Development Bank of the Philippines vs. Commission on Audit

A COA decision becomes final and executory after thirty days from notice unless a motion for reconsideration or appeal is timely filed; it may not thereafter be modified, and the COA cannot reopen a settled account under Section 52 of PD No. 1445 beyond the three-year period or on the strength of letters from a person who is not a real party in interest or an aggrieved party.

The Development Bank of the Philippines (DBP) is the petitioner, and the Commission on Audit (COA) is the respondent. The controversy concerns DBP's 1999 compensation plan and salary increases for eight senior officers. Under Section 52 of Presidential Decree No. 1445, the COA may open and revise settled accounts within three years after settlement, and under Section 261(g)(2) of the Omnibus Election Code, salary increases are prohibited within 45 days before a regular election. The COA's rules provide that its decisions become final and executory after 30 days from notice unless a motion for reconsideration or appeal is filed.

In 2006, the Board of Directors of the Development Bank of the Philippines granted salary increases to eight senior officers in the aggregate amount of P17,380,307.64 pursuant to its 1999 compensation plan. On June 19, 2007, the supervising auditor disallowed the amount because DBP's compensation plan lacked prior approval from the Office of the President. DBP appealed the notice of disallowance to the Commission on Audit Corporate Government Sector Cluster A - Financial. On June 2, 2010, the COA Cluster Director denied the appeal and affirmed the notice of disallowance. DBP then filed a petition for review before the COA, invoking a Memorandum dated April 22, 2010 in which former President Gloria Macapagal-Arroyo approved the implementation of DBP's compensation plan from 1999 onward.

On February 1, 2012, the COA granted the petition and lifted the notice of disallowance. It reasoned that the subsequent approval by the President of DBP's Compensation Plan for 1999 made the principal issue of the absence of Presidential approval moot and academic, citing COA Decision No. 97-689 dated November 4, 1997. DBP received a copy of the February 1, 2012 Decision on February 6, 2012 but did not file any motion for reconsideration or a petition to the Supreme Court. On March 27, 2012, Mario P. Pagaragan, the Vice President/Officer-In-Charge of DBP's Program Evaluation Department, submitted confidential letters to the COA asking it to reconsider the February 1, 2012 Decision. The letters explained that Section 261(g)(2) of the Omnibus Election Code prohibits the grant of salary increase within 45 days before a regular election, and that President Arroyo's post facto approval of DBP's compensation plan on April 22, 2010 was void because it was made within the 45-day period before the May 10, 2010 elections.

On April 13, 2015, the COA treated Pagaragan's letters as a motion for reconsideration and exercised its power under Section 52 of Presidential Decree No. 1445 to open and revise settled accounts. The COA found the motion meritorious and reversed its February 1, 2012 Decision, sustaining the notice of disallowance. It found that the post facto approval of then President Arroyo was made 18 days before the May 10, 2010 Presidential and Vice Presidential Elections, which was clearly within the 45-day prohibition, and that the increase of DBP senior officers' compensation had no legal basis. The COA also directed the Director, Fraud Audit Office, Special Services Sector, to investigate the letter-complaint dated September 12, 2010 of concerned DBP officers and employees against some DBP officials.

On July 29, 2015, DBP sought reconsideration on the ground that the COA Decision dated February 1, 2012 had become final and executory, and that Pagaragan was not a party to the case and was not entitled to any remedy. On June 14, 2019, the COA partly granted the motion. The COA sustained the disallowance and held that it had the power to re-examine cases on account of new and material evidence. However, the COA exempted the approving officers and the passive recipients from liability based on the presumption of good faith, in view of their reliance on the post facto approval of then President Arroyo. The COA accordingly affirmed the notice of disallowance with modification, exempting both the approving officers and the passive recipients from the obligation to refund the disallowance.

