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882 Phil. 744
EN BANC
[ G.R. No. 244128, September 08, 2020 ]
MARIO M. MADERA, BEVERLY C. MANANGUITE, CARISSA D. GALING, AND JOSEFINA O. PELO, PETITIONERS, VS. COMMISSION ON AUDIT (COA) AND COA REGIONAL OFFICE NO. VIII, RESPONDENTS.
DECISION
CAGUIOA, J:
In this case, the Court is presented the optimum opportunity to provide for a clear set of rules regarding the refund of amounts disallowed by the Commission on Audit (COA) in order to reach a just and equitable outcome among persons liable for disallowances.
The Facts
Before the Court is a petition for certiorari[1] under Rule 64 in relation to Rule 65 of the Rules of Court, assailing the COA Decision[2] dated December 27, 2017 and Resolutions[3] dated August 16, 2018 which affirmed the disallowance of various allowances given in 2013 to the officials and employees of the Municipality of Mondragon, Northern Samar (the Municipality).
In December 2013, the Municipality passed and approved Sangguniang Bayan (SB) Ordinance No. 08[4] and SB Resolutions Nos. 41,[5] 42,[6] 43,[7] and 48,[8] all series of 2013, granting various allowances to its officials and employees. These allowances are: 1) Economic Crisis Assistance (ECA), 2) Monetary Augmentation of Municipal Agency (MAMA), 3) Agricultural Crisis Assistance (ACA), and 4) Mitigation Allowance to Municipal Employees (MAME).
For the ECA, the Whereas Clauses of SB Resolution No. 41, series of 2013, state:
On post audit, the Audit Team Leader (ATL) and the Supervising Auditor (SA) of the Municipality issued a total of 11 Notices of Disallowance (NDs) dated February 20, 2014 for the grant of the ECA, MAMA, ACA and MAME (subject allowances) as specified below:
The persons held liable under the NDs were as follows:
COA Regional Office
On January 8, 2015, petitioners filed their appeal with the COA Regional Director (RD). They argued that the grant of additional allowances to the employees is allowed by R.A. 7160 or the Local Government Code (LGC); hence, the LGC actually repealed Section 12 of R.A. 6758[19] because the former law allows the municipality to grant additional allowances/financial assistance should its finances allow. Petitioners also claimed that the pronouncement of the Audit Team that the disallowed allowances were not among those listed under COA Circular No. 2013-003 is not correct considering that said Circular also stated that "other allowances not listed above, whether granted government-wide or specific to certain government agencies are likewise recognized provided there is sufficient legal basis thereof."[20]
Additionally, petitioners contended that the grant of additional allowances/financial assistance in the Municipality was a customary scheme over the years. They also claimed that the allowances were considered as financial assistance to the employees who suffered the effects of Typhoon Yolanda. Lastly, petitioners averred that the Sangguniang Panlalawigan (SP), the Department of Budget and Management (DBM) and the COA did not declare the appropriation ordinance as invalid; hence, they remain legal and valid.[21]
In a Decision[22] dated July 14, 2015, the RD affirmed the NDs and ruled that government units are not exempt from the SSL and the grant and payment of the subject allowances were subject to Section 12 of R.A. 6758 which provides that all allowances such as the ECA, MAMA, ACA and MAME are deemed integrated in the standardized salary rates and only six enumerated allowances are considered excluded from the integration. According to the RD, while it may be true that the subject allowances were not among those included in the list of authorized allowances and they may be granted if there is sufficient legal basis, the appropriation ordinance is not sufficient to become the legal basis. Moreover, petitioners' assertion that R.A.7160 repealed the provision of Section 12 of R.A. 6758 is not convincing since Section 534 of R.A. 7160 mentions the specific laws or parts thereof which are repealed, and R.A. 6758 is not one of them.[23]
Moreover, the RD ruled that petitioners cannot hide behind the claim that the grant of such benefits was a customary scheme of the Municipality because practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law.[24]
As for petitioners' contention that no appropriation ordinance of the Municipality had been declared invalid, the RD gave scant consideration to the same on the position that the subject ordinance and resolutions showed no indication of their having been transmitted to the SP for review in accordance with Section 327[25] of R.A. 7160. Moreover, the subject ordinance and resolutions appropriated amounts for the disallowed benefits from the savings, unexpended allotment, and unappropriated balances for 2013 of the Municipality, in violation of Section 322[26] of R.A. 7160.[27]
Lastly, petitioners cannot claim that the subject allowances were given as financial assistance to the employees because good intention, no matter how noble, cannot be made an excuse for not adhering to the rules.[28]
Consequently, petitioners appealed to the COA.
COA Proper
In a Decision dated December 27, 2017, the COA affirmed the ruling of the COA Regional Office, with modification in that the officials and employees who unwittingly received the disallowed benefits or allowances are not held liable for their reimbursement since they are recipient-payees in good faith.
The COA opined that, following applicable rules, the approving officer and each employee who received the disallowed benefit or allowance are obligated, jointly and severally, to refund the amount received. However, it also recognized that the Court has ruled, by way of exception, that passive recipients of disallowed amounts need not refund if they received the same in good faith. Thus, while the COA itself observed that this results in an inequitable burden on the approving officers and that the same is inconsistent with the concept of solutio indebiti, it nevertheless applied the exception as to passive recipients in deference to the Court.[29] Thus, the COA ruled as follows:
Petition Before the Court
On January 11, 2019, petitioners filed a petition for certiorari under Rule 64 in relation to Rule 65 of the Rules of Court. While petitioners maintain that the allowances were legal, they also raise the defense of good faith in order to not be held liable for the disallowed amounts.
In its Comment,[32] the COA, through the Office of the Solicitor General (OSG), contends that it did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in upholding the NDs. Likewise, it avers that the liability imposed on petitioners was grounded on jurisprudence.
ISSUE
The issue to be resolved is whether the COA committed grave abuse of discretion in issuing the assailed Decision and Resolution.
Specifically, the resolution of this case rests ultimately on whether the COA was correct in holding petitioners liable for the refund of the disallowed amounts.
RULING
The petition is partly meritorious.
I. Timeliness of the Petition
At the outset, the Court notes that the petition was filed out of time. Petitioners confused Rules 64 and 65 of the Rules of Court when they erroneously claimed that their petition was timely filed within 60 days from notice of judgment.[33] Rule 64 provides:
To recall, the COA Decision was promulgated on December 27, 2017 and petitioners received a copy of the Decision on February 23, 2018. Thus, the 30 day-period began to run from February 23, 2018. However, following Section 3, Rule 64 the period was interrupted when petitioners filed an MR on February 28, 2018. Petitioners received a copy of the Resolution denying their MR on November 12, 2018. Consequently, they had 25 days from November 12, or until December 7, 2018 to file their petition before the Court. However, petitioners only filed their petition on January 11, 2019 or 35 days after the last day of filing.
From the foregoing, there is no dispute that petitioners belatedly filed their petition before the Court. Nevertheless, the petition appears to be partly meritorious. Time and again, the Court has relaxed the observance of procedural rules to advance substantial justice.[34] Moreover, the present petition provides an appropriate avenue for the Court to settle the conflicting jurisprudence on the liability for the refund of disallowed allowances. Thus, the Court opts for a liberal application of the procedural rules considering that the substantial merits of the case warrant its review by the Court.
The Constitution vests the broadest latitude in the COA in discharging its role as the guardian of public funds and properties.[35] In recognition of such constitutional empowerment, the Court has generally sustained the COA's decisions or resolutions in deference to its expertise in the implementation of the laws it has been entrusted to enforce.[36] Thus, the Constitution and the Rules of Court provide the remedy of a petition for certiorari in order to restrict the scope of inquiry to errors of jurisdiction or to grave abuse of discretion amounting to lack or excess of jurisdiction committed by the COA.[37] For this purpose, grave abuse of discretion means that there is, on the part of the COA, an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, such as when the assailed decision or resolution rendered is not based on law and the evidence but on caprice, whim and despotism.[38]
In this case, petitioners failed to show that the COA gravely abused its discretion in affirming the subject NDs. Nevertheless, there is merit to their contention that they should not be held liable to refund the disallowed amounts.
II. Propriety of the Disallowance
As regards the propriety of the issuance of the NDs, the Court notes that while petitioners maintain that the subject allowances had sufficient legal basis, the petition fails to substantiate their claim. The petition principally tackles petitioners' liability for the disallowed amounts, insisting that they approved the subject allowances in good faith.[39] The petition offered no new argument as regards the legality of the subject allowances. Thus, as regards the validity of the disallowance, the Court is constrained to rely on petitioners' submissions before the COA.
After a careful review of the records of the case, the Court upholds the NDs against the subject allowances, finding no grave abuse of discretion on the part of the COA in affirming the disallowance. The Court quotes with approval the following pronouncements by the COA:
On their liability for the refund of the disallowed allowances, petitioners aver that they should not be held liable as they approved the disbursements in good faith. In support of this claim, petitioners cited various cases[41] where the Court did not order a refund despite upholding the disallowance.[42] Petitioners insist that since the COA failed to show that they were in bad faith in approving the allowances, the alleged refund should not be personally imposed on them especially considering that they merely relied on the yearly grant of additional allowances that were not previously disallowed by the COA.[43]
To recall, the NDs, as issued, held the payees of the disallowed allowances liable for being claimants or recipients of said amounts. The payees' liability to return the amounts was likewise affirmed by the COA RD. It was only on appeal to the COA Proper that the petitioning officers were held liable for the refund of the entire disallowed amount while the recipient-payees in good faith were excused.
In its assailed Decision, the COA Proper cited the 2015 case of Silang v. Commission on Audit[44] (Silang) where the Court ruled that public officials who are directly responsible for, or participated in making the illegal expenditures, as well as those who actually received the amounts therefrom, shall be solidarity liable for their reimbursement. Consequently, the obligation to refund the payment received falls upon both those directly responsible, i.e., the approving officers, and those who actually received the disallowed benefit.[45] According to the COA, this is consistent with Section 43, Chapter 5, Book VI of Executive Order No. (E.O.) 292 or the Administrative Code of 1987, which states in part:
In arriving at these new set of rules, the Court shall first delve into: a) the statutory bases for the liability of approving and certifying officers and payees for illegal expenditures; b) the badges of good faith in determining the liability of approving and certifying officers; c) the body of jurisprudence which inequitably absolve responsible persons from liability to return based on good faith; and d) the nature of the payees' participation and their liability for return and the acceptable exceptions as regards the liability to return disallowed amounts on the bases of unjust enrichment and solutio indebiti. The discussion on these matters will serve as the foundation of the rules of return that will be laid down in this decision.
A. Bases for Responsibility/Liability
The Budget Reform Decree of 1977[47] (PD 1177) provides:
Correspondingly, personal liability to return the disallowed amounts must be understood as civil liability[52] based on the loss incurred by the government because of the transaction, while administrative or criminal liability may arise from irregular or unlawful acts attending the transaction. This should be the starting point of determining who must return. The existence and amount of the loss and the nature of the transaction must dictate upon whom the liability to return is imposed.
Sections 38 and 39, Chapter 9, Book I of the Administrative Code of 1987 cover the civil liability of officers for acts done in performance of official duties:
The participation of these public officers, such as those who approve or certify unlawful expenditures, vis-a-vis the incurrence of civil liability is recognized by the COA in its issuances, beginning from COA Circular No. 81-156[54] dated January 19, 1981 (Old CSB Manual):
B. Badges of good faith in the determination of approving/certifying officers' liability
As mentioned, the civil liability under Sections 38 and 39 of the Administrative Code of 1987, including the treatment of their liability as solidary under Section 43, arises only upon a showing that the approving or certifying officers performed their official duties with bad faith, malice or gross negligence. For errant approving and certifying officers, the law justifies holding them solidarity liable for amounts they may or may not have received considering that the payees would not have received the disallowed amounts if it were not for the officers' irregular discharge of their duties, as further emphasized by Senior Associate Justice Estela M. Perlas-Bernabe (Justice Bernabe). This treatment contrasts with that of individual payees who, as will be discussed below, can only be liable to return the full amount they were paid, or they received pursuant to the principles of solutio indebiti and unjust enrichment.
Notably, the COA's regulations relating to the settlement of accounts and balances[57] illustrate when different actors in an audit disallowance can be held liable either based on their having custody of the funds, and having approved or certified the expenditure. The Court notes that officers referred to under Sections 19.1.1 and 19.1.3 of the MCSB, and Sections 16.1.1 and 16.1.3 of the RRSA, may nevertheless be held liable based on the extent of their certifications contained in the forms required by the COA under Section 19.1.2 of MCSB, and Sections 16.1.2 of the RRSA. To ensure that public officers who have in their favor the unrebutted presumption of good faith and regularity in the performance of official duty, or those who can show that the circumstances of their case prove that they acted in good faith and with diligence, the Court adopts Associate Justice Marvic M.V.F. Leonen's (Justice Leonen) proposed circumstances or badges[58] for the determination of whether an authorizing officer exercised the diligence of a good father of a family:
C. Cases absolving recipients' liability to return based on good faith
As for the civil liability of payees, certain jurisprudence provides that passive recipients or payees in good faith are excused from returning the amounts they received.
In the 1998 case of Blaquera v. Alcala,[60] (Blaquera), the Court relied on good faith to excuse the return of the disallowed amounts. The petition was brought by officials and employees of several government agencies assailing the disallowance of the excess productivity incentive benefits given in 1992, as rationalized by Administrative Orders Nos. 29 and 268. In excusing both the officers and the payees from the liability to return the benefits already received, the Court held:
The ruling in Blaquera was subsequently relied upon by the Court in the cases of De Jesus v. Commission on Audit[62] (De Jesus), Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit[63] and Home Development Mutual Fund v. COA[64] (HDMF), to excuse the return from all persons responsible. De Jesus, specifically dealing with the payment of allowances and bonuses authorized under a 1995 Local Water Utilities Administration Resolution to members of an interim Board of Directors (BOD) of a water district, is still cited as authority in benefits disallowances of water district employees. De Jesus and HDFM were also cited by petitioners herein in support of their argument.[65]
However, in the 2002 case of National Electrification Administration v. Commission on Audit[66] (NEA) involving the accelerated implementation of the salary increase in the Salary Standardization II in violation of law and executive issuances, the Court held both the approving officers and the payees as solidarity liable on the following explanation:
In the 2006 case of Casal v. Commission on Audit[70] (Casal), the Court's decisions in Blaquera and NEA were both relied upon, but the Court reached an outcome different from those reached in both cases. Finding that the non-compliance by the officers with relevant Presidential issuances amounted to gross negligence which could not be deemed a mere lapse consistent with the presumption of good faith, the ruling in NEA was applied as to the petitioners-approving officers, while the ruling in Blaquera was applied to excuse the payees. Thus, it was Casal that originated the peculiar outcome in disallowance cases where payees were excused from liability, while the solidary co-debtors, National Museum officials, were made solely liable for the entire amount of the disallowance.
This pronouncement in Casal further evolved in jurisprudence when the Court nuanced the same in the 2012 case of Manila International Airport Authority v. Commission on Audit[71] (MIAA) and the 2014 case of Technical Education and Skills Development Authority v. Commission on Audit[72] (TESDA). In these cases, the Court also considered the good faith of both payees and officers in determining who must return AND the extent of what must be returned. As ruled therein, a payee in good faith may retain what has been paid. In this regard, the government effectively absorbs the excess paid to good faith payees, and approving and/or certifying officers in bad faith were required to return only to the extent of the amounts they received.
In MIAA, the Court found that the amounts involved were properly disallowed signing bonus. Good faith payees were excused but responsible officers and members of the BOD were made to refund, but only the amounts they received, thus:
As Silang held that "passive recipients or payees of disallowed salaries, emoluments, benefits, and other allowances need not refund such disallowed amounts if they received the same in good faith," it relies upon the cases of Lumayna v. COA[78] (Lumayna) and Querubin v. The Regional Cluster Director Legal and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City[79] (Querubin). Petitioners herein also cite Lumayna to support their claim.[80]
Examining Lumayna, the Court excused all petitioners (including the petitioning approving and certifying officers - Municipal Mayor, Municipal Accountant, and Budget Officer) from liability to return the disallowed amounts despite the affirmance of the disallowance.
The same outcome was reached in Querubin where the members of the BOD of the Bacolod City Water District were excused from returning the benefits they themselves approved and received for having been received in good faith. Both these cases also rely upon Blaquera as jurisprudential support to excuse the return.
In sum, the evolution of the "good faith rule" that excused the passive recipients in good faith from return began in Blaquera (1998) and NEA (2002), where the good faith of both officers and payees were determinative of their liability to return the disallowed benefits - the good faith of all parties resulted in excusing the return altogether in Blaquera, and the bad faith of officers resulted in the return by all recipients in NEA. The rule morphed in Casal (2006) to distinguish the liability of the payees and the approving and/or certifying officers for the return of the disallowed amounts. In MIAA (2012) and TESDA (2014), the rule was further nuanced to determine the extent of what must be returned by the approving and/or certifying officers as the government absorbs what has been paid to payees in good faith. This was the state of jurisprudence then which led to the ruling in Silang (2015) which followed the rule in Casal that payees, as passive recipients, should not be held liable to refund what they had unwittingly received in good faith, while relying on the cases of Lumayna and Querubin.
The history of the rule as shown evinces that the original formulation of the "good faith rule" excusing the return by payees based on good faith was not intended to be at the expense of approving and/or certifying officers. The application of this judge made rule of excusing the payees and then placing upon the officers the responsibility to refund amounts they did not personally receive, commits an inadvertent injustice.
D. Nature of payee participation
Verily, excusing payees from return on the basis of good faith has been previously recognized as an exception to the laws on liability for unlawful expenditures. However, being civil in nature, the liability of officers and payees for unlawful expenditures provided in the Administrative Code of 1987 will have to be consistent with civil law principles such as solutio indebiti and unjust enrichment. These civil law principles support the propositions that (1) the good faith of payees is not determinative of their liability to return; and (2) when the Court excuses payees on the basis of good faith or lack of participation, it amounts to a remission of an obligation at the expense of the government.
To be sure, the application of the principles of unjust enrichment and solutio indebiti in disallowed benefits cases does not contravene the law on the general liability for unlawful expenditures. In fact, these principles are consistently applied in government infrastructure or procurement cases which recognize that a payee contractor or approving and/or certifying officers cannot be made to shoulder the cost of a correctly disallowed transaction when it will unjustly enrich the government and the public who accepted the benefits of the project.[81]
These principles are also applied by the Court with respect to disallowed benefits given to government employees. In characterizing the obligation of retirees-payees who received benefits properly disallowed by the COA, the Resolution in the 2004 case of Government Service Insurance System v. Commission on Audit[82] stated:
Consistent with the foregoing, the Court shares the keen observation of Associate Justice Henri Jean Paul B. Inting (Justice Inting) that payees generally have no participation in the grant and disbursement of employee benefits, but their liability to return is based on solutio indebiti as a result of the mistake in payment. Save for collective negotiation agreement incentives carved out in the sense that the employees are not considered passive recipients on account of their participation in the negotiated incentives as in Dubongco v. COA[90] (Dubongco), payees are generally held in good faith for lack of participation, with their participation limited to "accept[ing] the same with gratitude, confident that they richly deserve such benefits."[91]
On the other hand, the RRSA provides:
As may be gleaned from Section 16 of the RRSA, "the extent of their participation [or involvement] in the disallowed/charged transaction" is one of the determinants for liability. The Court has, in the past, taken this to mean that payees should be absolved from liability for lack of participation in the approval and disbursement process. However, under the MCSB and the RRSA, a "transaction" is defined as "[a]n event or condition the recognition of which gives rise to an entry in the accounting records."[92] To a certain extent, therefore, payees always do have an indirect "involvement" and "participation" in the transaction where the benefits they received are disallowed because the accounting recognition of the release of funds and their mere receipt thereof results in the debit against government funds in the agency's account and a credit in the payees' favor. Notably, when the COA includes payees as persons liable in an ND, the nature of their participation is stated as "received payment."
Consistent with this, "the amount of damage or loss [suffered by] the government [in the disallowed transaction],"[93] another determinant of liability, is also indirectly attributable to payees by their mere receipt of the disallowed funds. This is because the loss incurred by the government stated in the ND as the disallowed amount corresponds to the amounts received by the payees. Thus, cogent with the application of civil law principles on unjust enrichment and solutio indebiti, the return by payees primarily rests upon this conception of a payee's undue receipt of amounts as recognized within the government auditing framework. In this regard, it bears repeating that the extent of liability of a payee who is a passive recipient is only with respect to the transaction where he participated or was involved in, i.e., only to the extent of the amount that he unduly received. This limitation on the scope of a payee's participation as only corresponding to the amount he received therefore forecloses the possibility that a passive recipient may be held solidarily liable with approving/certifying officers beyond the amount that he individually received.
The exception to payee liability is when he shows that he is, as a matter of fact or law, actually entitled to what he received, thus removing his situation from Section 16.1.5 of the RRSA above and the application of the principle of solutio indebiti. This includes payees who can show that the amounts received were granted in consideration for services actually rendered. In such situations, it cannot be said that any undue payment was made. Thus, the government incurs no loss in making the payment that would warrant the issuance of a disallowance. Neither payees nor approving and certifying officers can be held civilly liable for the amounts so paid, despite any irregularity or procedural mistakes that may have attended the grant and disbursement.
Returning to the earlier cases of Blaquera, Lumayna, and Querubin, the good faith of all parties was basis to excuse the return of the entire obligation from any of the debtors in the case. Thus, either the COA or the Court through their respective decisions exercised an act of liberality by renouncing the enforcement of the obligation as against payees - persons who received the moneys corresponding to the disallowance, a determinate "respective share" in the resulting solidary obligation. This redounds to the benefit of officers. Clearly, therefore, cases which result in a clear transfer of economic burden cannot have been the intention of the law in exacting civil liability from payees in disallowance cases. Where the ultimate beneficiaries are excused, what can only be assumed as the legislative policy of achieving the highest possibility of recovery for the government unwittingly sanctions unjust enrichment.
In Dubongco,[94] the Court affirmed the disallowance of CNA incentives sourced out of CARP funds. Even as it recognized that the payees therein committed no fraud, the Court ordered the return, thus:
For other incentives not negotiated by the recipients, the Court promulgated its decision in Chozas v. COA[98] which dealt with the accomplishment incentive sourced out of Bulacan State University Special Trust Fund. Notably, this case relied upon the Court's ratiocination in Dubongco on the question of liability to return, without any showing of participation on the part of the payees as to the grant and disbursement. This is jurisprudential recognition that the judge made rule of absolving good faith payees is the exception, and not the rule.
In Rotoras v. COA,[99] the Court held that it will be unjust enrichment to allow the members of the governing boards to retain additional honoraria that they themselves approved and received. Here, the Court ruled that the nature of the obligation of approving officials to return "depends on the circumstances,"[100] with the officers' obligation to return expressly determined to not be solidary.[101] This case illustrates how approving officers may still be held liable to return in their capacity as payees, notwithstanding their good faith or bad faith.
In the ultimate analysis, the Court, through these new precedents, has returned to the basic premise that the responsibility to return is a civil obligation to which fundamental civil law principles, such as unjust enrichment and solutio indebiti apply regardless of the good faith of passive recipients. This, as well, is the foundation of the rules of return that the Court now promulgates.
Moreover, solutio indebiti is an equitable principle applicable to cases involving disallowed benefits which prevents undue fiscal leakage that may take place if the government is unable to recover from passive recipients amounts corresponding to a properly disallowed transaction.
Nevertheless, while the principle of solutio indebiti is henceforth to be consistently applied in determining the liability of payees to return, the Court, as earlier intimated, is not foreclosing the possibility of situations which may constitute bona fide exceptions to the application of solutio indebiti. As Justice Bernabe proposes, and which the Court herein accepts, the jurisprudential standard for the exception to apply is that the amounts received by the payees constitute disallowed benefits that were genuinely given in consideration of services rendered (or to be rendered)[102] negating the application of unjust enrichment and the solutio indebiti principle.[103] As examples, Justice Bernabe explains that these disallowed benefits may be in the nature of performance incentives, productivity pay, or merit increases that have not been authorized by the Department of Budget and Management as an exception to the rule on standardized salaries.[104] In addition to this proposed exception standard, Justice Bernabe states that the Court may also determine in the proper case bona fide exceptions, depending on the purpose and nature of the amount disallowed.[105] These proposals are well-taken.
Moreover, the Court may also determine in a proper case other circumstances that warrant excusing the return despite the application of solutio indebiti, such as when undue prejudice will result from requiring payees to return or where social justice or humanitarian considerations are attendant. Verily, the Court has applied the principles of social justice in COA disallowances. Specifically, in the 2000 case of Uy v. Commission on Audit[106] (Uy), the Court made the following pronouncements in overturning the COA's decision:
E. The Rules on Return
In view of the foregoing discussion, the Court pronounces:
To reiterate, the assessment of the presumptions of good faith and regularity in the performance of official functions and proof thereof will be done by the Court on a case-to-case basis. Moreover, the additional guidelines eloquently presented by Justice Leonen will greatly aid the Court in determining the good faith of officers and resultantly, whether or not they should be held solidarily liable in disallowed transactions.[110]
F. As applied to the instant case
Examined under the rubric of the rules above, the Court holds that petitioners approving and certifying officers need not refund the disallowed amounts inasmuch as they had acted in good faith.
In support of their good faith, petitioners aver:
First, a review of the SB Resolutions and Ordinance used as basis for the grant of the subject allowances shows that these were primarily intended as financial assistance to municipal employees in view of the increase of cost on prime commodities,[113] shortage of agricultural products,[114] and the vulnerability of their municipality to calamities and disasters.[115] Notably, these subject allowances were granted after the onslaught of typhoon Yolanda which greatly affected the Municipality. While noble intention is not enough to declare the allowances as valid, it nevertheless supports petitioners' claim of good faith. As held in Escarez v. COA:
Notably, since the issuance of the NDs in 2014, the Municipality has stopped giving these allowances to their employees.[117] However, this is not to say that the presumption of good faith would be ipso facto negated if the Municipality had otherwise continued to grant the allowances despite the issuance of NDs. After all, an ND is not immediately final as it may still be reversed by the COA or even the Court. Unless and until an ND becomes final, the continued grant of a benefit or allowance should not automatically destroy the presumption of good faith on the part of the approving/certifying officers, especially when there is sufficient or, at the very least, colorable legal basis for such grant.
Third, petitioners relied on the Resolutions and Ordinance of the Sangguniang Bayan which have not been invalidated; hence, it was within their duty to execute these issuances in the absence of any contrary holding by the Sangguniang Panlalawigan or the COA. They were of the belief, albeit mistakenly, that these Resolutions and Ordinance were sufficient legal bases for the grant of the allowances especially since the LGC[118] empowers the Sangguniang Bayan to approve ordinances and pass resolutions concerning allowances. Similar to the ruling in Veloso v. Commission on Audit[119] where the Court accepted as a badge of good faith the fact that the questioned disbursements were made pursuant to ordinances, petitioners' reliance on the SB Resolutions and Ordinance should likewise be considered in their favor.
As can be deduced above, petitioners disbursed the subject allowances in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such reward. Otherwise stated, and to borrow the language of Lumayna, these mistakes committed are not actionable, absent a clear showing that such actions were motivated by malice or gross negligence amounting to bad faith. There was no showing of some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will in the grant of these benefits. There was no fraud nor was there a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes.
