Title
Aguilar vs. Commission on Audit
Case
G.R. No. 258527
Decision Date
May 21, 2024
Petitioners challenged COA's ruling disallowing gratuity benefits paid by PNCC to its officers from 2007-2010, citing mistaken reliance on case law. COA's audit judgment upheld as to legality of payments made.
gratuity benefits
disallowed disbursements
civil liability
A

Case Summary (G.R. No. 165675)

Factual Background

The Philippine National Construction Corporation, formerly Construction Development Corporation of the Philippines, was incorporated in 1966 and was granted a thirty-year franchise under PD 1113 effective May 1, 1977. After debt-to-equity conversions and executive directives for privatization, government ownership of PNCC became predominant. Anticipating turn-over of tollway operations and the consequent separation of officers, the PNCC Board adopted several resolutions between 2005 and 2009 creating a retirement/gratuity benefit program and authorizing gratuity payments to directors and senior officers.

Board Resolutions and Payments

The PNCC Board passed a series of resolutions that authorized gratuity pay for outgoing directors and a Retirement/Resignation/Gratuity Benefit Program and created a Retirement Fund and Board of Trustees to administer it. Acting pursuant to these resolutions, PNCC disbursed gratuity benefits to multiple directors and senior officers between 2007 and 2010 in the aggregate sums identified in the COA audit records. The disbursements were made while PNCC had a deteriorated financial condition and in the period surrounding the expiration of its franchise.

COA Post-Audit and Notice of Disallowance

A COA post-audit team issued ND No. 11-002-(2007-2010) dated July 8, 2011, disallowing the gratuity payments. The ND concluded that the disbursements contravened COA Circular No. 85-55-A, DBM Circular Letter No. 2002-2, and applicable suspensions and directives from the Office of the President, and that the Board lacked authority to create the Retirement Fund. The ND specified persons liable for settlement and described roles such as approving officers, certifying officers, signatories, and payees.

Administrative Appeals and the COA-CGS Decision

Several named persons appealed the ND to the COA Corporate Government Sector (CGS). In Decision No. 2014-02 the COA-CGS denied the appeal and affirmed the ND in the total amount reflected in its ruling. The COA-CGS relied on Radstock to treat PNCC as a GOCC subject to COA audit jurisdiction, applied DBM Circular Letter No. 2002-2 to bar board members from retirement benefits absent express law, and concluded that presidential or DBM approval was required for the disbursements.

COA Proper Resolution

Aggrieved appellants sought review by the COA Proper. Initially the COA Proper dismissed the petition for late filing but, upon reconsideration, found the appeal timely and issued Resolution No. 2020-479 partially granting reconsideration. The COA Proper affirmed the disallowance with modification by excluding one officer, Glenna Jean R. Ogan, from liability, and otherwise sustained liability for the remaining named persons to the extent of amounts received or participation in the disallowed transaction. The COA Proper relied on PD 1597, OP Memorandum Order No. 20, AO No. 103, DBM Circular Letter No. 2002-2, and Section 5.09 of the PNCC By-Laws in concluding that the Board lacked authority to grant the gratuity benefits without presidential or DBM approval.

Petition and Proceedings Before the Supreme Court

Petitioners filed a petition for certiorari under Rule 64 in relation to Rule 65, challenging COA Proper Resolution No. 2020-479 for alleged grave abuse of discretion. The Supreme Court initially dismissed the petition for procedural deficiencies but reinstated it on motion for reconsideration and directed the COA to file its comment. Only the petitioners who signed the Certification on Non-Forum Shopping and the motion for reinstatement remained before the Court; the Court limited relief to those petitioners.

Petitioners' Contentions

Petitioners argued that PNCC was not a GOCC at the time the Board Resolutions were passed and relied on Pabion and Cuenca to assert PNCC's private corporate status and board authority under Corporation Code Section 36(10) to establish retirement plans. They contended that Radstock could not be applied retroactively and invoked the doctrine of operative fact. Petitioners further asserted good faith reliance on prevailing jurisprudence and claimed exemption from return liability under Madera v. Commission on Audit for approving officers acting in good faith.

Respondent's Contentions

The Commission on Audit maintained that PNCC is a non‑chartered GOCC within the meaning of EO 292, Section 2(13), and therefore subject to PD 1597 and presidential and DBM directives governing compensation and benefits. COA argued that Pabion applied AO No. 59 only within that administrative order and did not immunize PNCC from general GOCC regulations. COA insisted that existing issuances, including OP Memorandum Order No. 20, AO No. 103, and DBM Circular Letter No. 2002-2, restricted or suspended the grant of additional benefits and required prior approval, rendering the gratuity payments disallowable.

Legal Issue Presented

The central legal question was whether the COA acted with grave abuse of discretion in affirming the disallowance of gratuity benefits paid by PNCC to its directors and senior officers for 2007 to 2010 and in holding petitioners liable for the return of the disallowed amounts.

Standard of Review

The Court applied the narrow standard of certiorari review afforded by Article IX-A, Section 7, 1987 Constitution and Rule 64 in relation to Rule 65, limiting judicial inquiry to grave abuse of discretion or lack or excess of jurisdiction. The Court explained that petitioners bore the burden to show that COA Resolution No. 2020-479 was devoid of legal or evidentiary basis or was a capricious or arbitrary exercise of judgment.

Status of PNCC as a GOCC

The Court held that PNCC is a GOCC without an original charter, a conclusion consistent with Radstock and reaffirmed in subsequent jurisprudence including Alejandrino v. Commission on Audit and Philippine National Construction Corp. v. National Labor Relations Commission. The Court rejected petitioners' contention that Radstock must be applied only prospectively, explaining that the operative fact doctrine does not apply because no law, regulation, or prior doctrine was invalidated or overruled by Radstock. The Court further found that Pabion did not control the authority question here because it addressed a different factual issue and was not binding in the circumstances.

Application of Governing Issuances and Disallowance Rationale

The Court concluded that the gratuity benefits constituted additional compensation and therefore were governed by PD 1597, Section 6, and by the presidential and DBM issuances that suspended or limited grants of additional benefits. The Court observed that OP Memorandum Order No. 20 and AO No. 103 suspended new or increased benefits for board members and senior officers absent presidential approval. It also relied on DBM Circular Letter No. 2002-2 which treats board members as non‑salaried officials not entitled to retirement benefits unless expressly provided by law. The Court applied Corporation Code Section 30 and related jurisprudence to require that additional compensation to directors comply with the net income limitation. Given PNCC’s admitted negative net worth and accumulated losses in the relevant years, the Court found the COA’s determination that the gratuity payments were excessive, unreasonable, and therefore illegal to be supported by law and record.

Li

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