Philippine Air Lines vs COA, 245 SCRA39

Philippine Air Lines vs COA, 245 SCRA39

FACTS:

            

In this special civil action for certiorari and prohibition, petitioner Philippine Airlines. Inc. (PAL) seeks to review, annul end reverse Decision No. 1127 of the Commission on Audit (COA) dated January 5, 1990 and to prohibit, enjoin and prevent COA from enforcing or in any way implementing Department Order No. 19, s. 1974 of the then Department of General Services as implemented by COA Circular No. 78-84, Memorandum No. 498 and Memorandum No. 88-565. COA Decision No. 1127 required PAL to purchase its fuel requirements solely from Petron Corporation (Petron).

            

PAL is a domestic corporation organized and existing under the Philippine laws, principally engaged in the air transport business, both domestic and international. At the time of the filing of the petition on February 8, 1990, majority of its shares of stock was owned by the Government Service Insurance System (GSIS), a government corporation.

            

To assure itself of continuous, reliable and cost-efficient supply of fuel, PAL adopted a system of bidding out its fuel requirements under a multiple supplier set-up whereby PAL awarded to the lowest bidder sixty percent (60%) of its fuel requirements and to the second lowest bidder the remaining forty percent(40%), provided it matched the price of the lowest bidder.

            

On August 17, 1989, COA wrote PAL a letter  stating “It has come to our attention that PAL international fuel supply contracts are expiring this August 31, 1989. In this connection, you are advised to desist from bidding the company's fuel supply contracts, considering that existing regulations require government-owned or controlled corporations and other agencies of government to procure their petroleum product requirements from PETRON Corporation.”

            

PAL sought reconsideration of the August 17, 1989 advice, reiterating its reasons contained in an earlier letter, for preferring to bid out and secure its fuel supply from more than one supplier and for its contention that Department Order No. 19, s. 1974, as circularized by COA Office Memorandum No. 490, should not apply to PAL. The final appeal for reconsideration however it was denied. Hence this assailed decision.

ISSUE:

            

Whether the Commission on Audit committed grave abuse of discretion amount to lack or excess of jurisdiction in holding that Department Order No. 19,  of the defunct department of general services applies to PAL?

HELD:

            

[the Court is compelled to dismiss the petition pursuant to the government's privitization program, PAL's shares of stock were bidded out earlier this year, resulting in the acquisition by PR Holdings, a private corporation, of 67% PAL's outstanding stocks. PAL having ceased to be a government-owned or controlled corporation, is no longer under the audit jurisdiction of the COA.. Accordingly, the question raised in this petition has clearly become moot and academic.]

            

Had it not been for this supervening event, PAL would have obtained the relief sought in the instant petition. For although COA was correct in ruling that Department Order No. 19 applied to PAL as a government agency at the time, it nonetheless gravely abused its discretion in not exempting PAL therefrom.

            

The COA is clothed under Section 2(2), Article IX-D of the 1987 Constitution with the "exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules, and regulations including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures, or uses of government funds and properties." The authority granted under this constitutional provision, being broad and comprehensive enough, enables COA to adopt as its own, simply by reiteration or by reference, without the necessity of repromulgation, already existing rules and regulations. It may also expand the coverage thereof to agencies or instrumentalities under its audit jurisdiction.

            

The reasons given by PAL for seeking exemption from the operation of Department Order No. 19 were, to our mind, meritorious. They far outweigh the policy enunciated in Department Order No. 19 of giving preference to government sources in the filling of the needs of the government for supplies. Thus, PAL's bidding requirement conformed to the accepted policy of the government to subject every transaction/contract to public bidding in order to protect public interest by giving the public the best possible advantages thru open competition and to avoid or preclude suspicion of favoritism and anomalies in the execution of public contracts.

            

Its multiple supplier set-up was designed precisely to meet every contingency that might disrupt its fuel supply. It bespoke of foresight, careful planning and sound business judgment on the part of PAL. As a business operation heavily dependent on fuel supply, for PAL to rely solely on a single supplier would indeed be impracticable. To compel it to do so would amount to a grave abuse of discretion on its part as this might well lead to irregular, excessive or unconscionable expenditures, the very evil sought to be avoided in the creation of the COA.