Philippine Operations, Inc. v. Auditor General
REITERATIONFacts
The Antecedents: Philippine Operations, Inc. (petitioner) entered into a barter agreement with the Bureau of Prisons on October 3, 1947. The petitioner agreed to deliver a complete sawmill with accessories and two LCMs in good running condition in exchange for 350,000 board feet of sawed lumber. The agreement stipulated that the first delivery of lumber would occur thirty days after the installation of the sawmill, with subsequent monthly deliveries until the total amount was fulfilled. Procedural History: The petitioner claims the sawmill and LCMs were delivered, but the sawmill was missing parts and needed overhauling, while one LCM was missing spare parts. The petitioner alleges these defects were communicated, and it incurred expenses to rectify them. The Bureau of Prisons claims the petitioner agreed to reimburse them for repair costs. Due to delays in installation and subsequent negotiations to substitute lumber with surplus properties, the Bureau of Prisons was unable to deliver the lumber as initially agreed. The petitioner filed a claim with the Auditor General for P105,000, which was denied based on the opinion of the Secretary of Justice that the contract was a barter, not a sale, and the claim was unliquidated. The petitioner appealed this decision. The Petition: The petitioner appealed the Auditor General's denial of its claim, which initially amounted to P105,000. This claim was later reduced to P24,500 (representing the difference between the alleged market value of the lumber and the amount received) and P35,000 for alleged damages due to delay. The petitioner argued that the Auditor General had jurisdiction over its claim, particularly under Commonwealth Act No. 3038, which grants authority over moneyed claims arising from contracts. The government contended that the Auditor General lacked jurisdiction over unliquidated claims, citing precedent and the nature of the claim which involved disputed facts regarding the condition of the equipment and the cause of the delay.
Issue(s)
Whether the Auditor General has the jurisdiction to adjudicate unliquidated claims for damages arising from a breach of contract. Whether the Petitioner is entitled to damages for the delay in the delivery of the lumber by the Bureau of Prisons.
Ruling
The petition for review is dismissed. The claim of the petitioner for damages is denied.
Ratio Decidendi
On Issue 1: The Auditor General's jurisdiction is limited to 'accounts' and 'moneyed claims' that are liquidated. Applying the ruling in Compañia General de Tabacos v. French and Unson (39 Phil. 34), an account is something adjusted by an arithmetical process, whereas unliquidated claims for damages require judicial discretion and extraneous proof. The Court emphasized that 'all claims and demands' under the law do not authorize administrative officers to entertain unliquidated claims. Entrusting such decisions to an executive official would amount to an illegal delegation of judicial power, potentially depriving parties of property without due process. Therefore, the Auditor General cannot decide cases involving unliquidated damages where the liability or non-liability of the Government is in issue. On Issue 2: On the merits, the Petitioner’s claim for damages must be denied because the delay was caused by its own failure to comply with the barter agreement. The contract specifically required the Petitioner to deliver the sawmill 'complete' and 'found satisfactory,' and the landing barges in 'good running condition.' Evidence showed the sawmill was delivered with missing parts and required overhauling, which the Petitioner implicitly admitted by later furnishing the missing cable and belting. Since the BOP's obligation to deliver lumber was contingent on the installation of the sawmill, any delay in that installation due to the equipment's defects cannot be blamed on the BOP. Furthermore, the Petitioner's own request to seek surplus property instead of lumber further contributed to the delay in finalizing the original obligation.
Main Doctrine
The Auditor General has no jurisdiction over claims for unliquidated damages, as such claims require judicial determination involving the application of judgment and discretion, which are beyond the scope of administrative settlement of accounts.