This is a petition for certiorari
under Rule 65 of the Rules of Court seeking to annul (1) Decision No. 2700 dated February 19, 1993 of the Commission on Audit (COA); (2) the Memorandum dated April 10, 1991 of the Corporate Audit Office of the COA; and (3) the Memorandum dated September 3, 1990 of the resident auditor of the National Home Mortgage Finance Corporation.chanrob1es virtua1 1aw 1ibrary
The instant case involves the post-audit findings on disbursements of the National Home Mortgage Finance Corporation (NHMFC) for the purchase of a parcel of land under the Community Mortgage Program. Petitioners are all career service professionals of the NHMFC who were assigned to the NHMFC’s Community Mortgage Group (CMG). Petitioner Rogerio Olaguer was the Manager of the CMG, petitioner Ernesto S. Salvador was the Chief of Division, Project Evaluation, Monitoring and Relations Division, and petitioner Irma R. Fuentes was the Chief of Division, Documentation and Processing Division.
The NHMFC is a government corporation and an implementing arm of the National Shelter Program of the government that provides home financing to people in the lower income bracket of Philippine society. In 1987, the NHMFC, together with the Housing and Urban Development Council (HUDC), the Presidential Commission on Urban Poor (PCUP) and the Home Insurance Guaranty Corporation (HIGC) conceptualized and proposed guidelines for the introduction of a Community Mortgage Program in housing. In 1988, the NHMFC launched the Community Mortgage Program as a sub-program of the Unified Home Lending Program. The Community Mortgage Program was an innovative scheme in mortgage financing whereby several beneficiaries could acquire an undivided tract of land through the concept of community ownership. The Program was intended primarily to assist residents of blighted areas to own the lots they occupy or the lots to where they shall be relocated through low income financing to be coursed through duly accredited originators such as the National Housing Authority (NHA), HIGC, Local Government Units (LGU’s) and Non-Government Organizations (NGO’s).
On December 19, 1988, HIGC Vice-President Carlos P. Doble issued an appraisal policy for the Community Mortgage Program. The policy was concurred in by HIGC President Federico Gonzales, the NHMFC Officer-in-Charge/ EVP Ramon Albert and HUDC Chairman Teodoro Katigbak. 1
In 1989, the HIGC received a request from the Severino H. Gonzales, Jr. Construction Co., Inc., through its General Manager, Ceres Pajaron, for an appraisal of the value of a parcel of land in Barangay Sta. Catalina, Angeles City, Pampanga for community mortgage purposes.chanrob1es virtua1 1aw 1ibrary
The HIGC conducted an appraisal of the property and found that the land, registered under TCT Nos. 81241 and 81242 in the name of the Severino H. Gonzales Construction Co., Inc., covered 735,565 square meters, or 73.56 hectares in area, was adjacent to Clark Air Base and was approximately four (4) kilometers away from Angeles City proper. The property was flat in terrain, free from squatters, untenanted and devoted to non-agricultural purposes. It was an interior lot and, if provided with a road right-of-way, had a fair market value of P60.00 per square meter or P600,000.00 per hectare. The results of the appraisal was contained in a "Rawland Appraisal Report" dated February 13, 1989 of the HIGC. 2
On the same day the Rawland Appraisal Report was made, i.e., February 13, 1989, HIGC Vice-President Carlos P. Doble sent a letter to Ceres Pajaron of the Severino H. Gonzales Construction Co., Inc. informing her that the property had an appraised value of P60.00 per square meter. 3
On March 29, 1989, the Sapang Palay Community Development Foundation, Inc. (SPCDFI), a non-stock, non-profit and non-government organization that serves as a link between community-based organizations and the NHMFC, applied with the NHMFC for a Purchase Commitment Line of P91,647,661.90 to cover various Community Mortgage projects in its pipeline. Included therein was an application for a loan of P34,000,000.00 by the ALPRAC-Alyansa ng Maka-Maralitang Asosasyon at Kapatirang Organisasyon (AMAKO), a sub-federation of SPCDFI. This application, however, was not acted upon by the NHMFC’s Accreditation and Project Evaluation Department (APED) after finding that the documents submitted were incomplete. 4
On April 4, 1989, the SPCDFI, through its President, Nelson Concepcion, applied with the NHMFC for accreditation as originator of land and housing projects through a Purchase Commitment Line. This application embraced sixteen (16) project sites in various parts of the country and one of which was the Angeles City project, referred to as the AMAKO Project. The AMAKO Project covers the same land originally titled in the name of Romeo Gatan and later sold to and registered in the name of the Severino H. Gonzales, Jr. Construction Co., Inc. Earlier, in August 1988, the same property was offered by the Severino H. Gonzales Jr. Construction Co., Inc. for sale to members of SPCDFI-AMAKO. 5
In the meantime, the guidelines for the Community Mortgage Program were amended by, among others, increasing the loan ceiling and changing the origination fee. 6 On April 12, 1989, the Amended/Expanded Guidelines were approved by the NHMFC Board of Directors. 7
On September 7, 1989, Nelson Concepcion, SPCDFI President and at the same time Housing and Settlement Division Head of the Presidential Commission on Urban Poor, delivered to the NHMFC the documents of AMAKO for preliminary evaluation. Deficiencies were noted and the documents were returned to SPCDFI for compliance.
