G.R. No. 218068. March 15, 2022
Philippine Deposit Insurance Corporation, Petitioner, vs. Commission on Audit, Respondent.

FACTS

The Philippine Deposit Insurance Corporation (PDIC) granted financial assistance to Westmont Bank and Keppel Monte Savings Bank (KMSB). For Westmont Bank, PDIC condoned portions of the assistance totaling P1,656,830,000.00, which included a waived buyback agreement, early buyback incentives, and condoned deferred and regular interest. For KMSB, PDIC wrote off P325,000,000.00 in purchased non-performing loans, reclassifying them as an expense. The PDIC Corporate Auditor, upon post-audit, found these actions prejudicial to PDIC’s interests and indorsed the matter to the COA Proper. The COA Proper, in Decision No. 2012-120, denied the recommendation for condonation and write-off, ordered the issuance of Notices of Disallowance (ND), and held liable the PDIC Board members who approved the transactions. PDIC filed a Petition for Certiorari, arguing it had the power under its Charter to condone or release claims, that its actions were approved by the Monetary Board, and that COA committed grave abuse of discretion through unreasonable delay and erroneous findings.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in denying the condonation and write-off of the financial assistance granted by PDIC to Westmont Bank and KMSB and in ordering the issuance of notices of disallowance.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed Decision and Resolution of the Commission on Audit. The Court held that the COA did not commit grave abuse of discretion. The Court found that the condonation and write-off constituted expenditures of public funds that were subject to COA’s audit authority. PDIC’s Charter (Republic Act No. 3591) grants it the power to compromise, condone, or release claims, but this power is not absolute and must be exercised in accordance with law and with due regard to PDIC’s fiduciary role. The Court upheld COA’s factual determination that the condonation of the principal obligation to Westmont Bank and the write-off of KMSB’s account, which was deemed difficult but not uncollectible, were improper and prejudicial to PDIC. The Court also ruled that the COA’s constitutional mandate to audit government agencies includes the authority to disallow illegal or irregular expenditures, and the delay in resolving the audit did not amount to grave abuse of discretion. The liabilities imposed by the COA in the Notices of Disallowance were sustained.