COA Audit Power and Quantum Meruit: Lessons from Lotrim Construction v. COA

The Supreme Court, in Lotrim Construction, Inc. v. Commission on Audit (G.R. No. 270295, April 29, 2026), dismissed a contractor's petition against the Commission on Audit (COA), affirming COA's authority to determine the exact amount due to a contractor under the principle of quantum meruit. The decision also serves as a firm reminder of the strict rules on appeal periods and the consequences of raising jurisdictional issues late.

The Case: A Disallowed Government Contract

The case arose from a 2012 contract between the Bureau of Customs (BOC) and Lotrim Construction, Inc. for the expansion of the BOC Port of Davao Administration Building. COA disallowed the advance payment and first partial payment made to Lotrim, finding that the project was funded from misappropriated Maintenance and Other Operating Expenses (MOOE) funds, in violation of the Government Auditing Code (Presidential Decree No. 1445).

On appeal, the COA Cluster Director lifted the disallowances and allowed Lotrim to recover payment for its work under quantum meruit. However, on automatic review, the COA Proper affirmed the disallowances but reduced Lotrim's liability. After recomputation, COA found that the BOC had actually overpaid Lotrim by PHP 408,859.16, and ordered the contractor to return the excess.

The Issue: Did COA Commit Grave Abuse of Discretion?

Lotrim argued that COA gravely abused its discretion by: (1) violating its right to due process when the COA Technical and Information Technology Services (TechITS) inspected the project without notice; (2) exceeding its jurisdiction by determining the extent of work accomplished, which Lotrim claimed was a construction dispute for the Construction Industry Arbitration Commission (CIAC); and (3) incorrectly computing the amount due.

The Ruling: Procedural Infirmity and No Grave Abuse

The Court dismissed the petition on two grounds.

First, the petition was filed out of time. Under Section 3, Rule 64 of the Rules of Court, a petition for certiorari must be filed within 30 days from notice of the judgment or resolution. While a motion for reconsideration interrupts this period, the petitioner only had three days remaining when it filed its motion. The rules provide that if a motion is denied, the petitioner has a remaining period of not less than five days from notice of denial. The Court computed that Lotrim had until September 5, 2023 to file its petition, but it filed only on October 2, 2023. This belated filing triggered the doctrine of immutability of judgment, which bars any modification of a final decision.

Second, even on the merits, the petition failed. The Court held that Lotrim's right to due process was not violated. The essence of due process is the opportunity to be heard, and the records showed that Lotrim actively participated in the proceedings before COA, filed appeals, and had its motion for reconsideration resolved on the merits. The Court also noted that COA's TechITS, as an internal office, is not required to furnish a private contractor a copy of its inspection report.

On the issue of jurisdiction, the Court ruled that while the CIAC may have jurisdiction over construction disputes, Lotrim was barred from invoking it belatedly. The contractor actively participated in the COA proceedings for nearly eight years before raising the jurisdictional challenge. Citing Tijam v. Sibonghanoy and Megan Sugar Corp. v. RTC, the Court held that a party who seeks affirmative relief from a forum and participates in its proceedings is estopped from later challenging its jurisdiction.

Quantum Meruit: A Two-Way Street

The Court clarified that the principle of quantum meruit ("as much as he deserves") is grounded in equity. It protects private contractors by ensuring they are compensated for the reasonable value of services rendered to the government, preventing unjust enrichment of the State. However, the Court emphasized that this equitable doctrine "cannot be distorted into a shield for contractors to retain payments in excess of what is legally or contractually due." It cuts both ways: it obliges the government to pay for benefits received, but it also protects public funds by allowing the recovery of overpayments.

The Court gave great weight to COA's factual findings, citing its special expertise in determining the value of work accomplished. Absent a clear showing of grave abuse of discretion, the Court will not substitute its own judgment for that of the constitutional audit body.

Practical Takeaways

• Strict compliance with Rule 64 deadlines is crucial. The 30-day period for filing a petition for certiorari against COA decisions is mandatory. A motion for reconsideration interrupts the period, but the remaining balance applies, with a minimum of five days from denial. Missing this deadline is fatal.
• Raise jurisdictional objections promptly. A party cannot actively participate in proceedings before a tribunal and seek affirmative relief, only to challenge that tribunal's jurisdiction years later after receiving an adverse ruling. Such conduct constitutes a waiver.
• COA's audit power is broad. COA is not limited to the grounds initially cited by an auditor. It is duty-bound to make its own assessment of the merits of a disallowed disbursement, and may adjust amounts and identify additional liable persons.
• Quantum meruit applies to both sides. While a contractor may recover the reasonable value of work performed for the government despite an invalid contract, the government may likewise recover overpayments made to the contractor.
• COA findings are given great weight. The Court respects COA's specialized expertise in determining the value of work accomplished, and will not overturn its findings absent a clear showing of grave abuse of discretion.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.