On September 28, 1989, the Task Force on Community Mortgage Program was created within the NHMFC. Petitioner Olaguer was appointed Task Force Head, petitioner Salvador as Executive Assistant and petitioner Fuentes as Unit Head, Documentation and Processing Unit. The Task Force on CMP was later renamed as the Community Mortgage Management Office (CMMO) with nineteen (19) plantilla positions.chanrob1es virtua1 1aw 1ibrary
On October 3, 1989, SPCDFI-AMAKO submitted another application letter with revised project profile. This time, SPCDFI-AMAKO requested for an increase in purchase commitment line from P34 million to P36.8 million with the undertaking that SPCDFI shall shoulder other incidental costs like survey cost, transfer cost and mortgage registration cost. 8
On October 4, 1989, the SPCDFI’s application for accreditation was received by the Accreditation and Project Evaluation Department (APED) of the NHMFC.
On October 5, 1989, the APED submitted a Memorandum to the NHMFC President, thru the Officer in Charge, Credit and Collection Group, recommending approval of the AMAKO Project and the grant of a loan of P36,800,000.00 to the SPCDFI for purchase of the AMAKO land. 9 In the Memorandum, it was stated that the said project was evaluated in accordance with NHMFC’s CMP Corporate Circular No. 001 dated April 17, 1989 and was found to have complied with its requirements. It was also stated that the existing land use of the property is residential, that there are 2,641 prospective beneficiaries of the land, and that the subject land is untenanted as certified by the Department of Agrarian Reform.
The APED Memorandum was endorsed by the NHMFC Credit and Collection Group thru NHMFC President Ramon Albert to the NHMFC Board of Directors for approval. 10 The NHMFC Board, in its Resolution No. 662 dated October 23, 1989, approved the recommendation. 11
Thereafter, the MCR Specialist of the CMP Task Force conducted an investigation on AMAKO. In two (2) Memoranda dated November 20, 1989 and December 12, 1989 addressed to petitioners Olaguer and Salvador and signed by Jeffrey Calimlim and Ma. Helena Borromeo, it was found that AMAKO was an organization under the SPCDFI with head office in Angeles City, Pampanga; that AMAKO has 2,641 beneficiaries belonging to fourteen (14) local associations, eight (8) of which are under the Association for the Landless Poor Residents of Angeles City (ALPRAC); that AMAKO merged with ALPRAC to become the umbrella organization; that a majority of AMAKO’s members are squatters and lessors of the land they occupy for more than eight (8) years; and that retention fees and other fees for the home lots were being collected by AMAKO from its members. As regards the project site, it was found to be relatively flat, vegetated with wild grass and was untenanted. There was an "existing road" leading to the site but no public transportation traversed said road. The property was an interior lot and had no road right-of-way for ingress and egress. 12 As a result of the investigation, the following problems were identified:jgc:chanrobles.com.ph
"The following problems have been identified during the recent investigation:chanrob1es virtual 1aw library
1. The non-existence of the right-of-way, the land classification, the lack of transportation and the site being adjacent to Clark Air Base, might pose a serious implication on the proposed project.
