medical items.
 COA found that: (1) the medical items were purchased without public bidding; and (2) reference to brand names were
made in the procurement documents to justify the resort to exclusive distributorship, contrary to Section 18 of Republic
Act No. 9184.
 Petitioners Governor Lazaro, et al. argue that they had factual basis for resorting to direct contracting on the basis of
brand names because:
o (1) there are exceptions to the prohibition against referring to brand names under Republic Act No. 9184;
(2) the Therapeutics Committees of the Province of Laguna’s district hospitals issued
Certifications/Justifications recommending the brand names selected; and
(3) the Certificates of Exclusive Distributorship and Certificates of Product Registration proved that the
suppliers selected “were the exclusive distributors” of the procured medical items.
o Petitioners Governor Lazaro, et al. further insist that even if the contract was defective, a claim under the
defective contract can still be satisfied under the principle of quantum meruit.
 They point out that in Royal Trust Construction v. Commission on Audit and EPG Construction Co. v.
Hon. Vigilar, this Court allowed the payment to the contractor despite perceived infirmities in the
contract. The infirmities did not render the contract illegal.
o Petitioners Governor Lazaro, et al. cite National Center for Mental Health Management v. Commission on
Audit to support their claims.
 They point out that this Court accorded respect to administrative agencies’ exercise of discretion
whenever reference to brand names and the consequential resort to negotiated purchases were made.
 Petitioners also pointed out that while there could have been substitute items, the procuring entity’s
judgment on the suitability of the brand of the items procured should be accorded respect.
 Respondents state that Section 18 of Republic Act No. 9184 expressly prohibits reference to brand names, without any
exception or condition.
o The Certifications/Justifications issued by the Therapeutics Committees were merely recommendatory, whereas
the language of Republic Act No. 9184 is mandatory.
o Further, the Therapeutics Committees did not refer to any clinical study to support their claims in the
Certifications/Justifications.
o They did not prove that there were no substitutes for the procured items that could have been obtained at terms
more advantageous to the government.
o Respondents argue that the principle of quantum meruit does not apply here because petitioners patently
violated the legal provisions on competitive public bidding.
Issues and Held:
1. First, whether or not the necessary conditions for direct contracting were met in the disallowed transactions. –
YES.
 Petitioners failed to show that the Commission on Audit committed grave abuse of discretion in disallowing the
expenditures covered by the Notice of Disallowance.
 The case of National Center for Mental Health Management does not apply in this case since that case was decided in
1996, before Republic Act No. 9184 was enacted in 2003.
 o The law is patently clear, with no exceptions: “[r]eference to brand names shall not be allowed.” Without basis
to claim that it was proper to refer to brand names in their procurement, the claim that this case is an exception
to the requirement of competitive bidding has no leg to stand on. Consequently, the transactions were properly
disallowed.
2. Second, whether or not the principle of quantum meruit applies here. – No.
 When asserting their limited or absence of liability based on the principles of quantum meruit and good faith,
petitioners, in good diligence, must clearly allege and support the factual basis for their claims.
 Royal Trust Construction, EPG Construction Co., and Eslao are not squarely applicable here.
o All three (3) cases involved the question of whether payment should be made to the contractor who had
already provided the services covered by a disallowed transaction. They did not tackle the liability of
public officials responsible for irregular transactions.
 Indeed, the principle of quantum meruit—that a party is allowed to recover as much as he or she reasonably
deserves—is usually invoked with regard to paying a contractor for works rendered.
o Here, however, the contractors have already been paid, and the question to be resolved is whether the
public officers responsible for the irregularity must reimburse the government for it.
 Melchor is more relevant than the rest here, as it pertained to the liability of a public officer for disallowed
transactions. Nonetheless, it is still not entirely on all fours with this case. Melchor involved two (2) amounts
that were disallowed: (1) ₱344,340.88, when the Commission on Audit found that the legal requirements for the
contract had not been met; and (2) an additional ₱172,003.26, supposedly for extra work on the same project,
when the Commission on Audit found that there had been no supplemental agreement executed for this
additional amount.
o Despite the disallowance, this Court held that the petitioner’s liability for the entire amount of
₱172,003.26 should not be considered automatic.
o This Court recognized that while the principle of quantum meruit is generally contemplated for unpaid
contractors, it also applied to the public officer in that case.
o It directed the Commission on Audit to compute the value of the extra works under quantum meruit,
and hold the public officer liable for the excess or improper payment for the extra works, if any.
o The principle of quantum meruit was used to determine whether the contractor had been paid beyond
the amount deserved based on quantum meruit, such that the public officer there was liable only for the
amount that was paid beyond the reasonable amount deserved by the contractor.
