CASE DIGEST
Philippine Deposit
Insurance Corp. v. Commission on Audit
G.R. No. 218068, [March 15, 2022]
EN BANC, LOPEZ, M.V
Notice of
Disallowances by COA; PDIC's power to compromise, condone or release claims and
settle liability
Solidary liability to settle the
disallowed amount attaches to public officers upon a clear showing of bad
faith, malice, or gross negligence in the performance of official duties.
Parenthetically, well-settled is the rule that the palpable disregard of laws
and established directives amounts to gross negligence.
The case involves disputes related to
Westmont Bank (formerly Associated Bank, now United Overseas Bank of the
Philippines) and KMSB (formerly Monte de Piedad Savings Bank and Keppel Monte
Bank). The controversy arose from the PDIC Corporate Auditor's 1st Indorsement
dated August 24, 2000, which revealed that PDIC had provided financial
assistance to Westmont Bank, including the waiver of a buyback agreement, early
buyback incentives, deferred regular interest, refund of regular interest, and
abolition of PDIC interest spread. The Corporate Auditor opined that these
measures amounted to a release or condonation of Westmont Bank's principal
obligation and accrued interests, prejudicial to PDIC. The matter was referred
to COA for recommendation. The COA, through various levels of its structure,
concurred with the Corporate Auditor's findings. The COA Proper, in Decision
No. 2012-120, denied the recommendation for condonation and also directed the
issuance of a notice of disallowance for KMSB's account, holding PDIC Board of
Directors and officers liable for disallowed amounts. The PDIC, in its
petition, argued that the COA's delay in resolving the issues amounted to grave
abuse of discretion. Substantively, PDIC asserted its authority to condone or
release claims and argued that the COA erred in its findings.
Whether or COA committed grave abuse of
discretion in issuing Notices of Disallowance (NDs) and holding PDIC BOD liable
for disallowances.
NO. The court held that the petition
lacked merit. It ruled that the issuance of NFD was proper, rendering the
present petition not moot. The COA has the authority and duty to issue
recommendations on condonations and release of claims. The COA's authority to
do so emanates from Section 36 of Presidential Decree No. 1445. Additionally,
the court emphasized that the COA's factual findings must be respected unless
there is a showing of grave abuse of discretion. The COA correctly ruled that
its recommendation was mandatory, and PDIC cannot motu proprio compromise a
claim or liability. The authority of PDIC to condone applies
only to ordinary receivables, penalties and surcharges, and must be submitted
to the [COA] before it is implemented. This procedure would enable the [COA] to
inquire into the propriety of the condonation and to determine whether the same
will not prejudice the government's interest.
In this case, the COA found that the
disallowed condonation and write-off were implemented without Congressional
approval in patent disregard of the mandatory requirements under the
Administrative Code. The COA's, factual findings must be respected absent grave
abuse of discretion. The court also held that public officers, specifically the
Board of Directors (BOD) of the Philippine Deposit Insurance Corporation
(PDIC), can be held liable for disallowed amounts if there is a clear showing
of bad faith, malice, or gross negligence in the performance of official
duties. In authorizing the condonation and write-off, the PDIC BOD acted with gross
negligence, amounting to bad faith, which justifies their liability for the
disallowances. The patent illegality of the
condonation and write-off indubitably countermands PDIC's invocation of good
faith. There is no justification to legitimize the palpable lapse of the PDIC
BOD in simply ignoring the mandatory provisions of the Administrative Code,
which had long been in effect before the condonation and write-off were
implemented.
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