G.R. No. 173856 - Dao Heng Bank, Inc. vs. Spouses Laigo

Petitioner National Transmission Corporation (TransCo) is a government instrumentality created under Republic Act No. 9136 (EPIRA Law), tasked with operating and managing the power transmission system nationwide.
In December 2007, pursuant to the EPIRA Law, TransCo’s concession was awarded to the National Grid Corporation of the Philippines (NGCP), leading to the separation or retirement of its employees on June 30, 2009.

Mr. Alfredo V. Agulto, Jr. was a regular employee of TransCo holding the position of Principal Engineer B from March 17, 2003, up to June 29, 2009.
Under TransCo’s Resolution implementing the Early Separation Program, Agulto received separation benefits amounting to ₱656,597.50.

During a post-audit, the Supervising Auditor (SA) issued Notice of Disallowance (ND) No. TC-10-005 (09) dated October 19, 2010.
The SA disallowed the amount of ₱22,965.81 from Agulto’s separation benefits because this sum pertained to the period from March 1 to 15, 2004—a period when Agulto was still employed under a contractual arrangement.
The Service Agreement during that period explicitly stated that the service rendered was “not considered and will not be credited as government service.”

Bernadine L. Protomartir – Division Manager, General Accounting & Financial Reporting (GAFR)
Jose Mari M. Ilagan – Manager, Administrative Department
Alfredo V. Agulto, Jr. – The payee himself

TransCo appealed the ND before the COA Director, arguing that the payment of separation benefits to contractual employees was lawful in accordance with the EPIRA Law, the Corporation Code, and the Board Resolutions of TransCo.

On July 9, 2014, the COA Director partially granted the appeal by exempting Agulto from liability on the basis that he received the benefits in good faith, ordering only the members of the Board of Directors who had approved the pertinent resolutions to refund the disallowed amount.
Subsequently, on September 28, 2016, the Commission on Audit – Commission Proper (COA-CP) rendered Decision No. 2016-278, which disapproved the COA Director’s ruling.
COA-CP maintained that under Section 63 of RA 9136 and Rule 33 on separation benefits, only employees whose appointments were approved or attested to by the Civil Service Commission (CSC) were entitled to these benefits. Since there was no proof of CSC approval for Agulto’s appointment during the contractual period, the disallowance of ₱22,965.81 was declared proper.
The COA-CP also held that both the members of TransCo’s Board who approved the Early Separation Program resolutions and Agulto were solidarily liable to refund the disallowed amount, rejecting Agulto’s good faith defense by stating that a disregard of law could not serve as an exemption from refunding benefits not rightfully received.

TransCo eventually filed a Petition for Certiorari under Rule 64 in relation to Rule 65, challenging the issuance of Decision No. 2016-278 and the imposition of joint liability.

Whether the grant of financial assistance/separation benefits to former TransCo personnel engaged by virtue of service agreements is prohibited by law.
Whether it is within the TransCo Board’s power to grant financial assistance/separation benefits to personnel engaged by virtue of service agreements.
Whether the respondent COA-CP committed grave abuse of discretion in issuing Decision No. 2016-278 by disallowing a portion of Agulto’s separation benefits and in finding both Agulto and members of the TransCo Board of Directors solidarily liable.