• Finality of the February 1, 2012 Decision: DBP argued that the COA's Decision dated February 1, 2012 had become final and executory because no motion for reconsideration or appeal was filed within 30 days from notice, or from February 6, 2012 until March 7, 2012.
• Improper Opening of Settled Account: DBP maintained that Section 52 of PD No. 1445 cannot justify the opening of its account absent fraud, collusion, or error of calculation, or the discovery of new and material evidence.
• Lack of Legal Personality: DBP argued that Pagaragan was a stranger to the case and had no legal personality to move for reconsideration.
• Due Process and Speedy Disposition: DBP claimed violation of its rights to due process and speedy disposition of cases because the COA did not give it the opportunity to comment on Pagaragan's letters, which it learned of only upon receipt of the April 13, 2015 Decision, and because the COA took four years to resolve DBP's motion for reconsideration.
• Nature of the Presidential Approval: DBP contended that former President Arroyo's approval of the compensation plan on April 22, 2010 merely confirmed the salary increases already given to its senior officers and did not constitute a grant of new privileges.

• Real Party-in-Interest: COA maintained that Pagaragan is a real party-in-interest because he is concerned with the proper implementation of DBP's compensation plan and in ensuring that its funds are properly managed.
• Irrelevance of Pagaragan's Personality: COA argued that Pagaragan's legal personality is irrelevant because Section 52 of PD No. 1445 authorizes the COA to initiate, motu proprio, the reopening or revision of an account within three years from settlement.
• Speedy Disposition: COA countered that there is no violation of DBP's right to speedy disposition because delay is inevitable and not capricious or oppressive; it is the sole agency examining, auditing, and settling all accounts pertaining to the entire bureaucracy, including private entities that receive public funds, and it has a steady influx of petitions for money claim and requests for relief from accountability.
• Omnibus Election Code Violation: COA insisted that former President Arroyo's post-facto approval of the salary increases is contrary to the Omnibus Election Code because it was made on April 22, 2010, or 18 days before the May 10, 2010 national elections.

• Real Party in Interest / Aggrieved Party: Whether Pagaragan is a real party in interest or an aggrieved party entitled to file a motion for reconsideration or appeal from the COA's February 1, 2012 Decision.
• Speedy Disposition: Whether the COA violated DBP's right to speedy disposition of cases in acting on Pagaragan's letters and resolving DBP's motion for reconsideration.
• Finality of the COA Decision: Whether the COA's February 1, 2012 Decision became final and executory absent a timely motion for reconsideration or appeal.
• Opening and Revision of Settled Accounts: Whether the COA gravely abused its discretion in reopening and revising DBP's settled account under Section 52 of PD No. 1445 beyond the three-year period, absent new and material evidence, and without giving DBP an opportunity to comment on Pagaragan's letters.

• Real Party in Interest / Aggrieved Party: No. Pagaragan is not a real party in interest or an aggrieved party; he sustained no direct injury and was not a party to the original proceedings, so he could not file a motion for reconsideration or appeal.
• Speedy Disposition: Yes. The COA violated DBP's right to speedy disposition; it took more than three years to act on Pagaragan's letters and almost four years to resolve DBP's motion for reconsideration, without justification, despite DBP's four motions for early resolution.
• Finality of the COA Decision: Yes. The February 1, 2012 Decision became final and executory after 30 days from notice; DBP received it on February 6, 2012 and did not file a motion for reconsideration or appeal by March 7, 2012, so the COA had no jurisdiction to entertain Pagaragan's March 27, 2012 letters.
• Opening and Revision of Settled Accounts: No. The COA could not reopen the settled account under Section 52 of PD No. 1445; the three-year period had lapsed, no new and material evidence was discovered, and DBP was not given an opportunity to comment on Pagaragan's letters.

