Manila

EN BANC

[ G.R. No. 252940. April 05, 2022 ]

CENTRAL BAY RECLAMATION AND DEVELOPMENT CORPORATION, PETITIONER, VS. COMMISSION ON

AUDIT AND THE PHILIPPINE RECLAMATION AUTHORITY, RESPONDENTS.

DECISION

LOPEZ, M., J.:

The Court is not a legitimizer of violations of law.1 What cannot be done directly cannot be done indirectly.
This principle is elementary and does not need explanation. Certainly, if acts that cannot be legally done directly
can be done indirectly, then all laws would be illusory.2 These precepts guide the Court in resolving this petition
for certiorari3 assailing the Decision4 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, Parañaque 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 Decision7 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
form 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 barred 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:

1. 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 of the 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 these submerged areas.
Thereafter, the government 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 commerce of men," are "inexistent and void
from the beginning." The Court must perform its duty to defend and uphold the Constitution, and
therefore declares the Amended JVA null and void ab initio.

xxxx

WHEREFORE, the petition us GRANTED, the Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.

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
₱11,527,573,684.12.11 Later, the parties submitted a joint motion for judgment based on a Compromise
Agreement12 where PRA offered to pay the incurred costs of ₱1,027,031,483.79 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, Parañaque 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 [₱]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
[₱]1,027,031,483.79 in the form of reclaimed land at [the] appraised value of [₱]10,000.00 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[ñ]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 of land 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.

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 connection 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
[₱]123,243,778.05, 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 JVA 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 meruit 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 [₱]714,937,790.29, subject to availability of funds and
the usual accounting and auditing rules and regulations.16

Unsuccessful at a reconsideration,17 Central Bay filed this petition for certiorari18 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 government 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 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 of land 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)

In the same vein, the Compromise Agreement allowing Central Bay to assign the reclaimed land is void.
Applying the maxim "nemo dat quod 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
₱100,000.00 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 ₱100,000.00.33 In Binga Hydroelectric Plant, Inc. v. COA,34 the
Court clarified that the term "government agency" refers to "any of the various units of the Government, including
a department, bureau, office, instrumentality, or government-owned or controlled corporation [GOCC], 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
[₱]100,000.00 involving a government agency is vested, not in the COA, but exclusively in Congress."36

Obviously, the Compromise Agreement between PRA and Central Bay must bear the approval of the
Congress since the stipulated ₱1,027,031,483.79 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 Treasury except in
pursuance of an appropriation made by law." Sections 8437 and 85,38 Chapter 4, Title II of PD No.
1445,39 otherwise known as the Government Auditing Code of the Philippines, reinforce this constitutional
mandate 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 be 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 Article 5 of the Civil Code which states that "[a]cts executed against the provisions of
mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity." Indisputably,
without an appropriation law, PRA cannot lawfully pay the money claims to Central Bay. Any contract allowing
such payment, like the Compromise Agreement, shall be void.

Lastly, the COA correctly disallowed Central Bay's money claims except the amount of ₱714,937,790.29
representing 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
coation." 42 On this note, we quote with approval the COA's computations and findings, to wit:

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. x x x 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.

xxxx

On the advance payment amounting to [₱]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 doubtful, for lack of documents sufficient to
support 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 [₱]280,680,000.00. The other funds were allegedly received by a certain Mario Minora in
the amount of [₱]60,000.00; and grocery items and cash totaling [₱]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 [₱]15,661,689.00 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 he validated for lack of
supporting documents.

The project development costs amounting to [₱]414,939,965.45 allegedly represents the project
accomplishment of Central Bay at 3.3778% of the total contract cost of [₱]12.284 Billion. 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 accomplishment
shows the following:

1. 78.28% mobilization and construction of site facilities [₱]241,423,574.27

2. 100% removal of overburden 100,977,180.16
3. 100% rehandling preparation 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 [₱]414,937,790.29
==============

In sum, out of the [₱]1,004,439,048.45 claim, this Commission grants the

amount of [₱]714,937,790.29, summarized as follows:

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

2. Project development cost 414,937[,]790.29

Total
[₱]714,937,790.29
==============

xxxx

The squatter's relocation cost amounting to [P]22,350,560.11 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 [₱]15,664,693.75, Central Bay claims

reimbursement for payments allegedly made to MCRP Construction Corporation
(Extra Work Order No. 1) 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
[₱]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 [₱]1,175,961,478.48, based on the

Schedule of Professional and Legal Fees x x x, cannot also be granted. The amount
of [₱]972,750,000.00 or 83% of the alleged professional fees represents expenses
for Brokers' fees, which could not be considered directly related to the project. The
rest of professional fees were paid to law firms, accounting firms, engineering
companies, appraisers 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 x x.

xxxx

Thus, the claim of professional fees amounting to [₱]1,175,961,478.48 is denied

for lack of legal basis and insufficient supporting documents.

