Bangko Sentral ng Pilipinas vs. Commission on Audit

The Bangko Sentral ng Pilipinas is not a government-owned or -controlled corporation (GOCC) within the meaning of Section 2(b) of RA 7656 and thus lies outside the coverage of RA 7656; consequently, Section 2(d) of RA 7656 did not impliedly repeal Section 43 of RA 7653, which authorizes the BSP to maintain adequate reserves. Additionally, a ruling of the Commission on Audit that adjudicates audit observations on transactions that have not yet occurred and were not submitted for its review is void for having been rendered in excess of jurisdiction and does not attain finality.

The BSP, the country’s independent central monetary authority, was created under RA 7653 (the New Central Bank Act). Section 43 of RA 7653, prior to its 2019 amendment, provided that in computing net profits, the BSP “shall make adequate allowance or establish adequate reserves for bad and doubtful accounts.” The BSP had, for years, deducted reserves from its net earnings before remitting dividends to the national government. RA 7656, enacted five months later, required all GOCCs to declare and remit at least fifty percent of their annual net earnings to the national government and defined “net earnings” in Section 2(d) to mean income net of certain deductions but “in no case shall any reserve for whatever purpose be allowed as a deduction.” A conflict arose as to which law governs the dividend computation of the BSP.

• Nature of the Parties and the Governing Statutes: The BSP is the independent central monetary authority created by RA 7653, invested with corporate powers but designed to enjoy fiscal and administrative autonomy. Section 43 of RA 7653 originally stated that in calculating net profits, the BSP “shall make adequate allowance or establish adequate reserves for bad and doubtful accounts.” RA 7656, which followed shortly after, required all government-owned or -controlled corporations (GOCCs) to declare and remit at least fifty percent of their annual net earnings and, in its Section 2(d), defined “net earnings” as income from whatever source net of certain deductions “but in no case shall any reserve for whatever purpose be allowed as a deduction.”

• COA Opinion and Audit Observations: Pursuant to a post-audit, the COA’s Office of the General Counsel rendered Opinion No. 2006-031, taking the position that Section 2(d) of RA 7656 repealed Section 43 of RA 7653, effectively requiring the BSP’s dividend computation to be based on net earnings undiminished by any reserve. COA thereafter issued two Audit Observation Memoranda (AOM RMS-2006-02 and AOM FSAT-DP-AO-2007-02), concluding that the BSP had understated its dividend remittances for the years 2003 through 2006 by deducting reserves, with the total underpayment initially quantified at P2.101 billion and later revised to P7.147 billion.

• COA Adjudication and the Partial Compromise: BSP disputed the AOMs, arguing that its special charter (RA 7653) should prevail over the general provisions of RA 7656. In Decision No. 2010-042, the COA rejected the BSP’s position, holding that Section 2(d) of RA 7656 impliedly repealed Section 43 of RA 7653. It directed the issuance of a Notice of Charge for the understated dividends covering 2003 to 2006. On reconsideration, the COA issued Resolution No. 2011-007, recognizing a compromise among BSP, DOF, and COA that fixed the due dividends for 2003-2006 at P9.312 billion. Nevertheless, the COA made an express pronouncement that “for subsequent years, that is, for the years 2007 onwards, the BSP must compute the net earnings for purposes of dividends to be remitted to the NG undiminished by any reserve for whatever purpose.”

• MOA and the Assailed Rulings: The compromise was formalized in a Memorandum of Agreement dated January 27, 2011, under which BSP remitted P9.312 billion. The MOA also stated that the parties “shall diligently work towards a mutually acceptable and legal arrangement for the subsequent dividend payments.” Despite this undertaking, the COA informed the BSP that Resolution No. 2011-007 had become final and, through Decision No. 2012-154, declared with finality that “no reserve for whatever purpose shall be deducted from the BSP’s net earnings/income in the computation of dividends to be remitted to the NG.” The concomitant motion for reconsideration was denied in Resolution No. 2013-214.

