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.

Case Summary (G.R. No. 258527)

Petitioner, Respondent, and Relief Sought

Petitioners sought certiorari under Rule 64 in relation to Rule 65 of the Rules of Court to annul COA Resolution No. 2020-479 which affirmed (with modification) the COA Corporate Government Sector’s decision sustaining the ND. They challenged COA’s legal basis for disallowance and the imposition of civil liability to return the amounts disallowed.

Key Dates and Procedural Posture

Relevant dates include PNCC’s historical franchise (effective May 1, 1977 to May 1, 2007), Board Resolutions authorizing gratuities (2005–2009), the COA Audit Team’s ND dated July 8, 2011, COA-CGS Decision No. 2014-02 (denying appeal), COA Proper Decision No. 2015-457 (initial dismissal as late filed) and COA Resolution No. 2020-479 (dated January 31, 2020) which partially granted reconsideration and affirmed the ND with modification excluding one officer (Ogan). The Supreme Court resolved the petition by Decision of the Court (En Banc) affirming COA Resolution No. 2020-479 and dismissing the petition.

Applicable Law and Issuances Used by the Court

The Court’s analysis applies the 1987 Constitution (Article IX-A, Section 7) and pertinent statutes and issuances cited in the record: PD 1597 (Sec. 6), EO 292 (definition of GOCC), Corporations Code (Section 30, Section 36(10)), COA Circular No. 85-55-A, DBM Circular Letter No. 2002-2, OP Memorandum Order No. 20 (2001), Administrative Order No. 103 (2004), and governing COA rules on appeals and finality (PD 1445; COA Revised Rules). The Court also applied controlling jurisprudence as cited in the record (e.g., Strategic Alliance Dev’t Corp. v. Radstock Securities Ltd. and subsequent cases interpreting PNCC’s status).

Factual Background and Board Resolutions

PNCC (formerly CDCP) became majority government‑owned after a debt‑to‑equity conversion, with government equity reaching 76.8% pursuant to LOI No. 1295 (1983); it was later placed under privatization programs (Proclamation No. 50; AO No. 59). Anticipating privatization and related separations, PNCC’s Board adopted several resolutions (2005–2009) authorizing gratuity payments and creating a Retirement/Resignation/Gratuity Benefit Program (the Retirement Fund). Based on these Board Resolutions, PNCC paid gratuity benefits to listed directors and senior officers from 2007 to 2010, totaling roughly PHP 90.75 million.

COA Post‑Audit and Notice of Disallowance

After a post‑audit, the COA Audit Team issued ND No. 11-002-(2007-2010) (July 8, 2011) disallowing the gratuity payments. The ND reasoned the payments violated COA Circular No. 85-55-A and DBM Circular Letter No. 2002-2, were excessive given PNCC’s financial losses (2003–2006 and thereafter), were extravagant because board members are generally entitled only to reasonable per diems, and were illegal because the Board lacked authority to create the Retirement Fund without required approvals.

COA‑CGS and COA Proper Rulings on Appeal

The COA Corporate Government Sector (COA‑CGS) denied the appellants’ appeal in Decision No. 2014-02, affirming the ND. The COA Proper initially dismissed the COA‑CGS decision as containing an untimely petition but, upon reconsideration, concluded appellants actually received the ND on July 25, 2011 and thus their appeal was timely. In Resolution No. 2020-479, the COA Proper affirmed the ND with modification (excluding Glenna Jean R. Ogan from liability) and directed further factual verification regarding the participation of board members beyond being mere payees.

Issues Presented to the Supreme Court

The central legal issue before the Court was whether the COA acted with grave abuse of discretion in affirming the ND and finding the gratuity benefits disallowable, thereby making petitioners civilly liable to return the disallowed amounts. Secondary issues included (a) whether PNCC was a GOCC subject to COA audit and the cited executive issuances, (b) whether Radstock (and later jurisprudence) could be applied retroactively, and (c) whether petitioners acted in good faith so as to be excused from liability.

Standard of Review and Jurisdictional Limits

The Court reiterated the limited scope of judicial review in certiorari under Article IX‑A, Section 7 of the 1987 Constitution and the Rules of Court (Rule 64/65): the petitioner must demonstrate lack or excess of jurisdiction or grave abuse of discretion by COA. The proper inquiry is whether COA’s resolution was arbitrary, capricious, or entirely devoid of legal or evidentiary basis. The Court found no such grave abuse.

PNCC’s Legal Character: GOCC without an Original Charter

Relying on established jurisprudence (Radstock and later cases), the Court held that PNCC is a government‑owned or ‑controlled corporation (GOCC) without an original charter. The Court treated Radstock’s determination as confirming PNCC’s statutory status under EO 292 and related laws; this characterization subjects PNCC to presidential guidelines (e.g., PD 1597 Sec. 6) and to COA’s audit jurisdiction. The Court found Radstock’s application to be retroactive because it merely confirmed PNCC’s status consistent with existing law and did not overrule or invalidate a prior legal rule.

Retroactivity and the Operative‑Fact Doctrine

The petitioners argued that earlier cases (Pabion, Cuenca) treated PNCC as private and that Radstock’s reclassification should not be applied retroactively under the Operative‑Fact Doctrine. The Court rejected that argument: Pabion addressed a different factual issue (shareholder meeting/election) and did not bind the present controversy about authority to grant gratuities; Radstock did not overturn a law or established doctrine but clarified PNCC’s status under extant law, so retrospective application was proper.

Grounds for Disallowance: Additional Compensation and Applicable Limits

The Court agreed with COA that the gratuity payments were additional compensation (given in addition to retirement benefits) and therefore governed by statutes and executive issuances limiting GOCCs’ power to grant new or increased benefits without required approvals. Relevant controls included PD 1597 Sec. 6 (guidelines by the President), OP Memorandum Order No. 20 (suspension of salary increases/new benefits for GOCC senior positions), AO No. 103 (suspension of new/additional benefits), and DBM Circular Letter No. 2002-2 (board members are non‑salaried and not entitled to retirement benefits unless law provides). The Court also noted Section 5.09 of PNCC By‑Laws limited directors to modest per diems unless designated to perform executive functions, and Section 30 of the Corporation Code restricted total yearly compensation of directors to 10% of net income—requirements unmet here given PNCC’s losses.

COA’s Finding of Illegality, Excessiveness, and Extravagance

The COA’s disallowance rested on multiple determinations: the gratuities were illegal because the Board lacked authority and required appointive approvals; they were excessive and unreasonable in the context of PNCC’s negative financial condition; and they were extravagant because board members are ordinarily entitled to per diems only. The Court found COA’s factual and legal bases reasonable and supported by the record, including PNCC’s admitted losses and negative net worth in the relevant years.

Approving Officers’ Liability (Aguilar, Defensor, Cuejilo, Jr.)

Applying the rules on return and civil liability, the Court held approving officers who acted in bad faith, malice, or gross negligence are solidarily liable to return disallowed amounts. The Court found Ag

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