Star Special Corporate Security Management, Inc. vs. Commission on Audit

The Commission on Audit has no jurisdiction to reverse and set aside a final judgment of the Regional Trial Court. While the Commission on Audit has primary jurisdiction to examine, audit, and settle all debts and claims due from the government, this jurisdiction does not include the appellate power to review, revise, reverse, or modify judgments and orders of lower courts. A final and executory judgment may no longer be reviewed or modified directly or indirectly by any official, branch, or department of the Government, and any act violating the doctrine of immutability of judgment must be struck down.

Petitioners were the owners of a 5,942-square meter parcel of land in Puerto Princesa City, Palawan, covered by Transfer Certificate of Title No. 13680. The property was used as a road right-of-way when the national government established a military camp known as Western Command in Puerto Princesa. This takings of private property for public use gave rise to the obligation to pay just compensation, which became the subject of litigation between the landowners and the local government unit.

Star Special Corporate Security Management, Inc. (formerly Star Special Watchman and Detective Agency, Inc.), Celso A. Fernandez, and Manuel V. Fernandez were the owners of a parcel of land with an area of 5,942 square meters, more or less, covered by Transfer Certificate of Title No. 13680 issued by the Registry of Deeds of Puerto Princesa City, Palawan. The property was used as a road right-of-way when the national government established a military camp known as Western Command in Puerto Princesa. Star Special, et al. filed before the Regional Trial Court of Quezon City a complaint for just compensation (Civil Case No. Q-90-4930) against Puerto Princesa, Mayor Edward Hagedom, and the City Council of Puerto Princesa.

On July 22, 1993, the Regional Trial Court rendered a Decision in favor of Star Special, et al., ordering Puerto Princesa City to pay P1,500.00 per square meter on the land with 12% interest from March 12, 1990, and P2,000.00 monthly rental from 1986 until the whole value of the land had been fully paid. The total money judgment amounted to P16,930,892.97 as of October 1995. Sometime in November 1995, Celso and Puerto Princesa's legal counsel, Atty. Agustin Rocamora, verbally agreed to reduce the money judgment from P16,930,892.97 to P12,000,000.00, on the condition that the City would pay P2 million in February 1996 and, thereafter, P1 million monthly until fully paid. The P1 million monthly payment was further reduced to P500,000.00.

Pursuant to the verbal agreement, Puerto Princesa initially appropriated P2 million, and Check No. 049646 dated January 30, 1996 for P2 million was issued in the name of Celso, who received it on February 6, 1996. On May 10, 1996, Celso wrote a letter to Puerto Princesa asking payment for the months of March, April, and May of 1996, and requesting a continuing resolution for the P500,000.00 monthly payment until the remaining balance of P10 million was fully paid; otherwise, Star Special would set aside the verbal agreement within the first week of June 1996. Through Sangguniang Panlungsod Resolution No. 292-96, approved on August 6, 1996, Puerto Princesa authorized the release of P500,000.00 monthly as payment for Star Special's claim. Subsequently, checks were issued to Star Special, received by Celso on October 23, 1997, totaling the P12,000,000.00 agreed amount.

On November 27, 2001, which marked the fourth year since the balance of P12,000,000.00 was fully paid, Star Special, et al. filed another Complaint before the Regional Trial Court of Quezon City to recover the balance of the original money judgment of P16,930,892.97, docketed as Civil Case No. Q-01-45668 and raffled to Branch 223. Puerto Princesa filed its answer asserting that claimants had already been paid in full. During trial, Puerto Princesa failed to appear on the scheduled hearing dates for the presentation of its evidence. In a June 5, 2003 Order, the trial court considered Puerto Princesa to have waived the presentation of its evidence, and the case was deemed submitted for resolution. Puerto Princesa received notice of the June 5, 2003 Order on June 18, 2003; more than a month thereafter, it filed a Motion for Reconsideration, which was denied by the trial court for having been filed out of time.

The trial court rendered judgment based on the evidence adduced by Star Special, et al., finding that the compromise agreement did not novate Puerto Princesa's obligation under the July 22, 1993 Decision because the terms laid down by Star Special, et al. for the purported agreement to materialize were never complied with by Puerto Princesa. The trial court also rejected Puerto Princesa's allegations of estoppel and laches, ruling that the complaint was well within the 10-year prescriptive period under Article 1144(3) of the New Civil Code. The November 18, 2003 Decision ordered Puerto Princesa to pay P10,615,569.63 representing the unpaid balance under the July 22, 1993 Decision, with 12% interest per annum from November 27, 2001, plus P380,000.00 and P2,000.00 monthly rentals from November 2001 until full payment. The Decision became final and executory on January 20, 2004, and a Writ of Execution was issued on February 10, 2005.

