Philippine Deposit Insurance Corporation v. Commission on Audit
REITERATIONFacts
The Antecedents: The Philippine Deposit Insurance Corporation (PDIC) sought to condone and write off portions of financial assistance granted to Westmont Bank (formerly Associated Bank) and Keppel Monte Savings Bank (KMSB). For Westmont Bank, the condoned amount was P1,656,830,000.00, comprising waived buyback agreements, early buyback discounts, deferred interest, and refund of interest. For KMSB, P325,000,000.00 of non-performing loans purchased by PDIC were reclassified as an expense. The PDIC Corporate Auditor questioned these actions, opining they were prejudicial to PDIC's interests as they amounted to an outright release of obligations without trade-off. The matter was elevated to the Commission on Audit (COA) Proper. Procedural History: The COA Corporate Auditor, Supervising Auditor, and COA Corporate Government Sector (CGS) Director concurred that the condonation and write-off were improper. The COA Legal Adjudication Office – Corporate (LAO-C) Director opined that COA approval was not necessary for PDIC's exercise of its power to compromise, but advised review. Ultimately, the COA Proper, in Decision No. 2012-120 and a subsequent Resolution, denied the condonation and write-off, ordering the issuance of notices of disallowance (NDs) for the KMSB account, and holding PDIC Board of Directors (BOD) members and bank officers liable. The Petition: PDIC filed a Petition for Certiorari, assailing the COA's decision and resolution. PDIC argued that the COA committed grave abuse of discretion due to unreasonable delay, that it was empowered under its Charter to condone liabilities, and that the COA erred in its findings regarding the nature of the transactions and the collectibility of the KMSB loans. PDIC also contended that the issuance of NDs and a Notice of Finality of Decision (NFD) was a disrespect to the Court.
Issue(s)
Whether the COA committed grave abuse of discretion in issuing the NFD. Whether there was unreasonable delay, amounting to grave abuse of discretion, on the part of the COA in resolving the case. Whether the COA committed grave abuse of discretion in recommending to deny the condonation/write-off. Whether the COA committed grave abuse of discretion in issuing the NDs. Whether the COA committed grave abuse of discretion in holding the PDIC BOD liable to settle the disallowances.
Ruling
The Petition for Certiorari is DISMISSED. Decision No. 2012-120 dated August 2, 2012 and Resolution dated March 9, 2015 of the Commission on Audit Proper, as well as Notice of Disallowance No. 15-001-AFA-98 and Notice of Disallowance No. 15-002-FA-99, both dated July 10, 2015, are AFFIRMED.
Ratio Decidendi
On the issuance of the NFD and the mootness of the petition: The Court held that the filing of a petition for certiorari does not stay the execution of a COA decision or resolution unless a restraining order is issued. Since no such order was issued, the COA decision became final and executory after 30 days. However, the petition was not rendered moot because it was filed within the reglementary period before the questioned decision attained finality. Furthermore, if grave abuse of discretion is found, the COA decision would be void ab initio. On unreasonable delay: The Court found no inordinate delay on the part of the COA. While acknowledging the substantial time taken, it considered the complexity of the cases involving large sums, the varying rulings among COA officers, and the fact that the period for gathering and assessing information during the audit process should not be included in the determination of inordinate delay. The Court also noted PDIC's failure to timely invoke its right to speedy disposition and the lack of demonstrable prejudice. On COA's authority to recommend condonation/write-off AND the propriety of the condonation and write-off: The Court affirmed that the COA is authorized and duty-bound to issue recommendations on condonations or releases of claims. This authority stems from Section 36 of PD No. 1445 and is further clarified by Section 20 of EO No. 292 (Administrative Code of 1987). These provisions, as interpreted in jurisprudence, indicate that while GOCCs may have charter powers to compromise, such actions, especially for amounts exceeding P100,000.00, require COA recommendation and, in higher amounts, Congressional approval. The PDIC Charter's amendment under RA No. 10846, while granting PDIC broad powers, still necessitates adherence to the general principles of audit and the mandate of the COA. The Court upheld the COA's factual findings that the condonation for Westmont Bank was improper because it included the principal loan, not just interests and penalties. For KMSB, the COA correctly found that the non-performing loans were merely difficult to collect, not uncollectible, as evidenced by some collections. The Court emphasized that condonation is generally limited to interests and penalties when the principal is paid, to avoid loss to the government. The transactions were also implemented without the mandatory Congressional approval. On the propriety of the issuance of the NDs: The Court's ruling on the propriety of the condonation and write-off implicitly addresses the propriety of the Notices of Disallowance (NDs) issued as a consequence of those actions. Since the condonation and write-off were deemed improper, the NDs were consequently justified. On the liability of the PDIC BOD: The Court ruled that the PDIC BOD acted with gross negligence, amounting to bad faith, in authorizing the condonation and write-off without complying with the mandatory requirements of the Administrative Code. This palpable disregard of the law justifies their solidary liability for the disallowed amounts, as established in jurisprudence concerning public officers' liability for disallowed expenses.
Main Doctrine
The Commission on Audit (COA) has the authority and duty to recommend or deny the condonation or release of claims and liabilities of government agencies, including government-owned or controlled corporations (GOCCs), even if their respective charters grant them the power to compromise such claims. The exercise of this power by GOCCs is subject to the review and recommendation of the COA, and in cases exceeding P100,000.00, requires Congressional approval. The PDIC Board of Directors' authorization of condonation and write-off without such approval, especially when it includes principal amounts, constitutes gross negligence, justifying their liability for the disallowed amounts.