CASE DIGEST: Province of Aklan v. Jody King Construction

G.R. Nos. 197592 & 20262 : November 27, 2013




On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and Development Corp. (respondent) entered into a contract for the design and -construction of the Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total project cost isP38,900,000: P 18,700,000 for the design and construction of passenger terminal, andP20,200,000 for the design and construction of the jetty port facility.In the course of construction, petitioner issued variation/change orders for additional works. The scope of work under these change orders were agreed upon by petitioner and respondent.

On January 5, 2001, petitioner entered into a negotiated contract with respondent for the construction of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in Malay, Aklan. The contract price for Phase II isP2,475,345.54.

On October 22, 2001, respondent made a demand for the total amount ofP22,419,112.96 covering unpaid accomplishments on works undertaken, tax refunds, price escalation, labor costs, overhead costs, and interest.

On July 13, 2006, respondent sued petitioner in the Regional Trial Court to collect the aforesaid amounts.On August 17, 2006, the trial court issued a writ of preliminary attachment.

After trial, the trial court rendered its Decision in favor of plaintiff Jody King Construction And Development Corporation and against defendant Province of Aklan.

Petitioner filed its motion for reconsideration. On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV Antonio E. Gamboa, Jr. to demand from petitioner the immediate payment ofP67,027,378.34 and tender the same to the respondent. Consequently, Sheriff Gamboa served notices of garnishment on Land Bank of the Philippines, Philippine National Bank and Development Bank of the Philippines at their branches in Kalibo, Aklan for the satisfaction of the judgment debt from the funds deposited under the account of petitioner. Said banks, however, refused to give due course to the court order, citing the relevant provisions of statutes, circulars and jurisprudence on the determination of government monetary liabilities, their enforcement and satisfaction.

Petitioner filed in the CA a petition for certiorari with application for temporary restraining order (TRO) and preliminary injunction assailing the Writ of Execution dated November 24, 2009, docketed as CA-G.R. SP No. 111754.

On December 7, 2009, the trial court denied petitioners notice of appeal filed on December 1, 2009. Petitioners motion for reconsideration of the December 7, 2009 Order was likewise denied.On May 20, 2010, petitioner filed another petition for certiorari in the CA questioning the aforesaid orders denying due course to its notice of appeal.

By Decision dated October 18, 2010, the CAs First Division dismissed the petition as it found no grave abuse of discretion in the lower courts issuance of the writ of execution. Petitioner filed a motion for reconsideration which was likewise denied by the CA. The CA stressed that even assuming as true the alleged errors committed by the trial court, these were insufficient for a ruling that grave abuse of discretion had been committed. On the matter of execution of the trial courts decision, the appellate court said that it was rendered moot by respondents filing of a petition before the Commission on Audit (COA).

On August 31, 2011, the CAs Sixteenth Division rendered its Decision dismissing the petition. The CA said that petitioner failed to provide valid justification for its failure to file a timely motion for reconsideration; counsels explanation that he believed in good faith that the August 14, 2009 Decision of the trial court was received on September 25, 2009 because it was handed to him by his personnel only on that day is not a justifiable excuse that would warrant the relaxation of the rule on reglementary period of appeal. The CA also held that petitioner is estopped from invoking the doctrine of primary jurisdiction as it only raised the issue of COAs primary jurisdiction after its notice of appeal was denied and a writ of execution was issued against it.

Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court, Branch 273, Marikina City over the subject matter of the case.

The petition for certiorari filed before the CA due to the RTCs denial of petitioners Notice of Appeal was in accord with jurisprudence.


1. Whether or not the doctrine of primary jurisdiction is applicable to this case?

2. Whether or not the issuance of the writ of execution was proper?

HELD: Court of Appeals decision is reversed.

POLITICAL LAW: doctrine of primary jurisdiction

COA has primary jurisdiction over private respondents money claims. Petitioner is not estopped from raising the issue of jurisdiction

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of the proper administrative bodies, relief must first be obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter may well be within their proper jurisdiction.It applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative agency. In such a case, the court in which the claim is sought to be enforced may suspend the judicial process pending referral of such issues to the administrative body for its view or, if the parties would not be unfairly disadvantaged, dismiss the case without prejudice.

The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.

As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly owed by petitioner, a local government unit.

Under Commonwealth Act No. 327,as amended by Section 26 of Presidential Decree No. 1445,it is the COA which has primary jurisdiction over money claims against government agencies and instrumentalities.

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed, including non-governmental entities subsidized by the government, those funded by donations through the government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or those partly funded by the government.