2. The beneficiaries were being charged with fees beyond the actual cost incurred.chanrob1es virtua1 1aw 1ibrary
3. Subject property is an interior lot which is contrary to the beneficiaries’ knowledge." 13
As a result of the findings in the two (2) Memoranda of the MCR Specialist, petitioner Olaguer and Mr. Calimlim of the MCR Specialist were instructed to conduct interviews and take videotapes of the site for documentation purposes. 14
On January 4, 1990, in accordance with the APED Memorandum which the NHMFC Board duly approved, the amount of P36,796,711.55 was released by the NHMFC to the Severino H. Gonzales Construction Co., Inc. This amount represented the proceeds of the loan of AMAKO as purchase price for the Angeles property, with the same property set up as collateral.
Thereafter, the CMMO was reorganized and upgraded to the Community Mortgage Group with forty (40) plantilla positions. Petitioner Olaguer was appointed Manager, petitioner Salvador as Chief of Division, Project Evaluation, Monitoring and Relations Division, and petitioner Fuentes as Chief of Division, Documentation and Processing Division.
Meanwhile, an audit was conducted by NHMFC resident auditor, herein respondent, Lakambini Razon. In a Memorandum dated September 3, 1990 addressed to NHMFC President Ramon A. Albert, respondent Razon disallowed in audit the loan of AMAKO. The Memorandum reads as follows:jgc:chanrobles.com.ph
"This is to inform you that our audit of the aforesaid voucher paid under PNB Check No. 372994 dated January 4, 1990 in favor of Severino H. Gonzales, Jr. Construction, Inc. in the amount of P36,796,711.55 has been disallowed in audit for the following reasons:chanrob1es virtual 1aw library
1. Non-submission of documentary requirements/non-complying or defective documents as required under NHMFC Corporate Circular No. CMP-001 as amended —
a. Non-existence of the lease purchase agreement executed by the beneficiaries and the affidavits or certification of income of the beneficiaries at the time of take-out.
b. Non-compliance with the warranty of undertaking to submit the required documents within 90 days from date of issuance of Letter of Guaranty dated December 14, 1989, as of this date.
c. No explanation was made why the Manager of CMMO in his memo to this Office dated July 16, 1990 alleged that Block No. 32-37 are open spaces, although a master list of Block No. 32 was submitted to this Office on July 31, 1990.
d. The schematic plan shows that Block No. 65 is an open space, whereas payment was made thereof since it is included in the master list of beneficiaries consisting of sixteen (16) borrowers amounting to P220,597.65.
2. Irregular/excessive expenditures per COA Circular No. 85-55A dated September 8, 1985, thus disadvantageous to the Corporation.
a. The HIGC’s appraisal of the subject property dated February 13, 1989 is P60/ sq. m. if provided with a right-of-way but the MCR specialist of CMP Task Force reported to the Manager of CMMO on December 12, 1989 on its non-existence.chanrob1es virtua1 1aw 1ibrary
b. The certificates of land conversion dated November 14 and December 14, 1988 issued by the Department of Agrarian Reform of Angeles City submitted by the landowner appear to be spurious per verification made by the CMMO staff in their memorandum dated March 5, 1990.
c. The property was bought by the landowner per Entry No. 4346 - TCT No. 60675 on April 28, 1988 for only P1 million and per tax declaration submitted the fair market value of the property is only P7,355,660.00, however, the Corporation accepted the property as collateral for P36,796,711.55.
d. The amount paid was excessive, that is 90% of the appraised value of P60/ sq. m. which is almost equal to the selling price of the landowner per his voluntary offer to sell dated August 15, 1988. Further, per report of the CVEED dated July 31, 1990 the current raw land value of the property is only P20/sq. m. if the same is classified as a residential area. However, actual land use is agricultural and tenanted.
