94 Phil. 868
[ G.R. No. L-3659. April 30, 1954 ]
PHILIPPINE OPERATIONS, INC., PETITIONER, VS. AUDITOR GENERAL OF THE PHILIPPINES AND THE BUREAU OF PRISONS, RESPONDENTS.
D E C I S I O N
LABRADOR, J.:
claim of the Philippine Operations, Inc., against the Government
amounting to P105,000.00. The circumstances leading to this appeal are
briefly as follows:
On October 3, 1947, the petitioner herein, Philippine Operations,
Inc., entered into a barter agreement with the Bureau of Prisons
whereby it agreed to deliver to the Bureau a sawmill, complete, with a
diesel fuel engine, a stop saw edge and log turner, etc., and two LGMs
in good running condition, in exchange for 350,000 board feet of sawed
lumber (Annex A). The principal conditions of the barter agreement are
as follows:
- That Party of the Second Part shall deliver to the Party
of the First Part, the Sawmill above described, complete, with
accessories already crated, in Mindoro where it is at present located,
after the same shall have been inspected and found satisfactory; -
That the Party of the Second Part shall deliver to the Party of the
First Part, the two (2) LCMs, in good running condition, in Manila at
the Pasig River, after the same shall have been inspected and found
satisfactory; - That the Party of the First Part
shall deliver to the Party of the Second Part, SEVENTY THOUSAND
(70,000) bd. ft. of sawed lumber (Apitong, Malugay or Amugis) thirty
days after installation of the sawmill, and SEVENTY THOUSAND (70,000)
bd. ft. of said lumber every month there- after, until the Party of the
First Part shall have delivered to the Party of the Second Part THREE
HUNDRED FIFTY THOUSAND (350,000) bd. ft. of lumber.
The receipt that an employee of the Bureau of Prisons issued for the
sawmill and its accessories discloses the following unsatisfactory
conditions: there was no belting for the main saw; there was one
carriage frame broken; one head block was without hook and doe; there
was no steel rope cable for carriage drive; and all other important
parts of the machine were worn out and rusty and needing overhauling.
The cable and the belting, however, were furnished the Bureau of
Prisons on February 4, 1948 (Annex C). As to the landing barges, one
was received without any statement as to its condition, while the
other, upon inspection, was found acceptable, although various spare
parts were missing (Annex E). The person who received the landing barge
recommended that the spare parts needed to put it in running condition
be deducted from the contract price.
Claim is made by the Bureau of Prisons that when the barges were
examined at the Davao Penal Colony, the petitioner and its
representative were advised verbally about the defects therein, and so
were they with respect to the parts of the sawmill when it was found,
Upon delivery to the Iwahig Penal Colony, that it was not in good
running condition and that some parts were missing; and that
petitioner’s manager agreed to reimburse the Bureau of Prisons for
whatever expenses the latter may incur in putting the equipment in good
running condition. (2nd Indorsement of the Director of Prisons dated
November 26, 1948.) At the time the above indorsement was written, the
repairs on the barges and the sawmill had not yet been completed.
When around a year later, it became evident that it was not feasible
for the Bureau of Prisons to deliver the lumber, obviously due to the
delay in the installation, the petitioner herein proposed to obtain
surplus properties from the Surplus Property Commission in lieu of the
lumber so as to finally liquidate the obligation contracted by the
Bureau of Prisons. It turned out, however, that no equipment could be
found in the various Surplus Property Commission depots which could be
of service to the petitioner herein, so it proposed that the
corporation be credited with the amount of P70,000 and be allowed to
bid and negotiate in future surplus offerings up to that amount. (Annex
B to letter of Counsel for petitioner to Auditor General dated June 20,
1949.) Again, on November 2, 1948, petitioner offered to acquire
certain surplus properties located in Manicani Island, Samar, for
P100,000, with the suggestion that this price be paid for with its
credit of P70,000, plus an additional amount of P30,000 with which to
complete the full price above mentioned. (Annex C, Ibid.) As no
definite arrangement could be arrived at, the Bureau of Prisons in the
second indorsement of November 26. 1948, already alluded to, declared
that the Bureau had made preparations to deliver the lumber from the
Davao Penal Colony, and that it had a sufficient quantity of logs
stored to make initial delivery. Evidently, no action was taken by the
petitioner on this advice of the Director of Prisons.
On June 20, 1949, the attorney for the petitioner filed a claim with
the Auditor General. On August 26, 1949, the Director of Prisons
offered to deliver the first installment of sawed lumber after 30 days.
