In a crucial decision, the Supreme Court clarified the responsibility of a municipal treasurer in disbursement disallowances. The Court ruled that a treasurer who merely certifies to the availability of funds is not automatically liable for a disallowance unless there is proof the certification was falsified. This ruling protects public officials from undue liability when their role is limited to verifying fund availability, ensuring that responsibility is tied to direct involvement or malicious intent in irregular transactions. This distinction shields treasurers from bearing the brunt of disallowances stemming from budgetary or accounting errors made by other officials.

Cabuyao’s Garbage Collection: Who Pays When Funds Are Misallocated?

This case revolves around Elena A. Estalilla, the Municipal Treasurer of Cabuyao, Laguna, who was held liable by the Commission on Audit (COA) for the disallowance of P35,591,200.00 related to garbage collection contracts. The disallowance stemmed from payments for the 2004 garbage collections being charged against the 2005 appropriations. Estalilla, along with other local officials, was initially held solidarily liable, primarily because she had certified the availability of funds for the disbursements. However, Estalilla contested her liability, arguing that her role was limited to certifying the availability of funds and that the error was a budgetary and accounting matter outside her direct control. The central legal question is whether a municipal treasurer is liable for disallowances simply for certifying the availability of funds, even if the irregularity arises from incorrect budgetary allocation by other officials.

The COA dismissed Estalilla’s appeal due to her failure to file it within the prescribed six-month period, citing the immutability of judgments. Estalilla then filed a petition for certiorari with the Supreme Court, arguing that the COA committed grave abuse of discretion. She contended that her failure to file a timely appeal was not due to bad faith, but rather due to being preoccupied with other disallowances. She further argued that she had no direct participation or responsibility for the budgetary error, as her certification only indicated the presence of sufficient cash to cover the disbursements. The Sangguniang Bayan had authorized and approved the contracts, and the contractor had already performed the garbage hauling services in good faith.

The COA, through the Office of the Solicitor General (OSG), countered that Estalilla’s appeal was indeed filed late, and that the COA did not gravely abuse its discretion in denying her motion, as the Notices of Disallowance (NDs) had already become final. The OSG further argued that the garbage hauling services for 2004 were improperly disbursed against the 2005 appropriations. Estalilla, in her reply, maintained that the merits of her petition warranted setting aside technicalities and that her liability for the disallowed amounts was legally unwarranted. She invoked Section 351 of the Local Government Code and Section 103 of Presidential Decree No. 1445, asserting that she could not be held liable because she was not directly responsible for the questioned amounts.

The Supreme Court addressed both the procedural and substantive issues. Procedurally, the Court considered the COA’s argument that Estalilla’s failure to file a motion for reconsideration was a fatal defect. Substantively, the Court determined whether the COA gravely abused its discretion in dismissing Estalilla’s appeal and holding her liable for the disallowed amount. The Court ultimately granted the petition for certiorari, finding that the non-filing of the motion for reconsideration was justified.

The Court acknowledged the general rule that a motion for reconsideration is a prerequisite to filing a petition for certiorari. However, it recognized exceptions to this rule, including instances where a motion for reconsideration would be useless or where the petitioner was deprived of due process. The Court found that both of these exceptions applied to Estalilla’s case. Estalilla had consistently been denied access to disbursement vouchers and allotment and obligation slips (ALOBs), hindering her ability to defend herself against the disallowances. The COA’s repeated rejection of her pleas based solely on the lapse of the appeal period indicated that any attempt to seek reconsideration would have been futile.

Furthermore, the Court found that Estalilla’s right to due process had been violated. Her request for copies of the DVs and ALOBs, crucial for her defense, was denied, thus preventing her from meaningfully challenging the NDs. The Court emphasized that the COA’s order to withhold Estalilla’s salary and benefits to cover the disallowed amount underscored the urgency of the relief she sought. This order, predicated on her solidary liability, would have a severe impact on her right to life and property, especially considering she did not personally benefit from the disallowed disbursements.

Turning to the substantive issue, the Court emphasized that it generally respects the decisions of the COA due to the doctrine of separation of powers and the COA’s expertise. However, this deference is not absolute. The Court is empowered to intervene when the COA’s decision is tainted with grave abuse of discretion. In Estalilla’s case, the Court found that the COA had indeed gravely abused its discretion by imposing personal liability on her. The Court cited several exceptions to the rule on the immutability of final judgments, including cases involving matters of life, liberty, honor, or property, as well as cases with special or compelling circumstances.