Thus, petitioners-approving and certifying officers are shielded from civil liability for the disallowance under Section 38 of the Administrative Code of 1987.
As for the payees, the Court notes that the COA Proper already excused their return; hence, they no longer appealed. In any case, while they are ordinarily liable to return for having unduly received the amounts validly disallowed by COA, the return was properly excused not because of their good faith but because it will cause undue prejudice to require them to return amounts that were given as financial assistance and meant to tide them over during a natural disaster.
In view of the foregoing, the return is excused in its entirety in favor of all persons held liable in the ND.
A Final Note
In interpreting and applying the law, the Court is very sensitive to the need to balance competing interests and considerations amongst various stakeholders. Here, the Court is given the opportunity to set a workable rule that exacts accountability for disallowances and ensures that unjust enrichment and inadvertent unfairness do not result. This has been brought about by an acknowledgment that previous attempts by this Court to excuse payees who unwittingly received the disallowed amounts may have resulted in undue prejudice to the government. Further, if such rule would continue to be the norm in deciding these cases, then the Court may be unsuspectingly playing a role in the chilling effect on current and aspiring government officials, who were previously left to shoulder the entire disallowed amounts to the benefit of recipients. A chilling effect that ultimately hampers and suffocates urgent public need - which the Government, through the Executive Branch, is mandated to serve at the soonest time.
As the Court has previously held,[120] government employment should be seen as an opportunity for individuals of good will to render honest-to-goodness public service, and not a trap for the unwary. It should be an attractive alternative to private employment, not an undesirable undertaking grudgingly accepted, to therefore regret.[121] While the Court supports the mandate of the COA in ensuring that the funds of the government are properly utilized and the return to the government of funds unduly spent, the same must not be at the expense of public officials and employees who are directly tasked to discharge and render public service - especially when the presumptions of good faith and regularity in the performance of their duties have not been rebutted or overturned. Otherwise, the Court would unintentionally sanction the discouragement of competent and well-meaning individuals from joining the government. When service in the government is seen as unattractive and unappealing, it is the public that suffers.
Taking all this into consideration, the Court has laid down the rules that it deems equitable to the government whose interest is safeguarded by the COA, on the one hand, and to the government employees who approved, certified, and received the disallowed benefits, on the other.
Finally, the Court exhorts the COA to take into consideration the pronouncements made herein to prevent future decisions that "result [in] exempting recipients who are in good faith from refunding the amount received xxx [while] approving officers are made to shoulder the entire amount paid to the employees"[122] and impose, in the very words of the COA itself, "an inequitable burden on the approving officers, considering that they are or remain exposed to administrative and even criminal liability for their act in approving such benefits, and is not consistent with the concept of solutio indebiti and the principle of unjust enrichment."[123]
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Commission on Audit Decision No. 2017-454 dated December 27, 2017 affirming the Notice of Disallowance Nos. 14-004-101(2013) to 14-008-101(2013) and 14-010-101(2013) to 14-015-101(2013) in the total amount of P7,706,253.10 is AFFIRMED with MODIFICATION that petitioners need not refund the said disallowed amount.
SO ORDERED.
Peralta, C. J., Gesmundo, J. Reyes, Jr., Hernando, Carandang, Lazaro-Javier, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concur.
Perlas-Bernabe, J., Please see separate concurring opinion.
Leonen, J., See separate concurring opinion.
Inting, J., See concurring opinion.
Baltazar-Padilla, J., on leave.
[1] Rollo, pp. 3-17.
[2] Id. at 18-19.
[3] See id. at 30.
[4] Id. at 41-43.
[5] Id. at 31-32.
[6] Id. at 33-34.
[7] Id. at 35-36.
[8] Id. at 38-39.
[9] Id. at 31.
[10] Id. at 33.
[11] Id. at 35.
[12] Id. at 37.
[13] Id. at 19.
[14] Id. at 19-20.
[15] Id. at 20.
[16] Id.
[17] Id. at 21.
[18] Id. at 84-88, 89-93, 94-98, 110-116.
[19] Section 12. Consolidation of Allowances and Compensation. - All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.
[20] Rollo, p. 21.
[21] Id. at 22.
[22] Id. at 126-132.
[23] Id. at 22-23.
[24] Id. at 23.
[25] SECTION 327. Review of Appropriation Ordinances of Component Cities and Municipalities. - The sangguniang panlalawigan shall review the ordinance authorizing annual or supplemental appropriations of component cities and municipalities in the same manner and within the same period prescribed for the review of other ordinances.
If within ninety (90) days from receipt of copies of such ordinance, the sangguniang panlalawigan takes no action thereon, the same shall be deemed to have been reviewed in accordance with law and shall continue to be in full force and effect. If within the same period, the sangguniang panlalawigan shall have ascertained that the ordinance authorizing annual or supplemental appropriations has not complied with the requirements set forth in this Title, the sangguniang panlalawigan shall, within the ninety-day period hereinabove prescribed, declare such ordinance inoperative in its entirety or in part. Items of appropriation contrary to limitations prescribed in this Title or in excess of the amounts prescribed herein shall be disallowed or reduced accordingly.
The sangguniang panlalawigan shall, within the same period, advise the sangguniang panlungsod or sangguniang bayan concerned, through the local chief executive, of any action on the ordinance under review. Upon receipt of such advice, the city or municipal treasurer concerned shall not make further disbursements of funds from any of the items of appropriation declared inoperative, disallowed or reduced.
[26] SECTION 322. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations. - Unexpended balances of appropriations authorized in the annual appropriations ordinance shall revert to the unappropriated surplus of the general fund at the end of the fiscal year and shall not thereafter be available for the expenditure except by subsequent enactment. However, appropriations for capital outlays shall continue and remain valid until fully spent, reverted or the project is completed. Reversions of continuing appropriations shall not be allowed unless obligations therefor have been fully paid or otherwise settled.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation and the sanggunian concerned may approve, upon recommendation of the local chief executive, the reversion of funds no longer needed in connection with the activities funded by said continuing appropriations subject to the provisions of this section.
[27] Rollo, p. 23.
[28] Id.
[29] Id. at 27.
[30] Id. at 28.
[31] Id. at 6.
[32] Id. at 161-177.
[33] Id. at 6.
[34] See Barnes v. Padilla, G.R. No. 160753, September 30, 2004, 439 SCRA 675, 686.
[35] Miralles v. Commission on Audit, G.R. No. 210571, September 19, 2017, 840 SCRA 108, 116.
[36] Id. at 116-117.
[37] Estalilla v. Commission on Audit, G.R. No. 217448, September 10, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65721>.
[38] Catu-Lopez v. Commission on Audit, G.R. No. 217997, November 12, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65979>.
[39] Rollo, p. 8.
[40] Id. at 25-26.
[41] Blaquera v. Alcala, G.R. No. 109406, September 11,1998, 295 SCRA 366; De Jesus v. Commission on Audit, G.R. No. 149154, 403 SCRA 666; Home Development Mutual Fund v. Commission on Audit, G.R. No. 157001, October 19, 2004, 440 SCRA 643; and Lumayna v. Commission on Audit, G.R. No. 185001, September 25, 2009, 601 SCRA 163.
[42] Rollo, pp. 10-13.
[43] Id. at 13.
[44] G.R. No. 213189, September 8, 2015, 770 SCRA 110, 126.
[45] Rollo, pp. 26-27.
[46] Id. at 26-28.
[47] Presidential Decree No. 1177, July 30, 1977.
[48] Presidential Decree No. 1445, June 11, 1978.
[49] Chapter 9, Subtitle B, Title I, Book V.
[50] Book VI, Chapter 5.
[51] Domingo v. Rayala, G.R. Nos. 155831, 155840 & 158700, February 18, 2008, 546 SCRA 90, 112: "Basic in the law of public officers is the three-fold liability rule, which states that the wrongful acts or omissions of a public officer may give rise to civil, criminal and administrative liability, xxx".
[52] See Suarez v. Commission on Audit, G.R. No. 131077, August 7, 1998, 294 SCRA 96, 108-109, which treats liability for disallowance as civil liability, viz.,
[54] Restating the Requirements for the Use of the Certificate of Settlement and Balances and Providing Guidelines on Its Issuance Including the Accounting Treatment Thereof.
[55] Prescribing the Use of the Manual on Certificate of Settlement and Balances (Revised 1993).
[56] Prescribing the Use of the Rules and Regulations on Settlement of Accounts.
[57] See Section 19 of the MCSB and Section 16 of the RRSA.
[58] Separate Concurring Opinion of Justice Leonen, pp. 8, 13.
[59] Id. at 8.
[60] Supra note 41.
[61] Rotaras v. Commission on Audit, G.R. No. 211999, August 20, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65585>.
[62] Supra note 41.
[63] G.R. No. 150769, August 31, 2004, 437 SCRA 371.
[64] Supra note 41.
[65] Rollo, p. 12.
[66] G.R. No. 143481, February 15, 2002, 377 SCRA 223.
[67] Id. at 240.
[68] The COA in its Decision stated: "Thus, when the NEA effected full implementation of the new salary schedule on January 1, 1997, instead of November 1, 1997, NEA was, then, clearly acting in violation of the mandates of the law. Consequently, said wrongful implementation must be struck down for being baseless and unlawful, and all its employees who received the undue increases must necessarily return the amount thus received," id. at 227-228; emphasis and underscoring supplied.
[69] Id. at 224.
[70] G.R. No. 149633, November 30, 2006, 509 SCRA 138.
[71] G.R. No. 194710, February 14, 2012, 665 SCRA 653.
[72] G.R. No. 204869, March 11, 2014, 718 SCRA 402.
[73] Supra note 71, at 678-679.
[74] Supra note 44.
[75] Rollo, pp. 27-28.
[76] Silang v. Commission on Audit, supra note 44, at 129.
[77] Id.
[78] Supra note 41, at 182-183. The relevant portion reads:
[80] Rollo, pp. 12-13.
[81] See Melchor v. Commission on Audit, G.R. No. 95398, August 16, 1991, 200 SCRA 704, 714, citing Eslao v. Commission on Audit, supra note 53, at 739. This case applies the same principle of unjust enrichment in cases where the contractor seeks payment to this case where reimbursement is sought from the official concerned; see also Andres v. Commission on Audit, supra note 53.
[82] G.R. Nos. 138381 & 141625, November 10, 2004, 441 SCRA 532.
[83] Id. at 548-550.
[84] G.R. No. 218478, June 19, 2018, p. 2, (Unsigned Resolution), [En Banc].
[85] G.R. No. 210838, July 3, 2018, accessed at <http://elibraryjudiciary.gov.ph/thebookshelf/showdocs/1/64358>.
[86] G.R. No. 232272, July 24, 2018, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/64480>.
[87] Rollo, pp. 27-28.
[88] Separate Concurring Opinion of Justice Bernabe, p. 13.
[89] Separate Concurring Opinion of Justice Leonen, p. 12.
[90] G.R. No. 237813, March 5, 2019, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65051>.
[91] Blaquera v. Alcala, supra note 41, at 448.
[92] Sections 3.19 and 4.28 of the MCSB and the RRSA, respectively.
[93] The RRSA, Section 16.1.
[94] Supra note 90.
[95] Id.
[96] G.R. No. 237987, March 19, 2019, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65047>.
[97] Id.
[98] G.R. Nos. 226319 & 235031, October 8, 2019.
[99] Supra note 61.
[100] Separate Concurring Opinion of Justice Leonen, p. 12.
[101] Supra note 61. The dispositive portion of Rotoras reads:
WHEREFORE, the Petition for Certiorari is DISMISSED. The November 3, 2011 Decision and February 14, 2014 Resolution of the Commission on Audit in COA CP Case No. 2010-341 are AFFIRMED. The members of the governing boards of the state universities and colleges shall return the disallowed benefits. Their obligation to return shall not be solidary.
SO ORDERED.
[102] Separate Concurring Opinion of Justice Bernabe, p. 12.
[103] Id. at 11-12.
[104] Id. at 11. Justice Bernabe further explains:
[106] G.R. No. 130685, March 21, 2000, 328 SCRA 607.
[107] Id. at 619.
[108] Id.
[109] Concurring Opinion, p. 1.
[110] Separate Concurring Opinion of Justice Leonen, p. 8. To reiterate, Justice Leonen proposes the following circumstances or badges for the determination of whether an authorizing officer exercised the diligence of a good father of a family: "(1) Certificate of Availability of Funds pursuant to Section 40 of the Administrative Code, (2) In-house or Department of Justice legal opinion, (3) that there is no precedent disallowing a similar case in jurisprudence, (4) that it is traditionally practiced within the agency and no prior disallowance has been issued, and (5) with regard the question of law, that there is a reasonable textual interpretation on its legality."
[111] Rollo, pp. 9-13.
[112] Supra note 41, at 182.
[113] Rollo, p. 31.
[114] Id. at 35.
[115] Id. at 37.
[116] G.R. Nos. 217818, 218334, 219979, 220201, & 222118, May 31, 2016, p. 8 (Unsigned Resolution).
[117] Rollo, p. 9.
[118] R.A. 7160, Section 447(a)(1)(viii).
[119] G.R. No. 193677, September 6, 2011, 656 SCRA 767.
[120] Philippine Economic Zone Authority (PEZA) v. Commission on Audit, G.R. 210903, October 11, 2016, 805 SCRA 618.
[121] Id. at 621.
[122] Rollo, p. 27.
[123] Id.
PERLAS-BERNABE, J.:
I concur.
In this case, the Court has decided to set straight the conflicting jurisprudential guidelines in cases involving the directive to return amounts that are validly disallowed by the Commission on Audit (COA). As definitively expressed in the ponencia, the guidelines agreed upon by the members of this Court now serve to enlighten both the government and the public regarding the proper parameters for the return of disallowed public funds.
Consistent with the guidelines in the ponencia, I express my views on the frameworks of law that pertinently govern the return of amounts disallowed by the government. These frameworks of law pertain to the body of statutory provisions found in the Administrative Code on the one hand, and the applicable provisions of the Civil Code, on the other. An in-depth discussion of these two legal frameworks provides for a better understanding of the underlying reasons that justify the parameters for the return of disallowed amounts.
I. The Administrative Law Perspective
The Administrative Code "embodies changes in administrative structures and procedures designed to serve the people."[1] In the promulgation of Executive Order No. 292, Series of 1987, or the "Administrative Code of 1987," it was envisioned that "[t]he effectiveness of the Government will be enhanced by a new Administrative Code which incorporates in a unified document the major structural, functional and procedural principles and rules of governance."[2] In line with the foregoing, the impetus behind the Administrative Code provisions on public officers is to ensure public accountability. This is embodied in Section 32, Chapter 9, Book I thereof, which is a reflection of Section 1, Article XI[3] of the 1987 Constitution:
When there is an "[e]xpenditur[e] of government funds or us[e] of government property in violation of law or regulations,"[5] there is an "unlawful expenditure." An unlawful or illegal expenditure is subject to disallowance[6] by the COA.[7] Under Section 52, Chapter 9, Subtitle B, Title I, Book V of the Administrative Code, unlawful expenditures are the personal liability of officials or employees found to be directly responsible therefor:
However, it is integral to point out that approving or authorizing officers are not automatically held liable to return disallowed amounts based on every unlawful expenditure. Section 16.1.3 of COA Circular No. 2009-006 qualifies that approving/authorizing officers shall be liable for losses arising out of their negligence or failure to exercise the diligence of a good father of a family in approving/authorizing what turns out to be a disallowed transaction:
In a long line of cases,[18] the Court has ruled that the civil liability of public officers for illegal expenditures depends on a clear showing of bad faith, malice, or gross negligence; absent which, the presumptions of regularity and good faith operate to absolve them from said liability. Among others, in thel998 case of Suarez v. COA[19] (August 7, 1998), the Court absolved the petitioner therein of civil liability for the disallowance of a government contract on the basis of Section 38, Chapter 9, Book I of the Administrative Code, remarking that "[a] public officer is presumed to have acted in the regular performance of his/her duty; therefore, he/she cannot be held civilly liable, unless contrary evidence is presented to overcome the presumption[:]"[20]
Likewise, as indicated by the Administrative Code, good faith may be negated by a clear showing of the approving/authorizing officer's gross negligence in the performance of his duties. Gross negligence refers to:
In this relation, it should be stressed that the determination of whether a particular approving/authorizing officer has acted with bad faith, malice, or gross negligence in a given situation must be made on a case-to-case basis. To this end, the ponencia has adopted Justice Mario Victor M.V.F. Leonen's view that:
Once the existence of bad faith, malice, or gross negligence as contemplated under Section 38, Chapter 9, Book I of the Administrative Code is clearly established, the civil liability of approving/authorizing officers to return disallowed amounts based on an unlawful expenditure is solidary together with all other persons taking part therein, as well as every person receiving such payment. This solidary liability is found in Section 43, Chapter 5, Book VI of the Administrative Code, which states:
Since the law characterizes their liability as solidary in nature, it means that once this provision is triggered, the State can go after each and every person determined to be liable for the full amount of the obligation; this holds true irrespective of the actual amounts individually received by each co-obligor, without prejudice to claims for reimbursement from one another. As defined, a "solidary obligation [is] one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors."[39] However, "[h]e who made the payment may claim from his co-debtors only on the share which corresponds to each [co-debtor]."[40] Of course, the decision as to who the State will go after and the extent of the amount to be claimed falls within the discretion and prerogative of the COA. As provided for in Section 16.3 of COA Circular 2009-006:
II. The Civil Law Perspective
As preliminarily discussed, the main thrust of the Administrative Code is to exact accountability from public officials in the performance of official duties. For this reason, the Administrative Code requires a clear showing of bad faith, malice, or gross negligence on the part of the public officer in the performance of official duties before recovery of losses to the government may be sought.
However, when it comes to passive recipients, their civil liability is not premised on any bad faith, malice, or gross negligence, but rather, based on the application of the principles of solutio indebiti and unjust enrichment pursuant to the provisions of the Civil Code. Needless to state, when it comes to the Civil Code, there is no presumption of regularity because the individual is not viewed in his capacity as a State functionary, but rather, as an ordinary civil person. Consequently, the requirement to clearly show the existence of bad faith, malice, or gross negligence, as required in the Administrative Code, is not necessary to hold an individual liable under the provisions of the Civil Code.
In the case of Siga-an v. Villanueva,[41] the Court elucidated on the quasi contract of solutio indebiti:
At this juncture, it is crucial to underscore that good faith cannot be appreciated as a defense against an obligation under solutio indebiti as it is "'forced' by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment."[44] Moreover, it is discerned that the complete absolution of passive recipients from liability may indeed significantly reduce the funds to be recovered by the COA and as a result, cause great losses, or "fiscal leakage," to the detriment of the government. In other words, if non-return of passive recipients is the norm, then the COA's ability to recover may be greatly hampered. This skewed paradigm recognized in earlier jurisprudence should not anymore be propagated.
Nevertheless, the foregoing general rule mandating passive recipients to return should not apply where the disallowed compensation was genuinely intended as payment for services rendered. As examples, these disallowed benefits may be in the nature of performance incentives, productivity pay, or merit increases that have not been authorized by the Department of Budget and Management as an exception to the rule on standardized salaries. To be sure, Republic Act No. 6758,[45] otherwise known as the "Compensation and Position Classification Act of 1989," "standardize[s] salary rates among government personnel and do[es] away with multiple allowances and other incentive packages and the resulting differences in compensation among them."[46] Section 12 thereof lays down the general rule that all allowances of State workers are to be included in their standardized salary rates, with the exception of the following allowances:
Indeed, bearing in mind its underlying premise, which is "the ancient principle that no one shall enrich himself unjustly at the expense of another,"[47] solutio indebiti finds no application where there is no unjust enrichment. Particularly, an employee cannot be deemed to have been unjustly enriched where the disallowed amounts were genuinely intended as consideration for services rendered as there would be a practical exchange of value resulting into no loss to the government. In such instance, the return of the disallowed amounts is excused, and may therefore, be validly retained by the recipient. Further, the Court may also determine in the proper case bona fide exceptions, depending on the purpose and nature of the amount disallowed relative to the attending circumstances.
As earlier intimated, the treatment of passive recipient liability has a direct effect to the extent of the amount to be returned by erring approving/authorizing officers held solidarity liable under Section 38 (1), Chapter 9, Book I in relation to Section 43, Chapter 5, Book VI of the Administrative Code. When passive recipients are excused to return disallowed amounts for the reason that they were genuinely made in consideration for rendered services, or for some other bona fide exceptions determined by the Court on a case to case basis, the erring approving/authorizing officers' solidary obligation for the disallowed amount is net of the amounts excused to be returned by the recipients (net disallowed amount). The justifiable exclusion of these amounts signals that no proper loss should be recognized in favor of the government, and thus, bars recovery of civil liability to this extent. Accordingly, since there is a justified reason excusing the return, the State should not be allowed a double recovery of these amounts from the erring public officials and individuals notwithstanding their bad faith, malice or gross negligence. Besides, even if the amount to be recovered is limited in this sense, these erring public officers and those who have confederated and conspired with them[48] are subject to the appropriate administrative and criminal actions which may be separately and distinctly pursued against them.
III. Guidelines
All things considered, the following guidelines should be observed in disallowance cases for the guidance of the bench, bar, and the public:
1. Approving/authorizing public officers who were clearly shown to have acted in bad faith, with malice, or with gross negligence, are all solidarity liable for the return of the net disallowed amount. The net disallowed amount is the total disallowed amount minus the amounts excused to be returned by recipients (see exception in Guideline 3).
2. Those who have conspired or confederated with the approving/authorizing officers as stated in Guideline 1 are likewise solidarity liable with such officers for the net disallowed amount. Again, the net disallowed amount is the total disallowed amount minus the amounts excused to be returned by recipients (see exception in Guideline 3).
3. As a general rule, passive recipients, including approving/authorizing public officers who were not clearly shown to have acted in bad faith, with malice, or with gross negligence but had received disallowed amounts they have approved/authorized and thus also considered as passive recipients, are liable to return the amounts they have respectively received on the basis of solutio indebiti.
As an exception to this general rule, recipients - whether passive recipients or even erring approving/authorizing officers - are excused to return the disallowed amounts only if the amounts were genuinely intended in consideration for services rendered, or when reasonably excused by the Court due to bona fide exceptions depending on the purpose and nature of the amounts disallowed relative to the attending circumstances.
4. The foregoing civil liabilities notwithstanding, the State may pursue any other appropriate administrative or criminal actions against erring public officers and individuals involved in any unlawful expenditure case pursuant to existing laws and jurisprudence.
IV. Application to the Case at Bar
In this case, the COA disallowed the total amount of P7,706,253.10 pertaining to additional allowances given on top of the basic salary of the government employees involved. These are the Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Allowance (ACA), and Mitigation Allowance to Municipal Employees (MAME),[49] which, by nature, are all forms of financial assistance. The persons held liable were Municipal Mayor Mario M. Madera (Madera), Municipal Accountant Beverly C. Mananguite, and Municipal Budget Officers Carissa D. Galing and Josefina O. Pelo (Madera, et al.), and all other payees stated in the notices of disallowance.[50] As correctly ruled by the ponencia, Madera, et al., being the approving/authorizing officers, did not act in bad faith as there was no clear showing of any dishonest purpose, motive or intent, or ill will, when they granted these benefits to the payees involved. Quite the contrary, it was demonstrated that the resolutions and ordinances used as basis for the grant of these allowances were intended as financial assistance to municipal employees brought about by the effects of Typhoon Yolanda.[51] The amounts were then so disbursed for this purpose, despite the fact that they were technically unlawful expenditures for contravening Section 12[52] of RA 6758,[53] or the "Salary Standardization Law." Moreover, these additional allowances had been customarily granted over the years and that no previous disallowance was issued by the COA against similar allowances of such nature. Finally, the resolutions and ordinances, used as basis for these disbursements have not been invalidated, and hence, presumed to be valid.[54]
Taking these circumstances, Madera, et al. - the approving/authorizing officers who were not clearly shown to have acted in bad faith, with malice, or with gross negligence, are not civilly liable for the disallowed amounts under Section Section 38 (1), Chapter 9, Book I of the Administrative Code despite the legal propriety of the COA's reasons for disallowance.
As the disallowed amounts in this case, i.e., the subject ECA, MAMA, ACA, and MAME, were given as financial assistance in the wake of a significant calamity, i.e., the onslaught brought about by typhoon Yolanda, it is acceptable to excuse their return on humanitarian and social justice considerations. Accordingly, the subject notices of disallowance should be affirmed with modification as ruled in the ponencia. Again, it must be emphasized, that the exoneration of Madera, et al. from civil liability is without prejudice to the proper administrative or criminal actions that may be separately and distinctly pursued against them in accordance with law and jurisprudence.
[1] Executive Order No. 292, entitled "INSTITUTING THE 'ADMINISTRATIVE CODE OF 1987'" (August 3, 1988), 4th Whereas clause.
[2] ADMINISTRATIVE CODE, 3rd Whereas clause.
[3]ARTICLE XI
Accountability of Public Officers
Section 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives.
[4] 1987 CONSTITUTION, Article VI, Section 29 (1).
[5] ADMINISTRATIVE CODE, Book V, Title I, Subtitle B, Chapter 9, Section 52.
[6] Section 4.16 of COA Circular No. 2009-006 defines a disallowance as "the disapproval or in audit of a transaction."
[7] Section 10 of COA Circular No. 2009-006 pertinently reads:
[9] Section 50, Chapter 9, Subtitle B, Title I, Book V of the ADMINISTRATIVE CODE characterizes these officers as follows:
[11] Approved on September 15, 2009. Notably, the issuance superseded COA Circular No. 94-001, approved on January 20, 1994, otherwise known as the "Manual on Certificate of Settlement and Balances" (see Section 29, Chapter VII of COA Circular No. 2009-006), but the provisions on liability of public officers for disallowed expenditures have remained unchanged.
[12] COA Circular No. 2009-06, Section 4.21.
[13] 552 Phil. 101 (2007).
[14] Id.
[15] People v. Jolliffe, 105 Phil. 677, 682-683 (1959).
[16] 803 Phil. 652 (2017).
[17] Id. at 653.
[18] See Alejandrino v. COA, G.R. No. 245400, November 12, 2019; Gubat Water District v. COA, G.R. No. 222054, October 1, 2019; Unsigned Resolution in Castro v. COA, G.R. No. 233499, February 26, 2019; Montejo v. COA, G.R. No. 232272, July 24, 2018; Career Executive Service Board v. COA, G.R. No. 212348, June 19, 2018, 866 SCRA 475; Development Bank of the Philippines v. COA, 827 Phil. 818 (2018); Metropolitan Waterworks and Sewerage System v. COA, 821 Phil. 117 (2017); Philippine Health Insurance Corporation v. COA, 801 Phil. 427 (2016); Development Academy of the Philippines v. Tan, 797 Phil. 537 (2016); Philippine Economic Zone Authority v. COA, 797 Phil. 117 (2016); Social Security System v. COA, 794 Phil. 387 (2016); Velasco v. COA, 695 Phil. 226 (2012); Veloso v. COA, 672 Phil. 419 (2011); Agra v. COA, 677 Phil. 608 (2011); Singson v. COA, 641 Phil. 154 (2010); Lumayna v. COA, 616 Phil. 928 (2009); Bases Conversion and Development Authority v. COA, 599 Phil. 455 (2009); Barbo v. COA, 589 Phil. 289 (2008); Magno v. COA, 558 Phil. 76 (2007); Public Estates Authority v. COA, 541 Phil. 412 (2007); Casal v. COA, 538 Phil. 634 (2006); Kapisanan ng mga Manggagawa sa Government Service Insurance System v. COA, 480 Phil. 861 (2004); Abanilla v. COA, 505 Phil. 202 (2005); Home Development Mutual Fund v. COA, 483 Phil. 666 (2004); and Blaquera v. Alcala, 356 Phil. 678 (1998).