This offer was rejected by the petitioner on the ground that the offer
to deliver the lumber came too late, and it demanded that cash payment
of P70,000 be paid to it, plus P35,000 for damages suffered.
Upon the presentation of the claim with the Auditor General, the
latter sought the opinion of the Secretary of Justice, and this
official on January 3, 1950, held that inasmuch as the contract entered
into was one of barter, pure and simple, and not one of purchase and
sale, and as no money consideration ever entered the minds of the
parties at the time of the agreement, the demand of the petitioner for
P70,000 should be denied, and that instead in view of the willingness
of the Bureau of Prisons to perform its part of the obligation, the
contract be carried out by the immediate delivery of the 350,000 board
feet of lumber stipulated in the agreement. (See 6th Indorsement of the
Department of Justice dated January 3, 1950.) On the basis of this
opinion, the Auditor General denied the petitioner’s claim, and the
latter thereafter appealed to this Court.
It is to be noted at the outset that the original contract of barter
did not state what the value was of the barges and sawmill to be
delivered, or that of the 350,000 board feet of sawn lumber to be given
in exchange. As early as October 8, 1948, when attempts were made to
settle the obligation of the Bureau of Prisons in terms of surplus
materials, petitioner herein had claimed “that the value of the barges
and sawmill delivered was P70,000. (See letters of October 8, 1948, and
November 2, 1948.) On the other hand, as early as November 2, 1948, the
Director of Prisons had averred that he entered into a barter agreement
fixing P35,000 as the value of the equipment, equivalent to the 350,000
board feet which it promised to deliver in exchange, at P0.10 a board
foot. There is question, therefore, whether the equipment could be
valued at P70,000 or not.
The respondent also claims that the condition in which the barge and
the machinery were found at the time of delivery was unsatisfactory.
The Director of Prisons stated in his indorsement that notice of these
defects was given the petitioner through one Mr. Rowe and Mr. Enriquez,
and this fact is not, nor does not appear to be, denied. The receipt
issued upon the delivery of the sawmill shows that there were many
parts missing, and states that the specification that most of the parts
and engines needed complete overhauling was a notice to the petitioner
that the sawmill was not found satisfactory upon inspection. But the
claim of petitioner, as presented to the Auditor General, alleges that
the machinery were found satisfactory and in good running condition, on
the ground that the Bureau of Prisons had accepted the delivery
thereof. There is therefore, also an issue as to the condition of the
equipment bartered.
Again, it is the contention of the government, as indicated in the
opinion of the Secretary of Justice, that inasmuch as the first
delivery of lumber was to take effect upon the installation of the
sawmill, said installation was an essential element of the contract,
and consequently its obligation to deliver the lumber did not accrue
upon the delivery of the barges and machinery, and the accessories
thereof by the Bureau of Prisons, but from the moment that the
installation was finished. Lastly, the amount of petitioner’s claim for
damages does not appear to have been admitted by the Bureau of Prisons
or by any official of the Government, so that outside of petitioner’s
right thereto, its amount, assessed at P35,000, can not be considered
as a fact admitted by the adverse party.
The above considerations, regarding the existence of issues with
regard to petitioner’s claim for P105,000 are set forth in view of the
defense set up by the Bureau of Prisons that the Auditor General has no
jurisdiction over petitioner’s claim, and that the same is not
authorized under Commonwealth Act No. 327. However, it now appears that
in April, 1950, pending determination of petitioner’s claim, the
350,000 board feet of lumber agreed to be delivered by the Bureau of
Prisons were, by agreement of both parties, to be sold and the proceeds
delivered to petitioner. The latter has actually received the sum of
P45,500. So the claims of petitioner at the time of the submission of
this case to the Court for decision are, (1) the amount of P4,500
representing the difference between the alleged market value of the
lumber of P70,000 and the amount of P45,500 received, and (2) the
amount of P35,000 representing the damages allegedly suffered by the
petitioner due to the delay in the delivery of the lumber.
The respondents contend that Commonwealth Act No. 327, which imposes
upon the Auditor General the duty of acting upon and deciding “all
cases involving the settlement of accounts or claims other than those
of accountable officers,” does not authorize or empower the Auditor
General to pass upon the petitioner’s claim for P105,000, because the
term “claims” used in the said Act can refer to no other than
liquidated claims, as held in the case of Compana General de Tabacos
vs. French and Unson, 39 Phil. 34. In reply the petitioner argues that
under Commonwealth Act No. 3038, Sections 1 and 2, the Auditor General
has been granted the additional power upon “any moneyed claim involving
liability arising from contract, express or implied, which could serve
as a basis for civil action between private parties,” and that even
granting that the Auditor General has jurisdiction only over liquidated
claims, the claim for P70,000 is a liquidated claim because it has been
accepted by the parties as such.
