44 - Until Last Case in COA

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Commission on Elections vs. Silva, Jr.
G.R. No. 129417. February 10, 1998.*
COMMISSION ON ELECTIONS, petitioner, vs. HON. LORENZO R. SILVA, JR., as Presiding
Judge, RTC, Branches 2 and 3, Balanga, Bataan, HON. BENJAMIN T. VIANZON, as Presiding
Judge, Branch 1, of the same Court, ERASTO TANCIONGCO, and NORMA CASTILLO,
respondents.
Election Law; Appeals; Criminal Procedure; The approval of a notice of appeal, in cases where no
record on appeal is required by law, is a ministerial duty of the court to which the notice of appeal is
addressed, provided that such appeal is timely filed.—The issue is not just the right of the prosecution
to appeal from the previous orders of dismissal. It is settled that the approval of a notice of appeal, in
cases where no record on appeal is required by law, is a ministerial duty of the court to which the
notice of appeal is addressed, provided that such appeal is timely filed. Of course in criminal cases
the prosecution cannot appeal if the accused would thereby be placed in double jeopardy, but here
the cases were dismissed by the judges before the accused were arraigned and, therefore, jeopardy
has not attached. For while the right to appeal is statutory and is not constitutional, once it is granted
by statute, its denial would be a violation of the due process clause of the Constitution.
Same; Same; Same; Commission on Elections; The authority to decide whether or not to appeal the
dismissal of a criminal prosecution for an election offense belongs to the COMELEC, not the
designated prosecutor.—The ultimate question concerns the authority of the COMELEC prosecutor.
More precisely, the question is, who has authority to decide whether or not to appeal from the orders
of dismissal—the COMELEC or its designated prosecutor? The trial courts held the view that the
Chief State Prosecutor’s decision not to appeal the dismissal of the cases, consistent with his earlier
decision to leave the determination of the existence of probable cause to the trial courts, was binding
on them. We think this view to be mistaken. The authority to decide whether or not to appeal the
dismissal belongs to the COMELEC. Art. IX-C, §2(6) of the Constitution expressly vests in it the
power and function to “investigate and,
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* EN BANC.
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SUPREME COURT REPORTS ANNOTATED
where appropriate, prosecute cases of violations of election laws, including acts or omissions
constituting election frauds, offenses, and malpractices.”
Same; Same; Same; Same; Prosecutors designated by the COMELEC to prosecute the cases act as
its deputies—they derive their authority from it and not from their offices.—Prosecutors designated
by the COMELEC to prosecute the cases act as its deputies. They derive their authority from it and
not from their offices. Consequently, it was beyond the power of Chief State Prosecutor Zuño to
oppose the appeal of the COMELEC. For that matter, it was beyond his power, as COMELEC-
designated prosecutor, to leave to the trial courts the determination of whether there was probable
cause for the filing of the cases and, if it found none, whether the cases should be dismissed. Those
cases were filed by the COMELEC after appropriate preliminary investigation. If the Chief State
Prosecutor thought there was no probable cause for proceeding against private respondents, he should
have discussed the matter with the COMELEC and awaited its instruction. If he disagreed with the
COMELEC’s findings, he should have sought permission to withdraw from the cases. But he could
not leave the determination of probable cause to the courts and agree in advance to the dismissal of
the cases should the courts find no probable cause for proceeding with the trial of the accused. It was,
therefore, grave abuse of discretion on the part of the respondent judges to rely on the manifestation
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of Chief State Prosecutor Zuño as basis for denying due course to the notices of appeal filed by the
COMELEC.
Same; Same; Same; Same; The COMELEC has the right to appeal, in its own name, from a decision
dismissing a criminal case filed by it.—Their sole contention is that the petition should be dismissed
because, so it is argued, it should have been brought in the name of the People of the Philippines and
have been filed by the Solicitor General. This contention is without merit. This is not the first time
the COMELEC has come to this Court in its own name in regard to an action taken against it in cases
filed by it in the lower courts. In Commission on Elections v. Court of Appeals the COME-LEC’s
right to appeal from the decision of the Court of Appeals dismissing a criminal case filed by it was
sustained. This Court said: The COMELEC has sufficient interest in filing the petition [for certiorari]
to set aside the decision of the Court of Appeals having sustained the demurrer to evidence in the
criminal case against
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private respondent for violation of the Election Laws. This is so, for it is not only entrusted with the
duty to enforce the said law but also to prosecute all election offenses.
Same; Same; Same; Same; Solicitor General; Considering the authority of the COMELEC over the
prosecution of election offenses, its decision to bring a petition for certiorari and mandamus is
conclusive on the Solicitor General.—Considering the authority of the COMELEC over the
prosecution of election offenses, its decision to bring this instant petition for certiorari and mandamus
is conclusive on the Solicitor General. It would simply be a matter of referring this case to the Solicitor
General so that, if he agrees, he may take over the conduct of this case. Otherwise, the COMELEC
could just continue handling this case as it has actually done. Hence, the omission of the COMELEC
to refer this petition to the Office of the Solicitor General for representation should be disregarded.
To make the filing of this case depend on his decision would be to place him in the same position in
which respondent judges placed Chief State Prosecutor Zuño. That would further negate the
constitutional function of the COMELEC.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Mandamus.
The facts are stated in the opinion of the Court.
The Solicitor Generalfor petitioner.
MENDOZA, J.:
This case presents for determination the extent of control which those designated by the Commission
on Elections have in the prosecution of election offenses. The facts are not in dispute. Pursuant to its
power under Art. IX-C, §2(6) of the Constitution, the COMELEC charged private respondents Erasto
Tanciongco and Norma Castillo with violations of §27 of R.A. No. 6646, together with Zenon Uy, in
twelve separate informations filed with the Regional Trial Court of Bataan. Tanciongco, who is
provincial prosecutor of Bataan, was vice chairman, while Castillo, who is division superintendent of
schools, was secretary of the Provincial Board of Canvassers
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of Bataan. Uy, who is assistant regional director of elections, was chairman of the board. In each
information, the three were accused of having tampered, in conspiracy with one another, with the
certificates of canvass by increasing the votes received by then senatorial candidate Juan Ponce Enrile
in certain municipalities of Bataan in the May 8, 1995 elections.
The twelve cases were raffled to three branches of the court presided over by respondent judges,
Honorable Lorenzo R. Silva, Jr. (Branches 2 and 3) and Honorable Benjamin T. Vianzon (Branch 1).
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On October 30, 1996, Tanciongco and Castillo filed a joint “Omnibus Motion for Examination of
Evidence to Determine the Existence of Probable Cause; Suspension of Issuance of Warrant of Arrest;
and Dismissal of the Cases.” Chief State Prosecutor Jovencito Zuño, who had been designated by the
Commission on Elections to prosecute the cases, filed a comment joining in private respondents’
request. On the other hand, the complainant, Aquilino Q. Pimentel, Jr. expressed no objection to the
dismissal of the cases against the two.1
In orders dated March 31 and April 7, 1997 respectively, Judges Silva and Vianzon summarily
dismissed the cases against private respondents.2
The COMELEC sought to appeal the dismissal of the cases to the Court of Appeals by filing notices
on April 18, 1997,3 but the judges denied due course to its appeal. The sole basis for the denials was
the fact that the prosecutor, whom the COMELEC had deputized to prosecute the cases, had earlier
taken a contrary stand against the COMELEC.
Thus, in his order, dated May 16, 1997, denying due course to the Notice of Appeal of the COMELEC
in Criminal Case Nos. 6439, 6441, 6443, 6445, 6446, 6447, and 6470, Judge Silva, Jr. stated:
_______________
1 Rollo, pp. 79 and 81.
2 Id., pp. 80 and 85.
3 Id., pp. 86 and 88.
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A Notice of Appeal dated April 18, 1997, in the above-entitled cases was filed on April 23, 1997 by
Jose P. Balbuena, Director IV, Law Department, Commission on Elections, from the Order of the
Court dated March 31, 1997, insofar as it dismissed the above-entitled cases as regards the accused
Erasto Tanciongco and Norma P. Castillo.
Chief State Prosecutor Jovencito Zuño who has been authorized by the Commission on Elections to
prosecute the cases, was required to comment on the Notice of Appeal which does not bear his
signature. In his comment dated May 9, 1997, the Chief State Prosecutor states that he cannot give
his conformity to the Notice of Appeal filed by Jose P. Balbuena of the Comelec as it would not be
consistent with his position that he would abide by whatever finding the court may come up with on
the existence of probable cause as against the accused Erasto Tanciongco and Norma Castillo.
Consequently, the notice of appeal filed by Jose P. Balbuena is unauthorized and without legal effect.
WHEREFORE, the Notice of Appeal dated April 13, 1997, filed by Jose P. Balbuena is denied due
course.4
SO ORDERED.
Judge Vianzon took a similar course in Criminal Case Nos. 6438, 6440, 6442, 6444 and 6471. In his
order of May 23, 1997, he stated:
Considering that Chief State Prosecutor Jovencito R. Zuño has filed his comment to the Notice of
Appeal filed by Director Jose P. Balbuena of the COMELEC, manifesting his non-conformity with
the same because of his previous commitment to abide by the ruling of this court on the Omnibus
Motion filed by accused Tanciongco and Castillo and the Motion to Quash filed by accused Uy, and
considering further that Chief State Prosecutor has been duly deputized by the COMELEC en banc
to handle the prosecution of this case, the said Notice of Appeal is hereby DENIED.
SO ORDERED.5
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4 Id., p. 91.
5 Rollo, p. 92.
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Hence this petition for certiorari and mandamus seeking the nullification of the orders of the two
judges, denying due course to the Notices of Appeal of the COMELEC.6
The issue is not just the right of the prosecution to appeal from the previous orders of dismissal. It is
settled that the approval of a notice of appeal, in cases where no record on appeal is required by law,
is a ministerial duty of the court to which the notice of appeal is addressed, provided that such appeal
is timely filed.7 Of course in criminal cases the prosecution cannot appeal if the accused would thereby
be placed in double jeopardy, but here the cases were dismissed by the judges before the accused
were arraigned and, therefore, jeopardy has not attached.
For while the right to appeal is statutory and is not constitutional, once it is granted by statute, its
denial would be a violation of the due process clause of the Constitution.8
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6 The COMELEC alleges in its petition:
1 1.
This is a petition for certiorari and mandamus under Rule 65 of the Revised Rules of Court, to declare
as null and void the Orders issued by respondents Judge Lorenzo R. Silva, Jr., and Judge Benjamin
T. Vianzon, of the Regional Trial Court, Branches 1, 2 and 3, Balanga, Bataan, namely:
1 (a)
Order dated May 16, 1997, denying due course to the Notice of Appeal dated April 18, 1997, filed
by petitioner from the Order dated March 31, 1997, in Crim. Cases Nos. 6439, 6441, 6446, 6443,
6445, 6470 and 6447, and
2 (b)
Order dated May 23, 1997, denying due course to the Notice of Appeal dated April 18, 1997, filed
by petitioner from the Order dated March 31, 1997, in Crim. Cases Nos. 6438, 6440, 6442, 6444 and
6471,
and to compel said respondent Judges to approve the notice of appeal filed by petitioner in the
aforesaid cases.
7 See 1997 Rules of Civil Procedure, Rule 41; Santos v. Court of Appeals, 253 SCRA 632 (1996).
8 Estoya v. Abraham-Singson, 237 SCRA 1, 19 (1994).
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The ultimate question concerns the authority of the COMELEC prosecutor. More precisely, the
question is, who has authority to decide whether or not to appeal from the orders of dismissal—the
COMELEC or its designated prosecutor? The trial courts held the view that the Chief State
Prosecutor’s decision not to appeal the dismissal of the cases, consistent with his earlier decision to
leave the determination of the existence of probable cause to the trial courts, was binding on them.
We think this view to be mistaken. The authority to decide whether or not to appeal the dismissal
belongs to the COMELEC. Art. IX-C, §2(6) of the Constitution expressly vests in it the power and
function to “investigate and, where appropriate, prosecute cases of violations of election laws,
including acts or omissions constituting election frauds, offenses, and malpractices.” As this Court
has held:
In effect the 1987 Constitution mandates the COMELEC not only to investigate but also to prosecute
cases of violation of election laws. This means that the COMELEC is empowered to conduct
preliminary investigations in cases involving election offenses for the purpose of helping the Judge
determine probable cause and for filing an information in court. This power is exclusive with
COMELEC.9
Indeed, even before the present Constitution, the Omnibus Election Code (B.P. Blg. 881) and, before
it, the 1971 Election Code (R.A. No. 6388) and the 1978 Election Code (P.D. No. 1296) already gave
the COMELEC the exclusive power to conduct preliminary investigation of all election offenses and
to prosecute them in court.10 The purpose is to place in the
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9 People v. Inting, 187 SCRA 788, 799 (1990).
10 The OMNIBUS ELECTION CODE provides: “SEC. 265. Prosecution—The Commission shall,
through its duly authorized legal officers, have the exclusive power to conduct preliminary
investigation of all election offenses punishable under this Code, and to prosecute the same. The
Commission may avail of the assistance of other prosecuting arms of the government: Provided,
however, That
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hands of an independent prosecutor the investigation and prosecution of election offenses.11
Prosecutors designated by the COMELEC to prosecute the cases act as its deputies. They derive their
authority from it and not from their offices.12 Consequently, it was beyond the power of Chief State
Prosecutor Zuño to oppose the appeal of the COMELEC. For that matter, it was beyond his power,
as COMELEC-designated prosecutor, to leave to the trial courts the determination of whether there
was probable cause for the filing of the cases and, if it found none, whether the cases should be
dismissed. Those cases were filed by the COMELEC after appropriate preliminary investigation. If
the Chief State Prosecutor thought there was no probable cause for proceeding against private
respondents, he should have discussed the matter with the COMELEC and awaited its instruction. If
he disagreed with the COMELEC’s findings, he should have sought permission to withdraw from the
cases. But he could not leave the determination of probable cause to the courts and agree in advance
to the dismissal of the cases should the
_______________
in the event that the Commission fails to act on any complaint within four months from his filing, the
complainant may file the complaint with the office of the fiscal or with the Ministry of Justice for
proper investigation and prosecution, if warranted.”
11 Compare De Jesus v. People, 120 SCRA 760, 765-766 (1983): “The grant to the COMELEC of
the power, among others, to enforce and administer all laws relative to the conduct of election and
the concomittant authority to investigate and prosecute election offenses is not without compelling
reason. The evident constitutional intendment in bestowing this power to the COMELEC is to insure
the free, orderly and honest conduct of elections, failure of which would result in the frustration of
the true will of the people and make a mere idle ceremony of the sacred right and duty of every
qualified citizen to vote. To divest the COMELEC of the authority to investigate and prosecute
offenses committed by public officials in relation to their office would thus seriously impair its
effectiveness in achieving this clear constitutional mandate.” Reiterated in Corpus v. Tanodbayan,
149 SCRA 281, 283 (1987).
12 People v. Basilla, 179 SCRA 87 (1989); People v. Inting, 187 SCRA 788 (1990).
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courts find no probable cause for proceeding with the trial of the accused. It was, therefore, grave
abuse of discretion on the part of the respondent judges to rely on the manifestation of Chief State
Prosecutor Zuño as basis for denying due course to the notices of appeal filed by the COMELEC.
Whether respondent judges also erred in dismissing the cases filed by the COMELEC—indeed,
whether the trial courts at that stage were justified in inquiring into the existence of probable cause
because of exceptional reasons13—must be determined in the appeal after it is allowed. Here we only
hold that whether the orders of dismissal should be appealed is for the COMELEC to decide, not for
Chief State Prosecutor Zuño whom it has merely deputized to represent it in court.
Private respondents have nothing to say on this question. Their sole contention is that the petition
should be dismissed because, so it is argued, it should have been brought in the name of the People
of the Philippines and have been filed by the Solicitor General.
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This contention is without merit. This is not the first time the COMELEC has come to this Court in
its own name in regard to an action taken against it in cases filed by it in the lower courts. In
Commission on Elections v. Court of Appeals14 the COMELEC’s right to appeal from the decision of
the Court of Appeals dismissing a criminal case filed by it was sustained. This Court said:
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13 Unless there are exceptional circumstances justifying inquiry, such as those enumerated by this
Court in Brocka v. Enrile, 192 SCRA 183, 188-189 (1990), it is to be presumed that in filing cases in
court, the prosecutor found probable cause. If a court inquires at all into the existence of probable
cause, it is only for the purpose of determining whether a warrant of arrest should issue, but not
whether the cases should be dismissed. (See Roberts, Jr. v. Court of Appeals, 254 SCRA 307, 349
[1996] [Narvasa, C.J., concurring]; Webb v. De Leon, 247 SCRA 652 [1995]).
14 229 SCRA 501 (1994).
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The COMELEC has sufficient interest in filing the petition [for certiorari] to set aside the decision of
the Court of Appeals having sustained the demurrer to evidence in the criminal case against private
respondent for violation of the Election Laws. This is so, for it is not only entrusted with the duty to
enforce the said law but also to prosecute all election offenses.
Under the Constitution, the COMELEC has the power to “prosecute cases of violations of election
laws, including acts or omissions constituting election frauds, offenses, and malpractices” (Art. IX
[C], Sec. 2[6]), and under the Omnibus Election Code, (BP Blg. 881), it may avail of the assistance
of other prosecution arms of the government (Sec. 265). Thus, the COMELEC Rules of Procedure
gave the Chief State, Provincial and City Prosecutors a continuing authority “as deputies” to prosecute
offenses punishable under the Election laws (COMELEC Rules of Procedure, Part 12, Rule 34, Sec.
2).
We have allowed government agencies to handle their cases before appellate courts, to the exclusion
of the Solicitor General.15
In Commission on Elections v. Romillo16 the right of the COMELEC to file a petition for certiorari
and mandamus to question the dismissal of criminal cases which it had filed for violation of the
Election Code was assumed. Although the petition was eventually dismissed, the ruling was based
not on the lack of authority of the COMELEC to file the petition but on this Court’s determination
that the dismissal of the criminal cases by the trial court was correct, considering that the evidence
was insufficient.
Indeed, under the Rules of Court, the proper party who can file a petition for certiorari, prohibition
or mandamus is the person “aggrieved” by the action of a tribunal, board or official because such
action was taken without or in excess of jurisdiction or with grave abuse of discretion or in willful
neglect of duty.17 In contrast to an appealed case which is brought in the name of the parties in the
court of origin and for this reason
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15 Id., at 505.
16 158 SCRA 716 (1988).
17 Rule 65, §§1-3.
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retains its title below, the case, which is an original action, is brought by him.18
In this case, denied by the courts below the authority to prosecute the criminal actions because they
recognized instead the Chief State Prosecutor as the representative of the People, the COMELEC had
to bring this suit to seek vindication of its authority. Naturally, the petition has to be brought in its
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name as the “aggrieved” party. In Assistant Provincial Fiscal of Bataan v. Dollete,19 this Court granted
a petition for certiorari, which the fiscal had filed in his name, to annul an order of the trial court
denying his right to make an independent examination of the witnesses for the prosecution for the
purpose of satisfying himself of the sufficiency of the evidence.
Considering the authority of the COMELEC over the prosecution of election offenses, its decision to
bring this instant petition for certiorari and mandamus is conclusive on the Solicitor General. It would
simply be a matter of referring this case to the Solicitor General so that, if he agrees, he may take
over the conduct of this case. Otherwise, the COMELEC could just continue handling this case as it
has actually done.
Hence, the omission of the COMELEC to refer this petition to the Office of the Solicitor General for
representation should be disregarded. To make the filing of this case depend on his decision would
be to place him in the same position in which respondent judges placed Chief State Prosecutor Zuño.
That would further negate the constitutional function of the COMELEC.
WHEREFORE, the petition is GRANTED. The orders dated May 16, 1997 and May 23, 1997 of
respondent judges are hereby SET ASIDE as null and void and respondent judges are ORDERED to
give due course to the appeals of petitioner from their respective orders in Criminal Case Nos. 6438,
6440, 6442, 6444 and 6471 (filed in Branch 1); Criminal
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18 Rule 44, §1.
19 103 Phil. 914 (1958).
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Case Nos. 6439, 6441, 6443, 6445, 6446, and 6470 (filed in Branch 2); and Criminal Case No. 6447
(filed in Branch 3).
SO ORDERED.
Narvasa (C.J.), Regalado, Davide, Jr., Romero, Puno, Vitug, Kapunan, Francisco, Panganiban,
Martinez, Quisumbing and Purisima, JJ., concur.
Bellosillo and Melo, JJ., In the result.
Petition granted; Orders of respondent judges set aside.
Notes.—Considering that the COMELEC is vested by the Constitution with the exclusive charge of
the enforcement of all laws relative to the conduct of elections, the assumption of jurisdiction by the
trial court over a case involving the enforcement of the Election Code is at war with the plain
constitutional command. (Gallardo vs. Tabamo, Jr., 232 SCRA 690 [1994])
The constitutional grant of power to the COMELEC is so fundamental that it would be difficult for
the Supreme Court to situate respondent judge’s actions within the sphere of an ordinary error of
judgment since judges are expected to be knowledgeable of those jurisdictional areas mapped out and
reserved by the Constitution exclusively upon certain quasi-judicial bodies, particularly the
constitutional commissions. (Re: Comelec Resolution No. 2521, 234 SCRA 1 [1994])
The constitutional and statutory mandate for the Comelec to investigate and prosecute cases of
violation of election laws translates, in effect, to the exclusive power to conduct preliminary
investigations in cases involving election offenses for the twin purpose of filing an information in
court and helping the Judge determine, in the course of preliminary inquiry, whether or not a warrant
of arrest should be issued. (Kilosbayan vs. Commission on Elections, 280 SCRA 892 [1997])
——o0o——
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Commission on Elections vs. Tagle
G.R. Nos. 148948 & 148951-60. February 17, 2003.*
COMMISSION ON ELECTIONS, petitioner, vs. HON. LUCENITO N. TAGLE, Presiding Judge,
Regional Trial Court, Branch 20, Imus, Cavite, respondent.
Election Law; Vote-Buying; A free, orderly, honest, peaceful, and credible election is indispensable
in a democratic society, as without it, democracy would not flourish and would be a sham.—A free,
orderly, honest, peaceful, and credible election is indispensable in a democratic society. Without it,
democracy would not flourish and would be a sham. Election offenses, such as vote-buying and vote-
selling, are evils which prostitute the election process. They destroy the sanctity of the votes and abet
the entry of dishonest candidates into the corridors of power where they may do more harm. As the
Bible says, one who is dishonest in very small matters is dishonest in great ones. One who commits
dishonesty in his entry into an elective office through the prostitution of the electoral process cannot
be reasonably expected to respect and adhere to the constitutional precept that a public office is a
public trust, and that all government officials and employees must at all times be accountable to the
people and exercise their duties with utmost responsibility, integrity, loyalty, and efficiency.
Same; Same; Immunity Statutes; One of the effective ways of preventing the commission of vote-
buying and of prosecuting those committing it is the grant of immunity from criminal liability in favor
of the party whose vote was bought.—One of the effective ways of preventing the commission of
vote-buying and of prosecuting those committing it is the grant of immunity from criminal liability
in favor of the party whose vote was bought. This grant of immunity will encourage the recipient or
acceptor to come into the open and denounce the culprit-candidate, and will ensure the successful
prosecution of the criminal case against the latter. Congress saw the wisdom of this proposition, and
so Section 28 of R.A. No. 6646 on Prosecution of Vote-Buying and Vote-Selling concludes with this
paragraph: The giver, offeror, the promisor as well as the solicitor, acceptor, recipient and conspirator
referred to in paragraphs (a) and (b) of Section 261 of Batas Pambansa Blg. 881 shall be liable as
principals: Provided, That any person, otherwise guilty under said paragraphs who voluntarily gives
information and willingly testifies on any violation thereof in any official investigation or proceeding
shall be exempt from prosecution and punishment for the offenses with reference to which his
information and testimony were given: Provided, further, That nothing herein shall exempt such
person from criminal prosecution for perjury or false testimony.
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* EN BANC.
619
619
Same; Same; Same; The COMELEC has the exclusive power to conduct preliminary investigation of
all election offenses punishable under the election laws and to prosecute the same, except as may
otherwise be provided by law.—It must be stressed that the COMELEC has the exclusive power to
conduct preliminary investigation of all election offenses punishable under the election laws and to
prosecute the same, except as may otherwise be provided by law. The Chief State Prosecutor, all
Provincial and City Prosecutors, or their respective assistants are, however, given continuing
authority, as deputies of the COMELEC, to conduct preliminary investigation of complaints
involving election offenses and to prosecute the same. This authority may be revoked or withdrawn
by the COMELEC anytime whenever, in its judgment, such revocation or withdrawal is necessary to
protect the integrity of the COMELEC and to promote the common good, or when it believes that the
successful prosecution of the case can be done by the COMELEC.
Same; Same; Same; When the COMELEC nullifies a resolution of the Provincial Prosecutor which
is the basis of the informations for vote-selling, it, in effect, withdraws the deputation granted to the
prosecutor.—In this case, when the COMELEC nullified the resolution of the Provincial Prosecutor
in I.S. No. 1-99-1080, which was the basis of the informations for vote-selling, it, in effect, withdrew
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the deputation granted to the prosecutor. Such withdrawal of the deputation was clearly in order,
considering the circumstances obtaining in these cases where those who voluntarily executed
affidavits attesting to the vote-buying incident and became witnesses against the vote-buyers now
stand as accused for the same acts they had earlier denounced. What the Prosecutor did was to
sabotage the prosecution of the criminal case against the “vote-buyers” and put in serious peril the
integrity of the COMELEC, which filed the said case for vote-buying. If the Prosecutor had listened
to the command of prudence and good faith, he should have brought the matter to the attention of the
COMELEC.
Same; Same; Same; Where certain voters had already executed sworn statements attesting to the
corrupt practice of vote-buying in a pending case, it cannot be denied that they had already
voluntarily given information in the vote-buying case.—We agree with the petitioner and hold that
the respondents in I.S. No. 1-99-1080, who are the accused in Criminal Cases Nos. 7950-00 to 7959-
00 and 7980-00, are exempt from criminal prosecution for vote-selling by virtue of the proviso in the
last paragraph of Section 28 of R.A. No. 6646. Respondent judge lost sight of the fact that at the time
the complaint for vote-selling was filed with the Office of the Provincial Prosecutor, the respondents
in I.S. No. 1-99-1080 had already executed sworn statements attesting to the corrupt practice of vote-
buying in the case docketed as Criminal Case No. 7034-99. It cannot then be denied that they had
already voluntarily given information in the vote-
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buying case. In fact, they willingly testified in Criminal Case No. 7034-99 per petitioner’s
Memorandum filed with this Court.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Mandamus.
Jose P. Balbuena for petitioner.
DAVIDE, JR., C.J.:
In this special civil action for certiorari and mandamus, petitioner Commission on Elections
(COMELEC) seeks the nullification of the orders of 16 March 20011 and 9 May 20012 of respondent
Judge Lucenito N. Tagle of the Regional Trial Court (RTC), Branch 20, Imus, Cavite, denying
petitioner’s motion to dismiss Criminal Cases Nos. 7950-00 to 7959-00 and 7980-00 and motion for
reconsideration, respectively.
During the 11 May 1998 elections, Florentino A. Bautista ran for the position of mayor in the
Municipality of Kawit, Cavite. On 8 July 1998, he filed with the COMELEC a complaint against then
incumbent mayor Atty. Federico Poblete, Bienyenido Pobre, Reynaldo Aguinaldo, Arturo Ganibe,
Leonardo Llave, Diosdado del Rosario, Manuel Ubod, Angelito Peregrino, Mario Espiritu, Salvador
Olaes and Pedro Paterno, Jr., for violation of Section 261 (a) and (b) of the Omnibus Election Code.
The complaint was supported by the separate affidavits of forty-four (44) witnesses attesting to the
vote-buying activities of the respondents and was docketed as E.O. Case No. 98-219.
On 25 February 1999, upon the recommendation of its Law Department, the COMELEC en banc
issued a resolution3 directing the filing of the necessary information against the respondents in E.O.
Case No. 98-219 and authorizing the Director IV of the Law Department to designate a COMELEC
prosecutor to handle the prosecution of the cases and to file the appropriate motion for the preventive
suspension of the respondents.
_______________
1 Rollo, pp. 32-35.
2 Id., p. 36.
3 Rollo, pp. 18-19.
621
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621
The Law Department filed the corresponding information against the respondents in E.O. Case No.
98-219 before the RTC, Branch 90, Imus, Cavite, which was docketed as Criminal Case No. 7034-
99.
Before the trial of Criminal Case No. 7034-99 commenced, or on 2 December 1999, a complaint was
filed by Innocencio Rodelas and Gerardo Macapagal with the Office of the Provincial Prosecutor in
Imus, Cavite, for violation of Section 261 (a) of the Omnibus Election Code against the witnesses in
the criminal case for votebuying, who were the witnesses in E.O. Case No. 98-219. The complaint
was docketed as I.S. No. 1-99-1080.
On 10 April 2000, the Office of the Provincial Prosecutor resolved to file separate informations for
vote-selling in the various branches of the RTC in Imus, Cavite, against the respondents in I.S. No.
1-99-1080. The cases were docketed as (1) Criminal Cases Nos. 7940-00 to 7949-00 and 7981-00,
which were assigned to Branch 22; (2) Criminal Cases Nos. 7973-00 to 7979-00 and 797000, assigned
to Branch 21; (3) Criminal Cases Nos. 7950-00 to 7959-00 and 7980-00, assigned to Branch 20; and
(4) Criminal Cases Nos. 7960-00 to 7969-00, assigned to Branch 90.
On 23 June 2000, the respondents in I.S. No. 1-99-1080 appealed before the COMELEC the 10 April
2000 Resolution of the Provincial Prosecutor. On 6 July 2000, the COMELEC en banc denied the
appeal for lack of jurisdiction.4 However, upon the urgent motion to set for hearing the appeal, the
COMELEC en banc resolved to defer action on the appeal and refer the same to the Law Department
for comment and recommendation.5
The Law Department of the COMELEC filed motions to suspend proceedings before Branches 20,
21, 22 and 90 of the RTC of Imus, Cavite, until the COMELEC would have resolved the appeal of
the respondents in I.S. No. 1-99-1080. The Presiding Judge of Branch 22 granted the motion for the
suspension of proceedings in Criminal Cases Nos. 7940-00 to 7949-00 and 7981-00.
In its Minute Resolution No. 00-2453,6 the COMELEC en banc, upon the recommendation of its Law
Department, declared null and void the resolution of the Office of the Provincial Prosecutor in
_______________
4 Rollo, pp. 20-21.
5 Id., pp. 22-24.
6 Rollo, pp. 25-31.
622
622
I.S. No. 1-99-1080. It held that the respondents therein are exempt from criminal prosecution pursuant
to the fourth paragraph of Section 28 of R.A. No. 6646,7 otherwise known as “The Electoral Reforms
Law of 1987,” which grants immunity from criminal prosecution persons who voluntarily give
information and willingly testify against those liable for vote-buying or vote-selling. It further
directed the Law Department to file the necessary motions to dismiss the criminal cases filed against
the said respondents.
Pursuant to Minute Resolution No. 00-2453, the Law Department filed a motion to dismiss8 Criminal
Cases Nos. 7950-00 to 7959-00 and 7980-00 before Branch 20 of the RTC of Imus, Cavite, presided
by herein respondent judge. The latter, however, denied the said motion and the motion for
reconsideration. According to respondent judge, before one can be exempt from prosecution under
the fourth paragraph of Section 28 of R.A. No. 6646, it is necessary that such person has already
performed the overt act of voluntarily giving information or testifying in any official investigation or
proceeding for the offense to which such information or testimony was given. It was thus premature
to exempt the respondents in I.S. No. 1-99-1080 from criminal prosecution, since they have not yet
testified.
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Hence, this petition, ascribing to the respondent judge grave abuse of discretion amounting to excess
or lack of jurisdiction in peremptorily denying the prosecution’s motion to dismiss Criminal Cases
Nos. 7950-00 to 7959-00 and 7980-00.
This Court referred the petition to the Office of the Solicitor General (OSG) and required it to manifest
whether it is adopting the petition.9 In a Manifestation and Motion10 filed with this Court, the OSG
stated that it repleads the submissions contained in the petition and adopts the petition as its own.
The petition is meritorious.
A free, orderly, honest, peaceful, and credible election is indispensable in a democratic society.
Without it, democracy would not flourish and would be a sham. Election offenses, such as vote-
_______________
7 Entitled “An Act Introducing Additional Reforms in the Electoral System and for Other Purposes.”
8 Rollo, pp. 52-54.
9 Rollo, p. 63.
10 Id., pp. 64-65.
623
623
buying and vote-selling, are evils which prostitute the election process. They destroy the sanctity of
the votes and abet the entry of dishonest candidates into the corridors of power where they may do
more harm. As the Bible says, one who is dishonest in very small matters is dishonest in great ones.
One who commits dishonesty in his entry into an elective office through the prostitution of the
electoral process cannot be reasonably expected to respect and adhere to the constitutional precept
that a public office is a public trust, and that all government officials and employees must at all times
be accountable to the people and exercise their duties with utmost responsibility, integrity, loyalty,
and efficiency.
The provision of law alleged to have been violated by the respondents in E.O. Case No. 98-219, who
are the accused in Criminal Case No. 7034-99, reads as follows:
SEC. 261. Prohibited Acts.—The following shall be guilty of an election offense:
1 (a)
Vote-buying and vote-selling.—(1) Any person who gives, offers or promises money or anything of
value, gives or promises any office or employment, franchise or grant, public or private, or makes or
offers to make an expenditure, directly or indirectly, or cause an expenditure to be made to any person,
association, corporation, entity, or community in order to induce anyone or the public in general to
vote for or against any candidate or withhold his vote in the election, or to vote for or against any
aspirant for the nomination or choice of a candidate in a convention or similar selection process of a
political party.
1 (2)
Any person, association, corporation, group or community who solicits or receives, directly or
indirectly, any expenditure or promise of any office or employment, public or private, for any of the
foregoing considerations.
1 (b)
Conspiracy to bribe voters.—Two or more persons whether candidates or not, who come to an
agreement concerning the commission of any violation of paragraph (a) of this section and decide to
commit it.
One of the effective ways of preventing the commission of vote-buying and of prosecuting those
committing it is the grant of immunity from criminal liability in favor of the party whose vote was
bought. This grant of immunity will encourage the recipient or acceptor to come into the open and
denounce the culprit-candidate, and will ensure the successful prosecution of the criminal case
624
624
11 of 120
against the latter. Congress saw the wisdom of this proposition, and so Section 28 of R.A. No. 6646
on Prosecution of Vote-Buying and Vote-Selling concludes with this paragraph:
The giver, offeror, the promisor as well as the solicitor, acceptor, recipient and conspirator referred
to in paragraphs (a) and (b) of Section 261 of Batas Pambansa Blg. 881 shall be liable as principals:
Provided, That any person, otherwise guilty under said paragraphs who voluntarily gives information
and willingly testifies on any violation thereof in any official investigation or proceeding shall be
exempt from prosecution and punishment for the offenses with reference to which his information
and testimony were given: Provided, further, That nothing herein shall exempt such person from
criminal prosecution for perjury or false testimony.
However, to avoid possible fabrication of evidence against the vote-buyers, especially by the latter’s
opponents, Congress saw it fit to warn “vote-sellers” who denounce the vote-buying that they could
be liable for perjury or false testimony should they not tell the truth.
It must be stressed that the COMELEC has the exclusive power to conduct preliminary investigation
of all election offenses punishable under the election laws and to prosecute the same, except as may
otherwise be provided by law.11 The Chief State Prosecutor, all Provincial and City Prosecutors, or
their respective assistants are, however, given continuing authority, as deputies of the COMELEC, to
conduct preliminary investigation of complaints involving election offenses and to prosecute the
same.12 This authority may be revoked or withdrawn by the COMELEC anytime whenever, in its
judgment, such revocation or withdrawal is necessary to protect the integrity of the COMELEC and
to promote the common good, or when it believes that the successful prosecution of the case can be
done by the COMELEC.13
In this case, when the COMELEC nullified the resolution of the Provincial Prosecutor in I.S. No. 1-
99-1080, which was the basis of the informations for vote-selling, it, in effect, withdrew the
deputation granted to the prosecutor. Such withdrawal of the deputation was clearly in order,
considering the circumstances obtaining in these cases where those who voluntarily executed
affidavits at-
_______________
11 Section 1, Rule 34, COMELEC Rules of Procedure.
12 Section 2, Id.
13 Id.
625
625
testing to the vote-buying incident and became witnesses against the vote-buyers now stand as
accused for the same acts they had earlier denounced. What the Prosecutor did was to sabotage the
prosecution of the criminal case against the “vote-buyers” and put in serious peril the integrity of the
COMELEC, which filed the said case for vote-buying. If the Prosecutor had listened to the command
of prudence and good faith, he should have brought the matter to the attention of the COMELEC.
Petitioner COMELEC found that the respondents in I.S. No. 1-99-1080, who executed affidavits and
turned witnesses in Criminal Case No. 7034-99, voluntarily admitted that they were the acceptors or
recipients in the vote-buying done by the accused in said case. It was precisely because of such
voluntary admission and willingness to testify that the COMELEC en banc, in its Minute Resolution
No. 00-2453, declared null and void the resolution of the Office of the Provincial Prosecutor of Cavite
in I.S. No. 1-99-1080 and held that the respondents therein are exempt from criminal prosecution
pursuant to the last paragraph of Section 28 of R.A. No. 6646. Hence, it directed its Law Department
to file a motion to dismiss the criminal cases which the Office of the Provincial Prosecutor filed in
court against the respondents in I.S. No. 1-99-1080.
We agree with the petitioner and hold that the respondents in I.S. No. 1-99-1080, who are the accused
in Criminal Cases Nos. 7950-00 to 7959-00 and 7980-00, are exempt from criminal prosecution for
vote-selling by virtue of the proviso in the last paragraph of Section 28 of R.A. No. 6646. Respondent
12 of 120
judge lost sight of the fact that at the time the complaint for vote-selling was filed with the Office of
the Provincial Prosecutor, the respondents in I.S. No. 1-99-1080 had already executed sworn
statements attesting to the corrupt practice of vote-buying in the case docketed as Criminal Case No.
7034-99. It cannot then be denied that they had already voluntarily given information in the vote-
buying case. In fact, they willingly testified in Criminal Case No. 7034-99 per petitioner’s
Memorandum filed with this Court.14
In a futile attempt to justify his denial of the motion to dismiss Criminal Cases Nos. 7950-00 to 7959-
00 and 7980-00, respondent judge averred in his comment on the petition that nothing was mentioned
in the motion to dismiss that the accused in said cases
_______________
14 Rollo, pp. 69-79, at 78.
626
626
had already given information or testified in any proceeding. Besides, no record of any preliminary
investigation was attached to the motion to dismiss. The petitioner merely referred to the dispositive
portion of Minute Resolution No. 00-2453 without mentioning any preliminary investigation
conducted by the Law Department of the COMELEC.
This contention is without basis. A reading of the motion to dismiss Criminal Cases Nos. 7950-00 to
7959-00 and 7980-00 shows that a certified true copy of COMELEC Minute Resolution No. 002453
was attached thereto and was made an integral part thereof. The attached resolution indicated that the
accused in the cases sought to be dismissed had voluntarily given information and were willing to
testify against the vote-buyers, and are therefore utilized as witnesses in the pending case for vote-
buyers docketed as Criminal Case No. 7034-99.
Clearly then, respondent judge committed grave abuse of discretion when he denied the motion to
dismiss Criminal Cases Nos. 7950-00 to 7959-00 and 7980-00 despite COMELEC’s determination
that the accused therein are exempt from criminal prosecution for vote-selling pursuant to the proviso
in the fourth paragraph of Section 28 of R.A. No. 6646.
WHEREFORE, the petition is GRANTED. The challenged orders dated 16 March 2001 and 9 May
2001 of respondent judge in Criminal Cases Nos. 7950-00 to 7959-00 and 7980-00 before Branch 20
of the Regional Trial Court in Imus, Cavite, are hereby SET ASIDE, and said criminal cases are
ordered DISMISSED. No pronouncement as to costs.
SO ORDERED.
Bellosillo, Puno, Vitug, Mendoza, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-
Martinez, Corona, Carpio-Morales and Azcuna, JJ., concur.
Ynares-Santiago, J., On leave.
Callejo, Sr., J., No part.
Petition granted, orders set aside. Criminal cases dismissed.
Notes.—The constitutional and statutory mandate for the COMELEC to investigate and prosecute
cases of violation of elec-
627
627
Adriano vs. Villanueva
tion laws translates, in effect, to the exclusive power to conduct preliminary investigations in cases
involving election offenses for the twin purpose of filing an information in court and helping the
Judge determine, in the course of preliminary inquiry, whether or not a warrant of arrest should be
issued. (Kilosbayan, Inc. vs. Commission on Elections, 280 SCRA 892 [1997])
Prosecutors designated by the COMELEC act as its deputies—they derive their authority from it and
not from their offices. (Commission on Elections vs. Silva, Jr., 286 SCRA 177 [1998])
——o0o——
13 of 120
726
Caltex Philippines, Inc. vs. Commission on Audit
G.R. No. 92585. May 8, 1992.*
CALTEX PHILIPPINES, INC., petitioner, vs. THE HONORABLE COMMISSION ON AUDIT,
HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE
COMMISSIONER ALBERTO P. CRUZ, respondents.
Administrative Law; Commission on Audit; The audit power of the Auditor General under the 1935
Constitution and the Commission on Audit under the 1973 Constitution authorized them to disallow
illegal expenditures of funds or uses of funds and property.—There can be no doubt, however, that
the audit power of the Auditor General under the 1935 Constitution and the Commission on Audit
under the 1973 Constitution authorized them to disallow illegal expenditures of funds or uses of funds
and property. Our present Constitution retains that same power and authority, further strengthened by
the definition of the COA’s general jurisdiction in Section 26 of the Government Auditing Code of
the Philippines and Administrative Code of 1987. Pursuant to its power to promulgate accounting and
auditing rules and regulations for the prevention of irregular, unnecessary, excessive or extravagant
expenditures or uses of funds, the COA promulgated on 29 March 1977 COA Circular No. 77-55.
Since the COA is responsible for the enforcement of the rules and regulations, it goes without saying
that failure to comply with them is a ground for disapproving the payment of the proposed
expenditure.
Civil Law; Taxation; LOI 1416 has no binding force or effect as it was never published in the Official
Gazette after its issuance or at anytime after the decision in the above-mentioned cases.—LOI 1416
has, therefore, no binding force or effect as it was never published in the Official Gazette after its
issuance or at any time after the decision
_________
* EN BANC.
727
VOL. 208, MAY 8, 1992

