Philippine Deposit Insurance Corporation vs. Commission on Audit

An audit disallowance that has attained finality cannot be condoned by a government-owned and controlled corporation, because what is prohibited directly is also prohibited indirectly, and final judgments are immutable and unalterable.

Finance Secretary Roberto de Ocampo, acting as ex-officio Chairman of the PDIC Board from 1994 to 1996, received P440,068.62 representing Business Policy Development and Enforcement Expenses (BPDEE) and Christmas gift checks. The COA auditor disallowed the payment for violating the constitutional prohibition against double compensation. The disallowance was affirmed by the COA and subsequently by the Supreme Court En Banc in G.R. No. 155317, attaining finality on January 21, 2003. A Final Order of Adjudication was issued on October 7, 2003, directing the refund of the disallowed amount.

• Disallowance of Additional Compensation: Former Finance Secretary Roberto de Ocampo received P440,068.62 as BPDEE and Christmas gift checks while serving as ex-officio PDIC Chairman from 1994-1996. The COA Resident Auditor disallowed the expenditure via Notice of Disallowance No. 98-002, citing violations of the constitutional rule against multiple positions and double compensation.
• Affirmance and Finality: PDIC's appeals to the COA and the Supreme Court were denied. The Supreme Court's affirmance in G.R. No. 155317 became final and executory.
• Execution and Condonation: A Final Order of Adjudication was issued on October 7, 2003, to execute the disallowance. Rather than comply, PDIC issued Board Resolution No. 2003-09-157 on April 6, 2004, condoning P413,866.62 of the disallowed amount, invoking its charter's provision allowing it to condone claims to protect the Corporation's interest. PDIC noted that the Supreme Court's prior dismissal was based on technicalities rather than the merits.
• Referral to OSG: The COA Supervising Auditor, in a May 14, 2004 Memorandum, referred the condonation to the COA Legal Office, opining that PDIC could not condone a disallowance upheld by the Supreme Court. The COA Chairman subsequently referred the matter to the Office of the Solicitor General to file suit against PDIC officials for non-compliance.
• Denial of Condonation: PDIC sought reconsideration, claiming it did not receive notice of the May 14, 2004 Memorandum and was deprived of its right to appeal. COA denied the request in Decision No. 2006-005, ruling that PDIC had fully participated in the process and could not condone a disallowance already affirmed by the Supreme Court, as this would sanction an indirect violation of the prohibition on double compensation.

• Grave Abuse of Discretion: Petitioner argued that COA committed grave abuse of discretion by depriving PDIC of its right to be heard on the validity of its exercise of the power to condone a settled liability.
• Denial of Due Process: Petitioner maintained that the COA resident auditor failed to furnish it with a copy of the May 14, 2004 Memorandum disallowing the condonation, thereby depriving PDIC of its right to appeal the disallowance under the 1997 COA Revised Rules of Procedure.

• Res Judicata: Respondent countered that PDIC's right to appeal was barred by res judicata, as the validity of the disallowance had been affirmed with finality by the Supreme Court.
• Non-Appealable Memorandum: Respondent argued that the May 14, 2004 Memorandum was not an appealable order, decision, or ruling under Rule V of the COA Rules, but merely an informational referral to the Commission.
• Prohibition on Revisiting Final Judgments: Respondent maintained that allowing an appeal on the condonation would effectively review the validity of the original disallowance, which had already attained finality.

• Condonation of Final Disallowance: Whether the Commission on Audit committed grave abuse of discretion in disallowing PDIC's condonation of an audit disallowance that had already been affirmed with finality by the Supreme Court.
• Due Process: Whether PDIC was denied due process when the resident auditor failed to furnish it a copy of the May 14, 2004 Memorandum.

• Condonation of Final Disallowance: The petition was dismissed. An audit disallowance affirmed with finality cannot be condoned. Final and executory judgments are immutable and unalterable; PDIC's attempt to condone the disallowed amount circumvented the execution of the Supreme Court's final decision. Furthermore, what is prohibited directly is also prohibited indirectly (quando aliquid prohibitur ex directo, prohibitur et per obliquum). Because the disbursement was prohibited as double compensation, condoning it would indirectly violate the same constitutional prohibition. PDIC's charter authorizes condonation only of ordinary receivables, penalties, and surcharges to protect the Corporation's interest, and does not extend to liabilities arising from a violation of law or the Constitution.
• Due Process: No denial of due process occurred. Due process requires only an opportunity to be heard, which PDIC was afforded. PDIC fully participated in the original disallowance proceedings and was given sufficient opportunity to defend the validity of its condonation in its January 31, 2005 letter to the COA. Moreover, the May 14, 2004 Memorandum was not an appealable order but a mere referral, and Rule V of the COA Rules cannot apply to incidents of executing a final judgment.

• Immutability of Final Judgments — 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 is a ministerial duty. A final disallowance cannot be circumvented by condonation.
• Quando aliquid prohibitur ex directo, prohibitur et per obliquum — What is prohibited directly is also prohibited indirectly. A disbursement prohibited as double compensation cannot be legitimized or circumvented by condoning the resulting audit disallowance.
• Due Process — Due process demands merely an opportunity to be heard. Denial of due process constitutes a total lack of opportunity to be heard, which did not occur where the petitioner fully participated in prior proceedings and submitted a letter defending its position.

• "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."
• "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."

• Buenviaje v. Court of Appeals, 440 Phil. 84 (2002) — Followed. Cited for the doctrine that final and executory judgments are immutable and unalterable, and execution must conform strictly to the judgment.
• Philippine Deposit Insurance Corporation v. Commission on Audit, G.R. No. 155317 — Controlling precedent. The prior En Banc ruling affirming the COA disallowance of the double compensation paid to Secretary De Ocampo, which attained finality.
• Honoridez v. Mahinay, G.R. No. 153762, August 12, 2005 — Followed. Cited for the principle that a final decision is unalterable and immutable.
• J.D. Legaspi Construction v. NLRC, 439 Phil. 13 (2002) — Followed. Cited for the proposition that due process simply demands an opportunity to be heard.

• Section 13, Article VII, 1987 Constitution — Prohibits multiple positions and double compensation for the Secretary of Finance. Applied to invalidate the BPDEE and gift checks received by the ex-officio PDIC Chairman.
• Section 2(9), Republic Act No. 3591, as amended — Cited as violated by the additional compensation paid to the PDIC Chairman.
• Section 8, Paragraph 12, PDIC Charter (Republic Act No. 3591, as amended) — Grants PDIC the power to compromise, condone, or release claims or settled liabilities to protect the interest of the Corporation. Construed as inapplicable to liabilities arising from constitutional violations, and limited to ordinary receivables, penalties, and surcharges.
• Rule XII, 1997 COA Revised Rules of Procedure — Governs the execution of decisions, specifically the issuance of the Final Order of Adjudication and the notification of persons liable.
• Rule V, 1997 COA Revised Rules of Procedure — Governs appeals from the auditor to the director. Held inapplicable because the supervising auditor's memorandum was not an appealable order and the execution of a final judgment cannot be subject to appeal.

Reynato S. Puno (CJ), Leonardo A. Quisumbing, Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez, Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Adolfo S. Azcuna, Minita V. Chico-Nazario, Presbitero J. Velasco Jr., Antonio Eduardo B. Nachura, Ruben T. Reyes, Teresita J. Leonardo-De Castro.