G.R. No. 171548 ; February 22, 2008
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. COMMISSION ON AUDIT, respondent.

FACTS

The COA disallowed payments made by PDIC to its ex-officio Chairman, former Finance Secretary Roberto de Ocampo, for Business Policy Development and Enforcement Expenses and Christmas gift checks from 1994-1996, totaling P440,068.62. The disallowance was based on violations of the constitutional prohibition against double compensation and PDIC’s charter. PDIC’s appeals were denied, and the Supreme Court affirmed the disallowance with finality in G.R. No. 155317. Consequently, COA issued a Final Order of Adjudication (FOA) directing refund.
Instead of complying, PDIC’s Board of Directors passed a resolution condoning the bulk of the disallowed amount (P413,866.62), invoking its charter power to condone claims. The COA resident auditor, via a memorandum, reported this condonation to the Commission. COA, through Decision No. 2006-005, denied PDIC’s request to uphold the condonation and referred the matter to the Office of the Solicitor General for enforcement action against PDIC officials. PDIC petitioned the Supreme Court, alleging a denial of due process, as it was not formally notified of the auditor’s memorandum disallowing the condonation, thus depriving it of a right to appeal.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in disallowing PDIC’s condonation of the audit disallowance and in its related actions.

RULING

The Supreme Court ruled that the COA did not commit grave abuse of discretion. The legal logic is anchored on the doctrine of finality and immutability of judgments. The disallowance of the payments to Secretary de Ocampo had been affirmed with finality by the Supreme Court. A final and executory judgment is immutable and must be executed. The subsequent FOA functioned as a writ of execution in the audit process. PDIC’s act of condoning the liability after final judgment was an impermissible attempt to nullify a final judicial decree.
The Court held that PDIC’s charter-given power to condone liabilities cannot be exercised to contravene a final Supreme Court decision or to circumvent a constitutional prohibition. To allow such condonation would sanction an indirect violation of the law. On the due process claim, the Court found no violation. PDIC had full participation in the lengthy appeals process on the main disallowance. The resident auditor’s memorandum was merely an informational report to the COA Commission Proper, not a new appealable decision that required service to PDIC. The real order subject to execution was the FOA, which PDIC received. Thus, COA’s actions were a valid exercise of its constitutional power to audit.