Verzosa v. Carague

G.R. No. 157838 (February 7, 2012)

Candelario Verzosa, Jr. was liable for overpricing in procurement; SC upheld COA's disallowance.

Facts:

The case involves Candelario L. Verzosa, Jr., who served as the Executive Director of the Cooperative Development Authority (CDA). In December 1992, the CDA purchased 46 units of computer equipment and peripherals from Tetra Corporation for a total amount of P2,285,279. The procurement process involved a bidding where Tetra was selected among three bidders, with the Development Academy of the Philippines-Technical Evaluation Committee (DAP-TEC) conducting the technical evaluation.

In May 1993, the Commission on Audit (COA) was asked to assess the reasonableness of the prices paid for the computers. The COA's Technical Services Office (TSO) found that the purchased computers were overpriced by P881,819. Consequently, a Notice of Disallowance was issued on November 17, 1993, citing the lack of volume discounts and the high prices compared to market rates.

Verzosa appealed the disallowance, arguing that the comparison made by the COA was flawed, as it compared different brands and specifications of computers. He contended that the specifications and features of the purchased computers justified their price. The COA, however, upheld the disallowance, asserting that the brand of the computers was irrelevant to the determination of price reasonableness.

The case went through several administrative decisions, with the COA affirming its findings of overpricing and holding Verzosa personally and solidarily liable for the disallowed amount. Verzosa's motion for reconsideration was subsequently filed, raising several arguments regarding the lack of evidence for bad faith and the improper application of COA rules.

Legal Issues:

  1. Whether the COA committed grave abuse of discretion in disallowing the purchase and holding Verzosa personally liable for the overpricing.
  2. Whether there was substantial evidence to support the finding of bad faith on the part of Verzosa.
  3. Whether the COA's comparison of prices was valid and adhered to its own guidelines.

Arguments:

Petitioner (Verzosa):

  • Argued that there was no finding of bad faith in the Court's decision, asserting that he did not directly influence the bidding process.
  • Claimed that his role was merely ministerial and that signing documents does not constitute bad faith or negligence.
  • Contended that the COA's comparison of prices was flawed, as it compared different brands and did not adhere to the guidelines set forth in previous jurisprudence.
  • Cited the case of Arriola v. COA, arguing that the COA's disallowance lacked sufficient evidence and due process.

Respondents (COA):

  • Asserted that Verzosa's actions in modifying the evaluation process indicated bad faith, as he influenced the DAP-TEC to favor Tetra.
  • Maintained that the signing of documents involved discretion and was not merely ministerial.
  • Argued that the COA's findings were supported by substantial evidence, including the TSO's report, which indicated overpricing based on market comparisons.
  • Contended that the absence of volume discounts and the high prices justified the disallowance.

Court's Decision and Legal Reasoning:

The Court upheld the COA's decision, affirming that Verzosa was personally and solidarily liable for the disallowed amount of P881,819. The Court found that:

  1. The COA did not violate its own rules in determining overpricing, as the guidelines in question were not in effect at the time of the audit.
  2. The evidence presented by the COA, including the TSO's findings, was sufficient to establish that the prices paid were excessive compared to market rates.
  3. Verzosa's involvement in the procurement process went beyond mere ministerial duties, as he played a significant role in the reconstitution of the PBAC and the engagement of DAP-TEC, which led to the manipulation of the evaluation results.
  4. The Court reiterated the principle that findings of administrative agencies, particularly the COA, are generally accorded respect and finality when supported by substantial evidence.

Significant Legal Principles Established:

  • The case reaffirmed the principle that public officers can be held personally liable for disallowed amounts if there is a clear showing of bad faith, malice, or gross negligence in the performance of their official duties.
  • It established that the COA has the authority to determine the reasonableness of prices in government procurement and that the brand of products may be considered irrelevant if the specifications and functions are similar.
  • The decision highlighted the importance of due process in audit findings, emphasizing that agencies must provide sufficient evidence to support claims of overpricing.