Jalbuena v. Commission on Audit

EN BANC

[G.R. No. 218478. June 19, 2018.]

LE JAYME JALBUENA, LALAINE PEÑAFLORIDA, AND ERNESTO CABEROY, petitioners, vs. COMMISSION ON AUDIT, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution datedJUNE 19, 2018, which reads as follows: HTcADC

"G.R. No. 218478 (Le Jayme Jalbuena, Lalaine Peñaflorida, and Ernesto Caberoy v. Commission on Audit). — This is a petition for review on certiorari1 under Rule 65, in relation to Rule 64, of the Rules of Court, assailing the Commission on Audit's (COA) Decision No. 2014-068 2 dated May 8, 2014 and Resolution, 3 docketed as Decision No. 2015-041 (hereinafter, Resolution No. 2015-041) dated January 30, 2015. Decision No. 2014-068 affirmed the disallowance on the payment of rice allowances to the officers and employees of Metro Iloilo Water District (MIWD) in the amount of P3,270,580.00. Resolution No. 2015-041 modified Decision No. 2014-068, ruling that the officers who authorized, certified, or approved the payment of the disallowed benefits shall be solidarily liable for the total disallowance, but the rank-and-file employees who merely received the benefits in good faith need not refund the amount they received. 4

On June 2, 2005, Audit Team Leader Perla A. Valdellon issued Audit Observation Memorandum (AOM) No. 2005-005 (2003-2004) to MIWD requesting comments on the deficiencies noted in the payment of benefits for calendar years 2003 and 2004. Among the benefits questioned were the rice allowances granted to officers and employees who were hired after July 1, 1989. Finding the explanation of MIWD unsatisfactory, Valdellon forwarded the AOM and its supporting documents to the Regional Cluster Director (RCD) of the Regional Legal and Adjudication Sector of the COA Regional Office No. VI. 5

The RCD issued Notice of Disallowance No. 2008-005-101 (03/04) dated October 21, 2008 in the amount of P3,270,580.00 representing payment of rice allowances to the officers and employees of the MIWD. The RCD found that the grant of these allowances contravened Section 12 of Republic Act (RA) No. 6758 6 and Section 2 of Administrative Order (AO) No. 37, series of 1998 7 for lack of prior authorization from the Office of the President. 8

On appeal, the Regional Director of the COA Regional Office No. VI affirmed the disallowance. 9 The officers and employees of MIWD then appealed before the COA Proper, but the same was also denied. 10 The COA Proper held that the MIWD officers and employees are not entitled to receive rice allowances for the calendar years 2003 and 2004. Citing Agra v. Commission on Audit, 11 the COA Proper held that the grant of allowances and fringe benefits on top of the standardized salary rates for employees of government-owned and controlled companies and government financial institutions may be continued only if an employee is an incumbent as of July 1, 1989 and that the allowance or benefit is not consolidated in the standardized salary rate as prescribed by RA No. 6758. It then found no evidence to prove that the recipients of rice allowances were incumbents as of July 1, 1989 and had been receiving the benefit since then. The COA Proper also held that good faith cannot be appreciated as a valid defense to avoid liability under the principle of solutio indebiti. 12

On reconsideration, however, the COA Proper modified its resolution by absolving the rank-and-file employees from liability. 13 Citing Casal v. Commission on Audit, 14 the COA Proper held that in view of these employees' non-participation in the approval of the incentives, they cannot be said to be in bad faith or grossly negligent. The imprimatur given by the approving officers on the award gave it a color of legality from the perspective of these employees. 15

Hence, this petition. Petitioners Le Jayme Jalbuena and Ernesto Caberoy, who were the previous General Manager and Manager of the Administration Department, respectively, of the MIWD, and Lalaine Peñaflorida, who is still connected with the MIWD as Chief Corporate Accountant B, 16 allege that the COA acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, in holding them solidarily liable for the total amount disallowed.

We grant the petition.

Petitioners argue that the MIWD's Board of Directors (BOD) has the power, under Presidential Decree (PD) No. 198, 17 to determine the propriety of the grant of rice allowance to the employees. Petitioners, meanwhile, have the obligation to comply with whatever resolution that may be passed or policy that may be formulated relative thereto. Thus, when the BOD passed Resolution No. 57, series of 1991, on the grant of rice allowance to MIWD employees, petitioners contend that they had to disburse the same as a matter of duty. 18 Petitioners, in a nutshell, invoke that they acted in good faith. We agree.

Firstly, we affirm the findings of the COA that the grant of rice subsidy was without legal basis. Board Resolution Nos. 68 and 57, which supposedly authorized the disbursement of the rice allowances in 2003 and 2004, were issued in 1988 and 1991, 19 respectively. At the time the more recent board resolution was issued, RA 6758 was already in effect. Section 12 of this law provides for the consolidation of allowances in the standardized salary rates:

Sec. 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. TIADCc

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.