727
in the abovementioned cases.
Same; Same; Tax exemptions as a general rule are construed strictly against the grantee and liberally
in favor of the taxing authority.—Furthermore, even granting arguendo that LOI 1416 has force and
effect, petitioner’s claim must still fail. Tax exemptions as a general rule are construed strictly against
the grantee and liberally in favor of the taxing authority. The burden of proof rests upon the party
claiming exemption to prove that it is in fact covered by the exemption so claimed. The party claiming
exemption must therefore be expressly mentioned in the exempting law or at least be within its
purview by clear legislative intent.
Same; Same; Though LOI 1416 may suspend the payment of taxes by copper mining companies it
does not give petitioner the same privilege with respect to the payment of OPSF dues.—In the case
at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to ATLAS and
MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though LOI 1416 may
suspend the payment of taxes by copper mining companies, it does not give petitioner the same
privilege with respect to the payment of OPSF dues.
Same; Same; It is settled that a taxpayer may not affect taxes due from the claims that he may have
against the government.—It is settled that a taxpayer may not offset taxes due from the claims that
he may have against the government. Taxes cannot be the subject of compensation because the
14 of 120
government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes
is not such a debt, demand, contract or judgment as is allowed to be set-off.
PETITION for review of the decision of the Commission on Audi.
DAVIDE, JR., J.:
This is a petition erroneously brought under Rule 44 of the Rules of Court1 questioning the authority
of the Commission on
____________
1 Petitioner explicitly states in the opening paragraph of the petition that its petition is for review
under Section 1, Rule 44 of the Rules of Court.
728
728
Audit (COA) in disallowing petitioner’s claims for reimbursement from the Oil Price Stabilization
Fund (OPSF) and seeking the reversal of said Commission’s decision denying its claims for recovery
of financing charges from the Fund and reimbursement of underrecovery arising from sales to the
National Power Corporation, Atlas Consolidated Mining and Development Corporation (ATLAS)
and Marcopper Mining Corporation (MARCOPPER), preventing it from exercising the right to offset
its remittances against its reimbursement vis-a-vis the OPSF and disallowing its claims which are still
pending resolution before the Office of Energy Affairs (OEA) and the Department of Finance (DOF).
Pursuant to the 1987 Constitution,2 any decision, order or ruling of the Constitutional Commissions3
may be brought to this Court on certiorari by the aggrieved party within thirty (30) days from receipt
of a copy thereof. The certiorari referred to is the special civil action for certiorari under Rule 65 of
the Rules of Court.4
Considering, however, that the allegations that the COA acted with: (a) total lack of jurisdiction in
completely ignoring and showing absolutely no respect for the findings and rulings of the
administrator of the fund itself and in disallowing a claim which is still pending resolution at the OEA
level, and (b) “grave abuse of discretion and completely without jurisdiction”5 in declaring that
petitioner cannot avail of the right to offset any amount that it may be required under the law to remit
to the OPSF against any amount that it may receive by way of reimbursement therefrom are sufficient
to bring this petition within Rule 65 of the Rules of Court, and, considering further the importance of
the issues raised, the error in the designation of the remedy pursued will, in this instance, be excused.
The issues raised revolve around the OPSF created under
___________
2 Section 7, Subdivision A, Article IX; see also Section 35, Chapter 5, Subtitle B, Title I, Book V,
Administrative Code of 1987.
3 The Civil Service Commission, the Commission on Elections and the Commission on Audit.
4 Land Bank of the Philippines vs. COA, 190 SCRA 154 [1990].
5 Rollo, 6-7.
729
VOL. 208, MAY 8, 1992
729
Section 8 of Presidential Decree (P.D.) No. 1956, as amended by Executive Order (E.O.) No. 137.
As amended, said Section 8 reads as follows:
“SECTION 8. There is hereby created a Trust Account in the books of accounts of the Ministry of
Energy to be designated as Oil Price Stabilization Fund (OPSF) for the purpose of minimizing
frequent price changes brought about by exchange rate adjustments and/ or changes in world market
prices of crude oil and imported petroleum products. The Oil Price Stabilization Fund may be sourced
from any of the following:
15 of 120
1 a)
Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum
products subject to tax under this Decree arising from exchange rate adjustment, as may be
determined by the Minister of Finance in consultation with the Board of Energy;
2 b)
Any increase in the tax collection as a result of the lifting of tax exemptions of government
corporations, as may be determined by the Minister of Finance in consultation with the Board of
Energy;
3 c)
Any additional amount to be imposed on petroleum products to augment the resources of the Fund
through an appropriate Order that may be issued by the Board of Energy requiring payment by persons
or companies engaged in the business of importing, manufacturing and/or marketing petroleum
products;
4 d)
Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the
importation of crude oil and petroleum products is less than the peso costs computed using the
reference foreign exchange rate as fixed by the Board of Energy.
The Fund herein created shall be used for the following:
1 1)
To reimburse the oil companies for cost increases in crude oil and imported petroleum products
resulting from exchange rate adjustment and/or increase in world market prices of crude oil;
2 2)
To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction
of domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be
determined by the Ministry of Finance. ‘Cost underrecovery’ shall include the following:
730
730
1 i.
Reduction in oil company take as directed by the Board of Energy without the corresponding
reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the
price change;
2 ii.
Reduction in internal ad valorem taxes as a result of foregoing government mandated price
reductions;
3 iii.
Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.
The Oil Price Stabilization Fund (OPSF) shall be administered by the Ministry of Energy.”
The material operative facts of this case, as gathered from the pleadings of the parties, are not
disputed.
On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred to as
Petitioner, directing the latter to remit to the OPSF its collection, excluding that unremitted for the
years 1986 and 1988, of the additional tax on petroleum products authorized under the aforesaid
Section 8 of P.D. No. 1956 which, as of 31 December 1987, amounted to P335,037,649.00 and
informing it that, pending such remittance, all of its claims for reimbursement from the OPSF shall
be held in abeyance.6
On 9 March 1989, the COA sent another letter to petitioner informing it that partial verification with
the OEA showed that the grand total of its unremitted collections of the above tax is
P1,287,668,820.00, broken down as follows:
1986
—
16 of 120
P233,190,916.00
1987
—
335,065,650.00
1988
—
719,412,254.00;
directing it to remit the same, with interest and surcharges thereon, within sixty (60) days from receipt
of the letter; advising it that the COA will hold in abeyance the audit of all its claims for
reimbursement from the OPSF; and directing it to desist from further offsetting the taxes collected
against outstanding claims in 1989 and subsequent periods.7
_____________
6 Rollo, 65.
7 Id., 66.
731
VOL. 208, MAY 8, 1992
731
In its letter of 3 May 1989, petitioner requested the COA for an early release of its reimbursement
certificates from the OPSF covering claims with the Office of Energy Affairs since June 1987 up to
March 1989, invoking in support thereof COA Circular No. 89-299 on the lifting of pre-audit of
government transactions of national government agencies and government-owned or controlled
corporations.8
In its Answer dated 8 May 1989, the COA denied petitioner’s request for the early release of the
reimbursement certificates from the OPSF and repeated its earlier directive to petitioner to forward
payment of the latter’s unremitted collections to the OPSF to facilitate COA’s audit action on the
reimbursement claims.9
By way of a reply, petitioner, in a letter dated 31 May 1989, submitted to the COA a proposal for the
payment of the collections and the recovery of claims, since the outright payment of the sum of P1.287
billion to the OEA as a prerequisite for the processing of said claims against the OPSF will cause a
very serious impairment of its cash position.10 The proposal reads:
“We, therefore, very respectfully propose the following:
1 (1)
Any procedural arrangement acceptable to COA to facilitate monitoring of payments and
reimbursements will be administered by the ERB/Finance Dept./OEA, as agencies designated by law
to administer/regulate OPSF.
2 (2)
For the retroactive period, Caltex will deliver to OEA, P1.287 billion as payment to OPSF, similarly
OEA will deliver to Caltex the same amount in cash reimbursement from OPSF.
3 (3)
The COA audit will commence immediately and will be conducted expeditiously.
4 (4)
The review of current claims (1989) will be conducted expeditiously to preclude further accumulation
of reimbursement from OPSF.”
On 7 June 1989, the COA, with the Chairman taking no part, handed down Decision No. 921
accepting the above-stated pro-
__________
8 Rollo, 67-68.
9 Id., 76.
10 Id., 77.
732
732
17 of 120
posal but prohibiting petitioner from further offsetting remittances and reimbursements for the current
and ensuing years.11 Decision No. 921 reads:
“This pertains to the within separate requests of Mr. Manuel A. Estrella, President, Petron
Corporation, and Mr. Francis Ablan, President and Managing Director, Caltex (Philippines) Inc., for
reconsideration of this Commission’s adverse action embodied in its letters dated February 2, 1989
and March 9, 1989, the former directing immediate remittance to the Oil Price Stabilization Fund of
collections made by the firms pursuant to P.D. 1956, as amended by E.O. No. 137, S. 1987, and the
latter reiterating the same directive but further advising the firms to desist from offsetting collections
against their claims with the notice that ‘this Commission will hold in abeyance the audit of all x x x
claims for reimbursement from the OPSF.’
It appears that under letters of authority issued by the Chairman, Energy Regulatory Board, the
aforenamed oil companies were allowed to offset the amounts due to the Oil Price Stabilization Fund
against their outstanding claims from the said Fund for the calendar years 1987 and 1988, pending
with the then Ministry of Energy, the government entity charged with administering the OPSF. This
Commission, however, expressing serious doubts as to the propriety of the offsetting of all types of
reimbursements from the OPSF against all categories of remittances, advised these oil companies that
such offsetting was bereft of legal basis. Aggrieved thereby, these companies now seek
reconsideration and in support thereof clearly manifest their intent to make arrangements for the
remittance to the Office of Energy Affairs of the amount of collections equivalent to what has been
previously offset, provided that this Commission authorizes the Office of Energy Affairs to prepare
the corresponding checks representing reimbursement from the OPSF. It is alleged that the
implementation of such an arrangement, whereby the remittance of collections due to the OPSF and
the reimbursement of claims from the Fund shall be made within a period of not more than one week
from each other, will benefit the Fund and not unduly jeopardize the continuing daily cash
requirements of these firms.
Upon a circumspect evaluation of the circumstances herein obtaining, this Commission perceives no
further objectionable feature in the proposed arrangement, provided that 15% of whatever amount is
due from the Fund is retained by the Office of Energy Affairs, the same to be answerable for
suspensions or disallowances, errors or
____________
11 Rollo, 58-59.
733
VOL. 208, MAY 8, 1992
733
discrepancies which may be noted in the course of audit and surcharges for late remittances without
prejudice to similar future retentions to answer for any deficiency in such surcharges, and provided
further that no offsetting of remittances and reimbursements for the current and ensuing years shall
be allowed.”
Pursuant to this decision, the COA, on 18 August 1989, sent the following letter to Executive Director
Wenceslao R. De la Paz of the Office of Energy Affairs:12
“Dear Atty. dela Paz:
Pursuant to the Commission on Audit Decision No. 921 dated June 7, 1989, and based on our initial
verification of documents submitted to us by your Office in support of Caltex (Philippines), Inc.
offsets (sic) for the year 1986 to May 31, 1989, as well as its outstanding claims against the Oil Price
Stabilization Fund (OPSF) as of May 31, 1989, we are pleased to inform your Office that Caltex
(Philippines), Inc. shall be required to remit to OPSF an amount of P1,505,668,906, representing
remittances to the OPSF which were offset against its claims reimbursements (net of unsubmitted
claims). In addition, the Commission hereby authorize (sic) the Office of Energy Affairs (OEA) to
18 of 120
cause payment of P1,959,182,612 to Caltex, representing claims initially allowed in audit, the details
of which are presented hereunder: x x x
As presented in the foregoing computation the disallowances totalled P387,683,535, which included
P130,420,235 representing those claims disallowed by OEA, details of which is (sic) shown in
Schedule 1 as summarized as follows:
Disallowance of COA
Particulars
Amount
Recovery of financing charges
P162,728,475 /a
Product sales
48,402,398 /b
Inventory losses
Borrow loan arrangement

14,034,786 /c
Sales to Atlas/Marcopper
32,097,083 /d
Sales to NPC
558
______________
P257,263,300
Disallowances of OEA
________________
130,420,235
_____________
Total
P387,683,535
_____________
12 Rollo, 60-62.
734
734
The reasons for the disallowances are discussed hereunder:
a. Recovery of Financing Charges
Review of the provisions of P.D. 1596 as amended by E.O. 137 seems to indicate that recovery of
financing charges by oil companies is not among the items for which the OPSF may be utilized.
Therefore, it is our view that recovery of financing charges has no legal basis. The mechanism for
such claims is provided in DOF Circular 1-87.
b. Product Sales—Sales to International Vessels/Airlines
BOE Resolution No. 87-01 dated February 7, 1987 as implemented by OEA Order No. 87-03-095
indicating that (sic) February 7, 1987 as the effectivity date that (sic) oil companies should pay OPSF
impost on export sales of petroleum products. Effective February 7, 1987 sales to international
vessels/airlines should not be included as part of its domestic sales. Changing the effectivity date of
the resolution from February 7, 1987 to October 20, 1987 as covered by subsequent ERB Resolution
No. 88-12 dated November 18, 1988 has allowed Caltex to include in their domestic sales volumes
to international vessels/airlines and claim the corresponding reimbursements from OPSF during the
period. It is our opinion that the effectivity of the said resolution should be February 7, 1987.
c. Inventory losses—Settlement of Ad Valorem
19 of 120
We reviewed the system of handling Borrow and Loan (BLA) transactions including the related BLA
agreement, as they affect the claims for reimbursements of ad valorem taxes. We observed that oil
companies immediately settle ad valorem taxes for BLA transaction (sic). Loan balances therefore
are not tax paid inventories of Caltex subject to reimbursements but those of the borrower. Hence,
we recommend reduction of the claim for July, August, and November, 1987 amounting to
P14,034,786.
d. Sales to Atlas/Marcopper
LOI No. 1416 dated July 17, 1984 provides that ‘I hereby order and direct the suspension of payment
of all taxes, duties, fees, imposts and other charges whether direct or indirect due and payable by the
copper mining companies in distress to the national and local governments.’ It is our opinion that LOI
1416 which implements the exemption from payment of OPSF imposts as effected by OEA has no
legal
735
VOL. 208, MAY 8, 1992
735
basis.
Furthermore, we wish to emphasize that payment to Caltex (Phil.) Inc., of the amount as herein
authorized shall be subject to availability of funds of OPSF as of May 31, 1989 and applicable
auditing rules and regulations. With regard to the disallowances, it is further informed that the
aggrieved party has 30 days within which to appeal the decision of the Commission in accordance
with law.”
On 8 September 1989, petitioner filed an Omnibus Request for the Reconsideration of the decision
based on the following grounds:13
“A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER EXISTING RULES, ORDERS,
RESOLUTIONS, CIRCULARS ISSUED BY THE DEPARTMENT OF FINANCE AND THE
ENERGY REGULATORY BOARD PURSUANT TO EXECUTIVE ORDER NO. 137.
x x x
B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF EXERCISE OF
EXECUTIVE POWER BY DEPARTMENT OF FINANCE AND ENERGY REGULATORY
BOARD ARE LEGAL AND SHOULD BE RESPECTED AND APPLIED UNLESS DECLARED
NULL AND VOID BY COURTS OR REPEALED BY LEGISLATION.
x x x
C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT, AS AUTHORIZED BY
THE EXECUTIVE BRANCH OF GOVERNMENT, REMAINS VALID.”
x x x
On 6 November 1989, petitioner filed with the COA a Supplemental Omnibus Request for
Reconsideration.14
On 16 February 1990, the COA, with Chairman Domingo taking no part and with Commissioner
Fernandez dissenting in part, handed down Decision No. 1171 affirming the disallowance for
recovery of financing charges, inventory losses, and sales to MARCOPPER and ATLAS, while
allowing the recovery of product sales or those arising from export sales.15 Decision
____________
13 Rollo, 78-89.
14 Id., 89-90.
15 Rollo, 53-56. Commissioner Fernandez is of the opinion that petitioner should be allowed to
recover financing charges stating:
736
736
No. 1171 reads as follows:
20 of 120
“Anent the recovery of financing charges, you contend that Caltex Phil. Inc. has the authority to
recover financing charges from the OPSF on the basis of Department of Finance (DOF) Circular 1-
87, dated February 18, 1987, which allowed oil companies to ‘recover cost of financing working
capital associated with crude oil shipments,’ and provided a schedule of reimbursement in terms of
peso per barrel. It appears that on November 6, 1989, the DOF issued a memorandum to the President
of the Philippines explaining the nature of these financing charges and justifying their reimbursement
as follows:
‘As part of your program to promote economic recovery, . . . oil companies (were authorized) to
refinance their imports of crude oil and petroleum products from the normal trade credit of 30 days
up to 360 days from date of loading . . . Conformably . . ., the oil companies deferred their foreign
exchange remittances for purchases by refinancing their import bills from the normal 30-day payment
term up to the desired 360 days. This refinancing of importations carried additional costs (financing
charges) which then became, due to government mandate, an inherent part of the cost of the purchases
of our country’s oil requirement.’
We beg to disagree with such contention. The justification that financing charges increased oil costs
and the schedule of reimbursement rate in peso per barrel (Exhibit 1) used to support alleged increase
(sic) were not validated in our independent inquiry. As manifested in Exhibit 2, using the same
formula which the DOF used in arriving at the reimbursement rate but using comparable percent-
_____________
“I find merit in claimants (sic) reliance on and invocation of Department of Finance Circular No. 1-
87, dated February 18, 1987, in support of such claims. To my mind, the authority embodied in such
circular coupled with the justification therefor as set forth by the Secretary of Finance in his letter of
even date to the then Deputy Secretary for Energy Affairs as well as the Memorandum for the
President dated November 6, 1989 from the Acting Secretary of Finance, alluded to and subjoined
herein, cannot but deserve full faith and credit. I perceive no compelling reason for this Commission
to overturn or disturb these pronouncements which treat of a policy matter the resolution which (sic)
appropriately pertains to the executive agency concerned, the Department of Finance in this case.”
737
VOL. 208, MAY 8, 1992
737
ages instead of pesos, the ineluctable conclusion is that the oil companies are actually gaining rather
than losing from the extension of credit because such extension enables them to invest the collections
in marketable securities which have much higher rates than those they incur due to the extension. The
Data we used were obtained from CPI (CALTEX) Management and can easily be verified from our
records.
With respect to product sales or those arising from sales to international vessels or airlines, x x x, it
is believed that export sales (product sales) are entitled to claim refund from the OPSF.
As regard your claim for underrecovery arising from inventory losses, x x x It is the considered view
of this Commission that the OPSF is not liable to refund such surtax on inventory losses because
these are paid to BIR and not to OPSF, in view of which CPI (CALTEX) should seek refund from
BIR. x x x.
Finally, as regards the sales to Atlas and Marcopper, it is represented that you are entitled to claim
recovery from the OPSF pursuant to LOI 1416 issued on July 17, 1984, since these copper mining
companies did not pay CPI (CALTEX) and OPSF imposts which were added to the selling price.
Upon a circumspect evaluation, this Commission believes and so holds that the CPI (CALTEX) has
no authority to claim reimbursement for this uncollected OPSF impost because LOI 1416 dated July
17, 1984, which exempts distressed mining companies from ‘all taxes, duties, import fees and other
charges’ was issued when OPSF was not yet in existence and could not have contemplated OPSF
imposts at the time of its formulation. Moreover, it is evident that OPSF was not created to aid
distressed mining companies but rather to help the domestic oil industry by stabilizing oil prices.”
21 of 120
Unsatisfied with the decision, petitioner filed on 28 March 1990 the present petition wherein it
imputes to the COA the commission of the following errors:16
“I
RESPONDENT COMMISSION ERRED IN DISALLOWING RECOVERY OF FINANCING
CHARGES FROM THE OPSF.
II
RESPONDENT COMMISSION ERRED IN DISALLOWING
_____________
16 Rollo, 8-9.
738
738
CPI’s17 CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY ARISING FROM SALES TO
NPC.
III
RESPONDENT COMMISSION ERRED IN DENYING CPI’s CLAIMS FOR REIMBURSEMENT
ON SALES TO ATLAS AND MARCOPPER.
IV
RESPONDENT COMMISSION ERRED IN PREVENTING CPI FROM EXERCISING ITS
LEGAL RIGHT TO OFFSET ITS REMITTANCES AGAINST ITS REIMBURSEMENT VIS-A-VIS
THE OPSF.
V
RESPONDENT COMMISSION ERRED IN DISALLOWING CPI’s CLAIMS WHICH ARE STILL
PENDING RESOLUTION BY (SIC) THE OEA AND THE DOF.”
In the Resolution of 5 April 1990, this Court required the respondents to comment on the petition
within ten (10) days from notice.18
On 6 September 1990, respondents COA and Commissioners Fernandez and Cruz, assisted by the
Office of the Solicitor General, filed their Comment.19
This Court resolved to give due course to this petition on 30 May 1991 and required the parties to file
their respective Memoranda within twenty (20) days from notice.20
In a Manifestation dated 18 July 1991, the Office of the Solicitor General prays that the Comment
filed on 6 September 1990 be considered as the Memorandum for respondents.21
Upon the other hand, petitioner filed its Memorandum on 14 August 1991.
_______________
17 Caltex Philippines, Inc., petitioner herein.
18 Op. cit., 124.
19 Rollo, 143-185.
20 Id., 188.
21 Id., 191.
739
VOL. 208, MAY 8, 1992
739
1 I.
Petitioner dwells lengthily on its first assigned error contending, in support thereof, that:
1 (1)
In view of the expanded role of the OPSF pursuant to Executive Order No. 137, which added a second
purpose, to wit:
1 “2)
To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction
22 of 120
of domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be
determined by the Ministry of Finance. ‘Cost underrecovery’ shall include the following:
1 i.
price change;
2 ii.
reductions;
3 iii.
Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.”
the “other factors” mentioned therein that may be determined by the Ministry (now Department) of
Finance may include financing charges for “in essence, financing charges constitute unrecovered cost
of acquisition of crude oil incurred by the oil companies,” as explained in the 6 November 1989
Memorandum to the President of the Department of Finance; they “directly translate to cost
underrecovery in cases where the money market placement rates decline and at the same time the tax
on interest income increases. The relationship is such that the presence of underrecovery or
overrecovery is directly depen-dent on the amount and extent of financing charges.”
1 (2)
The claim for recovery of financing charges has clear legal and factual basis; it was filed on the basis
of Department of Finance Circular No. 1-87, dated 18 February 1987, which provides:
“To allow oil companies to recover the costs of financing working capital associated with crude oil
shipments, the following guidelines on the utilization of the Oil Price Stabilization Fund pertaining
to the payment of the foregoing (sic) exchange risk premium and recovery of financing charges will
be implemented:
740
740
1 1.
The OPSF foreign exchange premium shall be reduced to a flat rate of one (1) percent for the first (6)
months and 1/32 of one percent per month thereafter up to a maximum period of one year, to be
applied on crude oil’ shipments from January 1, 1987. Shipments with outstanding financing as of
January 1, 1987 shall be charged on the basis of the fee applicable to the remaining period of
financing.
2 2.
In addition, for shipments loaded after January 1987, oil companies shall be allowed to recover
financing charges directly from the OPSF per barrel of crude oil based on the following schedule:
Financing Period
Reimbursement Rate
Pesos per Barrel

