G.R. No. 210314 Separate Opinion

G.R. No. 210314, October 12, 2021,
♦ Decision, Hernando, [J]
♦ Concurring Opinion, Perlas-Bernabe, [J]
♦ Separate Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Zalameda, [J]

Bangko Sentral NG PILIPINAS, PETITIONER, VS. THE COMMISSION ON AUDIT, RESPONDENT.

This matter involves a Petition on Certiorari1 filed under Rule 65 of the Rules of Court assailing the Commission on Audit's Decision2 and Resolution.3

On November 16, 2006, the Commission on Audit issued against Bangko Sentral ng Pilipinas (Bangko Sentral) an Audit Observation Memorandum4 finding that for the years 2003 to 2005, Bangko Sentral had an understatement of dividends remitted to the government amounting to P2,101,000,000.00.

The Commission on Audit noted that in computing its dividends for those years, Bangko Sentral deducted reserves from its net income.5 The Commission on Audit found that this is contrary to Section 2(d) of Republic Act No. 7656,6 which states that government-owned and controlled corporations should base their dividend declarations on their net earnings, without deductions for any reserves for whatever purpose.7 It maintained that Section 43 of Republic Act No. 7653,8 or the New Central Bank Act, does not apply as it has been impliedly repealed by the former provision.9

Bangko Sentral contested the Audit Observation Memorandum, insisting that Republic Act No. 7656 did not repeal Republic Act No. 7653.10

After several exchanges on the matter, the Commission on Audit issued its March 23, 2010 Decision,11 ruling with finality that no reserves should be deducted from Bangko Sentral's net earnings when computing the dividends for remittance to the National Government.12 It found that Section 2(d) of Republic Act No. 7656 is a particular provision of a general law, and thus prevails over Section 43 of Republic Act No. 7653, which is a general provision of a special law. The Commission on Audit denied reconsideration in its January 25, 2011 Resolution.13 The dispositive portion reads:

WHEREFORE, in view of the foregoing considerations, this Commission hereby AFFIRMS Decision No. 2010-042 dated March 23, 2010. Accordingly, no reserve for whatever purpose shall be allowed to be deducted from BSP's net earnings/income in the computation of dividends to be remitted to the NG. However, for the years 2003 to 2006, this Commission interposes no objection to the agreement between the BSP and the DOF, in the presence of the DBM Secretary and the Senate Chairman of the Committee on Finance, that the BSP shall remit to the NG dividends in the amount of only P9.312 billion, subject to the submission of the duly signed Agreement of the parties concerned to form part of the record of the herein case.14

On January 27, 2011, Bangko Sentral, Commission on Audit, and Department of Finance entered into a Memorandum of Agreement15 where they settled the amount of dividends due from Bangko Sentral for the period of 2003 to 2006. Four days later, Bangko Sentral remitted P9,312,000,000.00.16

On July 15, 2011, the Commission on Audit informed Bangko Sentral that its January 25, 2011 Resolution became final, since Bangko Sentral did not file an appeal. Thus, beginning in 2007, reserves may not be deducted from Bangko Sentral's net earnings in computing the dividends to be remitted to the National Government.17

On September 7, 2012, the Commission on Audit rendered the assailed decision where it found that its January 25, 2011 Resolution had become final and executory and, thus, no reserves may be deducted from Bangko Sentral 's net earnings.18 In its assailed December 3, 2013 Resolution, the Commission on Audit denied Bangko Sentral's motion.19

The ponencia partly granted the Petition and set aside public respondent Commission on Audit's September 7, 2012 Decision and December 3, 2013 Resolution.20

It found that while Commission on Audit has the authority to rule on a question of law relating to its duty to audit and examine government entities, its rulings do not create legal precedent and are still subject to judicial review.21

It also held that while the Commission on Audit's January 25, 2011 Resolution has become final and executory,22 this ruling is void as of the period beginning in 2007 onwards because Commission on Audit exceeded its jurisdiction in rendering judgment as to transactions which have not yet occurred and have not been submitted for review.23 Thus, for the period of 2007 onwards, the ruling is void and could not have attained finality.24

Furthermore, while the ponencia acknowledged the mootness of the issue of whether or not Section 2(d) of Republic Act No. 7656 has repealed Section 43 of Republic Act No. 7653, it still resolved the issue because it is capable of repetition yet evading review.25

It found that Section 2(d) of Republic Act No. 7656 did not repeal Section 43 of Republic Act No. 7653 because petitioner Bangko Sentral is not a government-owned or controlled corporation covered under Section 2(b) of Republic Act No. 7656.26 It also held that the Constitutional Commission's records and the legislative deliberations on Republic Act No. 7653 show an intention to establish petitioner as independent and autonomous from the control of the Executive Department, and to exclude it from being classified as a government-owned and controlled corporation.27 Further, the ponencia established that this is also supported by subsequent legislations, including Republic Act No. 10149 and Republic Act No. 11211.28

I maintain that the Commission on Audit's January 25, 2011 Resolution has become final and executory.

