Case Summary (G.R. No. 258527)
Applicable Law
The 1987 Philippine Constitution is the foundational legal framework for this case, particularly concerning the jurisdiction and powers of the COA as established under Article IX-A. Additional laws and regulations cited include the Corporation Code of the Philippines, Presidential Decree No. 1597, Administrative Order No. 20, and COA regulations.
Background
Established in 1966 as the Construction Development Corporation of the Philippines, the PNCC subsequently received a franchise for toll facilities in 1977. Due to significant financial difficulties, the government converted the debts of PNCC into equity, leading to a government share of 76.8%. In 2005 and later years, anticipating privatization, the PNCC Board passed several resolutions to authorize the payment of gratuity benefits to its outgoing directors and senior officers.
Notice of Disallowance
On July 8, 2011, following a post-audit, the COA issued Notice of Disallowance No. 11-002-(2007-2010), disallowing gratuity payments totaling PHP 90,784,975.21. The COA asserted that such disbursement contravened COA regulations and was excessive, particularly given PNCC’s financial losses during the audited years.
Appeals Process
Aggrieved by the disallowance, several petitioners appealed to the COA Corporate Government Sector (CGS), which upheld the initial notice. Following further appeals and a motion for reconsideration, the COA Proper partially granted the motion but maintained the disallowance, with the exception of one individual, Glenna Jean R. Ogan, who was excluded from liability based on her ministerial role in the disbursement process.
Core Issue
The primary legal issue revolves around whether the COA acted with grave abuse of discretion in affirming the disallowance of the gratuity benefits and whether the petitioners are liable to return the disallowed sums.
Court's Ruling
The Supreme Court ultimately denied the petition, affirming the COA's findings. The Court found that the COA did not exercise grave abuse of discretion in holding that the gratuity benefits were disallowable given the context of PNCC as a government-owned and controlled corporation (GOCC). The ruling emphasized the necessity of governmental oversight and compliance with relevant regulations, particularly those which mandate prior approval from the Office of the President for additional benefits.
Liability of Petitioners
The Court concluded that the petitioners, particularly the approving officers, acted with
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Background and Parties Involved
- Petitioners include Arthur N. Aguilar, Ma. Theresa T. Defensor, Jeremy Z. Parulan, Fermin S. Lusung, Antonio T. Vilar, Enrique C. Cuejilo, Jr., Guillermo N. Hernandez, Rolando L. Macasaet, and Wilfredo P. Cu among others.
- Respondent is the Commission on Audit (COA).
- The case centers on a Petition for Certiorari under Rule 64 in relation to Rule 65 of the Rules of Court.
- COA's Resolution No. 2020-479 affirmed with modification a Notice of Disallowance (ND) No. 11-002-(2007-2010) regarding disallowed gratuity payments totaling PHP 90,784,975.21 paid by the Philippine National Construction Corporation (PNCC) to its directors and senior officers from 2007 to 2010.
Historical and Corporate Context of PNCC
- PNCC, formerly known as the Construction Development Corporation of the Philippines (CDCP), was incorporated in 1966 as a stock corporation under the Corporation Code.
- Engaged originally in general construction.
- In 1977, CDCP was granted a 30-year franchise under PD 1113 to operate toll facilities on North Luzon Expressway (NLEX) and South Luzon Expressway (SLEX) expiring in 2007.
- CDCP incurred substantial debts and was rehabilitated through LOI No. 1295 in 1983, converting debts to equity.
- Government acquired 76.8% ownership and renamed the corporation as PNCC to reflect government equity.
- In 1986, Proclamation No. 50 created the Asset Privatization Trust to privatize government assets including PNCC.
- Administrative Order No. 59 directed dissolution of government-acquired asset corporations like PNCC.
- Agreements executed between PNCC and private entities for the transfer of toll operations anticipated retrenchment/retirement of PNCC employees.
PNCC Board Resolutions on Gratuity Benefits
- Several Board Resolutions were passed pertaining to gratuity payments:
- Resolution No. BD-028-2005 authorized gratuity pay to outgoing directors equivalent to one month gross remuneration per year of continuous service.
- Resolution No. BD-031-2007 created Retirement/Resignation/Gratuity Benefit Program for Directors and Senior Officers.
- Resolution No. BD-043-2007 created a Board of Trustees for the Retirement Fund to approve payments.
- Resolution No. BD-019-2009 granted cash gratuities to specific former Presidents and Chairmen.
- Resolution No. BD-031-2008 allowed budget realignment to implement gratuity payments.
- Based on these resolutions, PNCC paid gratuities amounting to over PHP 90 million to various directors and senior officers from 2007 to 2010.
COA’s Notice of Disallowance (ND) and Findings
- COA Post-Audit Team issued ND No. 11-002-(2007-2010) disallowing the gratuity benefits.
- Justifications for disallowance included:
- Violation of COA Circular No. 85-55-A (prevention of irregular and extravagant expenditures).
- Violation of DBM Circular Letter No. 2002-2 which limits benefits to Board members.
- PNCC incurred losses from 2003 to 2006 making gratuities excessive and unreasonable.
- Board members were only entitled to reasonable per diems under the