G.R. No. 230818 - Concurring and Dissenting Opinion

G.R. No. 230818, February 14, 2023,
♦ Decision, Hernando, [J]
♦ Separate Concurring Opinion, Leonen, [J]
♦ Concurring and Dissenting Opinion, Lazaro-Javier, [J]
♦ Concurring and Dissenting Opinion, Kho, [J]

The case is closely related to Genuino v. Commission on Audit, G.R. No. 230818, in that they both involve Notice of Disallowance No. 2013-002 (10) dated February 20, 2013 disallowing the amount of PHP 2,000,000.00 granted by Philippine Amusement and Gaming Corporation (PAGCOR) as financial assistance to the Pleasant Village Subdivision and a common question of law of transcendental importance - the continuing immunity of PAGCOR funds from Commission on Audit's (COA) audit jurisdiction pursuant to Section 15 of Presidential Decree No. 1869 (PD 1869).1

I agree with the ponencia that we ought to revisit our ruling in Genuino, considering that PD 1869 predates the 1987 Constitution. As such, the former may no longer be operative because all funds received by the PAGCOR, though not to be turned over to government, becomes public funds subject to audit by virtue of these constitutional provisions.

I agree with the ponencia, not just because the Constitution was ratified more recently than PD 1869, but also because any law inconsistent with it shall be deemed repealed or void altogether.

Indeed, there should be no distinction as to the type of funds subject to the COA's audit jurisdiction over PAGCOR, a government owned and controlled corporation (GOCC).

SECTION 15. Auditor - The Commission on Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessary to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be fixed by the Chairman of the Commission on Audit or designated government agency, with the advice of the Board, and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share.1aшphi1

As then Associate Justice (now Senior Associate Justice) Marvic Mario Victor F. Leonen so wisely pointed out during the deliberations, Section 15 of PD 1869 remained good law only until the ratification of the 1987 Constitution. Section 2, Article IX-D now mandates the COA to audit all government agencies, including GOCCs with original charters, viz.:2

More, Sections 3 and 4, Article IX-D did away with the immunity of any instrumentality of the government from the COA's audit jurisdiction, thus:

SECTION 3. No law shall be passed exempting any entity of the Government or its subsidiary in any guise whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit.

SECTION 4. The Commission shall submit to the President and the Congress, within the time fixed by law, an annual report covering the financial condition and operation of the Government, its subdivisions, agencies, and instrumentalities, including government-owned or controlled corporations, and non-governmental entities subject to its audit, and recommend measures necessary to improve their effectiveness and efficiency. It shall submit such other reports as may be required by law.4 (Emphases supplied)

Verily, COA is now empowered, nay, duty-bound, to determine whether government and even non-government entities to a certain extent comply with laws and regulations in disbursing government funds and to disallow illegal or irregular disbursements of government funds.

Unquestionably, PAGCOR is a GOCC organized and existing under PD 1869.6 As such, PAGCOR and all of its funds are subject to COA's audit jurisdiction.

In any case, the plain and patent inconsistency between COA's constitutional jurisdiction and its scrimped jurisdiction as mentioned in Section 15 of PD 1869 has long been resolved by the repealing clause itself embodied in Section 3, Article 18 of the Constitution:7

SECTION 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed, or revoked.

The clear import of this provision is that all existing laws, executive orders, proclamations, letters of instructions, and other executive issuances inconsistent or repugnant to the Constitution are repealed.8 Surely, we cannot choose to continue to close our eyes to this plain and patent transgression of our Constitution.

It should be understood, therefore, that all of PAGCOR's funds, without distinction, should be subject to the COA's audit jurisdiction. PAGCOR and its officers cannot be allowed to hide behind the flimsy protection of an outdated audit rule that is clearly against the intention of the Constitution.

To my mind, the issue of the constitutionality of Section 15 of PD 1869 has arisen from a direct attack proceeding. While on its face, petitioners' suit seeks to reverse the disallowance made by COA and the imposition of civil liabilities against them, their basis is COA's lack of audit jurisdiction pursuant to Section 15 of PD 1869. Thus, petitioners themselves have brought the issue to the fore. Further, it would be the height of unfairness to disallow COA from responding to assert its jurisdiction.

I agree with COA that raising a constitutional defense to petitioners' claim of lack of jurisdiction is not, without more, an impermissible collateral attack. This is not inappropriate. A direct attack that has for its sole purpose to determine COA's jurisdiction is not exactly a more efficient process to have this issue decided.

For one, all the arguments about this issue have already been brought forth by the parties in this case. More, the jurisdictional issue is intimately connected to petitioners' specific claim to reverse the disallowance and the liabilities imposed upon them. Hence, there is no danger of either delaying or confusing the issues about the disallowance and the ensuing liabilities.

To be sure, dealing here and now with the jurisdictional issue prevents multiplicity of suits and results in a full settlement of the issues that have come to fore. More important, this approach gives real context to the Court's role as the guardian of the Constitution. If a statute is inconsistent with the Constitution, the overriding effect of invalidity is to give the Court not only the power, but the duty, to regard the inconsistent statute, to the extent of the inconsistency, as being no longer of force or effect.