The computation of dividend remittances is part of the Commission on Audit's mandate to "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."29 The Commission on Audit also has the jurisdiction to resolve novel, controversial, complicated, or difficult questions of law on government accounting and auditing.30

In Oriondo v. Commission on Audit,31 this Court recognized the Commission on Audit's competency to rule on a question of law as part of its duty to audit and examine government entities:

Therefore, it is absurd for petitioners to challenge the competency of the Commission on Audit to determine whether or not an entity is a government-owned or controlled corporation. Jurisdiction is "the power to hear and determine cases of the general class to which the proceedings in question belong," and the determination of whether or not an entity is the proper subject of its audit jurisdiction is a necessary part of the Commission's constitutional mandate to examine and audit the government as well as non-government entities that receive subsidies from it. To insist on petitioners' argument would be to impede the Commission on Audit's exercise of its powers and functions.

To question the Commission on Audit's decision, Article IX-A, Section 7 of the Constitution provides that the ruling "may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof."32 Sections 28 and 35 of the Administrative Code also provides:

SECTION 28. Decisions by the Constitutional Commissions. Each Commission shall decide, by a majority vote of all its Members, any case or matter brought before it within sixty (60) days from the date of its submission for decision or resolution. A case or matter is deemed submitted for decision or resolution upon the filing of the last pleading, brief, or memorandum required by the rules of the Commission or by the Commission itself. Unless otherwise provided by the Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty (30) days from receipt of a copy thereof.

SECTION 35. Appeal from Decision of the Commission. - Any decision, order or ruling of the Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from his receipt of a copy thereof in the manner provided by law and the Rules of Court. When the decision, order or ruling adversely affects the interest of any government agency, the appeal may be taken by the proper head of that agency.33

However, if the case is not elevated, the Commission on Audit's decision becomes final and executory. Section 36 of the Administrative Code states:34

SECTION 36. Finality of Decision of the Commission or Any Auditor. - A decision of the Commission or of any Auditor upon any matter within its or his jurisdiction, if not appealed as herein provided, shall be final and executory.

SECTION 1. Execution of Decision. - Execution shall issue upon a decision that finally disposes of the case. Such execution shall issue as a matter of right upon the expiration of the period to appeal therefrom if no appeal has been fully perfected.35

Accordingly, a final and executory judgment may no longer be reviewed. As this Court held in Vios v. Pantangco, Jr.36:

It is a hornbook rule that once a judgment has become final and executory, it may no longer be modified in any respect, even if the modification is meant to correct an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land, as what remains to be done is the purely ministerial enforcement or execution of the judgment.

The doctrine of finality of judgment is grounded on fundamental considerations of public policy and sound practice that at the risk of occasional errors, the judgment of adjudicating bodies must become final and executory on some definite date fixed by law.... the Supreme Court reiterated that the doctrine of immutability of final judgment is adhered to by necessity notwithstanding occasional errors that may result thereby, since litigations must somehow come to an end for otherwise, it would "be even more intolerable than the wrong and injustice it is designed to correct."37

A definitive final judgment, however erroneous, is no longer subject to change or revision.

A decision that has acquired finality becomes immutable and unalterable. This quality of immutability precludes the modification of a final judgment, even if the modification is meant to correct erroneous conclusions of fact and law. And this postulate holds true whether the modification is made by the court that rendered it or by the highest court in the land. The orderly administration of justice requires that, at the risk of occasional errors, the judgments/resolutions of a court must reach a point of finality set by the law. The noble purpose is to write finis to dispute once and for all. This is a fundamental principle in our justice system, without which there would be no end to litigations. Utmost respect and adherence to this principle must always be maintained by those who exercise the power of adjudication. Any act, which violates such principle, must immediately be struck down. Indeed, the principle of conclusiveness of prior adjudications is not confined in its operation to the judgments of what are ordinarily known as courts, but extends to all bodies upon which judicial powers had been conferred.39

Here, the assailed decision and resolution simply affirmed the finality of the Commission on Audit's ruling in its January 25, 2011 Resolution.40 It noted that petitioner did not file a petition to question the January 25, 2011 Resolution. As a result, its ruling in the dispositive portion is final and executory. Thus, "no reserve for whatever purpose shall be allowed to be deducted from [petitioner's] net earnings/income in the computation of dividends to be remitted to the NG."41