 Here, no part of the disallowed transaction could be deemed valid. Petitioners plainly violated the law requiring
procurement to undergo competitive bidding. In doing so, they also violated the law prohibiting reference to
brand names.
 Moreover, even if the principle of quantum meruit could be applied here, petitioners fail to establish the factual
basis for its application.
o In Melchor, to determine a public officer’s liability based on quantum meruit, the amount of reasonable
value of the procured items or services must first be established, so that the public officer is liable for
only the excess paid beyond the reasonable value.
o Here, petitioners were held liable for the disallowed purchase of medical items amounting to
₱118,039,493.46. They do not, however, provide any basis to determine what were purchased. Thus,
there is no basis to determine the reasonable value for the items purchased.
 Petitioners enumerated neither the items purchased without public bidding nor the suppliers for
these items.
 The incomplete list provided by the petitioners show that many of the items purchased without
bidding could have been purchased at a lower cost. Petitioners fail to address these. This Court
finds no basis to conclude that the amount of ₱118,039,493.46 constitutes the reasonable value
for the purchased goods.
 Petitioners fail to allege and support with good diligence their claims of good faith.
o To convince this Court of their good faith, petitioners should have sufficiently alleged facts that would
show that there was no collusion between petitioners and the Therapeutics Committees to use the
committee’s role as a tool to circumvent the rules on procurement. – They were not able to do this.
 To support their claims, petitioners Governor Lazaro, et al. supposedly attached copies of the
Certifications/Justifications of the Therapeutics Committees of different district hospitals of the
Provincial Government of Laguna.
  A scrutiny of these documents reveals that half of the Annexes were merely Certifications
signed by various companies, pertaining to Innovators Trading as their exclusive dealers.
 Petitioners Governor Lazaro, et al.’s submissions do not clearly allege and establish the
sequence of events, such as when and how the Therapeutics Committees made the
recommendations, and when and how petitioners responded to them. These circumstances are
vital in establishing petitioners’ frame of mind and good faith.
 The Justifications by the Therapeutics Committees were also undated.
 Further, this Court notes the Commission on Audit’s observations that: (1) the Therapeutics Committees did not
refer to any clinical study to support the claims in the Certifications/Justifications; and (2) these
Certifications/Justifications were merely recommendatory, whereas the language of Republic Act No. 9184 is
mandatory.
 In asserting limited or complete lack of liability based on the principle of quantum meruit and good faith,
petitioners, in good diligence, bear the burden to clearly allege and support the factual basis for their claims. It
is not this Court’s duty to construe their incomplete submissions and vague narrations to determine merit in
their assertions.
 Petitioners did not fulfill their burden; thus, their claims must be rejected.

3. Whether or not petitioner Villanueva can be held liable for disallowed transactions in which she has not been
shown to have participated.
 Petitioner Villanueva has repeatedly pointed out that she was designated as Officer-in-Charge of the Office of
the Provincial Accountant only on July 5, 2005.
o Prior to this, she was not a signatory to any document related to disbursements and purchases made by
the Provincial Government of Laguna. She was an Accountant IV, responsible only for preparing
financial reports and bank reconciliations. It was her predecessor as Provincial Accountant, Azucena C.
Gacias, who signed and certified the documents pertaining to the purchases in 2004.
 SC held that Public officers should not be held liable for disallowed transactions in which they did not
participate. Holding them liable without any proof of their participation in the transaction is grave abuse of
discretion.
 Since petitioner Villanueva’s liability for the disallowed transactions is anchored on her position as Provincial
Accountant, she should only be liable for the transactions that occurred after she was designated Officer-in-
Charge of the Office of the Provincial Accountant.
Disposition: WHEREFORE, the Petition in G.R. No. 213323 is DENIED and the Petition in G.R. No. 213324 is PARTIALLY
GRANTED. The August 17, 2011 Decision and May 6, 2014 Resolution of the Commission on Audit are AFFIRMED with
MODIFICATION. Petitioner Evelyn T. Villanueva is NOT LIABLE for the disallowed transactions that were completed prior
to her designation as Officer-in-Charge of the Office of the Provincial Accountant. The cases are REMANDED to the
Commission on Audit, which is directed to determine which of the disallowed transactions occurred prior to July 5, 2005, for
which petitioner Villanueva is not liable.