Less than 180 days
None
180 days to 239 days
1.90
241 (sic) days to 299
4.02
300 days to 369 (sic) days
6.16
360 days or more
8.28
23 of 120
The above rates shall be subject to review every sixty days.”22
Pursuant to this circular, the Department of Finance, in its letter of 18 February 1987, advised the
Office of Energy Affairs as follows:
“HON. VICENTE T. PATERNO
Deputy Executive Secretary
For Energy Affairs
Office of the President
Makati, Metro Manila
Dear Sir:
This refers to the letters of the Oil Industry dated December 4, 1986 and February 5, 1987 and
subsequent discussions held by the Price Review committee on February 6, 1987.
On the basis of the representations made, the Department of Finance recognizes the necessity to
reduce the foreign exchange risk
___________
22 Rollo, 23.
741
VOL. 208, MAY 8, 1992
741
premium accruing to the Oil Price Stabilization Fund (OPSF). Such a reduction would allow the
industry to recover partly associated financing charges on crude oil imports. Accordingly, the OPSF
foreign exchange risk fee shall be reduced to a flat charge of 1% for the first six (6) months plus
1/32% of 1% per month thereafter up to a maximum period of one year, effective January 1, 1987. In
addition, since the prevailing company take would still leave unrecovered financing charges,
reimbursement may be secured from the OPSF in accordance with the provisions of the attached
Department of Finance circular.”23
Acting on this letter, the OEA issued on 4 May 1987 Order No. 87-05-096 which contains the
guidelines for the computation of the foreign exchange risk fee and the recovery of financing charges
from the OPSF, to wit:
1 “B.
FINANCE CHARGES
1 1.
Oil companies shall be allowed to recover financing charges directly from the OPSF for both crude
and product shipments loaded after January 1, 1987 based on the following rates:
Financing Period
Reimbursement Rate
(PBbl.)
Less than 180 days
None
1.90
240 days to 229 (sic) days
4.02
6.16
360 days to more
8.28
1 2.
The above rates shall be subject to review every sixty days.”24
Then on 22 November 1988, the Department of Finance issued Circular No. 4-88 imposing further
guidelines on the recoverability of financing charges, to wit:
24 of 120
“Following are the supplemental rules to Department of Finance Circular No. 1-87 dated February
18, 1987 which allowed the recovery
___________
23 Rollo, 24-25.
24 Id., 25.
742
742
of financing charges directly from the Oil Price Stabilization Fund. (OPSF):
1 1.
The claim for reimbursement shall be on a per shipment basis.
2 2.
The claim shall be filed with the Office of Energy Affairs together with the claim on peso cost
differential for a particular shipment and duly certified supporting documents provided for under
Ministry of Finance No. 11-85.
3 3.
The reimbursement shall be on the form of reimbursement certificate (Annex A) to be issued by the
Office of Energy Affairs. The said certificate may be used to offset against amounts payable to the
OPSF. The oil companies may also redeem said certificates in cash if not utilized, subject to
availability of funds.”25
The OEA disseminated this Circular to all oil companies in its Memorandum Circular No. 88-12-
017.26
The COA can neither ignore these issuances nor formulate its own interpretation of the laws in the
light of the determination of executive agencies. The determination by the Department of Finance
and the OEA that financing charges are recoverable from the OPSF is entitled to great weight and
consideration.27 The function of the COA, particularly in the matter of allowing or disallowing certain
expenditures, is limited to the promulgation of accounting and auditing rules for, among others, the
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or
uses of government funds and properties.28
1 (3)
Denial of petitioner’s claim for reimbursement would be inequitable. Additionally, COA’s claim that
petitioner is gaining, instead of losing, from the extension of credit, is belatedly raised and not
supported by expert analysis.
_____________
25 Rollo, 25-26.
26 Id., 26.
27 Citing Ramos vs. CIR, 21 SCRA 1282 [1967]; Sagun vs. PHHC, 162 SCRA 411 [1988]; Hijo
Plantation, Inc. vs. Central Bank, 164 SCRA 192 [1988]; Beautifont, Inc. vs. Court of Appeals, 157
SCRA 481 [1988].
28 Citing Section 11, Book V. Administrative Code of 1987; Guevara vs. Gimenez, 6 SCRA 807
[1962].
743
VOL. 208, MAY 8, 1992
743
In impeaching the validity of petitioner’s assertions, the respondents argue that:
1 1.
The Constitution gives the COA discretionary power to disapprove irregular or unnecessary
government expenditures and as the monetary claims of petitioner are not allowed by law, the COA
acted within its jurisdiction in denying them;
25 of 120
2 2.
P.D. No. 1956 and E.O. No. 137 do not allow reimbursement of financing charges from the OPSF;
3 3.
Under the principle of ejusdem generis, the “other factors” mentioned in the second purpose of the
OPSF pursuant to E.O. No. 137 can only include “factors which are of the same nature or analogous
to those enumerated;”
4 4.
In allowing reimbursement of financing charges from OPSF, Circular No. 1-87 of the Department of
Finance violates P.D. No. 1956 and E.O. No. 137; and
5 5.
Department of Finance rules and regulations implementing P.D. No. 1956 do not likewise allow
reimbursement of financing charges.29
We find no merit in the first assigned error.
As to the power of the COA, which must first be resolved in view of its primacy, We find the theory
of petitioner—that such does not extend to the disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or use of government funds and properties, but only to
the promulgation of accounting and auditing rules for, among others, such disallowance—to be
untenable in the light of the provisions of the 1987 Constitution and related laws.
Section 2, Subdivision D, Article IX of the 1987 Constitution expressly provides:
“SECTION 2(1). The Commission on Audit shall have the power, authority, and duty to examine,
audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of
funds and property, owned or held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities, includ-
__________
29 Rollo, 155-164.
744
744
ing government-owned and controlled corporations with original charters, and on a post-audit basis:
(a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this
Constitution; (b) autonomous state colleges and universities; (c) other gov-ernment-owned or
controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the government, which are required by law
or the granting institution to submit to such audit as a condition of subsidy or equity. However, where
the internal control system of the audited agencies is inadequate, the Commission may adopt such
measures, including temporary or special pre-audit, as are necessary and appropriate to correct the
deficiencies. It shall keep the general accounts of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers pertaining thereto.
1 (2)
The Commission shall have 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
uses of government funds and properties.”
These present powers, consistent with the declared independence of the Commission,30 are broader
and more extensive than that conferred by the 1973 Constitution. Under the latter, the Commission
was empowered to:
“Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the
revenues, and receipts of, and expenditures or uses of funds and property, owned or held in trust by,
or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities including
government-owned or controlled corporations, keep the general accounts of the Government and, for
26 of 120
such period as may be provided by law, preserve the vouchers pertaining thereto; and promulgate
accounting and auditing rules and regulations including those for the prevention of irregular,
unnecessary, excessive, or extravagant expenditures or uses of funds and property.”31
_____________
30 Section 1, Subdivision A, Article IX.
31 Paragraph 1, Section 2, Subdivision D, Article XII.
745
VOL. 208, MAY 8, 1992
745
Upon the other hand, under the 1935 Constitution, the power and authority of the COA’s precursor,
the General Auditing Office, were, unfortunately, limited; its very role was markedly passive. Section
2 of Article XI thereof provided:
“SECTION 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the
revenues and receipts from whatever source, including trust funds derived from bond issues; and
audit, in accordance with law and administrative regulations, all expenditures of funds or property
pertaining to or held in trust by the Government or the provinces or municipalities thereof. He shall
keep the general accounts of the Government and preserve the vouchers pertaining thereto. It shall be
the duty of the Auditor General to bring to the attention of the proper administrative officer
expenditures of funds or property which, in his opinion, are irregular, unnecessary, excessive, or
extravagant. He shall also perform such other functions as may be prescribed by law.”
As clearly shown above, in respect to irregular, unnecessary, excessive or extravagant expenditures
or uses of funds, the 1935 Constitution did not grant the Auditor General the power to issue rules and
regulations to prevent the same. His was merely to bring that matter to the attention of the proper
administrative officer.
The ruling on this particular point, quoted by petitioner from the cases of Guevarra vs. Gimenez32 and
Ramos vs. Aquino,33 are no longer controlling as the two (2) were decided in the light of the 1935
Constitution.
There can be no doubt, however, that the audit power of the Auditor General under the 1935
Constitution and the Commission on Audit under the 1973 Constitution authorized them to disallow
illegal expenditures of funds or uses of funds and property. Our present Constitution retains that same
power and authority, further strengthened by the definition of the COA’s general jurisdiction in
Section 26 of the Government Auditing Code of the Philippines34 and Administrative Code of
____________
32 Supra.
33 39 SCRA 641 [1971].
34 P.D. No. 1445.
746
746
1987.35 Pursuant to its power to promulgate accounting and auditing rules and regulations for the
prevention of irregular, unnecessary, excessive or extravagant expenditures or uses of funds,36 the
COA promulgated on 29 March 1977 COA Circular No. 77-55. Since the COA is responsible for the
enforcement of the rules and regulations, it goes without saying that failure to comply with them is a
ground for disapproving the payment of the proposed expenditure. As observed by one of the
Commissioners of the 1986 Constitutional Commission, Fr. Joaquin G. Bernas:37
“It should be noted, however, that whereas under Article XI, Section 2, of the 1935 Constitution the
Auditor General could not correct ‘irregular, unnecessary, excessive or extravagant’ expenditures of
public funds but could only ‘bring [the matter] to the attention of the proper administrative officer,’
under the 1987 Constitution, as also under the 1973 Constitution, the Commission on Audit can
‘promulgate accounting and auditing rules and regulations including those for the prevention and
27 of 120
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or
uses of government funds and properties.’ Hence, since the Commission on Audit must ultimately be
responsible for the enforcement of these rules and regulations, the failure to comply with these
regulations can be a ground for disapproving the payment of a proposed expenditure.”
Indeed, when the framers of the last two (2) Constitutions conferred upon the COA a more active role
and invested it with broader and more extensive powers, they did not intend merely to make the COA
a toothless tiger, but rather envisioned a dynamic, effective, efficient and independent watchdog of
the Government.
The issue of the financing charges boils down to the validity of Department of Finance Circular No.
1-87, Department of Finance Circular No. 4-88 and the implementing circulars of the
____________
35 Section 11, Chapter 4, Subtitle B, Book V.
36 The 1987 Constitution adds one (1) more category of such expenditure or use—unconscionable.
37 BERNAS, J., The Constitution of the Republic of the Philippines: A Commentary, vol. II, 1988
ed., 372.
747
VOL. 208, MAY 8, 1992
747
OEA, issued pursuant to Section 8, P.D. No. 1956, as amended by E.O. No. 137, authorizing it to
determine “other factors” which may result in cost underrecovery and a consequent reimbursement
from the OPSF.
The Solicitor General maintains that, following the doctrine of ejusdem generis, financing charges
are not included in “cost underrecovery” and, therefore, cannot be considered as one of the “other
factors.” Section 8 of P.D. No. 1956, as amended by E.O. No. 137, does not explicitly define what
“cost underrecovery” is. It merely states what it includes. Thus:
“x x x ‘Cost underrecovery’ shall include the following:
1 i.
price change;
2 ii.
reductions;
3 iii.
Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.”
These “other factors” can include only those which are of the same class or nature as the two
specifically enumerated in subparagraphs (i) and (ii). A common characteristic of both is that they
are in the nature of government mandated price reductions. Hence, any other factor which seeks to
be a part of the enumeration, or which could qualify as a cost underrecovery, must be of the same
class or nature as those specifically enumerated.
Petitioner, however, suggests that E.O. No. 137 intended to grant the Department of Finance broad
and unrestricted authority to determine or define “other factors.”
Both views are unacceptable to this Court.
The rule of ejusdem generis states that “[w]here general words follow an enumeration of persons or
things, by words of a particular and specific meaning, such general words are not to be construed in
their widest extent, but are held to be as applying only to persons or things of the same kind or class
as
748
748
28 of 120
those specifically mentioned.”38 A reading of subparagraphs (i) and (ii) easily discloses that they do
not have a common characteristic. The first relates to price reduction as directed by the Board of
Energy while the second refers to reduction in internal ad valorem taxes. Therefore, subparagraph
(iii) cannot be limited by the enumeration in these subparagraphs. What should be considered for
purposes of determining the “other factors” in subparagraph (iii) is the first sentence of paragraph (2)
of the Section which explicitly allows cost underrecovery only if such were incurred as a result of the
reduction of domestic prices of petroleum products.
Although petitioner’s financing losses, if indeed incurred, may constitute cost underrecovery in the
sense that such were incurred as a result of the inability to fully offset financing expenses from yields
in money market placements, they do not, however, fall under the foregoing provision of P.D. No.
1956, as amended, because the same did not result from the reduction of the domestic price of
petroleum products. Until paragraph (2), Section 8 of the decree, as amended, is further amended by
Congress, this Court can do nothing. The duty of this Court is not to legislate, but to apply or interpret
the law. Be that as it may, this Court wishes to emphasize that as the facts in this case have shown, it
was at the behest of the Government that petitioner refinanced its oil import payments from the normal
30-day trade credit to a maximum of 360 days. Petitioner could be correct in its assertion that owing
to the extended period for payment, the financial institution which refinanced said payments charged
a higher interest, thereby resulting in higher financing expenses for the petitioner. It would appear
then that equity considerations dictate that petitioner should somehow be allowed to recover its
financing losses, if any, which may have been sustained because it accommodated the request of the
Government. Although under Section 29 of the National Internal Revenue Code such losses may be
deducted from gross income, the effect of that loss would be merely to reduce its
___________
38 Smith Bell and Co., Ltd. vs. Register of Deeds of Davao, 96 Phil. 53 [1954], citing BLACK on
Interpretation of Law. 2nd ed., 203; see also Republic vs. Migrino, 189 SCRA 289 [1990].
749
VOL. 208, MAY 8, 1992
749
taxable income, but not to actually wipe out such losses. The Government then may consider some
positive measures to help petitioner and others similarly situated to obtain substantial relief. An
amendment, as aforestated, may then be in order.
Upon the other hand, to accept petitioner’s theory of “unrestricted authority” on the part of the
Department of Finance to determine or define “other factors” is to uphold an undue delegation of
legislative power, it clearly appearing that the subject provision does not provide any standard for the
exercise of the authority. It is a fundamental rule that delegation of legislative power may be sustained
only upon the ground that some standard for its exercise is provided and that the legislature, in making
the delegation, has prescribed the manner of the exercise of the delegated authority.39
Finally, whether petitioner gained or lost by reason of the extensive credit is rendered irrelevant by
reason of the foregoing disquisitions. It may nevertheless be stated that petitioner failed to disprove
COA’s claim that it had in fact gained in the process. Otherwise stated, petitioner failed to sufficiently
show that it incurred a loss. Such being the case, how can petitioner claim for reimbursement? It
cannot have its cake and eat it too.
1 II.
Anent the claims arising from sales to the National Power Corporation, We find for the petitioner.
The respondents themselves admit in their Comment that underrecovery arising from sales to NPC
are reimbursable because NPC was granted full exemption from the payment of taxes; to prove this,
respondents trace the laws providing for such exemption.40 The last law cited is the Fiscal Incentives
Regulatory Board’s Resolution No. 17-87 of 24 June 1987 which provides, in part, “that the tax and
duty exemption privileges of the National Power Corporation, including those pertaining to its
domestic purchases of petroleum and petroleum products . . . are restored effective March 10, 1987.”
29 of 120
In a Memorandum issued on 5 October 1987 by the Office of the President, NPC’s tax exemption
was con-
___________
39 Philippine Communications Satellite Corp. vs. Alcuaz, et al., 180 SCRA 218 [1989].
40 Rollo, 176-177.
750
750
1 firmed and approved.
Furthermore, as pointed out by respondents, the intention to exempt sales of petroleum products to
the NPC is evident in the recently passed Republic Act No. 6952 establishing the Petroleum Price
Standby Fund to support the OPSF.41 The pertinent part of Section 2, Republic Act No. 6952 provides:
“SECTION 2. Application of the Fund shall be subject to the following conditions:
1 (1)
That the Fund shall be used to reimburse the oil companies for (a) cost increases of imported crude
oil and finished petroleum products resulting from foreign exchange rate adjustments and/or increases
in world market prices of crude oil; (b) cost underrecovery incurred as a result of fuel oil sales to the
National Power Corporation (NPC); and (c) other cost underrecoveries incurred as may be finally
decided by the Supreme Court; x x x”
Hence, petitioner can recover its claim arising from sales of petroleum products to the National Power
Corporation.
1 III.
With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER, petitioner relies
on Letter of Instruction (LOI) 1416, dated 17 July 1984, which ordered the suspension of payments
of all taxes, duties, fees and other charges, whether direct or indirect, due and payable by the copper
mining companies in distress to the national government. Pursuant to this LOI, then Minister of
Energy, Hon. Geronimo Velasco, issued Memorandum Circular No. 84-11-22 advising the oil
companies that Atlas Consolidated Mining Corporation and Marcopper Mining Corporation are
among those declared to be in distress.
In denying the claims arising from sales to ATLAS and MARCOPPER, the COA, in its 18 August
1989 letter to Executive Director Wenceslao R. de la Paz, states that “it is our opinion that LOI 1416
which implements the exemption from payment of OPSF imposts as effected by OEA has no legal
basis;”42 in its
___________
41 Id., 184.
42 Rollo, 62; Annex “C,” 3.
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VOL. 208, MAY 8, 1992
751
Decision No. 1171, it ruled that “the CPI (CALTEX) (Caltex) has no authority to claim
reimbursement for this uncollected impost because LOI 1416 dated July 17, 1984, . . . was issued
when OPSF was not yet in existence and could not have contemplated OPSF imposts at the time of
its formulation.”43 It is further stated that: “Moreover, it is evident that OPSF was not created to aid
distressed mining companies but rather to help the domestic oil industry by stabilizing oil prices.”
In sustaining COA’s stand, respondents vigorously maintain that LOI 1416 could not have intended
to exempt said distressed mining companies from the payment of OPSF dues for the following
reasons:
1 “a.
LOI 1416 granting the alleged exemption was issued on July 17, 1984. P.D. 1956 creating the OPSF
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was promulgated on October 10, 1984, while E.O. 137, amending P.D. 1956, was issued on February
25, 1987.
2 b.
LOI 1416 was issued in 1984 to assist distressed copper mining companies in line with the
government’s effort to prevent the collapse of the copper industry. P.D. No. 1956, as amended, was
issued for the purpose of ‘minimizing frequent price changes brought about by exchange rate
adjustments and/or changes in world market prices of crude oil and imported petroleum product’s;
and
3 c.
LOI 1416 caused the ‘suspension of all taxes, duties, fees, imposts and other charges, whether direct
or indirect, due and payable by the copper mining companies in distress to the National and Local
Governments . . .’ On the other hand, OPSF dues are not payable by (sic) distressed copper companies
but by oil companies. It is to be noted that the copper mining companies do not pay OPSF dues.
Rather, such imposts are built in or already incorporated in the prices of oil products.”44
Lastly, respondents allege that while LOI 1416 suspends the payment of taxes by distressed mining
companies, it does not accord petitioner the same privilege with respect to its obligation to pay OPSF
dues.
We concur with the disquisitions of the respondents. Aside from such reasons, however, it is apparent
that LOI 1416 was
_____________
43 Id., 56; Annex “A.”
44 Rollo, 174-176.
752
752
never published in the Official Gazette45 as required by Article 2 of the Civil Code, which reads:
“Laws shall take effect after fifteen days following the completion of their publication in the Official
Gazette, unless it is otherwise provided. x x x”
In applying said provision, this Court ruled in the case of Tañada vs. Tuvera: 46
“WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all
unpublished presidential issuances which are of general application, and unless so published they
shall have no binding force and effect.”
Resolving the motion for reconsideration of said decision, this Court, in its Resolution promulgated
on 29 December 1986,47 ruled:
“We hold therefore that all statutes, including those of local application and private laws, shall be
published as a condition for their effectivity, which shall begin fifteen days after publication unless a
different effectivity date is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in
the exercise of legislative powers whenever the same are validly delegated by the legislature or, at
present, directly conferred by the Constitution. Administrative rules and regulations must also be
published if their purpose is to enforce or implement existing laws pursuant also to a valid delegation.
x x x
WHEREFORE, it is hereby declared that all laws as above defined shall immediately upon their
approval, or as soon thereafter as possible, be published in full in the Official Gazette, to become
effective only after fifteen days from their publication, or on another date specified by the legislature,
in accordance with Article 2 of the Civil
__________
45 As verified from the National Printing Office. A certification to this effect, dated 19 November
1991, signed by Heriberto Bacalla, Chief, Official Gazette Publication, of the National Printing
Office, is attached to the rollo.
46 136 SCRA 27 [1985].
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47 146 SCRA 446 [1986].
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VOL. 208, MAY 8, 1992
753
Code.”
LOI 1416 has, therefore, no binding force or effect as it was never published in the Official Gazette
after its issuance or at any time after the decision in the abovementioned cases.
Article 2 of the Civil Code was, however, later amended by Executive Order No. 200, issued on 18
June 1987. As amended, the said provision now reads:
“Laws shall take effect after fifteen days following the completion of their publication either in the
Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise
provided.”
We are not aware of the publication of LOI 1416 in any newspaper of general circulation pursuant to
Executive Order No. 200.
Furthermore, even granting arguendo that LOI 1416 has force and effect, petitioner’s claim must still
fail. Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor
of the taxing authority.48 The burden of proof rests upon the party claiming exemption to prove that it
is in fact covered by the exemption so claimed. The party claiming exemption must therefore be
expressly mentioned in the exempting law or at least be within its purview by clear legislative intent.
In the case at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to ATLAS
and MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though LOI 1416 may
suspend the payment of taxes by copper mining companies, it does not give petitioner the same
privilege with respect to the payment of OPSF dues.
1 IV.
As to COA’s disallowance of the amount of P130,420,325.00, petitioner maintains that the
Department of Finance has still to issue a final and definitive ruling thereon; accordingly, it was
premature for COA to disallow it. By doing
_____________
48 CIR vs. Mitsubishi Metal Corp., 181 SCRA 214 [1990]; CIR vs. P.J. Kiener Co., Ltd., 65 SCRA
142 [1975].
754
754
1 so, the latter acted beyond its jurisdiction.49 Respondents, on the other hand, contend
that said amount was already disallowed by the OEA for failure to substantiate it.50 In fact, when OEA
submitted the claims of petitioner for pre-audit, the above-mentioned amount was already excluded.
An examination of the records of this case shows that petitioner failed to prove or substantiate its
contention that the amount of P130,420,235.00 is still pending before the OEA and the DOF.
Additionally, We find no reason to doubt the submission of respondents that said amount has already
been passed upon by the OEA. Hence, the ruling of respondent COA disapproving said claim must
be upheld.
1 V.
The last issue to be resolved in this case is whether or not the amounts due to the OPSF from petitioner
may be offset against petitioner’s outstanding claims from said fund. Petitioner contends that it should
be allowed to offset its claims from the OPSF against its contributions to the fund as this has been
allowed in the past, particularly in the years 1987 and 1988.51
Furthermore, petitioner cites, as bases for offsetting, the provisions of the New Civil Code on
compensation and Section 21, Book V, Title I-B of the Revised Administrative Code which provides
for “Retention of Money for Satisfaction of Indebtedness to Government.”52 Petitioner also mentions
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communications from the Board of Energy and the Department of Finance that supposedly authorize
compensation.
Respondents, on the other hand, citing Francia vs. IAC and Fernandez, 53 contend that there can be
no offsetting of taxes against the claims that a taxpayer may have against the government, as taxes
do not arise from contracts or depend upon the will of the taxpayer, but are imposed by law.
Respondents also allege that petitioner’s reliance on Section 21, Book V, Title I-B of the Revised
Administrative Code is misplaced because
______________
49 Rollo, 49.
50 Id., 173.
51 Rollo, 42-47.
52 Id., 48-49.
53 162 SCRA 753 [1988].
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VOL. 208, MAY 8, 1992
755
“while this provision empowers the COA to withhold payment of a government indebtedness to a
person who is also indebted to the government and apply the government indebtedness to the
satisfaction of the obligation of the person to the government, like authority or right to make
compensation is not given to the private person.”54 The reason for this, as stated in Commissioner of
Internal Revenue vs. Algue, Inc.,55 is that money due the government, either in the form of taxes or
other dues, is its lifeblood and should be collected without hindrance. Thus, instead of giving
petitioner a reason for compensation or set-off, the Revised Administrative Code makes it the
respondents’ duty to collect petitioner’s indebtedness to the OPSF.
Refuting respondents’ contention, petitioner claims that the amounts due from it do not arise as a
result of taxation because “P.D. 1956, as amended, did not create a source of taxation; it instead
established a special fund . . .,”56 and that the OPSF contributions do not go to the general fund of the
state and are not used for public purpose, i.e., not for the support of the government, the administration
of law, or the payment of public expenses. This alleged lack of a public purpose behind OPSF
exactions distinguishes such from a tax. Hence, the ruling in the Francia case is inapplicable.
Lastly, petitioner cites R.A. No. 6952 creating the Petroleum Price Standby Fund to support the
OPSF; the said law provides in part that:
“SECTION 2. Application of the fund shall be subject to the following conditions:
xxx
(3) That no amount of the Petroleum Price Standby Fund shall be used to pay any oil company which
has an outstanding obligation to the Government without said obligation being offset first, subject to
the requirements of compensation or offset under the Civil Code.”
We find no merit in petitioner’s contention that the OPSF
_______________
54 Op. cit., 171.
55 158 SCRA 9 [1988].
56 Petitioner’s Memorandum, 8.
756
756
contributions are not for a public purpose because they go to a special fund of the government.
Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the
government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation
and stabilization of a threatened industry which is affected with public interest as to be within the
police power of the state.57 There can be no doubt that the oil industry is greatly imbued with public
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interest as it vitally affects the general welfare. Any unregulated increase in oil prices could hurt the
lives of a majority of the people and cause economic crisis of untold proportions. It would have a
chain reaction in terms of, among others, demands for wage increases and upward spiralling of the
cost of basic commodities. The stabilization then of oil prices is one of prime concern which the state,
via its police power, may properly address.
Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that the source of OPSF is
taxation. No amount of semantical juggleries could dim this fact.
It is settled that a taxpayer may not offset taxes due from the claims that he may have against the
government.58 Taxes cannot be the subject of compensation because the government and taxpayer are
not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.59
We may even further state that technically, in respect to the taxes for the OPSF, the oil companies
merely act as agents for the Government in the latter’s collection since the taxes are, in reality, passed
unto the end-users—the consuming public. In that capacity, the petitioner, as one of such companies,
has the primary obligation to account for and remit the taxes collected to the administrator of the
OPSF. This duty stems from the fiduciary relationship between the two; petitioner certainly
___________
57 Lutz vs. Araneta, 98 Phil. 148 [1955]; Gaston vs. Republic Planters Bank, 158 SCRA 626 [1988].
58 Francia vs. IAC, supra.; Republic vs. Mambulao Lumber Co., 4 SCRA 622 [1962].
59 Cordero vs. Gonda, 18 SCRA 331 [1966].
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VOL. 208, MAY 8, 1992
757
cannot be considered merely as a debtor. In respect, therefore, to its collection for the OPSF vis-a-vis
its claims for reimbursement, no compensation is likewise legally feasible. Firstly, the Government
and the petitioner cannot be said to be mutually debtors and creditors of each other. Secondly, there
is no proof that petitioner’s claim is already due and liquidated. Under Article 1279 of the Civil Code,
in order that compensation may be proper, it is necessary that:
1 (1)
each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;
2 (2)
both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
3 (3)
the two (2) debts be due;
4 (4)
they be liquidated and demandable;
5 (5)
over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
That compensation had been the practice in the past can set no valid precedent. Such a practice has
no legal basis. Lastly, R.A. No. 6952 does not authorize oil companies to offset their claims against
their OPSF contributions. Instead, it prohibits the government from paying any amount from the
Petroleum Price Standby Fund to oil companies which have outstanding obligations with the
government, without said obligation being offset first subject to the rules on compensation in the Civil
Code.
WHEREFORE, in view of the foregoing, judgment is hereby rendered AFFIRMING the challenged
decision of the Commission on Audit, except that portion thereof disallowing petitioner’s claim for
reimbursement of underrecovery arising from sales to the National Power Corporation, which is
hereby allowed.
34 of 120
With costs against petitioner.
SO ORDERED.
Narvasa (C.J.), Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino,
Medialdea, Regalado,
758
758
People vs. Gelotin
Romero and Nocon, JJ., concur.
Cruz, J., No part. Related to counsel of petitioner.
Bellosillo, J., No part. Did not take part in deliberations.
Decision affirmed.
Note.—The grant of tax privileges to any government-owned or controlled corporation and all other
units of government has been expressly repealed by Presidential Decree No. 1177 (National Power
Corporation vs. Presiding Judge, RTC, Br. XXV, 190 SCRA 477.)
——o0o——
356
Development Bank of the Philippines vs. Commission on Audit
G.R. No. 88435. January 16, 2002.*
DEVELOPMENT BANK OF THE PHILIPPINES, JESUS P. ESTANISLAO, DOLORES A.
SANTIAGO, LYNN H. CATUNCAN, NORMA O. TERREL, MA. ANTONIA G. REBUENO,
petitioners, vs. COMMISSION ON AUDIT, respondent.
Commission on Audit (COA); Mere fact that private auditors may audit government agencies does
not divest the COA of its power to examine and audit the same government agencies.—The mere fact
that private auditors may audit government agencies does not divest the COA of its power to examine
and audit the same government agencies. The COA is neither by-passed nor ignored since even with
a private audit the COA will still conduct its usual examination and audit, and its findings and
conclusions will still bind government agencies and their officials. A concurrent private audit poses
no danger whatsoever of public funds or assets escaping the usual scrutiny of a COA audit.
Same; Same; The Central Bank is devoid of authority to allow or disallow expenditures of government
banks since this function belongs exclusively to the COA.—Despite the Central Bank’s concurrent
jurisdiction over government banks, the COA’s audit still prevails over that of the Central Bank since
the COA is the constitutionally mandated auditor of government banks. And in matters falling under
the second paragraph of Section 2, Article IX-D of the Constitution, the COA’s jurisdiction is
exclusive. Thus, the Central Bank is devoid of authority to allow or disallow expenditures of
government banks since this function belongs exclusively to the COA.
Same; Same; There is nothing in Section 26 that states, expressly or impliedly, that the COA’s power
to examine and audit government banks is exclusive, thereby preventing private audit of government
agencies concurrently with the COA audit.—Section 26 defines the extent and scope of the powers
of the COA. Considering the comprehensive definition in Section 26, the COA’s jurisdiction covers
all government agencies, offices, bureaus and units, including government-owned or controlled
corporations, and even non-government entities enjoying subsidy from the government. However,
there is nothing in Section 26 that states, expressly or impliedly, that the COA’s power to examine
and audit government banks is exclusive, thereby preventing private audit of government agencies
concurrently with the COA audit.
_______________
* EN BANC.
357
VOL. 373, JANUARY 16, 2002
35 of 120
357
Same; Same; Under existing laws, the COA does not have the sole and exclusive power to examine
and audit government banks; Central Bank has concurrent jurisdiction.—Clearly, under existing
laws, the COA does not have the sole and exclusive power to examine and audit government banks.
The Central Bank has concurrent jurisdiction to examine and audit, or cause the examination and
audit, of government banks.
PETITION for review on certiorari of a decision of the Commission on Audit.
Office of the Legal Counsel for DBP.
Ricardo G. Nepomuceno, Jr. for respondent.
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the letter-decision of the Chairman of the Commission
on Audit2 (“COA” for brevity) and the letter-decision of the COA en banc,3 prohibiting the
Development Bank of the Philippines (“DBP” for brevity) from hiring a private external auditor. This
petition raises a question of first impression, whether or not the constitutional power of the COA to
examine and audit the DBP is exclusive and precludes a concurrent audit of the DBP by a private
external auditor.
The Antecedent Facts
In 1986, the Philippine government, under the administration of then President Corazon C. Aquino,
obtained from the World Bank an Economic Recovery Loan (“ERL” for brevity) in the amount of
US$310 million. The ERL was intended to support the recovery of
_______________
1 Under Rule 45 of the Rules of Court.
2 Rollo, pp. 26-30, Petition, Annex “A,” Letter-Decision dated August 29, 1988 signed by COA
Chairman Eufemio Domingo.
3 Ibid., pp. 65-69, Petition, Annex “B,” Letter-Decision of the COA en banc dated May 20, 1989
signed by COA Chairman Eufemio Domingo, Commissioner Bartolome Fernandez, Jr. and
Commissioner Alberto Cruz.
358
358
the Philippine economy, at that time suffering severely from the financial crisis that hit the country
during the latter part of the Marcos regime.
As a condition for granting the loan, the World Bank required the Philippine government to
rehabilitate the DBP which was then saddled with huge non-performing loans. Accordingly, the
government committed to rehabilitate the DBP to make it a viable and self-sustaining financial
institution in recognition of its developmental role in the economy. The DBP was expected to
continue “providing principally medium and long-term financing to projects with risks higher than
the private sector may be willing to accept under reasonable terms.”4 The government’s commitment
was embodied in the Policy Statement for the Development Bank of the Philippines which stated in
part:
“4. Furthermore, like all financial institutions under Central Bank supervision, DBP will now be
required to have a private external audit, and its Board of Directors will now be opened to adequate
private sector representation. It is hoped that with these commitments, DBP can avoid the difficulties
of the past and can function as a competitive and viable financial institution within the Philippine
financial system.”5 (Emphasis supplied)
On November 28, 1986, the Monetary Board adopted Resolution No. 1079 amending the Central
Bank’s Manual of Regulations for Banks and other Financial Intermediaries, in line with the
government’s commitment to the World Bank to require a private external auditor for DBP. Thus, on
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December 5, 1986, the Central Bank Governor issued Central Bank Circular No. 1124, providing
that:
“SECTION 1. Subsection 1165.5 (Book I) is amended to read as follows:
1165.5 Financial Audit.—Each Bank, whether Government-owned or controlled or private, shall
cause an annual financial audit to be conducted by an external independent auditor not later than
_______________
4 Ibid., p. 70, Petition, Annex “C,” Policy Statement for the Development Bank of the Philippines.
5 Supra, see note 4.
359
VOL. 373, JANUARY 16, 2002
359
thirty (30) days after the close of the calendar year or the fiscal year adopted by the bank. x x x.
x x x The Audit of a Government-owned or controlled bank by an external independent auditor shall
be in addition to and without prejudice to that conducted by the Commission on Audit in the discharge
of its mandate under existing law. x x x.
xxx
“SECTION 3. The requirement for an annual financial audit by an external independent auditor shall
extend to specialized and unique government banks such as the Land Bank of the Philippines and the
Development Bank of the Philippines.”6
On December 12, 1986, pursuant to Central Bank Circular No. 1124 and the government’s
commitment to the World Bank, DBP Chairman Jesus Estanislao wrote the COA seeking approval
of the DBP’s engagement of a private external auditor in addition to the COA.7
On January 2, 1987, to formalize its request for the ERL, the Philippine government sent the World
Bank a letter assuring the World Bank that pursuant to Central Bank Circular No. 1124, “all Banks,
including government banks, shall be fully audited by external independent auditors x x x in addition
to that provided by the Commission on Audit.” The letter was signed by the Central Bank Governor
and the Ministers of Finance, Trade and Industry, and Economic Planning of the Philippine
government.8
On January 8, 1987, the Philippine government and World Bank negotiating panels reached final
agreement on the private audit of the DBP, as follows:
“13. With respect to the draft Policy Statement, it was agreed that Sections 4, 7 and 11 would be
amended as follows:
_______________
6 Ibid., p. 74, Petition, Annex “E,” Central Bank Circular No. 1124 dated December 5, 1986.
7 Ibid., p. 93, Petition, Annex “H,” Letter of DBP Chairman dated December 12, 1986.
8 Ibid., p. 76, Petition, Annex “F,” Letter of Development Policy dated January 2, 1987.
360
360
x x x (iii) Section 11 should in line with the letter of Development Policy, confirm that the external
independent audits would commence with a balance sheet audit as of December 31, 1986 and a full
financial audit, including income statements, starting with the period July 1 to December 31, 1986.
A copy of COA’s letter (referred to in par. 1, a draft of which is attached as Annex VIII) regarding
DBP’s appointment of a private external auditor will be sent to the Bank before the distribution of
the loan documents to the Bank’s Board, along with a copy of the scope of audit as approved by COA
and satisfactory to the Bank.
With regard to the scope of the audit to be undertaken by the private external auditors, the terms of
reference which will be issued to the selected auditors should be generally consistent with the attached
model terms of reference for financial audits (Annex IX). These general terms of reference were
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discussed during negotiations and form a part of the World Bank’s guidelines for financial
information on financial institutions.”9
On January 20, 1987, then COA Chairman Teofisto Guingona, Jr. replied to the December 12, 1986
letter of the DBP Chairman. The COA Chairman’s reply stated that:
“x x x the Commission on Audit (COA) will interpose no objection to your engagement of a private
external auditor as required by the Economic Recovery Program Loan Agreements of 1987 provided
that the terms for said audit are first reviewed and approved by the Commission.”10
The following day, the COA Chairman also informed the Consultant of the Central Bank that the
COA interposed no objection to the proposed scope of audit services to be undertaken by the private
external auditors to be engaged by the DBP.11
On February 18, 1987, the Board of Directors of the DBP approved the hiring of Joaquin Cunanan &
Co. as the DBP’s private external auditor for calendar year 1986 as required by Central
_______________
9 Ibid., p. 72, Petition Annex “D,” Agreed Minutes of Negotiations on the Philippine Economic
Recovery Program dated January 8, 1987.
10 Ibid., p. 94, Petition, Annex “I,” Letter of COA Chairman Teofisto Guingona to DBP Chairman
Jesus Estanislao dated January 20, 1987.
11 Ibid., p. 95, Petition, Annex “J,” Letter of COA Chairman Teofisto Guingona to Mr. Armand
Fabella dated January 21, 1987.
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VOL. 373, JANUARY 16, 2002
361
Bank Circular No. 1124 and the World Bank. The DBP Board of Directors placed a ceiling on the
amount of reimbursable out-of-pocket expenses that could be charged by the private auditor.12
On February 23, 1987, the World Bank President, in his Report to the Bank’s Executive Directors on
the Philippine government’s application for the ERL, certified that the Philippine government was
complying with the requirement of a private external auditor. The World Bank President’s
certification stated that:
“74. Accounting and Auditing.—All banks both government and private are now subject to
accounting and auditing standards as established by the Central Bank. To ensure full public
accountability, the Monetary Board now requires that all government banks be subject to annual
audits by independent private auditing firms, in addition to those normally undertaken by the
Government’s Commission on Audit. DBP and PNB have already selected private auditors, and
audited accounts for 1986 and 1987 will be a requirement for the releases of the second and third
tranches, respectively, of the ERL.”13
However, a change in the leadership of the COA suddenly reversed the course of events. On April
27, 1987, the new COA Chairman, Eufemio Domingo, wrote the Central Bank Governor protesting
the Central Bank’s issuance of Circular No. 1124 which allegedly encroached upon the COA’s
constitutional and statutory power to audit government agencies. The COA Chairman’s letter
informed the Governor that:
“This Commission hereby registers its strong objection to that portion of the CBP Circular No. 1124
which requires government banks to engage private auditors in addition to that conducted by the
Commission on Audit, and urges the immediate amendment thereof. It is the position of this
Commission that the said requirement: (a) infringes on Article IX-D of the Philippine Constitution;
(b) violates Section 26 and 32 of the Government Auditing Code of the Philippines; (c) exposes the
financial programs and strategies of the Philippine Government to high security risks; (d)
_______________
12 Ibid., p. 96, Petition, Annex “K,” DBP Resolution No. 0185 dated February 18, 1987.
13 Ibid., p. 91, Petition, Annex “G,” Report No. P-4466 dated February 23, 1987.
362
362
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allows the unnecessary and unconscionable expenditure of government funds; and (e) encourages
unethical encroachment among professionals.”14
On May 13, 1987, after learning that the DBP had signed a contract with a private auditing firm for
calendar year 1986, the new COA Chairman wrote the DBP Chairman that the COA resident auditors
were under instructions to disallow any payment to the private auditor whose services were
unconstitutional, illegal and unnecessary.15
On July 1, 1987, the DBP Chairman sent to the COA Chairman a copy of the DBP’s contract with
Joaquin Cunanan & Co., signed four months earlier on March 5, 1987. The DBP Chairman’s covering
handwritten note sought the COA’s concurrence to the contract.16
During the pendency of the DBP Chairman’s note-request for concurrence, the DBP paid the billings
of the private auditor in the total amount of P487,321.1417 despite the objection of the COA. On
October 30, 1987, the COA Chairman issued a Memorandum disallowing the payments, and holding
the following persons personally liable for such payment:
“SVP Fajardo who approved the voucher for payment; VP Santiago who certified that the expenditure
was authorized, necessary and lawful; SM Terrel, Catuncan and Rebueno who signed the checks; and
the head of office who signed the contract and who is immediately and primarily responsible for the
funds of the Bank.”18
On January 19, 1988, the DBP Chairman wrote the COA Chairman seeking reconsideration of the
COA Chairman’s Memo-
_______________
14 Rollo, pp. 190-224, Respondent’s Comment dated January 25, 1990, Annex “7,” p. 5.
15 Ibid., p. 257, Annex “8”.
16 Ibid., p. 97, Petition, Annex “L,” Handwritten note of the DBP Chairman dated July 1, 1987.
17 Ibid., p. 259, Respondent’s Comment dated January 25, 1990, Annex “9”.
18 Ibid., p. 98, Petition, Annex “M,” Memorandum of the COA Chairman dated October 30, 1987.
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VOL. 373, JANUARY 16, 2002
363
randum.19 However, the DBP received no response until August 29, 1988 when the COA Chairman
issued a letter-decision denying petitioner’s July 1, 1987 note-request for concurrence. The letter-
decision, one of the two COA decisions assailed in this petition, declared in part as follows:
“(a) In the letter to the Central Bank Governor x x x, this Commission clearly stated its non-negotiable
stand on the issue in the following terms:
‘x x x the very essence of the Commission on Audit as an independent constitutional commission in
the total scheme of Government, is its singular function to “[E]xamine, audit, and settle x x x all
accounts pertaining to x x x the Government, or any of its subdivisions, x x x including government-
owned or controlled corporations.” To allow private firms to interfere in this governmental audit
domain would be to derogate the Constitutional supremacy of State audit as the Government’s
guardian of the people’s treasury, and as the prime advocate of economy in the use of government
resources.’ x x x
“(c) In the letter to the Secretary of Finance dated January 28, 1988 x x x, this Commission maintains:
1 1.
‘COA is in no way prepared to permit ‘use of private auditors’ except insofar as the law allows, which
is ‘to deputize and retain in the name of the Commission such certified public accountants and other
licensed professionals not in the public service as it may deem necessary to assist government auditors
in undertaking specialized audit engagements’ (Sec. 31, PD No 1445). Outside of this, the
Commission does not consider the matter of hiring private auditing firms a negotiable matter, and
this we want to emphasize to avoid future embarrassment to the Government. The Commission on
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Audit is a constitutionally-created independent and separate body, and neither Congress nor the
Executive Department has the power to detract from its mandated duties, functions, and powers.
2 2.
‘Since the proceeds of the proposed loan accrue to the Republic of the Philippines as borrower, it
follows that its accounting and audit must comply with the laws of this country. To specify in the
Loan Agreement that the loan account, once released to the Gov
_______________
19 Ibid., p. 99, Petition, Annex “N,” Letter of the DBP Chairman dated January 19, 1988.
364
364
1 ernment, shall be ‘audited by independent auditors acceptable to the Bank’ is not only
to entirely by-pass this Commission but to ignore as well the Constitution and the laws of this country
which vests in this Commission the ‘power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property x
x x pertaining to the Government.’ (Sec. 2, Art. IX-D, Phil. Const.).
‘Such brazen disregard of the fundamental law of this country cannot be countenanced by this
Commission.’
“In view of all the foregoing, you are hereby advised:
1 “1.
To desist from proceeding with the audit of Joaquin Cunanan & Co. of the Bank’s financial statements
for the year ending December 31, 1987.
2 “2.
To refrain from making any payments out of the funds of the Development Bank of the Philippines,
in the event that such audit services have already been rendered, attention being invited to the
following provisions of the Government Auditing Code of the Philippines:
‘Sec. 108. 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.’
“3. To restitute, within thirty (30) days from receipt hereof, the total amount of P513,549.24 under
CV Nos. 9136, 5014, 6201 and 4082 for professional services rendered in the audit of the 1986
financial operations of the Bank. Pursuant to the aforequoted provisions of law, such unlawful
expenditure is the personal liability of the official directly responsible therefore.
“Please be guided accordingly.”20
On September 26, 1988, the DBP Chairman appealed the letter-decision to the COA en banc. On
May 20, 1989, the COA en banc, in a letter-decision, denied the DBP’s appeal. This letter-decision,
now also assailed by the DBP, held that:
“Upon a circumspect evaluation of the grounds upon which your instant request is predicated, this
Commission finds the same to be devoid of
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365
merit. As hereunder demonstrated, the justifications offered do not inspire rational belief in the mind
of this Commission.
“First, it bears stress that CB Circular No. 1124, series of 1986, which has earlier been shown to be
constitutionally and legally infirm, cannot by any means possess any binding and conclusive effect
upon this Commission and, hence, may not be properly invoked in support of the instant appeal.
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“Secondly, it was not the International Bank for Reconstruction and Development which required the
audit of government banks by private auditing firm, but the Central Bank itself.
“Thirdly, insofar as this Commission is concerned, PD 2029 is an anachronism of sorts if viewed in
the light of the present Constitution recognizing this Commission as the supreme and exclusive audit
institution of the government. This is necessarily implicit from the bare language of Section 2(1),
Article IX-D thereof which, despite the absence of the qualifying adjective ‘exclusive’ that anyway
would be a surplusage, ought to be reasonably construed as vesting in this Commission the ‘power,
authority, and duty’ to audit all government accounts to the exclusion of any other person or entity,
whether in the public or the private sector. Expressio unius est exclusio alterius. A contrary
interpretation, such as that being pressed upon this Commission, would reduce this constitutional
ordinance to an absurdity (reductio ad absurdum) as it thereby would give rise to the rather confusing
spectacle, as it were, of a government agency or corporation being audited not only by this
Commission but also and in addition thereto by one or two or several private accounting firms—cer-
tainly a situation never intended by the framers of the Constitution.
“Lastly, while this Commission has not lost sight of the letter of then COA Chairman Guingona, Jr.
to the DBP Chairman, dated January 20, 1987, it has opted to be guided and influenced by the more
persuasive and controlling COA Circular No. 860254 dated March 24, 1986, which in categorical and
precise terms ordained that:
‘Accordingly, by way of reassertion and reaffirmation of its primary audit jurisdiction, as herein
above defined, the Commission on Audit hereby issues the following directives:
1 1.
Any ongoing audit of a government-owned and/or controlled corporation or any of its subsidiaries or
corporate offsprings being conducted by a private auditor or accounting firm shall cease and terminate
on April 15, 1986. Henceforth, from and after said date, the audit of said corporate entity shall be
undertaken solely and exclusively by the Commission on Audit, x x x.’
366
366
“Premises considered, it is regretted that your instant request for reconsideration has to be, as it is
hereby, denied.”21
Hence, on June 14, 1989 the DBP filed this petition for review with prayer for a temporary restraining
order, assailing the two COA letter-decisions for being contrary to the Constitution and existing laws.
On June 15, 1989 this Court issued a temporary restraining order directing the COA to cease and
desist from enforcing its challenged letter-decisions. The Office of the Solicitor General, in a
Manifestation dated October 18, 1989, declined to appear on behalf of the COA on the ground that
the Solicitor General was “taking a position adverse to that of the COA.” Consequently, a private
counsel on pro bono basis represented the COA.
The Issues
The DBP’s petition raises the following issues:
1 1.
Does the Constitution vest in the COA the sole and exclusive power to examine and audit government
banks so as to prohibit concurrent audit by private external auditors under any circumstance?
2 2.
Is there an existing statute that prohibits government banks from hiring private auditors in addition
to the COA? If there is none, is there an existing statute that authorizes government banks to hire
private auditors in addition to the COA?
3 3.
If there is no legal impediment to the hiring by government banks of a private auditor, was the hiring
by the DBF of a private auditor in the case at bar necessary, and were the fees paid by DBP to the
private auditor reasonable, under the circumstances?
The Court’s Ruling
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The DBP’s petition is meritorious.
First Issue: Power of COA to Audit under the Constitution
The resolution of the primordial issue of whether or not the COA has the sole and exclusive power to
examine and audit government
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367
banks involves an interpretation of Section 2, Article IX-D of the 1987 Constitution. This Section
provides as follows:
“Sec. 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds
and property, owned and held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned or controlled corporations with original
charters, x x x.
“(2) The Commission shall have 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 therefore,
and promulgate accounting and auditing rules and regulations, including those for the prevention and
uses of government funds and properties.” (Emphasis supplied)
The COA vigorously asserts that under the first paragraph of Section 2, the COA enjoys the sole and
exclusive power to examine and audit all government agencies, including the DBP. The COA
contends this is similar to its sole and exclusive authority, under the second paragraph of the same
Section, to define the scope of its audit, promulgate auditing rules and regulations, including rules on
the disallowance of unnecessary expenditures of government agencies. The bare language of Section
2, however, shows that the COA’s power under the first paragraph is not declared exclusive, while
its authority under the second paragraph is expressly declared “exclusive.” There is a significant
reason for this marked difference in language.
During the deliberations of the Constitutional Commission, Commissioner Serafin Guingona
proposed the addition of the word “exclusive” in the first paragraph of Section 2, thereby granting
the COA the sole and exclusive power to examine and audit all government agencies. However, the
Constitutional Commission rejected the addition of the word “exclusive” in the first paragraph of
Section 2 and Guingona was forced to withdraw his proposal. Commissioner Christian Monsod
explained the rejection in this manner:
368
368
“MR. MONSOD. Earlier Commissioner Guingona, in withdrawing his amendment to add
‘EXCLUSIVE’ made a statement about the preponderant right of COA.
“For the record, we would like to clarify the reason for not including the word. First, we do not want
an Article that would constitute a disincentive or an obstacle to private investment. There are
government institutions with private investments in them, and some of these investors—Filipinos, as
well as in some cases, foreigners—require the presence of private auditing firms, not exclusively, but
concurrently. So this does not take away the power of the Commission on Audit. Second, there are
certain instances where private auditing may be required, like the listing in the stock exchange. In
other words, we do not want this provision to be an unnecessary obstacle to privatization of these
companies or attraction of investments.”22 (Emphasis supplied)
Shortly thereafter, Commissioner Guingona attempted to resurrect his amendment by proposing the
following provision:
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“Private auditing firms may not examine or audit accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property owned or held in trust by or pertaining to the
Government or any of its subdivisions, agencies or instrumentalities.”23
Guingona argued that a private audit in addition to the COA audit would be a useless duplication and
an unnecessary expense on the part of government.
The Constitutional Commission also rejected this proposed provision, after Commissioner Monsod
made the following explanation:
“MR. MONSOD. x x x But it is also a fact that even government agencies, instrumentalities and
subdivisions sometimes borrow money from abroad. And if we are at all going to preclude the
possibility of any concurrent auditing, if that is required, and insist that it is only exclusively the
government which can audit, we may be unnecessarily tying their hands without really accomplishing
much more than what we want. As long as the COA is there, and the COA’s power cannot be
eliminated by
_______________
22 Record of the Constitutional Commission, Vol. 5, p. 607.
23 Ibid., p. 614.
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369
law, by decree or anything of that sort, then the government funds are protected.
As far as the question of fees is concerned, this is always negotiable. Besides, if one talks about
auditing fees, these are governed by certain regulations within the auditing profession, beyond which
auditing firms cannot go. Furthermore, the government can always refuse to pay unconscionable fees.
So, that matter really is not that relevant. But I think what we want to insist on is that there should be
some flexibility so that a procedural requirement does not impede a substantive transaction as long as
COA is there.”24 (Emphasis supplied)
The rejection of Guingona’s second proposal put an end to all efforts to grant the COA the sole and
exclusive power to examine and audit government agencies.
In sharp contrast, the Constitutional Commission placed the word “exclusive” to qualify the authority
of the COA under the second paragraph of the same Section 2. The word “exclusive” did not appear
in the counterpart provisions of Section 2 in the 1935 and 1973 Constitutions.25 There is no dispute
that the COA’s authority under the second paragraph of Section 2 is exclusive as the language of the
Constitution admits of no other meaning. Thus, the COA has the exclusive authority to decide on
disallowances of unnecessary government expenditures. Other government agencies
_______________
24 Ibid.
25 Section 2, Article XI of the 1935 Constitution provided as follows:
“Section 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the receipts
and revenues from whatever source, including trust funds derived from bond issues, and audit, in
accordance with law and administrative regulations, all expenditures of funds or property pertaining
to or held in trust by the Government or the provinces or municipalities thereof, x x x.” Section 2,
Article XII-D of the 1973 Constitution provided as follows: “Sec. 2. The Commission shall have the
following powers and functions: (1) Examine, audit, and settle, in accordance with law and
regulations, all accounts pertaining to the revenues, and receipts of, and expenditures or uses of funds
and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities including government-owned or controlled corporations; x x x.”
370
370
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and their officials, as well as private auditors engaged by them, cannot in any way intrude into this
exclusive function of the COA.
The qualifying word “exclusive” in the second paragraph of Section 2 cannot be applied to the first
paragraph which is another sub-section of Section 2. A qualifying word is intended to refer only to
the phrase to which it is immediately associated, and not to a phrase distantly located in another
paragraph or sub-section.26 Thus, the first paragraph of Section 2 must be read the way it appears,
without the word “exclusive,” signifying that non-COA auditors can also examine and audit
government agencies. Besides, the framers of the Constitution intentionally omitted the word
“exclusive” in the first paragraph of Section 2 precisely to allow concurrent audit by private external
auditors.
The clear and unmistakable conclusion from a reading of the entire Section 2 is that the COA’s power
to examine and audit is non-exclusive. On the other hand, the COA’s authority to define the scope of
its audit, promulgate auditing rules and regulations, and disallow unnecessary expenditures is
exclusive.
Moreover, as the constitutionally mandated auditor of all government agencies, the COA’s findings
and conclusions necessarily prevail over those of private auditors, at least insofar as government
agencies and officials are concerned. The superiority or preponderance of the COA audit over private
audit can be gleaned from the records of the Constitutional Commission, as follows:
“MR. GUINGONA. Madam President, after consultation with the honorable members of the
Committee, I have amended my proposed amendment by deleting the word EXCLUSIVE because I
was made to understand that the Commission on Audit will still have the preponderant power and
authority to examine, audit and settle.”27 (Emphasis supplied)
The findings and conclusions of the private auditor may guide private investors or creditors who
require such private audit. Government agencies and officials, however, remain bound by the findings
and conclusions of the COA, whether the matter falls
_______________
26 Felipe vs. De la Cruz, 99 Phil. 940 (1956); Tirona vs. Cudiamat, 14 SCRA 264 (1965).
27 Record of the Constitutional Commission, Vol. 5, p. 605.
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371
under the first or second paragraph of Section 2, unless of course such findings and conclusions are
modified or reversed by the courts.
The power of the COA to examine and audit government agencies, while non-exclusive, cannot be
taken away from the COA. Section 3, Article IX-D of the Constitution mandates that:
“Sec. 3. No law shall be passed exempting any entity of the Government or its subsidiary in any guise
whatsoever, or any investment of public funds, from the jurisdiction of the Commission on Audit.”
The mere fact that private auditors may audit government agencies does not divest the COA of its
power to examine and audit the same government agencies. The COA is neither by-passed nor
ignored since even with a private audit the COA will still conduct its usual examination and audit,
and its findings and conclusions will still bind government agencies and their officials. A concurrent
private audit poses no danger whatsoever of public funds or assets escaping the usual scrutiny of a
COA audit.
Manifestly, the express language of the Constitution, and the clear intent of its framers, point to only
one indubitable conclusion—the COA does not have the exclusive power to examine and audit
government agencies. The framers of the Constitution were fully aware of the need to allow
independent private audit of certain government agencies in addition to the COA audit, as when there
is a private investment in a government-controlled corporation, or when a government corporation is
privatized or publicly listed, or as in the case at bar when the government borrows money from
abroad.
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In these instances the government enters the marketplace and competes with the rest of the world in
attracting investments or loans. To succeed, the government must abide with the reasonable business
practices of the marketplace. Otherwise no investor or creditor will do business with the government,
frustrating government efforts to attract investments or secure loans that may be critical to stimulate
moribund industries or resuscitate a badly shattered national economy as in the case at bar. By design
the Constitution is flexible enough to meet these exigencies. Any at-
372
372
tempt to nullify this flexibility in the instances mentioned, or in similar instances, will be ultra vires,
in the absence of a statute limiting or removing such flexibility.
The deliberations of the Constitutional Commission reveal eloquently the intent of Section 2, Article
IX-D of the Constitution. As this Court has ruled repeatedly, the intent of the law is the controlling
factor in the interpretation of the law.28 If a law needs interpretation, the most dominant influence is
the intent of the law.29 The intent of the law is that which is expressed in the words of the law, which
should be discovered within its four corners aided, if necessary, by its legislative history.30 In the case
of Section 2, Article IX-D of the Constitution, the intent of the framers of the Constitution is evident
from the bare language of Section 2 itself. The deliberations of the Constitutional Commission
confirm expressly and even elucidate further this intent beyond any doubt whatsoever.
There is another constitutional barrier to the COA’s insistence of exclusive power to examine and
audit all government agencies. The COA’s claim clashes directly with the Central Bank’s
constitutional power of “supervision” over banks under Section 20, Article XII of the Constitution.
This provision states as follows:
“Sec. 20. The Congress shall establish an independent central monetary authority, the members of
whose governing board must be natural-born Filipino citizens, of known probity, integrity, and
patriotism, the majority of whom shall come from the private sector. They shall also be subject to
such other qualifications and disabilities as may be prescribed by law. The authority shall provide
policy direction in the areas of money, banking, and credit. It shall have supervision over the
operations of banks and exercise such regulatory powers as may be provided by law over the
operations of finance companies and other institutions performing similar functions.” (Emphasis
supplied)
_______________
28 People vs. Purisima, 86 SCRA 542 (1978); Yellow Taxi & Pasay Transport Workers’ Union vs.
Manila Yellow Taxi Cab. Co., 80 Phil. 833 (1948); Ledesma vs. Pictain, 79 Phil. 95 (1947); Torres
vs. Limjap, 56 Phil 141 (1931).
29 De Jesus vs. City of Manila, 29 Phil. 73 (1914).
30 Manila Lodge No. 761 vs. Court of Appeals, 73 SCRA 162 (1976).
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373
Historically, the Central Bank has been conducting periodic and special examination and audit of
banks to determine the soundness of their operations and the safety of the deposits of the public.
Undeniably, the Central Bank’s power of “supervision” includes the power to examine and audit
banks, as the banking laws have always recognized this power of the Central Bank.31 Hence, the
COA’s power to examine and audit government banks must be reconciled with the Central Bank’s
power to supervise the same banks. The inevitable conclusion is that the COA and the Central Bank
have concurrent jurisdiction, under the Constitution, to examine and audit government banks.
However, despite the Central Bank’s concurrent jurisdiction over government banks, the COA’s audit
still prevails over that of the Central Bank since the COA is the constitutionally mandated auditor of
government banks. And in matters falling under the second paragraph of Section 2, Article IX-D of
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the Constitution, the COA’s jurisdiction is exclusive. Thus, the Central Bank is devoid of authority
to allow or disallow expenditures of government banks since this function belongs exclusively to the
COA.
Second Issue: Statutes Prohibiting or Authorizing Private Auditors
The COA argues that Sections 26, 31 and 32 of PD No. 1445, otherwise known as the Government
Auditing Code of the Philippines, prohibit the hiring of private auditors by government agencies.
Section 26 of PD No. 1445 provides that:
“Section 26. General Jurisdiction.—The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those accounts;
and the audit and settlement of the accounts of all persons respecting funds or property received or
held by them in an accountable capacity, as well as the exami-
_______________
31 Section 6-D, General Banking Act (RA No. 337); Section 58, General Banking Law of 2000 (RA
No. 8791); Sections 25 and 28, Central Bank Act (RA No. 265); Sections 25 and 28, New Central
Bank Act (RA No. 7653).
374
374
nation, audit, and settlement of all debts and claims of any sort due or owing to the Government or
any of its subdivisions, agencies or instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non-governmental
entities subsidized by the government, those funded by donations through the government, those
required to pay levies or government share, and those for which the government has put up a
counterpart fund or those partly funded by the government.”
Section 26 defines the extent and scope of the powers of the COA. Considering the comprehensive
definition in Section 26, the COA’s jurisdiction covers all government agencies, offices, bureaus and
units, including government-owned or controlled corporations, and even non-government entities
enjoying subsidy from the government. However, there is nothing in Section 26 that states, expressly
or impliedly, that the COA’s power to examine and audit government banks is exclusive, thereby
preventing private audit of government agencies concurrently with the COA audit.
Section 26 is a definition of the COA’s “general jurisdiction.” Jurisdiction may be exclusive or
concurrent. Section 26 of PD No. 1445 does not state that the COA’s jurisdiction is exclusive, and
there are other laws providing for concurrent jurisdiction. Thus, Section 26 must be applied in
harmony with Section 5832 of the General Banking Law of 2000 (RA No. 8791) which authorizes
unequivocally the Monetary Board to require banks to hire inde-
_______________
32 Previously, Section 6-D of the General Banking Act (RA No. 337) which provided as follows:
“The Monetary Board may, at its discretion, in specific cases where the circumstances so warrant,
require a bank to engage the services of an independent auditor to be chosen by the bank concerned
from a list of certified public accountants acceptable to the Monetary Board. The terms of engagement
shall be as prescribed by the Monetary Board which may either be on a continuing basis where the
auditor shall act as a resident examiner, or on the basis of special engagements, but in any case, the
independent auditor shall be responsible not only to the bank’s board of directors, but to the Monetary
Board as well: x x x.”
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pendent auditors. Section 58 of the General Banking Law of 2000 states as follows:
“Section 58. Independent Auditor.—The Monetary Board may require a bank, quasi-bank or trust
entity to engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust
entity concerned from a list of certified public accountants acceptable to the Monetary Board. The
term of the engagement shall be as prescribed by the Monetary Board which may either be on a
continuing basis where the auditor shall act as resident examiner, or on the basis of special
engagements; but in any case, the independent auditor shall be responsible to the bank’s, quasi-bank’s
or trust entity’s board of directors. A copy of the report shall be furnished to the Monetary Board, x
x x.” (Emphasis supplied)
Moreover, Section 26 must also be applied in conformity with Sections 25 and 2833 of the New Central
Bank Act (RA No. 7653) which authorize expressly the Monetary Board to conduct periodic or
special examination of all banks. Sections 25 and 28 of the New Central Bank Act state as follows:
“Sec. 25. Supervision and Examination.—The Bangko Sentral shall have supervision over, and
conduct periodic or special examinations of, banking institutions x x x. (Emphasis supplied)
xxx
“Sec. 28. Examination and Fees.—The supervising and examining department head, personally or
by deputy, shall examine the books of every
_______________
33 Previously, Sections 25 and 28 of the Central Bank Act (RA No. 265). Section 25 of this Act
provided as follows: “Creation of Appropriate Departments, x x x [T]he Central Bank shall have
appropriate supervising and examining departments which shall be charged with the supervision and
periodic or special examinations of banking institutions operating in the Philippines, including all
Government credit institutions, including their subsidiaries and affiliates, x x x.”
Section 28 of the same Act provided as follows: “Examination and Fees. It shall be the duty of the
head of the appropriate supervising and examining department, personally or by deputy, at least once
in every twelve months, and at such other times as either he or the Monetary Board may deem
expedient, to make an examination of the books of every banking institution within the purview of
this Act and to make a report on the same to the Monetary Board.”
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376
banking institution once in every twelve (12) months, and at such other time as the Monetary Board
by an affirmative vote of five (5) members may deem expedient and to make a report on the same to
the Monetary Board: x x x.” (Emphasis supplied)
The power vested in the Monetary Board under Section 58 of the General Banking Law of 2000, and
Sections 25 and 28 of the New Central Bank Act, emanates from the Central Bank’s explicit
constitutional mandate to exercise “supervision over the operations of banks.” Under Section 4 of the
General Banking Law of 2000, the term “supervision”34 is defined as follows:
“Section 4. Supervisory Powers.—The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. “Supervision” shall include the following:
xxx
4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
xxx
4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or sound basis:
Provided, That the deficiencies/irregularities found by or discovered by an audit shall immediately
be addressed;
x x x.” (Emphasis supplied)
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Clearly, under existing laws, the COA does not have the sole and exclusive power to examine and
audit government banks. The Central Bank has concurrent jurisdiction to examine and audit, or cause
the examination and audit, of government banks.
_______________
34 The term “supervision” was defined under Section 2 (e) of the General Banking Act (RA No. 337)
to “include not only the issuance of rules, but also the overseeing to ascertain that regulations are
complied with, investigating or examining to determine whether an institution is conducting its
business on a sound financial basis, and inquiring into the solvency and liquidity of the institution.”
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Section 31 of PD No. 1445, another provision of law claimed by the COA to prohibit the hiring of
private auditors by government agencies, provides as follows:
“Section 31. Deputization of private licensed professionals to assist government auditors.—(1) The
Commission may, when the exigencies of the service so require, deputize and retain in the name of
the Commission such certified public accountants and other licensed professionals not in the public
service as it may deem necessary to assist government auditors in undertaking specialized audit
engagements.
“(2) The deputized professionals shall be entitled to such compensation and allowances as may be
stipulated, subject to pertinent rules and regulations on compensation and fees.”
According to the COA, Section 31 is the maximum extent that private auditors can participate in
auditing government agencies and anything beyond this is without legal basis. Hence, the COA
maintains that the hiring of private auditors who act in their own name and operate independently of
the COA is unlawful.
Section 31 is bereft of any language that prohibits, expressly or impliedly, the hiring of private
auditors by government agencies. This provision of law merely grants authority to the COA to hire
and deputize private auditors to assist the COA in the auditing of government agencies. Such private
auditors operate under the authority of the COA. By no stretch of statutory construction can this
provision be interpreted as an absolute statutory ban on the hiring of private auditors by government
agencies. Evidently, the language of the law does not support the COA’s claim.
Moreover, the COA further contends that Section 32 of PD No. 1445 is another provision of law that
prohibits the hiring of private auditors by government agencies. Section 32 provides as follows:
“Section 32. Government contracts for auditing, accounting, and related services.—(1) No
government agency shall enter into any contract with any private person or firm for services to
undertake studies and services relating to government auditing, including services to conduct, for a
fee, seminars or workshops for government personnel on these topics, unless the proposed contract
is first submitted to the Commission to enable it to determine if it has the resources to undertake such
studies or
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378
services. The Commission may engage the services of experts from the public or private sector in the
conduct of these studies.
“(2) Should the Commission decide not to undertake the study or service, it shall nonetheless have
the power to review the contract in order to determine the reasonableness of its costs.” (Emphasis
supplied)
Section 32 refers to contracts for studies and services “relating to government auditing” which the
COA may or may not want to undertake itself for a government agency. Stated another way, Section
32 speaks of studies and services that the COA may choose not to render to a government agency.
Obviously, the subject of these contracts is not the audit itself of a government agency because the
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COA is compelled to undertake such audit and cannot choose not to conduct such audit. The
Constitution and existing law mandate the COA to audit all government agencies. Section 2, Article
IX-D of the Constitution commands that the COA “shall have the x x x duty to examine, audit, and
settle all accounts” of government agencies (Emphasis supplied). Similarly, the Revised
Administrative Code of 1987 directs that the “Commission on Audit shall have the x x x duty to
examine, audit, and settle all accounts”35 of government agencies (Emphasis supplied). Hence, the
COA cannot refuse to audit government agencies under any circumstance.
The subject of the contracts referred to in Section 32 is necessarily limited to studies, seminars,
workshops, researches and other services on government auditing which the COA may or may not
undertake at its discretion, thereby excluding the audit itself of government agencies. Since the COA
personnel have the experience on government auditing and are in fact the experts on this subject, it is
only proper for the COA to be granted the right of first refusal to undertake such services if required
by government agencies. This is what Section 32 is all about and nothing more. Plainly, there is
nothing in Section 32 which prohibits the hiring of private auditors to audit government agencies
concurrently with the COA audit.
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35 Section 11, Chapter 4, Subtitle B, Title I, Book V, Revised Administrative Code of 1987.
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379
On the other hand, the DBP cites Central Bank Circular No. 112436 as legal basis for hiring a private
auditor. This Circular amended Subsection 1165.5 (Book I) of the Manual of Regulations for Banks
and other Financial Intermediaries to require “[E]ach bank, whether government-owned or
controlled or private, x x x (to) cause an annual financial audit to be conducted by an external auditor
x x x.” Moreover, the Circular states that the “audit of a government-owned or controlled bank by an
external independent auditor shall be in addition to and without prejudice to that conducted by the
Commission on Audit in the discharge of its mandate under existing law.” Furthermore, the Circular
provides that the “requirement for an annual audit by an external independent auditor shall extend to
specialized and unique government banks such as the Land Bank of the Philippines and the
Development Bank of the Philippines.”
The Central Bank promulgated Circular No. 1124 on December 5, 1986 pursuant to its power under
the Freedom Constitution, the fundamental law then in force, as well as pursuant to its general rule
making authority under the General Banking Act (RA No. 337), the banking law in effect at that time.
Under the Freedom Constitution, the Central Bank exercised supervisory authority over the banking
system. Section 14, Article XV of the 1973 Constitution, which was re-adopted in the Freedom
Constitution, provided as follows:
“SEC. 14. The Batasang Pambansa shall establish a central monetary authority which shall provide
policy direction in the areas of money, banking and credit. It shall have supervisory authority over
the operations of banks and exercise such regulatory authority as may be provided by law over the
operations of finance companies and other institutions performing similar functions. Until the
Batasang Pambansa shall otherwise provide, the Central Bank of the Philippines, operating under
existing laws, shall function as the central monetary authority.” (Emphasis supplied)
Section 6-D of the General Banking Act (RA No. 337) vested the Monetary Board with the specific
power to “require a bank to engage the services of an independent auditor to be chosen by the
_______________
380
380
bank concerned from a list of certified public accountants acceptable to the Monetary Board.”
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The 1987 Constitution created an independent central monetary authority with substantially the same
powers as the Central Bank under the 1973 Constitution and the Freedom Constitution. Section 20,
Article XII of the 1987 Constitution provides that the Monetary Board “shall have supervision over
the operations of banks.” The specific power of the Central Bank under the General Banking Act (RA
No. 337) to require an independent audit of banks was re-enacted in Section 58 of the General
Banking Law of 2000 (RA No. 8791).
Indubitably, the Central Bank had the express constitutional and statutory power to promulgate
Circular No. 1124 on December 5, 1986. The power granted to the Central Bank to issue Circular No.
1124 with respect to the independent audit of banks is direct, unambiguous, and beyond dispute. The
Bangko Sentral ng Pilipinas, which succeeded the Central Bank, retained under the 1987 Constitution
and the General Banking Law of 2000 (RA No. 8791) the same constitutional and statutory power
the Central Bank had under the Freedom Constitution and the General Banking Act (RA No. 337)
with respect to the independent audit of banks.
Circular No. 1124 has the force and effect of law. In a long line of decisions,37 this Court has held
consistently that the rules and regulations issued by the Central Bank pursuant to its supervisory and
regulatory powers have the force and effect of law. The DBP, being a bank under the constitutional
and statutory supervision of the Central Bank, was under a clear legal obligation to comply with the
requirement of Circular No. 1124 on the private audit of banks. Refusal by the DBP to comply with
the Circular would have rendered the DBP and its officers liable to the penal provisions of
_______________
37 Banco Filipino Savings & Mortgage Bank vs. Navarro, 152 SCRA 346 (1987); Gonzalo Sy Trading
vs. Central Bank, 70 SCRA 570 (1976); Batchelder vs. Central Bank, 46 SCRA 102 (1972); People
vs. Que Po Lay, 94 Phil. 640 (1954).
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381
the General Banking Act,38 as well as the administrative and penal sanctions under the Central Bank
Act.39
The DBP also relies on Section 8 of PD No. 2029 as its statutory basis for hiring a private auditor.
This Section states in part as follows:
“The audit of government corporations by the Commission on Audit shall not preclude government
corporations from engaging the services of private auditing firms: Provided, however, that even if the
services of the latter are availed of, the audit report of the Commission on Audit shall serve as the
report for purposes of compliance with audit requirements as required of government corporations
under applicable law.”
Section 8 of PD No. 2029, however, also provides that the “policy of withdrawal of resident auditors
shall be fully implemented x x x.” Section 2 of the same decree also excludes from the term
“government-owned or controlled corporation” two classes of corporations. The first are originally
private corporations the majority of the shares of stock of which are acquired by government financial
_______________
38 Section 87 of RA No. 337 provided as follows: “Unless otherwise provided herein, the violation
of any of the provisions of this Act shall be punished by a fine of not more than two thousand pesos
or by imprisonment for not more than two years, or both, x x x.” This provision is now Section 66 of
the General Banking Law of 2000.
39 Section 34 of RA No. 265 provided as follows: “Whenever any person or entity willfully violates
this Act or any order, instruction, rule, or regulation issued by the Monetary Board, the person or
persons responsible for such violation shall be punished by a fine of not more than twenty thousand
pesos and by imprisonment of not more than five years.” This provision is now Section 36 of the New
Central Bank Act (RA No. 7653).
Section 34-A of RA No. 265 provided as follows: “The Monetary Board is hereby authorized, at its
discretion, to impose upon banking institutions, their directors and/or officers, x x x for any willful
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failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, x x x the following administrative sanctions: (a) Fines in
amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed
five thousand pesos a day for each type of violation, x x x; (b) Suspension, or removal of directors
and/or officers; x x x.” This provision is now Section 37 of the New Central Bank Act.
382
382
institutions through foreclosure or dacion en pago. The second are subsidiary corporations of
government corporations, which subsidiaries are organized exclusively to own, manage or lease
physical assets acquired by government financial institutions through foreclosure or dacion en pago.
Claiming that PD No. 2029 operates to exempt certain government-owned corporations from the
COA’s jurisdiction in violation of Section 3, Article IX-D of the Constitution, the COA is questioning
the constitutionality of PD No. 2029.
There is, however, no compelling need to pass upon the constitutionality of PD No. 2029 because the
Constitution and existing banking laws allow such hiring. The issues raised in this case can be
resolved adequately without resolving the constitutionality of PD No. 2029. This Court will leave the
issue of the constitutionality of PD No. 2029 to be settled in another case where its resolution is an
absolute necessity.40
Third Issue: Necessity of Private Auditor and
Reasonableness of the Fees
The remaining issue to be resolved is whether or not the DBP’s hiring of a private auditor was
necessary and the fees it paid reasonable under the circumstances. The hiring by the DBP of a private
auditor was a condition imposed by the World Bank for the grant to the Philippine government in
early 1987 of a US$310 million Economic Recovery Loan, at a time when the government desperately
needed funds to revive a badly battered economy. One of the salient objectives of the US$310 million
loan was the rehabilitation of the DBP which was then burdened with enormous bad loans. The
rehabilitation of the DBF was important in the overall recovery of the national economy.
On February 23, 1986, the World Bank President reported to the Bank’s Executive Directors that the
privately audited accounts of the DBF for 1986 and 1987 “will be a requirement for the releases of
the second and third tranches, respectively, of the ERL” (Emphasis supplied). Moreover, the Agreed
Minutes of Negotiations on
_______________
40 Alger vs. Court of Appeals, 135 SCRA 37 (1985).
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383
the Philippine Economic Recovery Program41 signed by the Philippine government and World Bank
negotiating panels on January 8, 1987, required that “a copy of COA’s letter x x x regarding DBP’s
appointment of a private external auditor will be sent to the (World) Bank before the distribution of
the loan documents to the Bank’s Board, along with a copy of the scope of audit as approved by COA
and satisfactory to the Bank” (Emphasis supplied).
As a creditor, the World Bank needed the private audit for its own information to monitor the progress
of the DBP’s rehabilitation. This is apparent from the said Agreed Minutes which provided that the
“general terms of reference (for the hiring of private external audit) were discussed during the
negotiations and form part of the World Bank’s guidelines for financial information on financial
institutions”42(Emphasis supplied).
The hiring of a private auditor being an express condition for the grant of the US$310 million
Economic Recovery Loan, a major objective of which was the DBP’s rehabilitation, the same was a
necessary corporate act on the part of the DBP. The national government, represented by the Central
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Bank Governor, as well as the Ministers of Finance, Trade, and Economic Planning, had already
committed to the hiring by all government banks of private auditors in addition to the COA. For the
DBP to refuse to hire a private auditor would have aborted the vital loan and derailed the national
economic recovery, resulting in grave consequences to the entire nation. The hiring of a private
auditor was not only necessary based on the government’s loan covenant with the World Bank, it was
also necessary because it was mandated by Central Bank Circular No. 1124 under pain of
administrative and penal sanctions.
The last matter to determine is the reasonableness of the fees charged by Joaquin C. Cunanan & Co.,
the private auditor hired by the DBP. The COA describes the private auditor’s fees as an “excessive,
extravagant or unconscionable expenditure” of government funds. For the audit of the DBP’s
financial statements in 1986, the
_______________
42 Ibid.
384
384
private auditor billed the DBP the amount of P487,321.14.43 In 1987, the private auditor billed the
DBP the amount of P529,947.00.44 In comparison, the COA billed the DBP an audit fee of
P27,015,963.0045 in 1988, and P15,421,662.0046 in 1989. Even granting that the COA’s scope of audit
services was broader,47 still it could not be said that the private auditor’s fees are excessive,
extravagant or unconscionable compared to the COA’s billings.
The hiring of a private auditor by the DBP being a condition of the US$310 million World Bank loan
to the Philippine government, the fees of such private auditor are in reality part of the government’s
cost of borrowing from the World Bank. The audit report of the private auditor is primarily intended
for the World Bank’s information48 on the financial status of the DBP whose rehabilitation was one
of the objectives of the loan. An annual private audit fee of about half a million pesos added to the
interest on a US$310 million loan would hardly make the cost of borrowing excessive, extravagant
or unconscionable. Besides, the condition imposed by a lender, whose money is at risk, requiring the
borrower or its majority-owned subsidiaries to submit to audit by an independent public accountant,
is a reasonable and normal business practice.
WHEREFORE, the petition is hereby GRANTED. The letter-decision of the Chairman of the
Commission on Audit dated August 29, 1988, and the letter-decision promulgated by the Commission
on Audit en banc dated May 20, 1989, are hereby SET ASIDE, and the temporary restraining order
issued by the court enjoining re-
_______________
44 Ibid.
45 Rollo, p. 365, footnote 7, Memorandum for the Respondent dated October 7, 1990. See also Rollo,
pp. 319-322, Petitioner’s Reply to Comment dated June 20, 1990, Annexes “A” and “B.”
46 Ibid.
47 The scope of the COA’s audit covers financial audit, compliance audit, and management audit.
Private external audit generally covers only financial audit. Rollo, p. 209, Respondent’s Comment
dated January 25, 1990.
48 Supra, see note 9, Agreed Minutes of Negotiations on the Philippine Economic Recovery Program.
385
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385
AF Realty & Development, Inc. vs. Dieselman Freight Services, Co.
52 of 120
spondent Commission on Audit from enforcing the said decisions is hereby made PERMANENT.
SO ORDERED.
Davide, Jr. (C.J.), Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing,
Pardo, Buena, Ynares-Santiago, De Leon, Jr. and Sandoval-Gutierrez, JJ., concur.
Petition granted, letter decisions of August 29, 1988 and May 20, 1989 set aside. Temporary
restraining order made permanent.
Note.—The Commission on Audit has the power, authority and duty to examine all accounts of the
Government or any of its agencies or instrumentality. (Osmeña vs. Commission on Audit, 230 SCRA
585 [1994])
——o0o——
112
Philippine Society for the Prevention of Cruelty to Animals vs. Commission on Audit
G.R. No. 169752. September 25, 2007.*
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS, petitioners, vs.
COMMISSION ON AUDIT, DIR. RODULFO J. ARIESGA (in his official capacity as Director of
the Commission on Audit), MS. MERLE M. VALENTIN and MS. SUSAN GUARDIAN (in their
official capacities as Team Leader and Team Member, respectively, of the audit Team of the
Commission on Audit), respondents.
Statutory Construction; Statutes; All statutes are to be construed as having only a prospective
operation, unless the purpose and
_______________
* EN BANC.
113
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113
intention of the legislature to give them a retrospective effect is expressly declared or is necessarily
implied from the language used; in case of doubt, the doubt must be also resolved against the
retrospective effect.—And since the underpinnings of the charter test had been introduced by the 1935
Constitution and not earlier, it follows that the test cannot apply to the petitioner, which was
incorporated by virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws in
general have no retroactive effect, unless the contrary is provided. All statutes are to be construed as
having only a prospective operation, unless the purpose and intention of the legislature to give them
a retrospective effect is expressly declared or is necessarily implied from the language used. In case
of doubt, the doubt must be resolved against the retrospective effect.
Same; Same; Cases where statutes can be given retroactive effect.—Statutes can be given retroactive
effect in the following cases: (1) when the law itself so expressly provides; (2) in case of remedial
statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and (5) in case of laws
creating new rights.
Corporation Law; Amendments introduced by C.A. No. 148 made it clear that the petitioner was a
private corporation and not an agency of the government.—The amendments introduced by C.A. No.
148 made it clear that the petitioner was a private corporation and not an agency of the government.
This was evident in Executive Order No. 63, issued by then President of the Philippines Manuel L.
Quezon, declaring that the revocation of the powers of the petitioner to appoint agents with powers
of arrest “corrected a serious defect” in one of the laws existing in the statute books.
Same; A reading of petitioner’s charter shows that it is not subject to control or supervision by any
agency of the State, unlike government-owned and -controlled corporations.—A reading of
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petitioner’s charter shows that it is not subject to control or supervision by any agency of the State,
unlike government-owned and -controlled corporations. No government representative sits on the
board of trustees of the petitioner. Like all private corporations, the successors of its members are
determined voluntarily and solely by the petitioner in accordance with its by-laws, and may exercise
those powers generally accorded to private corporations, such as the powers to hold property, to sue
and be sued, to use a common seal, and so forth. It may adopt by-laws for its internal operations: the
peti-
114
114
tioner shall be managed or operated by its officers “in accordance with its by-laws in force.”
Same; Fact that employees of the petitioner are registered and covered by the Social Security System
at the latter’s initiative, and not through the Government Service Insurance System which should be
the case if the employees are considered government employees is another indication of petitioner’s
nature as a private entity.—The employees of the petitioner are registered and covered by the Social
Security System at the latter’s initiative, and not through the Government Service Insurance System,
which should be the case if the employees are considered government employees. This is another
indication of petitioner’s nature as a private entity.
Same; Fact that a certain juridical entity is impressed with public interest does not, by that
circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private
though its charter contains provisions of a public character incorporated solely for the public
good.—The respondents contend that the petitioner is a “body politic” because its primary purpose is
to secure the protection and welfare of animals which, in turn, redounds to the public good. This
argument, is, at best, specious. The fact that a certain juridical entity is impressed with public interest
does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation
may be private although its charter contains provisions of a public character, incorporated solely for
the public good. This class of corporations may be considered quasi-public corporations, which are
private corporations that render public service, supply public wants, or pursue other eleemosynary
objectives. While purposely organized for the gain or benefit of its members, they are required by
law to discharge functions for the public benefit. Examples of these corporations are utility, railroad,
warehouse, telegraph, telephone, water supply corporations and transportation companies. It must be
stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor
is the type of service the former renders to the public: if it performs a public service, then it becomes
a quasi-public corporation.
Same; The true criterion to determine whether a corporation is public or private is found in the totality
of the relation of the corporation to the State.—The true criterion, therefore, to determine
115

