[ G.R. No. 242342, March 10, 2020 ]
NATIONAL POWER CORPORATION BOARD OF DIRECTORS MARGARITO B. TEVES, ROLANDO G. ANDAYA, JR., PETER B. FAVILA, ARTHUR C. YAP, ELEAZAR P. QUINTO, RONALDO V. PUNO, AUGUSTO B. SANTOS, AND FROILAN A. TAMPINCO, PETITIONERS, V. COMMISSION ON AUDIT, RESPONDENT.
D E C I S I O N
REYES, J. JR., J.:
Before the Court is a Petition for Certiorari under Rule 64 of the Revised Rules of Court seeking to reverse and set aside the February 16, 2017 Decision1 and the March 15, 2018 Resolution2 of the Commission on Audit (COA) which affirmed the Notice of Disallowance (ND) No. NPC 11-004-10.
On September 10, 2009, the National Power Corporation (NPC) Board of Directors (petitioners), through Board Resolution No. 2009-52, authorized the payment of Employee Health and Wellness Program and Related Financial Assistance (EHWPRFA) to qualified officials and employees of the NPC. The EHWPRFA is a monthly benefit equivalent to P5,000.00 to be released on a quarterly basis.3
On September 26, 2011, petitioners received a copy of ND No. NPC-11-004-10,4 which disallowed the payment of EHWPRFA for the first quarter of 2010 amounting to P29,715,000.00. The EHWPRFA was disallowed in audit because it was a new benefit and did not have prior approval from the Office of the President as required under Memorandum Order No. 20 dated June 25, 2001.5
Aggrieved, petitioners filed an appeal before the COA Corporate Government Sector-Cluster 3 (COA CGS-Cluster 3). In its December 27, 2013 Decision,6 the COA CGS-Cluster 3 affirmed ND No. NPC-11-004-10.
Unsatisfied, petitioners filed a petition for review before the COA.
The Assailed COA Decision
In its February 16, 2017 Decision, the COA upheld ND No. NPC-11-004-10.1âшphi1 It explained that the EHWPRFA was a new benefit granted to NPC personnel since it was a cash benefit. The COA noted that the benefits under the NPC Star Program, implemented under NPC Circular No. 2006-04 consisted of non-cash grants. It emphasized that the EHWPRFA was a mere allowance or financial assistance which was not categorically related to the activities or health program included in the NPC Star Program.
Further, the COA ruled that whether the EHWPRFA was a new benefit or an extension to an existing benefit, the grant and payment thereof still needed to comply with the requirements under Section 6 of Presidential Decree (P.D.) No. 1597, which requires the approval of the President through the Department of Budget and Management (DBM). In addition, it elucidated that the doctrine of qualified political agency was inapplicable in the present case. The COA expounded that while some members of the board of NPC are department secretaries, they were not acting as such, but as mere members of the board when they approved the grant of EHWPRFA. The COA Decision reads:
WHEREFORE, premises considered, the Petition for Review of National Power Corporation, Quezon City is hereby DENIED for lack of merit. Accordingly, Commission on Audit Corporate Government Sector - Cluster 3 Decision No. 2013-18 dated December 27, 2013 and Notice of Disallowance No. NPC-11-004-10 dated September 22, 2011, on the payment of the Employee Health and Wellness Program and Related Financial Assistance to the agency's Board of Directors, officials, and employees for the first quarter of 2010 in the total amount of P29,715,000.00 are AFFIRMED.7
Unsatisfied, petitioners moved for reconsideration.
