STAR SPECIAL CORPORATE SECURITY MANAGEMENT, INC. (FORMERLY STAR SPECIAL WATCHMAN & DETECTIVE AGENCY, INC.) HEREIN REPRESENTED BY EDGARDO C. SORIANO, THE HEIRS OF CELSO A. FERNAN…

Star Special Corporate Security Management versus Puerto Princesa City

The Case

This is a petition for certiorari brought by Star Special Corporate Security Management, formerly Star Special Watchman and Detective Agency, together with the heirs of Celso Fernandez and Manuel Hernandez, against the City of Puerto Princesa and the Commission on Audit. The petitioners hold a final and executory judgment of the Regional Trial Court of Quezon City awarding them the balance of just compensation for land taken as a road right-of-way, and they ask the Supreme Court to strike down the Commission on Audit's refusal to honor that judgment. The case matters because it draws the boundary between two powers that both touch public money: the audit body's authority to settle debts and claims due from the government, and the finality of a court's judgment. The Court answers a question every local government lawyer must know: may the Commission on Audit, in the exercise of its audit jurisdiction, reverse a final judgment of a trial court? The Court says no.

Procedural History

The story begins in the Regional Trial Court of Quezon City, which rendered judgment in favor of the landowners, ordering Puerto Princesa City to pay just compensation with interest and monthly rentals. That decision became final. When the city failed to pay in full, the landowners returned to the same trial court, which rendered a second decision fixing the unpaid balance, with interest and rentals. That second decision became final and executory in January 2004, and a writ of execution was later issued. When the city still did not pay, the trial court denied the motions to deliver the garnished account and to compel appropriation, but reiterated that the city must honor its obligation.

The landowners then wrote the Commission on Audit, which at first declined to act, saying the matter was already in execution. The landowners next filed a petition for mandamus before the Supreme Court, which denied it and directed them to refile their claim with the Commission on Audit under the Government Auditing Code. Complying, they filed a formal claim, which the Commission denied, finding that a verbal agreement had reduced the judgment and that the city had fully paid. Their motion for reconsideration was later withdrawn, and a second formal claim was filed. The Commission then issued a resolution affirming its denial with finality. From that resolution, the landowners came to the Supreme Court by petition for certiorari.

Facts

Star Special, Celso Fernandez, and Manuel Fernandez owned a parcel of land in Puerto Princesa City covered by a transfer certificate of title. When the national government established a military camp known as Western Command, the property was used as a road right-of-way. The owners sued for just compensation before the Regional Trial Court of Quezon City, which in July 1993 ordered the city to pay 1,500 pesos per square meter for the 5,942 square meters, with twelve percent interest from the filing of the complaint, plus 2,000 pesos monthly rental from 1986 until the land value was fully paid. The total money judgment reached 16,930,892 pesos and 97 centavos as of October 1995.

In November 1995, Celso and the city's counsel verbally agreed to reduce the judgment to 12,000,000 pesos, payable 2,000,000 pesos in February 1996 and 1,000,000 pesos monthly thereafter, later reduced to 500,000 pesos monthly. The city made an initial payment of 2,000,000 pesos and, through a sanggunian resolution, authorized the monthly releases. Checks were issued and received by Celso through October 1997. The trial court later found that the compromise did not novate the judgment obligation, because the terms set by the landowners for the agreement were never complied with by the city.

In November 2001, the landowners filed a second complaint to recover the balance of the original judgment. The city failed to appear for the presentation of its evidence and was deemed to have waived it. The trial court rendered judgment in November 2003 ordering the city to pay 10,615,569 pesos and 63 centavos as unpaid balance, with twelve percent interest from the date of the second complaint, plus 380,000 pesos and 2,000 pesos monthly rentals until full payment. That decision became final in January 2004. The Commission on Audit later denied the claim, holding that the verbal agreement had settled the obligation, and affirmed that denial with finality.

Issues

• Whether or not the Commission on Audit gravely abused its discretion when it denied the petitioners' money claim against Puerto Princesa City despite the finality of the trial court's decision.
• Whether or not the Commission on Audit has jurisdiction to reverse, modify, or nullify a final judgment of the Regional Trial Court in the exercise of its power to settle debts and claims due from the government.

Applicable Provisions

Section 2, Article IX-D of the Constitution defines the audit power of the Commission on Audit:

Examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the government, or any of its subdivisions, agencies, or instrumentalities.

This is the source of the audit body's authority to settle claims, and the Court reads it as a power to examine and settle accounts, not to sit in review over courts.

The same section also grants the rule-making power:

Promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties.

This power is exercised to safeguard public funds, and it does not carry with it the judicial power to annul a final judgment.

The Court also cites the constitutional allocation of judicial power, which it summarizes as vesting the power of judicial review only in the Supreme Court and in such lower courts as the law may establish. That allocation is the reason the audit body cannot revise a court's final ruling.

Ruling

On the first issue, the Court held that the Commission on Audit gravely abused its discretion. The trial court's November 2003 decision had long become final and established the city's unpaid balance. By denying the claim on the ground that a verbal agreement had settled the obligation, the Commission in effect reversed and set aside a final judgment, violating the doctrine of immutability of judgment. The Court restated that doctrine:

Under the doctrine of finality or immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land.

The Court added that any act violating this principle must immediately be struck down, and that the Commission should have approved the claim as a matter of course.

On the second issue, the Court held that the Commission on Audit has no jurisdiction to modify, much less nullify, a final judgment of the Regional Trial Court. It is not a court, and it is not part of the judicial system; it is an independent constitutional body with administrative and quasi-judicial functions in relation to its general audit power. Its primary jurisdiction over money claims against the government is real, and court-adjudicated claims must still be brought before it for satisfaction. But that jurisdiction does not include the appellate power to review, revise, reverse, or modify judgments of lower courts. The Court explained that in the earlier cases recognizing the audit body's primary jurisdiction, the objection was raised by the government agency or local government unit itself, and the audit body was asked to settle the claim, not to overrule a court.

Doctrine

First, a final and executory judgment is immutable and unalterable, and may not be modified in any respect, even to correct errors of fact or law, whether by the court that rendered it or by the highest court. Second, the Commission on Audit has primary jurisdiction to examine, audit, and settle all debts and claims of any sort due from or owing the government or any of its subdivisions, agencies, and instrumentalities, and court-adjudicated money claims must be filed with it for satisfaction. Third, that jurisdiction does not include the power to review, revise, reverse, or modify judgments and orders of lower courts, because judicial review belongs only to the courts. The practical rule: the audit body may examine and settle the claim, but it must respect the amount and the liability already fixed by a final judgment, and it should approve the claim as a matter of course.

Disposition

The Supreme Court granted the petition, set aside the Commission on Audit's denial, and upheld the petitioners' right to the balance of just compensation as adjudged in the final and executory decision of the Regional Trial Court.

Remember This

Memorize the line: the Commission on Audit has no jurisdiction to reverse and set aside a final judgment of the Regional Trial Court. Examiners use this case to test the interplay between the audit body's primary jurisdiction over money claims against the government and the doctrine of immutability of judgment.