Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 171548 February 22, 2008

PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner,

vs.
COMMISSION ON AUDIT, respondent.

DECISION

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.

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. 2002-053 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 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 Memorandum 5 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 judgment. 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 Audit 6 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 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 disallowed amount was forthcoming in
accordance with the COA Rules as, in fact, a Final Order of Adjudication 9 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. 12 11 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 disallowance 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

Whatever may have been the reason for the dismissal of PDIC's petition, the fact
remains that the decision upholding 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 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 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 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.

DANTE O. TINGA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-

Associate Justice SANTIAGO
Associate Justice

ANGELINA SANDOVAL-
GUTIERREZ ANTONIO T. CARPIO
Associate Justice
Associate Justice

MA. ALICIA AUSTRIA- RENATO C. CORONA

MARTINEZ Associate Justice
Associate Justice

CONCHITA CARPIO MORALES ADOLFO S. AZCUNA

Associate Justice Associate Justice
 MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice

ANTONIO EDUARDO B. RUBEN T. REYES

NACHURA Associate Justice
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that

the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes

1
Rollo, pp. 35-40.

2
Id at 35-36.

3
Id. at 197-211.

4
Id. at 191-212.

5
Id. at 213-237.

6
G.R. No. 155317.

7
Rollo, p. 101; Resolution dated January 21, 2003.

8
Buenviaje v. Court of Appeals, 440 Phil. 84, 94 (2002).

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]

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.

Honoridez v. Mahinay, G.R. No. 153762, August 12, 2005, 416 SCRA
14

646, 655.

15
Supra note 11.

16
J.D. Legaspi Construction v. NLRC, 439 Phil. 13, 20 (2002).

17
Rollo, pp. 109-111.