BY:

TIME:-:--~-::-::----,,..,,....--

3aepubli( of tlJe ~lJilippines

~upretne QCourt
JManila

ENBANC

CENTRAL BAY G.R. No. 252940

RECLAMATION AND
DEVELOPMENT
Present:
CORPORATION,
Petitioner,
GESMUNDO, C.J, Chairperson,
PERLAS-BERNABE,
-versus- LEONEN,
CAGUIOA,
HERNANDO,
COMMISSION ON AUDIT LAZARO-JAVIER,
and the PHILIPPINE INTING,
RECLA1\i1ATION ZALAMEDA,
AUTHORITY, LOPEZ, M.,
Respondents. GAERLAN,
ROSARIO,
LOPEZ, J.,
DIMAAMPAO,
MARQUEZ, and
KHO,JR.,JJ

Promulgated:
April .5, 2022

DffClSlON

M. LOPEZ, J:

The Court is not a legitirnizer of v 1cJiations of law. 1. 'vVhat cannot be

done directly cannot be done indirccily. "rh.is principli: is elementary and does
not need explanation. Certainlv,
.,, if aci.:J that cannot be kgally
.,, . done directlv
_, can

1
Strafegi-~ Alliu,;ce Devc!opme11l Corpom:irm F fows,c,:-lc .<::.: :1,vi/u-:s Limited, 622 Phil 4J l, 543 (2009!

r
Decision G.R. No. 252940

be done indirectly, then all laws would be illusory. 2 These precepts guide the
4
Court in resolving this petition for certiorari3 assailing the Decision of the
Commission on Audit (COA) dated May 23, 2019 in COA CP Case No.
2010-350. 5

ANTECEDENTS

On March 30, 1999, respondent Philippine Reclamation Authority

(PRA), formerly Public Estates Authority (PEA), entered into an Amended
Joint Venture Agreement6 (JVA) with petitioner Central Bay Reclamation
and Development Corporation (Central Bay), formerly known as the Amari
Coastal Bay and Development Corporation (AMARI), to develop three (3)
reclaimed islands with a combined titled area of 157 .84 hectares known as the
"Freedom Islands" located at the southern portion of the Manila-Cavite
Coastal Road, Parafiaque City, and to reclaim about 592.15 hectares of
foreshore and submerged areas of the Manila Bay. The agreement provided
that Central Bay will acquire and own 77.34 hectares of the Freedom Islands
and 290.156 hectares of still submerged areas of the Manila Bay. In a
Decision 7 dated July 9, 2002, this Court nullified the Amended JVA for
violating Sections 2 and 3, Article XII of the 1987 Constitution which
respectively prohibit the alienation of natural resources other than agricultural
lands of the public domain, and the acquisition of private corporations of any
kind of alienable land of the public domain, to wit:

The Regalian doctrine is deeply implanted in our legal system.

Foreshore and submerged areas fonn part of the public domain and are
inalienable. Lands reclaimed from foreshore and submerged areas also form
part of the public domain and are also inalienable, unless converted
pursuant to law into alienable or disposable lands of the public domain.
Historically, lands reclaimed by the government are sui generis, not
available for sale to private parties unlike other alienable public lands.
Reclaimed lands retain their inherent potential as areas for public use or
public service. Alienable lands of the public domain, increasingly
becoming scarce natural resources, are to be distributed equitably among
our ever-growing population. To insure such equitable distribution,
the 1973 and 1987 Constitutions have ban-ed private corporations from
acquiring any kind of alienable land of the public domain. Those who
attempt to dispose of inalienable natural resources of the State, or seek to
circumvent the conditional ban on alienation of lands of the public domain
to private corporations, do so at their own risks.