[19] 355 Phil. 527 (1998).
[20] Id. at 540-541.
[21] Id.
[22] Supra note 18.
[23] Id. at 165.
[24] Development Bank of the Philippines v. COA, supra note 18, at 833; Maritime Industry Authority v. COA, 750 Phil. 288, 337 (2015); and Philippine Economic Zone Authority v. COA, 690 Phil. 104, 115 (2012); emphases supplied.
[25] Fuentes v. People, 808 Phil. 586, 594 (2017).
[26] See G.R. No. 211999.
[27] See id.; citing Casal v. COA, supra note 18 and Sambo v. COA, 811 Phil. 344 (2017).
[28] See id.; citing Manila International Airport Authority v. COA, 681 Phil. 644 (2012) and Oriondo v. COA, G.R. No. 211293, June 4, 2019.
[29] Id.; citing Maritime Industry Authority v. COA, supra note 24.
[30] Id.; citing Silang v. COA, 769 Phil. 327 (2015).
[31] Office of the Ombudsman v. De Leon, 705 Phil. 26, 37-38 (2013).
[32] "[B]y law and jurisprudence, a mistake upon a doubtful or difficult question of law may properly be the basis of good faith." (Philippine National Bank v. Heirs of Militar, 526 Phil. 788, 797 [2006]).
[33] See supra note 26; citing Home Development Mutual Fund v. COA, supra note 18 and Lumayna v. COA, supra note 18.
[34] Rotoras, id.
[35] See supra note 18; see also Philippine Economic Zone Authority v. COA, supra note 18.
[36] Castro v. COA, supra note 18.
[37] Ponencia, pp. 21-22.
[38] Id. at 22; emphasis supplied.
[39] AFP Retirement and Separation Benefits System v. Sanvictores, 793 Phil. 442, 451 (2016); emphasis and underscoring supplied.
[40] CIVIL CODE, Article 1217.
[41] 596 Phil. 760 (2009).
[42] Id. at 772-773.
[43] Id. at 773.
[44] Philippine National Bank v. Court of Appeals, 291 Phil. 356, 367 (1993).
[45] Entitled "AN ACT PRESCRIBING A REVISED COMPENSATION AND POSITION CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER PURPOSES," approved on August 21, 1989.
[46] Gubat Water District v. COA, supra note 18.
[47] Ramie Textiles, Inc. v. Mathay, Sr., 178 Phil 482, 487 (1979).
[48] Section 16.1.4 of COA Circular No. 2009-006 provides:
[50] Id. at 4-6.
[51] See id. at 7.
[52] Section 12. Consolidation of Allowances and Compensation. - All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government. (Emphasis and underscoring supplied)
[53] Entitled "AN ACT PRESCRIBING A REVISED COMPENSATION AND POSITION CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER PURPOSES," also known as the "COMPENSATION AND POSITION CLASSIFICATION ACT OF 1989" (July 1, 1989).
[54] See ponencia, p. 7.
LEONEN, J.:
Before this Court are Mario Madera, Beverly Mananguite, Carissa Galing, and Josefina Pelo—the mayor, municipal accountant, and budget officers, respectively, of the municipality of Mondragon, Northern Samar. In their Petition for Certiorari under Rule 64 of the Rules of Court, they question the disallowances of Sangguniang Bayan Ordinance No. 08 and Sangguniang Bayan Resolution Nos. 41, 42, 43, and 48, series of 2013, which had granted various allowances[1] to the municipality's officials and employees amounting to P7,706,253.10.[2] They likewise contest being jointly and severally liable to refund the disbursed amounts, insisting that they approved the disbursements in good faith.
I concur with the ponencia that respondent Commission on Audit was correct in issuing the Notices of Disallowance, and that the public officers who authorized the disallowed benefits should be free of liability. Nevertheless, I qualify the additional guidelines on the liability that may attach to the authorizing officers, as well as the recipients (either passive or active) of the disallowed benefits.
I
I agree with the ponencia that petitioners applied the wrong reglementary period in filing their Petition. A petition for certiorari under Rule 64 applies Rule 65 provisions suppletorily. Although the sections for a petition for certiorari under Rule 64 and the ones under Rule 65 are almost identical, they provide different reglementary periods: Rule 64 provides a period of 30 days, while Rule 65 gives a period of 60 days.
To be sure, Rule 64 governs reviews of judgments or final orders of the Commission of Audit. Thus, its reglementary period will prevail here.
The 30-day period for filing a petition for certiorari began when petitioners received respondent's Decision on February 23, 2018. When they moved for reconsideration five days later, the reglementary period was interrupted. Thus, when petitioners received the subsequent Resolution on November 12, 2018, they still had 25 days, or until December 7, 2018, to file a petition. Unfortunately, they applied the 60-day period under Rule 65 and filed their petition on January 11, 2019.[3] Clearly, the Petition was filed out of time.
Nevertheless, I agree with the ponencia that this Petition presents an avenue to clarify the guidelines in cases involving disallowed benefits or incentives, as well as the corresponding liability of authorizing officers and recipients.[4]
II
It is well established that petitions for certiorari against Commission on Audit rulings are only granted when there is a sufficient finding of grave abuse of discretion. This is to give deference to the specialization of the Commission, whose power is constitutionally endowed:
Illegal expenditures are simply those that are contrary to law.[13] On the other hand, irregular, unnecessary, excessive, extravagant, or unconscionable transactions are comprehensively defined in Commission on Audit Circular No. 2012-003,[14] as follows:
In issuing the disallowances, respondent cited Section 12 of the Salary Standardization Law, which explicitly provides that the allowances not specified in the provision would be deemed included in the standard salary rates prescribed. It provides:
Aside from this, petitioners did not present in their Petition any new arguments regarding respondent's supposed grave abuse of discretion. Instead, they focused on their liability to refund the disallowed amounts. For that, I concur with the ponencia that petitioners failed to show that respondent had gravely abused its discretion in issuing the disallowances. The disallowances are, therefore, valid.
III
In discussing the liability of authorizing or certifying officers of disallowed disbursements, the ponencia took the opportunity to clarify conflicting jurisprudence on the issue. It adequately discussed the applicable laws and regulations and reviewed the relevant cases, which led to this Court's creation of a new set of guidelines in determining liability. In doing so, the ponencia went on to absolve petitioners from their liability to refund the disallowed amounts disbursed.
While I ultimately agree with the ponencia's conclusion, I propose that the nature of the transaction or the reason behind its disallowance be the basis in determining the liability of authorizing officers and recipients, instead of whether or not they acted in good faith.
Under Section 16.1 of Commission on Audit Circular No. 2009-006,[21] the liability of public officers and other persons for audit disallowances shall be determined based on the following: (a) the nature of the disallowance; (b) the duties of officers/employees concerned; (c) the extent of their participation in the disallowed transaction; and (d) the amount of damage or loss to the government.[22] Thus, the determination of liability will begin with identifying the reason behind the disallowance. Depending on the nature of the disallowance, various presumptions and liabilities for the responsible officers and employees will attach.
For expenditures disallowed for being excessive, extravagant, or ostentatious, there is no question that the Commission on Audit may properly demand their refund. The authorizing officers are to pay the disallowed benefits, not only for their blatant disregard of laws and regulations, but for their gross excessiveness and unreasonableness. That said, they would have no justification to excuse them from liability. This is illustrated in National Electrification Administration v. Commission on Audit,[23] where this Court found that the officers who had approved the advanced release of salary increases—which were later disallowed—blatantly disregarded the President's directives and orders. Accordingly, all officers and employees who had received the compensation were directed to refund the amounts received.
This was similarly applied in Casal v. Commission on Audit,[24] in which the incentive awards for employees, also released without authority from the President, were disallowed. This Court said:
To avoid this, authorizing officers for unnecessary disallowances generally have no liability to return the expenditures. Nevertheless, liability may attach if it is proven that the officers purposely and knowingly issued the unnecessary funds.
As for disallowances of illegal or irregular expenditures, a more objective approach is taken. First, the authorizing officer's basis for issuing the benefit must be reviewed. For one to be absolved of liability, the following requisites must be present: (1) a certificate of availability of funds, pursuant to Section 40[26] of the Administrative Code; (2) an in-house or a Department of Justice legal opinion; (3) lack of jurisprudence disallowing a similar case; (4) the issuance of the benefit is traditionally practiced within the agency and no prior disallowance has been issued; and (5) on the question of law, that there is a reasonable textual interpretation on the expenditure or benefit's legality.
If all of these requirements are met, the authorizing officer is absolved of liability for having shown that they exercised the diligence of a good father of the family in the performance of their duty.
In Blaquera v. Alcala,[27] officers and employees of several government agencies questioned the disallowance of productivity incentive benefits and their corresponding liability to return these benefits. While this Court upheld the disallowance since the benefits exceeded what was allowed, it excused the return of the amount, absent a showing of bad faith or malice. It held:
Recipients of the disallowed benefits enjoy an even wider leniency on liability. For illegal, irregular, or unnecessary transactions, recipients are not made liable, so as to prevent government employees from losing confidence in their superiors, lest the efficiency of administrative implementation and policy execution suffer. An exception is seen in Dubongco v. Commission on Audit,[31] where this Court affirmed the disallowance of collective negotiation agreement incentives and ordered both the authorizing officers and recipients to return the incentives received:
Nevertheless, Dubongco admits of an exception where recipients of collective negotiation agreement incentives may be excused from refund: if it is proven that they were not consulted in the agreement's ratification, and that they did not participate in disbursing the disallowed funds. Thus, in Silang v. Commission on Audit,[34] which also involved a collective negotiation agreement, the city mayor and Sanggunian members, who had approved the disallowed benefits, as well as the negotiating members of the union, were held liable for refund. Conversely, the passive recipients were not required to return the amounts since they did not participate in the acts that led to the disbursement. This Court held:
For ease of review, the matrix below illustrates the liability of each of the parties involved given the different reasons behind the disallowance.
IV
In this case, the disbursements were validly disallowed for being illegal and irregular. However, circumstances exist showing that petitioners exercised the diligence of a good father of the family when they implemented the release of the benefits.
It appears that petitioners implemented the disbursements in an honest belief that their release and distribution had legal basis. Records show that a Certificate of Availability of Funds was issued, showing that the municipality had enough savings to release the amounts. Moreover, believing that the disbursements were lawful, the Sangguniang Bayan even issued ordinances and resolutions appropriating a budget for the benefits. These disallowed benefits have been traditionally released to the municipality's employees and have never been disallowed in the past. There are also no jurisprudential precedents disallowing benefits of the like.
Clearly present here are all the requisites that absolve petitioners from liability on the amounts disbursed. Thus, as the ponencia declares, to order them to reimburse the disallowed amounts, including those received by the rank and file, would lead to undue prejudice.[38]
This is not to say that public officers are not to be held to a higher standard and do not need to be more circumspect in the performance of their duties. Given that our public officials discharge their functions as a public trust,[39] they are accountable for their actions that affect government funds and property they hold in trust for the public. However, when it is shown that they followed the required guidelines in the policy implementation, there is no need to penalize them by asking them to refund the disbursed amounts which they believed to be legal.
ACCORDINGLY, I vote to PARTIALLY GRANT the Petition.
[1] Ponencia, p. 2. These disallowed allowances were: (1) Economic Crisis Assistance; (2) Monetary Augmentation of Municipal Agency; (3) Agricultural Crisis Assistance; and (4) Mitigation Allowance to Municipal Employees.
[2] Id. at 4.
[3] Id. at 10.
[4] Id.
[5] CONST., art. IX-D, sec. 2(1).
[6] 633 Phil. 174 (2010) [Per J. Leonardo-De Castro, En Banc].
[7] Id. at 195-196.
[8] Presidential Decree No. 1445 (1978).
[9] 716 Phil. 322 (2013) [Per J. Perlas-Bernabe, En Banc].
[10] Id. at 332-333.
[11] Miralles v. Commission on Audit, 818 Phil. 380, 384 (2017) [Per J. Bersamin, En Banc].
[12] Id. at 390-391.
[13] Id. at 392.
[14] Updated Guidelines for the Prevention and Disallowance of Irregular, Unnecessary. Excessive, Extravagant and Unconscionable Expenditures, available at <https://www.coa.gov.ph/phocadownload/userupload/lssuances/Circulars/Circ2012/COA_C2012-003.pdf> (last accessed on September 7, 2020).
[15] COA Circular No. 2012-003(2012), item no. 3.1.
[16] COA Circular No. 2012-003(2012), item no. 4.1.
[17] COA Circular No. 2012-003(2012), item no. 5.1.
[18] COA Circular No. 2012-003 (2012), item no. 6.1.
[19] COA Circular No. 2012-003 (2012), item no. 7.1.
[20] COA Circular 2013-003 (2013), item II. Reiteration of Audit Disallowance of Payments without Legal Basis of Allowances, Incentives, and Other Benefits of Government Officials and Employees in the NGAs, LGUs, and GOCCs and their Subsidiaries, available at <https://www.coa.gov.ph/phocadownloadpap/userupload/Issuances/Circulars/Circ2013/COA_C2013- 003.pdf> (last accessed on September 7, 2020).
[21] Rules and Regulations on the Settlement of Accounts (2009).
[22] COA Circular No. 2009-006 (2009), sec. 16.1.
[23] 427 Phil. 464 (2002) [Per J. Carpio, En Banc].
[24] 538 Phil. 634 (2006) [Per J. Carpio Morales, En Banc].
[25] Id. at 644-645.
[26] SECTION 40. Certification of Availability of Funds. - No funds shall be disbursed, and no expenditures or obligations chargeable against any authorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged.
No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received.
[27] 356 Phil. 678 (1998) [Per J. Purisima, En Banc].
[28] Id. at 765-766.
[29] 616 Phil. 929 (2009) [Per J. Del Castillo, En Banc].
[30] Id. at 944-945.
[31] G.R. No. 237813, March 5, 2019, <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65051> [Per J.C. Reyes, En Banc].
[32] Id.
[33] G.R. No. 237987, March 19, 2019, <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65047> [Per. J. Reyes, Jr., En Banc].
[34] 769 Phil. 327 (2015) [Per J. Perlas-Bernabe, En Banc].
[35] Id. at 347-349.
[36] G.R. No. 211999, August 20, 2019, <http://sc.judiciary.gov.ph/8130/> [Per J. Leonen, En Banc].
[37] Id. at 24.
[38] Ponencia, p. 34.
[39] CONST., art. XI, sec. 1.
INTING, J.:
I concur.
I expound on my views on the liability of the actors involved in a disallowed transaction, as well as the concept of "good faith" in disallowance cases.
I
The ponente recognizes that disallowance cases have been ruled upon on a case-to-case basis. One could even go as far as saying that each disallowance case is unique, inasmuch as the facts behind, nature of the amounts involved, and individuals so charged in one notice of disallowance are hardly ever the same with any other.
I share my observations on the facts behind commonly cited jurisprudence on dissallowance cases.
Blaquera v. Hon. Alcala[1] (Blaquera), the pioneer case law on good faith and the obligation to reimburse in disallowance cases, was a case on the constitutionality (via petitions for certiorari and prohibition) of Administrative Order (AO) Nos. 29 and 268 on various grounds, which directed the concerned government agencies that paid out productivity incentive bonuses to return the same for being excessive and without prior approval of the President. The Court eventually upheld the AOs, but did not require the recipients nor the officials concerned to refund the bonuses on account of good faith, viz.:
Thereafter, the Court applied Blaquera in a number of cases involving the disallowance of illegal disbursements to exempt passive recipients[4] from their obligation to refund the amounts paid or released to them.
In contrast, a number of subsequent jurisprudence citing Blaquera, such as Executive Director Casal v. Commission on Audit,[5] Lumayna, et al. v. Commission on Audit,[6] TESDA v. COA Chairperson Tan, et al.,[7] Silang, et al. v. Commission on Audit,[8] Metropolitan Naga Water District, et al v. Commission on Audit,[9] National Transmission Corporation v. Commission on Audit, et al.,[10] Nayong Filipino Foundation, Inc. v. Chairperson Pulido Tan, et al.,[11] and Balayan Water District v. Commission on Audit,[12] were all disallowance cases per se that reached the Court via petitions for certiorari under Rule 64 in relation to Rule 65, assailing various COA decisions which upheld the disallowance of disbursements, and the corresponding liability of officials and recipients involved therein.
Following is a tabular comparison of the above-cited disallowance cases' pertinent details:
One notable factor that may have caused divergent outcomes in these cases is the manner by which the COA charges persons under notices of disallowance. Under the COA Rules,[14] custodians of public funds,[15] certifying officers,[16] approving/authorizing officials,[17] co-conspirators in the illegal disbursement,[18] and the recipients[19] of illegal payments may be held liable for a disallowance. Verily, there may be disbursements that may not have involved the participation of a custodian or a so-called co-conspirator. In contrast, the involvement of approving/certifying officers and recipients is indispensible inasmuch as these transactions would have necessarily been approved first prior to its release and the payment thereof received by a certain individual/entity. Thus, it is reasonable to expect that all notices of disallowance will be initially issued against these indispensable parties. Yet, as evident from the table above, there had been cases where the COA omitted the certifying/approving or the recipients from charges for no specified reason.
It becomes apparent that there are rarely two disallowance cases that will fall squarely on each others' factual foundation. The present case, for example, involves the payment of economic crisis assistance, monetary augmentation of municipal agency, agricultural crisis assistance, and mitigation allowance to municipal employees, as well as approving/certifying officers and payees alike. In other words, its factual background is distinct and separable.
That the guidelines as laid out by the ponente have now become more fluid is the most reasonable manner by which the Court could settle the present controversy, without unduly restricting the Court's exercise of judicial review in future disallowance cases. These rules appropriately serve as guideposts for subsequent rulings and at the same time allow the Court sufficient leeway to decide on these issues on a case-to-case basis.
II
The ponencia makes an excellent distinction between/among the different aspects of one's personal liability for a disallowance: the civil aspect, which is "based on the loss incurred by the government because of the transaction," and the administrative/criminal aspects, which are founded on "irregular or unlawful acts attending the transaction."
At this juncture, I find it important to clearly differentiate between payees and approving/certifying officers, to particularize their respective roles in the transactions. These roles must always be delineated because appreciating good faith in favor of the parties and determining their respective liabilities are founded on the extent of their participation in the transaction.
The statutory basis of liability over illegal expenditures is found in the Administrative Code of 1987,[20] viz.:
In the case at bar, the notice of disallowance charged persons under the first and third categories: approvers/certifiers who were at the same time payees of the disallowed amounts and payees whose participation was limited to their receipt of the amounts.
A. Approving/Certifying Officers
Verily, the first category encompasses all public officers who authorized/approved an illegal disbursement. However, not all seals of approval and authority, albeit in relation to the same transaction, bear the same weight.
Inasmuch as each officer's liability is grounded on the extent of his participation,[21] there must be a distinction among the different classes of "approving/certifying" officers involved in the disbursement according to the specific bounds of their authority, viz.: (i) the authority to direct or instruct the payment of a disbursement per se; (ii) the authority to act on these instructions/directives and approve documents to effect payment thereof (i.e., vouchers, checks, etc.); and (iii) the authority to certify that funds are available for the disbursement and that the allotment therefor may be charged accordingly.
Depending on the government agency or instrumentality, the power to disburse public funds is vested exclusively in the person/body named in their respective original charters, e.g., the department secretary, commission chairperson, local chief executive/sanggunian, or board of directors/trustees. Stated differently, only these officials are authorized to instruct/direct the payment of a disbursement through the issuance of a memorandum, letter of instruction, ordinance, or board resolution, as the case may be.
Certainly, this power is not unfettered. Their exercise therefor must yield to the fundamental rule that public funds shall only be used to pay expenditures pursuant to an appropriation law or other specific statutory authority.[22] Otherwise, their directive/instruction shall be ultra vires, rendering the disbursement illegal. Thus, these typically high-ranking officials shall answer for the resulting disallowance for acting beyond the authority entrusted to them.
In the ordinary course of fiscal administration, the higher authority's directive (i.e., memorandum, resolution, etc.) shall trigger the disbursement process. In turn, another group of "approving officers" shall prepare, review, and sign the relevant documents' (i.e., purchase orders, forms, disbursement/check vouchers, checks, etc.) to release the funds. Each one shall perform his duty in accordance with the applicable internal control procedures and rules mandated by the COA and/or the government instrumentality itself.
Expenses paid in violation of established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law (e.g., without the approval of the authorized signatory of checks, without the required supporting documents, etc.) are illegal or irregular[23] expenditures, as the case may be. The erring official shall be liable for the subsequent disallowance for failure to perform his specific duty in the disbursement process.
The Administrative Code of 1987[24] requires every disbursement to be accompanied by a certification issued by the Chief Accountant or head of accounting of the government instrumentality concerned, attesting to the following: a) that funds are available for the disbursement, b) that the corresponding allotment may be charged, and c) that the expense/disbursement is valid, authorized, and supported by sufficient evidence.[25]
A disbursement not validly certified according to this rule shall be disallowed for being illegal.[26] In turn, under the COA rules, a certifying officer shall be liable for the disallowed amount according to the extent of his certification.[27] Further, he shall be dismissed from service and susceptible to criminal prosecution.[28]
It is clear from the foregoing that the source of an approving officer's obligation to refund the disallowed amount is a quasi-delict,[29] since his liability hinges on the manner by which he exercised his functions. In this case, the defense of good faith is available to him. Further, he shall be presumed to have regularly performed his duties, provided there is no clear indicia of bad faith, showing patent disregard of his responsibility.
B. Payees
On the other hand, simple payees have no role in the transaction, much less the disbursement approval process, other than receiving and economically benefiting from the payment. Their liability is not based on an administrative duty to perform a task.
"Participation" does not only comprehend one's performance of an official function (public officer). One is seen to have participated in an unlawful expenditure if he had a role therein, even as a person who did not sign or approve any of the disbursements but merely received payment thereof. Their erroneous receipt is what gives rise to the liability to return.
Thus, payees are liable to return the amount simply because it was paid by mistake. No one should ever be unjustly enriched, especially if public funds are involved. Since their liability is a quasi-contract (solutio indebiti), good faith can never be an excuse. In other words, payees cannot be absolved from liability using the same reasoning to exempt approvers/certifiers, simply because the nature of their liability for the transaction is not the same.
III
The general rule remains to be holding a payee liable for a disallowed amount he has received because it violates the principle against unjust enrichment. It is only in truly exceptional circumstances, as shown and established by the antecedent facts, that the Court may exonerate him from the obligation. The unique exempting circumstance present in the case at bar is the onslaught of the typhoon Yolanda, which justifies the Court's appreciation of social justice considerations.
Also, the ponencia now enunciates to henceforth consider certain employee benefits as bona fide exceptions to the application of solutio indebiti, inasmuch as these were paid in exchange of services rendered.
Parenthetically, that a disallowed payment happened to be in the nature of employee benefits to compensate service rendered should not diminish or extinguish altogether the recipients' obligation to return. In theory, these benefits were given to compensate services rendered. However, is the payment itself supported by law? This virtual exchange of value (disbursement vis-a-vis service rendered by civil servant) should not be the sole consideration in upholding the payment's validity.
For example, merit increases are given for exemplary performance in public office. However, there are cases where the increases are excessive and totally lacking of legal basis because they were computed using a rate or facto in excess of what was provided under the law. In the computation of separation pay, there may be instances where the law clearly provides for a 1.5 multiplier and, yet, an employee nonetheless receives separation pay computed with a different one (e.g., 2.0 or 2.5, etc.), simply because the board of directors or the president took the initiative to reward their employees. Furthermore, there are also instances where employees are given allowances, which were intended to be consumed as part of the performance of their official functions, but clearly in violation of the Salary Standardization Law.
To stress, the uniqueness of each disallowance case simply demands the Court to individually evaluate the attending facts. While the Court recognizes certain rare exceptions, We will remain discriminating in exonerating payees from liability in the future.
Accordingly, I submit my concurrence to the ponencia.
[1] 356 Phil. 678 (1998).
[2] Id. at 765-766.
[3] 729 Phil. 60 (2014).
[4] See Silang, et al. v. Commission on Audit, 769 Phil. 327 (2015).
[5] 538 Phil. 634 (2006).
[6] 616 Phil. 929 (2009).
[7] TESDA v. COA Chairperson Tan, et al., supra note 3.
[8] Silang, et al. v. Commission on Audit, supra note 4.
[9] 782 Phil. 281 (2016).
[10] 800 Phil. 618 (2016).
[11] 818 Phil. 406 (2017).
[12] G.R. No. 229780, January 22, 2019.
[13] 501 Phil. 115 (2005).
[14] Section 16.1, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[15] Section 16.1.1, id.
[16] Section 16.1.2, id.
[17] Section 16.1.3, id.
[18] Section 16.1.4, id.
[19] Section 16 1.5, id.
[20] Section 43, Chapter 5, Book VI, Executive Order No. 292.
[21] Section 29(1), Article VI, 1987 Constitution. See also Section 16.1, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[22] Section 45, Chapter 8, Subtitle B, Title I, Book V, Administrative Code of 1987.
[23] Paragraph 3.1, COA Circular No. 85-55-A, [September 8, 1985].
[24] Section 40, Chapter 5, Book VI, Administrative Code of 1987.
[25] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence."
[26] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received."
[27] Section 16.1.2, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[28] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code."
[29] Article 2176, Civil Code.
Before the Court is a petition for certiorari[1] under Rule 64 in relation to Rule 65 of the Rules of Court, assailing the COA Decision[2] dated December 27, 2017 and Resolutions[3] dated August 16, 2018 which affirmed the disallowance of various allowances given in 2013 to the officials and employees of the Municipality of Mondragon, Northern Samar (the Municipality).
In December 2013, the Municipality passed and approved Sangguniang Bayan (SB) Ordinance No. 08[4] and SB Resolutions Nos. 41,[5] 42,[6] 43,[7] and 48,[8] all series of 2013, granting various allowances to its officials and employees. These allowances are: 1) Economic Crisis Assistance (ECA), 2) Monetary Augmentation of Municipal Agency (MAMA), 3) Agricultural Crisis Assistance (ACA), and 4) Mitigation Allowance to Municipal Employees (MAME).