Petitioner explained that it no longer questioned the January 25, 2011 Resolution because it assumed that the ruling only covered the years 2003 to 2006. Furthermore, the Memorandum of Agreement states that the patties will "diligently work towards a mutually acceptable and legal arrangement for the subsequent dividend payments."42

However, the dispositive portion of the January 25, 2011 Resolution clearly differentiates between its ruling on the dividend computation and the agreement on the amount due from petitioner for the years 2003 to 2006:

Furthermore, the scope of the Memorandum of Agreement is clearly limited to the years 2003 to 2006 and, thus, cannot be taken to mean its terms have superseded the ruling in the January 25, 2011 Resolution. It reads:

The BSP hereby expresses its willingness to declare and remit to the National Government additional dividends for calendar years 2003 to 2006 in the amount of P9.312 billion on the basis of the computation and dividend rate provided for in sections for 43 and 132(b) of R.A. No. 7653;

In view of the BSP's unique functions and responsibilities as the central monetary authority, the DOF hereby expresses its willingness to accept the additional dividends above referred to, and hereby concurs and tenders no objection to the method of computation adopted under aforesaid sections of R.A. No. 7653, and upon receipt of said dividends, thereby considers any obligations of the BSP to remit dividends for aforesaid years already finally closed, paid and fully settled;

The COA, on account of the acceptance with the National Government, the duly constituted beneficiary of the dividends, as stated in the immediately preceding paragraph, offers no objection to the (i) remittance by the BSP of additional dividends to the National Government amounting to P9.312 billion and (ii) agreement between DOF and BSP to consider any and all dividend obligations of BSP in favor of the National Government for the aforesaid years to be finally closed, paid and fully settled;

All the parties herein undertake to diligently work towards a mutually acceptable and legal arrangement for the subsequent dividend payments and account settlements consistent with above agreements between BSP and DOF and with due regard to the BSP's unique functions and responsibilities as central monetary authority of the country[.]44

The undertaking to "work towards a mutually acceptable and legal arrangement for the subsequent dividend payments and account settlements"45 is simply consistent with the Commission on Audit's authority to compromise claims.46

Here, petitioner failed to file a petition for certiorari to question the January 2, 2011 Resolution, and neither did the Memorandum of Agreement's terms supersede it. Thus, the January 25, 2011 Resolution has become final and executory.

I find that the Commission on Audit did not gravely abuse its discretion when it issued its September 7, 2012 Decision and December 3, 2013 affirming the finality of its ruling in its January 25, 2011 Resolution.47

Nonetheless, I opine that Section 3 of Republic Act No. 7656 should not have been made to apply to petitioner.

As defined and covered by Republic Act No. 7656, the Bangko Sentral is not an ordinary government-owned and controlled corporation or financial institution. Its functions are provided for under the Constitution itself. Article XII, Section 20 of the Constitution mandates it to provide "policy direction in areas of money, banking and credit," supervise the operations of banks, and regulate the operations of finance companies and similar institutions:

SECTION 20. The Congress shall establish an independent central monetary authority, the members of whose governing board must be natural-born Filipino citizens, of known probity, integrity, and patriotism, the majority of whom shall come from the private sector. They shall also be subject to such other qualifications and disabilities as may be prescribed by law. The authority shall provide policy direction in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as may be provided by law over the operations of finance companies and other institutions performing similar functions.

Until the Congress otherwise provides, the Central Bank of the Philippines, operating under existing laws, shall function as the central monetary authority.

Currently, the Bangko Sentral is governed by Republic Act No. 7653, as amended by Republic Act No. 11211. Prior to the latter amendment in 2019, the Congress had already explicitly stated that the Bangko Sentral enjoys fiscal and administrative autonomy:

SECTION 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy.48

The reason behind the fiscal and administrative autonomy of the Bangko Sentral may be deduced from its responsibilities and primary objective:

SECTION 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory and examination powers as provided in this Act and other pertinent laws over the quasi-banking operations of non-bank financial institutions. As may be determined by the Monetary Board, it shall likewise exercise regulatory and examination powers over money service businesses, credit granting businesses, and payment system operators. The Monetary Board is hereby empowered to authorize entities or persons to engage in money service businesses. The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced and sustainable growth of the economy and employment. It shall also promote and maintain monetary stability and the convertibility of the peso.