The Court found that Estalilla’s case met several of these exceptions. The potential loss of a significant portion of her income affected her right to life and property. There were compelling circumstances, including her limited participation in the transactions and the absence of any evidence of falsification in her certification. Moreover, Section 351 of the Local Government Code stipulates that personal liability for unlawful expenditures falls on the official or employee responsible for the violation.

The Court also referred to COA Circular No. 2009-006, which outlines the factors to be considered in determining liability for disallowances: (1) the nature of the disallowance; (2) the duties and responsibilities of the officers concerned; (3) the extent of their participation; and (4) the amount of damage suffered by the government. Furthermore, COA Circular No. 2006-002 clarifies the responsibilities of various public officers in the disbursement process. It specifies that the treasurer’s role is limited to certifying the availability of funds, as also stated in Section 344 of Republic Act No. 7160 (The Local Government Code):

Section 344. Certification, and Approval of, Vouchers.—No money shall be disbursed unless the local budget officer certifies to the existence of appropriation that has been legally made for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds for the purpose. x x x x

The Court emphasized that Estalilla’s primary duty was to certify the availability of funds, and there was no evidence that she had issued a deliberately false certification. The Court held that the COA gravely abused its discretion in holding her personally liable without establishing that she had falsely certified the availability of funds. The Court ultimately defined grave abuse of discretion as a capricious and whimsical exercise of judgment equivalent to a lack of jurisdiction. The COA’s decision to hold Estalilla liable, without evidence of her direct involvement or malicious intent, amounted to such grave abuse of discretion.

FAQs

What was the key issue in this case?	The key issue was whether a municipal treasurer could be held personally liable for a disallowance simply for certifying the availability of funds when the irregularity stemmed from a budgetary error by another official. The Supreme Court clarified that mere certification is not enough to establish liability.
What was the COA’s initial decision?	The COA initially held Estalilla solidarily liable for the disallowed amount of P35,591,200.00, arguing that she failed to file a timely appeal and that the Notices of Disallowance (NDs) had become final and executory. They based this decision on her certification of fund availability.
Why did the Supreme Court overturn the COA’s decision?	The Supreme Court overturned the COA’s decision because it found that the COA committed grave abuse of discretion. The Court emphasized that Estalilla’s role was limited to certifying the availability of funds and that there was no evidence of falsification.
What is the significance of Section 344 of the Local Government Code in this case?	Section 344 of the Local Government Code outlines the responsibilities of the local budget officer, accountant, and treasurer in the disbursement process. It clarifies that the treasurer’s role is limited to certifying the availability of funds, not the legality or propriety of the expenditure itself.
What factors does the COA consider when determining liability for disallowances?	According to COA Circular No. 2009-006, the factors to be considered include the nature of the disallowance, the duties and responsibilities of the officers involved, the extent of their participation, and the amount of damage suffered by the government.
What does “grave abuse of discretion” mean in this context?	Grave abuse of discretion refers to a capricious and whimsical exercise of judgment that is equivalent to a lack of jurisdiction. It implies that the decision was made arbitrarily, without regard for the law or the evidence presented.
What was the impact of denying Estalilla copies of the disbursement vouchers (DVs) and allotment and obligation slips (ALOBs)?	Denying Estalilla access to the DVs and ALOBs was a violation of her right to due process, as it prevented her from meaningfully defending herself against the disallowances. These documents were crucial for her to understand the basis for the disallowance and to demonstrate her limited role in the transactions.
What are the exceptions to the rule on the immutability of final judgments that applied in this case?	The exceptions that applied in this case include matters of life and property, compelling circumstances, and the merits of the case. The Court recognized that holding Estalilla liable for the disallowed amount would have a significant negative impact on her financial well-being.

This case serves as a reminder that public officials should not be held liable for disallowances unless there is clear evidence of their direct involvement in the irregularity or a deliberate disregard for the law. The ruling underscores the importance of due process and the need for a fair and equitable assessment of responsibility in government transactions. It clarifies the limited role of the treasurer in certifying fund availability, protecting them from liability arising from the actions of other officials.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ELENA A. ESTALILLA, VS. COMMISSION ON AUDIT, G.R. No. 217448, September 10, 2019