115
whether a corporation is public or private is found in the totality of the relation of the corporation to
the State. If the corporation is created by the State as the latter’s own agency or instrumentality to
help it in carrying out its governmental functions, then that corporation is considered public;
otherwise, it is private. Applying the above test, provinces, chartered cities, and barangays can best
exemplify public corporations. They are created by the State as its own device and agency for the
accomplishment of parts of its own public works.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition.
Gerardo M. Lobo II for petitioner.
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Elizabeth S. Zosa, Janet D. Nacion and Alexander B. Juliano for Commission on Audit, et al.
AUSTRIA-MARTINEZ, J.:
Before the Court is a special civil action for Certiorari and Prohibition under Rule 65 of the Rules of
Court, in relation to Section 2 of Rule 64, filed by the petitioner assailing Office Order No. 2005-0211
dated September 14, 2005 issued by the respondents which constituted the audit team, as well as its
September 23, 2005 Letter2 informing the petitioner that respondents’ audit team shall conduct an
audit survey on the petitioner for a detailed audit of its accounts, operations, and financial
transactions. No temporary restraining order was issued.
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No.
1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at the time it was
created, was composed of animal aficionados and animal propagandists. The objects of the
_______________
1 Rollo, p. 29.
2 Id., at p. 30.
116
116
petitioner, as stated in Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted
upon animals or the protection of animals in the Philippine Islands, and generally, to do and perform
all things which may tend in any way to alleviate the suffering of animals and promote their welfare.3
At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not
yet in existence. Act No. 1285 antedated both the Corporation Law and the constitution of the
Securities and Exchange Commission. Important to note is that the nature of the petitioner as a
corporate entity is distinguished from the sociedad anonimas under the Spanish Code of Commerce.
For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the
protection of animals, the petitioner was initially imbued under its charter with the power to
apprehend violators of animal welfare laws. In addition, the petitioner was to share one-half (1/2) of
the fines imposed and collected through its efforts for violations of the laws related thereto. As
originally worded, Sections 4 and 5 of Act No. 1285 provide:
“SEC. 4. The said society is authorized to appoint not to exceed five agents in the City of Manila,
and not to exceed two in each of the provinces of the Philippine Islands who shall have all the power
and authority of a police officer to make arrests for violation of the laws enacted for the prevention
of cruelty to animals and the protection of animals, and to serve any process in connection with the
execution of such laws; and in addition thereto, all the police force of the Philippine Islands, wherever
organized, shall, as occasion requires, assist said society, its members or agents, in the enforcement
of all such laws.
SEC. 5. One-half of all the fines imposed and collected through the efforts of said society, its members
or its agents, for violations of the laws enacted for the prevention of cruelty to animals and for their
protection, shall belong to said society and shall be used to promote its objects.
_______________
3 Act No. 1285, §2 (1905).
117
117
(emphasis supplied)
Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the
fines collected for violation of animal-related laws were recalled by virtue of Commonwealth Act
(C.A.) No. 148,4 which reads, in its entirety, thus:
Be it enacted by the National Assembly of the Philippines:
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Section 1. Section four of Act Numbered Twelve hundred and eighty-five as amended by Act
Numbered Thirty five hundred and forty-eight, is hereby further amended so as to read as follows:
Sec. 4. The said society is authorized to appoint not to exceed ten agents in the City of Manila, and
not to exceed one in each municipality of the Philippines who shall have the authority to denounce
to regular peace officers any violation of the laws enacted for the prevention of cruelty to animals
and the protection of animals and to cooperate with said peace officers in the prosecution of
transgressors of such laws.
Sec. 2. The full amount of the fines collected for violation of the laws against cruelty to animals and
for the protection of animals, shall accrue to the general fund of the Municipality where the offense
was committed.
Sec. 3. This Act shall take effect upon its approval.
Approved, November 8, 1936.” (Emphasis supplied)
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No. 63 dated
November 12, 1936, portions of which provide:
_______________
4 Entitled “AN ACT TO AMEND SECTION FOUR OF ACT NUMBERED TWELVE HUNDRED
AND EIGHTY-FIVE SO AS TO WITHDRAW FROM AGENTS OF THE SOCIETY FOR THE
PREVENTION OF CRUELTY TO ANIMALS OF THE PHILIPPINES THE POWER AND
AUTHORITY TO MAKE ARRESTS FOR VIOLATION OF THE LAW AGAINST CRUELTY TO
ANIMALS AND TO ABOLISH THE PRIVILEGE GRANTED TO SAID SOCIETY TO SHARE
IN THE AMOUNT OF THE FINES COLLECTED FOR SAID VIOLATIONS.”
118
118
“Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered
One Hundred Forty Eight was enacted depriving the agents of the Society for the Prevention of
Cruelty to Animals of their power to arrest persons who have violated the laws prohibiting cruelty to
animals thereby correcting a serious defect in one of the laws existing in our statute books.
xxxx
Whereas, the cruel treatment of animals is an offense against the State, penalized under our statutes,
which the Government is duty bound to enforce;
Now, therefore, I, Manuel L. Quezon, President of the Philippines, pursuant to the authority conferred
upon me by the Constitution, hereby decree, order, and direct the Commissioner of Public Safety, the
Provost Marshal General as head of the Constabulary Division of the Philippine Army, every Mayor
of a chartered city, and every municipal president to detail and organize special members of the police
force, local, national, and the Constabulary to watch, capture, and prosecute offenders against the
laws enacted to prevent cruelty to animals. (Emphasis supplied)”
On December 1, 2003, an audit team from respondent Commission on Audit (COA) visited the office
of the petitioner to conduct an audit survey pursuant to COA Office Order No. 2003-051 dated
November 18, 20035 addressed to the petitioner. The petitioner demurred on the ground that it was a
private entity not under the jurisdiction of COA, citing Section 2(1) of Article IX of the Constitution
which specifies the general jurisdiction of the COA, viz.:
“Section 1. General Jurisdiction.—The Commission on Audit shall have the power, authority, and
duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government,
or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled
corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions
and officers that have been
_______________
5 Rollo, p. 101.
119
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119
granted fiscal autonomy under the Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations and their subsidiaries; and (d) such
nongovernmental entities receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to submit to such audit as a
condition of subsidy or equity. However, where the internal control system of the audited agencies is
inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as
are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the
Government, and for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto. (Emphasis supplied)”
Petitioner explained thus:
1 a.
Although the petitioner was created by special legislation, this necessarily came about because in
January 1905 there was as yet neither a Corporation Law or any other general law under which it may
be organized and incorporated, nor a Securities and Exchange Commission which would have passed
upon its organization and incorporation.
2 b.
That Executive Order No. 63, issued during the Commonwealth period, effectively deprived the
petitioner of its power to make arrests, and that the petitioner lost its operational funding, underscore
the fact that it exercises no governmental function. In fine, the government itself, by its overt acts,
confirmed petitioner’s status as a private juridical entity.
The COA General Counsel issued a Memorandum6 dated May 6, 2004, asserting that the petitioner
was subject to its audit authority. In a letter dated May 17, 2004,7 respondent COA informed the
petitioner of the result of the evaluation,
_______________
6 Id., at pp. 43-45.
7 Id., at p. 42.
120
120
furnishing it with a copy of said Memorandum dated May 6, 2004 of the General Counsel.
Petitioner thereafter filed with the respondent COA a Request for Re-evaluation dated May 19, 2004,8
insisting that it was a private domestic corporation.
Acting on the said request, the General Counsel of respondent COA, in a Memorandum dated July
13, 2004,9 affirmed her earlier opinion that the petitioner was a government entity that was subject to
the audit jurisdiction of respondent COA. In a letter dated September 14, 2004, the respondent COA
informed the petitioner of the result of the re-evaluation, maintaining its position that the petitioner
was subject to its audit jurisdiction, and requested an initial conference with the respondents.
In a Memorandum dated September 16, 2004, Director Delfin Aguilar reported to COA Assistant
Commissioner Juanito Espino, Corporate Government Sector, that the audit survey was not conducted
due to the refusal of the petitioner because the latter maintained that it was a private corporation.
Petitioner received on September 27, 2005 the subject COA Office Order 2005-021 dated September
14, 2005 and the COA Letter dated September 23, 2005.
Hence, herein Petition on the following grounds:
A.
RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT RULED THAT
PETITIONER IS SUBJECT TO ITS AUDIT AUTHORITY.
_______________
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8 Id., at pp. 46-51.
9 Id., at pp. 121-123.
121
121
B.
PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE BEING NO APPEAL, NOR
ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW
AVAILABLE TO IT.10
The essential question before this Court is whether the petitioner qualifies as a government agency
that may be subject to audit by respondent COA.
Petitioner argues: first, even though it was created by special legislation in 1905 as there was no
general law then existing under which it may be organized or incorporated, it exercises no
governmental functions because these have been revoked by C.A. No. 148 and E.O. No. 63; second,
nowhere in its charter is it indicated that it is a public corporation, unlike, for instance, C.A. No. 111
which created the Boy Scouts of the Philippines, defined its powers and purposes, and specifically
stated that it was “An Act to Create a Public Corporation” in which, even as amended by Presidential
Decree No. 460, the law still adverted to the Boy Scouts of the Philippines as a “public corporation,”
all of which are not obtaining in the charter of the petitioner; third, if it were a government body,
there would have been no need for the State to grant it tax exemptions under Republic Act No. 1178,
and the fact that it was so exempted strengthens its position that it is a private institution; fourth, the
employees of the petitioner are registered and covered by the Social Security System at the latter’s
initiative and not through the Government Service Insurance System, which should have been the
case had the employees been considered government employees; fifth, the petitioner does not receive
any form of financial assistance from the government, since C.A. No. 148, amending Section 5 of
Act No. 1285, states that the “full amount of the fines, collected for violation of the laws against
cruelty to animals and for the protection of animals, shall accrue to the
_______________
10 Id., at p. 14.
122
122
general fund of the Municipality where the offense was committed”; sixth, C.A. No. 148 effectively
deprived the petitioner of its powers to make arrests and serve processes as these functions were
placed in the hands of the police force; seventh, no government appointee or representative sits on
the board of trustees of the petitioner; eighth, a reading of the provisions of its charter (Act No. 1285)
fails to show that any act or decision of the petitioner is subject to the approval of or control by any
government agency, except to the extent that it is governed by the law on private corporations in
general; and finally, ninth, the Committee on Animal Welfare, under the Animal Welfare Act of 1998,
includes members from both the private and the public sectors.
The respondents contend that since the petitioner is a “body politic” created by virtue of a special
legislation and endowed with a governmental purpose, then, indubitably, the COA may audit the
financial activities of the latter. Respondents in effect divide their contentions into six strains: first,
the test to determine whether an entity is a government corporation lies in the manner of its creation,
and, since the petitioner was created by virtue of a special charter, it is thus a government corporation
subject to respondents’ auditing power; second, the petitioner exercises “sovereign powers,” that is,
it is tasked to enforce the laws for the protection and welfare of animals which “ultimately redound
to the public good and welfare,” and, therefore, it is deemed to be a government “instrumentality” as
defined under the Administrative Code of 1987, the purpose of which is connected with the
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administration of government, as purportedly affirmed by American jurisprudence; third, by virtue
of Section 23,11
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11 Section 23. The Agencies under the Office of the President.—The agencies under the Office of the
President refer to those offices placed under the chairmanship of the President, those under the
supervision and control of the President, those under the administrative supervision of the Office of
the President, those attached to it for policy and program coordination, and those that are not placed
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Title II, Book III of the same Code, the Office of the President exercises supervision or control over
the petitioner; fourth, under the same Code, the requirement under its special charter for the petitioner
to render a report to the Civil Governor, whose functions have been inherited by the Office of the
President, clearly reflects the nature of the petitioner as a government instrumentality; fifth, despite
the passage of the Corporation Code, the law creating the petitioner had not been abolished, nor had
it been re-incorporated under any general corporation law; and finally, sixth, Republic Act No. 8485,
otherwise known as the “Animal Welfare Act of 1998,” designates the petitioner as a member of its
Committee on Animal Welfare which is attached to the Department of Agriculture.
In view of the phrase “One-half of all the fines imposed and collected through the efforts of said
society,” the Court, in a Resolution dated January 30, 2007, required the Office of the Solicitor
General (OSG) and the parties to comment on: a) petitioner’s authority to impose fines and the
validity of the provisions of Act No. 1285 and Commonwealth Act No. 148 considering that there are
no standard measures provided for in the aforecited laws as to the manner of implementation, the
specific violations of the law, the person/s authorized to impose fine and in what amount; and, b) the
effect of the 1935 and 1987 Constitutions on whether petitioner continues to exist or should organize
as a private corporation under the Corporation Code, B.P. Blg. 68 as amended.
Petitioner and the OSG filed their respective Comments. Respondents filed a Manifestation stating
that since they were being represented by the OSG which filed its Comment, they opted to dispense
with the filing of a separate one and adopt for the purpose that of the OSG.
_______________
by law or order creating them under any special department. (Emphasis supplied)
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The petitioner avers that it does not have the authority to impose fines for violation of animal welfare
laws; it only enjoyed the privilege of sharing in the fines imposed and collected from its efforts in the
enforcement of animal welfare laws; such privilege, however, was subsequently abolished by C.A.
No. 148; that it continues to exist as a private corporation since it was created by the Philippine
Commission before the effectivity of the Corporation law, Act No. 1459; and the 1935 and 1987
Constitutions.
The OSG submits that Act No. 1285 and its amendatory laws did not give petitioner the authority to
impose fines for violation of laws12 relating to the prevention of cruelty to animals and the protection
of animals; that even prior to the amendment of Act No. 1285, petitioner was only entitled to share
in the fines imposed; C.A. No. 148 abolished that privilege to share in the fines collected; that
petitioner is a public corporation and has continued to exist since Act No. 1285; petitioner was not
repealed by the 1935 and 1987 Constitutions which contain transitory provisions maintaining all laws
issued not inconsistent therewith until amended, modified or repealed.
The petition is impressed with merit.
The arguments of the parties, interlaced as they are, can be disposed of in five points.
First, the Court agrees with the petitioner that the “charter test” cannot be applied.
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Essentially, the “charter test” as it stands today provides:
“[T]he test to determine whether a corporation is government owned or controlled, or private in nature
is simple. Is it created by its own charter for the exercise of a public function, or by incorporation
under the general corporation law? Those with special charters are government corporations subject
to its provisions, and its employees are under the jurisdiction of the Civil Service Commission, and
are
_______________
12 Act No. 3547 (1928) and R.A. No. 8485 (1988).
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compulsory members of the Government Service Insurance System. x x x” (Emphasis supplied)13
The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime
established by the 1935 Constitution, Section 7, Article XIII, which states:
“Sec. 7. The National Assembly shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or controlled
by the Government or any subdivision or instrumentality thereof.”14
_______________
13 Baluyot v. Holganza, 382 Phil. 131, 136-137; 325 SCRA 248, 252 (2000); Camporedondo v.
National Labor Relations Commission, 370 Phil. 901, 906; 312 SCRA 47, 50 (1999).
14 Section 7 should be read with Sections 1 and 2 of Article XI of the same Constitution:
ARTICLE XI—General Auditing Office
Section 1. There shall be a General Auditing Office under the direction and control of an Auditor
General, who shall hold office for a term of ten years and may not be reappointed. The Auditor
General shall be appointed by the President with the consent of the Commission on Appointments,
and shall receive an annual compensation to be fixed by law which shall not be diminished during his
continuance in office. Until the Congress shall provide otherwise, the Auditor General shall receive
an annual compensation of twelve thousand pesos.
Sec. 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the revenues
and receipts from whatever source, including trust funds derived from bond issues; and audit, in
accordance with law and administrative regulations, all expenditures of funds or property pertaining
or held in trust by the Government or the provinces or municipalities thereof. He shall keep the general
accounts of the Government and preserve the vouchers pertaining thereto. It shall be the duty of the
Auditor General to bring the attention of the proper administrative officer expenditures of funds or
property which, in his opinion, are irregular, unnecessary, excessive, or extravagant. He shall also
perform such other functions as may be prescribed by law.
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The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions. Section 16
of Article XII of the present Constitution provides:
“Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.”
Section 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935 Constitution and
Section 4 of Article XIV of the 1973 Constitution.
During the formulation of the 1935 Constitution, the Committee on Franchises recommended the
foregoing proscription to prevent the pressure of special interests upon the lawmaking body in the
creation of corporations or in the regulation of the same. To permit the lawmaking body by special
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law to provide for the organization, formation, or regulation of private corporations would be in effect
to offer to it the temptation in many cases to favor certain groups, to the prejudice of others or to the
prejudice of the interests of the country.15
And since the underpinnings of the charter test had been introduced by the 1935 Constitution and not
earlier, it follows that the test cannot apply to the petitioner, which was incorporated by virtue of Act
No. 1285, enacted on January 19, 1905. Settled is the rule that laws in general have no retroactive
effect, unless the contrary is provided.16 All statutes are to be construed as having only a prospective
operation, unless the purpose and intention of the legislature to give them a retrospective effect is
expressly declared or is necessarily
_______________
15 2 ARUEGO, THE FRAMING OF THE CONSTITUTION 678 (1935); JOAQUIN G. BERNAS,
S.J., THE 1987 CONSTITUTION OF THE REPUBLIC OF THE
PHILIPPINES:ACOMMENTARY1181 (2003)
16 See CIVIL CODE OF THE PHILIPPINES, R.A. No. 386, as amended, Art. 4 (1950) & SPANISH
CIVIL CODE OF 1889, Art. 3.
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implied from the language used. In case of doubt, the doubt must be resolved against the retrospective
effect.17
There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when
the law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes;
(4) in case of laws interpreting others; and (5) in case of laws creating new rights.18 None of the
exceptions is present in the instant case.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise known
as the Corporation Law, which had been enacted by virtue of the plenary powers of the Philippine
Commission on March 1, 1906, a little over a year after January 19, 1905, the time the petitioner
emerged as a juridical entity. Even the Corporation Law respects the rights and powers of juridical
entities organized beforehand, viz.:
“SEC. 75. Any corporation or sociedad anonima formed, organized, and existing under the laws of
the Philippine Islands and lawfully transacting business in the Philippine Islands on the date of the
passage of this Act, shall be subject to the provisions hereof so far as such provisions may be
applicable and shall be entitled at its option either to continue business as such corporation or to
reform and organize under and by virtue of the provisions of this Act, transferring all corporate
interests to the new corporation which, if a stock corporation, is authorized to issue its shares of stock
at par to the stockholders or members of the old corporation according to their interests.” (Emphasis
supplied).
As pointed out by the OSG, both the 1935 and 1987 Constitutions contain transitory provisions
maintaining all laws
_______________
17 1 ARTUROM. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL
CODE OF THE PHILIPPINES 24 (1983), citing Montilla v. Agustinian Corporation, 24 Phil. 220
(1913).
18 Id., at p. 24.
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issued not inconsistent therewith until amended, modified or repealed.19
In a legal regime where the charter test doctrine cannot be applied, the mere fact that a corporation
has been created by virtue of a special law does not necessarily qualify it as a public corporation.
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What then is the nature of the petitioner as a corporate entity? What legal regime governs its rights,
powers, and duties?
As stated, at the time the petitioner was formed, the applicable law was the Philippine Bill of 1902,
and, emphatically, as also stated above, no proscription similar to the charter test can be found therein.
The textual foundation of the charter test, which placed a limitation on the power of the legislature,
first appeared in the 1935 Constitution. However, the petitioner was incorporated in 1905 by virtue
of Act No. 1258, a law antedating the Corporation Law (Act No. 1459) by a year, and the 1935
Constitution, by thirty years. There being neither a general law on the formation and organization of
private corporations nor a restriction on the legislature to create private corporations by direct
legislation, the Philippine Commission at that moment in history was well within its powers in 1905
to constitute the petitioner as a private juridical entity.
_______________
19 Section 7, Article VII, Transitory Provisions of the 1973 Philippine Constitution reads:
Section 7. All existing laws not inconsistent with this Constitution shall remain operative until
amended, modified, or repealed by the National Assembly.
Section 3, Article XVIII, Transitory Provisions of the 1985 Philippine Constitution reads:
Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, other
executive issuances not inconsistent with this Constitution shall remain operative until amended,
repealed, or revoked.
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129
Time and again the Court must caution even the most brilliant scholars of the law and all
constitutional historians on the danger of imposing legal concepts of a later date on facts of an earlier
date.20
The amendments introduced by C.A. No. 148 made it clear that the petitioner was a private
corporation and not an agency of the government. This was evident in Executive Order No. 63, issued
by then President of the Philippines Manuel L. Quezon, declaring that the revocation of the powers
of the petitioner to appoint agents with powers of arrest “corrected a serious defect” in one of the laws
existing in the statute books.
As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given
retroactive effect, thereby freeing all doubt as to which class of corporations the petitioner belongs,
that is, it is a quasi-public corporation, a kind of private domestic corporation, which the Court will
further elaborate on under the fourth point.
Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any
agency of the State, unlike government-owned and -controlled corporations. No government
representative sits on the board of trustees of the petitioner. Like all private corporations, the
successors of its members are determined voluntarily and solely by the petitioner in accordance with
its by-laws, and may exercise those powers generally accorded to private corporations, such as the
powers to hold property, to sue and be sued, to use a common seal, and so forth. It may adopt by-laws
for its internal operations: the petitioner shall be managed or operated by its officers “in accordance
with its by-laws in force.” The pertinent provisions of the charter provide:
_______________
20 See HELENCAM, INTRODUCTION:SELECTEDHISTORICAL ESSAYS OFF.W.
MAITLAND, xix (1957).
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130
“Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary S.
Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles
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Lahesa, Josefina R. de Luzuriaga, and such other persons as may be associated with them in
conformity with this act, and their successors, are hereby constituted and created a body politic and
corporate at law, under the name and style of “The Philippines Society for the Prevention of Cruelty
to Animals.”
As incorporated by this Act, said society shall have the power to add to its organization such and as
many members as it desires, to provide for and choose such officers as it may deem advisable, and in
such manner as it may wish, and to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive legacies and donations, to
conduct social enterprises for the purpose of obtaining funds, to levy dues upon its members and
provide for their collection to hold real and personal estate such as may be necessary for the
accomplishment of the purposes of the society, and to adopt such by-laws for its government as may
not be inconsistent with law or this charter.
xxxx
Sec. 3. The said society shall be operated under the direction of its officers, in accordance with its by-
laws in force, and this charter.
xxxx
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the society shall
have full power to locate and establish branch offices of the society wherever it may deem advisable
in the Philippine Islands, such branch offices to be under the supervision and control of the principal
office.”
Third. The employees of the petitioner are registered and covered by the Social Security System at
the latter’s initiative, and not through the Government Service Insurance System, which should be
the case if the employees are considered government employees. This is another indication of
petitioner’s nature as a private entity. Section 1 of Republic Act No. 1161, as amended by Republic
Act No. 8282, other-
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wise known as the Social Security Act of 1997, defines the employer:
“Employer—Any person, natural or juridical, domestic or foreign, who carries on in the Philippines
any trade, business, industry, undertaking or activity of any kind and uses the services of another
person who is under his orders as regards the employment, except the Government and any of its
political subdivisions, branches or instrumentalities, including corporations owned or controlled by
the Government: Provided, That a self-employed person shall be both employee and employer at the
same time.” (Emphasis supplied)
Fourth. The respondents contend that the petitioner is a “body politic” because its primary purpose
is to secure the protection and welfare of animals which, in turn, redounds to the public good.
This argument, is, at best, specious. The fact that a certain juridical entity is impressed with public
interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a
corporation may be private although its charter contains provisions of a public character, incorporated
solely for the public good. This class of corporations may be considered quasi-public corporations,
which are private corporations that render public service, supply public wants,21 or pursue other
eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are
required by law to discharge functions for the public benefit. Examples of these corporations are
utility,22 railroad, warehouse, telegraph, telephone, water supply corporations and transportation
companies.23 It must be stressed that a quasi-public corporation is a species of private corporations,
but the qualifying factor is the type of service the former renders to
_______________
21 RUPERTO G. MARTIN, PUBLIC CORPORATIONS 2 (1983).
22 Id.
23 Id., at p. 3.
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the public: if it performs a public service, then it becomes a quasi-public corporation.24
Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide,
for the fact is that almost all corporations are nowadays created to promote the interest, good, or
convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public
benefit. Private schools and universities are likewise private corporations; and yet, they are rendering
public service. Private hospitals and wards are charged with heavy social responsibilities. More so
with all common carriers. On the other hand, there may exist a public corporation even if it is endowed
with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a corporation is public or private is found in the
totality of the relation of the corporation to the State. If the corporation is created by the State as the
latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that
corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered
cities, and barangays can best exemplify public corporations. They are created by the State as its own
device and agency for the accomplishment of parts of its own public works.25
It is clear that the amendments introduced by C.A. No. 148 revoked the powers of the petitioner to
arrest offenders of animal welfare laws and the power to serve processes in connection therewith.
Fifth. The respondents argue that since the charter of the petitioner requires the latter to render
periodic reports to the Civil Governor, whose functions have been inherited by the President, the
petitioner is, therefore, a government instrumentality.
_______________
24 See id.
25 See id., at pp. 1-3.
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133
This contention is inconclusive. By virtue of the fiction that all corporations owe their very existence
and powers to the State, the reportorial requirement is applicable to all corporations of whatever
nature, whether they are public, quasipublic, or private corporations—as creatures of the State, there
is a reserved right in the legislature to investigate the activities of a corporation to determine whether
it acted within its powers. In other words, the reportorial requirement is the principal means by which
the State may see to it that its creature acted according to the powers and functions conferred upon it.
These principles were extensively discussed in Bataan Shipyard & Engineering Co., Inc. v.
Presidential Commission on Good Government.26 Here, the Court, in holding that the subject
corporation could not invoke the right against self-incrimination whenever the State demanded the
production of its corporate books and papers, extensively discussed the purpose of reportorial
requirements, viz.:
“x x x The corporation is a creature of the state. It is presumed to be incorporated for the benefit of
the public. It received certain special privileges and franchises, and holds them subject to the laws of
the state and the limitations of its charter. Its powers are limited by law. It can make no contract not
authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys
the laws of its creation. There is a reserve[d] right in the legislature to investigate its contracts and
find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having
chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty,
inquire how these franchises had been employed, and whether they had been abused, and demand
the production of the corporate books and papers for that purpose. The defense amounts to this, that
an officer of the corporation which is charged with a criminal violation of the statute may plead the
criminality of such corporation as a refusal to produce its books. To state this proposition is to answer
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it. While an individual may lawfully refuse to answer incriminating questions unless protected by an
immunity statute, it does not follow that a corporation vested with
_______________
26 No. L-75885, May 27, 1987, 150 SCRA 181.
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134
special privileges and franchises may refuse to show its hand when charged with an abuse of such
privileges. (Wilson v. United States, 55 Law Ed., 771, 780.)”27
WHEREFORE, the petition is GRANTED. Petitioner is DECLARED a private domestic corporation
subject to the jurisdiction of the Securities and Exchange Commission. The respondents are
ENJOINED from investigating, examining and auditing the petitioner’s fiscal and financial affairs.
SO ORDERED.
Puno (C.J.), Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales,
Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., Nachura and Reyes, JJ., concur.
Petition granted.
Note.—Congress cannot enact a law creating a private corporation with a special charter. Since
private corporation can not have special charter, it follows that Congress can create corporations with
special charters only if such corporations are government-owned or controlled. (Feliciano vs.
Commission on Audit, 419 SCRA 363 [2004])
——o0o——
_______________
27 Id., at pp. 234-23 (emphasis supplied and also in the original).
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Land Bank of the Philippines vs. Commission on Audit
G.R. Nos. 89679-81. September 28, 1990.*
LAND BANK OF THE PHILIPPINES, petitioner, vs. COMMISSION ON AUDIT, respondent.
Political Law; Constitutional Law; Powers of the Commission on Audit The Commission on Audit
has the power to examine all accounts of the Government or any of its agencies or instrumentalities.—
"SEC. 2 (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
agencies, or instrumentalities, including government-owned and controlled corporations with original
charters, x x x" (Article IX [D], Sec. 2[1], 1987 Constitution).
Mercantile Law; Corporation Law; A corporation has the power to do things necessary to carry out
corporate purpose or business.—Concededly, the power to write-off is not expressly granted in the
LBP Charter. It can be logically implied however, from LBP's authority to exercise the general powers
vested in banking institutions as provided in the General Banking Act. The clear intendment of its
Charter is for LBP to be clothed not only with the express powers granted to it, but also with those
implied, incidental and necessary for the exercise of those express powers. "The test to be applied is
whether the act of the corporation is in direct and immediate furtherance of its business, fairly incident
to the express powers and reasonably necessary to their exercise. If so, the corporation has the power
to do it; otherwise, not" (Montelibano v. Bacolod-Murcia Milling Co. Inc., L-15092, 18 May 1962, 5
SCRA 36).
Same; General Banking Act; The Land Bank of the Philippines is a specialized banking institution
under the supervision of the Central Bank of the Philippines.—lt will thus be seen that LBP is a
unique and specialized banking institution, not an ordinary "government agency" within the scope of
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Section 36 of Pres. Decree No. 1445. As a bank, it is specifically placed under the supervision and
regulation of the Central Bank of the Philippines pursuant to its Charter (Sec. 97, Rep. Act No. 3844,
as amended by Pres. Decree No. 251). In so far as loans and advances are concerned, therefore, it
should be deemed primarily
________________
* EN BANC.
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155
governed by Central Bank Circular No. 958, Series of 1983, which vests the determination of the
frequency of writing-off loans in the Board of Directors of a bank provided that the loans written-off
do not exceed a certain aggregate amount.
PETITION to review the decisions of the Commission on Audit.
Menandro A. Alvarez and Norberto L. Martinez for petitioner.
MELENCIO-HERRERA, J.:
This Petition raises the issue of whether it is within the corporate powers of the Land Bank of the
Philippines (LBP) to waive the penalty charges of P9,636.36 on the loan of the Home Savings Bank
and Trust Company (HSBTC). The LBP asserts that, as a banking institution, its Charter authorizes
it to condone claims or liabilities. The Commission on Audit, on the other hand, maintains that such
power is exclusively vested in the Commission pursuant to Section 36. of Pres. Decree No. 1445, or
the Government Auditing Code.
The records indicate that on 22 July 1980, the Board of Directors of the LBP issued Resolution No.
80-222 (Rollo, pp. 4-5, pp. 91-93) fixing the new rates for penalty charges on past due
loans/amortizations and other credit accommodations. The Resolution also provided that "in cases of
defaults in loan ' payment and other credit accommodations due to unforeseen, highly justifiable
reasons/circumstances beyond the control of the borrower such as damages due to natural calamities,
sickness, adverse government rulings or court judgments, duly processed and verified by the lending
units, penalty charges may be condoned / reduced by the Loan Executive Committee upon
recommendation of the appropriate lending units" (Italics supplied).
Pursuant to this Resolution, LBP, through its Loan Executive Committee, waived the penalty charges
in the amount of Nine Thousand Six Hundred Thirty Six Pesos and Thirty Six Centavos (P9,636.36)
on the loan of HSBTC, a thrift banking institution organized under Philippine laws (Rollo, p. 4).
On 23 September 1986, LBP requested its Corporate Auditor
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156
to pass in audit its waiver of the penalty charges. Said official questioned the waiver and opined that
the power to condone interests or penalties is vested exclusively in the COA but, in the absence of a
categorical ruling on the matter applicable to a government banking institution, referred the LBP
request to the COA in a letter dated 20 January 1987.
In COA Decision No. 551, dated 29 June 1988 (Annex "C", Petition, Rollo, p. 29), the COA held that
the waiver is unauthorized and should outrightly be disallowed in audit, pursuant to Pres. Decree No.
1445, Section 36, infra. Reconsiderations successively sought by LBP met with denial in COA
Decision No. 701, dated 13 December 1988 (Annex "F", Petition, Rollo, p. 38), and in COA Decision
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No. 977, dated 6 June 1989 (Annex "A", ibid., p. 25), both of which Decisions emphasized COA's
exclusive prerogative to settle and/or compromise claims.
Thus, this Petition and Amended Petition erroneously brought under Rules 44 and 43 of the Rules of
Court, respectively, the proper remedy being that of Certiorari under Rule 65 (Article IX (A), Sec. 7,
1987 Constitution).
The issue for resolution is whether or not LBP is authorized to compromise or release claims or
liabilities in whole or in part.
COA maintains that it has the sole prerogative to compromise liabilities to the Government pursuant
to Section 36 of Pres. Decree No. 1445, the Government Auditing Code, which provides, inter alia,
that:
"Sec. 36. Power to compromise claims.—
(1) When the interest of the government so requires, the Commission may compromise or release in
whole or in part, any claim or settled liability to any government agency not exceeding ten thousand
pesos and with the written approval of the Prime Minister, it may likewise compromise or release any
similar claim or liability not exceeding one hundred thousand pesos, the application for relief
therefrom shall be submitted, through the Commission and the Prime Minister, with their
recommendations, to the National Assembly.
x x x
On the other hand, LBP claims that it, too, has the power to condone penalties being a commercial
bank clothed with authority to exercise all the general powers mentioned in the Corporation Law and
the General Banking Act, as provided in
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157
Section 75[12] of its Charter, Rep. Act. No. 3844, as amended by Pres. Decree No. 251, among which
is the power to write off loans and advances (General Banking Act, Sec. 84, infra), which necessarily
includes the lesser power to charge off interests and penalties. LBP also submits that its Charter (Rep.
Act No. 3844, as amended), being a special law, should prevail over the general grant of authority to
COA by Pres. Decree No. 1445 to compromise claims.
We agree with LBP.
LBP was created as a body corporate and government instrumentality to provide timely and adequate
financial support in all phases involved in the execution of needed agrarian reform (Rep. Act No.
3844, as amended, Sec. 74). Section 75 of its Charter vests in LBP specific powers normally exercised
by banking institutions, such as the authority to grant short, medium and long-term loans and
advances against security of real estate and/or other acceptable assets; to guarantee acceptance(s),
credits, loans, transactions or obligations; and to borrow from, or rediscount notes, bills of exchange
and other commercial papers with the Central Bank. In addition to the enumeration of specific powers
granted to LBP, Section 75 of its Charter also authorizes it:
"12. To exercise the general powers mentioned in the Corporation Law and the General Banking Act,
as amended, insofar as they are not inconsistent or incompatible with this Decree."
One of the general powers mentioned in the General Banking Act is that provided for in Section 84
thereof, reading:
"xxx
"Writing-off loans and advances with an outstanding amount of one hundred thousand pesos or more
shall require the prior approval of the Monetary Board" (As amended by PD 71).
It will thus be seen that LBP is a unique and specialized banking institution, not an ordinary
"government agency" within the scope of Section 36 of Pres. Decree No. 1445. As a bank, it is
specifically placed under the supervision and regulation of the Central Bank of the Philippines
pursuant to its Charter (Sec. 97, Rep. Act No. 3844, as amended by Pres. Decree No. 251). In
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158
so far as loans and advances are concerned, therefore, it should be deemed primarily governed by
Central Bank Circular No. 958, Series of 1983, which vests the determination of the frequency of
writing-off loans in the Board of Directors of a bank provided that the loans written-off do not exceed
a certain aggregate amount. The pertinent portion of that Circular reads:
"b. Frequency/ceiling of write-off. The frequency for writing-off loans and advances shall be left to
the discretion of the Board of Directors of the bank concerned. Provided, that the aggregate amount
of loans and advances which may be written-off during the year, shall in no case exceed 3% of total
loans and investments; Provided, further, that charge-offs are made against allowance for possible
losses, earnings during the year and/or retained earnings."
The authority to write-off loans and advances should be construed to include within its scope the
waiver of penalty charges on past due loans, which are of a lesser category.
Concededly, the power to write-off is not expressly granted in the LBP Charter. It can be logically
implied however, from LBP's authority to exercise the general powers vested in banking institutions
as provided in the General Banking Act. The clear intendment of its Charter is for LBP to be clothed
not only with the express powers granted to it, but also with those implied, incidental and necessary
for the exercise of those express powers. "The test to be applied is whether the act of the corporation
is in direct and immediate furtherance of its business, fairly incident to the express powers and
reasonably necessary to their exercise. If so, the corporation has the power to do it; otherwise, not"
(Montelibano v. Bacolod-Murcia Milling Co. Inc., L-15092, 18 May 1962, 5 SCRA 36).
It bears emphasizing that LBP was created to provide adequate financial support to the agrarian
reform program as well as to grant loans to farmers' cooperatives/associations, and to finance and/or
guarantee the acquisition of farm lots transferred to tenant-farmers. Its clientele consists primarily of
agrarian reform beneficiaries, landowners affected by agrarian reform and Land Bank bond-holders.
It should, therefore, be given some measure of flexibility in its operations in order not to hamper it
unduly in the fulfillment of its objectives. Moreover,
159

