G.R. No. 225366 - Star Special Corporate Security Management, Inc. vs. Commission on Audit

Case Summary (G.R. No. 225366)

Background of the Case and Initial Regional Trial Court Actions

Star Special, Celso A. Fernandez, and Manuel V. Fernandez were the owners of a land parcel in Puerto Princesa, Palawan, which was utilized as a road right-of-way for a military camp. They filed a complaint for just compensation against Puerto Princesa City, pursuant to the Fifth Amendment and lawful just compensation rights, before the Regional Trial Court (RTC) of Quezon City. On July 22, 1993, the RTC ruled in their favor, ordering the city to pay the claimants a total sum, including interest, for the land. This judgment was final and executory when Puerto Princesa failed to appeal within the prescribed period.

Verbal Agreement on Payment and Subsequent Compliance Issues

Despite the RTC decision, a verbal agreement was reached in 1995 to reduce the monetary judgment from approximately P16.9 million to P12 million, with a staggered payment plan. Puerto Princesa complied partially, under the terms agreed upon, with monthly and initial lump-sum payments made as evidenced by a series of checks from 1996 to 1997. However, payments ceased before the full amount was cleared.

Filing of Additional Complaint and RTC’s November 18, 2003 Decision

Because the balance was unpaid, Star Special, et al. filed a new complaint in 2001 to recover the remaining amount. After procedural events including Puerto Princesa's failure to present evidence and denial of motion for reconsideration, the RTC ruled in 2003 that the verbal agreement did not novate or extinguish the original obligation. The court ordered Puerto Princesa to pay the unpaid balance with interest, while denying attorney’s fees. This decision became final in January 2004.

Enforcement Attempts and Commission on Audit’s Involvement

Star Special’s efforts to compel payment led to motions before the RTC to garnish accounts or to compel the city council to appropriate funds but were denied due to lack of an appropriation ordinance. Star Special then sought enforcement through the Commission on Audit (COA), asking it to instruct Puerto Princesa to appropriate and disburse the necessary funds.

COA’s Denial of Claim and Jurisdictional Issues

COA issued a decision in 2012 denying Star Special’s claim, contending that the local government had already settled its obligation consistent with the alleged verbal compromise agreement, effectively disallowing the enforcement of the RTC's 2003 final judgment. COA held that claimants could not renege on the verbal agreement since payments were received and accepted. The COA reiterated this stance in a 2016 Resolution, affirming their earlier decision with finality.

Petitioners’ Argument Against COA and Supreme Court’s Issue

Petitioners contended that COA gravely abused its discretion and violated the doctrines of immutability of judgment and res judicata by reversing and disregarding a final and executory RTC judgment. They asserted vested rights upon the finality of the judgment, estoppel against Puerto Princesa for questioning jurisdiction, and that administrative remedies were not required given the purely legal nature of the issues.

Supreme Court’s Resolution of the Jurisdictional Conflict

The Supreme Court held that the RTC’s November 18, 2003 Decision establishing the unpaid balance was final and executory, and that COA’s denial of the claim constituted an unlawful modification or nullification of a final judicial decision, violating the doctrine of immutability of judgment. Under this doctrine, final judgments cannot be altered or reversed by any body other than a court with proper jurisdiction, including COA.

Limits of COA’s Jurisdiction Regarding Final Judicial Decisions

The Court underscored COA’s constitutional role as an independent body charged with auditing and settling accounts involving government funds under Article IX-D, Section 2 of the 1987 Constitution and PD No. 1445. However, COA’s jurisdiction to audit and settle government debts and claims does not extend to modifying or annulling judicial decisions that have attained finality. COA acts administratively in auditing claims, but its powers do not include appellate review or judicial revision of RTC orders or decisions.

Differentiation Between Primary Jurisdiction and Review Power

While COA has primary jurisdiction to initially examine, audit, and settle money claims against the government, such jurisdiction is procedural and must be invoked timely. In this case, Puerto Princesa did not raise COA's primary jurisdiction during RTC proceedings or after the final judgment, resulting in estoppel by laches. The Court clarified that COA’s audit function cannot be used to bypass or nullify final court judgments and that judicial authority to review or overturn court rulings remains exclusive to the judiciary.