The Bangko Sentral shall promote financial stability and closely work with the National Government, including, but not limited to, the Department of Finance, Securities and Exchange Commission, the Insurance Commission, and the Philippine Deposit Insurance Corporation. The Bangko Sentral shall oversee the payment and settlement systems in the Philippines, including critical financial market infrastructures, in order to promote sound and prudent practices consistent with the maintenance of financial stability. In the attainment of its objectives, the Bangko Sentral shall promote broad and convenient access to high quality financial services and consider the interest of the general public.49

The autonomy of the Bangko Sentral is necessary because no other motivation, political or otherwise, may influence how it exercises its functions. Its insulation from political influences is necessary to attain its primary objective of price stability. Conversely, interfering with the policies of the Bangko Sentral may result in serious difficulties for our economy.

The Bangko Sentral regulates banks and controls the money supply, or the quantity of money that is available in the economy. In relation to these two functions, the Bangko Sentral also loans money to banks, and is the lender of last resort for banks in need of it. Its power to control the money supply necessarily affects the price level of goods and the demand for money. Thus, its role in the economy is undeniable. The policies of the Bangko Sentral affect inflation, production, and employment.50

Here, the contentious provision is Section 43 of Republic Act No. 7653, which states:

SECTION 43. Computation of Profits and Losses. - Within the first thirty (30) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and doubtful accounts.

The provision primarily pertains to petitioner's function of lending money to banks and other financial institutions. The provision contemplates the sound banking practice of setting aside an adequate reserve for bad and doubtful accounts or other purposes. It is meant to cover for those unable to pay back what was lent.

The Commission on Audit contends that this has been impliedly repealed by Section 3, in relation to Section 2(d), of Republic Act No. 7656 which states:

SECTION 2(d). "Net earnings" shall mean income derived from whatever source, whether exempt or subject to tax, net of deductions allowed under Section 29 of the National Internal Revenue Code, as amended, and income tax and other taxes paid thereon, but in no case shall any reserve for whatever purpose be allowed as a deduction from net earnings.

SECTION 3. Dividends. - All government-owned or -controlled corporations shall declare and remit at least fifty percent (50%) of their annual net earnings as cash; stock or property dividends to the National Government. This section shall also apply to those government-owned or -controlled corporations whose profit distribution is provided by their respective charters or by special law, but shall exclude those enumerated in Section 4 hereof: Provided, That such dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund.

Based on this argument, all reserves for whatever purpose shall be included with petitioner's net profits to be remitted to the National Government.

I find, however, that disallowing the deduction of all kinds of reserves from petitioner's net profit prior to its remittance to the National Government is contrary to sound policy. Reserves include the "deposits that banks have received but have not loaned out."51

The Bangko Sentral has the power to control the supply of money in the economy. One of the ways by which it does that is by changing its requirements for reserves.52 Increasing reserve requirements means that banks must retain more reserves and, therefore, can loan out less of each peso that is deposited. As a result, the money supply decreases. Conversely, decreasing reserve requirements increases the money supply.53 To simplify, if the reserve requirements are interfered with, the money supply is affected.

Here, if petitioner's reserves are not deducted from its net profits and it is then remitted to the National Government's treasury along with its profits,54 it will eventually be included as part of the gross domestic product55 as government expenditure.56 Thus, the amounts go back into circulation, and it runs contrary to the purpose of controlling the money supply. Necessarily, this affects the monetary policies that petitioner is seeking to implement to meet its objectives.

Thus, I find that disallowing the deduction of all kinds of reserves from the net profit of petitioner prior to its remittance to the National Government is contrary to sound policy. Section 3 of Republic Act No. 7656 should not have been made to apply to the Bangko Sentral.

Nonetheless, I note that this concern has already been addressed, because Section 43 of Republic Act No. 7653 has already been amended by Republic Act No. 11211. It now reads:

SECTION 43. Computation of Profits and Losses. - Within the first sixty (60) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. Notwithstanding any provision of law to the contrary, the net profit of the Bangko Sentral shall be determined after allowing for expenses of operation, adequate allowances and provisions for bad and doubtful debts, depreciation in assets, and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations.

SECTION 43-A. Bangko Sentral Reserve Fund. - The Bangko Sentral shall establish a reserve fund, whenever it has income or positive surplus, to mitigate future risks such as, but not limited to, the impacts of foreign exchange and price fluctuations, and to address other contingencies inherent in carrying out the Bangko Sentral-mandated functions as central monetary authority. The reserve fund shall consist of fluctuation reserve, contingency reserve and such other reserves as the Monetary Board deems prudent or necessary.

Thus, Bangko Sentral may now deduct allowances and provisions for contingencies from its net profits in computing its dividend remittance to the National Government.