Central Bay Reclamation v. Commission on Audit
REITERATIONFacts
The Antecedents: The Philippine Reclamation Authority (PRA), formerly Public Estates Authority (PEA), entered into an Amended Joint Venture Agreement (JVA) with Central Bay Reclamation and Development Corporation (Central Bay), formerly Amari Coastal Bay and Development Corporation (AMARI), for the development of reclaimed islands and foreshore/submerged areas of Manila Bay. This Court, in a prior decision, nullified the Amended JVA for violating Sections 2 and 3, Article XII of the 1987 Constitution, which prohibit the alienation of natural resources and the acquisition of alienable lands of the public domain by private corporations. Central Bay sought reimbursement for costs incurred prior to the nullification on a quantum meruit basis. The parties submitted a Compromise Agreement to the Commission on Audit (COA), wherein PRA offered to pay Central Bay's validated claim by transferring reclaimed land to Central Bay's qualified assignee. Procedural History: The COA disapproved the Compromise Agreement, finding it a circumvention of the Court's decision and constitutional prohibitions. The COA partially granted Central Bay's money claims, allowing reimbursement only for advance payment and project development costs amounting to P714,937,790.29, while denying other claims for lack of supporting documents or legal basis. Central Bay filed a petition for certiorari with the Supreme Court, assailing the COA's disapproval of the Compromise Agreement and disallowance of other claims. The Petition: Central Bay argued that it would not own the reclaimed land but would assign it to a qualified individual, thus not violating the constitutional ban. The COA, through the Solicitor General, countered that the Compromise Agreement contravened the constitutional ban against corporate ownership of land.
Issue(s)
Whether the COA committed grave abuse of discretion in disapproving the Compromise Agreement. Whether the Compromise Agreement, which involved the transfer of reclaimed land to Central Bay's qualified assignee, circumvented the constitutional prohibition against private corporations acquiring alienable lands of the public domain. Whether the Compromise Agreement, involving a claim exceeding P100,000.00, required congressional approval. Whether the COA correctly disallowed Central Bay's other money claims.
Ruling
The petition is DISMISSED. The Decision of the Commission on Audit (COA) dated May 23, 2019, and its Resolution dated January 21, 2020, in COA CP Case No. 2010-350, are AFFIRMED. The Compromise Agreement between the Philippine Reclamation Authority (PRA) and Central Bay Reclamation and Development Corporation (Central Bay) is declared VOID AB INITIO.
Ratio Decidendi
On the COA's grave abuse of discretion in disapproving the Compromise Agreement: The Court held that the COA did not commit grave abuse of discretion. The COA, as the guardian of public funds, has broad powers to disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. The COA's decision was based on law and evidence, not caprice. The principle that what cannot be done directly cannot be done indirectly is fundamental and applies here. On the circumvention of the constitutional prohibition against corporate ownership of alienable lands: The Court affirmed the COA's finding that the Compromise Agreement circumvented the constitutional ban. Section 3, Article XII of the 1987 Constitution prohibits private corporations from holding alienable lands of the public domain except by lease. The scheme of transferring the land to a "qualified assignee" granted Central Bay beneficial ownership or equitable title, which is a circumvention of the constitutional prohibition. Applying the principle of nemo dat quod non habet, Central Bay, as a private corporation disqualified from owning land, could not transfer ownership to any assignee, rendering the assignment void. On the requirement of congressional approval for the Compromise Agreement: The Court found that the Compromise Agreement, involving a claim exceeding P100,000.00, required congressional approval under Section 20(1), Chapter IV, Subtitle B, Title I, Book V of the Administrative Code of 1987. This provision vests exclusive authority in Congress to compromise claims exceeding P100,000.00 involving a government agency. Furthermore, Section 29(1), Article VI of the 1987 Constitution mandates that no money shall be paid out of the Treasury except in pursuance of an appropriation made by law. Without such appropriation, the Compromise Agreement was void. On the disallowance of other money claims: The COA correctly disallowed Central Bay's other money claims, except for the P714,937,790.29 representing advance payment and project development costs, which were properly substantiated. Claims for squatter relocation costs, additional advances, professional fees, interest, bank charges, foreign exchange losses, pre-operating and operating expenses, input tax, and documentary stamp tax were denied for lack of supporting documents, legal basis, or because they were part of Central Bay's investment risk and not directly related to the project. The principle of quantum meruit allows recovery only for the reasonable value of services rendered and costs incurred, provided they are duly supported.
Main Doctrine
A contract that violates the Constitution is void, and the Court will not permit to be done indirectly what cannot be done directly. A compromise agreement that circumvents constitutional prohibitions against corporate ownership of alienable lands of the public domain is void ab initio. Furthermore, any compromise agreement involving a settled claim or liability exceeding P100,000.00 against a government agency requires the written approval of Congress.