The Supreme Court ruled that government-owned and controlled corporations (GOCCs) must secure Presidential approval before purchasing vehicles, as mandated by Letter of Instruction No. 667 and Letter of Implementation No. 29. The Development Bank of the Philippines (DBP) was denied the lifting of a disallowance by the Commission on Audit (COA) for purchasing vehicles without such approval. This decision underscores the importance of strict adherence to regulations in government spending and procurement, ensuring accountability and preventing potential abuse of public funds.

Transparency on Wheels: When Presidential Approval Steers Government Purchases

This case revolves around the Development Bank of the Philippines’ (DBP) purchase of nineteen motor vehicles in 1988, without securing prior Presidential approval. The Commission on Audit (COA) disallowed the purchase, citing Letter of Instruction No. 667 and Letter of Implementation No. 29, which mandate such approval for government-owned and controlled corporations. DBP argued that the purchases were necessary for its modernization program and that the COA should have considered the urgency and transparency of the transactions. The central legal question is whether the COA committed grave abuse of discretion in disallowing the purchase despite DBP’s justifications.

The DBP, undergoing rehabilitation at the time, justified the vehicle purchases as necessary for fund generation. It argued that the vehicles were essential for mobilizing personnel and reaching a wider client base, particularly small and medium enterprises in the countryside. Despite these arguments, the COA maintained its disallowance, emphasizing the mandatory requirement of Presidential approval. The COA pointed to Letter of Instruction No. 667, which explicitly states that exceptions to standard specifications for vehicle purchases may be allowed only with specific authorization from the President.

Letter of Instruction No. 667 provides, in pertinent part:

When authorized to purchase motor vehicles pursuant to Letter of Implementation No. 29 dated December 5, 1975, national government agencies, including government-owned and controlled corporations and state colleges and universities shall observe the following maximum standard specifications:

5.0 Exceptions may be allowed only as specifically authorized by the President.

This requirement is further reinforced by Letter of Implementation No. 29, which specifies that the purchase of transport equipment continues to be referred to the President for personal consideration and action.

DBP contended that the COA should have applied the doctrine it adopted in COA Decision No. 98-320, where a similar disallowance was lifted. However, the Supreme Court acknowledged the inconsistency in COA’s decisions but clarified that the COA’s actions in the present case were in accordance with the law. The Court emphasized that grave abuse of discretion implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, not merely an abuse of discretion. In Tañada v. Angara, the Supreme Court defined grave abuse of discretion as:

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. x x x.

The Supreme Court found that the COA’s disallowance, based on the lack of Presidential approval, did not constitute grave abuse of discretion. The Court reasoned that the requirement of Presidential approval is not a mere technicality but a mandatory provision designed to ensure accountability and prevent the misuse of public funds. Allowing agencies to bypass this requirement would undermine the purpose of the law and open the door to potential abuse.

The Court also addressed the issue of proper service of the COA resolution. The resolution was initially served to the resident corporate auditor of DBP, whom the COA claimed was tantamount to service upon DBP itself. However, the Court disagreed, holding that the resident corporate auditor is an extension of the COA and not an employee of DBP. Therefore, service was only considered complete when DBP was actually furnished a copy of the resolution by the COA Office of Legal Affairs. This determination was crucial in establishing the timeliness of DBP’s petition for certiorari.

FAQs

What was the key issue in this case?	The key issue was whether the Commission on Audit (COA) committed grave abuse of discretion in disallowing the Development Bank of the Philippines’ (DBP) purchase of vehicles without prior Presidential approval, as required by Letter of Instruction No. 667 and Letter of Implementation No. 29.
What did Letter of Instruction No. 667 require?	Letter of Instruction No. 667 required national government agencies, including government-owned and controlled corporations (GOCCs), to obtain specific authorization from the President for any exceptions to standard vehicle purchase specifications.
Why did the COA disallow DBP’s vehicle purchase?	The COA disallowed the purchase because DBP failed to secure prior Presidential approval before buying the vehicles, violating Letter of Instruction No. 667 and Letter of Implementation No. 29.
What was DBP’s main argument against the disallowance?	DBP argued that the vehicle purchases were necessary for its modernization program and that the COA should have considered the urgency, necessity, and transparency of the transactions.
How did the Supreme Court define grave abuse of discretion in this case?	The Supreme Court defined grave abuse of discretion as a capricious and whimsical exercise of judgment equivalent to a lack of jurisdiction, not merely an abuse of discretion. It requires the power to be exercised in an arbitrary or despotic manner.
Was the service of the COA resolution to DBP’s resident corporate auditor considered valid?	No, the Supreme Court ruled that service to the resident corporate auditor was not valid because the auditor is an extension of the COA, not an employee of DBP. Service was only complete when DBP actually received a copy.
What was the practical implication of this ruling for GOCCs?	The ruling reinforces the need for strict adherence to regulations regarding government spending, particularly the requirement for Presidential approval for vehicle purchases, ensuring accountability and preventing potential abuse of public funds.
Did the Supreme Court find any inconsistency in COA’s decisions?	Yes, the Supreme Court acknowledged that the COA decided COA Case No. 2001-151 differently from COA Case No. 98-320, even though both cases involved similar facts and circumstances.

This case serves as a reminder of the importance of adhering to established procedures and regulations in government transactions. The requirement of Presidential approval is not a mere formality but a crucial safeguard against potential abuse and misuse of public funds. The Supreme Court’s decision reinforces the principle of accountability and transparency in government spending.

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: DEVELOPMENT BANK OF THE PHILIPPINES VS. COMMISSION ON AUDIT, G.R. NO. 166933, August 10, 2006