For the ECA, the Whereas Clauses of SB Resolution No. 41, series of 2013, state:
As regards the MAMA, the grant of the same is authorized by SB Resolution No. 42, series of 2013, which provides:
With respect, to the ACA, the Whereas Clauses of Resolution No. 43, series of 2013, state:
Lastly, SB Resolution No. 44, series of 2013, authorizes the grant of the MAME and its Whereas Clauses states:
In total, these allowances in question amounted to P7,706,253.10[13] as specified below:
Notices of Disallowance
On post audit, the Audit Team Leader (ATL) and the Supervising Auditor (SA) of the Municipality issued a total of 11 Notices of Disallowance (NDs) dated February 20, 2014 for the grant of the ECA, MAMA, ACA and MAME (subject allowances) as specified below:
The ATL and SA disallowed the subject allowances on the ground that the grants were in violation of the following:
a) | Section 12 of Republic Act No. (R.A.) 6758 or the Salary Standardization Law (SSL) as regards the consolidation of allowances and compensation; |
b) | Item II of COA Circular No. 2013-003 dated January 30, 2013 which excluded the subject allowances among the list of authorized allowances, incentives, and benefits; |
c) | Items 4 and 5 of Section 1.a of Civil Service Commission (CSC) Resolution No. 02-0790 dated June 5, 2002, which provides that employees under contract or job order do not enjoy the benefits enjoyed by the government employees (such as the Personnel Economic Relief Allowance or PERA, Additional Compensation Allowance or ACA, and Representation Allowance and Transportation Allowance or RATA), and that the services rendered thereunder are not considered as government service.[16] |
The persons held liable under the NDs were as follows:
Notably, the records show that Madera, Mananguite, Galing and Pelo (petitioners) also received the benefits covered by ND Nos. 14-010-101(2013), 14-011-101(2013), 14-012-101(2013), and 14-015-101(2013).[18]
On January 8, 2015, petitioners filed their appeal with the COA Regional Director (RD). They argued that the grant of additional allowances to the employees is allowed by R.A. 7160 or the Local Government Code (LGC); hence, the LGC actually repealed Section 12 of R.A. 6758[19] because the former law allows the municipality to grant additional allowances/financial assistance should its finances allow. Petitioners also claimed that the pronouncement of the Audit Team that the disallowed allowances were not among those listed under COA Circular No. 2013-003 is not correct considering that said Circular also stated that "other allowances not listed above, whether granted government-wide or specific to certain government agencies are likewise recognized provided there is sufficient legal basis thereof."[20]
Additionally, petitioners contended that the grant of additional allowances/financial assistance in the Municipality was a customary scheme over the years. They also claimed that the allowances were considered as financial assistance to the employees who suffered the effects of Typhoon Yolanda. Lastly, petitioners averred that the Sangguniang Panlalawigan (SP), the Department of Budget and Management (DBM) and the COA did not declare the appropriation ordinance as invalid; hence, they remain legal and valid.[21]
In a Decision[22] dated July 14, 2015, the RD affirmed the NDs and ruled that government units are not exempt from the SSL and the grant and payment of the subject allowances were subject to Section 12 of R.A. 6758 which provides that all allowances such as the ECA, MAMA, ACA and MAME are deemed integrated in the standardized salary rates and only six enumerated allowances are considered excluded from the integration. According to the RD, while it may be true that the subject allowances were not among those included in the list of authorized allowances and they may be granted if there is sufficient legal basis, the appropriation ordinance is not sufficient to become the legal basis. Moreover, petitioners' assertion that R.A.7160 repealed the provision of Section 12 of R.A. 6758 is not convincing since Section 534 of R.A. 7160 mentions the specific laws or parts thereof which are repealed, and R.A. 6758 is not one of them.[23]
Moreover, the RD ruled that petitioners cannot hide behind the claim that the grant of such benefits was a customary scheme of the Municipality because practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law.[24]
As for petitioners' contention that no appropriation ordinance of the Municipality had been declared invalid, the RD gave scant consideration to the same on the position that the subject ordinance and resolutions showed no indication of their having been transmitted to the SP for review in accordance with Section 327[25] of R.A. 7160. Moreover, the subject ordinance and resolutions appropriated amounts for the disallowed benefits from the savings, unexpended allotment, and unappropriated balances for 2013 of the Municipality, in violation of Section 322[26] of R.A. 7160.[27]
Lastly, petitioners cannot claim that the subject allowances were given as financial assistance to the employees because good intention, no matter how noble, cannot be made an excuse for not adhering to the rules.[28]
Consequently, petitioners appealed to the COA.
In a Decision dated December 27, 2017, the COA affirmed the ruling of the COA Regional Office, with modification in that the officials and employees who unwittingly received the disallowed benefits or allowances are not held liable for their reimbursement since they are recipient-payees in good faith.
The COA opined that, following applicable rules, the approving officer and each employee who received the disallowed benefit or allowance are obligated, jointly and severally, to refund the amount received. However, it also recognized that the Court has ruled, by way of exception, that passive recipients of disallowed amounts need not refund if they received the same in good faith. Thus, while the COA itself observed that this results in an inequitable burden on the approving officers and that the same is inconsistent with the concept of solutio indebiti, it nevertheless applied the exception as to passive recipients in deference to the Court.[29] Thus, the COA ruled as follows:
WHEREFORE, premises considered, the Petition for Review of Mayor Mario M. Madera, et al., Municipality of Mondragon, Northern Samar, of Commission on Audit - Regional Office No. VIII Decision No. 2015-020 dated July 14, 2015 is DENIED. Accordingly, Notice of Disallowance Nos. 14-004-101(2013) to 14-008-101 (2013) and 14-010-101 (2013) to 14-015-101(2013), all dated February 20, 2014, on the grant of Economic Crisis Assistance, Agricultural Crisis Allowance, Monetary Augmentation of Municipal Agency, and Mitigation Allowance to the officials and employees of the municipality, including national government employees assigned thereat, in the total amount of P7,706,253.10, are AFFIRMED with MODIFICATION.On February 28, 2018, petitioners filed a Motion for Reconsideration (MR), which was denied in a Resolution dated August 16, 2018. Petitioners received a copy of the Resolution denying the MR on November 12, 2018.[31] Aggrieved, petitioners filed the present petition.
The municipal officials who passed and approved the Sangguniang Bayan Ordinance and Resolutions authorizing the grant of subject allowances, including those who approved/certified the payment thereof, are made to refund the entire disallowed benefits or allowances. However, the officials and employees who unwittingly received the disallowed benefits or allowances are not liable for their reimbursement, they, being recipient-payees in good faith.[30] (Emphasis supplied and emphasis in the original omitted)
On January 11, 2019, petitioners filed a petition for certiorari under Rule 64 in relation to Rule 65 of the Rules of Court. While petitioners maintain that the allowances were legal, they also raise the defense of good faith in order to not be held liable for the disallowed amounts.
In its Comment,[32] the COA, through the Office of the Solicitor General (OSG), contends that it did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in upholding the NDs. Likewise, it avers that the liability imposed on petitioners was grounded on jurisprudence.
The issue to be resolved is whether the COA committed grave abuse of discretion in issuing the assailed Decision and Resolution.
Specifically, the resolution of this case rests ultimately on whether the COA was correct in holding petitioners liable for the refund of the disallowed amounts.
The petition is partly meritorious.
I. Timeliness of the Petition
At the outset, the Court notes that the petition was filed out of time. Petitioners confused Rules 64 and 65 of the Rules of Court when they erroneously claimed that their petition was timely filed within 60 days from notice of judgment.[33] Rule 64 provides:
SECTION 1. Scope. This Rule shall govern the review of judgments and final orders or resolutions of the Commission on Elections and the Commission on Audit.As gleaned from above, Rule 65 applies to petitions questioning the judgments, final orders, or resolutions of the COA only insofar as Rule 64 does not specifically provide the rules. Consequently, since Rule 64 explicitly provides the 30-day period for the filing of the petition, the same shall apply - not the 60-day period provided in Rule 65.
SEC. 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided.
SEC. 3. Time to file petition. The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial. (Underscoring supplied)
To recall, the COA Decision was promulgated on December 27, 2017 and petitioners received a copy of the Decision on February 23, 2018. Thus, the 30 day-period began to run from February 23, 2018. However, following Section 3, Rule 64 the period was interrupted when petitioners filed an MR on February 28, 2018. Petitioners received a copy of the Resolution denying their MR on November 12, 2018. Consequently, they had 25 days from November 12, or until December 7, 2018 to file their petition before the Court. However, petitioners only filed their petition on January 11, 2019 or 35 days after the last day of filing.
From the foregoing, there is no dispute that petitioners belatedly filed their petition before the Court. Nevertheless, the petition appears to be partly meritorious. Time and again, the Court has relaxed the observance of procedural rules to advance substantial justice.[34] Moreover, the present petition provides an appropriate avenue for the Court to settle the conflicting jurisprudence on the liability for the refund of disallowed allowances. Thus, the Court opts for a liberal application of the procedural rules considering that the substantial merits of the case warrant its review by the Court.
The Constitution vests the broadest latitude in the COA in discharging its role as the guardian of public funds and properties.[35] In recognition of such constitutional empowerment, the Court has generally sustained the COA's decisions or resolutions in deference to its expertise in the implementation of the laws it has been entrusted to enforce.[36] Thus, the Constitution and the Rules of Court provide the remedy of a petition for certiorari in order to restrict the scope of inquiry to errors of jurisdiction or to grave abuse of discretion amounting to lack or excess of jurisdiction committed by the COA.[37] For this purpose, grave abuse of discretion means that there is, on the part of the COA, an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, such as when the assailed decision or resolution rendered is not based on law and the evidence but on caprice, whim and despotism.[38]
In this case, petitioners failed to show that the COA gravely abused its discretion in affirming the subject NDs. Nevertheless, there is merit to their contention that they should not be held liable to refund the disallowed amounts.
II. Propriety of the Disallowance
As regards the propriety of the issuance of the NDs, the Court notes that while petitioners maintain that the subject allowances had sufficient legal basis, the petition fails to substantiate their claim. The petition principally tackles petitioners' liability for the disallowed amounts, insisting that they approved the subject allowances in good faith.[39] The petition offered no new argument as regards the legality of the subject allowances. Thus, as regards the validity of the disallowance, the Court is constrained to rely on petitioners' submissions before the COA.
After a careful review of the records of the case, the Court upholds the NDs against the subject allowances, finding no grave abuse of discretion on the part of the COA in affirming the disallowance. The Court quotes with approval the following pronouncements by the COA:
Section 447(a)(l)(viii) of RA No. 7160 provides:In view of the foregoing, the Court upholds the NDs against the ECA, ACA, MAME, and MAMA.SEC. 447. Powers, Duties, Functions and Compensation. - (a) The sangguniang bayan, as the legislative body of the municipality, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the municipality and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the municipality as provided for under Section 22 of this Code, and shall:In addition, Section 12 of RA No. 6758, the SSL, states:
Moreover, in the case of Luciano Veloso, et al. vs. COA, the Supreme Court ruled that:[T]he disbursement of public funds, salaries and benefits of government officers and employees should be granted to compensate them for valuable public services rendered, and the salaries or benefits paid to such officers or employees must be commensurate with services rendered. In the same vein, additional allowances and benefits must be shown to be necessary or relevant to the fulfillment of the official duties and functions of the government officers and employees. Without this limitation, government officers and employees may be paid enormous sums without limit or without justification necessary other than that such sums are being paid to someone employed by the government. Public funds are the property of the people and must be used prudently at all times with a view to prevent dissipation and waste.Thus, the grant of ECA, ACA, MAME, and MAMA to the officials and employees cannot be justified as a simple gesture of gratitude of the municipality to its employees for their great contribution to the delivery of public service. The grant of any benefit to them must be necessary or relevant to the performance of their official duties and functions, which is absent in this case.
The appellants' claim that the grant of additional allowances/financial assistance to the municipal and national employees assigned thereat is a customary scheme of the municipality anchored on a yearly appropriation ordinance is misplaced, as the grant thereof is illegal. xxx[40]
III. Liability of the petitioners for the return of the disallowed allowances |
On their liability for the refund of the disallowed allowances, petitioners aver that they should not be held liable as they approved the disbursements in good faith. In support of this claim, petitioners cited various cases[41] where the Court did not order a refund despite upholding the disallowance.[42] Petitioners insist that since the COA failed to show that they were in bad faith in approving the allowances, the alleged refund should not be personally imposed on them especially considering that they merely relied on the yearly grant of additional allowances that were not previously disallowed by the COA.[43]
To recall, the NDs, as issued, held the payees of the disallowed allowances liable for being claimants or recipients of said amounts. The payees' liability to return the amounts was likewise affirmed by the COA RD. It was only on appeal to the COA Proper that the petitioning officers were held liable for the refund of the entire disallowed amount while the recipient-payees in good faith were excused.
In its assailed Decision, the COA Proper cited the 2015 case of Silang v. Commission on Audit[44] (Silang) where the Court ruled that public officials who are directly responsible for, or participated in making the illegal expenditures, as well as those who actually received the amounts therefrom, shall be solidarity liable for their reimbursement. Consequently, the obligation to refund the payment received falls upon both those directly responsible, i.e., the approving officers, and those who actually received the disallowed benefit.[45] According to the COA, this is consistent with Section 43, Chapter 5, Book VI of Executive Order No. (E.O.) 292 or the Administrative Code of 1987, which states in part:
SECTION 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.Consequently, the COA concluded that the approving officers and each employee who received the disallowed benefit are obligated, jointly and severally, to refund the amount so received. However, in the same breath, the COA also acknowledged the ruling of the Court in several cases as regards passive recipients or payees of disallowed amounts who received the same in good faith, to wit:
Clearly, the approving officer and each employee who received the disallowed benefit are obligated, jointly and severally, to refund the amount so received. The Supreme Court has ruled that by way of exception, however, passive recipients or payees of disallowed salaries, emoluments, benefits and other allowances need not refund such disallowed amounts if they received the same in good faith. Stated otherwise, government officials and employees who unwittingly received disallowed benefits or allowances are not liable for their reimbursement if there is no finding of bad faith.Indeed, the Court recognizes that the jurisprudence regarding the refund of disallowed amounts by the COA is evolving, at times conflicting, and is primarily dealt with on a case-to-case basis. The discussions made in this petition, however, have made it apparent that there is now a need to harmonize the various rulings of the Court. For this reason, the Court takes this opportunity to lay down the rules that would be applied henceforth in determining the liability to return disallowed amounts, guided by applicable laws and rules as well as the current state of jurisprudence.
The result of exempting recipients who are in good faith from refunding the amount received is that the approving officers are made to shoulder the entire amount paid to the employees. This is perhaps an inequitable burden on the approving officers, considering that they are or remain exposed to administrative and even criminal liability for their act in approving such benefits, and is not consistent with the concept of solutio indebiti and the principle of unjust enrichment.
Nevertheless, in deference to the Supreme Court ruling in Silang v. COA, the Commission rules that government officials and employees who unwittingly received disallowed benefits or allowances are not liable for their reimbursement if there is no finding of bad faith. Public officials who are directly responsible for or participated in making illegal expenditures shall be solidarily liable for their reimbursement.[46] (Emphasis and underscoring supplied)
In arriving at these new set of rules, the Court shall first delve into: a) the statutory bases for the liability of approving and certifying officers and payees for illegal expenditures; b) the badges of good faith in determining the liability of approving and certifying officers; c) the body of jurisprudence which inequitably absolve responsible persons from liability to return based on good faith; and d) the nature of the payees' participation and their liability for return and the acceptable exceptions as regards the liability to return disallowed amounts on the bases of unjust enrichment and solutio indebiti. The discussion on these matters will serve as the foundation of the rules of return that will be laid down in this decision.
A. Bases for Responsibility/Liability
The Budget Reform Decree of 1977[47] (PD 1177) provides:
SEC. 49. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Decree or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.Parenthetically, the Government Auditing Code of the Philippines[48] (PD 1445), promulgated a year after PD 1177, provides:
Any official or employee of the Government knowingly incurring any obligation, or authorizing any expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the service, after due notice and hearing by the duly authorized appointing official. If the appointing official is other than the President and should he fail to remove such official or employee, the President may exercise the power of removal. (Underscoring supplied)
SECTION 102. Primary and secondary responsibility. - (1) The head of any agency of the government is immediately and primarily responsible for all government funds and property pertaining to his agency.These provisions of PD 1177 and PD 1445 are substantially reiterated in the Administrative Code of 1987, thus:
(2) Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the government.
SECTION 103. General liability for unlawful expenditures. - Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.
SECTION 104. Records and reports required by primarily responsible officers. - The head of any agency or instrumentality of the national government or any government-owned or controlled corporation and any other self-governing board or commission of the government shall exercise the diligence of a good father of a family in supervising accountable officers under his control to prevent the incurrence of loss of government funds or property, otherwise he shall be jointly and solidarity liable with the person primarily accountable therefore. The treasurer of the local government unit shall likewise exercise the same degree of supervision over accountable officers under his supervision otherwise, he shall be jointly and solidarity liable with them for the loss of government funds or property under their control.
SECTION 105. Measure of liability of accountable officers. - (1) Every officer accountable for government property shall be liable for its money value in case of improper or unauthorized use or misapplication thereof, by himself or any person for whose acts he may be responsible. He shall likewise be liable for all losses, damages, or deterioration occasioned by negligence in the keeping or use of the property whether or not it be at the time in his actual custody.
(2) Every officer accountable for government funds shall be liable for all losses resulting from the unlawful deposit, use, or application thereof and for all losses attributable to negligence in the keeping of the funds.
SECTION 51. Primary and Secondary Responsibility. - (1) The head of any agency of the Government is immediately and primarily responsible for all government funds and property pertaining to his agency;It is well-settled that administrative, civil, or even criminal liability, as the case may be, may attach to persons responsible for unlawful expenditures, as a wrongful act or omission of a public officer.[51] It is in recognition of these possible results that the Court is keenly mindful of the importance of approaching the question of personal liability of officers and payees to return the disallowed amounts through the lens of these different types of liability.
(2) Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the Government.
SECTION 52. General Liability for Unlawful Expenditures. - Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.[49]
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SECTION 40. Certification of Availability of Funds. - No funds shall be disbursed, and no expenditures or obligations chargeable against any authorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged.
No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received.
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SECTION 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.
Any official or employee of the Government knowingly incurring any obligation, or authorizing any expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the service, after due notice and hearing by the duly authorized appointing official. If the appointing official is other than the President and should he fail to remove such official or employee, the President may exercise the power of removal.[50] (Underscoring supplied)
Correspondingly, personal liability to return the disallowed amounts must be understood as civil liability[52] based on the loss incurred by the government because of the transaction, while administrative or criminal liability may arise from irregular or unlawful acts attending the transaction. This should be the starting point of determining who must return. The existence and amount of the loss and the nature of the transaction must dictate upon whom the liability to return is imposed.
Sections 38 and 39, Chapter 9, Book I of the Administrative Code of 1987 cover the civil liability of officers for acts done in performance of official duties:
SECTION 38. Liability of Superior Officers. - (1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross negligence.By the very language of these provisions, the liability for unlawful expenditures is civil. Nonetheless, since these provisions are situated in Chapter 9, Book I of the Administrative Code of 1987 entitled "General Principles Governing Public Officers," the liability is inextricably linked with the administrative law sphere. Thus, the civil liability provided under these provisions is hinged on the fact that the public officers performed his official duties with bad faith, malice, or gross negligence.
SECTION 39. Liability of Subordinate Officers. - No subordinate officer or employee shall be civilly liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or negligent acts done by him which are contrary to law, morals, public policy and good customs even if he acted under orders or instructions of his superiors.[53] (Emphasis and underscoring supplied)
The participation of these public officers, such as those who approve or certify unlawful expenditures, vis-a-vis the incurrence of civil liability is recognized by the COA in its issuances, beginning from COA Circular No. 81-156[54] dated January 19, 1981 (Old CSB Manual):
Subsequent to the Old CSB Manual, COA Circular No. 94-001[55] dated January 20, 1994 (MCSB) distinguished liability from responsibility and accountability, and provided the parameters for enforcing the civil liability to refund disallowed amounts:
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III. GENERAL INSTRUCTIONS:
SECTION 3, DEFINITION OF TERMSThese provisions are also substantially reproduced in COA Circular No. 2009-006[56] dated September 15, 2009 (RRSA) and the 2009 Revised Rules of Procedure of the Commission on Audit (RRPCOA). Under Section 4 of the RRSA:The following terms shall be understood in the sense herein defined, unless the context otherwise indicates:xxxx
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3.10 LIABILITY. - A personal obligation arising from an audit disallowance/charge which may be satisfied through payment or restitution as determined by competent authority and in accordance with law.
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3.12 PECUNIARY LIABILITY. - the amount of consequential loss or damage arising from an act or omission and for which restitution, reparation, or indemnification is required.
SECTION 18. SETTLEMENT OF DISALLOWANCES AND CHARGESDisallowances and charges shall be settled through submission of the required explanation/justification and/or documentations by the person or persons determined by the auditor to be liable therefor, or by payment of the amount disallowed in audit; or by such other applicable modes of extinguishment of obligation as provided by law.xxxx
SECTION 34. ENFORCEMENT OF CIVIL LIABILITY.To enforce civil liability, the auditor shall submit a report on the disallowances and charges to the COA Chairman (Thru: The Director concerned), requesting that the matter be referred to the Office of the Solicitor General (National Government agencies), or to the Office of the Government Corporate Counsel (for government-owned or controlled corporations) or to the appropriate Provincial or City Attorney (in the case of local government units). The report shall be duly supported with certified copies of the subsidiary records, the CSB, and the payrolls/vouchers/collections disallowed and charged together with all necessary documents, official receipts for the filing of the appropriate civil suit. (Emphasis and underscoring supplied)
4.17 Liability - a personal obligation arising from an audit disallowance or charge which may be satisfied through payment or restitution as determined by competent authority or by other modes of extinguishment of obligation as provided by law.The procedure for the enforcement of civil liability through the withholding of payment of money due to persons liable and through referral to the OSG is found in Rule XIII of the RRPCOA, particularly, Section 3 and Section 6.
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B. Badges of good faith in the determination of approving/certifying officers' liability
As mentioned, the civil liability under Sections 38 and 39 of the Administrative Code of 1987, including the treatment of their liability as solidary under Section 43, arises only upon a showing that the approving or certifying officers performed their official duties with bad faith, malice or gross negligence. For errant approving and certifying officers, the law justifies holding them solidarity liable for amounts they may or may not have received considering that the payees would not have received the disallowed amounts if it were not for the officers' irregular discharge of their duties, as further emphasized by Senior Associate Justice Estela M. Perlas-Bernabe (Justice Bernabe). This treatment contrasts with that of individual payees who, as will be discussed below, can only be liable to return the full amount they were paid, or they received pursuant to the principles of solutio indebiti and unjust enrichment.
Notably, the COA's regulations relating to the settlement of accounts and balances[57] illustrate when different actors in an audit disallowance can be held liable either based on their having custody of the funds, and having approved or certified the expenditure. The Court notes that officers referred to under Sections 19.1.1 and 19.1.3 of the MCSB, and Sections 16.1.1 and 16.1.3 of the RRSA, may nevertheless be held liable based on the extent of their certifications contained in the forms required by the COA under Section 19.1.2 of MCSB, and Sections 16.1.2 of the RRSA. To ensure that public officers who have in their favor the unrebutted presumption of good faith and regularity in the performance of official duty, or those who can show that the circumstances of their case prove that they acted in good faith and with diligence, the Court adopts Associate Justice Marvic M.V.F. Leonen's (Justice Leonen) proposed circumstances or badges[58] for the determination of whether an authorizing officer exercised the diligence of a good father of a family:
xxx For one to be absolved of liability the following requisites [may be considered]: (1) Certificates of Availability of Funds pursuant to Section 40 of the Administrative Code, (2) In-house or Department of Justice legal opinion, (3) that there is no precedent disallowing a similar case in jurisprudence, (4) that it is traditionally practiced within the agency and no prior disallowance has been issued, [or] (5) with regard the question of law, that there is a reasonable textual interpretation on its legality.[59]Thus, to the extent that these badges of good faith and diligence are applicable to both approving and certifying officers, these should be considered before holding these officers, whose participation in the disallowed transaction was in the performance of their official duties, liable. The presence of any of these factors in a case may tend to uphold the presumption of good faith in the performance of official functions accorded to the officers involved, which must always be examined relative to the circumstances attending therein.
C. Cases absolving recipients' liability to return based on good faith
As for the civil liability of payees, certain jurisprudence provides that passive recipients or payees in good faith are excused from returning the amounts they received.
In the 1998 case of Blaquera v. Alcala,[60] (Blaquera), the Court relied on good faith to excuse the return of the disallowed amounts. The petition was brought by officials and employees of several government agencies assailing the disallowance of the excess productivity incentive benefits given in 1992, as rationalized by Administrative Orders Nos. 29 and 268. In excusing both the officers and the payees from the liability to return the benefits already received, the Court held:
Untenable is petitioners' [payees'] contention that the herein respondents be held personally liable for the refund in question. Absent a showing of bad faith or malice, public officers are not personally liable for damages resulting from the performance of official duties.The decision refused to shift the economic burden of returning the amounts the payees received to the officers who authorized or approved the grant of the benefits. Instead, the decision opted to excuse the return altogether. While the discussion on the presumption of good faith and regularity in the performance of official duties can easily be inferred as anchored on Section 38 of the Administrative Code of 1987, no statutory basis was provided for the excuse of payees from the obligation to return, leading to the conclusion that it is merely a judge made rule.
Every public official is entitled to the presumption of good faith in the discharge of official duties. Absent any showing of bad faith or malice, there is likewise a presumption of regularity in the performance of official duties.
In upholding the constitutionality of AO 268 and AO 29, the Court reiterates the well-entrenched doctrine that "in interpreting statutes, that which will avoid a finding of unconstitutionality is to be preferred."
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 accepted the same with gratitude, confident that they richly deserve such benefits. (Emphasis, underscoring supplied and citations omitted)[61]
The ruling in Blaquera was subsequently relied upon by the Court in the cases of De Jesus v. Commission on Audit[62] (De Jesus), Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit[63] and Home Development Mutual Fund v. COA[64] (HDMF), to excuse the return from all persons responsible. De Jesus, specifically dealing with the payment of allowances and bonuses authorized under a 1995 Local Water Utilities Administration Resolution to members of an interim Board of Directors (BOD) of a water district, is still cited as authority in benefits disallowances of water district employees. De Jesus and HDFM were also cited by petitioners herein in support of their argument.[65]
However, in the 2002 case of National Electrification Administration v. Commission on Audit[66] (NEA) involving the accelerated implementation of the salary increase in the Salary Standardization II in violation of law and executive issuances, the Court held both the approving officers and the payees as solidarity liable on the following explanation:
This case would not have arisen had N[E]A complied in good faith with the directives and orders of the President in the implementation of the last phase of the Salary Standardization Law II. The directives and orders are clearly and manifestly in accordance with all relevant laws. The reasons advanced by NEA in disregarding the President's directives and orders are patently flimsy, even ill[-]conceived. This cannot be countenanced as it will result in chaos and disorder in the executive branch to the detriment of public service.[67]Thus, the petition filed by the NEA was denied, and the Decision of the COA[68] was affirmed by the Court. The affirmed decision directed "all NEA officials and employees who received compensation and allowances in violation of the provisions of Executive Order No. 389 and National Budget Circular No. 458 xxx to refund."[69]
In the 2006 case of Casal v. Commission on Audit[70] (Casal), the Court's decisions in Blaquera and NEA were both relied upon, but the Court reached an outcome different from those reached in both cases. Finding that the non-compliance by the officers with relevant Presidential issuances amounted to gross negligence which could not be deemed a mere lapse consistent with the presumption of good faith, the ruling in NEA was applied as to the petitioners-approving officers, while the ruling in Blaquera was applied to excuse the payees. Thus, it was Casal that originated the peculiar outcome in disallowance cases where payees were excused from liability, while the solidary co-debtors, National Museum officials, were made solely liable for the entire amount of the disallowance.
