The Supreme Court held that the Commission on Audit (COA) has primary jurisdiction over money claims against government entities. This means private parties seeking payment from government agencies must first exhaust administrative remedies with the COA before resorting to the courts. This decision underscores the importance of adhering to proper administrative procedures when dealing with government contracts, and ensures that specialized financial oversight bodies like the COA can first review claims involving public funds.

When Construction Claims Meet Government Oversight: Who Decides?

The case revolves around a contract dispute between the Province of Aklan and Jody King Construction regarding the Caticlan Jetty Port project. Jody King Construction sought to collect unpaid amounts for additional works, tax refunds, price escalations, and other costs, leading to a lawsuit against the Province of Aklan in the Regional Trial Court (RTC) of Marikina City. The RTC ruled in favor of Jody King Construction, but the Province of Aklan argued that the RTC lacked jurisdiction because such claims should first be brought before the Commission on Audit (COA). This raises a crucial question: Does a trial court have the authority to hear a case involving a money claim against a government entity before the COA has had the opportunity to review it?

The Supreme Court addressed the issue of primary jurisdiction, emphasizing that this doctrine applies when a case requires the expertise and specialized knowledge of administrative bodies. The doctrine ensures that courts refrain from exercising jurisdiction until an administrative agency has had the opportunity to determine questions within its special competence. In the context of money claims against government agencies, the Court highlighted the authority of the COA as provided under Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445, which explicitly grants the COA jurisdiction over the examination, audit, and settlement of debts and claims due from or owing to the Government.

The Supreme Court quoted Section 26 of Presidential Decree No. 1445, emphasizing the COA’s broad authority:

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 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.

Building on this statutory foundation, the Court also cited the 2009 Revised Rules of Procedure of the Commission on Audit, which explicitly includes money claims against government agencies under COA’s exclusive jurisdiction. This framework reinforces the principle that claims involving government funds are subject to COA’s primary review.

In the case of Euro-Med Laboratories Phil., Inc. v. Province of Batangas, the Supreme Court clearly established that it is the COA, not the RTC, that has primary jurisdiction to pass upon money claims against local government units. This landmark ruling underscored that such jurisdiction cannot be waived, even if parties fail to raise the issue or actively participate in court proceedings. The Court emphasized that the doctrine of primary jurisdiction exists for the proper distribution of power between judicial and administrative bodies, rather than for the convenience of the parties involved.

The Supreme Court reasoned that because Jody King Construction’s collection suit was directed against a local government unit, the claim should have been initially filed with the COA. The RTC should have suspended the proceedings and directed the claimant to seek recourse before the COA. Moreover, the Court held that the Province of Aklan was not estopped from raising the issue of jurisdiction, even after the denial of its notice of appeal. The Court explained that there are established exceptions to the doctrine of primary jurisdiction, such as estoppel, patent illegality, unreasonable delay, or purely legal questions. However, none of these exceptions applied to the circumstances of this case.

The Supreme Court made it clear that the doctrine of primary jurisdiction does not allow a court to assume authority over a controversy that is initially lodged with an administrative body of special competence. Consequently, all proceedings conducted by the court in violation of this doctrine, along with any orders or decisions rendered, are considered null and void. The Court held that a judgment rendered by a body lacking jurisdiction over the subject matter is not a valid judgment and cannot create rights or obligations. Therefore, any writ of execution based on such a void judgment is also invalid.

In light of these principles, the Supreme Court concluded that the Court of Appeals erred in ruling that the RTC did not commit grave abuse of discretion when it ordered the execution of its judgment against the Province of Aklan. Even though the construction company eventually filed a petition with the COA, this belated compliance did not rectify the RTC’s serious jurisdictional error. The Supreme Court emphasized that the RTC should have exercised caution and judiciousness in issuing the writ of execution and notices of garnishment against the Province of Aklan.

Finally, the Court cited Administrative Circular No. 10-2000, which directs courts to exercise utmost caution in issuing writs of execution against government agencies and local government units. The RTC had no authority to order the immediate withdrawal of funds from the Province of Aklan’s depositary banks, as this violated the established procedures for handling government monetary liabilities.

FAQs

What is the main legal issue in this case?	The primary issue is whether the Regional Trial Court had jurisdiction to hear a money claim against a local government unit before the Commission on Audit (COA) had the opportunity to review the claim.
What is the doctrine of primary jurisdiction?	The doctrine of primary jurisdiction holds that if a case requires the expertise and specialized knowledge of an administrative body, the courts should defer to that body’s expertise first.
Why does the COA have primary jurisdiction over money claims against government agencies?	Commonwealth Act No. 327 and Presidential Decree No. 1445 grant the COA the authority to examine, audit, and settle all debts and claims due from or owing to the government or its subdivisions.
What was the Supreme Court’s ruling in this case?	The Supreme Court ruled that the RTC lacked jurisdiction because the COA has primary jurisdiction over money claims against government entities, and the claimant should have first sought administrative remedies with the COA.
Can the issue of primary jurisdiction be waived?	No, the issue of primary jurisdiction cannot be waived. The court may raise the issue sua sponte, and the failure of parties to argue it does not constitute a waiver.
What happens if a court renders a decision without jurisdiction?	A judgment rendered by a body that has no jurisdiction over the subject matter of the case is not a valid judgment and cannot be the source of any right or obligation.
What is the significance of Administrative Circular No. 10-2000?	Administrative Circular No. 10-2000 directs courts to exercise utmost caution in issuing writs of execution against government agencies and local government units, and to adhere to the proper procedures for handling government monetary liabilities.
What should a private party do if they have a money claim against a government agency?	The private party should first file a claim with the Commission on Audit (COA) to exhaust administrative remedies before resorting to the courts.

This case highlights the critical role of the Commission on Audit in overseeing government finances and ensuring accountability in contractual obligations. By reaffirming the COA’s primary jurisdiction over money claims against government entities, the Supreme Court underscores the importance of adhering to established administrative procedures and respecting the specialized expertise of regulatory bodies.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: THE PROVINCE OF AKLAN VS. JODY KING CONSTRUCTION AND DEVELOPMENT CORP., G.R. Nos. 197592 & 202623, November 27, 2013