On the interest and bank charges on loans and foreign exchange losses on
loans in the total amount of [₱]1,832.472,580.76, this Commission finds the claim
without merit. Under the JVA and the 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

[₱]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, cannot be attributed to the government.

Central Bay also claims for reimbursement of input tax amounting to

[₱]53,949,402.00, representing 10% of the total purchases of capital goods and
services made by MCRP, including adjustments of [₱]313,038.36. Central Bay made
advance payments to MCRP in the total amount of [₱]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 [₱]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 [₱]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 case involves a
claim for indemnity and payment of damages against an insurance 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.

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 financing and development of the reclamation project at no cost to the
government. To put it succinctly, the losses Central Bay may have entailed are part
of the investment risks attached to the business venture it entered into with the
government, which it must solely bear. 1a⍵⍴h!1

Moreover, to award legal 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
valebant or as much as what is reasonably worth.

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

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.44

FOR THESE REASONS, the petition is DISMISSED. The Decision of the Commission on Audit
dated May 23, 2019 COA Decision No. 2019-157 and Resolution dated January 21, 2020 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 INITIO for 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 II of Presidential Decree No. 1445,
otherwise known as the Government Auditing Code of the Philippines.

SO ORDERED.

Gesmundo, C.J. (Chairperson), Perlas-Bernabe, S.A.J., Leonen, Caguioa, Hernando, Lazaro-Javier, Inting,
Zalameda, Gaerlan, Rosario, J. Lopez, Dimaampao, Marquez, and Kho, Jr., JJ., concur.

Footnotes
1
Strategic Alliance Development Corporation v. Radstock Securities Limited, 622 Phil. 431, 343 (2009).
2
Civil Service Commission v. Cortes, 734 Phil. 295, 299 (2014). See also Tawang Multi-Purpose
Cooperative v. La Trinidad Water District, 661 Phil. 390, 398 (2011).
3
Rollo, pp. 3-39.
4
Id. at 44-61. Signed by Commissioners Jose A. Fabia and Roland C. Pondoc, Chairperson Michael G.
Aguinaldo, no participation.
5
Docketed as Decision No. 2019-157. Id. at 44.
6
Id. at 89-114.
7
Chavez v. Public Estates Authority, 433 Phil. 506 (2002).
8
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.
13
Id. at 146-147.
14
Id. at 44-61.
15
Id. at 51-60.
16
Id. at 60.
17
Id. at 62.
18
Id. at 3-39.
19
Id. at 15-37.
20
Id. at 420-426.
21
See Section 2(1) and (2), D, Article IX of the 1987 Constitution. See also Yap v. COA, 633 Phil. 174, 189
(2010).
22
See Paraiso-Aban v. COA, 777 Phil. 730, 736 (2016); Delos Santos v. COA, 716 Phil. 322, 332 (2013);
and Sanchez v. COA, 575 Phil. 428, 444-445 (2008).
23
Miralles v. COA, 818 Phil. 380, 389 (2017).
24
Technical Education and Skills Development 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 System v. COA, 821 Phil. 117, 138 (2017).
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); Filinvest Credit Corporation v. Philippine Acetylene Company, 197 Phil.
394, 403-404 (1982); Industrial Finance Corporation v. Tobias, 168 Phil. 197, 203 (1977); and Industrial
Finance Corporation 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.
31
Duque v. Spouses Yu, 826 Phil. 358, 367 (2018).
32
Entitled "INSTITUTING THE 'ADMINISTRATIVE CODE Of 1987'," approved on July 25, 1987.
33
Strategic Alliance Development Corporation v. Radstock Securities Limited, supra note 1 at 506
34
836 Phil. 46 (2018).
35
Id. at 56-57.
36
Id. at 56.
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. — (1) 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 AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES,"
approved on June 11, 1978. 1a⍵⍴h!1

40
Section 86. Certificate Showing Appropriation to Meet Contract. — Except in the case of a contract for
personal service, for supplies for current consumption or to be earned 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 funds have been duly appropriated for the purpose and that the amount
necessary to cover the proposed contract for the current fiscal year is available for expenditure on account
thereof subject to verification by the auditor concerned. The certificate signed by the proper accounting
official and the auditor who verified it, shall be attached to and become an integral part of the proposed
contract and the sum so certified shall not thereafter be available for expenditure for any other purpose
until the obligation of the government agency concerned under the contract is fully extinguished.
41
Section 87. Void Contract and Liability of Officer. — Any contract entered into contrary to the
requirements of the two immediately preceding sections shall be void, and the officer or officers entering
into the contract shall be liable to the government or other contracting party for any consequent damage to
the same extent as if the transaction had been wholly between private parties.
42
See Section 4, paragraph 6 of PD No. 1445. See also Section 5 (f), Volume 1 of the Government
Accounting Manual for National Government Agencies.
43
Rollo, pp. 54-60.
44
Beumer v. Amores, 700 Phil. 90, 98 (2012).