When Puerto Princesa did not comply with its obligations, Star Special, et al. filed motions to order the Land Bank of the Philippines to deliver the garnished account and/or to order the City Council to appropriate funds. In an October 27, 2005 Order, the Regional Trial Court denied the motions on the ground that no appropriation ordinance had been enacted, but stated that Puerto Princesa must still honor its obligation and ordered it to comply with the November 18, 2003 Decision. Through a May 7, 2007 Letter, Star Special, et al. requested the Commission on Audit to order Puerto Princesa to pay the amount adjudged, followed by a formal claim on July 13, 2007. On July 17, 2007, Director Roy L. Ursal of the Legal and Adjudication Office of the Commission on Audit wrote a Letter to Celso informing him that the Commission could not act upon his request because it had no jurisdiction over the matter as the case was already in the execution stage. Through an August 27, 2007 Letter, Puerto Princesa asked for reconsideration and sought the Commission's interference pursuant to Supreme Court Administrative Circular No. 10-2000, as implemented by COA Circular No. 2001-002. In his March 28, 2008 reply, Director Salvador P. Isiderio reiterated the earlier stand.

Star Special, et al. then filed a Petition for Mandamus before the Supreme Court, docketed as G.R. No. 181792, seeking to enforce the judgment award. In a Decision promulgated on April 21, 2014, the Third Division denied the petition, holding that under Presidential Decree No. 1445, the Commission on Audit has primary jurisdiction to settle all debts and claims due from the Government, and this power can be exercised even if a court's decision had already become final and executory, and even after the issuance of a writ of execution. Meanwhile, on July 17, 2012, the Commission on Audit rendered Decision No. 2012-113 denying Star Special, et al.'s formal claim, finding that Puerto Princesa had already paid and settled its obligation as to the amount agreed upon, and that the claimants could not be allowed to renege on their verbal agreement. Star Special, et al. filed a motion for reconsideration on August 24, 2012, but on November 24, 2015, they withdrew their motion in view of the Supreme Court's April 21, 2014 Decision, and instead filed a second formal claim. The Commission on Audit rendered a May 31, 2016 Resolution denying the motion for reconsideration and the motion to withdraw, affirming Decision No. 2012-113 with finality. Hence, this Petition was filed.

• Immutability of Judgment: Petitioners contended that the balance of respondent Puerto Princesa's obligation had long been established in the final and executory November 18, 2003 Decision of the Regional Trial Court, and the Commission on Audit violated the doctrines on immutability of judgment and res judicata when it issued a contrary ruling and denied petitioners' claim.
• Estoppel: Petitioners asserted that respondent Puerto Princesa is estopped from assailing the jurisdiction of the Regional Trial Court, having actively participated in the proceedings without objecting to jurisdiction.
• Vested Rights: Petitioners argued that they acquired vested rights upon the finality of the November 18, 2003 Decision of the Regional Trial Court.
• Exhaustion of Administrative Remedies: Petitioners maintained that exhaustion of administrative remedies does not apply as the issues raised were purely legal.

• Primary Jurisdiction: Respondent Commission on Audit argued that petitioners' money claims against the local government unit fall under its primary jurisdiction, and hence, the November 18, 2003 Decision of the Regional Trial Court is void.
• Non-application of Doctrines: The Commission on Audit further contended that the doctrines on res judicata, law of the case, and immutability of judgment do not apply.
• Full Payment: Respondent Puerto Princesa argued that considering that the Commission on Audit has the authority to determine the propriety of money claims against the Government, its factual determination establishing full payment of the obligation should be accorded great weight and finality.

• Jurisdiction of the Commission on Audit: Whether respondent Commission on Audit gravely abused its discretion when it denied petitioners' money claim against respondent Puerto Princesa, considering the finality of the November 18, 2003 Decision of the Regional Trial Court.

• Jurisdiction of the Commission on Audit: Yes. The Commission on Audit gravely abused its discretion amounting to lack or excess of jurisdiction when it reversed and set aside the final and executory November 18, 2003 Decision of the Regional Trial Court, in violation of the doctrine of immutability of judgment. The Commission on Audit has no jurisdiction to modify, much less nullify, a final judgment of the Regional Trial Court, as it is not a court and the Constitution vests judicial power only in the Supreme Court and such lower courts as the law may establish.

• Jurisdiction of the Commission on Audit: The November 18, 2003 Decision of the Regional Trial Court, Branch 223, Quezon City established respondent Puerto Princesa's unpaid balance of the original money judgment under the July 22, 1993 Decision. Respondent Puerto Princesa failed to appeal within the period prescribed in the Rules of Court, and the November 18, 2003 Decision attained finality in January 2004. The Commission on Audit, in denying petitioners' money claim, held that the claimants and the City Government entered into a verbal agreement reducing the claim to P12,000,000.00 and that the City had already paid and settled its obligation. The Commission on Audit, in effect, reversed and set aside the final and executory decision of the Regional Trial Court, in violation of the doctrine of immutability of judgment. Under this doctrine, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must immediately be struck down.