e. The Corporation also paid an amount of P7,014,251.00 (130,207 sq. m. x P53.87) for creeks and rivers which form part of the 683,065 sq. m. of the property, per site inspection report of CMMO personnel dated July 5, 1990. Considering that 130,207 sq. m. or 13 hectares thereof are composed of creeks and rivers with a value of P7,014,251.00, a large portion of the property with designated beneficiaries would be affected, with this finding the beneficiaries cannot be expected to pay their amortization.
f. Remittance reports on collections from March to May, 1990 show that there are only about 300 beneficiaries paying their amortization. However, the first amortization payment in February and latest payment in July were not supported with the borrowers’ lists. As per report of CVEED dated August 2, 1990 the 2641 beneficiaries of the association cannot be accounted for.
g. Discrepancy between the report of APED on additional purchase commitment line granted to the originator and the certificate of loan examination issued by the CMMO as to the type of project, "on site" for the former and "off-site" for the latter, has not been classified as source of fund.
Inasmuch as the payment of P36,796,711.55 for the AMAKO project is disallowed, the payment of origination fee of P660,250.00 (2641 beneficiaries x P500 x 50%) per DV No. 89F2-5734 paid under PNB Check No. 373008 dated January 5, 1990 is likewise disallowed in audit.chanrob1es virtua1 1aw 1ibrary
In this connection, we have determined the following officers of NHMFC as the persons liable:chanrob1es virtual 1aw library
1. Ramon A. Albert, President
2. Fermin T. Arzaga, OIC, Finance, Corplan & Computer Services Group
3. Roger Olaguer, Head, CMP Task Force
4. Vivien Noble, Deputy Head, CMP Task Force
5. Ernesto Salvador, Exec. Asst. CMP Task Force
6. Cynthia O. Alas, Div. Chief II, Budget
7. Irma Fuentes, COD, CMMO.
For your appropriate action.
(SGD.) LAKAMBINI Q. RAZON
State Auditor IV" 15
The NHMFC President, herein petitioners and the other persons found liable in the audit report moved for reconsideration contesting the grounds for disallowance cited by the auditor. Acting on this motion, a memorandum dated April 10, 1991 was issued by herein respondent Emma M. Espina, Director, Corporate Audit Office, Commission on Audit addressed to the Director, Legal Office, Commission on Audit. Respondent Espina lifted the disallowance on Mr. Arzaga and Ms. Alas, their participation in the subject transaction being purely academic and ministerial. She, however, refused to lift the disallowance on the NHMFC President on the ground that the latter’s participation was material without whose approval the transaction would not have been finalized and no release of funds effected. Respondent Espina also found that:jgc:chanrobles.com.ph
"As regards the liabilities of the four (4) officers by the CMP Task Force, it is evident from existing documents that they erred in the performance of their duties. Their contention that the system of implementing the CMP is itself defective, hence, any defect in its implementation should not be attributed to them is untenable. It is pointed out that the CMP Task Force is responsible for the planning and implementation of CMP policies, systems and procedures and for recommending changes and further improvements for a more effective implementation of the Program (Emphasis supplied
). They cannot now avoid responsibility by passing the blame to a third party by saying that "failure of the system to safeguard the interest of the corporation should not be used against its personnel who merely implemented the guidelines without deviations" (Memorandum for the Auditor dated September 26, 1990). Moreover, it is their duty to process, review and evaluate CMP loan documents and in performing this function, they should have exercised proper care in its processing, review and evaluation to ensure that the terms are not disadvantageous to the government." 16
A motion for reconsideration was once again filed by the NHMFC President and herein petitioners. On February 19, 1993, COA Decision No. 2700 was issued by the Commission on Audit and signed by respondent Chairman Eufemio Domingo and respondents Commissioners Rogelio B. Espiritu and Sofronio B. Ursal. Their decision is as follows:chanrob1es virtua1 1aw 1ibrary
"Respectfully returned to the Auditor, National Home Mortgage Finance Corporation (NHMFC), Makati, Metro Manila, hereby affirming the disallowances imposed on the NHMFC President, Rogerio Olaguer, Vivien Noble, Ernesto Salvador and Irma Fuentes under CSB No. 90-001 (TO), dated September 5, 1990, for reasons stated in the within Memorandum dated September 3, 1990 of the Auditor for the NHMFC President and the Memorandum of the Director, Corporate Audit Office dated April 10, 1991.