Pursuant to its rule-making authority conferred by the 1987 Constitutionand existing laws, the COA promulgated the 2009 Revised Rules of Procedure of the Commission on Audit. Rule II, Section 1 specifically enumerated those matters falling under COAs exclusive jurisdiction, which include "money claims due from or owing to any government agency." Rule VIII, Section 1 further provides:

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction over:

a) money claim against the Government;

b) request for concurrence in the hiring of legal retainers by government agency;

c) write off of unliquidated cash advances and dormant accounts receivable in amounts exceeding one million pesos (P1,000,000.00);

d) request for relief from accountability for loses due to acts of man, i.e. theft, robbery, arson, etc, in amounts in excess of Five Million pesos (P5,000,000.00).

POLITICAL LAW: money claims against local government units are under the jurisdiction of the COA

In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,we ruled that it is the COA and not the RTC which has primary jurisdiction to pass upon petitioners money claim against respondent local government unit. Such jurisdiction may not be waived by the parties failure to argue the issue nor active participation in the proceedings. Thus:

This case is one over which the doctrine of primary jurisdiction clearly held sway for although petitioners collection suit forP487,662.80 was within the jurisdiction of the RTC, the circumstances surrounding petitioners claim brought it clearly within the ambit of the COAs jurisdiction.

First, petitioner was seeking the enforcement of a claim for a certain amount of money against a local government unit. This brought the case within the COAs domain to pass upon money claims against the government or any subdivision thereof under Section 26 of the Government Auditing Code of the Philippines:

The authority and powers of the Commission on Audit shall extend to and comprehend all matters relating to the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities.

The scope of the COAs authority to take cognizance of claims is circumscribed, however, by an unbroken line of cases holding statutes of similar import to mean only liquidated claims, or those determined or readily determinable from vouchers, invoices, and such other papers within reach of accounting officers. Petitioners claim was for a fixed amount and although respondent took issue with the accuracy of petitioners summation of its accountabilities, the amount thereof was readily determinable from the receipts, invoices and other documents. Thus, the claim was well within the COAs jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioners money claim was founded on a series of purchases for the medical supplies of respondents public hospitals. Both parties agreed that these transactions were governed by the Local Government Code provisions on supply and property management and their implementing rules and regulations promulgated by the COA pursuant to Section 383 of said Code. Petitioners claim therefore involved compliance with applicable auditing laws and rules on procurement. Such matters are not within the usual area of knowledge, experience and expertise of most judges but within the special competence of COA auditors and accountants. Thus, it was but proper, out of fidelity to the doctrine of primary jurisdiction, for the RTC to dismiss petitioners complaint.

Respondents collection suit being directed against a local government unit, such money claim should have been first brought to the COA.Hence, the RTC should have suspended the proceedings and refer the filing of the claim before the COA. Moreover, petitioner is not estopped from raising the issue of jurisdiction even after the denial of its notice of appeal and before the CA.

POLITICAL LAW: exceptions to the doctrine of primary jurisdiction

There are established exceptions to the doctrine of primary jurisdiction, such as:

(a) where there is estoppel on the part of the party invoking the doctrine;

(b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction;

(c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant;

(d) where the amount involved is relatively small so as to make the rule impractical and oppressive;

(e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice;

(f) where judicial intervention is urgent;

(g) when its application may cause great and irreparable damage;

(h) where the controverted acts violate due process;

(i) when the issue of non-exhaustion of administrative remedies has been rendered moot;

(j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and,

(l) in quo warranto proceedings.However, none of the foregoing circumstances is applicable in the present case.

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence.All the proceedings of the court in violation of the doctrine and all orders and decisions rendered thereby are null and void.

POLITICAL LAW: writ of execution that violates primary jurisdiction is void

Writ of Execution issued in violation of COAs primary jurisdiction is void

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject matter of the case is no judgment at all, it cannot be the source of any right or the creator of any obligation.All acts pursuant to it and all claims emanating from it have no legal effect and the void judgment can never be final and any writ of execution based on it is likewise void.

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion when it ordered the execution of its judgment against petitioner and garnishment of the latters funds.

In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA and not the RTC which has original jurisdiction over money claim against government agencies and subdivisions.The CA, in denying petitioner's motion for reconsideration, simply stated that the issue had become moot by respondent's filing of the proper petition with the COA. However, respondent's belated compliance with the formal requirements of presenting its money claim before the COA did not cure the serious errors committed by the RTC in implementing its void decision. The RTC's orders implementing its judgment rendered without jurisdiction must be set aside because a void judgment can never be validly executed.

Finally, the RTC should have exercised utmost caution, prudence and judiciousness in issuing the writ of execution and notices of garnishment against petitioner. The RTC had no authority to direct the immediate withdrawal of any portion of the garnished funds from petitioner's depositary banks.Such act violated the express directives of this Court under Administrative Circular No. 10-2000,which was issued "precisely in order to prevent the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the COA."