In its March 15, 2018 Resolution, the COA partially granted the petitioners' motion for reconsideration. It appreciated good faith in favor of the passive recipients who merely received the benefit, but had not participated in the approval and release thereof. As such, the COA absolved them from refunding the disallowed amount. Nevertheless, it ruled that the officials, who authorized, approved or certified the grant or payments cannot be deemed in good faith because the laws and rules requiring prior approval from the Office of the President and the DBM were already effective prior to the grant of the subject allowances and benefits. The COA Resolution reads:
WHEREFORE, premises considered, the Motion for Reconsideration is hereby PARTIALLY GRANTED. Accordingly, Commission on Audit (COA) Decision No. 2017-035 dated February 16, 2017, which affirmed COA Corporate Government Sector - Cluster 3 Decision No. 2013-18 dated December 27, 2013 and Notice of Disallowance (ND) No. NPC-11-004-10 dated September 22, 2011 on the payment of the Employee Health and Wellness Program and Related Financial Assistance to the agency's Board of Directors, officials, and employees for the first quarter of 2010 in the total amount of P29,715,000.00 is hereby AFFIRMED with MODIFICATION such that the passive recipients are no longer required to refund the disallowed benefits they have received in good faith.8
Hence, this present petition raising the following issues:
[WHETHER THE] COA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO A LACK OR EXCESS OF JURISDICTION IN RULING THAT EHWPRFA WAS A NEW BENEFIT[; and]
[WHETHER THE] COA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN RULING THAT THE GRANT OF EHWPRFA NEEDED PRESIDENTIAL APPROVAL.9
Petitioners argue that the EHWPRFA is not a new benefit as similar benefits had been granted in the past such as the Enhanced Comprehensive Health Benefit Program (CHBP). It explains that EHWPRFA was issued because the amount granted under the CHBP is no longer feasible owing to the exorbitant increase in the prices of medicine. Petitioners assail that EHWPRFA cannot be considered a new benefit as it merely expanded the wellness benefits already enjoyed by the NPC personnel. It laments that the EHWPRFA is an enforcement of the right of the NPC personnel to protect and promote their welfare or well-being.
In addition, petitioners contend that the President's approval was secured as a consequence of the approval of the EHWPRFA by the National Power Board. It highlights that the DBM Secretary is one of the members of the National Power Board. Petitioners aver that having a member of the board review an act already validly enacted by the board itself is a useless proposition as this would result in an absurd scenario that one member of the board can overrule an action taken and approved by the whole board.
In its Comment10 dated January 28, 2019, the COA reiterated that the EHWPRFA was a new benefit and one that can only be justified on the basis of its exemption from the Salary Standardization Law. It countered that under existing laws, agencies and government-owned or -controlled corporations (GOCCs) that are exempted from the standardized compensation are to observe guidelines and policies the President may issue governing position classification, salary rates, levels of allowances and other forms of compensation and fringe benefits. The COA highlighted that Memorandum Order (M.O.) No. 20 dated June 25, 2001 stated that any increase in the salary or compensation of the GOCCs is subject to the approval of the President. It pointed out that the EHWPRFA was granted without the required approval of the President. Further, the COA disagreed that there was no need for the EHWPRFA to be submitted for the approval of the President on the ground that the National Power Board was composed of cabinet secretaries. It explained that the alter ego doctrine cannot extend to acts done by the cabinet members in an ex officio capacity.
The Court's Ruling
The petition is without merit.
As the constitutionally mandated guardian of public funds, the COA is vested with latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds.11 Its findings are generally accorded not only respect, but at times finality if such findings are supported by substantial evidence.12 The findings of the COA can only be set aside when there is a showing that it has acted without, or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction.13
A finding of grave abuse of discretion against the COA means that the audit commission is guilty of 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.14 As the party alleging grave abuse of discretion, petitioners had the burden to prove that the COA had acted in a capricious, whimsical, arbitrary or despotic manner.15
The Court finds that the petitioners failed to prove that the COA acted with grave abuse of discretion in upholding ND No. NPC 11-004-10 disallowing the payment of EHWPRFA for the first quarter of 2010 amounting to P29,715,000.00.
Section 1 of M.O. No. 20 provided for the immediate suspension on the grant of any salary increase and new or increased benefit. On the other hand, Section 3 thereof requires that any increase in salary or compensation shall be subject to the approval of the President. In fact, at the time EHWPRFA was granted, Administrative Order (A.O.) No. 103 dated August 31 2004 was still in effect. Section 3(b) of the said A.O. directed the GOCCs to suspend the grant of new or additional benefits to officials and employees.