We can now summarize our conclusions as follows:

2
Civil Service Commission v. Cortes, 734 Phil. 295, 299 (2014). See also Tawang A1uiti-Purpose
Cooperative v. La Trinidad Water District, 661 Phil. 390, 398 (20 l 1).
Rollo, pp. 3~3li.
4
ld. at 44-61. Signed by Commissioners .Jose A Fabia and Roland C. Pondoc. Chairperson Michael G.
Aguinaldo, no participation.
Docketed as Decision No. 2019-157. Id. ar 44.
6
Id. at 89~114.
7
Chavez v. Public &rates Authority, 433 Phil. 506 (/(102).
 ~,
Decision ,) G.R. No. 252940

l. The 157.84 hectares of reclaimed lands comprising the Freedom

Islands, now covered by certificates of title in the name of PEA,
are alienable lands ofthe public domain. PEA may lease these lands
to private corporations but may not sell or transfer ownership of
these lands to private corporations. PEA may only sell these lands to
Philippine citizens, subject to the ownership limitations in the 1987
Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain

inalienable natural resources of the public domain until classified as
alienable or disposable lands open to disposition and declared no
longer needed for public service. The government can make such
classification and declaration only after PEA has reclaimed these
submerged areas. Only then can these lands qualify as agricultural
lands of the public domain, which are the only natural resources the
government can alienate. In their present state, the 592.15 hectares
of submerged areas are inalienable and outside the commerce of
man.

3. Since the Amended JVA seeks to transfer to AMARI, a

private corporation, ownership of 77.34 hectares of the
Freedom Islands, such transfer is void for being contrary to
Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land
of the public domain.

4. Since the Amended JVA also seeks to transfer

to AMARI ownership of 290.156 hectares of still submerged
areas of Manila Bay, such transfer is void for being contrary to
Section 2, Article XII of the 1987 Constitution which prohibits
the alienation of natural resources other than agricultural lands
of the public domain. PEA may reclaim thesr~ submerged areas.
Thereafter, the govermnent can classify the reclaimed lands as
alienable or disposable, and further declare them no longer needed
for public service. Still, the transfer of such reclaimed alienable
lands of the public domain to AMARI will be void in view of
Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the
public domain.

Clearly the Amended JVA violates glaringly Sections 2 and 3,

Article XII of the 1987 Constitution. Under Article 1409 of the Civil
Code. contracts whose "'object or purpose is contrary to law," or whose
"object is outside the commerte of men," are "inexistent and void from
the beginning." The Court must perform its duty to defend and uphold
the Constitution, and therefixe declares the Amended JV A null and void ab
initio.

xxxx

\VHEREFORE, the petition is GRANTED. The Public Estates

Authority and Amari Coastal Bay Development Corporation are
PER1'1ANENTL Y ENJOINED from implementing the Amended Joint
Venture Agreement \vhich is hereby declared NULL and VOID ab initio.
 Decision 4 G.R. No. 252940

SO ORDERED. 8 (Emphases supplied)

Aggrieved, Central Bay moved for reconsideration. In a Resolution9

dated May 6, 2003, this Court denied the motion and affirmed the nullity of
the JVA. 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 in the proper proceedings. 10
Accordingly, Central Bay filed a petition for money claim against PRA before
the COA in COA CP Case No. 2010-350. Central Bay sought to reimburse
from PRA the total amount of Pl l,527,573,684.12. 11 Later, the parties
submitted a joint motion for judgment based on a Compromise Agreement 12
where PRA offered to pay the incurred costs of Pl,027,031,483. 79 by
transferring 102,703.15 square meters of reclaimed land to Central Bay's
qualified assignee, viz. :

G. PRA is the sole and absolute owner of a piece of real property located in
Barangay San Dionisio, Parafiaque City with an area of One Hundred Two
Thousand Seven Hundred Three and 15/100 square meters (102,703.15
sq.m.) which is a portion of the parcel of land covered by Transfer
Certificate of Title No. 7309 with a current appraisal of [P] 10,000 per
square meter.

H. Central Bay and PRA agreed to amicably settle the PRA validated claim
and all other claims subject of the COA CP Case No. 2010-350 by way of
conveyance of the aforesaid Property.

The parties, duly assisted by their respective counsel, have thus entered into
this Compromise Agreement (Agreement) under the following terms and
conditions:

1. SUBJECT PROPERTY: By way of full settlement of the COA CP Case

No. 2010-350 filed by Central Bay against the PRA, the latter has offered to
reimburse to the former the amount of ['P]l,027,031,483.79 in the form of
reclaimed land at [the] appraised value of [P]l0,000.00 per square meter
and Central Bay has accepted PRA's offer[.] Hence, PRA shall cede,
transfer and convey to Central Bay's Qualified Assignee (defined
herein as a Filipino citizen who is qualified to own reclaimed lands
under existing laws, rules and regulations), a reclaimed land located in
Barangay San Dionisio, Para[fi]aque City with an area of One
Hundred Two Thousand Seven Hundred Three and 15/100 square
meters (102,703.15 sq.m.) which is a portion of the parcel ofland covered
by Transfer Certificate of Title No. 7309, the provisional technical
description is attached as Annex E.

