Central Bay Reclamation and Development Corp. v. Commission on Audit, G.R. No. 252940, [April 5, 2022]

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Central Bay Reclamation and Development Corp. v. Commission on Audit

G.R. No. 252940, [April 5, 2022]

EN BANC, LOPEZ, M.V

 

Property Reclamation; Inalienable lands of Public Domain; Quantum Meruit Principle in Void Government Contracts

Payment for services rendered on account of the government, although based on a void contract, may be granted on the basis of quantum meruit. The principle of quantum meruit allows recovery of an amount to the extent of the reasonable value of the thing or services rendered.

 

This case revolves around the nullification of an Amended Joint Venture Agreement (JVA) between the Philippine Reclamation Authority (PRA) and Central Bay Reclamation and Development Corporation (Central Bay) regarding the acquisition of reclaimed lands. PRA entered an Amended JVA with Central Bay to develop reclaimed islands known as the "Freedom Islands" and reclaim submerged areas in Manila Bay. The Supreme Court nullified this agreement, citing violations of the Constitution which prohibits private corporations from acquiring alienable land of the public domain. Now, Central Bay sought reimbursement from PRA for costs incurred prior to the nullification, eventually agreeing to a Compromise Agreement transferring reclaimed land to Central Bay's qualified assignee to settle the money claims. The Commission on Audit (COA) disapproves of the Compromise Agreement, as it contravened the letter and intent of the constitutional ban against corporate ownership of land. What cannot be done directly cannot be done indirectly. Thus, COA disallow Central Bay’s money claims. 

 

Whether the COA's disapproval of the Compromise Agreement and disallowance of other money claims were proper. 

Yes. The Supreme Court reiterated that the Compromise Agreement allowing Central Bay to assign the reclaimed land is void. It emphasized that the transfer of land to Central Bay's assignee granted Central Bay beneficial ownership violates the constitutional prohibition banning corporation to acquire alienable land of public domain. As the COA aptly observed, the qualified assignee mentioned in the Compromise Agreement can only acquire rights which Central Bay can lawfully exercise. However, Central Bay is a private corporation that cannot own land in the Philippines. Consequently, Central Bay cannot transfer ownership of any land to another party.

However, the Court held that Central Bay is not precluded to recover from PEA the costs incurred in implementing the agreement prior to its declaration of nullity on a quantum meruit basis. It is settled that payment for services rendered on account of the government, although based on a void contract, may be granted on the basis of quantum meruit. The principle of quantum meruit allows recovery of an amount to the extent of the reasonable value of the thing or services rendered, regardless of any agreement as to the value. Similarly, Central Bay may claim reimbursement for the actual costs it incurred in implementing the Amended JVA, provided that the claim is substantiated by supporting documents.

In sum, the COA did not commit grave abuse of discretion when it disapproved the Compromise Agreement and disallowed the money claims, except the amount of ₱714,937,790.29 that was properly established with documentary evidence. The Court reminds that a contract which violates the Constitution is void, and it will not permit to be done indirectly which, because of public policy, cannot be done directly.

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