This pronouncement in Casal further evolved in jurisprudence when the Court nuanced the same in the 2012 case of Manila International Airport Authority v. Commission on Audit[71] (MIAA) and the 2014 case of Technical Education and Skills Development Authority v. Commission on Audit[72] (TESDA). In these cases, the Court also considered the good faith of both payees and officers in determining who must return AND the extent of what must be returned. As ruled therein, a payee in good faith may retain what has been paid. In this regard, the government effectively absorbs the excess paid to good faith payees, and approving and/or certifying officers in bad faith were required to return only to the extent of the amounts they received.
In MIAA, the Court found that the amounts involved were properly disallowed signing bonus. Good faith payees were excused but responsible officers and members of the BOD were made to refund, but only the amounts they received, thus:
Clearly, good faith is anchored on an honest belief that one is legally entitled to the benefit. In this case, the MIAA employees who had no participation in the approval and release of the disallowed benefit accepted the same on the assumption that Resolution No. 2003-067 was issued in the valid exercise of the power vested in the Board of Directors under the MIAA charter. As they were not privy as to reason and motivation of the Board of Directors, they can properly rely on the presumption that the former acted regularly in the performance of their official duties in accepting the subject benefit. Furthermore, their acceptance of the disallowed grant, in the absence of any competent proof of bad faith on their part, will not suffice to render liable for a refund.In 2015, the Court promulgated the decision in Silang[74] which followed the rule in Casal. Parenthetically, the COA rationalizes the inequitable outcome it reached in this case as being in deference to Silang.[75] Silang involves the disallowance of CNA incentives granted to the employees of the Local Government Unit of Tayabas, Quezon. The case distinguished the liability to return based on the good faith of the persons held liable in the ND. The Court held that Mayor Silang, the Sanggunian, and the officers of the employee's organization cannot be deemed to have acted in good faith. Therefore, only passive recipients of the disallowed benefits were excused from the responsibility to return on the basis of their good faith "anchored on an honest belief that one is legally entitled to the benefit, as said employees did so believe in this case."[76] The Court stated that the payees "should not be held liable to refund what they had unwittingly received."[77]
The same is not true as far as the Board of Directors. Their authority under Section 8 of the MIAA charter is not absolute as their exercise thereof is "subject to existing laws, rules and regulations" and they cannot deny knowledge of SSS v. COA and the various issuances of the Executive Department prohibiting the grant of the signing bonus. In fact, they are duty-bound to understand and know the law that they are tasked to implement and their unexplained failure to do so barred them from claiming that they were acting in good faith in the performance of their duty. The presumptions of "good faith" or "regular performance of official duty" are disputable and may be contradicted and overcome by other evidence.
Granting that the benefit in question is a CNA Incentive, MIAA's Board of Directors has no authority to include its members, the members of the Board Secretariat, ExeCom and other employees not occupying rank-and-file positions in the grant. Indeed, this is an open and contumacious violation of PSLMC Resolution No. 2 and A.O. No. 135, which were unequivocal in stating that only rank-and-file employees are entitled to the CNA Incentive. Given their repeated invocation of these rules to justify the disallowed benefit, they cannot feign ignorance of these rules. That they deliberately ignored provisions of PSLMC Resolution No. 2 and A.O. No. 135 that they failed to observe bolsters the finding of bad faith against them.
The same is true as far as the concerned officers of MIAA are concerned. They cannot approve the release of funds and certify as to the legality of the subject disbursement knowing that it is a signing bonus. Alternatively, if they acted on the belief that the benefit is a CNA Incentive, they were in no position to approve its funding without assuring themselves that the conditions imposed by PSLMC Resolution No. 2 are complied with. They were also not in the position to release payment to the members of the Board of Directors, ExeCom and employees who do not occupy rank-and-file positions considering the express language of PSLMC Resolution No. 2.
Simply put, these individuals cannot honestly claim that they have no knowledge of the illegality of their acts. Thus, this Court finds that a refund of the amount of P30,000.00 received by each of the responsible officers and members of MIAA's Board of Directors is in order.[73] (Underscoring supplied and citations omitted)
As Silang held that "passive recipients or payees of disallowed salaries, emoluments, benefits, and other allowances need not refund such disallowed amounts if they received the same in good faith," it relies upon the cases of Lumayna v. COA[78] (Lumayna) and Querubin v. The Regional Cluster Director Legal and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City[79] (Querubin). Petitioners herein also cite Lumayna to support their claim.[80]
Examining Lumayna, the Court excused all petitioners (including the petitioning approving and certifying officers - Municipal Mayor, Municipal Accountant, and Budget Officer) from liability to return the disallowed amounts despite the affirmance of the disallowance.
The same outcome was reached in Querubin where the members of the BOD of the Bacolod City Water District were excused from returning the benefits they themselves approved and received for having been received in good faith. Both these cases also rely upon Blaquera as jurisprudential support to excuse the return.
In sum, the evolution of the "good faith rule" that excused the passive recipients in good faith from return began in Blaquera (1998) and NEA (2002), where the good faith of both officers and payees were determinative of their liability to return the disallowed benefits - the good faith of all parties resulted in excusing the return altogether in Blaquera, and the bad faith of officers resulted in the return by all recipients in NEA. The rule morphed in Casal (2006) to distinguish the liability of the payees and the approving and/or certifying officers for the return of the disallowed amounts. In MIAA (2012) and TESDA (2014), the rule was further nuanced to determine the extent of what must be returned by the approving and/or certifying officers as the government absorbs what has been paid to payees in good faith. This was the state of jurisprudence then which led to the ruling in Silang (2015) which followed the rule in Casal that payees, as passive recipients, should not be held liable to refund what they had unwittingly received in good faith, while relying on the cases of Lumayna and Querubin.
The history of the rule as shown evinces that the original formulation of the "good faith rule" excusing the return by payees based on good faith was not intended to be at the expense of approving and/or certifying officers. The application of this judge made rule of excusing the payees and then placing upon the officers the responsibility to refund amounts they did not personally receive, commits an inadvertent injustice.
D. Nature of payee participation
Verily, excusing payees from return on the basis of good faith has been previously recognized as an exception to the laws on liability for unlawful expenditures. However, being civil in nature, the liability of officers and payees for unlawful expenditures provided in the Administrative Code of 1987 will have to be consistent with civil law principles such as solutio indebiti and unjust enrichment. These civil law principles support the propositions that (1) the good faith of payees is not determinative of their liability to return; and (2) when the Court excuses payees on the basis of good faith or lack of participation, it amounts to a remission of an obligation at the expense of the government.
To be sure, the application of the principles of unjust enrichment and solutio indebiti in disallowed benefits cases does not contravene the law on the general liability for unlawful expenditures. In fact, these principles are consistently applied in government infrastructure or procurement cases which recognize that a payee contractor or approving and/or certifying officers cannot be made to shoulder the cost of a correctly disallowed transaction when it will unjustly enrich the government and the public who accepted the benefits of the project.[81]
These principles are also applied by the Court with respect to disallowed benefits given to government employees. In characterizing the obligation of retirees-payees who received benefits properly disallowed by the COA, the Resolution in the 2004 case of Government Service Insurance System v. Commission on Audit[82] stated:
Anent the benefits which were improperly disallowed, the same rightfully belong to respondents without qualification. As for benefits which were justifiably disallowed by the COA, the same were erroneously granted to and received by respondents who now have the obligation to return the same to the System.The COA similarly applies the principle of solutio indebiti to require the return from payees regardless of good faith. The COA Decisions in the cases of Jalbuena v. COA,[84] DBP v. COA[85] and Montejo v. COA,[86] are examples to that effect. In the instant case, the COA Decision expressly articulated this predicament of exempting recipients who are in good faith and expressed that the same is not consistent with the concept of solutio indebiti and the principle of unjust enrichment:
It cannot be denied that respondents were recipients of benefits that were properly disallowed by the COA. These COA disallowances would otherwise have been deducted from their salaries, were it not for the feet that respondents retired before such deductions could be effected. The GSIS can no longer recover these amounts by any administrative means due to the specific exemption of retirement benefits from COA disallowances. Respondents resultantly retained benefits to which they were not legally entitled which, in turn, gave rise to an obligation on their part to return the amounts under the principle of solutio indebiti.
Under Article 2154 of the Civil Code, if something is received and unduly delivered through mistake when there is no right to demand it, the obligation to return the thing arises. Payment by reason of mistake in the construction or application of a doubtful or difficult question of law also comes within the scope of solutio indebiti.
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While the GSIS cannot directly proceed against respondents' retirement benefits, it can nonetheless seek restoration of the amounts by means of a proper court action for its recovery. Respondents themselves submit that this should be the case, although any judgment rendered therein cannot be enforced against retirement benefits due to the exemption provided in Section 39 of RA 8291. However, there is no prohibition against enforcing a final monetary judgment against respondents' other assets and properties. This is only fair and consistent with basic principles of due process.[83] (Citations omitted)
Clearly, the approving officer and each employee who received the disallowed benefit are obligated, jointly and severally, to refund the amount so received. The Supreme Court has ruled that by way of exception, however, passive recipients or payees of disallowed salaries, emoluments, benefits and other allowances need not refund such disallowed amounts if they received the same in good faith. Stated otherwise, government officials and employees who unwittingly received disallowed benefits or allowances are not liable for their reimbursement if there is no finding of bad faith.With the liability for unlawful expenditures properly understood, payees who receive undue payment, regardless of good faith, are liable for the return of the amounts they received. Notably, in situations where officers are covered by Section 38 of the Administrative Code of 1987 either by presumption or by proof of having acted in good faith, in the regular performance of their official duties, and with the diligence of a good father of a family, payees remain liable for the disallowed amount unless the Court excuses the return. For the same reason, any amounts allowed to be retained by payees shall reduce the solidary liability of officers found to have acted in bad faith, malice, and gross negligence. In this regard, Justice Bernabe coins the term "net disallowed amount" to refer to the total disallowed amount minus the amounts excused to be returned by the payees.[88] Likewise, Justice Leonen is of the same view that the officers held liable have a solidary obligation only to the extent of what should be refunded and this does not include the amounts received by those absolved of liability.[89] In short, the net disallowed amount shall be solidarily shared by the approving/authorizing officers who were clearly shown to have acted in bad faith, with malice, or were grossly negligent.
The result of exempting recipients who are in good faith from refunding the amount received is that the approving officers are made to shoulder the entire amount paid to the employees. This is perhaps an inequitable burden on the approving officers, considering that they are or remain exposed to administrative and even criminal liability for their act in approving such benefits, and is not consistent with the concept of solutio indebiti and the principle of unjust enrichment.
Nevertheless, in deference to the Supreme Court ruling in Silang v. COA, the Commission rules that government officials and employees who unwittingly received disallowed benefits or allowances are not liable for their reimbursement if there is no finding of bad faith. Public officials who are directly responsible for or participated in making illegal expenditures shall be solidarily liable for their reimbursement.[87] (Emphasis and underscoring supplied)
Consistent with the foregoing, the Court shares the keen observation of Associate Justice Henri Jean Paul B. Inting (Justice Inting) that payees generally have no participation in the grant and disbursement of employee benefits, but their liability to return is based on solutio indebiti as a result of the mistake in payment. Save for collective negotiation agreement incentives carved out in the sense that the employees are not considered passive recipients on account of their participation in the negotiated incentives as in Dubongco v. COA[90] (Dubongco), payees are generally held in good faith for lack of participation, with their participation limited to "accept[ing] the same with gratitude, confident that they richly deserve such benefits."[91]
On the other hand, the RRSA provides:
SECTION 16. DETERMINATION OF PERSONS RESPONSIBLE/LIABLETo recount, as noted from the cases earlier mentioned, retention by passive payees of disallowed amounts received in good faith has been justified on said payee's "lack of participation in the disbursement." However, this justification is unwarranted because a payee's mere receipt of funds not being part of the performance of his official functions still equates to him unduly benefiting from the disallowed transaction; this gives rise to his liability to return.
As may be gleaned from Section 16 of the RRSA, "the extent of their participation [or involvement] in the disallowed/charged transaction" is one of the determinants for liability. The Court has, in the past, taken this to mean that payees should be absolved from liability for lack of participation in the approval and disbursement process. However, under the MCSB and the RRSA, a "transaction" is defined as "[a]n event or condition the recognition of which gives rise to an entry in the accounting records."[92] To a certain extent, therefore, payees always do have an indirect "involvement" and "participation" in the transaction where the benefits they received are disallowed because the accounting recognition of the release of funds and their mere receipt thereof results in the debit against government funds in the agency's account and a credit in the payees' favor. Notably, when the COA includes payees as persons liable in an ND, the nature of their participation is stated as "received payment."
Consistent with this, "the amount of damage or loss [suffered by] the government [in the disallowed transaction],"[93] another determinant of liability, is also indirectly attributable to payees by their mere receipt of the disallowed funds. This is because the loss incurred by the government stated in the ND as the disallowed amount corresponds to the amounts received by the payees. Thus, cogent with the application of civil law principles on unjust enrichment and solutio indebiti, the return by payees primarily rests upon this conception of a payee's undue receipt of amounts as recognized within the government auditing framework. In this regard, it bears repeating that the extent of liability of a payee who is a passive recipient is only with respect to the transaction where he participated or was involved in, i.e., only to the extent of the amount that he unduly received. This limitation on the scope of a payee's participation as only corresponding to the amount he received therefore forecloses the possibility that a passive recipient may be held solidarily liable with approving/certifying officers beyond the amount that he individually received.
The exception to payee liability is when he shows that he is, as a matter of fact or law, actually entitled to what he received, thus removing his situation from Section 16.1.5 of the RRSA above and the application of the principle of solutio indebiti. This includes payees who can show that the amounts received were granted in consideration for services actually rendered. In such situations, it cannot be said that any undue payment was made. Thus, the government incurs no loss in making the payment that would warrant the issuance of a disallowance. Neither payees nor approving and certifying officers can be held civilly liable for the amounts so paid, despite any irregularity or procedural mistakes that may have attended the grant and disbursement.
Returning to the earlier cases of Blaquera, Lumayna, and Querubin, the good faith of all parties was basis to excuse the return of the entire obligation from any of the debtors in the case. Thus, either the COA or the Court through their respective decisions exercised an act of liberality by renouncing the enforcement of the obligation as against payees - persons who received the moneys corresponding to the disallowance, a determinate "respective share" in the resulting solidary obligation. This redounds to the benefit of officers. Clearly, therefore, cases which result in a clear transfer of economic burden cannot have been the intention of the law in exacting civil liability from payees in disallowance cases. Where the ultimate beneficiaries are excused, what can only be assumed as the legislative policy of achieving the highest possibility of recovery for the government unwittingly sanctions unjust enrichment.
In Dubongco,[94] the Court affirmed the disallowance of CNA incentives sourced out of CARP funds. Even as it recognized that the payees therein committed no fraud, the Court ordered the return, thus:
Finally, the payees received the disallowed benefits with the mistaken belief that they were entitled to the same. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it. In fine, payees are considered trustees of the disallowed amounts, as although they committed no fraud in obtaining these benefits, it is against equity and good conscience for them to continue holding on to them.[95] (Italics in the original and citations omitted)Similarly, in DPWH v. COA,[96] the disallowance of CNA incentives sourced out of the Engineering Administrative Overhead (EAO) was upheld, and the recipients of the disallowed benefits were held liable to return. In finding that the payees are obliged to return the amounts they received, the Court stated:
Jurisprudence holds that there is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. The statutory basis for the principle of unjust enrichment is Article 22 of the Civil Code which provides that "[e]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."That the incentives were negotiated and approved by the employees was only one of several reasons for the return in the said case. The excerpt cited above sufficiently signals that the elements of unjust enrichment are completed as soon as a payee receives public funds without valid basis or justification - without necessarily requiring participation in the grant and disbursement.
The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at another's expense or damage. There is no unjust enrichment when the person who will benefit has a valid claim to such benefit.
The conditions set forth under Article 22 of the Civil Code are present in this case.
It is settled that the subject CNA Incentive was invalidly released by the DPWH IV-A to its employees as a consequence of the erroneous application by its certifying and approving officers of the provisions of DBM Budget Circular No. 2006-1. As such, it only follows that the DPWH IV-A employees received the CNA Incentive without valid basis or justification; and that the DPWH IV-A employees have no valid claim to the benefit. Moreover, it is clear that the DPWH IV-A employees received the subject benefit at the expense of another, specifically, the government. Thus, applying the principle of unjust enrichment, the DPWH IV-A employees must return the benefit they unduly received.[97] (Underscoring supplied and citations omitted)
For other incentives not negotiated by the recipients, the Court promulgated its decision in Chozas v. COA[98] which dealt with the accomplishment incentive sourced out of Bulacan State University Special Trust Fund. Notably, this case relied upon the Court's ratiocination in Dubongco on the question of liability to return, without any showing of participation on the part of the payees as to the grant and disbursement. This is jurisprudential recognition that the judge made rule of absolving good faith payees is the exception, and not the rule.
In Rotoras v. COA,[99] the Court held that it will be unjust enrichment to allow the members of the governing boards to retain additional honoraria that they themselves approved and received. Here, the Court ruled that the nature of the obligation of approving officials to return "depends on the circumstances,"[100] with the officers' obligation to return expressly determined to not be solidary.[101] This case illustrates how approving officers may still be held liable to return in their capacity as payees, notwithstanding their good faith or bad faith.
In the ultimate analysis, the Court, through these new precedents, has returned to the basic premise that the responsibility to return is a civil obligation to which fundamental civil law principles, such as unjust enrichment and solutio indebiti apply regardless of the good faith of passive recipients. This, as well, is the foundation of the rules of return that the Court now promulgates.
Moreover, solutio indebiti is an equitable principle applicable to cases involving disallowed benefits which prevents undue fiscal leakage that may take place if the government is unable to recover from passive recipients amounts corresponding to a properly disallowed transaction.
Nevertheless, while the principle of solutio indebiti is henceforth to be consistently applied in determining the liability of payees to return, the Court, as earlier intimated, is not foreclosing the possibility of situations which may constitute bona fide exceptions to the application of solutio indebiti. As Justice Bernabe proposes, and which the Court herein accepts, the jurisprudential standard for the exception to apply is that the amounts received by the payees constitute disallowed benefits that were genuinely given in consideration of services rendered (or to be rendered)[102] negating the application of unjust enrichment and the solutio indebiti principle.[103] As examples, Justice Bernabe explains that these disallowed benefits may be in the nature of performance incentives, productivity pay, or merit increases that have not been authorized by the Department of Budget and Management as an exception to the rule on standardized salaries.[104] In addition to this proposed exception standard, Justice Bernabe states that the Court may also determine in the proper case bona fide exceptions, depending on the purpose and nature of the amount disallowed.[105] These proposals are well-taken.
Moreover, the Court may also determine in a proper case other circumstances that warrant excusing the return despite the application of solutio indebiti, such as when undue prejudice will result from requiring payees to return or where social justice or humanitarian considerations are attendant. Verily, the Court has applied the principles of social justice in COA disallowances. Specifically, in the 2000 case of Uy v. Commission on Audit[106] (Uy), the Court made the following pronouncements in overturning the COA's decision:
xxx Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. Rightly, we have stressed that social justice legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application by long-winded arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice would be a meaningless term if an element of rigidity would be affixed to the procedural precepts. Flexibility should not be ruled out. Precisely, what is sought to be accomplished by such a fundamental principle expressly so declared by the Constitution is the effectiveness of the community's effort to assist the economically underprivileged. For under existing conditions, without such succor and support, they might not, unaided, be able to secure justice for themselves. To make them suffer, even inadvertently, from the effect of a judicial ruling, which perhaps they could not have anticipated when such deplorable result could be avoided, would be to disregard what the social justice concept stands for.[107] (Italics in the original)The pronouncements in Uy[108] illustrate the Court's willingness to consider social justice in disallowance cases. These considerations may be utilized in assessing whether there may be an exception to the rule on solutio indebiti so that the return may be excused altogether. As Justice Inting correctly pointed out, "each disallowance case is unique, inasmuch as the facts behind, nature of the amounts involved, and individuals so charged in one notice of disallowance are hardly ever the same with any other."[109]
E. The Rules on Return
In view of the foregoing discussion, the Court pronounces:
- If a Notice of Disallowance is set aside by the Court, no return shall be required from any of the persons held liable therein.
- If a Notice of Disallowance is upheld, the rules on return are as follows:
- Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987.
- Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are, pursuant to Section 43 of the Administrative Code of 1987, solidarity liable to return only the net disallowed amount which, as discussed herein, excludes amounts excused under the following sections 2c and 2d.
- Recipients - whether approving or certifying officers or mere passive recipients - are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered.
- The Court may likewise excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a case to case basis.
- Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987.
To reiterate, the assessment of the presumptions of good faith and regularity in the performance of official functions and proof thereof will be done by the Court on a case-to-case basis. Moreover, the additional guidelines eloquently presented by Justice Leonen will greatly aid the Court in determining the good faith of officers and resultantly, whether or not they should be held solidarily liable in disallowed transactions.[110]
F. As applied to the instant case
Examined under the rubric of the rules above, the Court holds that petitioners approving and certifying officers need not refund the disallowed amounts inasmuch as they had acted in good faith.
In support of their good faith, petitioners aver:
It has been a customary scheme of the municipality to grant additional allowances during year-end period and which act is legally anchored on yearly appropriation ordinance by the sanggunian. Similar scheme is also practiced in all government agencies, local or national.All in all, petitioners' averments are well-taken. In evaluating the presence of good faith in cases involving disallowances, the Court's pronouncement in Lumayna is still instructive and remains true even under the foregoing guidelines:
On such previous disbursement[s] of the municipality, there were no disallowance[s] issued by the COA or DBM, hence, the municipal officials [believed] in good faith that such grant of additional allowances were legal and allowed.
It was only on June 26,2014 when [the NDs herein were] issued and [the Municipality was informed]. That is why, since 2014, petitioners never grant[ed] additional allowances anymore to its employees.
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On [a] final note, since the COA foiled to show bad faith on the approving officers, the alleged refund should not be personally imposed on them, they being in good faith that recipients richly deserved such benefits and the officers relied merely on the yearly basis of granting additional allowances, without them being informed by [the] COA or DBM that such disbursements were illegal.[111]
Furthermore, granting arguendo that the municipality's budget adopted the incorrect salary rates, this error or mistake was not in any way indicative of bad faith. Under prevailing jurisprudence, mistakes committed by a public officer are not actionable, absent a clear showing that he was motivated by malice or gross negligence amounting to bad faith. It does not simply connote bad moral judgment or negligence. Rather, there must be some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will. It partakes of the nature of fraud and contemplates a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes. xxx[112] (Emphasis supplied)Applying the foregoing, the Court accepts the arguments raised by the petitioners as badges of good faith.
First, a review of the SB Resolutions and Ordinance used as basis for the grant of the subject allowances shows that these were primarily intended as financial assistance to municipal employees in view of the increase of cost on prime commodities,[113] shortage of agricultural products,[114] and the vulnerability of their municipality to calamities and disasters.[115] Notably, these subject allowances were granted after the onslaught of typhoon Yolanda which greatly affected the Municipality. While noble intention is not enough to declare the allowances as valid, it nevertheless supports petitioners' claim of good faith. As held in Escarez v. COA:
The grant of the FGI to petitioners has a lofty purpose behind it: the alleviation, to any extent possible, of the difficulty in keeping up with the rising cost of living. Indeed, under the circumstances, We find that the FGI was given and received in good faith. The NFA Council approved the grant under the belief, albeit mistaken, that the presidential issuances and the OGCC Opinion provided enough bases to support it; and the NFA officials and employees received the grant with utmost gratefulness.[116]Second, that these additional allowances had been customarily granted over the years and there was no previous disallowance issued by the COA against these allowances further bolster petitioners' claim of good faith. Indeed, while it is true that this customary scheme does not ripen into valid allowances, it is equally true that in all those years that the additional allowances had been granted, the COA did not issue any ND against these grants, thereby leading petitioners to believe that these allowances were lawful.
Notably, since the issuance of the NDs in 2014, the Municipality has stopped giving these allowances to their employees.[117] However, this is not to say that the presumption of good faith would be ipso facto negated if the Municipality had otherwise continued to grant the allowances despite the issuance of NDs. After all, an ND is not immediately final as it may still be reversed by the COA or even the Court. Unless and until an ND becomes final, the continued grant of a benefit or allowance should not automatically destroy the presumption of good faith on the part of the approving/certifying officers, especially when there is sufficient or, at the very least, colorable legal basis for such grant.
Third, petitioners relied on the Resolutions and Ordinance of the Sangguniang Bayan which have not been invalidated; hence, it was within their duty to execute these issuances in the absence of any contrary holding by the Sangguniang Panlalawigan or the COA. They were of the belief, albeit mistakenly, that these Resolutions and Ordinance were sufficient legal bases for the grant of the allowances especially since the LGC[118] empowers the Sangguniang Bayan to approve ordinances and pass resolutions concerning allowances. Similar to the ruling in Veloso v. Commission on Audit[119] where the Court accepted as a badge of good faith the fact that the questioned disbursements were made pursuant to ordinances, petitioners' reliance on the SB Resolutions and Ordinance should likewise be considered in their favor.
As can be deduced above, petitioners disbursed the subject allowances in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such reward. Otherwise stated, and to borrow the language of Lumayna, these mistakes committed are not actionable, absent a clear showing that such actions were motivated by malice or gross negligence amounting to bad faith. There was no showing of some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will in the grant of these benefits. There was no fraud nor was there a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes.
Thus, petitioners-approving and certifying officers are shielded from civil liability for the disallowance under Section 38 of the Administrative Code of 1987.
As for the payees, the Court notes that the COA Proper already excused their return; hence, they no longer appealed. In any case, while they are ordinarily liable to return for having unduly received the amounts validly disallowed by COA, the return was properly excused not because of their good faith but because it will cause undue prejudice to require them to return amounts that were given as financial assistance and meant to tide them over during a natural disaster.
In view of the foregoing, the return is excused in its entirety in favor of all persons held liable in the ND.
In interpreting and applying the law, the Court is very sensitive to the need to balance competing interests and considerations amongst various stakeholders. Here, the Court is given the opportunity to set a workable rule that exacts accountability for disallowances and ensures that unjust enrichment and inadvertent unfairness do not result. This has been brought about by an acknowledgment that previous attempts by this Court to excuse payees who unwittingly received the disallowed amounts may have resulted in undue prejudice to the government. Further, if such rule would continue to be the norm in deciding these cases, then the Court may be unsuspectingly playing a role in the chilling effect on current and aspiring government officials, who were previously left to shoulder the entire disallowed amounts to the benefit of recipients. A chilling effect that ultimately hampers and suffocates urgent public need - which the Government, through the Executive Branch, is mandated to serve at the soonest time.
