Delayed Payment Claims and COA Audit Powers: The Lotrim Construction Ruling

The Supreme Court recently affirmed the Commission on Audit's (COA) power to determine the exact amount owed to a government contractor under the principle of quantum meruit, even when doing so requires looking beyond the original grounds for a disallowance. The case of Lotrim Construction, Inc. v. Commission on Audit (G.R. No. 270295, April 29, 2026) also serves as a strict reminder that procedural rules—especially the 30-day period for filing petitions under Rule 64—are strictly applied.

The case arose from a 2013 contract between the Bureau of Customs (BOC) and Lotrim Construction for the expansion of the BOC Port of Davao's Administration Building. COA disallowed the advance and partial payments made to Lotrim because the project was funded using Maintenance and Other Operating Expenses (MOOE) in violation of the Government Auditing Code (Presidential Decree No. 1445) and other budget rules.

The Dispute Over Accomplishment

After the disallowances, COA's technical team inspected the project and found that Lotrim's actual accomplishment was only PHP 6,347,826.73, far lower than the PHP 13,878,362.71 the contractor reported. COA Proper later computed that the BOC had actually overpaid Lotrim by PHP 408,859.16 and ordered the contractor to return the excess.

Lotrim argued that it was denied due process because the COA inspection was conducted without notice, that the issue of its accomplishment should have been covered by a separate audit process, and that the dispute should have been referred to the Construction Industry Arbitration Commission (CIAC) under the contract's arbitration clause.

Procedural Lapse Was Fatal

The Court dismissed the petition primarily because it 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 decision. After Lotrim's motion for reconsideration was denied, it had only five days remaining to file its petition. The petition was filed nearly a month late, triggering the doctrine of immutability of judgment—a final decision can no longer be modified, even to correct errors.

COA's Broad Audit Powers

Even on the merits, the Court found no grave abuse of discretion. Citing Yap v. Commission on Audit, the Court held that COA is not limited to the grounds initially cited by an agency auditor. Its constitutional mandate under Article IX-D, Section 2(2) of the Constitution gives it exclusive authority to define the scope of its audit and examination. COA is duty-bound to make its own assessment of the merits of a disallowed disbursement.

The Court also rejected the due process claim. The essence of due process is the opportunity to be heard, and Lotrim actively participated in the proceedings—it appealed to the COA Cluster Director and filed a motion for reconsideration. The COA Technical and Information Technology Services (TechITS) is an internal office answerable only to COA and is not required to furnish contractors with copies of its inspection reports.

Belated Jurisdiction Claim

The Court likewise barred Lotrim from raising CIAC jurisdiction for the first time on appeal. Citing Tijam v. Sibonghanoy and related cases, the Court held that a party who actively participates in proceedings and seeks affirmative relief cannot later challenge the forum's jurisdiction after an adverse ruling. Lotrim raised the CIAC issue nearly eight years after the COA Cluster Director's decision.

Quantum Meruit Cuts Both Ways

The Court reaffirmed that quantum meruit ("as much as he deserves") allows contractors to recover the reasonable value of services rendered to the government, even without a valid contract. However, the principle is equitable and protects public funds as well. It does not allow contractors to retain overpayments. The Court deferred to COA's expertise in determining the amount due, noting that administrative findings supported by substantial evidence are entitled to great respect and finality.

Practical Takeaways

• Respect the 30-day reglementary period. Under Rule 64, a petition for certiorari against COA rulings must be filed within 30 days from notice. A motion for reconsideration interrupts this period, but the remaining days are counted—and cannot be less than five—after denial. Late filing is fatal.

• COA's audit powers are broad. COA may look beyond the original grounds of a disallowance and adjust amounts or identify additional liable persons, provided all parties are given an opportunity to be heard.

• Raise jurisdictional objections early. A party cannot actively participate in proceedings before COA and later invoke the CIAC's arbitration clause after receiving an adverse ruling. Such belated challenges are barred by estoppel.

• Quantum meruit is a two-way street. It protects contractors from unjust enrichment by the government, but it also allows the government to recover overpayments based on COA's technical assessment of actual accomplishment.

• Contractors should verify funding sources. Before entering into government contracts, contractors should ensure that the project is covered by a valid appropriation under the General Appropriations Act and applicable budget rules.

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