With respect to the liabilities of Mr. Fermin T. Arzaga and Ms. Cynthia O. Alas, this Commission interposes no objection to the lifting of the corresponding disallowances it appearing that their participation in the transaction was only ministerial in character.
Accordingly, the instant request for reconsideration of the NHMFC President, has to be, as it is hereby denied." 17
Hence this petition.
The sole issue for determination before this court is whether respondents gravely abused their discretion when they affirmed the audit disallowance where petitioners, as officers of NHMFC, were found liable for the loan of P37,456,961.55 to SPCDFI-AMAKO.
Before us, petitioners refute each and every ground cited for the disallowance by respondent Razon. Petitioners claim that they should not be held responsible for the loss incurred by the NHMFC for the reason that no single act or omission could be ascribed to them, either singly or collectively. Neither are they guilty of any negligence, fraud or bad faith in the performance of their assigned tasks.
Petitioners cannot escape liability by blaming NHMFC’s loss on SPCDFI-AMAKO, the Severino H. Gonzales, Jr. Construction Co., Inc., the HIGC, the APED and all other departments that handled SPCDFI’s loan application. Although there is nothing in petitioners’ annexes that would show that petitioners themselves personally approved and signed SPCDFI’s loan application, petitioners were the officers directly charged with the power of processing, reviewing and evaluating CMP loan documents. Office Order No. 361 dated 28 September 1989 creating the Task Force on CMP appointed petitioner Olaguer as head of the CMP with the power of; "processing, review, and evaluation of CMP loan documents." 18 The loan application of SPCDFI for the AMAKO Project was specifically for community mortgage purposes. At the time SPCDFI filed on October 3, 1989 its revised application for purchase commitment line, the Task Force on CMP was already created and petitioner Olaguer was discharging his functions as Task Force Head, petitioner Salvador was Executive Assistant of the Task Force and petitioner Fuentes was Unit Head, Documentation and Processing Unit. Petitioners were directly involved in the entire Community Mortgage Program, whether under the Task Force on CMP, the CMMO or the CMG.
In the exercise of the power to process, review and evaluate CMP loan applications, petitioners had the power to compel submission of documentary requirements such as the Lease Purchase Agreement (LPA) and the reproduction of the Affidavit of Income of beneficiaries. A loan application in the amount of P37 million is not minimal as to ignore documentation requirements. The undertaking to submit the LPA of the beneficiaries within ninety (90) days from date of payment does not dispense with the submission of said document. The LPA is required under Sec. 13.2 of the CMP Circular No. 001. And yet until now, no claim has been made that the LPA’s of the 2,641 beneficiaries have been finally submitted to the CMG or the NHMFC.
Petitioners also had the power to conduct surveys and ocular inspection on the subject property. The CMMO/CMG had a complement of 19 to 40 personnel and yet petitioners did not send anyone to verify the lack of a road right-of-way, find out the characteristics of the "existing road" reported by the MCR Specialist, and the existence of creeks and rivers and open spaces on sites of proposed home lots. The existence or non-existence of these physical structures and formations are vital to the program’s viability on the proposed site and its successful implementation. Petitioner Olaguer has admitted that he was instructed by NHMFC President Ramon Albert to conduct interviews and take videotapes of the site for documentation purposes. While a videotape of the site was apparently done, no mention has been made of his findings. If discrepancies between the reports and the videotape were found, no explanation has been given and no allegation made on whether the results of the videotape were brought to the attention of the proper authorities. Indeed, there is nothing in the records that would show that petitioners conducted an actual physical inspection of the AMAKO site before or even after release of the loan proceeds. Petitioner Olaguer should have taken steps to ensure the success of an innovative program such as the CMP, especially in the light of conflicting reports on the topography of the land. 19
Notably, despite non-compliance with the documentary requirements, SPCDFI-AMAKO’s revised loan application which was submitted on October 3, 1989 was approved by the APED on October 5, 1989 — in a span of only three (3) days.