• Real Party in Interest / Aggrieved Party: Judicial review requires legal standing—a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the act's enforcement. The interest must be material, personal, and not merely an interest in the question involved or a desire to vindicate a third party's right. In private suits, the real-party-in-interest rule requires that the party be the one benefited or injured by the judgment or entitled to the avails of the suit. Under the COA Rules, an aggrieved party is a person adversely affected by a decision, order, or ruling, and the term presupposes that the movant or appellant was a party to the original proceedings. Pagaragan questioned the validity of President Arroyo's approval of DBP's compensation plan but did not establish any personal and substantial interest; the allowance or disallowance of the salary increases would not affect him, because the money did not come from his personal funds and, if the disallowance were sustained, the senior officers would bear the consequence of returning the amounts. He was not a party to the original proceedings and came into the picture only when the COA lifted the notice of disallowance. Thus, he had no legal personality to move for reconsideration or appeal.
• Speedy Disposition: Section 16, Article III of the 1987 Constitution guarantees the right to a speedy disposition of cases before all judicial, quasi-judicial, or administrative bodies. The right is violated only when vexatious, capricious, and oppressive delays attend the proceedings, or when unjustified postponements are secured, or when a long period is allowed to elapse without cause or justifiable motive. The length of delay, the reasons for it, the assertion or failure to assert the right, and the prejudice caused are considered. Here, Pagaragan submitted his confidential letters on March 27, 2012, but the COA acted only on April 13, 2015—more than three years later—without justification. After DBP filed its motion for reconsideration on July 29, 2015, the COA resolved it only on June 14, 2019—almost four years later—again without explanation. The issues were not complex; they were run-of-the-mill disallowance matters, and the influx of cases was not a sufficient excuse absent special or peculiar circumstances. DBP asserted the right by filing four motions for early resolution. The delay prejudiced DBP and the senior officers, whose salary increases remained suspended and who faced the possibility of reimbursement. Thus, the COA violated the right to speedy disposition.
• Finality of the COA Decision: Under COA En Banc Resolution No. 2011-006, which modified Rule X, Sections 9 and 10 of the 2009 Revised Rules of Procedure of the COA, a decision or resolution of the Commission becomes final and executory after 30 days from notice, and a motion for reconsideration may be filed within 30 days from notice. This is consistent with Section 22.1 of Circular No. 2009-06 and Section 51 of PD No. 1445, which provide that a decision of the Commission or an auditor, if not appealed, becomes final and executory. DBP received the February 1, 2012 Decision on February 6, 2012 and had until March 7, 2012 to file a motion for reconsideration or a petition to the Supreme Court. Pagaragan's letters, which the COA treated as a motion for reconsideration, were filed only on March 27, 2012—beyond the reglementary period. Consequently, the February 1, 2012 Decision had become final and executory, and the COA had no jurisdiction to entertain the letters. The doctrine of immutability of a final judgment precludes modification even to correct perceived errors of law or fact; the exceptions—clerical errors, nunc pro tunc entries, void judgments, and supervening events—are not present.
• Opening and Revision of Settled Accounts: Section 52 of PD No. 1445 permits the COA to motu proprio review and revise a settled account within three years after settlement, and to open an account within three years after the original settlement when it appears tainted with fraud, collusion, or error of calculation, or when new and material evidence is discovered. The settlement of an account is the process of determining the status or balance of an accountable officer's account after audit and examination. Under Cruz, Jr. vs. Commission on Audit, it is the allowance in audit or the issuance of a notice of disallowance that becomes final and executory absent a motion for reconsideration or appeal; if the disallowance is appealed, the decision on appeal becomes final and settles the account. DBP's account was settled when the COA lifted the notice of disallowance on February 1, 2012. The COA acted on Pagaragan's letters only on April 13, 2015—more than three years later—so the three-year period had lapsed. The COA also did not give DBP an opportunity to comment on the letters; DBP learned of them only upon receipt of the April 13, 2015 Decision. Moreover, the allegation in the letters was not new evidence: the COA already knew or ought to have known the date President Arroyo approved the compensation plan before it rendered the February 1, 2012 Decision, because the Omnibus Election Code is subject to mandatory judicial notice and the 2010 national elections were an event of general notoriety. Thus, the COA committed grave abuse of discretion in reviewing a final and executory judgment and reopening a settled account beyond the legal period.

