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505 Phil. 202


[ G.R. NO. 142347, August 25, 2005 ]





Before us is a petition for certiorari under Rule 64 in relation to Rule 65 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision No. 98-465[1] dated December 3, 1998 and Resolution No. 2000-062[2] dated February 15, 2000 rendered by the Commission on Audit (COA).

The antecedents are:

Pursuant to Presidential Decree 198 or the Provincial Water Utilities Act of 1973, Metropolitan Cebu Water District (MCWD), a local water district was organized as a government-owned corporation with original charter.

Subsequently, MCWD, through its Board of Directors, issued the following Resolutions giving benefits and privileges to its personnel, one of whom is Dulce M. Abanilla, MCWD's General Manager, petitioner herein: (1) Board Resolution No. 054-83 dated May 23, 1983 granting hospitalization privileges; (2) Board Resolution Nos. 091-83 and 0203-85 dated October 21, 1983 and November 20, 1985, respectively, allowing the monetization of leave credits; (3) Board Resolution No. 0161-86 dated November 29, 1986 granting Christmas bonus; and (4) Board Resolution No. 083-88 granting longevity allowance.

On January 1, 1989, MCWD and Metropolitan Cebu Water District Employees Union, petitioner-in-intervention, executed a collective bargaining agreement (CBA) providing for the continuous grant to all its regular rank and file employees of existing benefits, such as cash advances, thirteenth month pay, mid-year bonus, Christmas bonus, vacation and sick leave credits, hospitalization, medicare, uniform privileges, and water allowance.

On January 1, 1992, the parties renewed their CBA.

On November 13, 1995, an audit team headed by Bernardita T. Jabines of the COA Regional Office No. VII at Cebu City, one of the herein respondents, conducted an audit of the accounts and transactions of MCWD.

Thereafter, the Regional Director of COA Regional Office No. VII, also a respondent, sent MCWD several notices disallowing the amount of P12,221,120.86 representing hospitalization benefits, mid-year bonus, 13th month pay, Christmas bonus and longevity pay. [3]

Aggrieved, petitioner interposed an appeal to respondent COA at Quezon City. She cited COA Memorandum Circular No. 002-94 providing that "all benefits provided under the duly existing CBAs entered into prior to March 12, 1992, the date of official entry of judgment of the Supreme Court ruling in Davao City Water District, et al. vs. CSC and COA, shall continue up to the respective expiry dates of the benefits or CBA whichever comes earlier."

On December 3, 1998, respondent COA rendered its Decision No. 98-465[4] denying petitioner's appeal. In sustaining the disallowance in the amount of P12,221,120.86, respondent COA cited this Court's ruling in Davao City Water District vs. Civil Service Commission[5] that "a water district is a corporation created pursuant to a special law - P.D. No. 198, as amended, and as such, its officers and employees are covered by the Civil Service Law."

Respondent COA then held that:
"There is no question that the CBA was concluded after the decision in the Davao case was promulgated. As far as the CBA is concerned the critical moment is the date of the promulgation itself. Any transaction (CBA) concluded after this date in violation of existing laws and regulations applicable to government entities is void and of no effect. It conferred no demandable right, it created no enforceable obligation.

x x x

PREMISES CONSIDERED, the instant appeal has to be, as it is hereby, denied. The disallowance in the total amount of P12,221,120.86 is hereby AFFIRMED.

Petitioner filed a motion for reconsideration but it was denied by respondent COA in a Resolution No. 2000-062[6] dated February 15, 2000. In denying petitioner's motion, respondent COA ruled that the compensation package of MCWD personnel may no longer be the subject of a CBA. For the terms of employment of those personnel are covered, not by the Labor Code, but by the Civil Service Law.

Hence, this petition for certiorari.

Petitioner contends that respondent COA acted with grave abuse of discretion in disallowing the above benefits and privileges and contravened the Labor Code provision on non-diminution of benefits.