2. DEED OF CONVEYANCE: PRA shall execute a Deed of

Conveyance in favor of Central Bay's Qualified Assignee upon
approval of this Agreement by the Commission on Audit.

Id. at 589-592.
9
Chavez v. Public Estates Authority, 451 Phil. 1 (2003).
10
Id. at 52.
11
Rollo, p. 44.
12
Id. at 145--150.
Decision 5 G.R. No. 252940

3. TAXES: Except for documentary stamp tax related to the execution of

the Deed of Conveyance in favor of Central Bay's Qualified Assignee, the
registration fees, tax on real property transfer and other expenses for the
transfer of the Property which shall be for the account of Central Bay's
Qualified Assignee, all other taxes in c01mection with the conveyance shall
be bourne by PRA.

Considering the effect on PRA' s cash flow of the large amount of VAT to
be paid by PRA, it is hereby agreed that the corresponding VAT for the
SUBJECT PROPERTY in the amount of [P]l23,243,778.05, which has an
equivalent land area of 12,324.38 square meters, shall be conveyed to
Central Bay's Qualified Assignee subject to existing laws, rules and
regulations. The VAT arising from the conveyance of the SUBJECT
PROPERTY and the VAT equivalent land area of 12,324.38 square meters
shall be paid in case by Central Bay to BIR. 13 (Emphases supplied)

In a Decision 14 dated May 23, 2019, the COA disapproved the

Compromise Agreement and ratiocinated that the stipulation to transfer the
reclaimed land from PRA to Central Bay's qualified assignee is a
circumvention of the Court's Decision which declared void the Amended
JV A for violating the constitutional prohibition against private corporations
from acquiring any kind of alienable land of the public domain except through
a lease. Anent the money claims, the COA found that Central Bay is entitled
to reimburse only the amount of ?714,937,790.29 representing advance
payment for the reclamation and project development. Yet, the COA denied
the money claims consisting of the squatter relocation cost, additional item of
advances, and professional fees for lack of supporting documents. Similarly,
the COA refused to award interest and bank charges on loans because the
government is not privy to Central Bay's transaction with any financial
institution. The COA likewise excluded the alleged foreign exchange losses
since they are part of Central Bay's investment risk as project financer. The
COA also held that the government is not liable for the pre-operating and
operating expenses because they are not directly related to the project. Lastly,
the COA declined to impose legal interest on the allowed money claims
because it is contrary to the principle of quantum mentit which permits
recovery of reasonable value regardless of any agreement, 15 thus:

WHEREFORE, premises considered, the Petition for Money Claim

of Central Bay Reclamation and Development Corporation against the
Philippine Reclamation Authority, for reimbursement of expenses in the
implementation of the Reclamation Project along the Manila-Cavite
Coastal Road, is PARTIALLY GRANTED in the amount of
[P]714,937,790.29, subject to availability of funds and the usual accounting
and auditing rules and regulations. 16

13
Id. at 146-147.
14
Id. at 44--61.

y
15
Id. at 51-60.
16
Id. at 60.
Decision 6 G.R. No. 252940

Unsuccessful at a reconsideration, 17 Central Bay filed this petition for

certiorari 18 ascribing grave abuse of discretion on the part of the COA in
disapproving the Compromise Agreement and disallowing the other money
claims. Central Bay insists that it will not own the reclaimed land but will be
assigning it to a qualified individual. 19 On the other hand, the COA, through
the Office of the Solicitor General, counters that the Compromise Agreement
contravened the letter and intent of the constitutional ban against corporate
ownership of land. 20