159
it is only the penalty -charges on a past due loan of the HSBTC that are being condoned and not the
loan itself. The criteria for waiver are likewise specifically spelled out in LBP Resolution No. 80-
222, namely, for "unforeseen, highly justifiable reasons/ circumstances beyond the control of the
borrower such as damages due to natural calamities, sickness, adverse government rulings or court
judgments, duly processed and verified by the appropriate lending units."
But while we rule that LBP is empowered by its corporate charter to waive penalty charges, thereby
overruling COA's avowed exclusive/prerogative to settle and compromise liabilities to the
Government, nevertheless, pursuant to Pres. Decree No. 1445, LBP is still subject to COA's general
audit jurisdiction to see to it that the fiscal responsibility that rests directly with the head of the
government agency has been properly and effectively discharged (Section 25[1]), and as provided for
in its Section 26, reading:
"Section 26. General jurisdiction.—The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those accounts,
and the audit and settlement of the accounts of all persons respecting funds or property received or
held by them in an accountable capacity, as well as the examination, audit, and settlement of all debts
and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and
68 of 120
instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations x
x x."
This is but in keeping with the wide sphere of state audit set forth in the fundamental law of the land.
"SEC. 2 (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
charters, x x x" (Article IX [D], Sec. 2[1], 1987 Constitution).
160
160
YBL (Your Bus Line) vs. NLRC
Having arrived at the foregoing conclusions, we find no need to pass upon the other arguments raised.
WHEREFORE, the Decisions of the Commission on Audit sought to be reviewed are hereby SET
ASIDE in so far as they hold that the Commission on Audit, vis-a-vis the Land Bank, has the exclusive
prerogative to settle and compromise liabilities to the Government. No costs.
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
Cortés, Griño-Aquino, Medialdea and Regalado, JJ., concur.
Paras, J., On leave.
Decisions set aside.
Note.—If the act is one which is lawful in itself and not otherwise prohibited, and is done for the
purpose of serving corporate ends, and reasonably contributes to the promotion of those ends in a
substantial and not in a remote and fanciful sense, it may be fairly considered within the corporation's
charter powers. (National Power Corporation v. Vera, 170 SCRA 721.)
——oOo——
© Copyright 2019 Central Book Supply, Inc. All rights reserved. Land Bank of the Philippines vs.
Commission on Audit, 190 SCRA 154, G.R. Nos. 89679-81 September 28, 1990
Judgment affirmed in full.

Notes.—Even if a firearm used was properly licensed to a security agency, its unauthorized use by
one of its security guards aggravated his offense. (Catalina Security Agency vs. Gonzalez-Decano,
429 SCRA 628 [2004])
A simple reading of Section 1 of R.A. No. 8294 shows that if an unlicensed firearm is used in the
commission of any crime, there can be no separate offense of simple illegal possession of firearms.
(Agote vs. Lorenzo, 464 SCRA 60 [2005])
——o0o——
G.R. No. 171548. February 22, 2008.*

PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. COMMISSION ON
AUDIT, respondent.
Commission on Audit; Audit Disallowance; Judgments; Writs of Execution; It is a fundamental rule
that when a judgment becomes final and executory it becomes immutable and unalterable, the
prevailing party can have it executed as a matter of right, and the issuance of a writ of execution
becomes a ministerial duty of the court.—The Court is confronted with the question of first
impression of whether the COA committed grave abuse of discretion when it disallowed the
condonation of an audit disallowance. There is no dispute that the disallowance of the amounts
disbursed to former Finance Secretary Roberto De Ocampo had been affirmed by this Court in an en
banc Resolution dated 12 November 2002 in Philippine Deposit Insurance Corporation v.
Commission on Audit, and that such affirmance had already attained finality. Being a final and
69 of 120
executory judgment, there was nothing left to be done but to execute the decision in accordance with
its terms. It is a fundamental rule that when a judgment becomes final and executory it becomes
immutable and unalterable, the prevailing party can have it executed as a matter of
_______________
* EN BANC.
474
right, and the issuance of a writ of execution becomes a ministerial duty of the court. The writ of
execution must conform to the judgment to be executed and adhere strictly to the very essential
particulars.
Same; Same; Same; The final order of adjudication thus functions as the writ of execution in audit
proceedings.—Under Rule XII of the COA Rules, execution shall issue upon a decision that finally
disposes of the case. The auditor is tasked to direct the persons liable to pay or refund the amount
disallowed, failing which, an auditor’s order shall be issued directing the cashier, treasurer or
disbursing officer to withhold the payment of any money due such persons. The final order of
adjudication thus functions as the writ of execution in audit proceedings.
Same; Same; Appeals; 1997 COA Revised Rules of Procedure (COA Rules); The appeals process set
forth in Rule V of the COA Rules pertains to appeals from an order, decision or ruling rendered by
the auditor—a memorandum which does not contain a disposition but merely informs the Commission
of the condonation carried out by an agency and refers the matter to the Commission for appropriate
action, is not such an order, decision or ruling that may be appealed under Rule V, and, more
importantly, Rule V cannot, by any stretch of legal interpretation, be presumed to apply when the
question pertains to an incident of execution of a final and executory judgment.—PDIC, however,
claims that it has the right to appeal the 14 May 2004 Memorandum of the supervising auditor under
the COA Rules. It proceeds to cite Rule V thereof which pertains to appeals from the auditor to the
director. The appeals process set forth in Rule V pertains to appeals from an order, decision or ruling
rendered by the auditor. To be subject to appeal, such an order, decision or ruling must contain a
disposition of a case, whether final or interlocutory. A memorandum, such as the one being
questioned by PDIC in this case, which does not contain a disposition but merely informs the
Commission of the condonation carried out by PDIC and refers the matter to the Commission for
appropriate action, is not such an order, decision or ruling that may be appealed under Rule V. More
importantly, Rule V cannot, by any stretch of legal interpretation, be presumed to apply when the
question pertains to an incident of execution of a final and executory judgment.
475
Same; Same; Condonation; An audit disallowance is not subject to condonation following the
principle that what is prohibited directly is also prohibited indirectly—the audit disallowance cannot
be circumvented and legitimized by resorting to condonation.—In dismissing the petition and
affirming the audit disallowance, this Court effectively declared that the payment of the BPDEE to
Secretary De Ocampo is prohibited as it violates the rule against double compensation. This
declaration necessarily also means that condonation of the same payment in favor of the same person
is likewise prohibited. To allow an appeal, as PDIC insists, on the issue of the propriety of the
condonation would also subject the propriety of the audit disallowance to review because the basis
for allowing condonation would be not only that PDIC has the authority to condone in this particular
instance but also that Secretary De Ocampo is entitled to receive the amounts paid to him, a question
that had already been put to rest in the Court’s decision. To settle the matter once and for all, the audit
disallowance is not subject to condonation following the principle that what is prohibited directly is
also prohibited indirectly. The audit disallowance cannot be circumvented and legitimized by
resorting to condonation. Quando aliquid prohibitur ex directo, prohibitur et per obliquum.
Same; Same; Same; Philippine Deposit Insurance Corporation; The authority of Philippine Deposit
Insurance Corporation (PDIC) to condone applies only to ordinary receivables, penalties and
surcharges and must be submitted to the Commission on Audit (COA) before it is implemented.—We
agree with the COA’s ruling that the authority of PDIC to condone applies only to ordinary
receivables, penalties and surcharges and must be submitted to the Commission before it is
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implemented. This procedure would enable the Commission to inquire into the propriety of the
condonation and to determine whether the same will not prejudice the government’s interest,
consistent with COA’s constitutional mandate to examine, audit and settle all accounts of the
government, its subdivisions, agencies and instrumentalities, including government-owned and
controlled corporations.
Same; Same; Same; Same; PDIC’s (Philippine Deposit Insurance Corporation’s) authority to
condone under its charter is circumscribed by the phrase “to protect the interest of the Corporation”
which authority does not include the power to condone a liability that
476
arises from a violation of law.—PDIC’s authority to condone under its charter is circumscribed by
the phrase “to protect the interest of the Corporation.” This authority does not include the power to
condone a liability that arises from a violation of law. With greater reason, the condonation of a
liability that arise from a violation of no less than the Constitution, as in this case, is not encompassed
by PDIC’s charter. It is not in the interest of PDIC to forego audit disallowances as it is neither its
mandate nor its task to perpetuate breaches of law.
Due Process; Due process simply demands an opportunity to be heard.—We are not inclined to put
much stock to PDIC’s allegations of denial of due process. Due process simply demands an
opportunity to be heard and this opportunity was not denied PDIC. PDIC fully participated in the
proceedings pertaining to the audit disallowance up until the same was finally upheld by this Court.
It was also given sufficient opportunity to defend the validity of its exercise of its authority to
condone.
PETITION for review on certiorari of a decision of the Commission on Audit.
Romeo M. Mendoza, Jr., Ma. Antonette Brillantes-Bolivar, Marivic C. Arriola & Raymond C. De
Lemos and The Government Corporate Counsel for Phil. Deposit Insurance Corporation.
The Solicitor General for respondent.
TINGA, J.:
The Philippine Deposit Insurance Corporation (PDIC) seeks succor from the Court against an alleged
infringement of its right to due process on account of Decision No. 2006-0051 of the Commission on
Audit (COA or Commission) dated 19 January 2006 which denied its request to permit the
condonation of an audit disallowance.
_______________
1 Rollo, pp. 35-40.
477
The following factual antecedents are undisputed:
“The former Finance Secretary, Mr. Roberto de Ocampo, in his capacity as ex officio Chairman of
the Philippine Deposit Insurance Corporation (PDIC) Board for the years 1994-1996 received a total
amount of P440,068.62 representing Business Policy Development and Enforcement Expenses
(BPDEE) and Christmas gift checks. The Auditor thereat issued Notice of Disallowance No. 98-002
(94-96) dated February 17, 1997, disallowing in audit the payment of said expenses on the ground
that it partook of the nature of additional compensation or remuneration in violation of the rule on
multiple positions proscribed under Section 13, Article VII of the Philippine Constitution and Section
2(9), Republic Act No. 3591, as amended. PDIC sought reconsideration of the subject disallowance
but the same was denied in COA Decision No. 2001-015 dated January 23, 2001 and COA Resolution
No. 2002-215 dated September 24, 2002.
On appeal by the PDIC to the Supreme Court En Banc, the latter in its Resolutions dated November
12, 2002 and January 21, 2003, respectively, in GR No. 155317 entitled “Philippine Deposit
Insurance Corporation (PDIC) v. Commission on Audit” affirmed with finality said COA decision
and resolution. Apropos to the finality of the decision of the Supreme Court, the Final Order of
Adjudication (FOA) was issued to PDIC for enforcement of the decision pursuant to Sections 1 to 4
Rule XII of the 1997 Revised Rules of Procedure and Item III.A.15 of COA Memorandum No. 2002-
71 of 120
053 dated August 26, 2002. However, instead of complying with the Order, PDIC condoned the
amount of P413,866.62 invoking its power to condone under Section 8, paragraph 12 of its charter.
On December 22, 2004, the Chairman, this Commission, referred the matter to the Office of the
Solicitor General (OSG) requesting assistance in the filing of appropriate action against PDIC
officials for failure to comply with the FOA and the final decision of the Supreme Court on the appeal.
In a letter dated January 31, 2005, the PDIC thru its counsels, seeks to have its right to appeal
reinstated and sought reconsideration of the action taken in view of the fact that it did not allegedly
receive any notice of disallowance of the condonation and that its management was deprived of its
right
478
to be heard as it was never provided a copy of the Resident Auditor’s Memorandum dated May 14,
2004.”2
The COA ruled that PDIC cannot feign violation of its right to due process because it fully
participated in the appeals process since the time the disbursements were disallowed. It cannot validly
invoke its authority under its charter to condone the disallowance because the same had already been
affirmed by the Supreme Court. To allow PDIC to condone the disallowance would be tantamount to
sanctioning the indirect violation of the prohibition against double compensation and the final
Supreme Court decision. Thus, COA denied PDIC’s request to uphold the condonation and to recall
COA’s letter to the Office of the Solicitor General (OSG) requesting the latter’s assistance in the
judicial enforcement of the disallowance.
In its Memorandum3 dated 12 February 2007, PDIC claims that COA Decision No. 2006-005 was an
arbitrary exercise of the Commission’s discretion because it deprived PDIC of its right to be heard
on the validity of the exercise of its right to condone a settled liability. The COA resident auditor
allegedly failed to furnish it with notice of the Memorandum dated 14 May 2004 disallowing the
condonation, and thereby deprived PDIC of its right to appeal from the disallowance as provided
under the 1997 COA Revised Rules of Procedure (COA Rules).4
The OSG, on behalf of the Commission, asserts in its Memorandum5 dated 20 February 2007 that
PDIC’s right to appeal from the Memorandum dated 14 May 2004 is already barred by res judicata.
Inasmuch as the validity of the disallowance had already been affirmed by the Supreme Court, PDIC
no longer had any recourse but to abide by the judg-
_______________
2 Id., at pp. 35-36.
3 Id., at pp. 197-211.
4 Id., at pp. 191-212.
5 Id., at pp. 213-237.
479
ment. Allowing an appeal from the disallowance of the condonation would mean to delve into the
validity of the disallowance of the disbursement once again. The Final Order of Adjudication dated
October 7, 2003 was issued as a matter of course to execute the disallowance.
Moreover, the resident auditor was not under obligation to furnish PDIC with a copy of the
Memorandum dated 14 May 2004 because the same did not contain any ruling or order but merely
informed COA that PDIC condoned the disallowance and referred the matter to the Commission for
appropriate action.
The Court is confronted with the question of first impression of whether the COA committed grave
abuse of discretion when it disallowed the condonation of an audit disallowance.
There is no dispute that the disallowance of the amounts disbursed to former Finance Secretary
Roberto De Ocampo had been affirmed by this Court in an en banc Resolution dated 12 November
2002 in Philippine Deposit Insurance Corporation v. Commission on Audit6 and that such affirmance
had already attained finality.7 Being a final and executory judgment, there was nothing left to be done
but to execute the decision in accordance with its terms.
It is a fundamental rule that when a judgment becomes final and executory it becomes immutable and
unalterable, the prevailing party can have it executed as a matter of right, and the issuance of a writ
72 of 120
of execution becomes a ministerial duty of the court. The writ of execution must conform to the
judgment to be executed and adhere strictly to the very essential particulars.8
Following this rule, PDIC should have reasonably expected that an order directing the payment or
refund of the disal-
_______________
6 G.R. No. 155317.
7 Rollo, p. 101; Resolution dated January 21, 2003.
8 Buenviaje v. Court of Appeals, 440 Phil. 84, 94; 391 SCRA 440, 447 (2002).
480
lowed amount was forthcoming in accordance with the COA Rules as, in fact, a Final Order of
Adjudication9 was issued on October 7, 2003.
Under Rule XII of the COA Rules, execution shall issue upon a decision that finally disposes of the
case. The auditor is tasked to direct the persons liable to pay or refund the amount disallowed, failing
which, an auditor’s order shall be issued directing the cashier, treasurer or disbursing officer to
withhold the payment of any money due such persons.10 The final order of adjudication thus functions
as the writ of execution in audit proceedings.
Notwithstanding the final order of adjudication, PDIC, invoking Sec. 8, par. 1211 of its charter, issued
Resolution No. 2003-09-157 dated 6 April 2004, condoning the audit disallowance. The
Memorandum dated 14 May 2004 of COA Supervising Auditor Virgie A. Paz came in the heels of
PDIC Resolution No. 2003-09-157 and referred the condonation to COA’s Legal and Administration
Office for appropriate action in view of the supervising auditor’s opinion that PDIC cannot condone
an audit disal-
_______________
9 Rollo, pp. 103-104.
10 Commission on Audit Revised Rules of Procedure (1997), Rule XII.
Section 1. Execution of Decision.—Execution shall issue upon a decision that finally disposes of
the case. Such execution shall issue as a matter of right upon the expiration of the period to appeal
therefrom if no appeal has been fully perfected.
Section 2. Notification of Person(s) Liable.—The Auditor shall issue an order directing the
person(s) liable to pay/refund the amount disallowed within five (5) days from the lapse of the period
to appeal.
Section 3. Withholding of money due.—In case of failure of the person(s) liable to refund the
amount disallowed/charged within the period specified in the preceding section, the Auditor shall
issue the Auditor’s Order directing the Cashier/Treasurer/Disbursing Officer to withhold the payment
of any money due such person(s).
11 Twelfth—To compromise, condone or release, in whole or in part, any claim or settled liability to
the Corporation, regardless of the amount involved, under such terms and conditions as may be
imposed by the Board of Directors to protect the interest of the Corporation. [An Act Establishing
The Philippine Deposit Insurance Corporation, Defining Its Powers And Duties And For Other
Purposes].
481
lowance which had already been upheld by this Court.
The COA Chairman ultimately referred the matter to the OSG for the filing of the appropriate suit
against responsible PDIC officials in accordance with the COA Rules.12
The foregoing action taken by the COA was obviously merely an execution of the Court’s final
decision upholding the audit disallowance. In contrast, PDIC Resolution No. 2003-09-157 appears to
have been borne out of a desire to get around the execution of the Supreme Court decision upholding
the audit disallowance. This is evident from the language of the resolution which mentions that the
PDIC “[B]oard noted that the Supreme Court denied PDIC’s petition due to technical reasons and not
on the merits.”13
73 of 120
Whatever may have been the reason for the dismissal of PDIC’s petition, the fact remains that the
decision upholding
_______________
12 Commission on Audit Revised Rules of Procedure (1997), Section 4. Non-compliance with the
Auditor’s Order.—In case of failure by the Cashier/Treasurer/Disbursing Officer to comply with the
Auditor’s Order, the Auditor shall notify the agency head concerned of the non-compliance except
where the agency head himself is one of the persons held liable for the disallowaqnce. At the same
time the Auditor shall report the matter to the COA Director concerned recommending any or all of
the following actions:
(a) Recommendation to the Commission Proper to cite defaulting party in contempt;
(b) Referral of the matter to the Solicitor General for the filing of appropriate civil suit;
(c) Referral to the Ombudsman for the filing of appropriate administrative or criminal action.
13 Rollo, p. 102.
482
the audit disallowance had become final and executory. At the risk of sounding trite, the decision is
now unalterable and immutable.14 It is no longer subject to any revision, modification or appeal.
PDIC, however, claims that it has the right to appeal the 14 May 2004 Memorandum of the
supervising auditor under the COA Rules. It proceeds to cite Rule V thereof which pertains to appeals
from the auditor to the director.
The appeals process set forth in Rule V pertains to appeals from an order, decision or ruling rendered
by the auditor. To be subject to appeal, such an order, decision or ruling must contain a disposition
of a case, whether final or interlocutory. A memorandum, such as the one being questioned by PDIC
in this case, which does not contain a disposition but merely informs the Commission of the
condonation carried out by PDIC and refers the matter to the Commission for appropriate action, is
not such an order, decision or ruling that may be appealed under Rule V.
More importantly, Rule V cannot, by any stretch of legal interpretation, be presumed to apply when
the question pertains to an incident of execution of a final and executory judgment.
In dismissing the petition and affirming the audit disallowance, this Court effectively declared that
the payment of the BPDEE to Secretary De Ocampo is prohibited as it violates the rule against double
compensation. This declaration necessarily also means that condonation of the same payment in favor
of the same person is likewise prohibited.
To allow an appeal, as PDIC insists, on the issue of the propriety of the condonation would also
subject the propriety of the audit disallowance to review because the basis for allowing condonation
would be not only that PDIC has the authority to condone in this particular instance but also that
_______________
14 Honoridez v. Mahinay, G.R. No. 153762, August 12, 2005, 416 SCRA 646, 655.
483
Secretary De Ocampo is entitled to receive the amounts paid to him, a question that had already been
put to rest in the Court’s decision.
To settle the matter once and for all, the audit disallowance is not subject to condonation following
the principle that what is prohibited directly is also prohibited indirectly. The audit disallowance
cannot be circumvented and legitimized by resorting to condonation. Quando aliquid prohibitur ex
directo, prohibitur et per obliquum.
We agree with the COA’s ruling that the authority of PDIC to condone applies only to ordinary
receivables, penalties and surcharges and must be submitted to the Commission before it is
implemented. This procedure would enable the Commission to inquire into the propriety of the
condonation and to determine whether the same will not prejudice the government’s interest,
consistent with COA’s constitutional mandate to examine, audit and settle all accounts of the
government, its subdivisions, agencies and instrumentalities, including government-owned and
controlled corporations.
Furthermore, PDIC’s authority to condone under its charter is circumscribed by the phrase “to protect
the interest of the Corporation.”15 This authority does not include the power to condone a liability that
74 of 120
arises from a violation of law. With greater reason, the condonation of a liability that arise from a
violation of no less than the Constitution, as in this case, is not encompassed by PDIC’s charter. It is
not in the interest of PDIC to forego audit disallowances as it is neither its mandate nor its task to
perpetuate breaches of law.
We are not inclined to put much stock to PDIC’s allegations of denial of due process. Due process
simply demands an opportunity to be heard and this opportunity was not denied PDIC.16 PDIC fully
participated in the proceedings pertaining
_______________
15 Supra note 11.
16 J.D. Legaspi Construction v. National Labor Relations Commission, 439 Phil. 13, 20; 390 SCRA
233, 238 (2002).
484
to the audit disallowance up until the same was finally upheld by this Court. It was also given
sufficient opportunity to defend the validity of its exercise of its authority to condone.
In its letter to the COA dated 31 January 2005,17 PDIC raised the issue of whether it had validly
exercised its authority under its charter to condone the disallowance of the BPDEE paid to Secretary
De Ocampo.
The Commission resolved the issue in the negative, decreeing that an audit disallowance which had
been affirmed by this Court with finality can no longer be the subject of condonation. Otherwise, the
constitutional prohibition against double compensation would be violated.
The fact that PDIC was heard on the issue of the validity of the condonation already suffices. Denial
of due process is the total lack of opportunity to be heard. Such a situation does not obtain in this
case.
WHEREFORE, the petition is DISMISSED. No pronouncement as to costs.
SO ORDERED.
Puno (C.J.), Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona,
Carpio-Morales, Azcuna, Chico-Nazario, Velasco, Jr., Reyes and Leonardo-De Castro, JJ., concur.
Nachura, J., No Part; Signed pleading as Solicitor General.
Petition dismissed.
Notes.—Price findings reflected in a report are not, in the absence of the actual canvass sheets and/or
price quotations from identified suppliers, valid bases for outright disallowance of agency
disbursements for government projects. (Na-
_______________
17 Rollo, pp. 109-111.
VOL. 218, JANUARY 29, 1993