The benefits excluded from the standardized salary rates are the "allowances" which are usually granted to officials and employees of the government to defray or reimburse the expenses incurred in the performance of their official functions. Clearly, rice subsidy is not among the allowances listed in Section 12 which State workers can continue to receive under RA No. 6758 over and above their standardized salary rates. 20

Moreover, pursuant to its authority under Section 23 of RA No. 6758, the Department of Budget and Management (DBM) issued on October 2, 1989 Corporate Compensation Circular (DBM-CCC) No. 10, 21 covering all government-owned or controlled corporations and government financial institutions. Section 5.5 of DBM-CCC No. 10 enumerated the other allowances/fringe benefits not likewise integrated into the basic salary and allowed to be continued only for incumbents as of June 30, 1989, and subject to the condition that the grant of the same is with appropriate authorization either from the DBM, Office of the President, or legislative issuances. Rice subsidy is among those allowances enumerated. The original DBM-CCC No. 10, though nullified in De Jesus v. Commission on Audit22 for lack of publication, was re-issued in 1999 and duly published shortly thereafter. At the time of the disbursements in 2003 and 2004, therefore, integration or consolidation of rice allowances in the standardized salary rates was already the general rule.

Thus, there should have been no reason why MIWD cannot apply Section 12 of RA No. 6758. There is no question RA No. 6758 applies to MIWD, it being a local water district. As early as 1991, in Davao City Water District v. Civil Service Commission, 23 we have already declared that local water districts are government-owned or controlled corporations with original charter and are under the jurisdiction of the Civil Service Commission and the COA. The coverage of RA No. 6758 also clearly provides that it applies to all government positions, including those in government-owned or controlled corporations, without qualification. 24 Consequently, the COA was correct in disallowing the allowances of the payees, absent any evidence that they were incumbents as of July 1, 1989 and have been receiving the benefits since then.

The foregoing discussion notwithstanding, we find petitioners and all the recipients to have acted in good faith in the disbursement and receipt of the disallowed benefits. The term "good faith" is ordinarily used to describe that 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 [the] transaction unconscientious." 25 With this definition in mind, we agree with the COA in holding that the payees or employees who merely received the disallowed amounts are not obliged to refund the same because they had no participation in approving the release of these allowances. These payees are 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 employees should not be held liable to refund what they had unwittingly received. 26

Good faith, however, may also be appreciated in favor of petitioners as the approving officers. The general rule in our jurisdiction is that officers who participated in the approval of disallowed allowances or benefits are presumed to have acted in good faith in the performance of their duties. However, they can be held personally accountable for acts claimed to have been performed in connection with official duties where they have acted beyond their scope of authority or where there is a showing of bad faith. 27 Thus, approving officers may be required to refund the amounts disallowed when they are found to be in bad faith or grossly negligent amounting to bad faith. 28

Our previous ruling in De Jesus v. Commission on Audit, 29 applying, in turn, our decision in Blaquera v. Alcala, 30 supports petitioners' position on the refund of the disallowed benefits. We appreciated good faith in favor of the petitioners in De Jesus, who were members of the board of directors of the Catbalogan Water District and granted themselves various allowances by virtue of a board resolution of the Local Water Utilities Administration (LWUA). We ruled that they received the additional allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. We also held that petitioners had no knowledge that the payment of the additional allowances and bonuses was without legal basis because at the time they received the same, the Court had not yet decided Baybay Water District v. Commission on Audit, 31 where we ruled for the first time that members of the board of water districts cannot receive allowances and benefits more than those allowed by PD No. 198. 32 AIDSTE

Similarly in this case, petitioners merely relied on Board Resolution No. 57 which authorized the grant of the rice allowances. As they correctly raised, it was the BOD which determined it as a policy to grant the allowances. Meanwhile, petitioners, especially Jalbuena, as general manager, had the duty to implement the Resolution as with all the other plans and policies of the BOD. 33 There being no revocation or declaration of the invalidity of the resolution, it was incumbent upon Jalbuena to implement it as general manager in accordance with his mandate under PD No. 198. 34

Moreover, lack of knowledge of a similar ruling by this Court prohibiting a particular disbursement is a badge of good faith. 35 At the time of the disbursements in 2003 and 2004, there was no definite ruling yet on the application of Section 12 of RA No. 6758 to local water districts. It was only De Jesus v. Commission on Audit, 36 decided in 2005, when this issue was touched upon. The Court applied RA No. 6758 to the LWUA's grant of rice subsidy to its employees pursuant to a series of board resolutions. Unlike here, however, the Court reversed the disallowance by the COA, ruling that the allowances may be continuously granted to employees for as long as they are incumbents as of July 1, 1989, and that the allowances were not consolidated in the standardized salary rate as prescribed by RA No. 6758. 37

WHEREFORE, the May 8, 2014 Decision and January 30, 2015 Resolution of the Commission of Audit are AFFIRMED with MODIFICATION in that all the officials of MIWD who approved, and all its employees who received, the rice allowances in 2003 and 2004 need not refund the same." (adv26)

Very truly yours,

(SGD.) EDGAR O. ARICHETAClerk of Court

 

Footnotes

1.Rollo, pp. 3-11.

2.Id. at 16-21.

3.Id. at 22-26.

4.Id. at 25.