The Solicitor General, in his comment, maintains that the COA did not gravely abuse its discretion in denying petitioner's appeal considering that the terms and conditions of employment, such as the entitlement of government personnel, like the affected MCWD employees, to privileges and benefits are governed by the Civil Service Law, the General Appropriations Act and applicable issuances of the Department of Budget and Management, not by the Labor Code.

The petition is bereft of merit.

In light of this Court's ruling in Davao City Water District[7] that the officers and employees of a water district are covered by the Civil Service Law,[8] petitioner's invocation of the CBA, in justifying the receipt by the MCWD personnel of benefits and privileges, is utterly misplaced. Thus, we sustain the disallowance by respondent COA.

In Alliance of Government Workers vs. Minister of Labor and Employment,[9] this Court held:
"Subject to the minimum requirements of wage laws and other labor and welfare legislation, the terms and conditions of employment in the unionized private sector are settled through the process of collective bargaining. In government employment, however, it is the legislature and, where properly given delegated power, the administrative heads of government which fix the terms and conditions of employment. And this is effected through statutes or administrative circulars, rules, and regulations, not through collective bargaining agreements."
While we sustain the disallowance of the above benefits by respondent COA, however, we find that the MCWD affected personnel who received the above mentioned benefits and privileges acted in good faith under the honest belief that the CBA authorized such payment. Consequently, they need not refund them.

In Querubin vs. Regional Cluster Director, Legal and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City,[10] citing De Jesus vs. Commission on Audit,[11] this Court held:
"Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accept the same with gratitude, confident that they richly deserve such benefits.

x x x. Petitioners here received the additional allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional allowances and bonuses, the Court had not yet decided Baybay Water District. Petitioners had no knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund the allowances and bonuses they received but disallowed by the COA."
WHEREFORE, the petition is DENIED. The assailed Decision No. 98-465 dated December 3, 1998 and Resolution No. 2000-062 dated February 15, 2000 of respondent COA are AFFIRMED with MODIFICATION in the sense that the amount of P12,221,120.86 representing disallowed benefits and privileges should not be refunded by the MCWD personnel.


Davide, Jr., CJ., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

[1] Annex "B", Petition for Certiorari, Rollo at 23-26.

[2] Annex "A", id. at 20-22.

[3] Notice of Disallowance Nos. 96-036, 96-050, 96-051, 96-055, 96-069, 96-073 and 96-074 covering disallowed hospitalization privileges for the year 1995; Notice of Disallowance No. 96-025 covering disallowed payment of mid-year bonus for the year 1995; Notice of Disallowance Nos. 96-026, 96-068 and 96-075 covering the disallowed 13th month pay for the year 1995; Notice of Disallowance No. 96-081 covering disallowed Christmas bonus; and Notice of Disallowance No. 96-075 covering disallowed longevity pay.

[4] Signed by Chairman Celso D. Gangan, respondent, Commissioner Sofronio B. Ursal (not impleaded as respondent) and Commissioner Raul C. Flores, respondent.

[5] G.R. No. 95237-38, September 13, 1991, 201 SCRA 593.

[6] Signed by Chairman Celso D. Gangan, Commissioner Raul C. Flores and Commissioner Emmanuel M. Dalman, all impleaded as respondent herein.

[7] Supra.

[8] "SEC. 3. (Civil Service Law). - Terms and Conditions of Employment. -The terms and conditions of employment of all government employees, including those in government-owned or controlled corporations with original charters, shall be fixed by law. The terms and conditions of employment which are not fixed by law may be the subject of negotiation between duly recognized employee's organizations and appropriate government authorities."

"SEC. 6. Scope of Civil Service. -(1) The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters."

[9] G.R. No. 60403, August 3, 1983, 124 SCRA 1, 13.

[10] G.R. No. 159299, July 7, 2004, 433 SCRA 769, 773.

[11] G.R. No. 149154, June 10, 2003, 403 SCRA 666, 676.

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