G.R. No. 165333 ; February 9, 2010
REPUBLIC OF THE PHILIPPINES (DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES), Petitioner, vs. TECHNOLOGICAL ADVOCATES FOR AGRO-FOREST PROGRAMS ASSOCIATION, INC. (TAFPA, INC.), Respondent.

FACTS

On November 27, 1995, respondent TAFPA, Inc. and the DENR Regional Office No. IX entered into a contract for community organizing activities, social investigation, and information education campaign at a reforestation sub-project in Zamboanga del Norte. Respondent submitted Accomplishment Reports and Requests for Billing for the 4th to 7th Quarters in 1998 and 1999. After evaluation, the Composite Inspection Committee recommended payment of ₱802,350.64 to respondent. However, in a letter dated September 8, 1999, DENR Regional Executive Director Antonio M. Mendoza informed respondent that due to delayed submission of reports, a penalty of ₱1,192,611.00 was imposed, deductible from the collectibles, leaving respondent liable to DENR for ₱390,260.36. Respondent sought reconsideration. The DENR Legal Division issued a memorandum clarifying that the penalty clause in the contract referred to delay in undertaking primary community organizing activities, not to non-submission of reports. Despite this, the DENR Program Director upheld the imposition of the penalty and informed respondent that its only recourse was to petition the court for equitable reduction of the penalty.
On December 15, 1999, respondent filed a special civil action for Mandamus with Damages in the RTC of Zamboanga City, which was treated as an action for specific performance. The DENR, through deputized counsel Atty. Vidzfar A. Julie, filed an answer. Respondent filed a motion for judgment on the pleadings, which the DENR did not oppose. On December 1, 2000, the RTC granted the motion. On March 16, 2001, the RTC rendered a decision ordering DENR to pay respondent ₱802,350.64 plus legal interest, attorney’s fees, and costs. DENR, through its deputized counsel, filed a motion for reconsideration, which was denied. The decision became final and executory on January 31, 2002, and a writ of execution was issued.
The Office of the Solicitor General (OSG) later filed a Manifestation and Motion to set aside the decision on grounds of lack of due process, which the RTC denied. The OSG then filed a Notice of Appeal, which the RTC disapproved, ruling that the decision had become final and executory. Petitioner filed a petition for Annulment of Judgment before the Court of Appeals, arguing that: (1) the action lies within the jurisdiction of the Commission on Audit (COA) and not the courts; (2) respondent failed to exhaust administrative remedies; and (3) respondent is not entitled to its money claim. The CA denied the petition, affirming the RTC decision. Hence, this petition.

ISSUE

Whether the Court of Appeals erred in denying the petition for Annulment of Judgment and affirming the RTC decision, particularly on grounds of due process, jurisdiction, and exhaustion of administrative remedies.

RULING

The Supreme Court denied the petition and affirmed the CA decision. The Court held that an action for annulment of judgment is an extraordinary remedy allowed only in exceptional cases. The CA correctly ruled that the RTC acquired jurisdiction over respondent’s cause of action, as the claim was based on a contract and prior resort to COA is required only when the money claim is against government funds not yet appropriated by law. The defense of non-exhaustion of administrative remedies was estopped, as the DENR itself informed respondent that its recourse was to petition the court. The Court also found no violation of due process, as petitioner was represented by deputized counsel who was notified of all court processes, and notice to the deputized counsel constituted notice to the OSG. The RTC decision had become final and executory, and its correctness was no longer in issue. The petition was devoid of merit.