As the Court has previously held,[120] government employment should be seen as an opportunity for individuals of good will to render honest-to-goodness public service, and not a trap for the unwary. It should be an attractive alternative to private employment, not an undesirable undertaking grudgingly accepted, to therefore regret.[121] While the Court supports the mandate of the COA in ensuring that the funds of the government are properly utilized and the return to the government of funds unduly spent, the same must not be at the expense of public officials and employees who are directly tasked to discharge and render public service - especially when the presumptions of good faith and regularity in the performance of their duties have not been rebutted or overturned. Otherwise, the Court would unintentionally sanction the discouragement of competent and well-meaning individuals from joining the government. When service in the government is seen as unattractive and unappealing, it is the public that suffers.
Taking all this into consideration, the Court has laid down the rules that it deems equitable to the government whose interest is safeguarded by the COA, on the one hand, and to the government employees who approved, certified, and received the disallowed benefits, on the other.
Finally, the Court exhorts the COA to take into consideration the pronouncements made herein to prevent future decisions that "result [in] exempting recipients who are in good faith from refunding the amount received xxx [while] approving officers are made to shoulder the entire amount paid to the employees"[122] and impose, in the very words of the COA itself, "an inequitable burden on the approving officers, considering that they are or remain exposed to administrative and even criminal liability for their act in approving such benefits, and is not consistent with the concept of solutio indebiti and the principle of unjust enrichment."[123]
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Commission on Audit Decision No. 2017-454 dated December 27, 2017 affirming the Notice of Disallowance Nos. 14-004-101(2013) to 14-008-101(2013) and 14-010-101(2013) to 14-015-101(2013) in the total amount of P7,706,253.10 is AFFIRMED with MODIFICATION that petitioners need not refund the said disallowed amount.
SO ORDERED.
Peralta, C. J., Gesmundo, J. Reyes, Jr., Hernando, Carandang, Lazaro-Javier, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concur.
Perlas-Bernabe, J., Please see separate concurring opinion.
Leonen, J., See separate concurring opinion.
Inting, J., See concurring opinion.
Baltazar-Padilla, J., on leave.
[1] Rollo, pp. 3-17.
[2] Id. at 18-19.
[3] See id. at 30.
[4] Id. at 41-43.
[5] Id. at 31-32.
[6] Id. at 33-34.
[7] Id. at 35-36.
[8] Id. at 38-39.
[9] Id. at 31.
[10] Id. at 33.
[11] Id. at 35.
[12] Id. at 37.
[13] Id. at 19.
[14] Id. at 19-20.
[15] Id. at 20.
[16] Id.
[17] Id. at 21.
[18] Id. at 84-88, 89-93, 94-98, 110-116.
[19] Section 12. Consolidation of Allowances and Compensation. - All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.
[20] Rollo, p. 21.
[21] Id. at 22.
[22] Id. at 126-132.
[23] Id. at 22-23.
[24] Id. at 23.
[25] SECTION 327. Review of Appropriation Ordinances of Component Cities and Municipalities. - The sangguniang panlalawigan shall review the ordinance authorizing annual or supplemental appropriations of component cities and municipalities in the same manner and within the same period prescribed for the review of other ordinances.
If within ninety (90) days from receipt of copies of such ordinance, the sangguniang panlalawigan takes no action thereon, the same shall be deemed to have been reviewed in accordance with law and shall continue to be in full force and effect. If within the same period, the sangguniang panlalawigan shall have ascertained that the ordinance authorizing annual or supplemental appropriations has not complied with the requirements set forth in this Title, the sangguniang panlalawigan shall, within the ninety-day period hereinabove prescribed, declare such ordinance inoperative in its entirety or in part. Items of appropriation contrary to limitations prescribed in this Title or in excess of the amounts prescribed herein shall be disallowed or reduced accordingly.
The sangguniang panlalawigan shall, within the same period, advise the sangguniang panlungsod or sangguniang bayan concerned, through the local chief executive, of any action on the ordinance under review. Upon receipt of such advice, the city or municipal treasurer concerned shall not make further disbursements of funds from any of the items of appropriation declared inoperative, disallowed or reduced.
[26] SECTION 322. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations. - Unexpended balances of appropriations authorized in the annual appropriations ordinance shall revert to the unappropriated surplus of the general fund at the end of the fiscal year and shall not thereafter be available for the expenditure except by subsequent enactment. However, appropriations for capital outlays shall continue and remain valid until fully spent, reverted or the project is completed. Reversions of continuing appropriations shall not be allowed unless obligations therefor have been fully paid or otherwise settled.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation and the sanggunian concerned may approve, upon recommendation of the local chief executive, the reversion of funds no longer needed in connection with the activities funded by said continuing appropriations subject to the provisions of this section.
[27] Rollo, p. 23.
[28] Id.
[29] Id. at 27.
[30] Id. at 28.
[31] Id. at 6.
[32] Id. at 161-177.
[33] Id. at 6.
[34] See Barnes v. Padilla, G.R. No. 160753, September 30, 2004, 439 SCRA 675, 686.
[35] Miralles v. Commission on Audit, G.R. No. 210571, September 19, 2017, 840 SCRA 108, 116.
[36] Id. at 116-117.
[37] Estalilla v. Commission on Audit, G.R. No. 217448, September 10, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65721>.
[38] Catu-Lopez v. Commission on Audit, G.R. No. 217997, November 12, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65979>.
[39] Rollo, p. 8.
[40] Id. at 25-26.
[41] Blaquera v. Alcala, G.R. No. 109406, September 11,1998, 295 SCRA 366; De Jesus v. Commission on Audit, G.R. No. 149154, 403 SCRA 666; Home Development Mutual Fund v. Commission on Audit, G.R. No. 157001, October 19, 2004, 440 SCRA 643; and Lumayna v. Commission on Audit, G.R. No. 185001, September 25, 2009, 601 SCRA 163.
[42] Rollo, pp. 10-13.
[43] Id. at 13.
[44] G.R. No. 213189, September 8, 2015, 770 SCRA 110, 126.
[45] Rollo, pp. 26-27.
[46] Id. at 26-28.
[47] Presidential Decree No. 1177, July 30, 1977.
[48] Presidential Decree No. 1445, June 11, 1978.
[49] Chapter 9, Subtitle B, Title I, Book V.
[50] Book VI, Chapter 5.
[51] Domingo v. Rayala, G.R. Nos. 155831, 155840 & 158700, February 18, 2008, 546 SCRA 90, 112: "Basic in the law of public officers is the three-fold liability rule, which states that the wrongful acts or omissions of a public officer may give rise to civil, criminal and administrative liability, xxx".
[52] See Suarez v. Commission on Audit, G.R. No. 131077, August 7, 1998, 294 SCRA 96, 108-109, which treats liability for disallowance as civil liability, viz.,
In holding petitioner liable for having failed to show good faith and diligence in properly performing her functions as a member of the PBAC, Respondent COA misconstrued Sec. 29.2 of the Revised CSB Manual. The aforesaid section requires a clear showing of bad faith, malice or gross negligence before a public officer may be held civilly liable for acts done in the performance of his or her official duties. The same principle is reiterated in Book I, Chapter 9, Section 38 of the 1987 Administrative Code. A public officer is presumed to have acted in the regular performance of his/her duty; therefore, he/she cannot be held civilly liable, unless contrary evidence is presented to overcome the presumption. There is no such evidence in this case. From the foregoing, it is as clear as day that Respondent COA committed grave abuse of discretion in including petitioner among those liable for the subject disallowance. (Underscoring supplied)[53] See Eslao v. Commission on Audit, G.R. No. 89745, April 8, 1991, 195 SCRA 730 (procurement of plans and designs for extension of school building); Andres v. Commission on Audit, G.R. No. 94476, September 26, 1991, 201 SCRA 780 (overpricing in purchase of school desks); Arriola v. Commission on Audit, G.R. No. 90364, September 30, 1991, 202 SCRA 147 (overpricing of Batangas Water Well Project); Orocio v. Commission on Audit, G.R. No. 75959, August 31, 1992, 213 SCRA 109 (legal officer sought to be held liable for hospitalization costs advanced by National Power Corporation based on his legal opinion that the agency is liable under quasi-delict for the accident in Malaya Thermal Plant); Suarez v. Commission on Audit, id.
[54] Restating the Requirements for the Use of the Certificate of Settlement and Balances and Providing Guidelines on Its Issuance Including the Accounting Treatment Thereof.
[55] Prescribing the Use of the Manual on Certificate of Settlement and Balances (Revised 1993).
[56] Prescribing the Use of the Rules and Regulations on Settlement of Accounts.
[57] See Section 19 of the MCSB and Section 16 of the RRSA.
[58] Separate Concurring Opinion of Justice Leonen, pp. 8, 13.
[59] Id. at 8.
[60] Supra note 41.
[61] Rotaras v. Commission on Audit, G.R. No. 211999, August 20, 2019, accessed at <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65585>.
[62] Supra note 41.
[63] G.R. No. 150769, August 31, 2004, 437 SCRA 371.
[64] Supra note 41.
[65] Rollo, p. 12.
[66] G.R. No. 143481, February 15, 2002, 377 SCRA 223.
[67] Id. at 240.
[68] The COA in its Decision stated: "Thus, when the NEA effected full implementation of the new salary schedule on January 1, 1997, instead of November 1, 1997, NEA was, then, clearly acting in violation of the mandates of the law. Consequently, said wrongful implementation must be struck down for being baseless and unlawful, and all its employees who received the undue increases must necessarily return the amount thus received," id. at 227-228; emphasis and underscoring supplied.
[69] Id. at 224.
[70] G.R. No. 149633, November 30, 2006, 509 SCRA 138.
[71] G.R. No. 194710, February 14, 2012, 665 SCRA 653.
[72] G.R. No. 204869, March 11, 2014, 718 SCRA 402.
[73] Supra note 71, at 678-679.
[74] Supra note 44.
[75] Rollo, pp. 27-28.
[76] Silang v. Commission on Audit, supra note 44, at 129.
[77] Id.
[78] Supra note 41, at 182-183. The relevant portion reads:
Furthermore, granting arguendo that the municipality's budget adopted the incorrect salary rates, this error or mistake was not in any way indicative of bad faith. Under prevailing jurisprudence, mistakes committed by a public officer are not actionable, absent a clear showing that he was motivated by malice or gross negligence amounting to bad faith. It does not simply connote bad moral judgment or negligence. Rather, there must be some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will. It partakes of the nature of fraud and contemplates a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes. As we see it, the disbursement of the 5% salary increase was done in good faith. Accordingly, petitioners need not refund the disallowed disbursement in the amount of P895,891.50. (Citations omitted and underscoring supplied)[79] G.R. No. 159299, July 7, 2004, 433 SCRA 769.
[80] Rollo, pp. 12-13.
[81] See Melchor v. Commission on Audit, G.R. No. 95398, August 16, 1991, 200 SCRA 704, 714, citing Eslao v. Commission on Audit, supra note 53, at 739. This case applies the same principle of unjust enrichment in cases where the contractor seeks payment to this case where reimbursement is sought from the official concerned; see also Andres v. Commission on Audit, supra note 53.
[82] G.R. Nos. 138381 & 141625, November 10, 2004, 441 SCRA 532.
[83] Id. at 548-550.
[84] G.R. No. 218478, June 19, 2018, p. 2, (Unsigned Resolution), [En Banc].
[85] G.R. No. 210838, July 3, 2018, accessed at <http://elibraryjudiciary.gov.ph/thebookshelf/showdocs/1/64358>.
[86] G.R. No. 232272, July 24, 2018, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/64480>.
[87] Rollo, pp. 27-28.
[88] Separate Concurring Opinion of Justice Bernabe, p. 13.
[89] Separate Concurring Opinion of Justice Leonen, p. 12.
[90] G.R. No. 237813, March 5, 2019, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65051>.
[91] Blaquera v. Alcala, supra note 41, at 448.
[92] Sections 3.19 and 4.28 of the MCSB and the RRSA, respectively.
[93] The RRSA, Section 16.1.
[94] Supra note 90.
[95] Id.
[96] G.R. No. 237987, March 19, 2019, accessed at <http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65047>.
[97] Id.
[98] G.R. Nos. 226319 & 235031, October 8, 2019.
[99] Supra note 61.
[100] Separate Concurring Opinion of Justice Leonen, p. 12.
[101] Supra note 61. The dispositive portion of Rotoras reads:
WHEREFORE, the Petition for Certiorari is DISMISSED. The November 3, 2011 Decision and February 14, 2014 Resolution of the Commission on Audit in COA CP Case No. 2010-341 are AFFIRMED. The members of the governing boards of the state universities and colleges shall return the disallowed benefits. Their obligation to return shall not be solidary.
SO ORDERED.
[102] Separate Concurring Opinion of Justice Bernabe, p. 12.
[103] Id. at 11-12.
[104] Id. at 11. Justice Bernabe further explains:
xxx To be sure, Republic Act No. 6758, otherwise known as the "Compensation and Position Classification Act of 1989," "standardize[s] salary rates among government personnel and do[es] away with multiple allowances and other incentive packages and the resulting differences in compensation among them." Section 12 lays down the general rule that all allowances of state workers are to be included in their standardized salary rates, with the exception of the following allowances: xxx[105] Id. at 12.
The said allowances are the "only allowances which government employees can continue to receive in addition to their standardized salary rates." Conversely, "all allowances not covered by the [above] exceptions xxx are presumed to have been integrated into the basic standardized pay" and hence, subject to disallowance. Id. at 11-12.
[106] G.R. No. 130685, March 21, 2000, 328 SCRA 607.
[107] Id. at 619.
[108] Id.
[109] Concurring Opinion, p. 1.
[110] Separate Concurring Opinion of Justice Leonen, p. 8. To reiterate, Justice Leonen proposes the following circumstances or badges for the determination of whether an authorizing officer exercised the diligence of a good father of a family: "(1) Certificate of Availability of Funds pursuant to Section 40 of the Administrative Code, (2) In-house or Department of Justice legal opinion, (3) that there is no precedent disallowing a similar case in jurisprudence, (4) that it is traditionally practiced within the agency and no prior disallowance has been issued, and (5) with regard the question of law, that there is a reasonable textual interpretation on its legality."
[111] Rollo, pp. 9-13.
[112] Supra note 41, at 182.
[113] Rollo, p. 31.
[114] Id. at 35.
[115] Id. at 37.
[116] G.R. Nos. 217818, 218334, 219979, 220201, & 222118, May 31, 2016, p. 8 (Unsigned Resolution).
[117] Rollo, p. 9.
[118] R.A. 7160, Section 447(a)(1)(viii).
[119] G.R. No. 193677, September 6, 2011, 656 SCRA 767.
[120] Philippine Economic Zone Authority (PEZA) v. Commission on Audit, G.R. 210903, October 11, 2016, 805 SCRA 618.
[121] Id. at 621.
[122] Rollo, p. 27.
[123] Id.
SEPARATE CONCURRING OPINION
PERLAS-BERNABE, J.:
I concur.
In this case, the Court has decided to set straight the conflicting jurisprudential guidelines in cases involving the directive to return amounts that are validly disallowed by the Commission on Audit (COA). As definitively expressed in the ponencia, the guidelines agreed upon by the members of this Court now serve to enlighten both the government and the public regarding the proper parameters for the return of disallowed public funds.
Consistent with the guidelines in the ponencia, I express my views on the frameworks of law that pertinently govern the return of amounts disallowed by the government. These frameworks of law pertain to the body of statutory provisions found in the Administrative Code on the one hand, and the applicable provisions of the Civil Code, on the other. An in-depth discussion of these two legal frameworks provides for a better understanding of the underlying reasons that justify the parameters for the return of disallowed amounts.
The Administrative Code "embodies changes in administrative structures and procedures designed to serve the people."[1] In the promulgation of Executive Order No. 292, Series of 1987, or the "Administrative Code of 1987," it was envisioned that "[t]he effectiveness of the Government will be enhanced by a new Administrative Code which incorporates in a unified document the major structural, functional and procedural principles and rules of governance."[2] In line with the foregoing, the impetus behind the Administrative Code provisions on public officers is to ensure public accountability. This is embodied in Section 32, Chapter 9, Book I thereof, which is a reflection of Section 1, Article XI[3] of the 1987 Constitution:
Undoubtedly, an essential administrative function of the government is the disbursement of public funds. In this regard, public officers and government employees tasked with this vital function are mandated to ensure that public expenditures are made in conformity with the law. This mandate stems from the Constitution itself which states that "[n]o money shall be paid out of the Treasury except in pursuance of an appropriation made by law."[4] This command is also mirrored in Section 32, Chapter 5, Book VI of the Administrative Code which states that "[a]ll moneys appropriated for functions, activities, projects and programs shall be available solely for the specific purposes for which these are appropriated."CHAPTER 9
General Principles Governing Public Officers
Section 32. Nature of Public Office. - Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with the utmost responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest lives.
When there is an "[e]xpenditur[e] of government funds or us[e] of government property in violation of law or regulations,"[5] there is an "unlawful expenditure." An unlawful or illegal expenditure is subject to disallowance[6] by the COA.[7] Under Section 52, Chapter 9, Subtitle B, Title I, Book V of the Administrative Code, unlawful expenditures are the personal liability of officials or employees found to be directly responsible therefor:
Section 52. General Liability for Unlawful Expenditures. - Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. (Emphasis and underscoring supplied)This provision is mirrored in Section 103, Chapter 5, Title II of Presidential Decree No. 1445[8] (PD 1445), otherwise known as the "Government Auditing Code of the Philippines" (Audit Code):
Section 103. General Liability for Unlawful Expenditures. - Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. (Emphasis and underscoring supplied)Notably, the liability for unlawful expenditures per se must be distinguished from the liability of accountable officers tasked with the custody and safekeeping of government property and funds pertaining to an agency.[9] With respect to the latter, Section 51, Chapter 9, Subtitle B, Title I, Book V of the Administrative Code distinctly provides for the primary and secondary responsibilities of the following officers:
Section 51. Primary and Secondary Responsibility. - (1) The head of any agency of the Government is immediately and primarily responsible for all government funds and property pertaining to his agency;Under COA Circular No. 2009-006[11] or the "Rules and Regulations for the Settlement of Accounts," the term "persons responsible" is defined as those "persons determined to be answerable for compliance with the audit requirements as called for in the Notice of Suspension."[12] A public officer who approves or authorizes a public expenditure (approving/authorizing officer) is necessarily considered as a person directly responsible.
(2) Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the Government.[10] (Emphases supplied)
However, it is integral to point out that approving or authorizing officers are not automatically held liable to return disallowed amounts based on every unlawful expenditure. Section 16.1.3 of COA Circular No. 2009-006 qualifies that approving/authorizing officers shall be liable for losses arising out of their negligence or failure to exercise the diligence of a good father of a family in approving/authorizing what turns out to be a disallowed transaction:
16.1.3 Public officers who approve or authorize expenditures shall be liable for losses arising out of their negligence or failure to exercise the diligence of a good father of a family. (Emphases and underscoring supplied)This implementing Circular is an apparent reflection of the exacting requirements of the Administrative Code. Under Section 38 (1), Chapter 9, Book I thereof, there must be a "clear showing" of bad faith, malice, or gross negligence in order to hold a public officer civilly liable for acts done in the performance of his official duties:
Section 38. Liability of Superior Officers. - (1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross negligence. (Emphases and underscoring supplied)This provision is supplemented by Section 39 of the same Code which prescribes the need to debunk the good faith of a subordinate officer before he is likewise held civilly liable for acts done under orders or instructions of his superiors:
Section 39. Liability of Subordinate Officers. - No subordinate officer or employee shall be civilly liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or negligent acts done by him which are contrary to law, morals, public policy and good customs even if he acted under orders or instructions of his superiors. (Emphases and underscoring supplied)To be sure, the need to first prove bad faith, malice, or gross negligence before holding a public officer civilly liable traces its roots to the core concept of the law on public officers. From the perspective of administrative law, public officers are considered as agents of the State, and as such, acts done in the performance of their official functions are considered as acts of the State. In contrast, when a public officer acts negligently, or worse, in bad faith, the protective mantle of State immunity is lost as the officer is deemed to have acted outside the scope of his official functions; hence, he is treated to have acted in his personal capacity and necessarily, subject to liability on his own. In the case of Vinzons-Chato v. Fortune Tobacco Corporation,[13] the Court explained this distinct and peculiar treatment of public officer liability as follows:
[T]he general rule is that a public officer is not liable for damages which a person may suffer arising from the just performance of his official duties and within the scope of his assigned tasks. An officer who acts within his authority to administer the affairs of the office which he/she heads is not liable for damages that may have been caused to another, as it would virtually be a charge against the Republic, which is not amenable to judgment for monetary claims without its consent. However, a public officer is by law not immune from damages in his/her personal capacity for acts done in bad faith which, being outside the scope of his authority, are no longer protected by the mantle of immunity for official actions.[14] (Emphases and underscoring supplied)In line with this, public officers are accorded with the presumption of regularity in the performance of their official functions - "[t]hat is, when an act has been completed, it is to be supposed that the act was done in the manner prescribed and by an officer authorized by law to do it."[15] This presumption is a rule borne out of administrative necessity and practicality. In Yap v. Lagtapon,[16] the Court characterized the presumption of regularity as "an aid to the effective and unhampered administration of government functions. Without such benefit, every official action could be negated with minimal effort from litigants, irrespective of merit or sufficiency of evidence to support such challenge."[17]
In a long line of cases,[18] the Court has ruled that the civil liability of public officers for illegal expenditures depends on a clear showing of bad faith, malice, or gross negligence; absent which, the presumptions of regularity and good faith operate to absolve them from said liability. Among others, in thel998 case of Suarez v. COA[19] (August 7, 1998), the Court absolved the petitioner therein of civil liability for the disallowance of a government contract on the basis of Section 38, Chapter 9, Book I of the Administrative Code, remarking that "[a] public officer is presumed to have acted in the regular performance of his/her duty; therefore, he/she cannot be held civilly liable, unless contrary evidence is presented to overcome the presumption[:]"[20]
In holding petitioner liable for having failed to show good faith and diligence in properly performing her functions as a member of the PBAC, Respondent COA misconstrued Sec. 29.2 of the Revised CSB Manual. The aforesaid section requires a clear showing of bad faith, malice or gross negligence before a public officer may be held civilly liable for acts done in the performance of his or her official duties. The same principle is reiterated in Book I, Chapter 9, Section 38 of the 1987 Administrative Code. A public officer is presumed to have acted in the regular performance of his/her duty; therefore, he/she cannot be held civilly liable, unless contrary evidence is presented to overcome the presumption. xxx[21] (Emphasis and underscoring supplied)Also, in the oft-cited case of Blaquera v. Alcala[22] (September 11, 1998), the Court ruled that:
Absent a showing of bad faith or malice, public officers are not personally liable for damages resulting from the performance of official duties.In disallowance cases, "good faith" has been defined as a "state of mind denoting honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious."[24] Thus, in order to overcome the presumption of regularity on the ground of bad faith, as well as the synonymous ground of malice, there must be a clear showing that the said officer approved/authorized an unlawful expenditure, acting with full knowledge of the circumstances and with the intention of taking unconscientious advantage of his public position. This intention may be shown by, for instance, proof that he approved/authorized the unlawful expenditure for his personal gain or to benefit another. Because the Administrative Code requires a clear showing of bad faith or malice, the Court may analogously apply the jurisprudential definition of "evident bad faith" to gauge the intention behind the acts involved:
Every public official is entitled to the presumption of good faith in the discharge of official duties. Absent any showing of bad faith or malice, there is likewise a presumption of regularity in the performance of official duties.[23] (Emphases supplied)
"[E]vident bad faith" connotes not only bad judgment but also palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse motive or ill will. It contemplates a state of mind affirmatively operating with furtive design or with some motive or self-interest or ill will or for ulterior purposes.[25] (Emphasis and underscoring supplied)In the 2019 case of Rotoras v. COA[26] (Rotoras; August 20, 2019), the Court held that "officials and officers who disbursed the disallowed amounts are liable to refund: (1) when they patently disregarded existing rules in granting the benefits to be disbursed, amounting to gross negligence;[27] (2) when there was clearly no legal basis for the benefits or allowances;[28] (3) when the amount disbursed is so exorbitant that the approving/authorizing officers were alerted to its validity and legality;[29] or (4) when they knew that they had no authority over such disbursement.[30]" To my mind, these instances are manifestations of the public officer's bad faith or malice.
Likewise, as indicated by the Administrative Code, good faith may be negated by a clear showing of the approving/authorizing officer's gross negligence in the performance of his duties. Gross negligence refers to:
[N]egligence characterized by the want of even slight care, or by acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to the consequences, insofar as other persons may be affected. It is the omission of that care that even inattentive and thoughtless men never fail to give to their own property. It denotes a flagrant and culpable refusal or unwillingness of a person to perform a duty. In cases involving public officials, gross negligence occurs when a breach of duty is flagrant and palpable.[31] (Emphases and underscoring supplied)Gross negligence may become evident through the non-compliance of an approving/authorizing officer of clear and straightforward requirements of an appropriation law, or budgetary rule or regulation, which because of their clarity and straightforwardness only call for one reasonable interpretation. On the other hand, gross negligence may be rebutted by showing that an appropriation law, or budgetary rule or regulation is susceptible of various reasonable interpretations because its application involves complicated questions of law,[32] or that by consistent institutional practice over the years, the law, rule or regulation has been unwittingly applied by said officer in accordance with such practice. In Rotoras, the Court observed that in previous occasions, public officials and employees were allowed to keep disallowed benefits and allowances they had already received when, inter alia, "the approving authority failed to exercise diligence or made mistakes but did not act with malice or in bad faith,"[33] or "there was ambiguity in existing rules and regulations that have not yet been clarified."[34] The rationale, as practically observed by the Court in Castro v. COA,[35] is that:
[I]t [would be] unfair to penalize public officials based on overly stretched and strained interpretations of rules which were not that readily capable of being understood at the time such functionaries acted in good faith. xxx A contrary rule would be counterproductive. It could result in paralysis, or lack of innovative ideas getting tried. In addition, it could dissuade others from joining the government. When government service becomes unattractive, it could only have adverse consequences for society.[36]Thus, in order to establish gross negligence, one must ultimately determine whether or not in effecting the unlawful expenditure, there was "want of even slight care" on the part of the approving/authorizing officer with a "conscious indifference to the consequences." If there is clear showing of the affirmative, then the approving/authorizing officer must be held civilly liable for the return of the disallowed amounts to the government.
In this relation, it should be stressed that the determination of whether a particular approving/authorizing officer has acted with bad faith, malice, or gross negligence in a given situation must be made on a case-to-case basis. To this end, the ponencia has adopted Justice Mario Victor M.V.F. Leonen's view that:
For one to be absolved of liability the following requisites [may be considered]: (1) Certificates of Availability of Funds pursuant to Section 40 of the Administrative Code, (2) In-house or Department of Justice legal opinion, (3) that there is no precedent allowing a similar case in jurisprudence, (4) that it is traditionally practiced within the agency and no prior disallowance has been issued, [or] (5) with regard the question of law, that there is a reasonable textual interpretation on its legality.[37]and aptly pointed out that "[t]he presence of any of these factors in a case may tend to uphold the presumption of good faith in the performance of official functions accorded to the officers involved, which must always be examined relative to the circumstances attending therein."[38]
Once the existence of bad faith, malice, or gross negligence as contemplated under Section 38, Chapter 9, Book I of the Administrative Code is clearly established, the civil liability of approving/authorizing officers to return disallowed amounts based on an unlawful expenditure is solidary together with all other persons taking part therein, as well as every person receiving such payment. This solidary liability is found in Section 43, Chapter 5, Book VI of the Administrative Code, which states:
Section 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received. (Emphases and underscoring supplied)Notably, with respect to "every official or employee authorizing or making such payment" in bad faith, with malice, or gross negligence, the law justifies holding them solidarity liable for the amounts they may or may not have received, considering that the payees would not have received the disallowed amounts if it were not for the officers' irregular discharge of their duties.