The Court relied on Osmeña vs. Commission on Audit, where the Commission on Audit disallowed an amount appropriated by the City of Cebu relative to a compromise agreement embodied in a judgment of the Regional Trial Court, and this Court held that the disallowance was tainted with grave abuse of discretion. Similarly, respondent Puerto Princesa's outstanding balance was already adjudged in the November 18, 2003 Decision of the Regional Trial Court, which had acquired finality, and the Commission on Audit should have approved petitioners' claim as a matter of course.

The Commission on Audit has no jurisdiction to modify, much less nullify, a final judgment of the Regional Trial Court. It is not a court; neither is it a part of the judicial system. It is an independent constitutional body possessed of administrative or quasi-judicial functions in relation to its general audit power. Section 2, Article IX-D of the Constitution mandates the Commission on Audit 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. Included in the Commission on Audit's general audit jurisdiction is the authority to examine, audit, and settle all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. Consequently, court-adjudicated money claims against the government must be separately brought before the Commission on Audit for their satisfaction.

However, this jurisdiction of the Commission on Audit does not include the appellate power to review, revise, reverse, or modify judgments and orders of lower courts. The Constitution vests the power of judicial review only in this Court and in such lower courts as the law may establish. In cases where the primary jurisdiction of the Commission on Audit was recognized, the doctrine was properly or opportunely raised by the government agency or local government unit. In this case, respondent Puerto Princesa is barred by laches from impugning the jurisdiction of the Regional Trial Court. Respondent Puerto Princesa neither objected to the Regional Trial Court's jurisdiction nor invoked the doctrine of primary jurisdiction of the Commission on Audit over the money claim. On the contrary, respondent Puerto Princesa actively participated in the proceedings before the Regional Trial Court. Even after the November 18, 2003 Decision attained finality, respondent Puerto Princesa did not avail of the remedies under the Rules of Court to assail the Regional Trial Court's jurisdiction, such as a petition for annulment of judgment under Rule 47 on the grounds of extrinsic fraud and lack of jurisdiction. By the time respondent Commission on Audit filed before this Court its Comment on the Petition for Certiorari, claiming that the November 18, 2003 Decision is void for lack of jurisdiction of the Regional Trial Court, estoppel by laches had already set in.

The Court distinguished Binga Hydroelectric Plant, Inc. vs. COA, where the Commission on Audit's denial of a money claim based on a Compromise Agreement approved by the Court of Appeals was sustained. In that case, the petition for certiorari was denied primarily because it was filed out of time, and the Commission on Audit was correct in pointing out that the Compromise Agreement was null and void because the power to compromise the claims was lodged exclusively with Congress. The factual milieu in this case is different: respondent Puerto Princesa is barred by laches by its failure to assail the Regional Trial Court's jurisdiction within a reasonable time, and the November 18, 2003 Decision had long attained finality. Respondent Commission on Audit's action in reversing the November 18, 2003 Decision constitutes a breach of its constitutional competence, and it acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

• Doctrine of Immutability of Judgment — A decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must immediately be struck down. The Court applied this doctrine to nullify the Commission on Audit's denial of petitioners' claim, holding that the Commission on Audit, in effect, reversed and set aside the final and executory decision of the Regional Trial Court.

• Doctrine of Primary Jurisdiction — The Commission on Audit has primary jurisdiction to examine, audit, and settle all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities. Court-adjudicated money claims against the government must be separately brought before the Commission on Audit for their satisfaction. However, this jurisdiction does not include the appellate power to review, revise, reverse, or modify judgments and orders of lower courts. The doctrine of primary jurisdiction and its corollary, the doctrine of exhaustion of administrative remedies, are not ironclad rules; an exception exists where there is estoppel on the part of the party invoking the doctrine.

• Laches — Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. The Court applied this doctrine to bar respondent Puerto Princesa from impugning the jurisdiction of the Regional Trial Court, having actively participated in the proceedings without objecting to jurisdiction and having failed to avail of remedies such as a petition for annulment of judgment.

• Grave Abuse of Discretion — Grave abuse of discretion is such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction; it is when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. The Court found that the Commission on Audit's decision disallowing petitioners' claim to enforce a final and executory judgment of the Regional Trial Court was tainted with grave abuse of discretion.

• "Under the doctrine of finality [or] immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must immediately be struck down." — This passage, quoted from FGU Insurance Corp. v. Regional Trial Court of Makati City, Branch 66, states the canonical formulation of the doctrine of immutability of judgment and is the central ratio decidendi of the decision.