Before the advent of the Commonwealth Government, the jurisdiction
of the Auditor General to pass upon and decide claims of private
persons against the Government was contained in sections 24 and 25 of
the Jones Law promulgated August 29, 1916. The pertinent provisions of
the said law are as follows:
SEC. 24. * * *. The Auditor shall, except as
hereinafter provided, have like authority as that conferred by law upon
the several auditors of the United States Treasury and is authorized to
communicate directly with any person having claims before him for
settlement, or with any department, officer, or person having official
relations with his office.SEC. 25. That any person aggrieved
by the action or decision of the Auditor in the settlement of his
account or claim may, within one year, take an appeal in writing to the
Governor-General, which appeal shall specifically set forth the
particular action of the Auditor to which exception is taken, with the
reason and authorization relied on for reversing such decision.
The powers of treasury officials of the United States over the
settlement of accounts has always been clearly distinguished from their
power over claims. It has been generally held that an account is
something which may be adjusted and liquidated by an arithmetical
computation (Power vs. U. S., 18 Court of Claims 263; 31 USCA 23), and
that claims for unliquidated damages can not be considered as accounts
and are not committed by law to their control and decision. (Ibid.;
McClure vs. U. S., 19 Court of Claims 173, 179; Denis vs. V. S., 20
Court of Claims, 119, 121; U. S. vs. McKee, 97 U. S. 233, 24 L. ed.
911; 31 USCA 23-24.) The reason for denying treasury officials of the
United States jurisdiction over unliquidated damages for breach of
contract is because these claims “often involve a broad field of
investigation and require the application of judgment and discretion
upon the measure of damages and the weight of conflicting evidence. (
Ibid.)
A case decided in this jurisdiction while the Jones Law was still in
force is that of Compania General de Tabacos vs. French and Unson, 39
Phil. 34, 42, where we held:
“Section 584 of the Administrative Code of 1917 is
very similar in its terms to section 236 of the Revised Statutes of the
United States which reads as follows:“All claims and demands
whatever in which the United States are concerned, either as debtors or
as creditors, shall be settled and adjusted in the Department of the
Treasury.” Nevertheless, the words ‘all claims and demands whatever * *
* against’ the United States as used in this statute have been held
repeatedly not to authorize the officers of the Treasury Department to
entertain unliquidated claims against the United States for damages. In
the case of Power vs. United States (18 C. Cls. R., 275), Judge Davis
writing the opinion of the court said:“An account is
something which may be adjusted and liquidated by an arithmetical
process * * *. But no law authorizes Treasury officials to allow and
pass in accounts a number not the result of numerical computation upon
a subject within the operation of a mutual part of a contract. Claims
for unliquidated damages require for their settlement the application
of the qualities of judgment and discretion. They are frequently,
perhaps generally sustained by extraneous proof, having no relation to
the subjects of the contract which are common to both parties. * * *.
The results to be reached in such cases can in no just sense be called
an account, and are not committed by law to the control and decision of
Treasury accounting officers.”
It is contended on behalf of the petitioner that Act No. 3083
authorizes the Auditor to take cognizance of unliquidated claims. We
find nothing in the context from which this contention can be inferred.
The term used is moneyed claims, which has a well-defined concept under the Jones Law as above indicated.
There are other fundamental reasons why Act No. 3083 could not have
contemplated unliquidated claims, or cases where the liability of the
Government or its non-liability is in issue. In these cases the most
important questions to be determined are judicial in nature, involving
the examination of evidence and the use of judicial discretion. To
assume that the legislature granted this jurisdiction to an
administrative officer like the Auditor General is not warranted,
because it would amount to an illegal act, as a delegation of judicial
power to an executive officer. If the power were interpreted as having
been granted to the Auditor General to pass upon the rights of private
persons, without the judicial process established by the Constitution
and the laws, private parties would be deprived of their property
without due process of law. For these very obvious reasons, therefore,
Act No. 3083 may not be interpreted to grant jurisdiction to the
Auditor General to determine and decide cases involving unliquidated
damages.