Petitioners argue that the EHWPRFA is not a new benefit as it is a similar benefit with the previous CHBP under Circular No. 2000-55 dated September 11, 2000. It explains that the EHWPRFA was granted because the amount granted under the CHBP was no longer reasonable owing to the exorbitant increase in the prices of medicines and considering that the preventive approach to wellness would benefit the work force more.
Petitioners' argument fails to persuade.
A perusal of Circular No. 2000-55,16 which implemented the CHBP, would negate the petitioners' claim that the EHWPRFA is not a new benefit, but merely increased the amounts provided under the CHBP. Under the above-mentioned circular, NPC employees were entitled to the following benefits: (a) reimbursement of medical, dental and optical expenses; (b) medical assistance; (c) Annual Physical Examination; and (d) Annual Executive Check-Up.
On the other hand, the EHWPRFA is a straight-up cash benefit equivalent to P5,000.00 monthly to be released quarterly. It is readily apparent that the EHWPRFA cannot be considered as merely increasing the amounts prescribed under the CHBP since none of the benefits therein consisted of giving cash to the employees. While the CHBP provided Medical Assistance as one of the benefits, it was limited to employees suffering from dreaded diseases. In contrast, the EHWPRFA was given to employees regardless of their health condition as it was not even required that they suffered any medical condition.
Even assuming that the petitioners are correct in arguing that the EHWPRFA merely increased existing benefits of NPC employees, it still erred in concluding that the same did not require the imprimatur of the President. Both M.O. No. 20 and A.O. No. 103 did not limit their application to new benefits, but likewise included the increase of existing benefits. Section 3 of M.O. No. 20 required that any increase in salary or compensation shall be subject to the approval of the President. On the other hand, Section 3(b) of A.O. No. 103 directed the GOCCs to suspend the grant of new or additional benefits to officials and employees. Clearly, the augmenting of the benefits the NPC employees already enjoyed still required the approval from the President.
On the other hand, the petitioners forward that even if it were to concede that the EHWPRFA required presidential approval, the said requirement was complied with. It notes that the DBM Secretary was one of the members of the National Power Board. Thus, petitioners conclude that since the DBM Secretary was one of the board members who approved the grant of EHWPRFA, presidential approval was already secured by virtue of the doctrine of qualified political agency.
Again, the petitioners' position fail to convince.
The doctrine of political agency provides that department secretaries are alter egos of the President and that their acts are presumed to be those of the latter unless disapproved or reprobated by him.17 In short, acts of department secretaries are deemed acts of the President. Acting on this premise, the petitioners posit that the acquiescence of the DBM Secretary as member of the National Power Board to the grant of EHWPRFA has the effect of obtaining the President's approval thereto.
In Atty. Manalang-Demigillo v. Trade and Investment Development of the Philippines Corporation,18 the Court had differentiated the effects of the secretaries' actions as members of the cabinet and actions performed in an ex officio capacity, to wit:
The doctrine of qualified political agency essentially postulates that the heads of the various executive departments are the alter egos of the President, and, thus, the actions taken by such heads in the performance of their official duties are deemed the acts of the President unless the President himself should disapprove such acts. This doctrine is in recognition of the fact that in our presidential form of government, all executive organizations are adjuncts of a single Chief Executive; that the heads of the Executive Departments are assistants and agents of the Chief Executive; and that the multiple executive functions of the President as the Chief Executive are performed through the Executive Departments. The doctrine has been adopted here out of practical necessity, considering that the President cannot be expected to personally perform the multifarious functions of the executive office.
But the doctrine of qualified political agency could not be extended to the acts of the Board of Directors of TIDCORP despite some of its members being themselves the appointees of the President to the Cabinet. x x x Such Cabinet members sat on the Board of Directors of TIDCORP ex officio, or by reason of their office or function, not because of their direct appointment to the Board by the President. Evidently, it was the law, not the President, that sat them in the Board.