RULING

The 1987 Constitution has made the COA the guardian of public funds,
vesting it with broad powers over all accounts pertaining to gove1nment
revenue and expenditures and the uses of public funds and property, including
the exclusive authority to define the scope of its audit and examination,
establish the techniques and methods for such review, and promulgate
accounting and auditing rules and regulations. 21 The COA is endowed with
enough latitude to determine, prevent and disallow irregular, unnecessary,
excessive, extravagant or unconscionable expenditures of government
funds. 22 Indeed, the Court has generally sustained the decisions or resolutions
of COA owing to its constitutional mandate and special knowledge on matters
within its powers unless it has clearly acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction. 23 Specifically, grave abuse of discretion refers to evasion of a
positive duty or virtual refusal to perform a duty enjoined by law or to act in
contemplation of law such as when the assailed decision or resolution is not
based on law and evidence but on caprice, whim and despotism. 24 Petitioner
has the burden to prove public respondent's arbitrariness in rendering the
assailed decision. Mere reversible error or abuse is not enough, it must be
grave abuse of discretion. 25 In this case, there is no grave abuse of discretion
when the COA disapproved the Compromise Agreement.

The proscription against corporate ownership of alienable lands is

absolute and clear. Apropos is Section 3, Article XII of the 1987 Constitution
which provides that private corporations "may not hold such alienable lands
of the public domain except by lease, for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and not to exceed one
17
Id. at 62.
18
Id. at 3-39.
19
Id. at 15--37.
20
Id. at 420---426.
21
See Section 2 (I) and (2), D, Article IX of the l 987 Constitution. See also Yap v. COA 633 Phil. 174 189
(2010). , ,
22
See Paraiso-Aban v. COA, 777 Phil. 730, 736 (20 l 6); Delos Santos v. COA, 716 Phil. 322, 332 (20 l 3);
and Sanchez v. COA, 575 Phil. 428, 444-445 (2008).
23
Miralles v. COA, 818 Phil. 380, 389 (2017).
24
Technical Education and Skills Devclopme;1t Authority v. COA, 729 Phil. 60, 72-73 (2014). See also Yap
v. COA, supra note 21, at 195-196.
25
Metropolitan Waterworks and Sewerage ,~vsrem v. C'OA, 821 Phil. 117, l 38 (2017).

I
Decision 7 G.R. No. 252940

thousand hectares in area." Here, the Compromise Agreement obliged PRA

to transfer the reclaimed land to Central Bay's qualified assignee. Yet, this
scheme grants Central Bay beneficial ownership or equitable title defined as
"[a] title derived through a valid contract or relation, and based on
recognized equitable principles; the right in the party, to whom it belongs, to
have the legal title transferred to him[]" 26 Indeed, the provision in the
Compromise Agreement allowing conveyance to "Central Bay's [q]ualified
[a]ssignee" clearly means that Central Bay will hold the reclaimed land other
than by lease which the constitutional ban seeks to avoid. Further, the
stipulation presupposes that Central Bay, as an assignor, is qualified by law to
exercise ownership of the land and transfer it to another party. On this score,
the Court reiterates that an assignee cannot acquire greater rights than those
pertaining to the assignor. 27 The assignee is merely subrogated to the rights
and obligations of the assignor. The assignee is bound by exactly the same
conditions that held the assignor under the original parties' transaction. 28

In the analogous case of Strategic Alliance Development Corporation

v. Radstock Securities Limited29 the Court declared void the Compromise
Agreement because the assignment of rights circumvented the prohibition
against foreign corporations to own land in the Philippines, thus:

There is no dispute that Radstock is disqualified to own lands in the

Philippines. Consequently, Radstock is also disqualified to own the rights
to ownership of lands in the Philippines. Contrary to the OGCC's claim,
Radstock cannot own the rights to ownership of any land in the Philippines
because Radstock cannot lawfully own the land itself. Otherwise, there will
be a blatant circumvention of the Constitution, which prohibits a foreign
private corporation from owning land in the Philippines. In addition,
Radstock cannot transfer the rights to ownership ofland in the Philippines if
it cannot own the land itself. It is basic that an assignor or seller cannot
assign or sell something he does not own at the time the ownership, or
the rights to the ownership, are to be transferred to the assignee or
buyer.

