CASE BrieF NO. 2019-0035


“Passive recipients should not be faulted in unwittingly receiving allowances or benefits they assumed they were entitled to.


CASE: Balayan Water District, Conrado S. Lopez and Romeo D. Pantoja vs. COA [G.R. No. 229780, January 22, 2019]

PONENTE: Associate Justice Jose C. Reyes, Jr.

SUBJECT:

  1. R.A. No. 6758:
    i. Cost of Living Allowance (in government sector)
    ii. Good Faith – Requisites in appreciating good faith on the part of officers responsible for the disallowed disbursement

FACTS:        In 2006, the Board of Directors of Balayan Water District (BWD), a government entity, passed a Resolution granting the payment of Cost of Living Allowance (COLA) to BWD employees starting 2006. In 2012, several Notice of Disallowances (ND)were issued disallowing the payment of accrued COLA during calendar years 2010 and 2011. Aggrieved, BWD appealed before the COA-Regional Office (COA-RO).

The COA-RO denied BWD’s appeal and affirmed the NDs. It explained that water districts were never covered by Letter of Instruction (LOI) No. 97which authorizes the payment of COLA to government-owned and controlled corporations (GOCC). In addition, the COA-RO expounded that in order for BWD employees to be entitled to COLA it must be shown that they were employed in the water district on or before July 1, 1989 (the effectivity of R.A. No. 6758) and that they were already receiving the said allowance on such date, or prior thereto.

Unsatisfied, BWD filed a petition for review before the COA.

In 2016, the COA affirmed the COA-RO Decision.

Hence, BWD filed a petition (via Rule 64) to the Supreme Court with the following arguments:

  1. BWD issued Resolution allowing the grant of COLA to BWD employees relying on the pronouncements of the Court in Metropolitan Naga Water District v. Commission on Audit (MNWD) G.R. No. 218072, March 8, 2016. It highlighted that in MNWD the Court ruled: that local water districts are included in the provisions of LOI No. 97; and that there was no need to establish that the employees were already receiving COLA prior to the effectivity of R.A. No. 6758.
  2. BWD should not be held liable to refund the disallowed amounts because of good faith.

ISSUES:

A.       Whether the COA acted with grave abuse of discretion in finding that the COLA back payments were without basis.
a.       Whether there is no basis for BWD to grant COLA to its employees.

B.       Whether BWD officials acted in good faith.
a.       Whether BWD official should be absolved from refunding the amount on the basis of good faith.
b.       What are the requisites in appreciating good faith on the part of officers responsible for the disallowed disbursement.
c.       What is stare decisis?

C.       Whether the BWD employees who received their COLA back payments should refund the same.

RULING:
A.       There was no grave abuse of discretion.

While it is true that in MNWD, the Court clarified that LOI No. 97 covered local water district, nevertheless, the Court ultimately upheld the disallowance of COLA back payments in the same case because COLA was already deemed integrated in the compensation of government employees.

Relevant to the resolution of the present disallowance is Section 12of R.A. No. 6758. It provided that as a general rule, all allowances are deemed included in the standardized salary prescribed therein. However, Section 12 of R.A. No. 6758 enumerated specific non-integrated benefits, namely: (a) Representation and Transportation Allowance (RATA); (b) Clothing and laundry allowances; (c) Subsistence allowance of marine officers and crew on board government vessels and hospital personnel; (d) Hazard pay; (e) Allowances of foreign service personnel stationed abroad; and (f) Such other additional compensation as may be determined by the Department of Budget and Management (DBM).

In Maritime Industry Authority v. Commission on Audit [750 Phil. 288 (2015)], the Court further ruled:

In addition to the non-integrated allowances specified in Section 12, the Department of Budget and Management is delegated the authority to identify other allowances that may be given to government employees in addition to the standardized salary.

Action by the DBM is not required to implement Section 12 integrating allowances into the standardized salary. Rather, an issuance by the Department of Budget and Management is required only if additional non-integrated allowances will be identified. Without this issuance from the Department of Budget and Management, the enumerated non-integrated allowances in Section 12 remain exclusive. (Emphasis and underscoring supplied)

In Philippine Health Insurance Corporation v. Commission on Audit [801 Phil. 427 (2016)], the Court reiterated that it had been long settled that Section 12 of R.A. No. 6758 is self-executing in integrating allowances notwithstanding the absence of any DBM issuances, viz:

Time and again, the Court has ruled that Section 12 of the SSL is self-executing. This means that even without DBM action, the standardized salaries of government employees are already inclusive of all allowances, save for those expressly identified in said section. It is only when additional non-integrated allowances will be identified that an issuance of the DBM is required. Thus, until and unless the DBM issues rules and regulations identifying those excluded benefits, the enumerated non-integrated allowances in Section 12 remain exclusive. When a grant of an allowance, therefore, is not among those excluded in the Section 12 enumeration or expressly excluded by law or DBM issuance, such allowance is deemed already given to its recipient in their basic salary. As a result, the unauthorized issuance and receipt of said allowance is tantamount to double compensation justifying COA disallowance.

