G.R. No. 123892 - Soler vs. Court of Appeals

Petitioner: Dulce M. Abanilla, in her capacity as General Manager of the Metropolitan Cebu Water District (MCWD).
Respondents:

MCWD was organized as a government-owned corporation under Presidential Decree No. 198 (Provincial Water Utilities Act of 1973).
As part of its operations, MCWD, through its Board of Directors, issued several resolutions granting benefits and privileges to its personnel, including:

Hospitalization privileges (Board Resolution No. 054-83 dated May 23, 1983).
Monetization of leave credits (Board Resolutions Nos. 091-83 and 0203-85 dated October 21, 1983 and November 20, 1985, respectively).
Christmas bonus (Board Resolution No. 0161-86 dated November 29, 1986).
Longevity allowance (Board Resolution No. 083-88).

On January 1, 1989, MCWD and its Employees Union executed a CBA which included benefits such as cash advances, thirteenth month pay, mid-year bonus, Christmas bonus, vacation and sick leave credits, hospitalization, medicare, uniform privileges, and water allowance.
The CBA, covering the terms of employment for regular rank-and-file employees, was renewed on January 1, 1992.

On November 13, 1995, an audit was conducted by a COA team, headed by Bernardita T. Jabines of the COA Regional Office No. VII at Cebu City, reviewing the accounts and transactions of MCWD.
Following the audit, the COA Regional Director issued several notices disallowing benefits amounting to P12,221,120.86, which covered:

Petitioner appealed the COA’s decision, invoking COA Memorandum Circular No. 002-94 which maintained that benefits under CBAs concluded before March 12, 1992, would continue up to their expiry or CBA’s termination date.

Denied petitioner’s appeal.
Cited the precedent from the Davao City Water District case, emphasizing that MCWD’s employees are covered by the Civil Service Law, not the Labor Code.
Held that any transactions, specifically the CBA executed after the Davao decision, are void and non-enforceable as they conflict with existing laws regulating government entities.

A subsequent motion for reconsideration was filed by the petitioner, but on February 15, 2000, COA Resolution No. 2000-062 denied the motion.

The resolution affirmed that the compensation package for MCWD personnel falls under the Civil Service Law, making it ineligible for collective bargaining adjustments.

Petitioner contended that the COA acted with grave abuse of discretion by disallowing the benefits and argued that this action contravened the Labor Code’s provision on non-diminution of benefits.
The Solicitor General argued in favor of the COA, emphasizing that government employees’ benefits are determined by the Civil Service Law, the General Appropriations Act, and related issuances by the Department of Budget and Management rather than by collective bargaining agreements.

The Supreme Court, while sustaining the COA’s disallowance of the disputed benefits and privileges, recognized that:

The MCWD personnel received the benefits in good faith, under the honest belief that the CBA authorized such payments.
Thus, those personnel are not required to refund the benefits disallowed by the COA.

The petition for certiorari was denied, and the COA decisions were affirmed with the noted modification regarding the refund of disallowed benefits.

Whether the COA’s disallowance of benefits granted under the CBA violated the non-diminution principle contained within the Labor Code.
Whether the CBA, concluded after the promulgation of pertinent judicial precedents (e.g., the Davao City Water District ruling), can validly alter the terms and conditions of employment already established by law.
Whether the MCWD personnel who received the benefits acted in good faith and, consequently, whether they should be exempted from refunding the disallowed benefits.