The third party assignee under the Compromise Agreement who

will be designated by Radstock can only acquire rights duplicating those
which its assignor (Radstock) is entitled by law to exercise. Thus, the
assignee can acquire ownership of the land only if its assignor, Radstock,
owns the land. Clearly, the assignment by PNCC of the real properties
to a nominee to be designated by Radstock is a circumvention of the
Constitutional prohibition against a private foreign corporation
owning lands in the Philippines. Such circumvention renders the
Compromise Agreement void. 30 (Emphases supplied)

26
PVC Investment & Management Corporation v. Borcena, 507 Phil. 668, 681 (2005); citations omitted.
27
See Gonzales v. Land Bank of the Philippines, 262 Phil. 568, 574 (1990); Zayas, Jr. v. Luneta Motors
Company, 203 Phil. 91, 99 (1982); Fi/invest Credit Corporation v. Philippine Acetylene Company, 197
Phil. 394, 403-404 (l 982); Industrial Fznance Corporation v. Tobias, 168 Phil. 197, 203 ( 1977); and
Industrial Finance C01poration v. Judge Ramirez, 167 Phil. 509, 513-514 (1977).
28
Fort Bonifacio Development Corporation v. Fong, 757 Phil. 314,324 (2015).
29
Supra note 1.
30
Id. at 529-530.

I
Decision 8 G.R. No. 252940

In the same vein, the Compromise Agreement allowing Central Bay to

assign the reclaimed land is void. Applying the maxim "nemo dat quad non
habet," the qualified assignee can acquire ownership of the land only if
Central Bay owns the land. 31 Otherwise, the stipulation will evade the Court's
decision which declared void the Amended JVA between PRA and Central
Bay for violating the constitutional prohibition against private corporations
from acquiring any kind of alienable land of the public domain except through
a lease. 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.

Moreover, the COA correctly rejected the Compromise Agreement

absent congressional approval. Section 20 (1 ), Chapter IV, Subtitle B, Title I,
Book V of Executive Order No. 292, 32 or the Administrative Code of 1987, is
explicit that the Congress has the exclusive authority to compromise a settled
claim or liability that exceeded Pl00,000.00 involving a government agency,
to wit: "Section 20. Power to Compromise Claims. - (1) When the interest of
the Government so requires, the Commission may compromise or release in
whole or in part, any settled claim or liability to any government agency not
exceeding ten thousand pesos arising out of any matter or case before it or
within its jurisdiction, and with the written approval of the President, it may
likewise compromise or release any similar claim or liability not exceeding
one hundred thousand pesos. In case the claim or liability exceeds one
hundred thousand pesos, the application for relief therefrom shall be
submitted, through the Commission and the President, with their
recommendations, to the Congress." The law seeks to prevent a compromise
agreement on a creditor's claim settled through admission by a government
agency without the approval of Congress for amounts exceeding
Pl00,000.00. 33 In Binga Hydroelectric Plant, Inc. v. COA, 34 the Court
clarified that the term "government agency" refers to "any ofthe various units
ofthe Government, including a department, bureau, office, instrumentality, or
government-owned or controlled corporation [GOCCJ, or a local
government or a distinct unit therein. Thus, the provision applies to all
GOCCs, with or without original charters. A GOCC cannot validly invoke its
autonomy to enter into a compromise agreement that is in violation of the
above provision. " 35 The Court also echoed that "the authority to compromise
a settled claim or liability exceeding [P] 100,000.00 involving a government
agency is vested, not in the COA, but exclusivefy in Congress. " 36

31
Duque v. Spouses Yu, 826 Phil. 358,367 (2018).
32
Entitled "INSTITUTING THE' ADMINISTRAT(VE CODE OF l 987' ," approved on July 25, ] 987.
33
Strategic Alliance Development Corporation v. Rads.tock Securities Limited, supra note 1, at 506.
34
836 Phil. 46 (2018).
35
Id. at 56-57.
36
Id. at 56.

t
Decision 9 G.R. No. 252940

Obviously, the Compromise Agreement between PRA and Central Bay

must bear the approval of the Congress since the stipulated
Pl,027,031,483.79 money claim exceeded the threshold amount. Notably,
Section 29 (1), Article VI of the 1987 Constitution provides that "[n]o money
shall be paid out of the TreasUJJ' except in pursuance of an appropriation
made by law." Sections 8437 and 85,' 8 Chapter 4, Title II of PD No. 1445,39
otherwise lmown as the Govenunent Auditing Code of the Philippines,
reinforce this constitutional maedate and require that before a government
agency can enter into a contract involving the expenditure of government
:funds, there must be an appropriation law for such expenditure. Section 8640
of PD No. 1445, on the other hand, requires that the proper accounting official
must certify that funds have been appropriated for the purpose. Section 8741
of PD No. 1445 provides that any contract entered into contrary to the
requirements of Sections 85 and 86 shall he void.