203
Commissioner of lnternal Revenue vs. Commission on Audit
G.R. No. 101976. January 29, 1993.*
THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE COMMISSION ON
AUDIT, respondent.
G.R. No. 102258. January 29, 1993.*
TIRSO B. SAVELLANO, petitioner, vs. THE COMMISSION ON AUDIT, respondent.
Constitutional Law; Commission on Audit; COA is a constitutional agency vested with the power,
authority and duty to examine, audit and settle all accounts pertaining to the revenue and receipts of
and expenditures or uses of funds and property owned or held in trust by the government or any of
its subdivisions, agencies or instrumentalities.—The final determination by the Department of
Finance, through the recommendation of the BIR, of petitioner Savellano's entitlement to the
informer's reward is, under Section 90, conclusive only upon the executive agencies concerned.
Respondent COA is not an executive agency. It is one of the three (3) independent constitutional
75 of 120
commissions. Specifically, it is the constitutional agency vested with the "power, authority and duty
to examine, audit and settle all
________________
* EN BANC.
204
204
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property
owned or held in trust by x x x the government, or any of its subdivisions, agencies or instrumentalities
x x x."
Same; Same; Final determination made by the Finance Department cannot bind respondent COA or
foreclose its review thereof in the exercise of its constitutional function and duty to ensure that public
funds are expended and used in conformity with law.—The final determination made by the Finance
Department cannot bind respondent COA or foreclose its review thereof in the exercise of its
constitutional function and duty to ensure that public funds are expended and used in conformity with
law. To hold otherwise would be to ignore the clear mandate and the equally clear implications of
Section 3, Article IX (D) of the 1987 Constitution.
Same; Same; The exercise by respondent COA 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 gov-
ernment such as ours.—The exercise by respondent COA of its general audit power is among the
constitutional mechanisms that give life to the check-and-balance system inherent ent in a republican
form of government such as ours. Taken in this light, such exercise cannot be regarded as an unlawful
or unwarranted invasion of, or interference with, the authority and power of the executive agency
concerned to determine whether or not a person is entitled to a reward provided by law and the amount
thereof.
Same; Same; Disallowance in audit by respondent COA may be set aside and nullified by the Court
if done with grave abuse of discretion.—This is not to say, however, that the disallowance in audit
by respondent COA is in itself final. The same may be set aside and nullified by this Court, if done
with grave abuse of discretion.
Same; Same; Fact that the informer's reward was sought and given in relation to tax delinquencies of
government agencies provides no reason for disallowance.—That the informer's reward was sought
and given in relation to tax delinquencies of government agencies provides no reason for
disallowance. The law on the matter makes no distinction whatsoever between delinquent taxpayers
in this regard, whether private persons or corporations, or public or quasi-public agencies, it being
sufficient for its operation that the person or entity concerned is subject to, and violated, revenue laws,
and the informer's report thereof resulted in the recovery of revenues. It is elementary
205
VOL. 218, JANUARY 29, 1993

205
that where the law does not distinguish, none must be made. Ubi lex non distinguit nec nos distinguere
debemos.
PADILLA, J., Dissenting opinion
Constitutional Law; Commission on Audit; It would appear logical to conclude that the enforcement
powers sought to be strengthened by increasing the informer's reward refers to cases involving purely
private taxpayers.—It would appear logical to conclude that the "enforcement powers" sought to be
strengthened by increasing the informer's reward refers to cases involving purely private taxpayers
76 of 120
since no less than the Constitution has provided for its own "informer" in the case of government
entity-taxpayers. This "informer" is, of course, the Commission on Audit not to mention the officials
of the very government entity-taxpayers concerned who are all presumed to be regularly performing
their duties.
PETITIONS to review the decisions of the Commission on Audit.
Law Firm of Armando A. Armovit for petitioner in G.R. No. 102258.
NARVASA, C.J.:
The issues joined in these consolidated petitions focus, as it were, on the general audit jurisdiction of
the Commission on Audit vis-a-vis the Bureau of Internal Revenue's power to determine entitlement
to the tax informer's reward under Section 3161 of the National Internal Revenue Code.
On June 25, 1986, petitioner Tirso B. Savellano furnished the Bureau of Internal Revenue (BIR) with
a confidential affidavit of information2 denouncing the National Coal Authority (NCA) and the
Philippine National Oil Company (PNOC) for non-payment of taxes totalling P234 Million on interest
earnings of their respective money placements with the Philip-
______________
1 Now Section 281.

2 Docketed as Confidential Information No. 1853, Annex "C", Reply to Respondent's Comment, p.
144, Rollo in G.R. No. 101976.
206
206
pine National Bank (PNB) since October 15, 1984 to said date. Investigation by the BIR confirmed
the reported tax liabilities, and upon demands thereafter made, NCA and PNOC paid to the BIR the
following amounts of taxes corresponding to the period October 15, 1984 to August 31, 1986:
NCA Schedule of Payments
Confirmation Receipt No. Date of Payment Amount Paid
B6402543
9-10-86
P 1,067,682.86
B7373646
10-15-86
14,918,482.19
Total
P15,986,165.05
PNOC Schedule of Payments
Confirmation Receipt No. Date of Payment Amount Paid
B6402542
9-10-86
P 2,952,349.23
B12581298
6-30-87
31,003,129.89
B12581904
7-31-87
30,000,000.00
B12601251
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10-01-87
30,000,000.00
Total
P93,955,479.12
By a letter dated November 28, 1986, then BIR Commissioner Bienvenido Tan, Jr. recommended to
the Minister of Finance payment to petitioner Savellano of an informer's reward equivalent to 15%
of the amount of P15,986,165.00 paid by NCA, or P2,397,924.75.3 Said recommendation having
been favorably passed upon by the Committee on Rewards of the Department of Finance, the same
was approved by then Deputy Minister of Finance Alfredo Pio de Roda, Jr.;4 and Savellano was in
due time paid the aforesaid amount.
The records do not show when the informer's reward in the PNOC case was recommended for
payment; only that it was approved by then Finance Undersecretary Marcelo Fernando.5 Petitioner
Savellano was paid his informer's reward in the
______________
3 Annex "A", Petition in G.R. No. 102258, pp. 21-22, Rollo,

4 Annex "B", Ibid., p. 23, Rollo.
5 Petition in G.R. No. 101976, p. 6, Rollo.
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207
PNOC case in the total amount of P 14,093,321.89 in four (4) installments, the last of them on
December 1, 1987.6
On February 8, 1989, respondent Commission on Audit (COA) rendered COA Decision No. 7407
disallowing in audit the payment of informer's reward to petitioner Savellano in the NCA case on the
ground that payment of an informer's reward under Section 281 of the National Internal Revenue
Code is conditioned upon the actual recovery or collection of revenues, and no such revenue or
income was actually realized or recovered or any benefit accrued to the government, since two (2)
government agencies were involved. The income realized by the BIR out of the withholding taxes
paid by the NCA was a reduction of the income of the latter, resulting in a zero effect in revenues
realized or recovered. Respondent COA also impugned the propriety of the claim for informer's
reward based on intergovernmental violations. In its view, allowance of claims of the kind would not
only place a premium upon violations committed by government agencies but also induce collusion
among government offices in order to obtain the informer's reward. It reasoned that if the State cannot
be held responsible for the tortious acts of its employees unless the latter acted as special agents, with
more reason it should not be held liable to pay informer's reward upon violations committed by
government agencies.8
Petitioner Commissioner of Internal Revenue sought reconsideration of COA Decision No. 740. He
was followed by petitioner Tirso Savellano and Mrs. Potenciana Evangelista, former Chief of the BIR
Accounting Division after the COA Resident Auditor issued Revised Certificate of Settlement and
Balances (CSB) No. 89-0001-104(c) dated July 20,1989,9 directing the withholding of salaries or any
amount due them and to the following BIR officials/employees/persons who were being held
personally liable for the disallowed amount of
______________
6 p. 3, Annex "A", Submission and Motion for Prompt Resolution of Petitioner Savellano in G.R.
No. 102258.
7 Annex "A", Petitioner in G.R. No. 101976, pp. 24-27, Rollo.
8 Annex "A", Petition in G.R. No. 101976, p. 26, Rollo.
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9 Annex "A", Reply to Respondent's Comment, p. 139, Rollo in
208
208
P11,397,924.75:10
Atty. Jaime Maza, Chief, Legal Division
Ms. Potenciana Evangelista, Chief, Rev. Acctg. Division
Mr. Jesus Parado, Chief, Personnel & Adm. Office
Atty. Vicente Y. Puno, Asst. Commissioner, Personnel & Adm.
Mr. Marcelo N. Fernando, Undersecretary of Finance
Mr. Eufracio Santos, Deputy Commissioner, BIR
Mr. Jose A. Resurreccion, Asst. Commissioner, Administrative
Ms. Marilyn Soledad, Researcher, Legal Division
Atty. Alicia P. Clemeno, Chief, Law Division
Mr. Melchor S. Ramos, Chief, Financial & Mgt.
Mrs. Elena C. Pineda, Special Disbursing Officer
These pleas were denied due course in COA Decision No. 1930,11 denying due course to the requests
for reconsideration. Hence, these separate petitions, which were ordered consolidated in the Court's
Resolution dated March 10, 1992 in G.R. No. 102258.12
In seeking nullification of COA Decisions Nos. 740 and 1930 in G.R. No. 101976, petitioner
Commissioner of Internal Revenue argues that: the approval by the Department of Finance of the
claim for informer's reward of petitioner Savellano is conclusive upon the executive agencies
concerned, respondent COA included, as it constitutes the final determination of the proper
administrative authority under Section 90 of the Government Auditing Code of the Philippines; there
were actual cash collections of P 109,941,644.17 from NCA and PNOC for non-payment of
withholding taxes on interest earnings, which amount had accrued to the General Fund; Section 316
(now 281) of the National Internal Revenue Code (NIRC) entitling an informer to a reward for
information leading to the collection of internal revenue taxes is clear and needs no interpretation;
and assuming that it does, it should be interpreted in G.R. No. 101976.
_______________
10 This amount includes part of the informer's reward paid in the PNOC case.
11 Annex "B", Petition in G.R. No. 101976, pp. 28-31, Rollo.
12 p. 110, Rollo in G.R. No. 102258.
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209
favor of the informer; NCA and PNOC have separate personalities from the Bureau of Internal
Revenue as well as the Government and the State; and superior and subordinate officers of the
government are not civilly liable for acts done in the performance of their official duties.
For his part, petitioner Tirso Savellano questions the COA disallowance on the ground that the
express statutory grant to BIR of the power to allow or disallow claims for payment of tax informer's
reward is an implied statutory denial of the same power to the COA, which would otherwise transform
said respondent into "a super tax authority" and "undermine and dilute the substance and efficacy of
the very entity created and empowered by law to collect taxes and augment the government's revenue
collecting potentials."13 He further maintains that there was "actual" collection of tax by the BIR
from the NCA and PNOC because while said agencies are governmentowned corporations, they
derive their income from the exercise of corporate/proprietary/private functions, which does not, in
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and by itself, constitute public funds. It is only when such income is taxed that whatever part thereof
corresponds to the amount of the tax becomes part of the national treasury, thereby redounding to the
benefit of the government.
Required to comment on the petition in G.R. No. 101976, and later, on the petition in G.R. No.
102258, the Solicitor General begged off on the ground that "its position is different from the stand
taken by respondent Commission on Audit (COA) in the present case" and sought to be excused from
further representing respondent COA, in whose behalf he prayed for a reasonable period of time to
file its own comment.14 In its Resolution of January 16, 1992 in G.R. No. 101976, this Court noted
the Solicitor General's manifestation, excused him from further representing respondent COA in the
case and required the latter to file its own comment within ten (10) days from notice.15 In G.R. No.
102258, however, the Court denied a similar plea. It required the Solicitor General to explain within
ten (10) days
_____________
13 p. 8, Petition, p. 14, Rollo in G.R. No. 102258.

14 p. 46, Rollo, G.R. No. 101976; p. 39, Rollo, G.R. No. 102258.
15 p. 49, Rollo, G.R. No. 101976.
210
210
from notice why his position was different from COA's, and gave said respondent a period of ten (10)
days to file its comment on the petition, if it so desired.16
Briefly put, the Solicitor General's explanation is that he found COA's disallowance of the informer's
reward erroneous because: government corporations are subject to tax under the NIRC; having
personalities distinct from the government, if they evade payment of their taxes, the amounts
corresponding to such liabilities could be utilized for purposes exclusive to them; contrarily, if they
do pay their taxes, the amounts so paid accrue to the General Fund; Section 281 of the NIRC does
not make any distinction among taxpayers from whom taxes are eventually recovered; it simply
prescribes that for an informer to be entitled to the reward, the information he furnishes should result
in the recovery of revenues; statutes offering reward must be liberally construed in favor of informers;
the possibility of collusion is not sufficient basis for disallowance, since collusion cannot be assumed,
while the official acts of the BIR and the Department of Finance are entitled to a presumption of
regularity; even if the taxpayers referred to by an informer are private entities, the possibility of
collusion still remains; such a consideration, moreover, goes into the wisdom of the law a matter that
concerns the legislature and not the courts, much less, COA; and there being no evidence of any
irregularity, the determination made by the BIR should be binding upon COA pursuant to the
Government Auditing Code.
Respondent COA questions the personality of petitioner Commissioner of Internal Revenue to bring
the instant suit, arguing that the Commissioner is not an aggrieved party adversely affected by the
assailed decisions. In justification of its actions, COA invokes its constitutionally-vested audit
jurisdiction over all government agencies, to which, it contends, the statutorily granted power of the
Secretary of Finance under Section 90, P.D. 1445 must yield. It insists that petitioner Savellano is not
entitled to the informer's reward because there was no actual collection of revenues under the benefit-
to-thegovernment rule; and Savellano's alleged information did not
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16 Resolution of February 4, 1992.

211
VOL. 218, JANUARY 29, 1993
80 of 120
211
lead to the discovery of a fraud. It characterizes the payment of informer's reward as irregular, being
predicated upon violations committed by government agencies, and would have the persons named
in CSB No. 89-0001-104 (c) held liable for participation in illegal or irregular disbursements of public
funds by reason of their respective duties.
The Commissioner of Internal Revenue, in assailing respondent COA's authority to disallow the
payment of informer's reward, relies heavily on Section 90 of P.D. No. 1445, otherwise known as the
"Government Auditing Code of the Philippines." A reading of said provision, which is quoted
hereunder, shows that such reliance is misplaced:
Section 90. Payment of rewards.—When a reward becomes payable by authority of law for
information given relative to any offense or for any act done in connection with the apprehension of
the offender, the reward shall, in the absence of special provisions, be paid in such manner as shall
be prescribed by executive order. The final determination by the proper administrative authority
pursuant to law or any such order, as to whether or not the persons concerned are entitled to any
reward and the amount thereof, shall be conclusive upon the executive agencies concerned as regards
the liability of the government.
The final determination by the Department of Finance, through the recommendation of the BIR, of
petitioner Savellano's entitlement to the informer's reward is, under Section 90, conclusive only upon
the executive agencies concerned. Respondent COA is not an executive agency. It is one of the three
(3) independent constitutional commissions.17 Specifically, it is the constitutional agency vested with
the "power, authority and duty to examine, audit and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property owned or held in trust by x x x the
government, or any of its subdivisions, agencies or instrumentalities x x x."18 To ensure the effective
discharge of its functions, it has been empowered, subject to the limitations imposed by Article IX
(D)
_____________
17 Sec. 1, Art. IX (A), 1987 Constitution.

18 Sec. 2 (1), Article IX (D), 1987 Constitution.
212
212
of the 1987 Constitution, 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.19
The final determination made by the Finance Department cannot bind respondent COA or foreclose
its review thereof in the exercise of its constitutional function and duty to ensure that public funds are
expended and used in conformity with law. To hold otherwise would be to ignore the clear mandate
and the equally clear implications of Section 3, Article IX (D) of the 1987 Constitution providing
that:
"No law shall be passed exempting any entity of the government or it subsidiary in any guise
whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit."
The exercise by respondent COA 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. Taken in this light, such exercise cannot be regarded as an unlawful or unwarranted invasion
of, or interference with, the authority and power of the executive agency concerned to determine
whether or not a person is entitled to a reward provided by law and the amount thereof. As held in
Dingcong us. Guingona, Jr., et al.:
81 of 120
"Constitutional Law; Administrative Law; Power and authority of COA—Not only is the
Commission on Audit (COA) vested with the power and authority, but it is also charged with the
duty, to examine, audit and settle all accounts pertaining to xxx the expenditures or uses of funds xxx
owned by, or pertaining to, the Government or any of its subdivisions, agencies, or instrumentalities
(Article IX [D], Section 2[1], 1987 Constitution). That authority extends to the accounts of all persons
respecting funds or properties received or held by them in an accountable capacity (Section 26, P.D.
No. 1445). In the
______________
19 Sec. 2(2), Ibid.

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213
exercise of its jurisdiction, it determines whether or not the fiscal responsibility that rests directly
with the head of the government agency has been properly and effectively discharged (Section 25[1],
ibid.), and whether or not there has been loss or wastage of government resources. It is also
empowered to review and evaluate contracts (Section 18[4], ibid.). And, after an audit has been made,
its auditors issue a certificate of settlement to each officer whose account has been audited and settled
in whole or in part, stating the balances found due thereon and certified, and the charges or differences
arising from the settlement by reason of disallowances, charges or suspensions (Section 82, ibid.)."
This is not to say, however, that the disallowance in audit by respondent COA is in itself final. The
same may be set aside and nullified by this Court, if done with grave abuse of discretion.
The informer's reward granted to petitioner Savellano is based on Section 316 (now 281) of the
National Internal Revenue Code.20 It reads:
Sec. 281. Informer's reward to persons instrumental in the discovery of violation of the National
Internal Revenue Code and in the discovery and seizure of smuggled goods.
(1) For violation of the National Internal Revenue Code. Any person except an internal revenue
official or employee, or other public official, or his relative within the sixth grade of consanguinity,
who voluntarily gives definite and sworn information, not yet in the possession of the Bureau of
Internal Revenue, leading to the discovery of frauds upon internal revenue laws or violation of any
of the provisions thereof, thereby resulting in the recovery of revenues, surcharges and fees and/or
the conviction of the guilty party and/or imposition of any fine or penalty, shall be rewarded in the
sum equivalent to fifteen per centum of the revenues, surcharges or fees recovered and/or fine or
penalty imposed and collected. The same amount of reward shall also be given to an informer where
the offender has offered to compromise the violation of law committed by him and his offer has been
accepted by the Commissioner and in such a case, the fifteen per centum reward fixed herein shall be
based on the amount agreed upon in the compromise and collected from the
_______________
20 162 SCRA 782.

214
214
offender: Provided, That should no revenues, surcharges or fees be actually recovered or collected,
such person shall not be entitled to a reward: Provided, further, That the information mentioned herein
shall not refer to a case already pending or previously investigated or examined by the Commissioner
or any of his deputies, agents or examiners, or the Secretary of Finance or any of his deputies or
82 of 120
agents: Provided, finally, That the reward provided herein shall be paid under the regulations issued
by the Commissioner of Internal Revenue with the approval of the Secretary of Finance.
One of the reasons for respondent COA's disallowance of the informer's reward under consideration
is that there was actually no revenue realized or recovered as two (2) government agencies were
involved. This view is simplistic and merits no concurrence. It overlooks the fact that the two (2)
government agencies involved, NCA and PNOC, possess legal personalities separate and distinct
from the Philippine government. Although both are government-owned and controlled corporations,
NCA and PNOC perform proprietary functions. Their revenues do not automatically devolve to the
general coffers of the government. Unless transferred to the Philippine government through the
vehicle of taxation, no part of their revenues is available for appropriation by the Legislature for
expenditure in government projects; such revenues remain said agencies' in their entirety, to be
applied to and expended for their own exclusive purpose. Clearly, then, when said revenues are
subjected to tax, the portion thereof corresponding to such tax becomes, in its own, revenue for the
government accruing to the General Fund.
That the informer's reward was sought and given in relation to tax delinquencies of government
agencies provides no reason for disallowance. The law on the matter makes no distinction whatsoever
between delinquent taxpayers in this regard, whether private persons or corporations, or public or
quasipublic agencies, it being sufficient for its operation that the person or entity concerned is subject
to, and violated, revenue laws, and the informer's report thereof resulted in the recovery of revenues.
It is elementary that where the law does not distinguish, none must be made. Ubi lex non distinguit
nec nos
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215
distinguere debemos.21
The Solicitor General correctly dismisses the mere possibility of collusion to obtain the informer's
reward as sufficient ground for disallowance. Collusion cannot be presumed. It must be proved by
clear and convincing evidence. In the case at bar, there is no showing of collusion between petitioner
Savellano as informer and any official or employee of the BIR or the Department of Finance. Neither
is there any evidence to overcome the presumption of regularity22 enjoyed by the official acts of the
BIR and the Department of Finance in approving the claim of petitioner Savellano for informer's
reward.
Respondent COA considers the payment of informer's reward in this case as placing a premium upon
violations committed by government agencies and therefore, improper. At first blush, it would appear
that by paying the informer's reward, the government punishes itself for violations committed by its
own agencies. This, however, is more apparent than real. The delinquencies of these agencies are not
condoned, much less rewarded. It is the person whose information led to the discovery of their
transgressions who is being rewarded. Although this results in a reduction in the amount of revenues
actually received, the net effect is that the government still gains from the remaining amount paid,
which otherwise would have been lost to it.
WHEREFORE, the consolidated petitions are hereby GRANTED. The assailed decisions of
respondent Commission on Audit are set aside. No pronouncement as to costs.
_______________
21 Philippine British Assurance Co., Inc. vs. IAC, 150 SCRA 520; citing Colgate-Palmolive Phil.
Inc. vs. Gimenez, G.R. No. 14787, Jan. 28,1961,1 SCRA 267; Libudan vs. Gil, G.R. No. 21163, May
17, 1972, 45 SCRA 17; Dominador vs. Derahunan, 49 Phil. 452 (1926); Guevarra vs. Inocentes, G.R.
No. 25577, March 15, 1966, 16 SCRA 379; Director of Lands vs. Gonzales, G.R. No. 32522, January
28, 1963; Alfato vs. Commission on Elections, G.R. No. 52749, March 31, 1981, 103 SCRA 741;
Statutory Construction by Ruben E. Agpalo, 1986, pp. 143-144.
83 of 120
22 Sec. 3(m), Rule 131, Revised Rules of Court.
216
216
SO ORDERED.
Gutierrez, Jr., Cruz, Feliciano, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Campos, Jr., JJ., concur.
Padilla, J., See dissenting opinion.
DISSENTING OPINION
PADILLA, J.:
I regret that I cannot join in the majority opinion. It is unfortunate that the literal and, if I may add,
quite hasty application of a rule of statutory construction should result in loss of revenue to the
government in an amount of SIXTEEN MILLION PESOS (P16,000,000.00), more or less, by way
of a tax informer's reward.
The majority, while conceding that "Although this (the informer's reward) results in a reduction in
the amounts of revenues actually received," in the same sentence, justifies the informer's reward in
favor of petitioner Tirso B. Savellano by stating that "the net effect is that the government still gains
from the remaining amount paid, which otherwise would have been lost to it."
I really fail to perceive how the government stands to gain from this operation. To me, it is merely a
case of transferring government funds from government-owned corporations (the NCA and the
PNOC) to the BIR, in the form of taxes, which in turn diminishes the funds of said government
corporations, whether intended for operations or dividends. Actually, therefore, it is a transfer of
government funds from one pocket to another, and in the process, an informer is paid a reward of P16
million pesos. This situation would, of course, not exist were the NCA and PNOC private individuals
or entities. Their payment of taxes to the government would constitute a definite gain to the
government since, in the exercise, no reduction of government funds (but of private funds) results.
An informer's reward in such a case would be in order. I am really apprehensive that the exercise or
process which this Court, in effect now
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217
sanctions, would be, as the saying goes, "to fry one (the government) in its own lard."
Moreover, the resulting loss (or reduction) of revenue to the government referred to (in the tax
informer's reward) appears to be the result of the application of Section 316 (now 281) of the National
Internal Revenue Code in isolation, without considering the Constitution, to which all laws are
subordinate and to which every law must harmonize.
The 1987 Constitution provides that:
"The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies or
instrumentalities, including government-owned or controlled corporations with original charters, and
on a post-audit basis: x x x c) other government-owned or controlled corporations and their
subsidiaries."1
It cannot be denied that under the aforequoted Constitutional provision, the NCA and PNOC are both
subject to audit by the COA. The intent of the Constitution is clear. The Commission on Audit is the
office which possesses the mechanism by which the accounts of all government bodies and agencies
are evaluated and examined. The mechanism necessarily includes the determination of whether or
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not the correct taxes have been paid by them to the Bureau of Internal Revenue. The two (2)
government agencies involved, the COA and BIR, can readily and regularly determine the correct
taxes due from such government entities. The situation in the case of purely private taxpayers is quite
different, since there is no regular audit done on them by the government, through the COA. It is from
this perspective that we should begin to determine whether or not the informer's reward should be
awarded in the cases at bar.
Presidential Decree No. 1773 which increased the informer's reward, in its preamble, states:
______________
1 Section 2(1), Article IX-D, 1987 Constitution.

218
218
"WHEREAS, it is necessary to amend further certain provisions of the National Internal Revenue
Code in order to strengthen the enforcement powers of the Bureau of Internal Revenue;"
It would appear logical to conclude that the "enforcement powers" sought to be strengthened by
increasing the informer's reward refers to cases involving purely private taxpayers since no less than
the Constitution has provided for its own "informer" in the case of government entity-taxpayers. This
"informer" is, of course, the Commission on Audit not to mention the officials of the very government
entity-taxpayers concerned who are all presumed to be regularly performing their duties.
The need for an informer not being present in the case at bar, the provision concerning the informer's
reward should not apply. It would, in my view, be absurd to presume that the lawmaking body
intended the statutory provision to apply to a situation where its application would not serve any
purpose. This is specially true when the disbursement of public funds is involved and the Court, in
the case of Alliance of Government Workers, et al. v. The Honorable Minister of Labor, et al.2 had
occasion to emphasize that:
"It is an old rule of statutory construction that restrictive statutes and acts which impose burdens on
the public treasury or which diminish rights and interests, no matter how broad their terms do not
embrace the Sovereign, unless the sovereign is specifically mentioned."
While petitioner, Tirso B. Savellano should be commended for his concern for the public interest, the
informer's reward does not apply under the circumstances and should not be awarded for the reasons
discussed above.
I therefore vote to DENY the consolidated petitions and further vote for the non-payment of the
informer's reward in both cases, such award being contrary to law and jurisprudence.
Petitions granted; decisions set aside.
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2 G.R. No. 60403, 3 August 1983, 124 SCRA 1.

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219
Medija, Jr. vs. Sandiganbayan
Note.—The Commission on Audit has the power to examine all accounts of the Government or any
of its agencies or instrumentalities (Land Bank of the Philippines vs. Commission on Audit, 190
SCRA 154).
——o0o——
© Copyright 2019 Central Book Supply, Inc. All rights reserved. Commissioner of lnternal Revenue
vs. Commission on Audit, 218 SCRA 203, G.R. No. 101976, G.R. No. 102258 January 29, 1993
85 of 120
VOL. 245, JUNE 9, 1995
39
Philippine Airlines, Inc. vs. Commission on Audit
G.R. No. 91890. June 9, 1995.*
PHILIPPINE AIRLINES, INC., petitioner, vs. COMMISSION ON AUDIT and PETRON
CORPORATION, respondents.
Constitutional Law; Commission on Audit; PAL, having ceased to be a government-owned or
controlled corporation is no longer under the audit jurisdiction of the COA.—Once again, we find
ourselves compelled to dismiss the petition. Pursuant to the government’s privatization program,
PAL’s shares of stock were bidded out early this year, resulting in the acquisition by PR Holdings, a
private corporation, of 67% of 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.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

Fortunato Gupit, Jr., Caesar R. Dulay and Rene B. Gorospe for petitioner.
Federico Y. Alikpala, Jr. for private respondent.
ROMERO, J.:
In this special civil action for certiorari and prohibition, petitioner Philippine Airlines, Inc. (PAL)
seeks to review, annul and
_______________
* EN BANC.
40
40
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 duly organized and existing under 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.
For the period September 1988 to August 1989, the fuel supply requirements of PAL were allocated
among Petron, Caltex and Shell in the following proportions:
Location
Petron
Shell
Caltex
Total Requirements
86 of 120
Mla. Int’l.
36,7201(60%)
24,480 (40%)
___
61,200
Mactan Int’l.
1,450 (100%)
___
___
1,450
Package A2
___
13,256 (40%)
19,884 (60%)
33,140
Package B3
7,450 (100%)
__________
__________
___7,450___
OVERALL
45,620 (44%)
37,736 (37%)
19,884 (19%)
103,240
On August 17, 1989, COA wrote PAL a letter4 stating:
_______________
1 All figures in Thousand U.S. Gallons.

2 Nichols, Mactan Domestic, Davao, Zamboanga.
3 Iloilo, Cagayan de Oro, Bacolod, Tacloban, Cotabato, Legazpi, Puerto Princesa, Tuguegarao,
Laoag.
4 Annex “C”, Petition, Rollo, p. 34.
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VOL. 245, JUNE 9, 1995

41
“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.”
The existing regulations referred to in the letter were Department Order No. 19 dated May 1, 1974 of
the defunct Department of General Services, COA Office Memorandum No. 498 dated September
12, 1974 and COA Circular No. 78-84 dated August 1, 1978, which required strict compliance with
said Department Order No. 19, as well as COA Memorandum No. 88-565 dated August 2, 1988,
reiterating COA Circular No. 78-84 and COA Office Memorandum No. 498. Department Order No.
19 reads as follows:
“SUBJECT: PROCUREMENT OF PETROLEUM PRODUCTS BY GOVERNMENT.
TO : All Heads of Departments and Chiefs of Bureaus, Offices and Agencies of the Government.
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To give essence to the policy of preference to government resources in the filling of the needs of the
government for supplies, it is hereby prescribed that all departments, bureaus, offices and/or agencies
of the Philippine government, procure their petroleum product requirements (gasoline, diesel fuel,
bunker fuel, jet fuel, aviation oil, marine oil, kerosene, lubricants, greases and asphalt) from the
PETROPHIL5 Corporation, a government-owned corporation, whenever these commodities are
adequately available and whenever practicable, at prices not exceeding those set by the Oil Industry
Commission.
The PETROPHIL Corporation shall furnish copies of the price lists, showing points of delivery, to
the Commission on Audit and all prospective government requisitioners.
For statistical purposes, the PETROPHIL Corporation shall render a quarterly report to the Bureau of
Supply Coordination (BSC) of deliveries made during the quarter in accordance with the format
prescribed by the BSC and to be submitted within forty five (45) days after the end of each quarter.
This Department Order shall take effect immediately.
_______________
5 Now PETRON.
42
42
(SGD.) CONSTANCIO E. CASTAÑEDA
Secretary”
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.6
In a letter7 dated September 5, 1989, COA denied PAL’s request for reconsideration, holding that
Department Order No. 19 s. 1974 applied to government-owned or controlled corporations, including
subsidiaries. It disposed of PAL’s contention that competitive bidding ensured the best price by
suggesting that “PAL negotiate with PETRON for the lowest possible price for its fuel requirements
and to request PETRON to ensure adequate and continued fuel supply to PAL.”
A final appeal for reconsideration was made by PAL in a letter8 dated September 15, 1989, but this
was denied in the now assailed COA Decision No. 1127, the essential portion of which states:
“In this regard, we obtained information from PETRON Corporation that it can easily supply PAL’s
total jet fuel requirements on a daily basis and that there is an existing Borrow and Loan Agreement
(BLA) among oil companies whereby they assist each other during times of product shortfall
conformably to industry practice. In view thereof, this Commission is unable to find merit in your
justifications for the procurement of petroleum products by PAL from oil companies other than
PETRON Corporation thru bidding as an exception to Department Order No. 19, s. 1974 of the then
Department of General Services, as implemented by COA Memorandum No. 88-565. Your
contention that PAL is not covered by subject department order has already been considered by this
Commission when it rendered the decision in question.”
_______________
6 Annex “D”, Ibid., Rollo, p. 35.

7 Annex “E”, Ibid., Rollo, pp. 36-37.
8 Annex “F”, Petition, Rollo, pp. 38-40.
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43
88 of 120
there being no appeal or any other plain, speedy, adequate andeffective remedy in the ordinary course
of law from the aforementioned Decision, PAL instituted the present petition, allegingthat:
“I
THE COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN HOLDING THAT
DEPARTMENT ORDER NO. 19 OF THE DEFUNCT DEPARTMENT OF GENERAL SERVICES
APPLIES TO PAL
II
THE COA LIKEWISE EXCEEDED ITS JURISDICTION IN EXTENDING THE APPLICATION

OF SAID DEPARTMENT ORDER TO PETITIONER
III
ASSUMING ARGUENDO THAT THE ORDER IN QUESTION WAS INTENDED TO COVER

PAL, THE SAME CONSTITUTES AN ARBITRARY, CAPRICIOUS, AND WHIMSICAL
REGULATION THAT DEPRIVES PETITIONER OF ITS RIGHTS UNDER THE
CONSTITUTIONAL GUARANTEE OF SUBSTANTIVE DUE PROCESS.”
On May 17, 1990, after COA, through the Office of the Solicitor General, had filed its Comment on
the petition, the Court resolved “to dismiss the petition, there being no grave abuse of discretion
committed by the respondent Commission on Audit in rendering the questioned decision.”9 PAL
moved for reconsideration; whereupon, the Court resolved on July 10, 1990 to implead Petron
Corporation as respondent in the case and to require both COA and Petron to comment on the motion
for reconsideration.10
Respondents having filed their respective Comments and petitioner, its Reply to the Comments, the
motion for reconsideration
_______________
9 Rollo, p. 85.
10 Resolution dated July 10, 1990, Rollo, p. 102-A. VOL. 245, JUNE 9, 1995
44
44
was set for hearing on November 13, 1990. Thereafter, the Court resolved to grant the motion for
reconsideration, reinstate the petition, consider the respondent’s comment as Answer to the petition,
give due course to the petition and require the parties to file simultaneously their respective
Memoranda.11 The Court further resolved to issue a temporary restraining order directing the
respondent COA, or any other officer or subordinate official thereof to cease and desist from
enforcing its Decision No. 1127.
Once again, we find ourselves compelled to dismiss the petition. Pursuant to the government’s
privatization program, PAL’s shares of stock were bidded out early this year, resulting in the
acquisition by PR Holdings, a private corporation, of 67% of 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.
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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. It is in this light that we view COA
Memorandum No. 88-565 issued on August 1, 1988.
As asserted by the Solicitor General, while Memorandum No. 88-565 still referred to Office
Memorandum No. 498, dated Sep-
_______________
11 Resolution of November 13, 1990, Rollo, pp. 191-192.

