importance of prospective application of new judicial rulings and the doctrine of operative fact

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G.R. No. 258159, June 13, 2023
Case Digest: Efraim C. Genuino vs. Commission on Audit

DISSENTING OPINION

GAERLAN, J.:

Case Summary
 
The case involves a dispute over the audit jurisdiction of the Commission on Audit (COA) over the funds of the Philippine Amusement and Gaming Corporation (PAGCOR). The Supreme Court initially ruled in 2021 that COA's audit jurisdiction is limited to the 5% franchise tax and the government's 50% share of gross earnings. However, in 2023, the Court reversed its decision, striking down the relevant provision as unconstitutional and applying the new ruling prospectively.
Key Facts
  • The COA audited PAGCOR's funds for transactions in 2008 and 2009.
  • The Supreme Court's 2021 decision in Genuino v. Commission on Audit limited COA's audit jurisdiction over PAGCOR's funds.
  • The Court's 2023 decision reversed the 2021 ruling, declaring the relevant provision unconstitutional and applying the new ruling prospectively.
 
Issues
  • Whether the COA had jurisdiction to audit PAGCOR's funds for transactions in 2008 and 2009.
  • Whether the petitioner, Efraim C. Genuino, can be held personally liable for the transactions.
 
Ruling
The dissenting opinion argues that:
  • The doctrine of operative fact recognizes the effects of a law or executive issuance prior to its invalidation when relied upon in good faith.
  • The 2021 Genuino Decision's judicial interpretation of the law should be deemed incorporated into the law as of its original passage.
  • The COA did not have jurisdiction to audit the funds subject to the instant case, and petitioner cannot be held personally liable.
 
Significance
This case highlights the importance of prospective application of new judicial rulings and the doctrine of operative fact in ensuring fairness and justice in the application of the law. The dissenting opinion's reasoning emphasizes the need to recognize the effects of a law or executive issuance prior to its invalidation when relied upon in good faith.
 
Notes:
 
Equity and fair play call for the application of the doctrine of operative fact which recognizes the effects of the law or executive issuance prior to its invalidation when relied upon by the public in good faith. Said doctrine exhorts that until the judiciary declares the invalidity of certain legislative or executive acts, such acts are presumed constitutional and valid.
 

Thus, from the enactment of P.D. No. 1869 by former President Ferdinand E. Marcos until the invalidation of Section 15 thereof in the 2023 Genuino Decision, the effects of said provision, having been relied upon in good faith, must be recognized as valid.

To this end, I humbly submit that the reckoning point of the prospective application of the doctrine laid down in the 2023 Genuino Decision is the date of its finality. The COA 's audit of PAGCOR's funds prior to this date should still be subject to the limitation provided under Section 15 of P.D. No. 1869.

Moreover, it is my considered view that the 2021 Genuino Decision, prior to its reversal by the 2023 Genuino Decision, is a "judicial interpretation of a statute," in this case P.D. No. 1869, which "constitutes part of that law as of the date of its original passage." In other words, the 2021 Genuino Decision's judicial interpretation of Section 15 of P.D. No. 1869 should be deemed incorporated at the moment of its legislation.

Thus, the 2021 Genuino Decision should govern the scope of the COA's audit jurisdiction of PAGCOR funds from the date of the effectivity of P.D. No. 1869, or on July 11, 1983, until the day prior to the finality of the 2023 Genuino Decision.

Prescinding from this proposition, it may be concluded that the COA did not have any jurisdiction to audit the funds subject of the instant case. Accordingly, petitioner could not be held personally liable therefor.

 

G.R. No. 258159, June 13, 2023

EFRAIM C. GENUINO, PETITIONER, VS. COMMISSION ON AUDIT (COA), COMMISSION PROPER, OFFICE OF THE DIRECTOR, CORPORATE GOVERNMENT SECTOR, CLUSTER 6, REPRESENTED BY DIRECTOR JOSEPH B. ANACAY, AND OFFICE OF THE SUPERVISING AUDITOR, REPRESENTED BY BELEN B. LADINES, IN HER CAPACITY AS COA SUPERVISING AUDITOR - PHILIPPINE AMUSEMENT AND GAMING CORPORATION, RESPONDENTS.

D E C I S I O N

SINGH, J.:

Summary:
This case involves a petition for certiorari filed by Efraim C. Genuino, challenging the Commission on Audit's (COA) decision to disallow donations made by the Philippine Amusement and Gaming Corporation (PAGCOR) to the Magallanes Village Association, Inc. (MVAI).
 
Facts:
  • Genuino was the Chairperson of the Board of Directors and Chief Executive Officer of PAGCOR from 2001 to 2010.
  • PAGCOR made two donations to MVAI in 2008 and 2009, which were disallowed by the COA.
  • The COA held that the donations were not for a public purpose and were therefore invalid.
Issues:
  • Whether the COA has audit jurisdiction over PAGCOR's funds.
  • Whether the donations made by PAGCOR to MVAI were for a public purpose.
  • Whether Genuino is personally liable for the disallowed donations.
Ruling:
  • The COA has audit jurisdiction over PAGCOR's funds, regardless of their source.
  • The donations made by PAGCOR to MVAI were not for a public purpose, as they benefited a private association and not the general public.
  • Genuino is personally liable for the disallowed donations, as he was the approving officer and showed gross ignorance in approving the donations.
Doctrine:
  • The concept of public purpose is evolving and should be given a broad interpretation.
  • Public funds can only be used for purposes that are primarily for the benefit of the public, with any benefit to private entities being merely incidental.
  • Approving officers can be held personally liable for disallowed transactions if they show gross ignorance or negligence.
Conclusion:
The Supreme Court dismissed Genuino's petition and remanded the case to the COA for a final determination of the amount to be returned by Genuino. The Court held that the COA has audit jurisdiction over PAGCOR's funds, the donations were not for a public purpose, and Genuino is personally liable for the disallowed donations.

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