With these substantial findings, we affirm the ruling of respondent Commission on Audit. As to the other claims raised by petitioners, suffice it to state that in this jurisdiction, courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies. 20 With all the more reason should this rule hold when, as in the instant case, the findings of respondent Razon have been affirmed and reaffirmed along the administrative hierarchy. Respondent Commission on Audit’s exercise of its general audit power is among the constitutional mechanisms that give life to the check and balance system inherent in a republican form of government such as ours. 21
Finally, during the pendency of this petition, petitioners informed us that on April 18, 1995, the Regional Trial Court, Makati, Branch 147 dismissed Civil Case No. 91-378 against them. 22 This was an action filed by the NHMFC against petitioners and other officials of the NHMFC for recovery of the purchase price of P36 million for the property in Angeles City. Civil Case No. 91-378 was dismissed with prejudice after the parties agreed instead to foreclose on the mortgage of the Angeles City property. 23
The dismissal of the Civil Case No. 91-378 is not binding on the instant petition. The case at bar is a special civil action questioning the administrative findings of the Commission on Audit. Petitioners’ liability herein does not arise from an ordinary civil transaction but from their position as public officials held accountable for public funds. Presidential Decree No. 1445, the Government Auditing Code of the Philippines, in Section 103 provides:jgc:chanrobles.com.ph
"SECTION 103. General liability for unlawful expenditures — Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefore."cralaw virtua1aw library
IN VIEW WHEREOF, finding no grave abuse of discretion on the part of respondents, we affirm their findings. The petition is DISMISSED.
Davide, Jr., C.J.
, Bellosillo, Melo, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and Sandoval-Gutierrez, JJ.
* This case was transferred to the ponente on March 13, 2001 pursuant to the Resolution in A.M. No. 00-9-03-SC. - Re: Creation of Special Committee on Case Backlog dated February 27, 2001.
1. Annexes "J" and "K" to the Petition, Rollo, pp. 62-64.
2. Annex "L" to Petition, pp. 65-68.
3. Annex "M" to Petition, pp. 69-70.
4. Petition, pp. 7-8, Rollo, pp. 8-9.
5. Petition, pp. 8-9, Rollo, pp. 9-10; Annexes "N" and "O" to Petition, Rollo, pp. 74-75.
6. Annex "Q" to Petition Rollo, pp. 74-76.
7. Annex "R" to Petition, Rollo, p. 77.
8. Petition, p. 10, Rollo, p. 11; Annex "S" to Petition, Rollo, p. 78.
9. Annex "U" to Petition, Rollo, pp. 80-83.
10. Annex "U-l" to Petition, Rollo, pp. 84-87.
11. Annex "U-2" to the Petition, Rollo, pp. 89-90.
12. Annexes "V" and "W" to Petition, Rollo, pp. 89-93.
13. Annex "W" to the Petition, p. 3, Rollo, p. 93.
14. Petition, pp. 11-12, Rollo, pp. 12-13.
15. Annex "C" to the Petition, Rollo, pp. 42-44.
16. Annex "B" to Petition, Rollo, pp. 39-41.
17. Annex "A" to the Petition, Rollo, p. 39.
18. Rollo, p. 543.
19. The general function of Manager of the CMG was to plan, organize, supervise, coordinate and control the operations of the department to enhance the promotion, understanding and expansion of the Community Mortgage Program to ensure its viability and successful implementation. — CMG Department Description of Functions, COA Records, Rollo, p. 489.
20. First Lepanto Ceramics, Inc. v. Court of Appeals, 253 SCRA 552, 558 ; Biak-na-Bato Mining Co. v. Tanco, Jr., 193 SCRA 323, 332 .
21. Commissioner of Internal Revenue v. Commission on Audit, 218 SCRA 203, 212 ; see also National Housing Authority v. Commission on Audit, 226 SCRA 55, 63-64  on the power of the COA to disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures.
22. Reply, pp. 1-2, Rollo, pp. 151-152.
23. Joint Motion to Dismiss, Annex "A-1" to Reply, Rollo, pp. 164-165.