Under the circumstances, when the members of the Board of Directors effected the assailed 2002 reorganization, they were acting as the responsible members of the Board of Directors of TIDCORP constituted pursuant to Presidential Decree No. 1080, as amended by Republic Act No. 8494, not as the alter egos of the President. We cannot stretch the application of a doctrine that already delegates an enormous amount of power. Also, it is settled that the delegation of power is not to be lightly inferred. (Emphases and underscoring supplied)
Petitioners concede that the DBM Secretary sits as member of the National Power Board in an ex officio capacity pursuant to R.A. No. 9136 or the Electric Power Industry Reforms Act of 2001. As such, the Budget Secretary's authority to sit in the National Power Board emanated from the law, and not from the appointment of the President. Thus, the doctrine of qualified political agency does not attach to the acts performed by cabinet secretaries in connection with their position as ex officio members of the National Power Board.
Contrary to petitioners' assumption, no absurd situation arises in still requiring presidential approval in the grant of the EHWPRFA. In assenting to the grant of EHWPRFA as part of the National Power Board, the Budget Secretary was not acting as the alter ego of the President as it was in connection with his ex officio position as member of the board. Thus, the approval or disapproval of the DBM Secretary as required under the law would not have the effect of one member of the board overturning the votes of the majority of the board since it is, by legal fiat, actually the act of the President exercised through his alter ego.
In sum, the COA did not act with grave abuse of discretion in upholding ND No. NPC-11-004-10 and in finding that the NPC officers who had approved or authorized the disbursement in question are liable to refund the same. To reiterate, the grant of EHWPRFA for the first quarter of 2010 was contrary to existing laws, rules and regulations as it was made sans presidential approval.
Unjust enrichment vis-à-vis obligation to refund the disallowed amount
Nevertheless, the Court finds that the COA committed grave abuse of discretion in exempting the passive recipients of the disallowed benefit from refunding on account of good faith. In Dubongco v. Commission on Audit,19 the Court ruled that passive recipients must refund the disallowed benefits considering that they were never entitled to them in the first place, to wit:
Every 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. Unjust enrichment refers to the result or effect of failure to make remuneration of, or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them. To be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. Unjust enrichment is not itself a theory of reconveyance. Rather, it is a prerequisite for the enforcement of the doctrine of restitution. Thus, 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 principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification; and (2) that such benefit is derived at the expense of another. Conversely, there is no unjust enrichment when the person who will benefit has a valid claim to such benefit.
x x x x
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, the payees are considered as 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.
In Department of Public Works and Highways v. Commission on Audit,20 the Court also ruled that employees who have received the disallowed benefit are obliged to return the amounts they received under the principle of unjust enrichment. Meanwhile, in Rotoras v. Commission on Audit,21 the Court was even more unequivocal in ruling that regardless of their lack of malice or bad faith, passive recipients are required to return the benefits they were not entitled to, viz.:
The defense of good faith, which precludes the requirement to return disallowed benefits or allowances, is based on the principle that public officials are entitled to the presumption of good faith when discharging their official duties. Both the public officers who disbursed the benefits or allowances and those who received them will not be required to return the benefits or disallowances when it is shown that they acted in good faith in doing so.
x x x x
Nonetheless, there have been instances when, regardless of the alleged good or bad faith of the responsible officers and recipients, this Court ordered the refund of the amounts received. Applying the rule against unjust enrichment, it required public officers to return the disallowed benefits, considering them as trustees of funds which they should return to the government.
x x x x
The rule against unjust enrichment, along with the treatment of recipients of disallowed benefits as trustees in favor of government, was applied in the recent case of Dubongco v. Commission on Audit. There, this Court declined to ascribe good or bad faith to the recipients of the disallowed collective negotiation agreement incentives. It found that since they had no valid claim to the benefits, they cannot be allowed to retain them, notwithstanding the absence of fraud in their receipt:
x x x x
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. (Emphases supplied)
In other words, good faith is not a valid defense for passive recipients because they are deemed trustees of a constructive trust for having received benefits they were never entitled to in the first place. In addition, the doctrine of unjust enrichment only concerns the question of whether an individual was benefited without legal basis at the expense of another — the belief or intent of the party placed at an advantage is immaterial. Such scenario exists in the disallowance of benefits as the concerned employees receive benefits or emoluments sans legal basis to the prejudice of the government.