5.Id. at 16.

6. Compensation and Position Classification Act of 1989.

7. Re: Authorizing the Grant of Amelioration Assistance to all Government Personnel and Prohibiting Payments of Similar Benefits in Future Years Unless Authorized by the President. Section 2 of Administrative Order No. 37, series of 1998, provides:

   Sec. 2. Heads of [National Government Agencies], [Local Government Units] including [Government-Owned and Controlled Corporations] and [Government Financial Institutions] as well as their respective governing boards are hereby enjoined and prohibited from authorizing/granting Amelioration Assistance or any other similar benefit without prior approval and authorization via Administrative Order by the Office of the President. Henceforth, anyone found violating any of the provisions of this Order, including all officials/employees and the COA Resident Auditor of such government entity found to have taken part thereof, shall be accordingly and severely dealt with in accordance with the applicable provisions of existing administrative and penal laws.

   Consequently, all administrative authorizations granting any and all forms of additional compensation paid outside of the prescribed basic salary under RA 6758 that are inconsistent with the legislated policy on the matter or are not covered by any legislative action are hereby revoked.

8.Rollo, pp. 16-17.

9.Id. at 17, 42-44.

10.Supra note 2.

11. G.R. No. 167807, December 6, 2011, 661 SCRA 563.

12.Rollo, pp. 18-19.

13.Supra note 3.

14. G.R. No. 149633, November 30, 2006, 509 SCRA 138.

15.Rollo, p. 25.

16.Id. at 3.

17. Provincial Water Utilities Act of 1973.

18.Rollo, pp. 7-9.

19. See id. at 109-110.

20.Benguet State University v. Commission on Audit, G.R. No. 169637, June 8, 2007, 524 SCRA 437, 449.

21. Rules and Regulations for the Implementation of the Revised Compensation and Position Classification Plan in Government-Owned and/or Controlled Corporations and Government Financial Institutions.

22. G.R. No. 109023, August 12, 1998, 294 SCRA 152.

23. G.R. No. 95237-38, September 13, 1991, 201 SCRA 593.

24. See Mendoza v. Commission on Audit, G.R. No. 195395, September 10, 2013, 705 SCRA 306. See also Section 4 of Republic Act No. 6758. It provides:

   Sec. 4. Coverage. — The Compensation and Position Classification System herein provided shall apply to all positions, appointive or elective, on full or part-time basis, now existing or hereafter created in the government, including government-owned or controlled corporations and government financial institutions.

   The term "government" refers to the Executive, the Legislative and the Judicial Branches and the Constitutional Commissions and shall include all, but shall not be limited to, departments, bureaus, offices, boards, commissions, courts, tribunals, councils, authorities, administrations, centers, institutes, state colleges and universities, local-government units, and the armed forces. The term "government-owned or controlled corporations and financial institutions" shall include all corporations and financial institutions owned or controlled by the National Government, whether such corporations and financial institutions perform governmental or proprietary functions.

25. Philippine Economic Zone Authority v. Commission on Audit, G.R. No. 189767, July 3, 2012, 675 SCRA 513, 524. Emphasis omitted.

26. Silang v. Commission on Audit, G.R. No. 213189, September 8, 2015, 770 SCRA 110, 126.

27. See Velasco v. Commission on Audit, G.R. No. 189774, September 18, 2012, 681 SCRA 102, 116.

28. See Technical Education and Skills Development Authority (TESDA) v. Commission on Audit, G.R. No. 204869, March 11, 2014, 718 SCRA 402 and Silang v. Commission on Audit, G.R. No. 213189, September 8, 2015, 770 SCRA 110.

29. G.R. No. 149154, June 10, 2003, 403 SCRA 666.

30. G.R. No. 109406, September 11, 1998, 295 SCRA 366.

31. G.R. Nos. 147248-49, January 23, 2002, 374 SCRA 482.

32. De Jesus v. Commission on Audit, supra at 676-677.

33. See Civil Service Commission v. Pililla Water District, G.R. No. 190147, March 5, 2013, 692 SCRA 406, 422, where we ruled that:

   The BOD is confined to policy-making and prescribing a system of business administration and accounting for the water district patterned upon and in conformity to the standards established by the Local Water Utilities Administration (LWUA), and it is the General Manager who implements the plans and policies approved by the BOD. And while the BOD may not engage in the detailed management of the water district, it is empowered to delegate to such officers or agents designated by it any executive, administrative or ministerial power, including entering into contracts under conditions and restrictions it may impose. x x x It is likewise evident that the General Manager is directly accountable to the BOD which has disciplinary jurisdiction over him. The foregoing working relationship of the General Manager and BOD under the governing law of water districts clearly demands a high degree of trust and confidence between them. . . x x x (Citation omitted.)

34. See Munar v. Bautista, A.C. No. 7424, February 8, 2017, 817 SCRA 114, 126.

35. Zamboanga City Water District v. Commission on Audit, G.R. No. 213472, January 26, 2016, 782 SCRA 78, 98-100.

36. G.R. No. 127515, May 10, 2005, 458 SCRA 368.

37. Id. at 384.