G.R. No. 86051 - Ledesma vs. Court of Appeals

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G.R. No. 86051: Ledesma vs. Court of Appeals

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Title Source: Supreme Court: National Power Corp. Board of Directors vs. Commission on Audit

Case: G.R. No. 218052

Decision Date: Jan 26, 2021

NPC officials and employees granted PIB in 2009 despite net loss; COA disallowed for lack of presidential approval, extravagance, and untimely appeal. SC upheld COA, holding petitioners liable for refund.

Case Digest (G.R. No. 86051)
Standard Advanced

Facts:

Approval and Implementation of the 2009 PIB

The NPC Board of Directors confirmed and ratified Board Resolution No. 2009-72 dated December 18, 2009, which granted Calendar Year (CY) 2009 Performance Incentive Benefits (PIB) equivalent to five and one‐half monthly basic salaries to designated NPC personnel.
To implement the grant, NPC President and CEO Froilan A. Tampinco approved NPC Circular No. 2009-58 dated December 21, 2009, with a total disbursement amounting to P327,272,424.91.

Audit and Issuance of the Notice of Suspension

On February 15, 2012, the NPC Audit Team issued a Notice of Suspension, requiring NPC to explain the grant of the PIB due to two main grounds:

Lack of prior approval by the President as mandated under Section 3 of AO No. 103 (dated August 31, 2004).
The grant being extravagant under Section 3.4 of COA Circular No. 85-55A (dated September 5, 1985), especially given the NPC-SPUG’s net loss of P2,874,144,564.00 in CY 2009.

In response, on April 10, 2012, NPC management issued a letter rationalizing the PIB by:

Citing the successful privatization of several power plants.
Asserting a “High Very Satisfactory (VS)” rating of corporate performance under the balanced scorecard.
Noting the implementation of the organization’s right-sizing in 2010.

Despite the rationalization, no law or direct presidential issuance was invoked to legitimize the PIB.

Notice of Disallowance and Subsequent Appeals

The COA Audit Team issued the Notice of Disallowance (ND) No. NPC 12-007 (09,10) dated October 15, 2012, disallowing the PIB on the grounds of lacking presidential approval and the extravagance of the grant.
The ND was addressed to Tampinco and received by him on October 23, 2012.
On April 11, 2013, petitioners filed an appeal to the COA Corporate Government Sector (CGS) Cluster 3 a Public Utilities, arguing:

That the PIB was authorized by President Fidel V. Ramos through MO No. 198 dated March 24, 1994, which they claimed served as the required presidential imprimatur.
That the NPC Board, composed of cabinet members, acted as the President’s alter egos, and their ratification constituted the necessary presidential approval.

On February 28, 2014, COA CGS Decision No. 2014-03 affirmed the ND by ruling:

AO No. 103 had superseded MO No. 198 in suspending benefits.
Even if MO No. 198 applied, the PIB was not pegged to a Productivity Enhancement Program (PEP) as required under Section 2.2 of MO No. 198.
The amount of five and one‐half months’ salary was extravagant considering the NPC’s significant net loss in CY 2009.

Filing of the Petition for Review

On March 26, 2014, petitioners filed a Petition for Review to the COA Proper, challenging the CGS decision and asserting:

The ND was not individually served, thus making the appeal period “not yet commenced” for some or all petitioners.
They were denied an opportunity to be heard, despite their claim of acting in good faith based on the alleged presidential authorization through MO No. 198.

On April 6, 2015, in Decision No. 2015-108, the COA Proper dismissed the Petition for Review, holding that:

The appeal was filed beyond the reglementary period of six months (180 days) mandated by PD No. 1445 and the COA Revised Rules of Procedure.
The ND had attained finality, thereby affirming that the disallowed PIB, amounting to P327,272,424.91, was final and executory.

Additional Arguments and Contentions

Petitioners contended that:

The constructive service of the ND was improper since individual personal liability was imposed on each petitioner.
They had not been given the chance to be heard on the merits due to the ND’s mode of service.

The COA maintained that:

The service of the ND, even constructively through the designated officer, was valid under COA Circular No. 2009-006.
The disallowance was proper based on both the lack of requisite presidential approval and the extravagance of the PIB given NPC’s financial condition in 2009.

Ultimately, the COA found the petitioners liable:

The Board of Directors was held solidarily liable for the disallowed amount.
Individual payees were held liable to return the amounts they received, relying on principles of unjust enrichment and solutio indebiti.

Issues:

Timeliness and Procedural Compliance

Whether the COA committed grave abuse of discretion in dismissing the appeal for being filed beyond the reglementary six-month period.
Whether the constructive service of the ND was proper, considering that not all petitioners were individually served.

Substantive Validity of the PIB

Whether the grant of the 2009 PIB was valid and whether MO No. 198 could be invoked as the required presidential authority to approve the performance-based bonus.
Whether the PIB was extravagant given the financial losses incurred by NPC in CY 2009.

Liability for Refund

Whether the COA acted with grave abuse of discretion in holding the petitioners, both as approving/certifying officers (the Board of Directors) and as individual payees, liable to refund the disallowed amounts.

Ruling:

(Subscriber-Only)

Ratio:

(Subscriber-Only)

Doctrine:

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END