45
VOL. 245, JUNE 9, 1995

45
tember 12, 1974 requiring strict compliance with Department Order No. 19 dated May 1, 1974, in
restating in full said Department Order No. 19 in Memorandum No. 88-565, COA effectively adopted
it as its own, thereby expanding its coverage to government-owned or controlled corporations. Such
action was in consonance with its jurisdiction as defined under the 1987 Constitution, as follows:
“Sec. 2.(1) The Commission on Audit shall have the power, authority and duty to examine, audit and
settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations with original charters and their subsidiaries; and
(d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through
the government, which are required by law of the granting institution to submit to such audit as a
condition of subsidy or equity. x x x”
as well as the settled legal meaning of the phrase “agency of the Government,” as incorporated in
Section 2, Chapter I, Subtitle B, of the Revised Administrative Code of 1987, thus:
“(8) ‘Government agency’ or ‘agency of the government,’ or ‘agency’ refers to any department,
bureau or office of the National Government, or any of its branches and instrumentalities, or any
political sub-division, as well as any government-owned or controlled corporation, including its
subsidiaries or other self-governing board or commission of the Government.”
As a corporation, the majority shares of stocks of which were owned by the GSIS at that time, PAL
could not hope to escape the operation of Memorandum No. 88-565.
Be that as it may, it must be noted that Department Order No. 19 itself states that the procurement of
petroleum product requirements from the then PETROPHIL, now PETRON Corporation, is
prescribed “whenever these commodities are adequately available and whenever practicable, at prices
not exceeding
46
46
those set by the Oil Industry Commission.”
90 of 120
In its letters of reconsideration addressed to COA, PAL stated the reasons why procuring all its fuel
requirements from PETRON Corporation might not be practicable. One reason was that bidding gave
the best and lowest prices. If compelled to purchase all of its fuel needs from PETRON, PAL stood
to lose some P34,055,377.00; indeed, a considerable amount for a corporation trying to effect a
financial turnabout, and consequently, an additional burden to the riding public which has to
eventually shoulder the added operating costs.
Another reason given by PAL was that relying on a single fuel supplier would put into jeopardy the
regularity of its services, as there were possible contingencies not within PETRON’s control which
could cause a disruption of fuel supply. In fact, during the pendency of the petition, PETRON gave
notice to PAL of its inability at the time to serve PAL’s requirement at Nichols/Cebu/
Davao/Zamboanga and suggested that PAL arrange with its other suppliers for the balance of its needs
by simply extending all of its existing contracts covering domestic fuels.
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.12
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
_______________
12 Danville Maritime, Inc. v. Commission on Audit, G.R. No. 85285, July 28, 1989, 175 SCRA 701.
47
VOL. 245, JUNE 9, 1995

47
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. This, however, is so
much water under the bridge. PAL’s corporate complexion having changed during the pendency of
the instant petition from government-controlled to private ownership, we dismiss the petition for
being moot and academic.
WHEREFORE, the petition is hereby DISMISSED for being moot and academic. No pronouncement
as to costs.
SO ORDERED.
Regalado, Davide, Jr., Melo, Kapunan and Francisco, JJ., concur.
Narvasa (C.J.), Feliciano, Bellosillo, and Quiason, JJ., On leave.
Padilla (Actg. C.J.), Vitug and Mendoza, JJ., In the result.
Puno, J., I concur in the result.
Petition dismissed.
Note.—The responsibility for state audit is vested by the Constitution on the Commission on Audit.
(Mamaril vs. Domingo, 227 SCRA 206 [1993])
———o0o———
48
© Copyright 2019 Central Book Supply, Inc. All rights reserved. Philippine Airlines, Inc. vs.
Commission on Audit, 245 SCRA 39, G.R. No. 91890 June 9, 1995
91 of 120
VOL. 328, MARCH 21, 2000
607
Uy vs. Commission on Audit
G.R. No. 130685. March 21, 2000.*
FELIX UY, ROMAN CAGATIN, JAMES ENGUITO, EMMIE HURBODA, FRANCISCO
OLAER, LEONCIO BUSTAMANTE, FRANCISCO RANARIO, JOE OSIN, JORGE PEDIDA,
JOSE BATISTING, LUCIO BATISTING, SEGUNDINO BOLOTAOLO, HEIRS OF
DEMOCRITO RANARIO Represented by FRANCISCO RANARIO, HEIRS OF LOPE NAKILA,
BONIFACIO BUSCAGAN, MARIANO CAPA, JUAN MORALES, GODOFREDO RACHO,
ELIZABETH AMARILLO, BENIGNO ACAMPADO, PEDRO AREGLO, SERVITO BATAO,
ELEODORO BATISTING, ROGELIO DE CLARO, SILFORO LIBANDO, HILARIO MARINAS,
ALEJANDRO NOJA, HEIRS OF PEDRITA OLAER Represented by surviving spouse Francisco
Olaer, HEIRS OF SILFORO MORALES Represented by EVANGELINA MORALES, ANTONIO
RETUERTO, STELLA FILIPINAS, TEODOLO FILIPINAS, HEIRS OF MANSUETO NATAD
Represented by NATIVIDAD NATAD, AMADO MAGSIGAY, TIMOTEO GOLORAN,
GREGORIO SEQUILLA, HEIRS OF ANTONIO CANOY, APOLINARIO PLAZA, JESUS
GUDELASAO, HEIRS OF APOLONIO ANTIPASADO, TERESO CAGADAS, LUCIO
BARONG, LEONARDO LAPIZ, FRANCISCO PAIGAN, ARTURO ESCOBIDO, BONIFACIO
BUNOL, HEIRS OF FRANCISCO PATAYAN Represented by NORMA PATAYAN, SALVADOR
CENA, BASILIO PAJE, DOMINADOR DAGONDON, FAUSTINO LASTIMADO,
EMPERATRIZ MORAN, EUGENIO MIRA, ANGELO PLAZA, DEMETRIA ABAY-ABAY,
ROLANDO GASCON, DOROTEO GASCON, RIZALINO CUBILLAS, HEIRS OF FAUSTINO
MAGLAHUS Represented by LUISA MAGLAHUS, and JOEL PLAZA, petitioners, vs.
COMMISSION ON AUDIT, Represented by its Chairman, CELSO D. GANGAN and by its
Commissioners, SOFRONIO B. URSAL and RAUL C. FLORES, respondents.
________________
* EN BANC.
608
608
Administrative Law; Commission on Audit; The exercise of the power of respondent Court of
Appeals to decide administrative cases involving expenditure of public funds involves the quasi-
judicial aspect of government audit.—The case at bar brings to the fore the parameters of the power
of the respondent COA to decide administrative cases involving expenditure of public funds.
Undoubtedly, the exercise of this power involves the quasi-judicial aspect of government audit. As
statutorily envisioned, this pertains to the “examination, audit, and settlement of all debts and claims
of any sort due from or owing to the Government or any of its subdivisions, agencies and
instrumentalities.” The process of government audit is adjudicative in nature. The decisions of COA
presuppose an adjudicatory process involving the determination and resolution of opposing claims.
Its work as adjudicator of money claims for or against the government means the exercise of judicial
discretion. It includes the investigation, weighing of evidence, and resolving whether items should or
should not be included, or as applied to claim, whether it should be allowed or disallowed in whole
or in part. Its conclusions are not mere opinions but are decisions which may be elevated to the
Supreme Court on certiorari by the aggrieved party.
Same; Same; While administrative agencies exercising quasijudicial powers are not hidebound by
technical procedures, nonetheless, they are not free to disregard the basic demands of due process.—
Accordingly, the fundamental requirements of procedural due process cannot be violated in
proceedings before the COA. In the case at bar, former Governor Paredes was never made a party to
92 of 120
nor served a notice of the proceedings before the COA. While administrative agencies exercising
quasi-judicial powers are not hidebound by technical procedures, nonetheless, they are not free to
disregard the basic demands of due process. Notice to enable the other party to be heard and to present
evidence is not a mere technicality or a trivial matter in any administrative proceedings but an
indispensable ingredient of due process. It would be unfair for COA to hold former Governor Paredes
personally liable for the claims of petitioners amounting to millions of pesos without giving him an
opportunity to be heard and present evidence in his defense.

609
VOL. 328, MARCH 21, 2000

609
PUNO, J.:
Petitioners were among the more than sixty permanent employees of the Provincial Engineering
Office, Province of Agusan del Sur, who were dismissed from the service by then Governor Ceferino
S. Paredes, Jr. when the latter assumed office, allegedly to scale down the operations of the said
office.1 On July 11, 1988, a petition for reinstatement was filed by petitioners before the Merit
Systems Protection Board (MSPB), docketed as MSPB Case No. 91-1739, alleging that Governor
Paredes was motivated by political vengeance when he dismissed them and hired new employees to
replace them. It appears that during the pendency of the petition for reinstatement, Governor Paredes
issued Memorandum Order No. 3-A dated March 20, 1989 providing for the hiring of casual
employees to replace the dismissed employees, allegedly due to exigency of service.
The MSPB required Governor Paredes to comment on the petition. On February 1, 1989, the governor
specifically denied the allegations of petitioners that their dismissal was illegal. Subsequently, an
amended petition and an amended answer were filed by the parties. Hearings were conducted by the
Civil Service Regional Office No. X, Cagayan de Oro City, where both parties were represented by
their respective counsels. The last hearing was held on June 29, 1990, after which the parties
submitted their respective memorandum together with their evidence.
On January 29, 1993, the MSPB rendered a decision holding that the reduction in work force was not
done in accordance with civil service rules and regulations, and ordering the reinstatement of
petitioners.2 The pertinent portions of said decision state, viz.:
_________________
1 Pursuant to Administrative Order No. 88-1 issued on February 26, 1988.

2 Annex C, Petition; Rollo, 50.
610
610
“The focal point of controversy is whether or not Administrative Order No. 88-01 streamlining the
personnel complement of the PEO is in accordance with Civil Service Laws, Rules and Regulations.
The law applicable in the case at bar, which is hereby quoted as follows are Section 29 of E.O. 292
and Section 14 of the Rules on Personnel Actions and Policies, thus:
‘Sec. 29. Reduction in Force.—Whenever it becomes necessary for lack of work or funds or due to
change in the scope or nature of an agency’s program or as a result of reorganization, to reduce the
staff of any department or agency, those in the same group or class of positions in one or more
agencies within the particular department or agency wherein the reduction is to be effected, shall be
93 of 120
reasonably compared in terms of relative fitness, efficiency and length of service, and those found to
be least qualified for the remaining position shall be laid off. (italics supplied).
Sec. 14. The names of permanent employees laid off shall be entered in a reemployment list for the
appropriate occupation. The list, arranged in the order of the employees’ retention credit, shall be
kept by the Department or agency where the reduction took place, and a copy thereof shall be
furnished the Commission. The Commission shall certify for purposes of reemployment from such
list as the opportunity for reemployment arises.’
It has been conceded that reduction in force due to lack of funds is a valid ground for terminating the
services of an employee. But this, of course, is subject to some limitations.
While the Governor of the Province of Agusan del Sur may take measures to retrench or reduce the
work force yet this must be done in accordance with law and rules. As the plantilla schedule for the
period of January to December 1988 would show, there are 106 employees in the provincial
Engineering Office and out of these, 53 employees were terminated. There is no showing that these
employees were compared in terms of relative fitness, efficiency and length of service. Thus, there is
no basis in removing these employees except for the reason of lack of funds.
The manifest repugnance of the action taken by Governor Paredes, Jr. was further exacerbated by the
issuance of the highly questionable Memorandum Order No. 3-A s. 1989 dated March 20,
611
VOL. 328, MARCH 21, 2000

611
1989. Said memorandum provides for the hiring of casuals under the facade of exigency of the public
service. It was also a blatant violation of Section 14 of the Rules on Personnel Actions and Policies
which succinctly states that the names of permanent employees laid off shall be entered in a
reemployment list for the appropriate occupation. The list, arranged in the order of the employees’
retention credit, shall be kept by the Department or agency where the reduction took place and copy
thereof shall be furnished the Commission. They shall certify for purposes of reemployment from
such list as the opportunity for reemployment arises.
xxx xxx x x x.”
Pursuant to a Motion for Clarification filed by petitioners, the MSPB issued an Order dated April 19,
1993 which directed the Provincial Government of Agusan del Sur pay petitioners their back salaries
and other money benefits for the period that they had been out of the service until their reinstatement.3
In another motion dated May 24, 1993, petitioners sought an order directing the Provincial
Government of Agusan del Sur to reinstate them and declare as invalid the appointments of those
who replaced them. On June 24, 1993, the Provincial Governor of Agusan del Sur was ordered to
reinstate the dismissed employees.4 The Governor continued to refuse to implement the order to
reinstate. Another motion was filed by petitioners and hence, an Order was issued by the MSPB on
October 8, 1993, directing the Governor to show cause why he should not be declared in contempt.
The matter was thereafter brought before the Civil Service Commission (CSC) which issued an Order
dated December 14, 1993 directing the Governor to reinstate the employees with the caveat that
should he fail to do so, the CSC would be constrained to initiate contempt proceedings against him
and other responsible officials.5 As per its Resolution No. 94-1567 dated March 21, 1994, the CSC
actually initiated indirect contempt proceedings against the Provincial Governor who
_________________
3 Annex D, id.; Ibid., 55.

4 Annex E, id.; Ibid., 58.
5 Annex F, id.; Ibid., 61.
612
612
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was by then Democrito Plaza.6 This prompted Governor Plaza to comply, and herein petitioners were
finally reinstated to their former positions.
The difficulties of petitioners did not end, for on July 9, 1994, the Provincial Administrator, for and
in behalf of Governor Plaza, wrote a letter7 to respondent COA through the Provincial Auditor,
inquiring on whether or not:
“1. The MSPB Civil Service Commission decision directing the incumbent Provincial Governor,
Agusan del Sur to pay back salaries and other benefits of the reinstated sixty one (61) PEO employees,
illegally dismissed by the former Provincial Governor Ceferino S. Paredes, Jr., is final and executory;
2. The Commission on Audit is the only proper authority to determine disbursement of such is in
order;
3. The former Provincial Governor Ceferino S. Paredes, Jr., who perpetrated the illegal act of
dismissing the 61 PEO employees, would be personally liable for payment of back salaries and other
benefits.”
In the meantime, the Provincial Treasurer of Agusan del Sur made a partial payment to the reinstated
employees on December 12, 1995, representing back salaries in the amount of P2,291,423.34.8
On July 2, 1996, respondent COA rendered its Decision No. 96-3519 holding as follows:
“As regards the first issue, suffice it to state that the order of payment of the back salaries and other
benefits due the petitioners has become final and executory there being no appeal filed by the
Provincial Government of Agusan del Sur within the reglementary period.
__________________
6 Annex G, id.; Ibid., 63.

7 Annex I, id.; Ibid., 67.
8 Annex H, id.; Ibid., 66.
9 Annex A-1, id.; Ibid., 45.
613
VOL. 328, MARCH 21, 2000

613
Anent the issue on jurisdiction, the Supreme Court had occasion to rule in the case of Department of
Agriculture vs. National Labor Relations Commission x x x, thus:
‘Pursuant, however to CA. No. 327, as amended by PD No. 1445, the money claim should first be
brought to the Commission on Audit.’
The focal point of controversy in the case at bar is the issue as to whether or not subject claim for
back salaries and other monetary benefits may be allowed in audit.
As a general proposition, a public official is not entitled to any compensation if he has not rendered
any service, and the justification for the payment of salary during the period of suspension is that the
suspension was unjustified or that the official was innocent x x x.
The Civil Service Commission, in Resolution No. 91-1739 dated January 29, 1993 ruled that there
was illegal termination due to failure to comply with the provisions of Section 29 of Executive Order
No. 292. The said Section 29, supra, provides that in case of reduction of force, those of the same
group of positions shall be reasonably compared in terms of relative fitness, efficiency and length of
service. As a consequence of the illegal termination of herein claimants, the Civil Service
Commission ordered their reinstatement. It is a settled rule that when a government official has been
illegally suspended or dismissed, and his reinstatement had been ordered, for all intents and purposes,
he is considered as not having left his office, so that he is entitled to all the rights and privileges that
accrue to him by virtue of the office that he held x x x.
Premises considered, This Commission sees no further legal impediment to the payment of the claims
of Ms. Emmie Hurboda, et al., of the Provincial Engineering Office, Province of Agusan del Sur, for
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back salaries and other monetary benefits in the total amount of P3,322,896.06 which has become the
personal liability of former Governor Paredes, it appearing that the illegal dismissal was done in bad
faith as clearly shown in the herein records.”
As a result, the Provincial Government of Agusan del Sur, through its Acting Provincial Treasurer,
refused to release petitioners’ remaining back salaries and other monetary benefits. A motion for
reconsideration filed by petitioners was
614
614
denied by respondent COA in its Decision No. 97-497 dated August 28, 1997.10
In this special civil action for certiorari, petitioners raise the following assignment of errors:
“(A) The Honorable Commission on Audit committed grave abuse of discretion tantamount to lack
of jurisdiction when it promulgated Decision No. 97-497 on August 28, 1997 denying their motion
for reconsideration and affirming its Decision No. 96-351, dated July 2, 1996 by ruling that payment
of their back salaries and other money benefits became the personal liability of former Governor
Ceferino Paredes, Jr. and not of the Provincial Government of Agusan del Sur, after the Merit Systems
Protection Board and the Civil Service Commission declared its decisions final and executory;
(B) The Honorable Commission on Audit has no appellate authority to revise, amend and modify the
final and partially executed decisions/orders of the Merit Systems Protection Board and the Civil
Service Commission, being the same constitutional commission and co-equal with each other;
(C) The decisions of the Merit Systems Protection Board and the Civil Service Commission have
already been partially executed by the local government unit of the Province of Agusan del Sur by
reinstating petitioners to their former positions in 1993 and partially paying their back wages in the
amount of Two Million Two Hundred Ninety One Four Hundred Twenty Three and Thirty Four
(P2,291,423.34) Pesos on December 12, 1995; and
(D) The jurisprudence cited by public respondent in the case of Dumlao vs. CA, 114 SCRA 251;
Salcedo vs. CA, 81 SCRA 408; and Correa vs. CFI of Bulacan, 92 SCRA 312 are not applicable in
this case.”
The hinge issue is whether respondent COA, in the exercise of its power to audit, can disallow the
payment of back wages of illegally dismissed employees by the Provincial Government of Agusan
del Sur which has been decreed pursuant to a final decision of the Civil Service Commission.
___________________
10 Annex A-2, id.; Ibid., 47.

615
VOL. 328, MARCH 21, 2000

615
We hold that respondent COA is bereft of power to disallow the payment of petitioners’ back wages.
FIRST. The ruling of the respondent COA is based on its finding that bad faith attended the dismissal
of petitioners. In arriving at this conclusion, respondent COA relied solely on the MSPB decision of
January 29, 1993 holding that the dismissal was illegal because first, it was made in violation of
Section 29 of EO 292 and Section 14 of the Rules on Personnel Action and Policies, and second, new
casual employees were hired under the guise of exigency of the public service. A careful perusal of
said Decision will disclose that the MSPB never made a categorical finding of fact that former
Governor Paredes acted in bad faith and hence, is personally liable for the payment of petitioners’
back wages. Indeed, the MSPB even found that there was lack of funds which would have justified
the reduction in the workforce were it not for the procedural infirmities in its implementation. If the
MSPB found bad faith on the part of Governor Paredes it would have categorically decreed his
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personal liability for the illegal dismissal of the petitioners. To be sure, even the petitioners did not
proceed from the theory that their dismissal is the personal liability of Governor Paredes. Familiar
learning is our ruling that bad faith cannot be presumed and he who alleges bad faith has the onus of
proving it.11 In the case at bar, the decision of the MSPB by itself does not meet the quantum of proof
necessary to overcome the presumption of good faith.
SECOND. The case at bar brings to the fore the parameters of the power of the respondent COA to
decide administrative cases involving expenditure of public funds.12 Undoubtedly, the exercise of
this power involves the quasi-judicial aspect of government audit. As statutorily envisioned, this
pertains to the “examination, audit, and settlement of all debts and claims of any sort due from or
owing to the Government or any of its subdivisions, agencies and instrumen-
_________________
11 Guerrero v. Villamor, 296 SCRA 88 (1998).

12 Article IX-D, Section 2, 1987 Constitution.
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616
talities.”13 The process of government audit is adjudicative in nature. The decisions of COA
presuppose an adjudicatory process involving the determination and resolution of opposing claims.
Its work as adjudicator of money claims for or against the government means the exercise of judicial
discretion. It includes the investigation, weighing of evidence, and resolving whether items should or
should not be included, or as applied to claim, whether it should be allowed or disallowed in whole
or in part. Its conclusions are not mere opinions but are decisions which may be elevated to the
Supreme Court on certiorari by the aggrieved party.14
Accordingly, the fundamental requirements of procedural due process cannot be violated in
proceedings before the COA. In the case at bar, former Governor Paredes was never made a party to
nor served a notice of the proceedings before the COA. While administrative agencies exercising
quasi-judicial powers are not hidebound by technical procedures, nonetheless, they are not free to
disregard the basic demands of due process.15 Notice to enable the other party to be heard and to
present evidence is not a mere technicality or a trivial matter in any administrative proceedings but
an indispensable ingredient of due process.16 It would be unfair for COA to hold former Governor
Paredes personally liable for the claims of petitioners amounting to millions of pesos without giving
him an opportunity to be heard and present evidence in his defense. Our rulings holding that public
officials are personally liable for damages arising from illegal acts done in bad faith are premised on
said officials having been sued both in their official and personal capacities.17
THIRD. There is a further impediment in the exercise of the audit power of the respondent COA. The
MSPB decision of
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13 Sec. 26, PD 1445.

14 Fernandez, Jr., Statutory Construction for State Auditors, pp. 1; 235.
15 Alliance v. Hon. Laguesma, et al., 254 SCRA 565 0 996).
16 Napocor v. NLRC, et al., 272 SCRA 704 (1997).
17 The City of Angeles, et al. v. CA, et al., 261 SCRA 90 (1996).
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617
January 29, 1993 became final and executory when the Provincial Government of Agusan del Sur
failed to appeal within the reglementary period. To be sure, the decision has already been partially
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executed as the Acting Provincial Treasurer had paid petitioners some of their backwages. Again, our
undeviating jurisprudence is that final judgments may no longer be reviewed or in any way modified
directly or indirectly by a higher court, not even by the Supreme Court, much less by any other
official, branch or department of Government.18 Administrative decisions must end sometime as
public policy demands that finality be Written on controversies.19 In the case at bar, the action taken
by COA in disallowing the further payment by the Provincial Government of Agusan del Sur of
backwages due the petitioners amended the final decision of the MSPB. The jurisdiction of the MSPB
to render said decision is unquestionable. This decision cannot be categorized as void. Thus, we
cannot allow the COA to set it aside in the exercise of its broad powers of audit. The audit authority
of COA is intended to prevent irregular, unnecessary, excessive, extravagant or unconscionable
expenditures, or uses of government funds and properties.20 Payment of backwages to illegally
dismissed government employees can hardly be described as irregular, unnecessary, excessive,
extravagant or unconscionable. This is the reason why the Acting Provincial Treasurer, despite the
pendency of his query with the COA, proceeded to release government funds in partial payment of
the claims of petitioners.
It cannot likewise be said that the MSPB gravely abused its discretion in failing to hold former
Governor Paredes personally liable. In the first place, it is not clear whether the petitioners sued
former Governor Paredes in his personal capacity. Indeed, they did not appeal the ruling of the MSPB
which did not hold Governor Paredes personally liable for the pay-
_________________
18 Johnson & Johnson (Phils.), Inc. v. CA, et al., 262 SCRA 298 (1996).
19 CANORECO, et al. v. Hon. Torres, et al., 286 SCRA 666, 681 (1998).
20 Article IX-D, Section 2(2), 1987 Constitution.
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618
ment of their back salaries. Moreover, jurisprudence exists that under exceptional circumstances
public officials who acted in bad faith in the performance of their official duties were not held
personally liable.21 We are not unaware of our ruling in Aguinaldo v. Sandiganbayan22 that the
conclusive effect of the finality of the COA’s decision on the executive branch of the government
relates solely to the administrative aspect of the matter. However, in the case at bar, the disallowance
of the payment of backwages radically alters the MSPB decision which held the provincial
government, not the provincial governor, personally liable. The COA decision affects not only the
procedural, but more importantly the substantive rights of the parties.
FOURTH. We subscribe to the time-honored doctrine that estoppel will not lie against the State. In
the case of CIR v. CA, et al.,23 however, we held that “admittedly the government is not estopped
from collecting taxes legally due because of mistakes or errors of its agents. But like other principles
of law, this admits of exceptions in the interest of justice and fair play, as where injustice will result
to the taxpayer.” In the case at bar, a stringent application of the rule exempting the state from the
equitable principle of estoppel will prejudice petitioners who are lowly employees of government.
Petitioners’ sufferings started way back in 1988 when they were unceremoniously dismissed from
the service. It took five years for the MSPB to decide in their favor. Still, they were not reinstated
until the following year, and this only after several motions filed and orders issued to compel the
concerned public officials to reinstate them. Then again, despite an Order issued as early as April 19,
1993 by the MSPB, the provincial government was able to pay petitioners, and even only partially at
that, a good two and a half years after or on December 12, 1995. Now, after more than a decade,
respon-
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21 See Cruz, et al. vs. Primicias, Jr., et al., 23 SCRA 998 (1968); Dario vs. Mison, et al., 176 SCRA
84 (1989).
22 265 SCRA 121 (1996).
23 267 SCRA 557 (1997).
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VOL. 328, MARCH 21, 2000

619
dent COA holds that petitioners should run after Governor Paredes in his personal capacity to collect
their claims. Worse, petitioners stand in danger of being made to reimburse what has been paid to
them. Under the policy of social justice, the law bends over backward to accommodate the interests
of the working class on the humane justification that those with less privilege in life should have more
in law.24 Rightly, we have stressed that social justice legislation, to be truly meaningful and
rewarding to our workers, must not be hampered in its application by long-winded arbitration and
litigation. Rights must be asserted and benefits received with the least inconvenience.25 And the
obligation to afford protection to labor is incumbent not only on the legislative and executive branches
but also on the judiciary to translate this pledge into a living reality.26 Social justice would be a
meaningless term if an element of rigidity would be affixed to the procedural precepts. Flexibility
should not be ruled out. Precisely, what is sought to be accomplished by such a fundamental principle
expressly so declared by the Constitution is the effectiveness of the community’s effort to assist the
economically underprivileged. For under existing conditions, without such succor and support, they
might not, unaided, be able to secure justice for themselves. To make them suffer, even inadvertently,
from the effect of a judicial ruling, which perhaps they could not have anticipated when such
deplorable result could be avoided, would be to disregard what the social justice concept stands for.27
Be that as it may, the Provincial Government of Agusan del Sur is not without remedy against
Governor Ceferino S. Paredes, Jr., if he indeed acted in bad faith. Subject to the usual defenses, the
proper suit may be filed to recover whatever
___________________
24 Ditan v. POEA, et al., 191 SCRA 823 (1990).

25 Maternity Children’s Hospital v. Secretary of Labor, et al., 174 SCRA 632 (1989).
26 Marquez v. Secretary of Labor, et al., 171 SCRA 337 (1989).
27 Supra.
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People vs. Adila, Jr.
damages may have been suffered by the provincial government.
WHEREFORE, the Orders of the respondent Commission on Audit dated July 2, 1996 and August
28, 1997 are SET ASIDE.
SO ORDERED.
Davide, Jr. (C.J.), Bellosillo, Melo, Kapunan, Mendoza, Panganiban, Quisumbing, Purisima,
Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and De Leon, Jr., JJ., concur.
Vitug, J., In the result.
Orders set aside.
Note.—It is elementary that before a person can be deprived of his right or property he should first
be informed of the claim against him and the theory on which such claim is premised. (Republic vs.
Sandiganbayan, 266 SCRA 515 [1997])
——o0o——
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© Copyright 2019 Central Book Supply, Inc. All rights reserved. Uy vs. Commission on Audit, 328
SCRA 607, G.R. No. 130685 March 21, 2000
G.R. No. 180989. February 7, 2012.*

GUALBERTO J. DELA LLANA, petitioner, vs. THE CHAIRPERSON, COMMISSION ON
AUDIT, THE EXECUTIVE SECRETARY and THE NATIONAL TREASURER, respondents.
Remedial Law; Civil Procedure; Parties; Taxpayer’s Suit; A taxpayer is deemed to have the standing
to raise a constitutional issue when it is established that public funds from taxation have been
disbursed in alleged contravention of the law or the Constitution.—A taxpayer is deemed to have the
standing to raise a constitutional issue when it is established that public funds from taxation have
been disbursed in alleged contravention of the law or the Constitution. Petitioner claims that the
issuance of Circular No. 89-299 has led to the dissipation of public funds through numerous
irregularities in government financial transactions. These transactions have allegedly been left
unchecked by the lifting of the pre-audit per-
_______________
* EN BANC.
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177
Dela Llana vs. The Chairperson, Commission on Audit
formed by COA, which, petitioner argues, is its Constitutional duty. Thus, petitioner has standing to
file this suit as a taxpayer, since he would be adversely affected by the illegal use of public money.
Same; Same; Appeals; Decisions and orders of the Commission on Audit (COA) rendered in its quasi-
judicial capacity are reviewable by the court via a petition for certiorari and not those promulgated
under its quasi-legislative or rule-making powers.—Petitioner is correct in that decisions and orders
of the COA are reviewable by the court via a petition for certiorari. However, these refer to decisions
and orders which were rendered by the COA in its quasi-judicial capacity. Circular No. 89-299 was
promulgated by the COA under its quasi-legislative or rule-making powers. Hence, Circular No. 89-
299 is not reviewable by certiorari. Neither is a petition for prohibition appropriate in this case. A
petition for prohibition is filed against any tribunal, corporation, board, or person—whether
exercising judicial, quasi-judicial, or ministerial functions—who has acted without or in excess of
jurisdiction or with grave abuse of discretion, and the petitioner prays that judgment be rendered,
commanding the respondent to desist from further proceeding in the action or matter specified in the
petition. However, prohibition only lies against judicial or ministerial functions, but not against
legislative or quasi-legislative functions.
Same; Same; Same; Supreme Court has in the past seen fit to step in and resolve petitions despite
their being the subject of an improper remedy, in view of the public importance of the issues raised
therein.—This Court has in the past seen fit to step in and resolve petitions despite their being the
subject of an improper remedy, in view of the public importance of the issues raised therein. In this
case, petitioner avers that the conduct of pre-audit by the COA could have prevented the occurrence
of the numerous alleged irregularities in government transactions that involved substantial amounts
of public money. This is a serious allegation of a grave deficiency in observing a constitutional duty
if proven correct. This Court can use its authority to set aside errors of practice or technicalities of
procedure, including the aforementioned technical defects of the Petition, and resolve the merits of a
case with such serious allegations of constitutional breach. Rules of procedure were promulgated to
provide guidelines for the orderly administration of justice, not to shackle the hand that dispenses it.
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178
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Constitutional Law; Commission on Audit (COA); The 1987 Constitution has made the Commission
on Audit (COA) the guardian of public funds.—The 1987 Constitution has made the COA the
guardian of public funds, vesting it with broad powers over all accounts pertaining to government
revenues and expenditures and the use of public funds and property, including the exclusive authority
to define the scope of its audit and examination; to establish the techniques and methods for the
review; and to promulgate accounting and auditing rules and regulations. Its exercise of its general
audit power is among the constitutional mechanisms that give life to the check and balance system
inherent in our form of government.
Same; Same; The conduct of a pre-audit is not a mandatory duty that this Court may compel the
Commission on Audit (COA) to perform.—The conduct of a pre-audit is not a mandatory duty that
this Court may compel the COA to perform. This discretion on its part is in line with the constitutional
pronouncement that the COA has the exclusive authority to define the scope of its audit and
examination. When the language of the law is clear and explicit, there is no room for interpretation,
only application. Neither can the scope of the provision be unduly enlarged by this Court.
The facts are stated in the petition of the Court.
The Solicitor General for respondents.
SERENO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court with a prayer for the issuance of
a temporary restraining order pursuant to Section 7, Article IX-D of the 1987 Constitution, seeking
to annul and set aside Commission on Audit (COA) Circular No. 89-299, which lifted its system of
pre-audit of government financial transactions.
Statement of the Facts and the Case
On 26 October 1982, the COA issued Circular No. 82-195, lifting the system of pre-audit of
government financial trans-
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179
actions, albeit with certain exceptions. The circular affirmed the state policy that all resources of the
government shall be managed, expended or utilized in accordance with law and regulations, and
safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government. Further, the circular
emphasized that the responsibility to ensure faithful adherence to the policy rested directly with the
chief or head of the government agency concerned. The circular was also designed to further facilitate
or expedite government transactions without impairing their integrity.
After the change in administration due to the February 1986 revolution, grave irregularities and
anomalies in the government’s financial transactions were uncovered. Hence, on 31 March 1986, the
COA issued Circular No. 86-257, which reinstated the pre-audit of selected government transactions.
The selective pre-audit was perceived to be an effective, although temporary, remedy against the said
anomalies.
With the normalization of the political system and the stabilization of government operations, the
COA saw it fit to issue Circular No. 89-299, which again lifted the pre-audit of government
transactions of national government agencies (NGAs) and government-owned or -controlled
corporations (GOCCs). The rationale for the circular was, first, to reaffirm the concept that fiscal
responsibility resides in management as embodied in the Government Auditing Code of the
Philippines; and, second, to contribute to accelerating the delivery of public services and improving
government operations by curbing undue bureaucratic red tape and ensuring facilitation of
government transactions, while continuing to preserve and protect the integrity of these transactions.
Concomitant to the lifting of the pre-audit of government transactions of NGAs and GOCCs, Circular
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No. 89-299 mandated the installation, implementation and monitoring of an adequate internal control
system, which would be the direct responsibility of the government agency head.
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180
Circular No. 89-299 further provided that the pre-audit activities retained by the COA as therein
outlined shall no longer be a pre-requisite to the implementation or prosecution of projects and the
payment of claims. The COA aimed to henceforth focus its efforts on the post-audit of financial
accounts and transactions, as well as on the assessment and evaluation of the adequacy and effectivity
of the agency’s fiscal control process. However, the circular did not include the financial transactions
of local government units (LGUs) in its coverage.
The COA later issued Circular No. 94-006 on 17 February 1994 and Circular No. 95-006 on 18 May
1995. Both circulars clarified and expanded the total lifting of pre-audit activities on all financial
transactions of NGAs, GOCCs, and LGUs. The remaining audit activities performed by COA auditors
would no longer be pre-requisites to the implementation or prosecution of projects, perfection of
contracts, payment of claims, and/or approval of applications filed with the agencies.1
It also issued COA Circular No. 89-299, as amended by Circular No. 89-299A, which in Section 3.2
provides:
3.2 Whenever circumstances warrant, however, such as where the internal control system of a
government agency is inadequate, This Commission may reinstitute pre-audit or adopt such other
control measures, including temporary or special pre-audit, as are necessary and appropriate to protect
the funds and property of the agency.
On 18 May 2009, COA issued Circular No. 2009-002, which reinstituted the selective pre-audit of
government transactions in view of the rising incidents of irregular, illegal, wasteful and anomalous
disbursements of huge amounts of public funds and disposals of public property. Two years later, or
on 22 July 2011, COA issued Circular No. 2011-002, which lifted the pre-audit of government
transactions implemented by
_______________
1 Circular No. 95-006, Sec. 5.01.
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181
Circular No. 2009-002. In its assessment, subsequent developments had shown heightened vigilance
of government agencies in safeguarding their resources.
In the interregnum, on 3 May 2006, petitioner dela Llana wrote to the COA regarding the
recommendation of the Senate Committee on Agriculture and Food that the Department of
Agriculture set up an internal pre-audit service. On 18 July 2006, the COA replied to petitioner,
informing him of the prior issuance of Circular No. 89-299.2 The 18 July 2006 reply of the COA
further emphasized the required observance of Administrative Order No. 278 dated 8 June 1992,
which directed the strengthening of internal control systems of government offices through the
installation of an internal audit service (IAS).
On 15 January 2008, petitioner filed this Petition for Certiorari under Rule 65. He alleges that the pre-
audit duty on the part of the COA cannot be lifted by a mere circular, considering that pre-audit is a
constitutional mandate enshrined in Section 2 of Article IX-D of the 1987 Constitution.3 He further
claims that, because of the lack of pre-audit by COA, serious irregularities in government transactions
have been committed, such as the P728-million fertilizer fund scam, irregularities in the P550-million
call center laboratory project of the Commission on Higher Education, and many others.
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On 22 February 2008, public respondents filed their Comment4 on the Petition. They argue therein
that the Petition must be dismissed, as it is not proper for a petition for certiorari, considering that (1)
there is no allegation showing that the COA exercised judicial or quasi-judicial functions when it
promulgated Circular No. 89-299; and (2) there is no convincing explanation showing how the
promulgation of the circular
_______________
2 Rollo, p. 4.
3 While the Petition states “1978 Constitution,” the cited provisions refer to those of the 1987
Constitution.
4 Rollo, pp. 21-32.
182
182
was done with grave abuse of discretion. Further, the Petition is allegedly defective in form, in that
there is no discussion of material dates as to when petitioner received a copy of the circular; there is
no factual background of the case; and petitioner failed to attach a certified true copy of the circular.
In any case, public respondents aver that the circular is valid, as the COA has the power under the
1987 Constitution to promulgate it.
On 9 May 2008, petitioner filed his Reply5 to the Comment.
On 17 June 2008, this Court resolved to require the parties to submit their respective memoranda. On
12 September 2008, public respondents submitted their Memorandum.6 On 15 September 2008,
Amethya dela Llana-Koval, daughter of petitioner, manifested to the Court his demise on 8 July 2008
and moved that she be allowed to continue with the Petition and substitute for him. Her motion for
substitution was granted by this Court in a Resolution dated 7 October 2008. On 5 January 2009,
petitioner, substituted by his daughter,7 filed his Memorandum.8
The main issue for our resolution in this Petition is whether or not petitioner is entitled to the
extraordinary writ of certiorari.
Procedural Issues
Technical Defects of the Petition
Public respondents correctly allege that petitioner failed to attach a certified true copy of the assailed
Order, and that the
_______________
5 Rollo, pp. 34-39.
6 Id., at pp. 43-55.
7 For purposes of convenience, references to “petitioner” shall henceforth continue to refer to the
original petitioner, Gualberto J. dela Llana, as substituted by his daughter, Amethya dela Llana-
Koval.
8 Rollo, pp. 70-78.
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183
Petition lacked a statement of material dates. In view, however, of the serious matters dealt with in
this Petition, this Court opts to tackle the merits thereof with least regard to technicalities. A perusal
of the Petition shows that the factual background of the case, although brief, has been sufficiently
alleged by petitioner.
Standing
This Petition has been filed as a taxpayer’s suit.
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A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that
public funds from taxation have been disbursed in alleged contravention of the law or the
Constitution.9 Petitioner claims that the issuance of Circular No. 89-299 has led to the dissipation of
public funds through numerous irregularities in government financial transactions. These transactions
have allegedly been left unchecked by the lifting of the pre-audit performed by COA, which,
petitioner argues, is its Constitutional duty. Thus, petitioner has standing to file this suit as a taxpayer,
since he would be adversely affected by the illegal use of public money.
Propriety of Certiorari
Public respondents aver that a petition for certiorari is not proper in this case, as there is no indication
that the writ is directed against a tribunal, a board, or an officer exercising judicial or quasi-judicial
functions, as required in certiorari proceedings.10 Conversely, petitioner for his part claims that
certiorari is proper under Section 7, Article IX-A of the 1987 Constitution, which provides in part:
_______________
9 Gonzales v. Narvasa, G.R. No. 140835, 392 Phil. 518; 337 SCRA 733 (2000); Uy v.
Sandiganbayan, G.R. No. 111544, 6 July 2004, 433 SCRA 424.
10 Rules of Court, Rule 65, Sec. 1; Delos Santos v. Court of Appeals, G.R. No. 169498, 11 December
2008, 573 SCRA 690.
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184
“Section 7. x x x. Unless otherwise provided by this Constitution or by law, any decision, order, or
ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party
within thirty days from receipt of a copy thereof.”
Petitioner is correct in that decisions and orders of the COA are reviewable by the court via a petition
for certiorari. However, these refer to decisions and orders which were rendered by the COA in its
quasi-judicial capacity. Circular No. 89-299 was promulgated by the COA under its quasi-legislative
or rule-making powers. Hence, Circular No. 89-299 is not reviewable by certiorari.
Neither is a petition for prohibition appropriate in this case. A petition for prohibition is filed against
any tribunal, corporation, board, or person—whether exercising judicial, quasi-judicial, or ministerial
functions—who has acted without or in excess of jurisdiction or with grave abuse of discretion, and
the petitioner prays that judgment be rendered, commanding the respondent to desist from further
proceeding in the action or matter specified in the petition.11 However, prohibition only lies against
judicial or ministerial functions, but not against legislative or quasi-legislative functions.12
Nonetheless, this Court has in the past seen fit to step in and resolve petitions despite their being the
subject of an improper remedy, in view of the public importance of the issues raised therein.13 In this
case, petitioner avers that the conduct of pre-audit by the COA could have prevented the occurrence
of the numerous alleged irregularities in govern-
_______________
11 Ongsuco v. Malones, G.R. No. 182065, 27 October 2009, 604 SCRA 499.
12 Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, 529 Phil. 573; 497
SCRA 581 (2006).
13 See Quinto v. Commission on Elections, G.R. No. 189698, 1 December 2009, 606 SCRA 258;
Equi-Asia Placement, Inc. v. Department of Foreign Affairs, G.R. No. 152214, 19 September 2006,
502 SCRA 295.
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ment transactions that involved substantial amounts of public money. This is a serious allegation of
a grave deficiency in observing a constitutional duty if proven correct. This Court can use its authority
to set aside errors of practice or technicalities of procedure, including the aforementioned technical
defects of the Petition, and resolve the merits of a case with such serious allegations of constitutional
breach. Rules of procedure were promulgated to provide guidelines for the orderly administration of
justice, not to shackle the hand that dispenses it.14
Substantive Issues
The 1987 Constitution has made the COA the guardian of public funds, vesting it with broad powers
over all accounts pertaining to government revenues and expenditures and the use of public funds and
property, including the exclusive authority to define the scope of its audit and examination; to
establish the techniques and methods for the review; and to promulgate accounting and auditing rules
and regulations.15 Its exercise of its general audit power is among the constitutional mechanisms that
give life to the check and balance system inherent in our form of government.16
Petitioner claims that the constitutional duty of COA includes the duty to conduct pre-audit. A pre-
audit is an examination of financial transactions before their consumption or payment.17 It seeks to
determine whether the following condi-
_______________
14 Quinto v. Commission on Elections, G.R. No. 189698, 1 December 2009, 606 SCRA 258.
15 Yap v. Commission on Audit, G.R. No. 158562, 23 April 2010, 619 SCRA 154, citing Sec. 2 (1)
and (2), Art. IX-A, 1987 Constitution.
16 Olaguer v. Domingo, G.R. No. 109666, 411 Phil. 576; 359 SCRA 78 (2001).
17 Villanueva v. Commission on Audit, G.R. No. 151987, 493 Phil. 887; 453 SCRA 782 (2005),
citing Development Bank of the
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186
tions are present: (1) the proposed expenditure complies with an appropriation law or other specific
statutory authority; (2) sufficient funds are available for the purpose; (3) the proposed expenditure is
not unreasonable or extravagant, and the unexpended balance of appropriations to which it will be
charged is sufficient to cover the entire amount of the expenditure; and (4) the transaction is approved
by the proper authority and the claim is duly supported by authentic underlying evidence.18 It could,
among others, identify government agency transactions that are suspicious on their face prior to their
implementation and prior to the disbursement of funds.
Petitioner anchors his argument on Section 2 of Article IX-D of the 1987 Constitution, which reads
as follows:
Section 2.
1. The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle
all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or
instrumentalities, including government-owned or controlled corporations with original charters, and
on a post-audit basis:
a. constitutional bodies, commissions and offices that have been granted fiscal autonomy under this
Constitution;
b. autonomous state colleges and universities;
c. other government-owned or controlled corporations and their subsidiaries; and
d. such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through
the Government, which are required by law or the granting institution to submit to such audit as a
condition of subsidy or equity. However, where the internal control system of the audited agencies is
inadequate, the Commis-
105 of 120
_______________
Philippines v. Commission on Audit, G.R. No. 107016, 11 March 1994, 231 SCRA 202.
18 Id.
187
sion may adopt such measures, including temporary or special pre-audit, as are necessary and
appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for
such period as may be provided by law, preserve the vouchers and other supporting papers pertaining
thereto.
2. The Commission shall have 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.” (Emphasis supplied)
He claims that under the first paragraph quoted above, government transactions must undergo a
pre-audit, which is a COA duty that cannot be lifted by a mere circular.
We find for public respondents.
Petitioner’s allegations find no support in the aforequoted Constitutional provision. There is nothing
in the said provision that requires the COA to conduct a pre-audit of all government transactions and
for all government agencies. The only clear reference to a pre-audit requirement is found in Section
2, paragraph 1, which provides that a post-audit is mandated for certain government or private entities
with state subsidy or equity and only when the internal control system of an audited entity is
inadequate. In such a situation, the COA may adopt measures, including a temporary or special pre-
audit, to correct the deficiencies.
Hence, the conduct of a pre-audit is not a mandatory duty that this Court may compel the COA to
perform. This discretion on its part is in line with the constitutional pronouncement that the COA has
the exclusive authority to define the scope of its audit and examination. When the language of the
law is clear and explicit, there is no room for interpretation,
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188
only application.19 Neither can the scope of the provision be unduly enlarged by this Court.
WHEREFORE, premises considered, the Petition is DISMISSED.
SO ORDERED.
Corona (C.J.), Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Abad, Villarama,
Jr., Perez, Mendoza, Reyes and Perlas-Bernabe, JJ., concur.
Del Castillo, J., On Sick Leave.
Petition dismissed.
Notes.—Quite often, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi,
which is not surprising, for even if the issue may appear to concern only the public in general, such
capacities nonetheless equip the petitioner with adequate interest to sue. (De Castro vs. Judicial and
Bar Council, 615 SCRA 666 [2010]).
Taxpayers’ contributions to the state’s coffers entitle them to question appropriations for expenditures
which are claimed to be unconstitutional or illegal. (Paguia vs. Office of the President, 621 SCRA
600 [2010]).
——o0o——
_______________
19 Mendoza v. COMELEC, G.R. No. 191084, 25 March 2010, 616 SCRA 443.
106 of 120
© Copyright 2019 Central Book Supply, Inc. All rights reserved. Dela Llana vs. The Chairperson,
Commission on Audit, 665 SCRA 176, G.R. No. 180989 February 7, 2012
VOL. 117, OCTOBER 18, 1982

669
Saligumba vs. Commission on Audit
No. L-61676. October 18, 1982.*
EDITHA B. SALIGUMBA, petitioner, vs. COMMISSION ON AUDIT AND LEONARDO
ESTELLA, respondents.
Courts; Supreme Court; Power of judicial review over decisions of Commission on Audit refer to
money matters, not to administrative cases involving personnel discipline.—Our power to
________________
* SECOND DIVISION.
670
670
review COA decisions refers to money matters and not to administrative cases involving the
discipline of its personnel.
Same; Same; Same; Power to review limited to legal issues, not factual issues.—Even assuming that
We have jurisdiction to review decisions on administrative matters as mentioned above, We can not
do so on factual issues; Our power to review is limited to legal issues.
PETITION to review the decision of the Commission on Audit.
The facts are stated in the resolution of the Court.