Since the law characterizes their liability as solidary in nature, it means that once this provision is triggered, the State can go after each and every person determined to be liable for the full amount of the obligation; this holds true irrespective of the actual amounts individually received by each co-obligor, without prejudice to claims for reimbursement from one another. As defined, a "solidary obligation [is] one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors."[39] However, "[h]e who made the payment may claim from his co-debtors only on the share which corresponds to each [co-debtor]."[40] Of course, the decision as to who the State will go after and the extent of the amount to be claimed falls within the discretion and prerogative of the COA. As provided for in Section 16.3 of COA Circular 2009-006:
16.3 The liability of persons determined to be liable under an ND/NC shall be solidary and the Commission may go against any person liable without prejudice to the latter's claim against the rest of the persons liable. (Emphasis supplied)That being said, it must be observed that a disallowed amount under a Notice of Disallowance does not only comprise of amounts received by guilty public officials but also of amounts unwittingly received by passive recipients. This begs the following question: should the erring public officer be held liable for the return of the entire disallowed amount, including the amounts received by passive recipients? To this end, the nature of a passive recipient's liability must be examined under the perspective of the civil law principles of solutio indebiti and unjust enrichment.
As preliminarily discussed, the main thrust of the Administrative Code is to exact accountability from public officials in the performance of official duties. For this reason, the Administrative Code requires a clear showing of bad faith, malice, or gross negligence on the part of the public officer in the performance of official duties before recovery of losses to the government may be sought.
However, when it comes to passive recipients, their civil liability is not premised on any bad faith, malice, or gross negligence, but rather, based on the application of the principles of solutio indebiti and unjust enrichment pursuant to the provisions of the Civil Code. Needless to state, when it comes to the Civil Code, there is no presumption of regularity because the individual is not viewed in his capacity as a State functionary, but rather, as an ordinary civil person. Consequently, the requirement to clearly show the existence of bad faith, malice, or gross negligence, as required in the Administrative Code, is not necessary to hold an individual liable under the provisions of the Civil Code.
In the case of Siga-an v. Villanueva,[41] the Court elucidated on the quasi contract of solutio indebiti:
Article 2154 of the Civil Code explains the principle of solutio indebiti. Said provision provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another.[42] (Emphasis supplied)In the same case, the Court observed that "[t]he principle of solutio indebiti applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause."[43] These requisites clearly obtain in the case of passive recipients who, by mistake of the erring approving/authorizing officer, were able to unduly receive compensation from disbursements later disallowed by the COA. Indeed, from a strictly technical point of view, there would be no legal duty to pay compensation which contravenes or lacks basis in law. Hence, as a general rule, passive recipients, notwithstanding their good faith, should be liable to return disallowed amounts they have respectively received on the basis of solutio indebiti. To note, this same general rule must equally apply to approving/authorizing officers who have not acted in bad faith, with malice, or with gross negligence because while they may not be held civilly liable under Section 38(1), Chapter 9, Book I of the Administrative Code, they are still subject to return the amounts unduly received by them on the basis of solutio indebiti. In this respect, they may also be considered as passive recipients.
At this juncture, it is crucial to underscore that good faith cannot be appreciated as a defense against an obligation under solutio indebiti as it is "'forced' by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment."[44] Moreover, it is discerned that the complete absolution of passive recipients from liability may indeed significantly reduce the funds to be recovered by the COA and as a result, cause great losses, or "fiscal leakage," to the detriment of the government. In other words, if non-return of passive recipients is the norm, then the COA's ability to recover may be greatly hampered. This skewed paradigm recognized in earlier jurisprudence should not anymore be propagated.
Nevertheless, the foregoing general rule mandating passive recipients to return should not apply where the disallowed compensation was genuinely intended as payment for services rendered. As examples, these disallowed benefits may be in the nature of performance incentives, productivity pay, or merit increases that have not been authorized by the Department of Budget and Management as an exception to the rule on standardized salaries. To be sure, Republic Act No. 6758,[45] otherwise known as the "Compensation and Position Classification Act of 1989," "standardize[s] salary rates among government personnel and do[es] away with multiple allowances and other incentive packages and the resulting differences in compensation among them."[46] Section 12 thereof lays down the general rule that all allowances of State workers are to be included in their standardized salary rates, with the exception of the following allowances:
The said allowances are the "only allowances which government employees can continue to receive in addition to their standardized salary rates." Conversely, "all allowances not covered by the [above] exceptions xxx are presumed to have been integrated into the basic standardized pay" and hence, subject to disallowance.
- Representation and transportation allowances (RATA);
- Clothing and laundry allowances;
- Subsistence allowances of marine officers and crew on board government vessels;
- Subsistence allowance of hospital personnel;
- Hazard pay;
- Allowance of foreign service personnel stationed abroad; and
- Such other additional compensation not otherwise specified herein as may be determined by the DBM. (Emphasis supplied)
Indeed, bearing in mind its underlying premise, which is "the ancient principle that no one shall enrich himself unjustly at the expense of another,"[47] solutio indebiti finds no application where there is no unjust enrichment. Particularly, an employee cannot be deemed to have been unjustly enriched where the disallowed amounts were genuinely intended as consideration for services rendered as there would be a practical exchange of value resulting into no loss to the government. In such instance, the return of the disallowed amounts is excused, and may therefore, be validly retained by the recipient. Further, the Court may also determine in the proper case bona fide exceptions, depending on the purpose and nature of the amount disallowed relative to the attending circumstances.
As earlier intimated, the treatment of passive recipient liability has a direct effect to the extent of the amount to be returned by erring approving/authorizing officers held solidarity liable under Section 38 (1), Chapter 9, Book I in relation to Section 43, Chapter 5, Book VI of the Administrative Code. When passive recipients are excused to return disallowed amounts for the reason that they were genuinely made in consideration for rendered services, or for some other bona fide exceptions determined by the Court on a case to case basis, the erring approving/authorizing officers' solidary obligation for the disallowed amount is net of the amounts excused to be returned by the recipients (net disallowed amount). The justifiable exclusion of these amounts signals that no proper loss should be recognized in favor of the government, and thus, bars recovery of civil liability to this extent. Accordingly, since there is a justified reason excusing the return, the State should not be allowed a double recovery of these amounts from the erring public officials and individuals notwithstanding their bad faith, malice or gross negligence. Besides, even if the amount to be recovered is limited in this sense, these erring public officers and those who have confederated and conspired with them[48] are subject to the appropriate administrative and criminal actions which may be separately and distinctly pursued against them.
All things considered, the following guidelines should be observed in disallowance cases for the guidance of the bench, bar, and the public:
1. Approving/authorizing public officers who were clearly shown to have acted in bad faith, with malice, or with gross negligence, are all solidarity liable for the return of the net disallowed amount. The net disallowed amount is the total disallowed amount minus the amounts excused to be returned by recipients (see exception in Guideline 3).
2. Those who have conspired or confederated with the approving/authorizing officers as stated in Guideline 1 are likewise solidarity liable with such officers for the net disallowed amount. Again, the net disallowed amount is the total disallowed amount minus the amounts excused to be returned by recipients (see exception in Guideline 3).
3. As a general rule, passive recipients, including approving/authorizing public officers who were not clearly shown to have acted in bad faith, with malice, or with gross negligence but had received disallowed amounts they have approved/authorized and thus also considered as passive recipients, are liable to return the amounts they have respectively received on the basis of solutio indebiti.
As an exception to this general rule, recipients - whether passive recipients or even erring approving/authorizing officers - are excused to return the disallowed amounts only if the amounts were genuinely intended in consideration for services rendered, or when reasonably excused by the Court due to bona fide exceptions depending on the purpose and nature of the amounts disallowed relative to the attending circumstances.
4. The foregoing civil liabilities notwithstanding, the State may pursue any other appropriate administrative or criminal actions against erring public officers and individuals involved in any unlawful expenditure case pursuant to existing laws and jurisprudence.
In this case, the COA disallowed the total amount of P7,706,253.10 pertaining to additional allowances given on top of the basic salary of the government employees involved. These are the Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Allowance (ACA), and Mitigation Allowance to Municipal Employees (MAME),[49] which, by nature, are all forms of financial assistance. The persons held liable were Municipal Mayor Mario M. Madera (Madera), Municipal Accountant Beverly C. Mananguite, and Municipal Budget Officers Carissa D. Galing and Josefina O. Pelo (Madera, et al.), and all other payees stated in the notices of disallowance.[50] As correctly ruled by the ponencia, Madera, et al., being the approving/authorizing officers, did not act in bad faith as there was no clear showing of any dishonest purpose, motive or intent, or ill will, when they granted these benefits to the payees involved. Quite the contrary, it was demonstrated that the resolutions and ordinances used as basis for the grant of these allowances were intended as financial assistance to municipal employees brought about by the effects of Typhoon Yolanda.[51] The amounts were then so disbursed for this purpose, despite the fact that they were technically unlawful expenditures for contravening Section 12[52] of RA 6758,[53] or the "Salary Standardization Law." Moreover, these additional allowances had been customarily granted over the years and that no previous disallowance was issued by the COA against similar allowances of such nature. Finally, the resolutions and ordinances, used as basis for these disbursements have not been invalidated, and hence, presumed to be valid.[54]
Taking these circumstances, Madera, et al. - the approving/authorizing officers who were not clearly shown to have acted in bad faith, with malice, or with gross negligence, are not civilly liable for the disallowed amounts under Section Section 38 (1), Chapter 9, Book I of the Administrative Code despite the legal propriety of the COA's reasons for disallowance.
As the disallowed amounts in this case, i.e., the subject ECA, MAMA, ACA, and MAME, were given as financial assistance in the wake of a significant calamity, i.e., the onslaught brought about by typhoon Yolanda, it is acceptable to excuse their return on humanitarian and social justice considerations. Accordingly, the subject notices of disallowance should be affirmed with modification as ruled in the ponencia. Again, it must be emphasized, that the exoneration of Madera, et al. from civil liability is without prejudice to the proper administrative or criminal actions that may be separately and distinctly pursued against them in accordance with law and jurisprudence.
[1] Executive Order No. 292, entitled "INSTITUTING THE 'ADMINISTRATIVE CODE OF 1987'" (August 3, 1988), 4th Whereas clause.
[2] ADMINISTRATIVE CODE, 3rd Whereas clause.
[3]
Accountability of Public Officers
Section 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives.
[4] 1987 CONSTITUTION, Article VI, Section 29 (1).
[5] ADMINISTRATIVE CODE, Book V, Title I, Subtitle B, Chapter 9, Section 52.
[6] Section 4.16 of COA Circular No. 2009-006 defines a disallowance as "the disapproval or in audit of a transaction."
[7] Section 10 of COA Circular No. 2009-006 pertinently reads:
Section 10. Notice of Disallowance (ND). -[8] Entitled "ORDAINING AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES," approved on June 11, 1978.
10.1 The Auditor shall issue an ND-Form 3 - for transactions which are irregular/unnecessary/excessive and extravagant as defined in COA Circular No. 85-55A as well as other COA issuances, and those which are illegal and unconscionable.
10.1.1 Illegal expenditures are expenditures which are contrary to law.
xxxx (Emphasis supplied)
[9] Section 50, Chapter 9, Subtitle B, Title I, Book V of the ADMINISTRATIVE CODE characterizes these officers as follows:
Section 50. Accountable Officers; Board Requirements. - (1) Every officer of any government agency whose duties permit or require the possession or custody government funds shall be accountable therefor and for safekeeping thereof in conformity with law; and[10] See also Section 102, Chapter 5, Title II of the AUDIT CODE.
(2) Every accountable officer shall be properly bonded in accordance with law.
[11] Approved on September 15, 2009. Notably, the issuance superseded COA Circular No. 94-001, approved on January 20, 1994, otherwise known as the "Manual on Certificate of Settlement and Balances" (see Section 29, Chapter VII of COA Circular No. 2009-006), but the provisions on liability of public officers for disallowed expenditures have remained unchanged.
[12] COA Circular No. 2009-06, Section 4.21.
[13] 552 Phil. 101 (2007).
[14] Id.
[15] People v. Jolliffe, 105 Phil. 677, 682-683 (1959).
[16] 803 Phil. 652 (2017).
[17] Id. at 653.
[18] See Alejandrino v. COA, G.R. No. 245400, November 12, 2019; Gubat Water District v. COA, G.R. No. 222054, October 1, 2019; Unsigned Resolution in Castro v. COA, G.R. No. 233499, February 26, 2019; Montejo v. COA, G.R. No. 232272, July 24, 2018; Career Executive Service Board v. COA, G.R. No. 212348, June 19, 2018, 866 SCRA 475; Development Bank of the Philippines v. COA, 827 Phil. 818 (2018); Metropolitan Waterworks and Sewerage System v. COA, 821 Phil. 117 (2017); Philippine Health Insurance Corporation v. COA, 801 Phil. 427 (2016); Development Academy of the Philippines v. Tan, 797 Phil. 537 (2016); Philippine Economic Zone Authority v. COA, 797 Phil. 117 (2016); Social Security System v. COA, 794 Phil. 387 (2016); Velasco v. COA, 695 Phil. 226 (2012); Veloso v. COA, 672 Phil. 419 (2011); Agra v. COA, 677 Phil. 608 (2011); Singson v. COA, 641 Phil. 154 (2010); Lumayna v. COA, 616 Phil. 928 (2009); Bases Conversion and Development Authority v. COA, 599 Phil. 455 (2009); Barbo v. COA, 589 Phil. 289 (2008); Magno v. COA, 558 Phil. 76 (2007); Public Estates Authority v. COA, 541 Phil. 412 (2007); Casal v. COA, 538 Phil. 634 (2006); Kapisanan ng mga Manggagawa sa Government Service Insurance System v. COA, 480 Phil. 861 (2004); Abanilla v. COA, 505 Phil. 202 (2005); Home Development Mutual Fund v. COA, 483 Phil. 666 (2004); and Blaquera v. Alcala, 356 Phil. 678 (1998).
[19] 355 Phil. 527 (1998).
[20] Id. at 540-541.
[21] Id.
[22] Supra note 18.
[23] Id. at 165.
[24] Development Bank of the Philippines v. COA, supra note 18, at 833; Maritime Industry Authority v. COA, 750 Phil. 288, 337 (2015); and Philippine Economic Zone Authority v. COA, 690 Phil. 104, 115 (2012); emphases supplied.
[25] Fuentes v. People, 808 Phil. 586, 594 (2017).
[26] See G.R. No. 211999.
[27] See id.; citing Casal v. COA, supra note 18 and Sambo v. COA, 811 Phil. 344 (2017).
[28] See id.; citing Manila International Airport Authority v. COA, 681 Phil. 644 (2012) and Oriondo v. COA, G.R. No. 211293, June 4, 2019.
[29] Id.; citing Maritime Industry Authority v. COA, supra note 24.
[30] Id.; citing Silang v. COA, 769 Phil. 327 (2015).
[31] Office of the Ombudsman v. De Leon, 705 Phil. 26, 37-38 (2013).
[32] "[B]y law and jurisprudence, a mistake upon a doubtful or difficult question of law may properly be the basis of good faith." (Philippine National Bank v. Heirs of Militar, 526 Phil. 788, 797 [2006]).
[33] See supra note 26; citing Home Development Mutual Fund v. COA, supra note 18 and Lumayna v. COA, supra note 18.
[34] Rotoras, id.
[35] See supra note 18; see also Philippine Economic Zone Authority v. COA, supra note 18.
[36] Castro v. COA, supra note 18.
[37] Ponencia, pp. 21-22.
[38] Id. at 22; emphasis supplied.
[39] AFP Retirement and Separation Benefits System v. Sanvictores, 793 Phil. 442, 451 (2016); emphasis and underscoring supplied.
[40] CIVIL CODE, Article 1217.
[41] 596 Phil. 760 (2009).
[42] Id. at 772-773.
[43] Id. at 773.
[44] Philippine National Bank v. Court of Appeals, 291 Phil. 356, 367 (1993).
[45] Entitled "AN ACT PRESCRIBING A REVISED COMPENSATION AND POSITION CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER PURPOSES," approved on August 21, 1989.
[46] Gubat Water District v. COA, supra note 18.
[47] Ramie Textiles, Inc. v. Mathay, Sr., 178 Phil 482, 487 (1979).
[48] Section 16.1.4 of COA Circular No. 2009-006 provides:
16.1.4 Public officers and other persons who confederated or conspired in a transaction which is disadvantageous or prejudicial to the government shall be held liable jointly and severally with those who benefited therefrom. (Emphases supplied)[49] Ponencia, pp. 4-5.
[50] Id. at 4-6.
[51] See id. at 7.
[52] Section 12. Consolidation of Allowances and Compensation. - All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government. (Emphasis and underscoring supplied)
[53] Entitled "AN ACT PRESCRIBING A REVISED COMPENSATION AND POSITION CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER PURPOSES," also known as the "COMPENSATION AND POSITION CLASSIFICATION ACT OF 1989" (July 1, 1989).
[54] See ponencia, p. 7.
SEPARATE CONCURRING OPINION
LEONEN, J.:
Before this Court are Mario Madera, Beverly Mananguite, Carissa Galing, and Josefina Pelo—the mayor, municipal accountant, and budget officers, respectively, of the municipality of Mondragon, Northern Samar. In their Petition for Certiorari under Rule 64 of the Rules of Court, they question the disallowances of Sangguniang Bayan Ordinance No. 08 and Sangguniang Bayan Resolution Nos. 41, 42, 43, and 48, series of 2013, which had granted various allowances[1] to the municipality's officials and employees amounting to P7,706,253.10.[2] They likewise contest being jointly and severally liable to refund the disbursed amounts, insisting that they approved the disbursements in good faith.
I concur with the ponencia that respondent Commission on Audit was correct in issuing the Notices of Disallowance, and that the public officers who authorized the disallowed benefits should be free of liability. Nevertheless, I qualify the additional guidelines on the liability that may attach to the authorizing officers, as well as the recipients (either passive or active) of the disallowed benefits.
I agree with the ponencia that petitioners applied the wrong reglementary period in filing their Petition. A petition for certiorari under Rule 64 applies Rule 65 provisions suppletorily. Although the sections for a petition for certiorari under Rule 64 and the ones under Rule 65 are almost identical, they provide different reglementary periods: Rule 64 provides a period of 30 days, while Rule 65 gives a period of 60 days.
To be sure, Rule 64 governs reviews of judgments or final orders of the Commission of Audit. Thus, its reglementary period will prevail here.
The 30-day period for filing a petition for certiorari began when petitioners received respondent's Decision on February 23, 2018. When they moved for reconsideration five days later, the reglementary period was interrupted. Thus, when petitioners received the subsequent Resolution on November 12, 2018, they still had 25 days, or until December 7, 2018, to file a petition. Unfortunately, they applied the 60-day period under Rule 65 and filed their petition on January 11, 2019.[3] Clearly, the Petition was filed out of time.
Nevertheless, I agree with the ponencia that this Petition presents an avenue to clarify the guidelines in cases involving disallowed benefits or incentives, as well as the corresponding liability of authorizing officers and recipients.[4]
It is well established that petitions for certiorari against Commission on Audit rulings are only granted when there is a sufficient finding of grave abuse of discretion. This is to give deference to the specialization of the Commission, whose power is constitutionally endowed:
SECTION 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post-audit basis[.][5]In Yap v. Commission on Audit:[6]
We have previously declared that it is the general policy of the Court to sustain the decisions of administrative authorities, especially one that was constitutionally created like herein respondent COA, not only on the basis of the doctrine of separation of powers, but also of their presumed expertise in the laws they are entrusted to enforce. It is, in fact, an oft-repeated rule that findings of administrative agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. Thus, only when the COA acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, may this Court entertain a petition for certiorari under Rule 65 of the Rules of Court.Under Article IX-D, Section 2(2) of the 1987 Constitution, the Commission on Audit shall have exclusive authority to "promulgate accounting and auditing rules and regulations, including those for the prevention of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties." This was reiterated in Section 33 of the Government Auditing Code of the Philippines,[8] which states:
There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism.[7] (Citations omitted)
SECTION 33. Prevention of irregular, unnecessary, excessive, or extravagant expenditures of funds or uses of property; power to disallow such expenditures. - The Commission shall promulgate such auditing and accounting rules and regulations as shall prevent irregular, unnecessary, excessive, or extravagant expenditures or uses of government funds or property.The constitutional commission is granted enough autonomy and authority to fulfill its role of maintaining checks and balances within the government. In Delos Santos v. Commission on Audit,[9] this Court, in upholding the Commission on Audit's disallowance of the irregularly disbursed Priority Development Assistance Fund, stated:
At the outset, it must be emphasized that the CoA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures of government funds. It is tasked to be vigilant and conscientious in safeguarding the proper use of the government's, and ultimately the people's, property. The exercise of its general audit power is among the constitutional mechanisms that gives life to the check and balance system inherent in our form of government.Nevertheless, pursuant to the Constitution, the Commission on Audit's power to disallow is limited to transactions deemed "irregular, unnecessary, excessive, extravagant, illegal, or unconscionable"[11] expenditures or uses of government funds and property.[12]
Corollary thereto, it is the general policy of the Court to sustain the decisions of administrative authorities, especially one which is constitutionally-created, such as the CoA, not only on the basis of the doctrine of separation of powers but also for their presumed expertise in the laws they are entrusted to enforce. Findings of administrative agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. It is only when the CoA has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning its rulings.[10] (Emphasis supplied, citation omitted)
Illegal expenditures are simply those that are contrary to law.[13] On the other hand, irregular, unnecessary, excessive, extravagant, or unconscionable transactions are comprehensively defined in Commission on Audit Circular No. 2012-003,[14] as follows:
"IRREGULAR" EXPENDITURES[15]Based on these definitions, it is apparent that the disallowed benefits here are illegal, irregular government expenditures.
The term "irregular expenditure" signifies an expenditure incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in laws. Irregular expenditures are incurred if funds are disbursed without conforming with prescribed usages and rules of discipline. There is no observance of an established pattern, course, mode of action, behavior, or conduct in the incurrence of an irregular expenditure. A transaction conducted in a manner that deviates or departs from, or which does not comply with standards set is deemed irregular. A transaction which fails to follow or violates appropriate rules of procedure is, likewise, irregular.
"UNNECESSARY" EXPENDITURES[16]
The term pertains to expenditures which could not pass the test of prudence or the diligence of a good father of a family, thereby denoting non-responsiveness to the exigencies of the service. Unnecessary expenditures are those not supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation. This would also include incurrence of expenditure not dictated by the demands of good government, and those the utility of which cannot be ascertained at a specific time. An expenditure that is not essential or that which can be dispensed with without loss or damage to property is considered unnecessary. The mission and thrusts of the agency incurring the expenditures must be considered in determining whether or not an expenditure is necessary.
"EXCESSIVE" EXPENDITURES[17]
The term "excessive expenditures" signifies unreasonable expense or expenses incurred at an immoderate quantity and exorbitant price. It also includes expenses which exceed what is usual or proper, as well as expenses which are unreasonably high and beyond just measure or amount. They also include expenses in excess of reasonable limits.
"EXTRAVAGANT" EXPENDITURES[18]
The term "extravagant expenditure" signifies those incurred without restraint, judiciousness and economy. Extravagant expenditures exceed the bound of propriety. These expenditures are immoderate, prodigal, lavish, luxurious, grossly excessive, and injudicious.
"UNCONSCIONABLE" EXPENDITURES[19]
The term "unconscionable expenditures" pertains to expenditures which are unreasonable and immoderate, and which no man in his right sense would make, nor a fair and honest man would accept as reasonable, and those incurred in violation of ethical and moral standards.
In issuing the disallowances, respondent cited Section 12 of the Salary Standardization Law, which explicitly provides that the allowances not specified in the provision would be deemed included in the standard salary rates prescribed. It provides:
SECTION 12. Consolidation of Allowances and Compensation. - All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.Respondent also cited Item II of its Circular No. 2013-003 to emphasize that "[g]overnment officials and employees shall be entitled only to allowances, incentives, and other benefits expressly provided by law, and other statutory authority, and the rules and regulations promulgated by competent authority."[20] As the allowances issued by petitioners were not authorized in Circular No. 2013-003 or in the exemptions mentioned in the Salary Standardization Law, it is patently clear that petitioners' claim that respondent's disallowances were erroneous is without basis.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.
Aside from this, petitioners did not present in their Petition any new arguments regarding respondent's supposed grave abuse of discretion. Instead, they focused on their liability to refund the disallowed amounts. For that, I concur with the ponencia that petitioners failed to show that respondent had gravely abused its discretion in issuing the disallowances. The disallowances are, therefore, valid.
In discussing the liability of authorizing or certifying officers of disallowed disbursements, the ponencia took the opportunity to clarify conflicting jurisprudence on the issue. It adequately discussed the applicable laws and regulations and reviewed the relevant cases, which led to this Court's creation of a new set of guidelines in determining liability. In doing so, the ponencia went on to absolve petitioners from their liability to refund the disallowed amounts disbursed.
While I ultimately agree with the ponencia's conclusion, I propose that the nature of the transaction or the reason behind its disallowance be the basis in determining the liability of authorizing officers and recipients, instead of whether or not they acted in good faith.
Under Section 16.1 of Commission on Audit Circular No. 2009-006,[21] the liability of public officers and other persons for audit disallowances shall be determined based on the following: (a) the nature of the disallowance; (b) the duties of officers/employees concerned; (c) the extent of their participation in the disallowed transaction; and (d) the amount of damage or loss to the government.[22] Thus, the determination of liability will begin with identifying the reason behind the disallowance. Depending on the nature of the disallowance, various presumptions and liabilities for the responsible officers and employees will attach.
For expenditures disallowed for being excessive, extravagant, or ostentatious, there is no question that the Commission on Audit may properly demand their refund. The authorizing officers are to pay the disallowed benefits, not only for their blatant disregard of laws and regulations, but for their gross excessiveness and unreasonableness. That said, they would have no justification to excuse them from liability. This is illustrated in National Electrification Administration v. Commission on Audit,[23] where this Court found that the officers who had approved the advanced release of salary increases—which were later disallowed—blatantly disregarded the President's directives and orders. Accordingly, all officers and employees who had received the compensation were directed to refund the amounts received.
This was similarly applied in Casal v. Commission on Audit,[24] in which the incentive awards for employees, also released without authority from the President, were disallowed. This Court said:
The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather, even if the grant of the incentive award were not for a dishonest purpose as they claimed, the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof. The following ruling in National Electrification Administration v. COA bears repeating:On the other hand, this Court has been more forgiving in disallowed expenditures that were unnecessary—those not supportive of the government agency's main objective, inessential, or dispensable. For these, the participants need not return the expenditures to allow the executives or implementers leeway in carrying out their functions. They are expected to create contingencies in light of circumstances that are fluid and susceptible to change. Given that the Commission on Audit merely reviews expenditures in hindsight, to make authorizing officers liable to return the disallowed amounts will hamper the decision-making of an executive and further constrain the implementation of government programs. Moreover, it may cause a chilling effect on government officials.....