Applying Section 29 ( 1), Article VI of the 1987 Constitution, as

implanted in Sections 84 and 85 of the Government Auditing Code, a law
must first be enacted by Congress appropriating ?1,027,031,483.79 as
compromise money before payment to Central Bay can be made. Otherwise,
such payment violates a prohibitory law and thus void under A1iicle 5 of
the Civil Code which states that "[a}cts executed against the provisions of
mandator~v or prohibitory laws shall be void, except when the law itse(f
authorizes their validity." Indisputably, without an appropriation law, PR.A
cannot lawfully pay the money claims to Central Bay. Any contract allowing
such payment, like the Compromise Agreement, shall be void.

37
Section 84. Disbursement of Government Funds. ~ (1) Revenue funds shall not be paid out of any
public treasury or depository except in pursuance of an appropriation law or other specific statutory
authority.
xxxx
38
Section 85. Appropriation Before Entering into Contract.~ (I) No contract involving the expenditure
of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of
which. free of other obligations, is sufficient to cover the proposed expenditure.
xxxx
39
Entitled "ORDAINING /\ND INSTITUTING A G0VEllNMENT AUDJTING Com: OF Tl-IE PHIUPPJNES,"
approved on June l l, 1978.
40
Section 86. Certificate Showing Approprialion to Meet Contract. -- Except in the case of a contract for
personal service, for supplies for current consumption or to be carried in stock not exceeding the
estimated consumption for three months. or banking transactions of government-owned or controlled
banks, no contract involving the expenditure of public funds by any government agency shall be entered
into or authorized unless the proper accounting official of the agency concerned shall have certified to
the officer entering into the obligation that Junds have been duly appropriated for the purpose and that
the amount necessary to cover the proposed comract for the current fiscal year is available for
expenditure on account thereat~ subject to verification by the auditor concerned. The certificate signed
by the proper accounting official anu the auditor who verified it, shall be attached to and become an
integral part of the proposed contrn,:t and the '.>mn so ce1tified shall not thereafter be available for
expenditure for any i)ther purpose unli; i h1: ol,ligation of thr: government agency concerned under the
contract is fully extinguished.
41
Section 87. Void Contract and Liahilir,y cf Off;'cer, ··-- Any contrad entered into contrary to the
requirements of the two immediately pre.:cdtn:I, ::,c!.::.l,.:ms shall be void, and the officer or officers entering
into the contract sha!! be liable to the goyern,nt:ni or ,i1her contracting pmty for any consequent damage
to the same extent as if the· transaction had been wblil_v between private parties.
 lO G.R. No. 252940
Decision

Lastly, the COA con-cctly disallowed Central Bay's money claims

except the amount of P714,937,790.29 rnpresenting advance payment for the
reclamation and project development which were properly established with
documentary evidence. It bears emphasis that one of the fundamental
principles governing financial transactions and operations of any government
agency is that "[c]laims against government funds shall be supported with
complete documentation." 42 On this note, we quote with approval the COA's
computations and findings, tu wit:

It is settled that pc1yment 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. x x x Similarly,
Central Bay may claim reimbursement for the actual costs it incurred in
implementing the Amended JV A, provided that the claim is substantiated
by supporting documents.

xxxx

On the advance payment amounting to [P]300,000,000.00, records

show that the amount was paid by Central Bay to PRA as partial payment
for the rawland reclamation cost x x x. Considering that this is directly
connected to the implementation of the project, and is duly supported
with copies of official receipts, the amount is hereby granted.

xxxx

However, the squatter's relocation costs remain doubtfol, for lack of

documents sufficient to suppmi the claim that the amount was actually
incurred for the intended purpose of relocation. On record are mere
photocopies of payable vouchers, check vouchers, and acknowledgment
receipts by GGL for [P]280,680,000.00. The other funds were allegedly
received by a certain Mario Minoro in the amount of [P]60,000.00; and
grocery items and cash totaling [P]200,000.00 were acknowledged under
letter dated January 4, 2000. Thus, the claim for squatter's relocation
costs is denied.