RESOLUTION
ABAD SANTOS, J.:
This is a petition to review the decision of the Commission on Audit (COA) in Administrative Case
No. 81-525 for disgraceful and immoral conduct.
On the basis of the sworn complaint of Editha Saligumba, the COA instituted the administrative case
against Leonardo Estella, Auditing Examiner III, in the Auditor's Office of Misamis Occidental. The
charge was that the respondent raped Editha Saligumba on several occasions.
On April 12, 1982, the COA rendered a decision with the following judgment:
"Wherefore, for insufficiency of evidence, the instant charge is hereby dropped. Respondent is,
however, warned to comport himself henceforth in such a manner as would forestall the filing of
similar complaints in the future."
Editha Saligumba now wants Us to review the COA decision. She insists that the decision of the COA
is contrary to the evidence. Thus, she raises these "vital issues":
"a) Was the petitioner raped on three (3) occasions by respondent Estella, with grave abuse of
confidence?
"b) Was petitioner fabricating her charges against the respondent?
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VOL. 117, OCTOBER 18, 1982

671
"c) Is respondent Estella the father of the child of the petitioner by his maneuvers of amicable
settlement indicating his guilt?
107 of 120
"d) Whose testimonies are more credible, that of petitioner or that of respondent Estella including
their witnesses?
"e) Is respondent Estella guilty of immorality and fit to be dismissed from service?
"f) Is the commission on audit ignoring the evidence on record of the petitioner, because the
investigating lawyer who received the evidence in Oroquieta City, Philippines; the mother of the
investigator, is the superior of respondent Estella's wife as a classroom teacher?"
The petition has to be dismissed for the following reasons:
1. Our power to review COA decisions refers to money matters and not to administrative cases
involving the discipline of its personnel.
2. Even assuming that We have jurisdiction to review decisions on administrative matters as
mentioned above, We can not do so on factual issues; Our power to review is limited to legal issues.
Accordingly, the petition is dismissed.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.
Petition dismissed.
Notes.—Conduct of public officers and employees in their dealings with each other and with the
public should be marked by respect for and consideration of the feelings of others. (Verzosa vs.
Magdaluyo, 92 SCRA 17.)
Decisions of Administrative Officers are not to be disturbed by the courts except when the former
have acted without or in excess of their jurisdiction or with grave abuse of discretion. (Sichangco vs.
Board of Commissioners of Immigration, 94 SCRA 61.)
——o0o——
672
© Copyright 2019 Central Book Supply, Inc. All rights reserved. Saligumba vs. Commission on
Audit, 117 SCRA 669, No. L-61676 October 18, 1982
VOL. 213, AUGUST 31, 1992

109
Orocio vs. Commission on Audit
G.R. No. 75959. August 31, 1992.*
VICTORIANO V. OROCIO, petitioner, vs. COMMISSION ON AUDIT, SOFRONIO B. URSAL,
MARCOS S. SEGARRA, LEON J. PILAR, JR., and JOSE M. AGUSTIN, respondents.
Administrative Law; Public Officers; Legal opinions of General Counsel of National Power
Corporation does not inextricably and unjustifiably bind the corporation but is subject to review by
the Supreme Court.—We find petitioner’s proposition to be a bit outlandish; he overrates the power
of the General Counsel of the NPC and belittles the authority of the COA. While it may be true that
Section 15-A of R.A. No. 6395 (charter of the NPC) provides that all legal matters shall be handled
by the General Counsel of the Corporation, it by no means follows that all legal opinions of the
General Counsel are ex-cathedra and binding upon all. In short, said provision does not confer upon
him any degree of infallibility. It would have been dangerous if it were otherwise for not only would
he be able to inextricably and unjustly bind the corporation or compel it to abide by his legal opinion
even if it were wrong, he would also subordinate this Court to such opinion even if this Court is the
final authority on how the law should be read. Petitioner’s theory destroys the very essence of the
public trust character of a public office.
Same; Powers of Commission on Audit; Power of Commission on Audit to audit includes prevention
of irregular, unnecessary, excessive or extravagant expenditures or uses of funds or property by
government-owned or controlled corporations.—The NPC, as a government-owned corporation, is
under the COA’s audit power. Under the 1973 Constitution, which was the Constitution in force at
the time the disallowance in question was made, the COA had the power to, inter alia, examine, audit,
and settle, in accordance with law and regulations, all accounts pertaining to the revenues and receipts
108 of 120
of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned
or controlled corporations; and promulgate accounting and auditing rules and regulations including
those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or uses of
funds or property.
_______________
* THIRD DIVISION.
110
110
Same; Same; Commission on Audit not bound by opinion of legal counsel of agency or
instrumentality regarding necessity of agency’s expenditures.—In determining whether an
expenditure of a Government agency or instrumentality such as the NPC is irregular, unnecessary,
excessive, extravagant or unconscionable, the COA should not be bound by the opinion of the legal
counsel of said agency or instrumentality which may have been the basis for the questioned
disbursement; otherwise, it would indeed become a toothless tiger and its auditing function would be
a meaningless and futile exercise. Its beacon lights then should be nothing more than the pertinent
laws and its rules and regulations.
Same; Same; Liability; Due Process; Auditor’s imposition of liability on person not a party to the
proceedings is denial of due process.—Petitioner was not found to be liable. He was made jointly and
severally liable with Villafuerte, Gajasan and Hermosura only in the Memorandum of respondent
Agustin dated 30 June 1986. It may be noted that in his Memorandum he excluded Gamama.
Considering that what was sustained up to the level of the General Counsel of the COA was the
disallowance made in the aforementioned Certificate of Settlement and Balances and necessarily, his
ruling thereon as to who are the parties liable therefor, Agustin acted arbitrarily and with grave abuse
of discretion when, without prior notice to petitioner, he made the latter liable for the disallowance
and worse, he directed, in the guise of a request, the Chief Accountant of the NPC, Metro Manila
Regional Center, to book the disallowance in the name of petitioner. Petitioner was not made a party
to the motion for reconsideration which the General Counsel of the COA acted upon. Respondent
Agustin effectively denied petitioner of his right to due process.
Same; Same; Motion for Reconsideration; Jurisdiction; Filing of Motion for Reconsideration in the
Commission on Audit vests jurisdiction on the same.—It must be recalled that in his Memorandum
of 14 February 1985, General Counsel Ilao of the NPC asked for a reconsideration of the disallowance
and requested that the same be forwarded to the Chairman of the COA pursuant to Item III-7 of COA
Circular 81-156 dated 19 January 1981. Clearly, therefore, the motion for reconsideration became a
matter for the COA to resolve or decide.
Same; Same; General Counsel of Commission on Audit cannot act for the Commission itself.—The
COA, both under the 1973 and 1987 Constitutions, is a collegial body. It must resolve cases presented
to it as such. Its General Counsel cannot act for the Commission for he
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VOL. 213, AUGUST 31, 1992

111
is not even a Commissioner thereof. He can only offer legal advice or render an opinion in order to
aid the COA in the resolution of a case or a legal question.
Same; Same; Indorsement made by General Counsel not a “decision” hence void ab initio even if
considered as such.—Thus, Nepomuceno’s 5th indorsement cannot, by any stretch of the imagination,
109 of 120
be considered as a “decision” of the COA. If the same were to be so considered, it would be void ab
initio for having been rendered by one who is not possessed with any power or authority.
Same; Public Officers; Liability; Mere legal opinion made by public officer does not make him
directly responsible for disbursement of funds thereunder.—Under said Section 103, 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 directly responsible therefor. In the instant case, while it
may perhaps be true that the petitioner had rendered the opinion which was relied upon for the
disbursement, it cannot be said that he was directly responsible therefor. His was only a legal opinion
which the governing board of the NPC or any of its authorized officials could adopt or reject in the
resolution of the request of OPLGS for reimbursement.
Same; Same; Same; But public officer may be liable for legal opinions made with malice and in bad
faith.—It does not necessarily follow, however, that in no case may the petitioner be liable for his
legal opinion. As the then officer-in-charge of the Office of the General Counsel of NPC, he exercised
quasi-judicial functions. He was empowered with discretion and authority to render an opinion as to
whether the claim for reimbursement by the OPLGS was proper and ultimately, to determine if the
NPC or any of its employees was responsible for the accident and, therefore, liable for the injury
suffered by Abodizo under the law on quasi-delict. If he rendered the opinion in the just performance
of his official duties and within the scope of his assigned tasks, he would not be personally liable for
any injury that may result therefrom. Otherwise stated, a public official may be liable in his personal
capacity for whatever damage he may have caused by his act done with malice and in bad faith or
beyond the scope of his authority or jurisdiction.
Same; Same; Same; Due Process; Determination of presence of malice or bad faith or excess of
authority or jurisdiction cannot be deposed of unilaterally or summarily.—But whether petitioner
acted
112
112
with malice, bad faith or beyond the scope of his authority or jurisdiction is a matter respondent
Agustin cannot dispose of unilaterally and summarily without infringing on the petitioner’s right to
due process.
PETITION for review of the decision of the Commission on Audit.

Victoriano V. Orocio for and in his own behalf.
DAVIDE, JR., J.:
On 25 May 1982, an accident occurred at the Malaya Thermal Plant of the National Power
Corporation (NPC). Based on the accident report of Robinson D. Mapili and Ildefonso I. Barrera
dated 27 May 1982,1 tube leaks on HPH 5B were confirmed at 2:30 o’clock in the morning of 25
May 1982. From the time of such confirmation until 8:00 o’clock that morning, the system was
drained and prepared for repair by mechanical maintenance personnel. By 8:45 o’clock, the system
was declared safe for repair. Work thus progressed that same morning until 11:10 o’clock, when the
plug from the leaking tube gave way, thereby releasing steam and hot water which hit two (2) of the
employees working on the tube leak.
Ernesto Pumaloy, an NPC employee, suffered 1st and 2nd degree burns on the lower part of his body
while Domingo Abodizo, a casual employee of O.P. Landrito’s General Services (OPLGS), a
janitorial contractor of the NPC, assigned to the Maintenance Section, suffered 1st and 2nd degree
burns on nearly seventy percent (70%) of his body. The injured personnel were brought to the Tanay
General Hospital for treatment and were later transferred to Meralco’s J.F. Cotton Hospital. Total
hospitalization expenses for the treatment of Domingo Abodizo reached P53,802.26.
110 of 120
The NPC initially advanced this amount by setting it up as an account receivable from OPLGS
deducted on a staggered basis from the latter’s billings against NPC until the same was fully satisfied.
______________
1 Annex “I”; Rollo, 29.

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113
Subsequently, OPLGS, through its manager Ofelia Landrito, in a letter to Mr. Larry S. Gaerlan, Vice-
President, Human Resources & General Services (VP-HRGS) NPC, dated 30 August 1982,2
requested for a refund of the total amount deducted from their billings representing payment of the
advances made by the NPC. This request was reiterated in a follow-up letter dated 6 September 1982.3
In his Memorandum to the VP-HRGS dated 14 September 1982, Atty. C.Q. Crucillo, Assistant Chief
Legal Counsel of the NPC, recommended favorable action on the request of the contractor.4 This was
forwarded to the Acting Manager, Metro Manila Regional Center (MMRC) of the NPC.5 In turn, this
opinion was referred to the General Counsel of the NPC for comment.6 At that time, petitioner, then
Legal Services Chief D of the NPC, was designated by the Manager of the Legal Counseling Division
of the NPC, who was to attend and participate in a Management Convocation scheduled for 30
September to 2 October 1992, as officer-in-charge of the Office of the General Counsel for that
period.7 In a memorandum dated 1 October 1982, petitioner, as officer-in-charge, recommended
favorable action on OPLGS’ request, in support whereof he stated:
xxx
“In brief, it is posited in the Memorandum that under Article 2176 of the Civil Code of the Philippines
and pursuant to the doctrine of ‘res ipsa loquitor’ (sic) (the thing speaks for itself) and citing the case
of Bernabe Africa, et al. vs. Caltex, et al., L-12986, March 31, 1966, it may be reasonably inferred
that the incident causing injuries to Mr. Abodizo happened for want of care on the part of the Metro
Manila Regional Center (MMRC) crew, rendering NPC, as their employer and owner of the Malaya
Thermal Plant liable for damages sustained by Mr. Abodizo. It is further contended that under Article
2179 of the New Civil Code, NPC may not be liable for such damages only if Mr.
_______________
2 Annex “G”; Rollo, 27.

3 Annex “F”; Id., 20.
4 Annex “E”; Id., 23-24.
5 Annex “D”; Rollo, 22.
6 Annex “C”; Id., 21.
7 Annex “A”; Id., 19.
114
114
Abodizo’s own negligence was the immediate and proximate cause of his injury, which is certainly
not so in the instant case.
After a review of the findings stated in the said memorandum against the applicable laws and
jurisprudence on the matter, we find the request of OPLGS legally in order and should, therefore, be
given due course.”8
xxx
Thereupon, the amount for the hospitalization expenses was refunded to the contractor OPLGS. In
Certificate of Settlement and Balances (CSB) No. 01-04-83 prepared by respondent Jose M. Agustin,
111 of 120
Unit Auditor of the Commission on Audit (COA) assigned to the NPC-MRRC, on 30 July 1989,9 the
refund of the hospitalization expenses for Domingo Abodizo was disallowed for “[u]nder the NPC-
O.P. Landrito contract, there is no employer-employee relationship between the Corporation and the
latter’s employees.” Hence, the NPC is not answerable for such expenses. The following employees
were made liable for the disallowances: Mr. M.V. Villafuerte (Approving Authority)—primarily
liable; E. Camama and P. Gajasan (Management’s examiners)—secondarily and jointly liable; L.
Hermosura (Chief Accountant)—primarily liable.
General Counsel Marcelino C. Ilao of the NPC, in his Memorandum of 6 September 1984, asked for
a reconsideration of the aforesaid disallowance, stressing that:
xxx
“A review of the legal opinion (Memorandum dated October 1, 1982 of the Officer-in-Charge of the
Office of the General Counsel) for the Officer-in-Charge, MMRC, which was the basis for the
payment of the amount being disallowed, admits the non-existence of employer-employee
relationship between NPC and Mr. Abodizo, employee of O.P. Landrito. However, the legal opinion
premises the legality of the request for payment on the basis of quasi-delict, more particularly, the
negligence and/or want of care on the part of the MMRC crew which resulted to the injuries sustained
by Mr. Abodizo. Obligation arise (sic) not only from contracts but also from quasi-delicts, ....”10
_______________
8 Annex “B”; Id., 20.

9 Annex “K”; Rollo, 33-34.
10 Annex “L”; Id., 35.
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115
xxx
In his memorandum dated 9 January 1985,11 respondent Agustin informed General Counsel Ilao of
the NPC that he is adopting his stand contained in his memorandum to the COA Regional Director
dated 9 October 1984 as the answer to the request for reconsideration. In the latter memorandum, he
maintains that:
xxx
“. . . there being no pre-existing contractual relation between the Corporation and the subject
employee, the former is not liable for the damages sustained by the latter. We maintain that while
quasidelicts could be a source of obligation, the fault or negligence of the party from whom damages
is being recovered must first be proven. . . .
The opinion rendered by the NPC Legal Office clearly concedes lack of proof of negligence on the
part of the NPC personnel undertaking the repair work or on the part of the Corporation . . . .
Moreover, the negligence of the crew does not make the Corporation automatically and/or equally
negligent.
We further contend that it is not for the NPC Legal Office to declare the Corporation negligent and
admit liability. It could have been a better decision if the matter was left to a competent court to
determine.”12
xxx
The COA Regional Director, herein respondent Leon J. Pilar, Jr., in a Memorandum dated 3
December 1984, confirmed the disallowance and held that the persons determined to be liable should
be directed to immediately refund the amount disallowed and/or the proper official be directed to
retain any money due them in satisfaction thereof.13
General Counsel Ilao submitted a second request for reconsideration on 14 February 1985.14 This
request justifies the legal opinion rendered based on Section 15-A of R.A. No. 6395 (the NPC charter),
as amended, which provides that “. . . all
112 of 120
________________
11 Annex “M”; Rollo, 36.

12 Annex “N”; Id., 38.
13 Annex “O”; Id., 39-40.
14 Annex “P”; Rollo, 41.
116
116
legal matters shall be handled by the General Counsel of the Corporation . . . .”
In a first indorsement dated 22 March 1985,15 respondent Agustin submitted the request to the
Chairman of respondent COA with the claim that his findings on the said disallowance have already
been confirmed by the Regional Director, NCR. In a second indorsement dated 2 April 1985,16
respondent Sofronio B. Ursal, Manager of the Corporate Audit Office of respondent COA, referred
for comment and/or recommendation to the Auditor, NPC, the request for reconsideration. In a third
indorsement dated 24 April 1985,17 respondent Marcos Segarra, Corporate Auditor of COA, returned
the second indorsement to respondent Ursal informing the latter that he concurs with the
comment/opinion of respondent Agustin contained in the 1st indorsement of 22 March 1985. In his
4th indorsement dated 30 May 1985,18 respondent Ursal, expressing his concurrence with the
disallowance, referred to the COA’s General Counsel for an opinion the request for reconsideration.
In his 5th indorsement dated 21 May 1986,19 Ricardo G. Nepomuceno, Jr., General Counsel of the
COA, acting “FOR THE COMMISSION”, made a return to the Unit Auditor, herein respondent
Agustin; Nepomuceno expressed his concurrence with the views of said Unit Auditor contained in
the latter’s 1st indorsement of 22 March 1985.
Thereupon, on 30 June 1986, respondent, now in his capacity as Regional Auditor, transmitted to the
General Counsel of the NPC a copy of the aforesaid 5th indorsement of COA’s General Counsel,
which the former considers as the Commission’s decision (hereinafter designated as “5th
Indorsement”), together with the pertinent papers, on the appeal made relative to the disallowance;20
on the same date, he also sent a memorandum to the VP-MMRC of the NPC wherein he ordered that
the
_______________
15 Annex “Q”; Id., 43.

16 Annex “R”; Id., 45.
17 Annex “S”; Id., 46.
18 Annex “T”; Id., 47-48.
19 Annexes “U” and “V”; Id., 49-50.
20 Annex “W”; Rollo, 51.
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117
subject disallowance “be booked” in the petitioner’s name, “upon whose legal opinion the payment
of the aforesaid refund was made possible, jointly and severally with Mr. M.V. Villafuerte
(Approving official on the voucher), Ms. P. Gajasan (Examiner), and Ms. L.M. Hermosura (Chief
Accountant),” thereby amending previous findings as to the persons liable.21 On 22 July 1986, a
Debit Memorandum22 was issued in petitioner’s name debiting his account with the NPC for the
amount of the hospitalization expenses.
113 of 120
Petitioner, on 28 September 1986, filed the instant petition seeking to annul and set aside the above-
mentioned:
a) Memorandum of respondent Agustin dated 9 January 1985;
b) Memorandum of respondent Pilar dated 3 December 1984;
c) 1st indorsement of respondent Agustin, dated 22 March 1985, to the Chairman, COA;
d) 3rd indorsement of respondent Segarra dated 24 April 1985;
e) 4th indorsement of respondent Ursal, dated 30 May 1985, to the General Counsel of the COA,
conforming to the position of Jose M. Agustin; and
f) 5th indorsement of the COA General Counsel Nepomuceno, Jr. dated 21 May 1986.23
and praying for a writ of preliminary injunction to enjoin respondents from enforcing the same.
In support thereof, petitioner alleges that he prepared the questioned legal opinion in the performance
of his official functions as mandated by law. At the time he rendered it, he was the officer-in-charge
of the NPC’s Office of the General Counsel. Section 15-A of its charter24 provides that all legal
matters shall be handled by the General Counsel of the Corporation. As such, he provides legal advice
and/or renders legal opinions on legal matters involving the NPC. Since this function is quasi-judicial
in nature, the discretion exercised in the discharge thereof is not subject to re-examination or
controversion by the respon-
_______________
21 Annexes “X” and “Y”; Id., 52-53.

22 Annex “Y”; Id., 53.
23 Rollo, 8-9.
24 R.A. No. 6395.
118
118
dents; when the latter did what was proscribed, they in effect usurped the statutory function of the
General Counsel of the NPC. There is no law which expressly authorizes the respondents to re-
examine or controvert the General Counsel’s opinion. Petitioner additionally stresses that he is not
personally liable for the amount disallowed as he was merely performing his official functions.
Besides, his questioned opinion is not alleged to have been rendered with malice and bad faith.25
In the Resolution of 6 October 1986, this Court dismissed the petition “for having been filed out of
time ... and for late payment of the legal fees . . .”26
Acting on petitioner’s motion for reconsideration, this Court, on 22 June 1987, granted the motion,
reinstated the petition and required the respondents to comment on the same.27
Respondents, through the Office of the Solicitor General, filed their Comment on 9 October 1987.28
They maintain that the questioned disbursement on the basis of the legal opinion of the petitioner is
within the scope of the auditing power of the COA. The Constitution grants the COA the power,
authority and duty to examine, audit and settle all accounts pertaining to the expenditures or uses of
funds and property pertaining to the Government or any of its subdivisions, agencies or
instrumentalities, including government-owned or controlled corporations.29 The matter of allowing
in audit a disbursement account is not a ministerial function, but one which necessitates the exercise
of discretion. Besides, the OPLGS, Abodizo’s employer, admitted that the incident was purely
accidental and that there is no showing whatsoever in the accident report of any negligence on the
part of the NPC or its employees; this being the case, the liability of the NPC for quasi-delict under
Article 2176 of the New Civil Code cannot be sustained. Finally, respondents assert that it was
petitioner’s legal opinion which made possible
______________
25 Chartered Bank vs. Government Auditing Office, 149 SCRA 58 [1987].
114 of 120
26 Rollo, 54.
27 Id., 80.
28 Id., 95-102.
29 Section 2(1), Article XII-D, 1973 Constitution; Section 2(1), Article IX-D, 1987 Constitution.
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119
the questioned disbursement; accordingly, the 30 June 1986 request of respondent Agustin to book
the disallowance in the petitioner’s name, jointly and severally with the other officials found
responsible therefor, is in order as it was made pursuant to Section 103 of the Government Auditing
Code30 which provides:
“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 therefor.”
On 18 April 1988, this Court resolved to give due course to the petition and require both parties to
submit their simultaneous Memoranda,31 which they subsequently complied with.
The principal issues raised in this case are:
(1) Does the legal opinion of petitioner, which was relied upon for the disbursement in question,
preclude or bar the COA from disallowing in post-audit such disbursement?
(2) Has the General Counsel of the COA the authority to decide a motion to reconsider the
disallowance in question?
(3) Is the petitioner personally liable for the disallowance on the theory that the disbursement was
made on the basis thereof?
1. As to the first, We find petitioner’s proposition to be a bit outlandish; he overrates the power of the
General Counsel of the NPC and belittles the authority of the COA. While it may be true that Section
15-A of R.A. No. 6395 (charter of the NPC) provides that all legal matters shall be handled by the
General Counsel of the Corporation, it by no means follows that all legal opinions of the General
Counsel are ex-cathedra and binding upon all. In short, said provision does not confer upon him any
degree of infallibility. It would have been dangerous if it were otherwise for not only would he be
able to inextricably and
_______________
30 P.D. No. 1445.

31 Rollo, 130.
120
120
unjustly bind the corporation or compel it to abide by his legal opinion even if it were wrong, he
would also subordinate this Court to such opinion even if this Court is the final authority on how the
law should be read. Petitioner’s theory destroys the very essence of the public trust character of a
public office. He should be reminded—just as others in government service—of Section 1, Article
XI of the 1987 Constitution which reads:
“Section 1. Public office is a public trust. Public officers and employees must at all times be
accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency,
act with patriotism and justice, and lead modest lives.”
The NPC, as a government-owned corporation, is under the COA’s audit power. Under the 1973
Constitution, which was the Constitution in force at the time the disallowance in question was made,
the COA had the power to, inter alia, examine, audit, and settle, in accordance with law and
regulations, all accounts pertaining to the revenues and receipts of, and expenditures or uses of funds
115 of 120
agencies, or instrumentalities, including government-owned or controlled corporations;32 and
promulgate accounting and auditing rules and regulations including those for the prevention of
irregular, unnecessary, excessive, or extravagant expenditures or uses of funds or property.
The 1987 Constitution preserves this power and function and grants the COA:
“x x x 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.”33
_______________
32 Section 2(1), Article XII-D, 1973 Constitution.

33 Section 2(2), Id.
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121
Both the 1973 and 1987 Constitutions conferred upon the COA a more active role and invested it
with broader and more extensive powers. These were not meant to make it a toothless tiger, but a
dynamic, effective, efficient and independent watchdog of the Government.34
In determining whether an expenditure of a Government agency or instrumentality such as the NPC
is irregular, unnecessary, excessive, extravagant or unconscionable, the COA should not be bound by
the opinion of the legal counsel of said agency or instrumentality which may have been the basis for
the questioned disbursement; otherwise, it would indeed become a toothless tiger and its auditing
function would be a meaningless and futile exercise. Its beacon lights then should be nothing more
than the pertinent laws and its rules and regulations.
In the instant case, on the basis of the pertinent documents attached to the pleadings, the COA auditor
had every reason to believe that the disbursement of P53,802.26 by the NPC as a refund to the OPLGS
for the hospitalization expenses of Abodizo, on the theory that the NPC was actually liable under the
law on quasi-delict, as determined by the petitions, was irregular, if not illegal. Other than the report
of Mapili and Barrera dated 27 May 1982,35 there is no competent evidence to show that either the
NPC or any of its employees were responsible for the accident.
On the contrary, in its letter of 30 August 1982,36 the OPLGS admitted that the “incident was purely
accidental in nature,” but that “considering that the accident took place within the premises of the
National Power Corporation and the cause of which was the Tube leaks of HPH 5B, which was still
undergoing repair, it is but proper that cost of hospital bills and other expenses incurred by MR.
DOMINGO ABODIZO be shouldered by the National Power Corporation.” It further admits that it
will not “press our contention that the National Power Corpora-
_______________
34 Caltex Philippines, Inc. vs. Commission on Audit, G.R. No. 92585, 8 March 1992.
35 Rollo, 29.
36 Annex “G”; Rollo, 27.
122
122
116 of 120
tion should pay” the hospital expenses, but appeals and requests that in the light of the “relationship”
between it and the NPC, and the services both render to each other, the NPC nonetheless pay for the
hospitalization expenses.
It is not disputed that petitioner conducted no further investigation into the causes of the accident to
determine for himself if indeed the NPC’s or any of its employees’ negligence was the proximate
cause of the accident. Neither is it disputed that petitioner was at that time merely an officer-in-charge
of the Office of the General Counsel. He remained such only from 30 September to 2 October 1982.
He rendered the questioned legal opinion on 1 October 1982,37 on the second day of his short tenure
and barely a day before it ended. There was hardly any time for him to inquire further into the facts
surrounding the incident, although he had all the time to simply refer it to the regular General Counsel
who was expected to report back on 3 October 1982.
Finally, the OPLGS’ claim for reimbursement was not referred to the NPC’s governing board or
authorized officer for approval in the light of the legal opinion. By itself, the latter did not vest him
with authority to approve the claim. It was nothing but a recommendation in favor of the claim.
Respondent Agustin then cannot be faulted when in his Certificate of Settlement and Balances No.
01-04-83,38 he disallowed NPC’s questioned disbursement. However, in his notation as to the
persons to be liable therefor, he mentions only Mr. M.V. Villafuerte (the Approving Authority) whose
liabilities are primary; E. Gamama and P. Gajasan (Management’s Examiners) whose liabilities are
“secondary and joint”; and H.L. Hermosura (Chief Accountant) whose liability is primary. Petitioner
was not found to be liable. He was made jointly and severally liable with Villafuerte, Gajasan and
Hermosura only in the Memorandum of respondent Agustin dated 30 June 1986.39 It may be noted
that in his Memorandum he excluded Gamama. Considering that what was sustained up to the level
_______________
37 Annex “B”; Id., 20.

38 Annex “K”; Rollo, 33-34.
39 Annex “W”; Id., 51.
123
VOL. 213, AUGUST 31, 1992

123
of the General Counsel of the COA was the disallowance made in the aforementioned Certificate of
Settlement and Balances and necessarily, his ruling thereon as to who are the parties liable therefor,
Agustin acted arbitrarily and with grave abuse of discretion when, without prior notice to petitioner,
he made the latter liable for the disallowance and worse, he directed, in the guise of a request, the
Chief Accountant of the NPC, Metro Manila Regional Center, to book the disallowance in the name
of petitioner. Petitioner was not made a party to the motion for reconsideration which the General
Counsel of the COA acted upon. Respondent Agustin effectively denied petitioner of his right to due
process.
2. What is claimed in this case to be the decision of the COA is actually the 5th Indorsement of
Ricardo G. Nepomuceno, Jr., General Counsel thereof, which reads:
xxx
“5th Indorsement
May 21, 1986
Respectfully returned to the Auditor, National Power Corporation, Quezon City, concurring with the
views of the Unit Auditor, as contained in the 1st Indorsement, dated March 22, 1985, on the refund
of hospitalization expenses in favor of Domingo Abodizo.
FOR THE COMMISSION:
(S/T) RICARDO G. NEPOMUCENO, JR.
General Counsel”40
117 of 120
It must be recalled that in his Memorandum of 14 February 1985,41 General Counsel Ilao of the NPC
asked for a reconsideration of the disallowance and requested that the same be forwarded to the
Chairman of the COA pursuant to Item III-7 of COA Circular 81-156 dated 19 January 1981. Clearly,
therefore, the motion for reconsideration became a matter for the COA to resolve or decide. Under
the provisions of the Constitution then in force, the COA was bound to decide it
_______________
40 Annex “U”; Rollo, 49.

41 Annex “P”; Id., 44.
124
124
within sixty (60) days from the date of its submission for resolution. Section 2 of Article XII-D thereof
reads:
“SEC. 2. The Commission on Audit shall have the following powers and functions:
xxx
(2) Decide any case brought before it within sixty days from the date of its submission for resolution.
Unless otherwise provided by law, any decision, order, or ruling of the Commission may be brought
to the Supreme Court on certiorari by the aggrieved party within thirty days from his receipt of a copy
thereof.”
Section 7, Article IX-A of the present Constitution also provides:
“SEC. 7. Each Commission shall decide by a majority vote of all its members any case or matter
brought before it within sixty days from the date of its submission for decision or resolution. A case
or matter is deemed submitted for decision or resolution upon the filing of the last pleading, brief, or
memorandum required by the rules of the Commission or by the Commission itself. Unless otherwise
provided by this Constitution or by law, any decision, order, or ruling of each Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of
a copy thereof.”
The COA, both under the 1973 and 1987 Constitutions, is a collegial body. It must resolve cases
presented to it as such. Its General Counsel cannot act for the Commission for he is not even a
Commissioner thereof. He can only offer legal advice or render an opinion in order to aid the COA
in the resolution of a case or a legal question.
Thus, Nepomuceno’s 5th indorsement cannot, by any stretch of the imagination, be considered as a
“decision” of the COA. If the same were to be so considered, it would be void ab initio for having
been rendered by one who is not possessed with any power or authority. In Mison vs. Commission
on Audit,42 this Court held that a so-called decision, denominated as Decision
________________
42 187 SCRA 445 [1990].

125
VOL. 213, AUGUST 31, 1992

125
No. 77-142 by the Manager of the Technical Service Office of the COA, “by authority of the acting
chairman” is “substantively void ab initio,” because it was rendered without jurisdiction. “It had an
essential inherent defect that could not be cured or waived.”
What Mr. Nepomuceno should have done was to render the opinion precisely sought for in the
preceding 4th indorsement of respondent Ursal dated 30 May 1985,43 and submit the same to the
Commission for the latter’s guidance in resolving the motion for reconsideration.
118 of 120
Respondent Agustin, therefore, acted prematurely and with undue haste in implementing the
disallowance against the parties allegedly liable therefor on the basis of the favorable opinion of Mr.
Nepomuceno who, incidentally, merely concurred with his (Agustin’s) 22 March 1985 indorsement.
3. Even if We are to assume that the disallowance was proper, there would still be no basis for directly
holding petitioner liable therefor together with those earlier found to be responsible by Agustin in his
Certificate of Settlement and Balances; moreover, there would be no reason to debit immediately his
account with the NPC. In the first place, as earlier stated, up to the level of the General Counsel of
the COA who acted for the Commission, it was never claimed that petitioner was personally liable
for the disallowed disbursement; only the approving authority, the management examiners and the
Chief Accountant of the NPC were deemed liable therefor. This seemed to be proper in the light of
Sections 103, 105(1) and 106 of P.D. No. 1445. Under said Section 103, 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 directly responsible therefor. In the instant case, while it may perhaps
be true that the petitioner had rendered the opinion which was relied upon for the disbursement, it
cannot be said that he was directly responsible therefor. His was only a legal opinion which the
governing board of the NPC or any of its authorized officials could adopt or reject in the resolution
of the request of OPLGS for reimbursement. As
________________
43 Annex “T”; Rollo, 47.

126
126
earlier indicated, there is no showing at all that such governing board or any authorized official
formally approved the request and granted the authority to make the refund. Respondent then was
originally correct in excluding petitioner from the Certificate of Settlement and Balances.
It does not necessarily follow, however, that in no case may the petitioner be liable for his legal
opinion. As the then officer-in-charge of the Office of the General Counsel of NPC, he exercised
quasi-judicial functions. He was empowered with discretion and authority to render an opinion as to
whether the claim for reimbursement by the OPLGS was proper and ultimately, to determine if the
NPC or any of its employees was responsible for the accident and, therefore, liable for the injury
suffered by Abodizo under the law on quasi-delict. If he rendered the opinion in the just performance
of his official duties and within the scope of his assigned tasks, he would not be personally liable for
any injury that may result therefrom.44 Otherwise stated, a public official may be liable in his
personal capacity for whatever damage he may have caused by his act done with malice and in bad
faith or beyond the scope of his authority or jurisdiction.45 Paragraph (1), Section 38, Chapter 9,
Book I, of the Administrative Code of 198746 expressly provides:
“SEC. 38. Liability of superior officers.—(1) A public officer shall not be civilly liable for acts done
in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross
negligence.”
xxx
But whether petitioner acted with malice, bad faith or beyond the scope of his authority or jurisdiction
is a matter respondent Agustin cannot dispose of unilaterally and summarily without infringing on
the petitioner’s right to due process.
WHEREFORE, the instant petition is GRANTED. The chal-
________________
44 Zulueta vs. Nicolas, G.R. No. L-3251, 31 January 1959.
119 of 120
45 Chartered Bank vs. National Government Auditing Office, 149 SCRA 58 [1987]; Dumlao vs.
Court of Appeals, 114 SCRA 247 [1982]; Mindanao Realty Corporation vs. Kintanar, 6 SCRA 814
[1962].
46 Executive Order No. 292.
127
VOL. 213, AUGUST 31, 1992

127
Venegas vs. National Labor Relations Commission
lenged 5th indorsement of the General Counsel of the respondent Commission on Audit, dated 21
May 1986, the Memorandum of respondent Agustin of 30 June 1986, insofar, as it holds petitioner
personally liable for the disallowed disbursement and the Debit Memo, dated 22 July 1986, of the
Manager of the Accounting Department of the National Power Corporation, are hereby set aside for
being null and void.
SO ORDERED.
Gutierrez, Jr. (Chairman), Bidin and Romero, JJ., concur.
Feliciano, J., On official leave.
Petition granted.
Note.—Due process is also required in administrative proceedings (Doruelo vs. Commission on
Elections, 133 SCRA 376).
——o0o——
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213 SCRA 109, G.R. No. 75959 August 31, 1992
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286, FEBRUARY 10, 1998

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VOL. 208, MAY 8, 1992

Borrow loan arrangement

Pesos per Barrel

VOL. 373, JANUARY 16, 2002

VOL. 534, SEPTEMBER 25, 2007

VOL. 534, SEPTEMBER 25, 2007

VOL. 190, SEPTEMBER 28, 1990

VOL. 190, SEPTEMBER 28, 1990

VOL. 190, SEPTEMBER 28, 1990

Judgment affirmed in full.

G.R. No. 171548. February 22, 2008.*

© Copyright 2019 Central Book Supply, Inc. All rights reserved.

VOL. 218, JANUARY 29, 1993

VOL. 218, JANUARY 29, 1993

1 Now Section 281.

3 Annex "A", Petition in G.R. No. 102258, pp. 21-22, Rollo,

VOL. 218, JANUARY 29, 1993

VOL. 218, JANUARY 29, 1993

13 p. 8, Petition, p. 14, Rollo in G.R. No. 102258.

16 Resolution of February 4, 1992.

VOL. 218, JANUARY 29, 1993

17 Sec. 1, Art. IX (A), 1987 Constitution.

19 Sec. 2(2), Ibid.

VOL. 218, JANUARY 29, 1993

20 162 SCRA 782.

VOL. 218, JANUARY 29, 1993

VOL. 218, JANUARY 29, 1993

1 Section 2(1), Article IX-D, 1987 Constitution.

2 G.R. No. 60403, 3 August 1983, 124 SCRA 1.

VOL. 218, JANUARY 29, 1993

The facts are stated in the opinion of the Court.

1 All figures in Thousand U.S. Gallons.

VOL. 245, JUNE 9, 1995

6 Annex “D”, Ibid., Rollo, p. 35.

VOL. 245, JUNE 9, 1995

THE COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION

THE COA LIKEWISE EXCEEDED ITS JURISDICTION IN EXTENDING THE APPLICATION

ASSUMING ARGUENDO THAT THE ORDER IN QUESTION WAS INTENDED TO COVER

11 Resolution of November 13, 1990, Rollo, pp. 191-192.

VOL. 245, JUNE 9, 1995

VOL. 245, JUNE 9, 1995

The facts are stated in the opinion of the Court.

VOL. 328, MARCH 21, 2000

1 Pursuant to Administrative Order No. 88-1 issued on February 26, 1988.

VOL. 328, MARCH 21, 2000

3 Annex D, id.; Ibid., 55.

6 Annex G, id.; Ibid., 63.

VOL. 328, MARCH 21, 2000

10 Annex A-2, id.; Ibid., 47.

VOL. 328, MARCH 21, 2000

11 Guerrero v. Villamor, 296 SCRA 88 (1998).

13 Sec. 26, PD 1445.

VOL. 328, MARCH 21, 2000

VOL. 328, MARCH 21, 2000

24 Ditan v. POEA, et al., 191 SCRA 823 (1990).

G.R. No. 180989. February 7, 2012.*

VOL. 665, FEBRUARY 7, 2012

VOL. 665, FEBRUARY 7, 2012

VOL. 665, FEBRUARY 7, 2012

VOL. 665, FEBRUARY 7, 2012