• "The Commission on Audit has no jurisdiction to modify, much less nullify, a final judgment of the Regional Trial Court. It is not a court; neither is it a part of the judicial system. It is an independent constitutional body possessed of administrative or quasi-judicial functions in relation to its general audit power." — This passage defines the limits of the Commission on Audit's jurisdiction and establishes that it cannot exercise appellate power over lower court judgments.

• "Again, the settled doctrine is that 'final judgments may no longer be reviewed or in any way modified directly or indirectly by a higher court, not even by [this Court], much less by any other official, branch or department of Government.'" — This passage, quoting Uy v. Commission on Audit, reinforces the absolute nature of the immutability of final judgments and extends the prohibition to any branch or department of the Government.

• FGU Insurance Corp. vs. Regional Trial Court of Makati City, Branch 66, 659 Phil. 117 (2011) — Cited as controlling precedent for the doctrine of immutability of judgment, providing the canonical definition that a final decision may no longer be modified in any respect.

• Osmeña vs. Commission on Audit, 308 Phil. 487 (1994) — Followed as controlling precedent; the Court held that the Commission on Audit's disallowance of an amount appropriated relative to a compromise agreement embodied in a Regional Trial Court judgment was tainted with grave abuse of discretion, and the claim should have been approved as a matter of course.

• Roxas vs. Republic Real Estate Corp., 786 Phil. 163 (2016) — Cited for the proposition that court-adjudicated money claims against the government must be brought before the Commission on Audit for satisfaction, and that the Commission on Audit has primary jurisdiction over such claims.

• Euro-Med Laboratories Phil., Inc. vs. Province of Batangas, 527 Phil. 623 (2006) — Distinguished; in that case, the doctrine of primary jurisdiction was properly raised by the local government unit, whereas in this case, respondent Puerto Princesa failed to invoke it.

• The Province of Aklan vs. Jody King Construction and Development Corp., 722 Phil. 315 (2013) — Distinguished; the local government unit there timely raised the primary jurisdiction issue, whereas respondent Puerto Princesa here did not.

• Metropolitan Manila Development Authority vs. D.M. Consunji, Inc., G.R. No. 222423, February 20, 2019 — Distinguished; the government agency asserted the primary jurisdiction defense in its Answer, unlike respondent Puerto Princesa here.

• Binga Hydroelectric Plant, Inc. vs. COA, G.R. No. 218721, July 10, 2018, 871 SCRA 492 — Distinguished on its facts; in that case, the petition was filed out of time and the compromise agreement was null and void because the power to compromise was lodged exclusively with Congress, whereas here respondent Puerto Princesa was barred by laches.

• Alaban vs. Court of Appeals, 507 Phil. 682 (2005) — Cited for the nature and purpose of petitions for annulment of judgment, which may be filed on the grounds of extrinsic fraud and lack of jurisdiction.

• Uy vs. Commission on Audit, 385 Phil. 324 (2000) — Cited for the proposition that final judgments may no longer be reviewed or modified directly or indirectly by any official, branch, or department of Government.

• Republic vs. Lacap, 546 Phil. 87 (2007) — Cited for the exceptions to the doctrines of primary jurisdiction and exhaustion of administrative remedies, including estoppel on the part of the party invoking the doctrine.

• Section 2, Article IX-D, 1987 Constitution — Mandates the Commission on Audit 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, and to promulgate accounting and auditing rules and regulations. The Court applied this provision to define the scope of the Commission on Audit's jurisdiction, holding that it does not include appellate power over lower court judgments.

• Section 1, Article VIII, 1987 Constitution — Vests judicial power in the Supreme Court and in such lower courts as may be established by law, including the duty to determine whether there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. The Court applied this provision to establish that the Commission on Audit, not being a court, cannot review or modify judgments of lower courts.

• Section 7, Article IX-A, 1987 Constitution — Provides that any decision, order, or ruling of each Constitutional Commission may be brought to the Supreme Court on certiorari by the aggrieved party. This provision was the basis for the Court's jurisdiction over the petition.

• Section 26, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Grants the Commission on Audit the authority to examine, audit, and settle all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities. The Court acknowledged this as the basis of the Commission on Audit's primary jurisdiction over money claims against the government.

• Rule 47, Rules of Court — Governs the annulment by the Court of Appeals of judgments of the Regional Trial Court on the grounds of extrinsic fraud and lack of jurisdiction. The Court noted that respondent Puerto Princesa failed to avail of this remedy to assail the Regional Trial Court's jurisdiction.

• Article 1144(3), New Civil Code — Provides the 10-year prescriptive period for actions upon a judgment. The trial court relied on this provision in rejecting respondent Puerto Princesa's claim of laches.

Peralta, C.J., Perlas-Bernabe, Caguioa, Gesmundo, Reyes, J., Jr., Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concurred. Baltazar-Padilla, J., was on leave.