G.R. No. 195395 - Mendoza vs. Commission on Audit

Engineer Manolito P. Mendoza served as the general manager of Talisay Water District in Talisay City, Negros Occidental, which was established under Presidential Decree No. 198, otherwise known as the Provincial Water Utilities Act of 1973.
Mendoza’s compensation as general manager was fixed by the board of directors of the water district pursuant to Section 23 of PD 198.

The Commission on Audit (COA) disallowed a total amount of P380,208.00 that Mendoza received for the years 2005 to 2006, reasoning that his salary was not in consonance with the rates prescribed under Republic Act No. 6758 (the Salary Standardization Law) and the approved plantilla of positions.
The COA further ruled that Mendoza’s claim of salary was unsupported by an appointment duly attested by the Civil Service Commission, which rendered the payment “illegal.”

On July 6, 2009, the COA issued its "Notice of Finality of COA Decision" and instructed the withholding of the disallowed amounts from Mendoza’s salary.
Although Mendoza argued that he had not been personally served a copy of the notice—thereby losing his opportunity for immediate response—the COA maintained that receipt by his employee constituted constructive service equivalent to substituted service in administrative proceedings.

Mendoza filed a Motion for Reconsideration contesting the finality of the COA decision and the method of service of the notice.
He also contended that Section 23 of PD 198 granted the Talisay Water District board of directors the authority to fix his salary, thereby exempting him from the coverage of the Salary Standardization Law, and that he had relied on this provision in good faith.
The COA denied his motion for reconsideration for lack of merit, and subsequently, Mendoza elevated the issue through a Petition for Certiorari alleging grave abuse of discretion by the COA.

Whether the Notice of Disallowance/s became final and executory despite Mendoza not being personally served the notice.

Whether the salary of a water district’s general manager is covered by the Salary Standardization Law, notwithstanding the grant under Section 23 of PD 198 to fix compensation.

Whether Mendoza’s alleged good faith reliance on Section 23 of PD 198 excuses him from reimbursing the government the amounts disallowed by the COA.