• MOA Superseded Prior COA Decisions: Petitioner argued that the Memorandum of Agreement among BSP, COA, and DOF, which adopted the BSP’s own computation for 2003–2006 and committed to negotiate future payments, superseded Decision No. 2010-042 and Resolution No. 2011-007, preventing those resolutions from being used as a “concrete precedent.”

• COA Lacks Power to Interpret Laws with Finality: Petitioner maintained that the COA does not possess the authority to issue binding, final interpretations of the law; its pronouncements remain advisory and subject to judicial review, and its rulings do not create legal precedent akin to stare decisis.

• Disregard of BSP Independence and Implied Powers: Petitioner contended that the COA, with grave abuse of discretion, failed to consider the BSP’s constitutionally mandated independence as the central monetary authority. The BSP, as the primary agency entrusted to enforce RA 7653, has the authority to interpret its own charter and the implied power to maintain reserves necessary for prudent central banking operations.

• No Implied Repeal; Special Law Governs: Petitioner asserted that Section 2(d) of RA 7656, a general statute applicable to all GOCCs, did not impliedly repeal Sections 43 and 44 of RA 7653, a special law specifically governing the BSP. Under principles of statutory construction, the special law prevails in cases of conflict, and implied repeals are not favored.

• Inconsistent COA Computation: Petitioner pointed out that the COA’s method of computing dividends was inconsistent and vague, as the COA recognized that the BSP could still deduct reserves for bad or doubtful accounts after remitting dividends, contradicting the premise of the implied repeal ruling.

• Transitory Period: Petitioner claimed that RA 7656 does not apply during the twenty-five-year transitory period provided under Section 132(b) of RA 7653.

• Finality of Prior Rulings: Respondent countered that Decision No. 2010-042 and Resolution No. 2011-007 had already attained finality because the BSP failed to appeal within the reglementary period; a petition for certiorari could no longer disturb final and executory decisions of a constitutional commission.

• MOA Limited to 2003–2006: Respondent argued that the MOA settled only the dividends for the period 2003 to 2006, and its undertaking to negotiate future arrangements did not supersede the COA’s definitive ruling that for 2007 onwards no reserves may be deducted.

• Particular Provision of General Law Prevails: Respondent relied on the principle that where a general provision of a special law conflicts with a particular provision of a general law, the latter should prevail, citing Bagatsing v. Ramirez. Thus, the specific prohibition in Section 2(d) of RA 7656 overrides Section 43 of RA 7653.

• No Implied Power to Maintain Reserves: Respondent maintained that Section 2(d) of RA 7656 is an explicit legislative prohibition that eliminates any claimed implied power of the BSP to maintain reserves at the expense of dividend remittances.

• Consistency of COA’s Computation: Respondent denied any inconsistency or vagueness in its manner of computing dividends, insisting that the rule against any deduction for reserves was uniformly applied.

• Finality and Void Judgment: Whether the COA’s ruling in Resolution No. 2011-007 as to dividend payments for 2007 onwards had attained finality and could serve as a “concrete precedent” for all future dividend payments of the BSP.
• COA’s Power to Interpret Law and Create Precedent: Whether the COA has the authority to render binding interpretations of law that preclude judicial review or that operate as binding legal precedent for future cases.
• BSP as a GOCC under RA 7656: Whether the BSP is a government-owned or -controlled corporation within the contemplation of Section 2(b) of RA 7656 and thus subject to the no-reserve rule under Section 2(d) thereof.
• Implied Repeal of RA 7653: Whether Section 2(d) of RA 7656 impliedly repealed Section 43 of RA 7653.

• Finality and Void Judgment: The portion of Resolution No. 2011-007 that pertained to dividends from 2007 onwards was void and did not attain finality. The COA exceeded its jurisdiction by adjudicating audit observations on transactions that had not yet occurred and were not part of the actual dispute submitted for its resolution. A judgment rendered in excess of jurisdiction is void and cannot become final, nor can it serve as a binding precedent for future years.