Both Dubongco and DPWH involved the disallowance of Collective Negotiation Agreement (CNA) incentives on account of it funded from improper or illegal sources. In the latter case, the Court even expounded that the obligation to reimburse the amounts received becomes more obvious when the nature of CNA incentive as a negotiated benefit is considered. In Rotoras, the Court explicitly ruled that the defense of good faith is unavailable to the rank-and-file employees should the allowance or benefit be the subject of collective negotiation agreement negotiations.
Nevertheless, the application of the doctrine of unjust enrichment is not limited to cases which involved the disallowance of CNA or negotiation benefits. It must be remembered that in the above-mentioned cases, there was no express pronouncement that passive recipients are obliged to return what they received only when the benefit in question is CNA incentive.
In Government Service Insurance System v. Commission on Audit,22 the Court ordered the employees who received benefits under the disallowed GSIS Retirement/Financial Plan (RFP) to return the subject benefit. It was ruled that while the employees committed no fraud in obtaining the benefits under the RFP, it was against equity and good conscience for them to continue holding onto them. As such, it is readily apparent that the application of the doctrine of unjust enrichment is not limited to cases involving the disallowance of CNA incentives because the crux of unjust enrichment is the receipt of a benefit by someone who was not entitled thereto.
Consequently, the NPC employees who received the EHWPRFA must still be held liable to refund the disallowed amount because they were not entitled thereto as its grant was without legal basis.
In Department of Public Works and Highways v. Commission on Audit,23 the Court had modified the COA Decision when it absolved passive recipients from refunding the disallowed benefit. In the said case, only one of the responsible officers had assailed the COA Decision which held only the responsible officers form refunding the disallowed amount. Similar to DPWH, only responsible officers challenged the assailed COA Decision as NPC employees who received the EHWPRFA were exempted from refunding on account of good faith. As such, the subject COA Decision must likewise be modified to include the passive recipients in refunding the disallowed amount in order to conform to recent jurisprudence.
WHEREFORE, the February 16, 2017 Decision and the March 15, 2018 Resolution of the Commission on Audit in Decision No. 2017-035 and Decision No. 2018-257, respectively, are AFFIRMED with MODIFICATION. The certifying and approving officers, as well as all the employees of the National Power Corporation who received the disallowed benefit, are liable for the amount of disallowance. They must reimburse the amount they received through salary deduction, or through whatever mode of payment the Commission on Audit may deem just and proper under the circumstances.
Peralta (C.J.), Perlas-Bernabe, Caguioa, A. Reyes, Jr., Gesmundo, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concur.
Leonen, J., see separate concurring and dissenting opinion.
NOTICE OF JUDGMENT
Please take notice that on March 10, 2020 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on September 17, 2020 at 1:40 p.m.
Very truly yours,
(Sgd.) EDGAR O. ARICHETA
Clerk of Court
1 Concurred in by Chairperson Michael G. Aguinaldo, Commissioners Jose A. Fabia and Isabel D. Agito; rollo, pp. 18-25.
2 Id. at 26-30.
3 Id. 43-44.
4 Not attached in the rollo.
5 Rollo, p. 5.
6 Not attached in the rollo.
7 Id. at 24.
8 Id. at 28-29.
9 Id. at 7.
10 Id. at 66-83.
11 Technical Education and Skills Development Authority v. Commission on Audit, 753 Phil. 434, 441 (2015).
12 Felix Gochan & Sons Realty Corporation v. Commission on Audit, G.R. No. 223228, April 10, 2019.
13 Tetangco v. Commission on Audit, 810 Phil. 459, 466 (2017).
14 Miralles v. Commission on Audit, 818 Phil. 380, 389-390 (2017).
15 Chua v. People, G.R. No. 195248, November 22, 2017, 846 SCRA 74, 81.
16 Rollo, pp. 31-32.
17 Manubay v. Garilao, 603 Phil 135, 139 (2009).
18 705 Phil. 331, 347-349 (2013).
19 G.R. No. 237813, March 5, 2019.
20 G.R. No. 237987, March 19, 2019.
21 G.R. No. 211999, August 20, 2019.
22 694 Phil. 518 (2012)
23 Supra note 20.
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