Finally, on this point, instead of immediately rebuffing collateral attacks on the constitutionality of statutes, due regard must be given to contextual factors in deciding whether to allow the collateral attack to proceed or to require a direct attack instead. Among these factors are:

As for petitioner's liability for the disallowed amount, the public or private character of the project in question becomes relevant. To be sure, the Court has the power to review whether a particular project has a public character.9 Public purpose or public use in the context of disbursing public funds means:

. . . means any purpose or use directly available to the general public as a matter of right. Thus, it has also been defined as "an activity as will serve as benefit to [the) community as a body and which at the same time is directly related function of government." However, the concept of public use is not limited to traditional purposes. Here as elsewhere, the idea that "public use" is strictly limited to clear cases of "use by the public" has been discarded. In fact, this Court has already categorically stated that the term "public purpose" is not defined, since it is an elastic concept that can be hammered to fit modern standards. It should be given a broad interpretation; therefore, it does not only pertain to those purposes that which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing[,] and urban or agrarian reform. In short, public use is now equated with public interest, and that it is not unconstitutional merely because it incidentally benefits a limited number of persons.10 (Emphases supplied, citations omitted)

Public purpose or use has also been held to be synonymous with "public interest," "public benefit," "public welfare," and "public convenience."11 Indeed, whatever may be beneficially employed for the general welfare satisfies the requirement of public use.12

In its more recent iteration, the concept of public use now includes the broader notion of indirect public benefit or advantage.13 Thus, a project retains its public use character although only a few persons could actually benefit therefrom.14 That a greater benefit is derived by a particular class or group of persons from a government project, does not diminish the essence and character of public use.15

These principles squarely apply here. Verily, flood control initiatives have recognized benefits to the general welfare, viz.:

Inadequate flood protection and control could certainly contribute to the creation [or] continuation of a slum or blighted area. Likewise, adequate flood protection is certainly essential to the proper [development or} redevelopment of an area of a city - just as essential as adequate streets, drainage and the like.16 (Emphasis supplied)

That the flood control initiative is located within Pleasant Village Subdivision is of no moment. Generally, when floodwaters reach a critical mass, they are no longer susceptible to human control and direction. They will ravage every thoroughfare, residence and crevice that they can course through, even beyond the confines of Pleasant Village Subdivision. As such, the presence of a flood control system within Pleasant Village Subdivision redounds not only to the benefit of its residents, but also to those of adjacent neighborhoods and localities.

Further, the flood control initiative also ensures the sustainability of the ecosystems within and around Pleasant Village Subdivision because it addresses the substantial detrimental effects commonly associated with floods such as: (a) reduced tree and vegetative cover; (b) reduced soil fertility; (c) accumulation of wastes and water pollution; (d) deformed land topography; and (e) reduced viability of ecosystems, among others.17 It is therefore indisputable that said flood control system serves a public purpose or use.

Consequently, the primordial reason for the disallowance, i.e., that public funds were spent for a private purpose, disappears. As the ponencia states, "the socio-economic projects mentioned in PD 1869 may be allocated with public funds, provided that the requirement of public purpose is satisfied."18 In fact, PD 1869 directs the PAGCOR to generate sources of revenue to fund infrastructure, and socio-civic projects such as flood control programs and other essential public services.19 To pursue the directive, PAGCOR may perform "such other powers, functions and duties . . . as may be necessary for the accomplishment of its purposes and objectives"20 i.e., through its Corporate Social Responsibility programs.

Nevertheless, safeguards must be adopted so that the constitutional requirement that government funds or property shall be spent or used solely for public purposes is given adequate protection. The idea behind these safeguards is to prevent the trivialization of this exception and the opportunity to siphon public funds to dubious and fly-by night organizations for allegedly community-based projects. While homeowners' associations have a peculiar standing given by the law itself in the communities they serve, this alone is not enough to categorize the public funding as one for a public purpose.

The nature of the organization itself must be scrutinized. Does it have a peculiar standing in the community as recognized and accorded by the law itself? The activity to be funded must also be allied with and relevant to traditional government functions. There must be on-sight and pre-activity coordination with and endorsement from concerned government agencies. This should address why it is this organization, and not the government agency tasked to do the job, that is implementing the activity? What has happened to the public trust mandate of this government agency? Has there been a failure of governance? The organization must itself register with COA for proper auditing measures, such as the identification of the key persons answerable for the disbursement of the public funds, the audit times and mechanisms, and all the other requirements on accountability and transparency, including bidding and conflict of interest, must apply to the organization. In the process, to be able to avail of public funds, the organization and its personalities become public officers subject to the corrective and punitive mechanisms otherwise applicable to public officials and employees.

These factors have not been canvassed in the case at bar.1aшphi1 This is because the approach of the ponencia is to deny the public purpose character of the public funding. This notwithstanding, I maintain that an examination of the foregoing factors is necessary. Such safeguards will ensure that future transactions of this same kind will not be compromised. With better accountability and transparency mechanisms are in place, this revitalized concept of public purpose vis-a-vis public funding is not abused to become a mode of thievery of the public coffers.

As for petitioner's liability for the disallowed amount, the Rules of Return laid down in Madera v. Commission on Audit21 is inapplicable here.

As aptly pointed out by then Senior Associate Justice Estela M. Perlas-Bernabe during our deliberations in Torreta v. Commission on Audit,22 the Madera Rules of Return were specifically borne from the context of disallowance cases involving employee incentives and benefits, hence, said rules find no application to government contracts for the procurement of goods and services. On this score, I am of the view that the Madera Rules of Return are likewise inapplicable to government grants of financial assistance to private entities, as here.

In any event, Torreta instructs that the errant approving and certifying officers may still be held liable under Sections 38 and 43 of the Administrative Code upon which the Madera Rules of Return were partly based, thus:

All told, I vote to partially GRANT the Motion for Reconsideration filed by the Commission on Audit insofar as it pertains to the Commission's authority to audit PAGCOR funds. I maintain however, that the assistance granted to Pleasant Village Subdivision for its flood control initiatives qualifies as an expenditure for a public purpose.