Estoppel and Laches Against the Respondent Local Government Unit

Puerto Princesa was barred by the doctrine of laches from contesting the RTC’s jurisdiction and the finality of the 2003 decision, having actively participated in the proceedings and failed to appeal, raise jurisdictional objections, or move for annulment within acceptable periods. The Court held that a party cannot collaterally attack a final court decision through administrative bodies, especially when the government agency failed

Case Syllabus (G.R. No. 225366)

Background and Parties Involved

Petitioners include Star Special Corporate Security Management, Inc. (formerly Star Special Watchman & Detective Agency, Inc.), represented by Edgardo C. Soriano, the heirs of Celso A. Fernandez, and Manuel V. Fernandez for himself and the heirs.
Respondents are the Commission on Audit (COA), Puerto Princesa City, Hon. Lucilo R. Bayron in his capacity as city mayor, and the members of the Sangguniang Panlungsod.
The case arises from a money claim for just compensation for a parcel of land utilized as a road right-of-way in Puerto Princesa City.
Star Special and the heirs owned 5,942 square meters of land covered by Transfer Certificate of Title No. 13680, which was used by the city for the establishment of a military camp.

Initial Judicial Proceedings and Judgment

Petitioners filed Complaint for just compensation with the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q-90-4930) against Puerto Princesa City, its mayor, and city council.
On July 22, 1993, the RTC rendered a Decision ordering Puerto Princesa City to pay P1,500.00 per square meter, with interest, monthly rentals, and cancellation of the title.
The total money judgment was P16,930,892.97 as of October 1995.
A verbal compromise agreement between Celso Fernandez and the City’s legal counsel reduced the amount to P12,000,000.00, with installments planned thereafter.
Payments followed through authorized appropriations and monthly checks from 1996 to 1997.

Further Proceedings and Enforcement of Judgment

On November 27, 2001, petitioners filed a complaint for the unpaid balance of the original money judgment with the RTC (Civil Case No. Q-01-45668).
Puerto Princesa answered that it had fully paid the amount due.
Puerto Princesa failed to appear for hearings, and the case was submitted based on petitioners’ evidence.
The RTC, on November 18, 2003, ruled in favor of petitioners, holding the compromise agreement did not novate the original obligation owing to non-compliance by Puerto Princesa.
The RTC’s decision ordered payment of P10,615,569.63 with interest and monthly rentals; attorney’s fees were denied.
The decision became final and executory on January 20, 2004, leading to the issuance of a writ of execution on February 10, 2005.
Motions to enforce payment failed for lack of appropriation ordinance approval, but the court reaffirmed Puerto Princesa’s obligation.

Administrative Proceedings before the Commission on Audit

Petitioners requested COA to compel payment of the judgment award in 2007, including formal claims presenting unpaid balance and accrued interest amounting to over P21 million.
The COA, via Director Roy L. Ursal and subsequently Director Salvador P. Isiderio, declined jurisdiction over the matter, stating the case was already in execution.
Petitioners filed a Petition for Mandamus (G.R. No. 181792), which the Court denied in 2014, directing petitioners to refile their claim with COA in accordance with Presidential Decree No. 1445 (PD 1445).

COA Decisions and Resolutions on Money Claims

On July 17, 2012, COA rendered Decision No. 2012-113 denying petitioners' formal claim, finding the verbal compromise agreement had been complied with by Puerto Princesa.
COA held that petitioners cannot repudiate the agreement by relying on the original judgment.
Petitioners filed a motion for reconsideration in August 2012 but withdrew it in 2015 following the Supreme Court’s prior decision in G.R. No. 181792; instead, they filed a second formal claim.
On May 31, 2016, COA affirmed its earlier decision denying petitioners’ claim for lack of merit.

Core Legal Issue and Arguments

The principal issue is whether COA gravely abused its discretion when it denied petitioners’ claim despite the existence of a final and executory RTC judgment.
Petitioners argued that COA violated the doctrin