As to Central Bay's alleged advances to PRA in the amount of

[PJ15,661,689.00 for the relocation of the squatters of Freedom
Island-CBP-1 and expenses for Housing Cash Assistance Program and
Payment (HCAP) to its beneficiaries, the same could not be validated for
lack of supporting documents.

The project development costs amoun1ing to [1"]414,939,965.45

allegedly represents the project accomplishment of Central Bay at 3.3778S"o
of the total contract cost of [P] 12.2.84 Bil lion. Based on the accomplishment
reports certified by PRA, the accomplishment includes mobilization,
temporary facilities, initial containment, and reclamation works x x x. A
revalidation of the accompiis11n1cnt shows the following:

-l2
See Section 4, paragraph 6 of PD No. 1445. Sec also Section 5 (I\ Volume 1 of the Government
Accounting Manual for National Government Agencies. ·

I
Decision 11 G.R. No. 252940

1. 78.28% mobilization m1j construction of site facilities [P]24 l ,423,574.27

2. 100% removal of overburden 100,977,180.16
3. 100% rehandling preparat10n 53,854,485.42
4. 2.679% soil improvement 4,729,454.35
5. Production of pre-cast materials 4,643,190.25
6. Installation of pre-cast materials 9,309,905.84
Total [P]414,937,790.29

In sum, out of the [-P] 1,004,439,048.45 claim, this Commission

grants the amount of [P]714,937,790.29. summarized as follows:

1. Advance payment to PRA [P]300,000,000.00

2. Project development cost 414,937(,7790.29
Total [P]714,937, 790.29

xxxx

The squatter's relocation cost amounting to [P]22,350,560.ll is

denied under Section 168(c) of the Government Accounting and Auditing
Manual Volume 1 and paragraph 6, Section 4 of [Presidential Decree (PD)]
No. 1445, for lack and/or insufficiency of supporting documents.

xxxx

On the development cost amounting to [P]15,664,693.75, Central

Bay claims reimbursement for payments allegedly made to MCRP
Construction Corporation (Extra Work Order No. l) for the equipment and
fuel used in the maintenance of the access road. Under the PRA Verification
Report dated January 14, 2014, the PRA Committee recommended giving
due course to this expense in the amount of [P]6,871,673.50 only.
However, in the absence of the approved Extra Work Order No. 1,
MCRP Billing of Extra Work Order in the total amount of
[P]7,114,906.64, and other pertinent documents to establish the
validity of the claim, this Commission cannot grant the claim.

The professional fees amounting to [P]l,175,961,478.48, based on

the Schedule of Professional and Legal Fees x x x, cannot also be granted.
The amount of [P]972,750,000.00 or 83% of the alleged professional foes
represents expenses for Brokers' fees, which could not be considered
directly related to the project. The rest of professional foes were paid to law
firms, accounting firms, engineering companies, apprai:sers and developers,
which are not also directly related to the implementation of the project. If at
all, these expenses were incurred by Central Bay for its own benefit
and in connection with its obligation under Section 7.10 of the
Amended JVA x xx.

xxxx

Thus. the claim of professional foes amounting to

[P]l,175,961,478.48 is denied fot· tack of legal basls and insufficient
supporting documents.

On the interest and bank charges on loans and foreign exchange

losses on Io:ms in the total !::.,rncv.:1t of [P] l ,832A72,580 . 76, this
Commission finds the claim withoul merit. Under the JVA and the

I
 12 G.R. No. 252940
Decision

Amended JVA, the funding of the project is at the sole expense of Central
Bay. Thus, the government is not privy to any loan agreement entered
into by Central Bay for the financing of the project. More importantly,
the losses are part of Central Bay's investment risk as financer of the
project, which cannot hold the government liable.

The claim of pre-operating and operating expenses in the amount of

[P] 142,730,146.00 is likewise denied for lack of merit. These expenses
pertain to Central Bay's operational expenses and are not directly
related to the project, thus, camiot be attributed to the government.