• COA’s Power to Interpret Law and Create Precedent: The COA is empowered to resolve questions of law necessary for its constitutional mandate to audit government entities. However, its rulings do not create legal precedent equivalent to judicial decisions entitled to the doctrine of stare decisis. Only decisions of the Supreme Court establish jurisprudence that forms part of the legal system. Furthermore, COA rulings on questions of law are always subject to judicial review.

• BSP as a GOCC under RA 7656: The BSP is not a GOCC as defined under Section 2(b) of RA 7656 and the Administrative Code. Applying the parameters from Manila International Airport Authority v. Court of Appeals, the BSP is organized neither as a stock corporation (it has no capital stock divided into shares) nor as a non-stock corporation (it has no members, and it is mandated to distribute profits to the government). It also does not fall under the special category of “financial institutions owned or controlled by the National Government” within the definition because it supervises, rather than operates as, the entities described, and it does not collect funds from the public. The legislative records of both the Constitutional Commission and Congress confirm the deliberate intent to remove the BSP from the general category of GOCCs and place it beyond the control of the Executive branch. Subsequent legislation—RA 10149 (GOCC Governance Act of 2011) expressly excluding the BSP, and RA 11211 amending Section 43 to reinforce the BSP’s power to maintain reserves—further supports this conclusion.

• Implied Repeal of RA 7653: Because the BSP is not covered by RA 7656, the question of implied repeal does not arise; the two provisions do not operate on the same subject matter. Even if there were an apparent conflict, implied repeals are not favored and every effort must be made to harmonize statutes. The BSP Charter, not RA 7656, exclusively governs the computation of the BSP’s net earnings.

• _Definition and Parameters of a Government-Owned or -Controlled Corporation (Manila International Airport Authority doctrine): An entity must be organized as a stock or non-stock corporation to qualify as a GOCC under the Administrative Code and RA 7656. A stock corporation must have capital stock divided into shares and authorize the distribution of dividends to shareholders; a non-stock corporation must have members and must not distribute any part of its income to its members. Entities vested with corporate powers but lacking the hallmarks of stock or non-stock corporations—such as the BSP, MIAA, PPA, and similar instrumentalities—are not GOCCs in the strict legal sense.

• _Power of COA to Rule on Questions of Law (Oriondo doctrine): The COA, in the exercise of its audit jurisdiction, may resolve novel or difficult questions of law as a necessary incident of its constitutional mandate. However, such determinations are subject to judicial review and do not create binding legal precedent; they lack the force of stare decisis that attaches only to judicial decisions.

• Implied Repeal of Statutes: Repeals by implication are not favored. Courts must harmonize apparently conflicting statutes, and a repeal will be inferred only when the provisions of two acts on the same subject matter are irreconcilably contradictory, or when a later act covers the whole subject of an earlier one and is clearly intended as a substitute. All doubts must be resolved against implied repeal.

• Doctrine of Finality — Exception for Void Judgments: A decision that has attained finality may no longer be modified, but void judgments are an exception. A ruling rendered in excess of jurisdiction is void and produces no legal effect, and it can never become final through the mere passage of time.

• Void Judgment for Excess of Jurisdiction: A tribunal acts in excess of jurisdiction when it resolves issues or transactions not raised in the pleadings or not submitted for its determination. A decision on matters outside the actual controversy is a nullity.

• Mootness — Capable of Repetition Yet Evading Review: Courts may resolve an otherwise moot question when the issue is capable of repetition yet evading review, or when the resolution is necessary for the formulation of controlling principles to guide the bench, bar, and public.

• “A government-owned or controlled corporation must be ‘organized as a stock or non-stock corporation.’ … Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation.” — the Court quoted its ruling in MIAA v. CA, applying the same framework to exclude the BSP from the GOCC classification.

• “In fine, following the definition of a GOCC under the law and in line with settled jurisprudence, the BSP does not qualify as a GOCC as defined under RA 7656.”

• “Repeals by implication are not favored, and courts must generally assume their congruent application. The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the inference of implied repeal may be drawn.”

• “A void judgment does not attain finality. … The actions of a court outside its jurisdiction cannot produce legal effects and cannot likewise be perpetuated by a simple reference to the principle of immutability of final judgment; a void decision can never become final.”

