The Supreme Court affirmed that once a decision becomes final and executory, it is immutable. Therefore, the Philippine Deposit Insurance Corporation (PDIC) could not condone an audit disallowance that had already been upheld by the Supreme Court. Allowing the PDIC to do so would sanction an indirect violation of the prohibition against double compensation. This ruling underscores the importance of respecting final court decisions and adhering to the principle that what is directly prohibited cannot be indirectly legitimized.

PDIC’s Attempt to Circumvent Final Judgment: Can Condonation Undo a Supreme Court Decision?

This case revolves around the attempt by the Philippine Deposit Insurance Corporation (PDIC) to condone an audit disallowance previously affirmed by the Supreme Court. The core legal question is whether PDIC, under its charter, can condone a liability that has been the subject of a final and executory judgment by the highest court of the land.

The factual backdrop involves disbursements made to former Finance Secretary Roberto De Ocampo during his tenure as ex-officio Chairman of the PDIC Board. These disbursements were disallowed by the Commission on Audit (COA) due to their nature as additional compensation, violating the constitutional prohibition against multiple positions. The disallowance was challenged by PDIC, eventually reaching the Supreme Court, which upheld COA’s decision. Consequently, PDIC was expected to enforce the decision, as indicated by the Final Order of Adjudication (FOA) issued by COA.

However, instead of complying with the FOA, PDIC invoked its power under Sec. 8, par. 12 of its charter to condone the disallowed amount. This prompted COA to seek the assistance of the Office of the Solicitor General (OSG) to file appropriate action against PDIC officials for non-compliance with the FOA and the Supreme Court’s decision. PDIC then sought to have its right to appeal reinstated, arguing that it did not receive notice of the disallowance of the condonation. This argument centered on an alleged violation of due process.

COA denied PDIC’s request, stating that PDIC had fully participated in the appeals process. Therefore, it could not claim a violation of due process. The Commission further reasoned that allowing the condonation would indirectly violate the prohibition against double compensation and the final Supreme Court decision.

The Supreme Court emphasized that a final and executory judgment is immutable and unalterable. When a judgment becomes final, the prevailing party has the right to its execution. PDIC should have reasonably expected the issuance of an order directing the refund of the disallowed amount. By attempting to condone the disallowance, PDIC sought to circumvent the execution of the Supreme Court’s decision.

PDIC argued that it had the right to appeal the supervising auditor’s memorandum under the COA Rules, citing Rule V thereof. However, the Court clarified that Rule V applies to appeals from an order, decision, or ruling containing a disposition of a case. The memorandum in question merely informed COA of the condonation and referred the matter for appropriate action. Therefore, it was not appealable under Rule V.

Building on this principle, the Supreme Court stated that the audit disallowance could not be circumvented and legitimized by resorting to condonation. Furthermore, PDIC’s authority to condone under its charter is limited by the phrase “to protect the interest of the Corporation.” This authority does not extend to condoning liabilities arising from a violation of law, especially a constitutional prohibition against double compensation.

The Court also rejected PDIC’s claims of denial of due process, stating that PDIC was given sufficient opportunity to be heard throughout the proceedings. The essence of due process is the opportunity to be heard, which was not denied to PDIC.

FAQs

What was the key issue in this case?	The key issue was whether PDIC could condone an audit disallowance that had already been affirmed by a final and executory decision of the Supreme Court.
What was the basis for the COA’s original disallowance?	The COA disallowed the payment because it deemed the disbursements to be additional compensation in violation of the constitutional prohibition against holding multiple positions.
Why did PDIC attempt to condone the disallowance?	PDIC invoked its power under its charter, specifically Section 8, paragraph 12, which allows it to compromise, condone, or release claims or settled liabilities.
What did the Supreme Court rule regarding PDIC’s attempt to condone the disallowance?	The Supreme Court ruled that PDIC could not condone the disallowance because the decision affirming it was already final and executory. The Court stated that such an attempt would indirectly violate the prohibition against double compensation.
What is the significance of a “final and executory” judgment?	A final and executory judgment is one that can no longer be appealed or modified; it is unalterable and immutable. It is the duty of the losing party to abide by the decision.
Did the Supreme Court find a violation of PDIC’s right to due process?	No, the Supreme Court found no violation of PDIC’s right to due process, as PDIC had fully participated in the proceedings leading up to the Supreme Court decision.
Can the power to condone be applied to violations of law?	No, the Court clarified that PDIC’s authority to condone only applies to ordinary receivables, penalties, and surcharges, but not to liabilities that arise from a violation of law or the Constitution.
What is the effect of this ruling on other government-owned and controlled corporations (GOCCs)?	The ruling reinforces that GOCCs must respect final and executory judgments and that their power to condone is limited and cannot be used to circumvent legal and constitutional prohibitions.

In conclusion, the Supreme Court’s decision serves as a stark reminder that the principle of finality of judgments is paramount. Attempts to circumvent or undermine final court decisions, even through powers granted by a corporation’s charter, will not be tolerated, especially when they contravene fundamental legal and constitutional principles.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine Deposit Insurance Corporation vs. Commission on Audit, G.R. No. 171548, February 22, 2008