Central Bay Reclamation And Development Corporation v. Commission On Audit
Central Bay Reclamation and Development Corporation v. Commission on Audit and the Philippine Reclamation Authority, G.R. No. 252940, April 05, 2022
- Procedural (Remedial Law)
- Civil Law
- certiorari
- Commission on Audit
- public domain
- Regalian doctrine
- inalienability of foreshore and submerged areas
- reclaimed lands
- quantum meruit
- joint venture agreement
- Article XII, 1987 Constitution
- void contracts
I. Facts of the Case
Central Bay and the Philippine Reclamation Authority (PRA), formerly the Public Estates Authority (PEA), entered into an Amended Joint Venture Agreement (JVA) for the development of reclaimed islands and the reclamation of large portions of Manila Bay’s foreshore and submerged areas. After the Supreme Court nullified the Amended JVA as unconstitutional and void ab initio, Central Bay sought reimbursement of its implementation costs before the COA, leading to a COA decision and a subsequent petition for certiorari before the Supreme Court.
1999-03-30
PRA (formerly PEA) entered into an Amended Joint Venture Agreement (JVA) with Central Bay to develop three reclaimed islands (“Freedom Islands”) and to reclaim about 592.15 hectares of foreshore and submerged areas in Manila Bay.
2002-07-09
The Supreme Court nullified the Amended JVA for violating Sections 2 and 3, Article XII of the 1987 Constitution, declaring the transfers void and permanently enjoining PRA and Amari from implementing the Amended JVA.
2003-05-06
After Central Bay moved for reconsideration, the Supreme Court denied the motion, affirmed the nullity of the Amended JVA, and clarified that Central Bay is not precluded to recover its implementation costs from PRA on a quantum meruit basis in the proper proceedings.
2010
Central Bay filed a petition for money claim against PRA before the COA in COA CP Case No. 2010-350, seeking reimbursement of ₱11,527,573,684.12.
2019-05-23
The COA rendered a Decision dated May 23, 2019 in COA CP Case No. 2010-350, which Central Bay assailed in a petition for certiorari before the Supreme Court.
The parties submitted a joint motion for judgment based on a Compromise Agreement, where PRA agreed to pay Central Bay incurred costs of ₱1,027,031,483.79 by transferring 102,703.15 square meters of reclaimed land to Central Bay’s qualified assignee.
2022-04-05
The Supreme Court resolved the petition for certiorari assailing the COA Decision dated May 23, 2019, reiterating that the Court is not a legitimizer of violations of law and applying the constitutional principles on the public domain and inalienability to the situation.
II. Issues
Whether the Supreme Court, in resolving the petition for certiorari, should uphold the Commission on Audit’s Decision dated May 23, 2019 in COA CP Case No. 2010-350.
Whether or not Central Bay may recover, on a quantum meruit basis, the costs incurred in implementing the Amended Joint Venture Agreement prior to its declaration of nullity.
III. Ruling
Whether the Supreme Court, in resolving the petition for certiorari, should uphold the Commission on Audit’s Decision dated May 23, 2019 in COA CP Case No. 2010-350.
The Supreme Court granted the petition for certiorari and did not uphold the challenged COA Decision insofar as it cannot validate or perpetuate the unconstitutional Amended JVA arrangements.
How the Court reasoned
- The Court emphasized the principle that it is not a legitimizer of violations of law and that unlawful acts cannot be sustained by indirect means.
- The challenged arrangement stems from an Amended JVA that the Court had already declared unconstitutional and void ab initio for violating Sections 2 and 3, Article XII of the 1987 Constitution.
- Because the Amended JVA was permanently enjoined and declared null and void ab initio, any COA ruling that effectively supports implementation beyond what the Constitution allows cannot stand.
- The Court reiterated the constitutional treatment of the public domain and reclaimed areas, applying the same constitutional framework to the dispute over money claims arising from the void agreement.
“The Court is not a legitimizer of violations of law.1”
Rule applied
Article XII, Sections 2 and 3, 1987 Constitution; general principle against validating unlawful acts (what cannot be done directly cannot be done indirectly)
Whether or not Central Bay may recover, on a quantum meruit basis, the costs incurred in implementing the Amended Joint Venture Agreement prior to its declaration of nullity.
Central Bay is not barred from recovering, on a quantum meruit basis, the costs it incurred implementing the null and void Amended JVA prior to its declaration of nullity, but such recovery must proceed consistently with the constitutional ruling and in proper proceedings.
How the Court reasoned
- Although the Amended JVA was declared null and void ab initio, the Court previously clarified that recovery of actual implementation costs is still possible in proper proceedings.
- Quantum meruit allows reimbursement of the value of benefits or costs attributable to a party’s performance, even when the underlying contract is void, provided the claim is not used to validate the unlawful arrangement itself.
- This approach is consistent with the Court’s earlier ruling that the illegality of the agreement bars enforcement of its terms, but does not necessarily foreclose recovery of costs on a quantum meruit basis.
Rule applied
Quantum meruit; Article 1409 of the Civil Code; earlier Supreme Court ruling denying reconsideration while allowing quantum meruit recovery in proper proceedings
Doctrines
The Court is not a legitimizer of violations of law.
What cannot be done directly cannot be done indirectly.
Foreshore and submerged areas form part of the public domain and are inalienable; reclaimed lands retain their inherent character as areas for public use or public service and are inalienable unless converted pursuant to law into alienable or disposable lands of the public domain.
A contract or agreement that violates constitutional provisions and is void ab initio cannot be enforced; however, courts may recognize quantum meruit recovery of actual costs in proper proceedings consistent with the doctrine on void contracts.
Final Disposition
WHEREFORE, the petition is 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.
Notes
The narrative includes the earlier Supreme Court rulings (July 9, 2002; May 6, 2003) that declared the Amended JVA void ab initio and clarified the availability of quantum meruit recovery, and it notes the later compromise submitted for judgment in the COA proceedings.