• “Administrative decisions do not enjoy the same level of recognition as judicial decisions applying or interpreting the laws or the Constitution. These decisions do not have a binding effect similar to stare decisis.”

• “It is owned by the government, but not quite government-owned or -controlled corporation as defined now by various law.” — Senate deliberations, reflecting the legislative intent to treat the BSP as sui generis.

• Manila International Airport Authority v. Court of Appeals, 528 Phil. 181 (2006) — Applied as the controlling framework for determining whether an entity qualifies as a GOCC. The same structural analysis (absence of capital stock and members) was extended to the BSP.

• Oriondo v. Commission on Audit, G.R. No. 211293, June 4, 2019, 903 SCRA 71 — Recognized as authority for the COA’s competence to rule on questions of law in the course of its audit jurisdiction, but with the crucial limitation that such rulings are subject to judicial review and do not create precedent.

• Bagatsing v. Ramirez, 165 Phil. 909 (1976) — The case on which the COA relied; distinguished and effectively overruled in the context of this dispute because the BSP was found not covered by the general law in the first place.

• Philippine Bank of Communications v. Commissioner of Internal Revenue, 361 Phil. 916 (1999) — Cited for the principle that administrative interpretations of law do not bind the courts and do not have the force of stare decisis.

• FGU Insurance Corp. v. Regional Trial Court of Makati City, 659 Phil. 117 (2011) — Used to frame the doctrine of finality of judgments and its recognized exceptions, particularly void judgments.

• Gonzales III v. Office of the President, 694 Phil. 52 (2012) — Cited for the rule that statutes must be harmonized and that implied repeals are strongly disfavored.

• Section 2, Article IX-D, 1987 Constitution — Defines the audit powers of the COA. Interpreted as the source of the COA’s authority to resolve necessary questions of law in auditing government accounts.

• Section 1, Article VIII, 1987 Constitution — Vests judicial power in the Supreme Court and lower courts. Applied to underscore that only courts can issue binding legal interpretations with stare decisis effect.

• Section 20, Article XII, 1987 Constitution — Mandates the creation of an independent central monetary authority. Used to demonstrate the constitutional intent to insulate the BSP from ordinary GOCC classification and executive control.

• Section 2(b) and (d) in relation to Section 3, RA 7656 — Defines GOCCs and “net earnings” for dividend computation; the definitional provision was held inapplicable to the BSP because the BSP does not meet the statutory definition of a GOCC.

• Section 43, RA 7653 (New Central Bank Act) — The original provision allowing the BSP to set up reserves; held not to have been impliedly repealed because RA 7656 does not cover the BSP.

• Section 43, RA 7653, as amended by RA 11211 — The 2019 amendment expressly confirms that the BSP’s net profit shall be determined after allowing for “adequate allowances and provisions for bad and doubtful debts, depreciation … and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine.” Conceived as a subsequent legislative affirmation of the BSP’s authority over reserves.

• Section 2(13), Introductory Provisions, Administrative Code of 1987 — The definition of a GOCC as an agency “organized as a stock or non-stock corporation,” applied to conclude that the BSP does not qualify.

• Section 4, RA 10149 (GOCC Governance Act of 2011) — Expressly excludes the BSP from the coverage of the law regulating GOCCs, reinforcing its distinct status.

Chief Justice Gesmundo and Justices Inting, Gaerlan, Rosario, J. Lopez, and Dimaampao concurred in the Decision. Justice Perlas-Bernabe (on official leave but voted) wrote a Concurring Opinion; Justice Caguioa and Justice Lazaro-Javier each submitted separate Concurring Opinions; Justice Zalameda wrote a Separate Concurring Opinion. Justice M. Lopez was on official leave but voted. Justice Leonen submitted a Separate Opinion. Justice Carandang was on official leave.

No dissenting opinion was registered. The separate and concurring opinions did not dissent from the dispositive result but offered varying emphases or supplementary reasoning, particularly on the doctrines of mootness and finality of COA decisions.