Prescinding from the foregoing, the Court had consistently ruled that not being an enumerated exclusion, the COLA is deemed already incorporated x x x (Emphases supplied)

Thus, the COA did not act with grave abuse of discretion in finding that the COLA back payments were without basis as the said allowance was already integrated in the salary received by BWD employees. There was no accrued COLA to speak of, which requires back payments because upon the effectivity of R.A. No. 6758, all allowances, save for those specifically excluded in Section 12, received by government employees were deemed included in the salaries they received. Considering that the COLA had been considered integrated into the basic salary of government employees, there is no basis for the redundant back payment of the said allowances [Land Bank of the Philippines v. Naval, Jr., 731 Phil. 532, 557 (2014).]


B.       BWD officials are in bad faith.

BWD argue that, in granting COLA to its employees, its officials acted in the honest belief that they were performing their duties in accordance with relevant jurisprudence.

In Zamboanga City Water District v. Commission on Audit [779 Phil. 225 (2016)], the Court defined good faith in relation to the disallowance of benefits as the 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 though technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transactions unconscientious.”

Meanwhile, in Development Bank of the Philippines v. Commission on Audit(G.R. No. 221706, March 13,2018), the Court synthesized recent jurisprudence on COA disallowances to provide the requisites in appreciating good faith on the part of officers responsible for the disallowed disbursement, to wit: (1) they acted in good faith believing that they could disburse the disallowed amounts based on the provisions of the law; and (2) that they lacked knowledge of facts or circumstances which would render the disbursement illegal, such when there is no similar ruling by this Court prohibiting a particular disbursement or when there is no clear and unequivocal law or administrative order barring the same.

BWD contend that similar to the responsible officers in the MNWD case, good faith should also be appreciated in favor of the officials who approved the COLA back payments to BWD employees applying the principle of stare decisis. Essentially, stare decisis means that principles of law set forth by the Court shall apply to future cases where the facts are substantially similar, regardless whether the parties and property are the same (City of Baguio v. Masweng, G.R. No. 195905, July 4, 2018). However, contrary to BWD’s contention, the present circumstances are not in all fours with those in MNWD to warrant its full application.

In the caseof MNWD, the COLA back payments were made pursuant to a Board Resolution passed by the BOD on August 20, 2002. On the other hand, BWD’s BOD authorized the release of the COLA back payments in its Resolution dated February 10, 2006. It is noteworthy that on October 26, 2005, the DBM had issued NB Circular No. 2005-502, the pertinent provisions of which read:

6.0     All agency heads and other responsible officials and employees found to have authorized the grant of COLA and other allowances and benefits already integrated in the basic salary shall be personally held liable for such payment, and shall be severely dealt with in accordance with applicable administrative and penal laws.x x x x

Thus, unlike in MNWD, at the time the BWD passed a resolution for the release of COLA back payments, DBM NB Circular No. 2005-502 was valid and existing. It unequivocally and categorically prohibited the payment of COLA. Good faith cannot be appreciated in favor of the responsible officers of BWD because at the time of the approval of the disallowed disbursement, there was a clear and straightforward proscription on the payment of COLA. The DBM Circular should have put them on guard and be more circumspect in allowing the disbursement.

C.       Nevertheless, good faith should be appreciated in favor of BWD employees who merely received their COLA back payments. Passive recipients of disallowed disbursements who acted in good faith are exempt from refunding the disallowed amount [National Transmission Corporation v. Commission on Audit, 800 Phil. 618, 630 (2016). In Silang v. Commission on Audit 769 Phil. 327 (2015), the Court explained that passive recipients are absolved from refunding as they had no participation in the disallowed disbursement, to wit:

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. x x x

In the same vein, BWD employees who had no hand in the approval or release of the COLA back payments are exempt from refunding the disallowed amount. They had acted in good faith as they were unaware of any irregularity in its disbursement, especially since it was made pursuant to the resolution passed by BWD’s BOD. Passive recipients should not be faulted in unwittingly receiving allowances or benefits they assumed they were entitled to.

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THINGS DECIDED:

  1. Considering that the COLA had been considered integrated into the basic salary of government employees, there is no basis for the redundant back payment of the said allowances
  2. Good faith in relation to the disallowance of benefits refers to the 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 though technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transactions unconscientious.”
  3. The requisites in appreciating good faith on the part of officers responsible for the disallowed disbursement, are: (1) they acted in good faith believing that they could disburse the disallowed amounts based on the provisions of the law; and (2) that they lacked knowledge of facts or circumstances which would render the disbursement illegal, such when there is no similar ruling by this Court prohibiting a particular disbursement or when there is no clear and unequivocal law or administrative order barring the same.
  4. Stare decisis means that principles of law set forth by the Court shall apply to future cases where the facts are substantially similar, regardless whether the parties and property are the same.
  5. Passive recipients of disallowed disbursements who acted in good faith are exempt from refunding the disallowed amount.
  6. Passive recipients should not be faulted in unwittingly receiving allowances or benefits they assumed they were entitled to.

‘Stand by things decided’ ~ Stare Decisis


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