This case would not have arisen had NEA complied in good faith with the directives and orders of the President in implementation of the last phase of the Salary Standardization Law II. The directives and orders are clearly and manifestly in accordance with all relevant laws. The reasons advanced by NEA in disregarding the President's directives and orders are patently flimsy, even ill-conceived. This cannot be countenanced as it will result in chaos and disorder in the executive branch to the detriment of public service.[25] (Citations omitted)
To avoid this, authorizing officers for unnecessary disallowances generally have no liability to return the expenditures. Nevertheless, liability may attach if it is proven that the officers purposely and knowingly issued the unnecessary funds.
As for disallowances of illegal or irregular expenditures, a more objective approach is taken. First, the authorizing officer's basis for issuing the benefit must be reviewed. For one to be absolved of liability, the following requisites must be present: (1) a certificate of availability of funds, pursuant to Section 40[26] of the Administrative Code; (2) an in-house or a Department of Justice legal opinion; (3) lack of jurisprudence disallowing a similar case; (4) the issuance of the benefit is traditionally practiced within the agency and no prior disallowance has been issued; and (5) on the question of law, that there is a reasonable textual interpretation on the expenditure or benefit's legality.
If all of these requirements are met, the authorizing officer is absolved of liability for having shown that they exercised the diligence of a good father of the family in the performance of their duty.
In Blaquera v. Alcala,[27] officers and employees of several government agencies questioned the disallowance of productivity incentive benefits and their corresponding liability to return these benefits. While this Court upheld the disallowance since the benefits exceeded what was allowed, it excused the return of the amount, absent a showing of bad faith or malice. It 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 accepted the same with gratitude, confident that they richly deserve such benefits.[28] (Emphasis supplied)In Lumayna v. Commission on Audit,[29] officers of the municipality of Mayoyao, Ifugao assailed the disallowance of the 5% salary increase of municipality personnel, as well as the directive for them to refund. This Court affirmed the disallowance but excused both the authorizing officials and passive employees from returning the disallowed amounts. It stated:
In the instant case, although the 5% salary increase exceeded the limitation for appropriations for personal services in the Municipality of Mayoyao, this alone is insufficient to overthrow the presumption of good faith in favor of petitioners as municipal officials. It must be mentioned that the disbursement of the 5% salary increase of municipal personnel was done under the color and by virtue of resolutions enacted pursuant to LBC No. 74, and was made only after the Sangguniang Panlalawigan declared operative the 2002 municipal budget. In fact, the Notice of Disallowance was issued only on 16 May 2003, after the municipality had already implemented the salary increase. Moreover, in its Resolution No. 2004-1185, the Sangguniang Panlalawigan reconsidered its prior disallowance of the adoption of a first class salary schedule and 5% salary increase of the Municipality of Mayoyao based on its finding that the municipal officials concerned acted in good faith, thus:In both Blaquera and Lumayna, the authorizing officers granted the disallowed benefits believing that they had basis for their implementation, and only upon audit did they discover that these exceeded what was allowed. Thus, when the authorizing officers have a colorable basis for the benefits that were disallowed, this Court refrains from ordering them to refund the wrongfully released amounts. The officers will not be liable to return the amount released.
....
Furthermore, granting arguendo that the municipality's budget adopted the incorrect salary rates, this error or mistake was not in any way indicative of bad faith. Under prevailing jurisprudence, mistakes committed by a public officer are not actionable, absent a clear showing that he was motivated by malice or gross negligence amounting to bad faith. It does not simply connote bad moral judgment or negligence. Rather, there must be some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will. It partakes of the nature of fraud and contemplates a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes. As we see it, the disbursement of the 5% salary increase was done in good faith. Accordingly, petitioners need not refund the disallowed disbursement in the amount of P895,891.50.[30] (Emphasis supplied, citations omitted)
Recipients of the disallowed benefits enjoy an even wider leniency on liability. For illegal, irregular, or unnecessary transactions, recipients are not made liable, so as to prevent government employees from losing confidence in their superiors, lest the efficiency of administrative implementation and policy execution suffer. An exception is seen in Dubongco v. Commission on Audit,[31] where this Court affirmed the disallowance of collective negotiation agreement incentives and ordered both the authorizing officers and recipients to return the incentives received:
In this case, it must be emphasized that the grant of CNA Incentive was financed by the CARP Fund, contrary to the express mandate of PSLMC Resolution No. 4, Series of 2002, A.O. No. 135 and DBM Budget Circular No. 2006-01. This is not simply a case of a negotiating union lacking the authority to represent the employees in the CNA negotiations, or lack of knowledge that the CNA benefits given were not negotiable, or failure to comply with the requirement that payment of the CNA Incentive should be a one-time benefit after the end of the year. Here, the use of the CARP Fund has no basis as the three issuances governing the grant of CNA Incentive could not have been any clearer in that the CNA Incentive shall be sourced solely from savings from released MOOE allotments for the year under review. Consequently, the payees have no valid claim to the benefits they received.In Dubongco, the recipients were made to return the incentives since these were borne from a collective negotiation agreement that they themselves ratified, meaning they were not mere passive recipients and could not deny their participation in its disbursement. Likewise, in Department of Public Works and Highways, Region IV-A v. Commission on Audit,[33] the recipients of the disallowed benefits were obligated to return the amounts they had received since they negotiated and approved the disbursement despite no valid justification.
....
Hence, it can be gleaned that unlike ordinary monetary benefits granted by the government, CNA Incentives require the participation of the employees who are the intended beneficiaries. The employees indirectly participate through the negotiation between the government agency and the employees' collective negotiation representative and directly, through the approval of the CNA by the majority of the rank-and-file employees in the negotiating unit. Thus, the employees' participation in the negotiation and approval of the CNA, whether direct or indirect, allows them to acquire knowledge as to the prerequisites for the valid release of the CNA Incentive. They could not feign ignorance of the requirement that CNA Incentive must be sourced from savings from released MOOE.[32] (Emphasis supplied, citations omitted)
Nevertheless, Dubongco admits of an exception where recipients of collective negotiation agreement incentives may be excused from refund: if it is proven that they were not consulted in the agreement's ratification, and that they did not participate in disbursing the disallowed funds. Thus, in Silang v. Commission on Audit,[34] which also involved a collective negotiation agreement, the city mayor and Sanggunian members, who had approved the disallowed benefits, as well as the negotiating members of the union, were held liable for refund. Conversely, the passive recipients were not required to return the amounts since they did not participate in the acts that led to the disbursement. This Court held:
In this case, the majority of the petitioners are the LGU of Tayabas, Quezon's rank-and-file employees and bona fide members of UNGKAT (named-below) who received the 2008 and 2009 CNA Incentives on the honest belief that UNGKAT was fully clothed with the authority to represent them in the CNA negotiations. As the records bear out, there was no indication that these rank-and-file employees, except the UNGKAT officers or members of its Board of Directors named below, had participated in any of the negotiations or were, in any manner, privy to the internal workings related to the approval of said incentives; hence, under such limitation, the reasonable conclusion is that they were mere passive recipients who cannot be charged with knowledge of any irregularity attending the disallowed disbursement. Verily, good faith is anchored on an honest belief that one is legally entitled to the benefit, as said employees did so believe in this case. Therefore, said petitioners should not be held liable to refund what they had unwittingly received.It must be highlighted that the liability of the responsible officers and recipients is solidary only to the extent of what should be refunded. This does not include the amounts received by the rank and file who were absolved of liability to return. This is pursuant to Rotoras v. Commission on Audit,[36] in which this Court stated that the nature of the obligation of approving officials to return "depends on the circumstances":
....
Similarly, such finding of good faith cannot be made to apply to Silang, who, as City Mayor, approved the allowances, as well as the local Sanggunian members, who enacted the ordinances authorizing the payment of the subject CNA Incentives. As City Mayor and members of the local Sanggunian, they are presumed to be acquainted with—and, in fact, even duty bound to have full knowledge of—the requirements under the applicable policies for the valid grant of CNA Incentives, i.e., the requisite accreditation of UNGKAT with the CSC at the time of the signing of the CNA as required under DBM Budget Circular No. 2006-01. Indeed, knowledge of basic procedure is part and parcel of their shared fiscal responsibility under Section 305 (1), Chapter I, Title V, Book II of the LGC[.][35] (Emphasis supplied, citations omitted)
The defense of good faith is, therefore, no longer available to members of governing boards and officials who have approved the disallowed allowance or benefit. Neither would the defense be available to the rank and file should the allowance or benefit be the subject of collective negotiation agreement negotiations. Furthermore, the rank and file's obligation to return shall be limited only to what they have actually received. They may, subject to the Commission on Audit's approval, agree to the terms of payment for the return of the disallowed funds. For the approving board members or officers, however, the nature of the obligation to return—whether it be solidary or not—depends on the circumstances.[37]In this regard, Section 16.3 of Commission on Audit Circular No. 2009-006, series of 2009, states:
16.3 The liability of persons determined to be liable under an ND/NC shall be solidary and the Commission may go against any person liable without prejudice to the latter's claim against the rest of the persons liable.Based on this, those held liable have a solidary obligation only to the extent of what should be refunded. This does not include the amounts received by those absolved of liability.
For ease of review, the matrix below illustrates the liability of each of the parties involved given the different reasons behind the disallowance.
With this matrix, we move away from a subjective determination of "good faith," and therefore provide better guidelines for the management of branches and offices in government.
Not liable if the following are present:
1) Certificate of availability of funds;
2) In-house or Department of Justice legal opinion;
3) No precedent disallowing a similar case in jurisprudence; 4) It is traditionally practiced within the agency and no prior disallowance has been issued; and
5) There is a reasonable textual interpretation on its legality.
In this case, the disbursements were validly disallowed for being illegal and irregular. However, circumstances exist showing that petitioners exercised the diligence of a good father of the family when they implemented the release of the benefits.
It appears that petitioners implemented the disbursements in an honest belief that their release and distribution had legal basis. Records show that a Certificate of Availability of Funds was issued, showing that the municipality had enough savings to release the amounts. Moreover, believing that the disbursements were lawful, the Sangguniang Bayan even issued ordinances and resolutions appropriating a budget for the benefits. These disallowed benefits have been traditionally released to the municipality's employees and have never been disallowed in the past. There are also no jurisprudential precedents disallowing benefits of the like.
Clearly present here are all the requisites that absolve petitioners from liability on the amounts disbursed. Thus, as the ponencia declares, to order them to reimburse the disallowed amounts, including those received by the rank and file, would lead to undue prejudice.[38]
This is not to say that public officers are not to be held to a higher standard and do not need to be more circumspect in the performance of their duties. Given that our public officials discharge their functions as a public trust,[39] they are accountable for their actions that affect government funds and property they hold in trust for the public. However, when it is shown that they followed the required guidelines in the policy implementation, there is no need to penalize them by asking them to refund the disbursed amounts which they believed to be legal.
ACCORDINGLY, I vote to PARTIALLY GRANT the Petition.
[1] Ponencia, p. 2. These disallowed allowances were: (1) Economic Crisis Assistance; (2) Monetary Augmentation of Municipal Agency; (3) Agricultural Crisis Assistance; and (4) Mitigation Allowance to Municipal Employees.
[2] Id. at 4.
[3] Id. at 10.
[4] Id.
[5] CONST., art. IX-D, sec. 2(1).
[6] 633 Phil. 174 (2010) [Per J. Leonardo-De Castro, En Banc].
[7] Id. at 195-196.
[8] Presidential Decree No. 1445 (1978).
[9] 716 Phil. 322 (2013) [Per J. Perlas-Bernabe, En Banc].
[10] Id. at 332-333.
[11] Miralles v. Commission on Audit, 818 Phil. 380, 384 (2017) [Per J. Bersamin, En Banc].
[12] Id. at 390-391.
[13] Id. at 392.
[14] Updated Guidelines for the Prevention and Disallowance of Irregular, Unnecessary. Excessive, Extravagant and Unconscionable Expenditures, available at <https://www.coa.gov.ph/phocadownload/userupload/lssuances/Circulars/Circ2012/COA_C2012-003.pdf> (last accessed on September 7, 2020).
[15] COA Circular No. 2012-003(2012), item no. 3.1.
[16] COA Circular No. 2012-003(2012), item no. 4.1.
[17] COA Circular No. 2012-003(2012), item no. 5.1.
[18] COA Circular No. 2012-003 (2012), item no. 6.1.
[19] COA Circular No. 2012-003 (2012), item no. 7.1.
[20] COA Circular 2013-003 (2013), item II. Reiteration of Audit Disallowance of Payments without Legal Basis of Allowances, Incentives, and Other Benefits of Government Officials and Employees in the NGAs, LGUs, and GOCCs and their Subsidiaries, available at <https://www.coa.gov.ph/phocadownloadpap/userupload/Issuances/Circulars/Circ2013/COA_C2013- 003.pdf> (last accessed on September 7, 2020).
[21] Rules and Regulations on the Settlement of Accounts (2009).
[22] COA Circular No. 2009-006 (2009), sec. 16.1.
[23] 427 Phil. 464 (2002) [Per J. Carpio, En Banc].
[24] 538 Phil. 634 (2006) [Per J. Carpio Morales, En Banc].
[25] Id. at 644-645.
[26] SECTION 40. Certification of Availability of Funds. - No funds shall be disbursed, and no expenditures or obligations chargeable against any authorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged.
No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received.
[27] 356 Phil. 678 (1998) [Per J. Purisima, En Banc].
[28] Id. at 765-766.
[29] 616 Phil. 929 (2009) [Per J. Del Castillo, En Banc].
[30] Id. at 944-945.
[31] G.R. No. 237813, March 5, 2019, <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65051> [Per J.C. Reyes, En Banc].
[32] Id.
[33] G.R. No. 237987, March 19, 2019, <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/65047> [Per. J. Reyes, Jr., En Banc].
[34] 769 Phil. 327 (2015) [Per J. Perlas-Bernabe, En Banc].
[35] Id. at 347-349.
[36] G.R. No. 211999, August 20, 2019, <http://sc.judiciary.gov.ph/8130/> [Per J. Leonen, En Banc].
[37] Id. at 24.
[38] Ponencia, p. 34.
[39] CONST., art. XI, sec. 1.
CONCURRING OPINION
INTING, J.:
I concur.
I expound on my views on the liability of the actors involved in a disallowed transaction, as well as the concept of "good faith" in disallowance cases.
The ponente recognizes that disallowance cases have been ruled upon on a case-to-case basis. One could even go as far as saying that each disallowance case is unique, inasmuch as the facts behind, nature of the amounts involved, and individuals so charged in one notice of disallowance are hardly ever the same with any other.
I share my observations on the facts behind commonly cited jurisprudence on dissallowance cases.
Blaquera v. Hon. Alcala[1] (Blaquera), the pioneer case law on good faith and the obligation to reimburse in disallowance cases, was a case on the constitutionality (via petitions for certiorari and prohibition) of Administrative Order (AO) Nos. 29 and 268 on various grounds, which directed the concerned government agencies that paid out productivity incentive bonuses to return the same for being excessive and without prior approval of the President. The Court eventually upheld the AOs, but did not require the recipients nor the officials concerned to refund the bonuses on account of good faith, viz.:
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 accepted the same with gratitude, confident that they richly deserve such benefits.[2] (Underscoring and italics supplied.)The following factual milieu sets Blaquera apart from other cases involving illegal disbursements of compensation and bonuses: first, it was not integrally a disallowance case inasmuch as it was primarily a constitutionality case. The petitioners therein came to the Court assailing the validity of administrative issuances, not the issuance of notices of disallowance or any Commission on Audit (COA) decision holding them, public officials, liable for the disallowed amount. Notably, the Court only mentioned in passing that the corporate auditor disallowed the subject disbursement, without referring to a specific notice of disallowance nor identifying the officials charged therein. Second, as already observed by Associate Justice Arturo D. Brion in his Separate Opinion in TESDA v. COA Chairperson Tan, et al.,[3] the case involved "numerous petitioners, numbering in several hundreds, that would make a refund very cumbersome" and "small amounts (about P1,000.00 per plaintiff) whose aggregate sum was not commensurate with the administrative costs of enforcing the refund." Third, by the time the case was brought to the Court, the government had already recovered a significant portion of the bonuses ordered to be refunded by way of salary deductions from those who received them.
Thereafter, the Court applied Blaquera in a number of cases involving the disallowance of illegal disbursements to exempt passive recipients[4] from their obligation to refund the amounts paid or released to them.
In contrast, a number of subsequent jurisprudence citing Blaquera, such as Executive Director Casal v. Commission on Audit,[5] Lumayna, et al. v. Commission on Audit,[6] TESDA v. COA Chairperson Tan, et al.,[7] Silang, et al. v. Commission on Audit,[8] Metropolitan Naga Water District, et al v. Commission on Audit,[9] National Transmission Corporation v. Commission on Audit, et al.,[10] Nayong Filipino Foundation, Inc. v. Chairperson Pulido Tan, et al.,[11] and Balayan Water District v. Commission on Audit,[12] were all disallowance cases per se that reached the Court via petitions for certiorari under Rule 64 in relation to Rule 65, assailing various COA decisions which upheld the disallowance of disbursements, and the corresponding liability of officials and recipients involved therein.
Following is a tabular comparison of the above-cited disallowance cases' pertinent details:
Some may interpret the variations in the Court's rulings as "inconsistencies" or "flip-flopping." However, the disparity in the Court's ratio decidendi is only a logical result of the different circumstances present in and most of the time unique to each disallowance case.
liable cf. good faith2) Lumayna, et al. v. Commission on Audit
(e.g., municipal mayor, Sangguniang Bayan members who approved the resolution)
(e.g., budget officer, municipal accountant)
Suspension?
amount
(e.g. TESDA
Director-Generals
who directed the
payment and were,
at the same time,
recipients thereof)
(no discussion on
good faith)
liable cf. good faith
(e.g., mayor, local sanggunian members who enacted ordinances authorizing payment)
of Disallowance but nonetheless adjudged as not liable for being mere passive recipients (cf. Silang v. COA)
(one payee only)
(e.g., Board of Directors)
(e.g., Board of Trustees and corporate officers)
(e.g., Board of Trustees and corporate officers)
One notable factor that may have caused divergent outcomes in these cases is the manner by which the COA charges persons under notices of disallowance. Under the COA Rules,[14] custodians of public funds,[15] certifying officers,[16] approving/authorizing officials,[17] co-conspirators in the illegal disbursement,[18] and the recipients[19] of illegal payments may be held liable for a disallowance. Verily, there may be disbursements that may not have involved the participation of a custodian or a so-called co-conspirator. In contrast, the involvement of approving/certifying officers and recipients is indispensible inasmuch as these transactions would have necessarily been approved first prior to its release and the payment thereof received by a certain individual/entity. Thus, it is reasonable to expect that all notices of disallowance will be initially issued against these indispensable parties. Yet, as evident from the table above, there had been cases where the COA omitted the certifying/approving or the recipients from charges for no specified reason.
It becomes apparent that there are rarely two disallowance cases that will fall squarely on each others' factual foundation. The present case, for example, involves the payment of economic crisis assistance, monetary augmentation of municipal agency, agricultural crisis assistance, and mitigation allowance to municipal employees, as well as approving/certifying officers and payees alike. In other words, its factual background is distinct and separable.
That the guidelines as laid out by the ponente have now become more fluid is the most reasonable manner by which the Court could settle the present controversy, without unduly restricting the Court's exercise of judicial review in future disallowance cases. These rules appropriately serve as guideposts for subsequent rulings and at the same time allow the Court sufficient leeway to decide on these issues on a case-to-case basis.
The ponencia makes an excellent distinction between/among the different aspects of one's personal liability for a disallowance: the civil aspect, which is "based on the loss incurred by the government because of the transaction," and the administrative/criminal aspects, which are founded on "irregular or unlawful acts attending the transaction."
At this juncture, I find it important to clearly differentiate between payees and approving/certifying officers, to particularize their respective roles in the transactions. These roles must always be delineated because appreciating good faith in favor of the parties and determining their respective liabilities are founded on the extent of their participation in the transaction.
The statutory basis of liability over illegal expenditures is found in the Administrative Code of 1987,[20] viz.:
SECTION 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every pay rient made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received. (Emphasis supplied.)In her separate opinion, Senior Associate Justice Estela M. Perlas-Bernabe aptly identified the three categories of persons solidarily liable for disallowed amounts under the above-cited provision, to wit: (i) every official or employee authorizing or making such payment, (ii) those taking part therein, and (iii) recipients.
In the case at bar, the notice of disallowance charged persons under the first and third categories: approvers/certifiers who were at the same time payees of the disallowed amounts and payees whose participation was limited to their receipt of the amounts.
A. Approving/Certifying Officers
Verily, the first category encompasses all public officers who authorized/approved an illegal disbursement. However, not all seals of approval and authority, albeit in relation to the same transaction, bear the same weight.
Inasmuch as each officer's liability is grounded on the extent of his participation,[21] there must be a distinction among the different classes of "approving/certifying" officers involved in the disbursement according to the specific bounds of their authority, viz.: (i) the authority to direct or instruct the payment of a disbursement per se; (ii) the authority to act on these instructions/directives and approve documents to effect payment thereof (i.e., vouchers, checks, etc.); and (iii) the authority to certify that funds are available for the disbursement and that the allotment therefor may be charged accordingly.
(i) | Authority to direct or instruct the payment of a disbursement per se. |
Depending on the government agency or instrumentality, the power to disburse public funds is vested exclusively in the person/body named in their respective original charters, e.g., the department secretary, commission chairperson, local chief executive/sanggunian, or board of directors/trustees. Stated differently, only these officials are authorized to instruct/direct the payment of a disbursement through the issuance of a memorandum, letter of instruction, ordinance, or board resolution, as the case may be.
Certainly, this power is not unfettered. Their exercise therefor must yield to the fundamental rule that public funds shall only be used to pay expenditures pursuant to an appropriation law or other specific statutory authority.[22] Otherwise, their directive/instruction shall be ultra vires, rendering the disbursement illegal. Thus, these typically high-ranking officials shall answer for the resulting disallowance for acting beyond the authority entrusted to them.
(ii) | Authority to act on instructions/directives and approve documents to effect payment thereof. |
In the ordinary course of fiscal administration, the higher authority's directive (i.e., memorandum, resolution, etc.) shall trigger the disbursement process. In turn, another group of "approving officers" shall prepare, review, and sign the relevant documents' (i.e., purchase orders, forms, disbursement/check vouchers, checks, etc.) to release the funds. Each one shall perform his duty in accordance with the applicable internal control procedures and rules mandated by the COA and/or the government instrumentality itself.
Expenses paid in violation of established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law (e.g., without the approval of the authorized signatory of checks, without the required supporting documents, etc.) are illegal or irregular[23] expenditures, as the case may be. The erring official shall be liable for the subsequent disallowance for failure to perform his specific duty in the disbursement process.
(ii) | Authority to certify that funds are available for the disbursement and that the allotment therefor may be charged accordingly. |
A disbursement not validly certified according to this rule shall be disallowed for being illegal.[26] In turn, under the COA rules, a certifying officer shall be liable for the disallowed amount according to the extent of his certification.[27] Further, he shall be dismissed from service and susceptible to criminal prosecution.[28]
It is clear from the foregoing that the source of an approving officer's obligation to refund the disallowed amount is a quasi-delict,[29] since his liability hinges on the manner by which he exercised his functions. In this case, the defense of good faith is available to him. Further, he shall be presumed to have regularly performed his duties, provided there is no clear indicia of bad faith, showing patent disregard of his responsibility.
B. Payees
On the other hand, simple payees have no role in the transaction, much less the disbursement approval process, other than receiving and economically benefiting from the payment. Their liability is not based on an administrative duty to perform a task.
"Participation" does not only comprehend one's performance of an official function (public officer). One is seen to have participated in an unlawful expenditure if he had a role therein, even as a person who did not sign or approve any of the disbursements but merely received payment thereof. Their erroneous receipt is what gives rise to the liability to return.
Thus, payees are liable to return the amount simply because it was paid by mistake. No one should ever be unjustly enriched, especially if public funds are involved. Since their liability is a quasi-contract (solutio indebiti), good faith can never be an excuse. In other words, payees cannot be absolved from liability using the same reasoning to exempt approvers/certifiers, simply because the nature of their liability for the transaction is not the same.
The general rule remains to be holding a payee liable for a disallowed amount he has received because it violates the principle against unjust enrichment. It is only in truly exceptional circumstances, as shown and established by the antecedent facts, that the Court may exonerate him from the obligation. The unique exempting circumstance present in the case at bar is the onslaught of the typhoon Yolanda, which justifies the Court's appreciation of social justice considerations.
Also, the ponencia now enunciates to henceforth consider certain employee benefits as bona fide exceptions to the application of solutio indebiti, inasmuch as these were paid in exchange of services rendered.
Parenthetically, that a disallowed payment happened to be in the nature of employee benefits to compensate service rendered should not diminish or extinguish altogether the recipients' obligation to return. In theory, these benefits were given to compensate services rendered. However, is the payment itself supported by law? This virtual exchange of value (disbursement vis-a-vis service rendered by civil servant) should not be the sole consideration in upholding the payment's validity.
For example, merit increases are given for exemplary performance in public office. However, there are cases where the increases are excessive and totally lacking of legal basis because they were computed using a rate or facto in excess of what was provided under the law. In the computation of separation pay, there may be instances where the law clearly provides for a 1.5 multiplier and, yet, an employee nonetheless receives separation pay computed with a different one (
To stress, the uniqueness of each disallowance case simply demands the Court to individually evaluate the attending facts. While the Court recognizes certain rare exceptions, We will remain discriminating in exonerating payees from liability in the future.
Accordingly, I submit my concurrence to the ponencia.
[1] 356 Phil. 678 (1998).
[2] Id. at 765-766.
[3] 729 Phil. 60 (2014).
[4] See Silang, et al. v. Commission on Audit, 769 Phil. 327 (2015).
[5] 538 Phil. 634 (2006).
[6] 616 Phil. 929 (2009).
[7] TESDA v. COA Chairperson Tan, et al., supra note 3.
[8] Silang, et al. v. Commission on Audit, supra note 4.
[9] 782 Phil. 281 (2016).
[10] 800 Phil. 618 (2016).
[11] 818 Phil. 406 (2017).
[12] G.R. No. 229780, January 22, 2019.
[13] 501 Phil. 115 (2005).
[14] Section 16.1, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[15] Section 16.1.1, id.
[16] Section 16.1.2, id.
[17] Section 16.1.3, id.
[18] Section 16.1.4, id.
[19] Section 16 1.5, id.
[20] Section 43, Chapter 5, Book VI, Executive Order No. 292.
[21] Section 29(1), Article VI, 1987 Constitution. See also Section 16.1, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[22] Section 45, Chapter 8, Subtitle B, Title I, Book V, Administrative Code of 1987.
[23] Paragraph 3.1, COA Circular No. 85-55-A, [September 8, 1985].
[24] Section 40, Chapter 5, Book VI, Administrative Code of 1987.
[25] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence."
[26] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received."
[27] Section 16.1.2, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, COA Circular No. 006-09, [September 15, 2009].
[28] Section 40, Chapter 5, Book VI, Administrative Code of 1987 provides, "xxx The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code."
[29] Article 2176, Civil Code.