Central Bay also claims for reimbursement of input tax amounting

to [P]53,949,402.00, representing 10% of the total purchases of capital
goods and services made by MCRP, including adjustments of
[P]313,038.36. Central Bay made advance payments to MCRP in the total
amount of [P]590 million from December 1996 to September 1997, for the
implementation of the project. The input tax of MCRP, a VAT-registered
corporation, for domestic purchases of capital goods and services is a form
of tax credit. At the end of each quarter, the input VAT is applied against its
VAT liabilities. Likewise, Central Bay is claiming reimbursement for
documentary stamp tax in the amount of [P]3,203,847.20. The documentary
stamp tax was paid on the loan agreement between Central Bay and
Bangkok Bank Public Company Limited amounting to $32,100,000.00
Both claims have no legal basis for these are part of the development
cost, which, as previously stated, is solely for the account of Central.
Bay. Thus, the claim for input tax and documentary stamp tax in the
total amount of [P]57,153,249.20 is denied.

xxxx

Central Bay claims cost of money at the rate of 12% interest per
annum x x x. Central Bay contends that cost of money pertains to the
foregone interest or benefit on the funds used in relation to the project, and
thus, the principle in Eastern Assurance and Surety Corporation v. Court of
Appeals [379 Phil. 84 (2000)] applies. In said case, the SC held that "when
the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance or credit." Central Bay likewise submits that
this Commission has, in the past, granted payment of interest in money
claims, citing COA Decision No. 2009-093 dated October 14, 2009.

The contentions are untenable.

The ruling of the SC in Eastern Assurance cannot apply because its

facts and circumstances are different from this case. The Eastern Assurance
~ase involves a claim for indemnity and payment of damages against an
msurance company for breach of contract, and the only issue therein was
the computation of the applicable legal rate of interest. It does not involve a
money claim against the government for reimbursement of costs and
payment based on quantum meruit. Further, in COA Decision No.
2009-093, this Commission merely affirmed a decision of the SC which has
long been declared final and executory. The decision particularly contained
a computation of the monetary award and legal interest. Thus, this
Commission had no recourse but to conform thereto.

t
Decision !1 G.R. No. 252940

It bears stressing that the claim stems from the nullification of a

JVA entered into by Central Bay and the government. Being a joint venture,
Central Bay undertook the fimucing and development of the reclamation
project at no cost to the gc/vcnunent. To put it succinctly, the losses Central
Bay may have entailed are pan of the investment risks attached to the
business venture it entered into with the government, which it must solely
bear.

Moreover, to award kgal interest, is contrary to the principle of

quantum meruit, on which this petition is based. To reiterate, quantum
meruit allows recovery of the reasonable value regardless of any agreement
as to value. It entitles the party to as much as he reasonably deserves as
distinguished from quantum valebam or as much as what is reasonably
worth.

All told, this Commission finds Central Bay entitled to the total
amount of [j)]714,937,790.29, representing Central Bay's advance payment
to PRA ([P]300,000,000.00) and Project Development Cost
([?]414,937,790.29). 43 (Emphases suppiied)

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 wil1 not permit to be done indirectly which,
because of public policy, cannot be done directly.·14

FOR THESE REASONS, the petition is DISlVIISS.ED. The Decision

of the Commission on Audit dated May 23, 2019 in COA CP Case No.
2010-350 is AFFIRMED. The Compromise Agreement between respondent
Philippine Reclamation Authority and petitioner Central Bay Reclamation
and Development Corporation is declared VOID AB JN/110 fur being
contrary to Section 3, Article XII of the 1987 Constitution; Section 20 (1),
Chapter IV, Subtitle B, Title I, Book V of Executive Order No. 292, or the
Administrative Code of 1987; and Section 87, Chapter 4, Title U of
Presidential Decree No. 1445, otherwise knovvn as the Government Auditing
Code of the Philippines.

SO ORDERED.

- - - - - - -----·-----·-·--
43 Rollo. µp. 54--60.
44
Beumer v. Amores. 700 Phil. 90. 98 (:;'(!; 2).
 •\
J4 U.R. No. 252940

W!f CONCUR:

RICARD
Assoc1ate Justice
Decision 1.) G.R. No. 252940

CERTIFICATION

Pursuant to Section 13, }uiic!~ VHt of the Constitution, it is hereby

certified that the conclusions in the above Decision had been reached in
consultation before the case was as~igned to the writer of the opinion of the
Court.

CERTIFIED TRUE COPY

[l__ \.,{, '_2 /
~ --..,...-- ~ . , y

MARIA LlJISA 1\1. SANTILLA

Deputy Clerk of Court and
Executive Officer
OCC-En Banc, Supreme Court