• Real Party in Interest and Legal Standing — Legal standing requires a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the enforcement of the assailed act. The interest must be material, personal, and not merely an interest in the question involved or a desire to vindicate a third party's right. In private suits, the real party in interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. The Court applied this doctrine to hold that Pagaragan, who questioned the validity of the presidential approval but stood to suffer no direct injury from the allowance or disallowance of the salary increases, lacked legal personality to seek reconsideration or appeal.
• Aggrieved Party under COA Rules — An aggrieved party is a person adversely affected by any decision, order, or ruling of the Commission or any of its duly authorized representatives. The term presupposes that the movant or appellant is a party to the original proceedings that gave rise to the assailed decision, order, or ruling. The Court applied this to Pagaragan, who was not a party to the original proceedings and came into the picture only when the COA lifted the notice of disallowance.
• Immutability of Final Judgments — A decision that has acquired finality becomes immutable and unalterable. This quality precludes modification of a final judgment, even if the modification is meant to correct erroneous conclusions of fact and law, whether by the court that rendered it or by the highest court. The doctrine is subject to exceptions: correction of clerical errors, nunc pro tunc entries, void judgments, and supervening events. The Court applied the doctrine to the COA's February 1, 2012 Decision, finding that it had become final and executory and that none of the exceptions existed.
• Opening and Revision of Settled Accounts under Section 52, PD No. 1445 — The COA may motu proprio review and revise a settled account within three years after settlement. It may open an account within three years after the original settlement when the account appears tainted with fraud, collusion, or error of calculation, or when new and material evidence is discovered. The settlement of an account is the process of determining the status or balance of an accountable officer's account after audit and examination. The Court held that DBP's account was settled on February 1, 2012, that the three-year period had lapsed by April 13, 2015, and that no new and material evidence existed because the COA already knew or ought to have known the facts surrounding the presidential approval and the 2010 elections.
• Right to Speedy Disposition of Cases — Section 16, Article III of the 1987 Constitution guarantees the right to a speedy disposition of cases before all judicial, quasi-judicial, or administrative bodies. The right is violated only when vexatious, capricious, and oppressive delays attend the proceedings, or when unjustified postponements are secured, or when a long period is allowed to elapse without cause or justifiable motive. The Court considered the length of delay, the reasons for it, the assertion or failure to assert the right, and the prejudice caused. It found the COA's delays of more than three years and almost four years unjustified, especially because DBP filed four motions for early resolution and the issues were not complex.
• Mandatory Judicial Notice — Courts shall take judicial notice, without introduction of evidence, of the existence and territorial extent of states, their political history, forms of government, the political constitution and history of the Philippines, the official acts of the legislative, executive, and judicial departments, the laws of nature, the measure of time, and the geographical divisions. The Court applied this to the Omnibus Election Code, which is a law subject to mandatory judicial notice, and to the 2010 national elections, an event of general notoriety, to conclude that the facts alleged in Pagaragan's letters were already available when the February 1, 2012 Decision was rendered and thus were not new evidence.
• Finality of COA Decisions — A decision or resolution of the COA becomes final and executory after 30 days from notice unless a motion for reconsideration or an appeal to the Supreme Court is filed. This is consistent with Section 22.1 of Circular No. 2009-06 and Section 51 of PD No. 1445. The Court applied this to hold that the February 1, 2012 Decision became final and executory on March 7, 2012, and that the COA had no jurisdiction to entertain Pagaragan's March 27, 2012 letters.

• "The COA Rules of Procedure is explicit that the Commission's Decision or Resolution shall become final and executory after 30 days from notice unless a motion for reconsideration or an appeal to the Supreme Court is filed." — This passage states the controlling finality rule for COA decisions, which the Court used to hold that the February 1, 2012 Decision had become final and executory.
• "A decision that has acquired finality becomes immutable and unalterable. This quality of immutability precludes the modification of a final judgment, even if the modification is meant to correct erroneous conclusions of fact and law." — This is the Court's canonical formulation of the doctrine of immutability of final judgments, applied to bar the COA's reversal of its final February 1, 2012 Decision.
• "Contrary to the COA's theory, the three-year period had already lapsed. The DBP's account was settled on February 1, 2012 but it took COA until April 13, 2015 or more than three years to act on Pagaragan's letters." — This passage supplies the ratio for rejecting the COA's invocation of Section 52 of PD No. 1445, because the three-year period for reopening a settled account had expired.
• "Pagaragan did not sustain any direct injury or is in danger of suffering any damages from the assailed salary increases." — This passage is the core factual finding supporting the holding that Pagaragan lacked legal standing as a real party in interest or aggrieved party.