Having come to the conclusion that under the Jones Law and the laws
in force up to the time of the adoption of the Constitution the Auditor
General has no jurisdiction or power to take cognizance of claims for
unliquidated damages, we now come to the question as to whether under
the provisions of the Constitution and the laws enacted thereafter by
Congress, such power may not be considered as having been lodged in the
Auditor General. An examination of the provisions of the Constitution
fails to disclose any power vested in or granted to the Auditor General
to consider claims. All that is vested in the Auditor General is the
settlement of accounts. “Accounts,” because of the absence of any
reasons to the contrary, must be deemed to have the same meaning as
accounts under the laws in force before the approval of the
Constitution. The Constitution does not grant the Auditor General the
right to consider claims. After the promulgation of the Constitution,
the power was granted under the provisions of Commonwealth Act No. 327.
We have examined this law, and we find nothing therein to show that the
term “moneyed claims,” the jurisdiction over which is granted the
Auditor General, should not be interpreted in the same sense that it
was understood prior to the adoption of the Constitution.
The above considerations would suffice to dispose of the case. We
prefer to rest the decision thereof, however, not on the technical
ground of jurisdiction alone, but on the merits also.
The only remaining part of the original claim presented by the
petitioner is the supposed damage caused by the delay in the delivery
of the lumber. It is claimed by the petitioner that P24,500 and P35,000
represent the difference between the actual value of the lumber
received by it in April, 1950, and the value thereof had it been
delivered within a reasonable time after the delivery of the sawmill
and the landing barges. A first reason for denying the claim is the
fact that the delay was due to the failure on the part of the
petitioner, party of the second part, to deliver the sawmill in the
condition it was to be delivered, i.e., the sawmill shall be “complete”
and upon inspection “found satisfactory.” At the time of delivery, it
was incomplete, and it presented various unsatisfactory conditions. The
two landing barges were also agreed to be in good running condition,
but on delivery one of them was found with various spare parts missing,
and these had to be purchased to put it “in running condition.” The
sawmill and the landing barges were, therefore, unsatisfactory and were
not as guaranteed in the barter agreement. The fact that the petitioner
itself purchased various spare parts both for the sawmill and the
landing barges in order to complete them, is a clear admission on its
part of its failure to deliver the sawmill and barges complete. The
obligation of the party of the first part to deliver the lumber in
exchange for the equipment was to accrue or became due “thirty days
after the installation of the sawmill.” But the delay in said
installation is not attributable to the party of the first part, but to
the party of the second part, which had not complied with its
obligation to deliver the equipment and machinery “in good running
condition.” The responsibility for the resulting delay in the delivery
of the lumber may not, therefore, be laid at the door of the party of
the first part, but to that of the party of the second part, which had
failed to live up to its obligation.
A second reason is the fact that the party of the second part was
ready to deliver the lumber in November, 1948, even before the sawmill
could be installed, but the petitioner preferred to be paid in another
manner. The original agreement was entered into on October 3, 1947, and
the missing parts of the sawmill were furnished only in the month of
February, 1948. Before the end of the year 1948, even if the
installation of the sawmill had not yet been completed, the Director of
Prisons offered to deliver the lumber to the petitioner (See 2nd
Indorsement of the Director of Prisons dated November 26, 1948), but at
that time petitioner was not ready and willing to accept the lumber,
for it had proposed, with the consent of the party of the first party,
that the value of the sawmill and the landing barges was to be
collected by it in the form of surplus materials. This attempted
modification of the contract, by allowing the party of the second part
to accept surplus materials instead of the lumber, was to a great
extent, the cause for the belated delivery of the lumber.
The above considerations clearly show that the claim of the
petitioner for P24,500 and P35,000 damages cannot be sustained, for
admitting that the said amounts represent the difference in the value
between the lumber delivered in April, 1950, and that which was to be
delivered within thirty days after the installation of the sawmill, the
delay in the delivery was” due to petitioner’s own fault, namely, its
failure to deliver the sawmill and the landing barges complete and in
the satisfactory condition it had guaranteed them, and in part to its
desire to change the lumber for surplus materials.
For the foregoing considerations, the petition for review is hereby dismissed, with costs against the petitioner.
Paras, C. J., Bengzon, Reyes, Jugo, and Concepcion, JJ., concur.
PABLO, M.:
Concurro con el sobreseimiento por la razon de que el Auditor no tiene jurisdiccion para decidir la reclamacion.
Date created: October 08, 2014
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