• Cruz, Jr. vs. Commission on Audit, 788 Phil. 435 (2016) — Clarified that the allowance in audit or the issuance of a notice of disallowance becomes final and executory absent a motion for reconsideration or appeal; if the disallowance is appealed, the decision on appeal becomes final and settles the account. The Court applied this to hold that DBP's account was settled on February 1, 2012.
• Mocorro, Jr. vs. Ramirez, 582 Phil. 357, 366-367 (2008) — Quoted for the doctrine that a final judgment is immutable and unalterable, precluding modification even to correct erroneous conclusions of fact and law. The Court used it to reject the COA's reopening of the final February 1, 2012 Decision.
• FGU Insurance Corp. vs. RTC of Makati City, Branch 66, 659 Phil. 117, 123 (2011) — Cited for the exceptions to the immutability of final judgments: clerical errors, nunc pro tunc entries, void judgments, and supervening events. The Court found none present.
• Lopez, Jr. vs. Office of the Ombudsman, 417 Phil. 39, 49-50 (2001) — Cited for the factors in determining whether the right to speedy disposition was violated: length of delay, reasons for the delay, assertion or failure to assert the right, and prejudice caused. Applied to find the COA's delay unjustified.
• Agan, Jr. vs. Phil. International Air Terminals Co., Inc., 450 Phil. 744, 802 (2003) — Cited for the requirement that parties have a personal stake in the outcome of the controversy to assure concrete adverseness. Applied to Pagaragan's lack of standing.
• Central Cement Corp. (now Union Cement Corp.) vs. Mines Adjudication Board, 566 Phil. 275, 288 (2008) — Cited for the principle that justice delayed is justice denied. Applied in finding the violation of DBP's right to speedy disposition.

• Section 16, Article III, 1987 Constitution — Guarantees the right to a speedy disposition of cases before all judicial, quasi-judicial, or administrative bodies. The Court found the COA violated this right due to unjustified delays in acting on Pagaragan's letters and resolving DBP's motion for reconsideration.
• Section 52, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Authorizes the COA to motu proprio review and revise a settled account within three years after settlement, and to open an account within three years when tainted with fraud, collusion, or error of calculation, or when new and material evidence is discovered. The Court held the three-year period had lapsed and no new evidence existed.
• Section 51, Presidential Decree No. 1445 — Provides that a decision of the Commission or any auditor upon any matter within its jurisdiction, if not appealed, is final and executory. The Court applied this to the February 1, 2012 Decision.
• Rule X, Sections 9 and 10, 2009 Revised Rules of Procedure of the Commission on Audit, as modified by COA En Banc Resolution No. 2011-006 — Provide that a COA decision or resolution becomes final and executory after 30 days from notice, and that a motion for reconsideration may be filed within 30 days from notice. The Court used these to find the February 1, 2012 Decision final.
• Rule X, Section 4, 2009 Revised Rules of Procedure of the Commission on Audit — Requires any case brought to the Commission Proper to be decided within 60 days from the date it is submitted for decision or resolution. The Court cited this in finding the COA's delay unjustified.
• Section 22.1, Circular No. 2009-06 (2009 Rules and Regulations on the Settlement of Accounts) — States that a decision of the Commission Proper, ASB, Director, or Auditor, if not appealed, becomes final and executory. The Court cited this as consistent with the COA Rules.
• Section 4.6, Circular No. 2009-06 (2009 Rules and Regulations on the Settlement of Accounts) — Defines an aggrieved party as a person adversely affected by any decision, order, or ruling of the Commission or any of its duly authorized representatives. The Court used this to hold Pagaragan was not an aggrieved party.
• Section 261(g)(2), Article XXII, Omnibus Election Code — Prohibits the grant of salary increase within 45 days before a regular election. The COA invoked this to disallow the salary increases; the Court noted it is a law subject to mandatory judicial notice, so the COA already knew or ought to have known the facts before February 1, 2012.
• Rule 129, Section 1, Rules of Court — Requires courts to take mandatory judicial notice of laws, including the Omnibus Election Code, and other matters. The Court applied this to conclude that the alleged violation was not new evidence.
• Rule 64, Rules of Court — Governs the petition for certiorari assailing the COA Decision. The petition was granted.

Peralta, C.J., Perlas-Bernabe, Leonen, Caguioa, Gesmundo, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Delos Santos, Gaerlan, Rosario, and J. Lopez, JJ., concur.