Title
Araullo vs. Aquino III
Case
G.R. No. 209287
Decision Date
Feb 3, 2015
Petitioners challenged the constitutionality of the Disbursement Acceleration Program (DAP), arguing it violated separation of powers and the President's limited authority to reallocate funds without Congressional approval. The Supreme Court ruled key DAP practices unconstitutional, emphasizing strict adherence to constitutional limits on executive power.

Case Summary (G.R. No. 156052)

Key Dates

Decision under reconsideration: July 1, 2014 (original Decision).
Motion for Reconsideration resolution: February 3, 2015 (En Banc).
Constitutional basis applied: 1987 Philippine Constitution (decision year 2015 > 1990).

Applicable Law and Authorities

Primary constitutional provision: Article VI, Section 25(5) (no law authorizing transfer of appropriations; augmentation of items by specified officials only from savings within their respective appropriations).
Statutory and administrative authorities considered: General Appropriations Acts (GAAs) definitions of “savings” (2011–2014 GAAs), Administrative Code (Sections 38 and 39, Chapter 5, Book VI), NBC No. 541 (DBM Circular), Government Accounting and Auditing Manual (GAAM), and jurisprudence interpreting “item,” “savings,” and the President’s augmentation/item-veto powers (cases cited in the Decision).

Procedural Outcome on Motions for Reconsideration

  • Respondents’ Motion for Reconsideration: Partially granted to clarify and modify portions of the July 1, 2014 Decision. Procedural challenges (standing, justiciability, mootness) were dismissed as rehashes of earlier arguments already decided.
  • Petitioners’ Motion for Partial Reconsideration (G.R. No. 209442): Denied.

Core Rulings (Dispositive Modification)

The Court PARTIALLY GRANTED the petitions for certiorari and prohibition and MODIFIED the dispositive portion of the July 1, 2014 Decision to declare the following acts UNCONSTITUTIONAL under Article VI, Section 25(5) and separation-of-powers doctrine:

  • The withdrawal of unobligated allotments and declaration of withdrawn unobligated allotments and unreleased appropriations as “savings” prior to the end of the fiscal year without complying with the statutory definition of savings in the GAAs.
  • Cross-border transfers of savings by the Executive to augment appropriations of offices outside the Executive.
    The Court FURTHER DECLARED VOID the use of Unprogrammed Funds when released despite absence of certification by the National Treasurer that revenue collections exceeded revenue targets, for non-compliance with relevant GAAs. (Other clarifications and qualifications in the Decision were made; see following paragraphs.)

Judicial Review and Justiciability

  • The Court reaffirmed its exclusive power of judicial review, including authority to interpret the GAA and settle whether acts under DAP and NBC No. 541 constituted grave abuse of discretion in violation of the Constitution. Judicial interpretation of statutory definitions that bear on constitutional limits (e.g., “savings”) is within the Court’s competence.
  • Procedural objections that there was no case or controversy, or lack of standing by petitioners, were rejected as previously addressed in the July 1, 2014 Decision.

Strict Construction of Savings and Augmentation

  • The power to augment is an exception to the constitutional rule limiting expenditures to amounts appropriated by Congress; therefore augmentation and the underlying concept of “savings” are to be strictly construed to guard Congress’s power of the purse.
  • Even beneficial public aims do not excuse breaches of constitutional and statutory limits: lawful methods are required for laudable policies.

NBC No. 541, Withdrawal of Unobligated Allotments, and Section 38 (Administrative Code)

  • NBC No. 541 authorized withdrawal of unobligated allotments for reissuance, realignment or augmentation. The Court reiterated that “withdrawn unobligated allotments” are not automatically “savings.” Under the statutory GAA definition, savings arise only upon specific circumstances (completion or final discontinuance/abandonment of the work, balances from unpaid compensation for vacant positions/leaves without pay, or realized efficiencies).
  • Section 38 (Administrative Code) authorizes the President to suspend or stop further expenditure when public interest so requires, but suspension alone does not create savings unless the statutory conditions for savings are met (i.e., funds are free of obligation and the appropriation’s purpose is completed/discontinued/abandoned).
  • The DBM’s practice of withdrawing unobligated allotments and treating them as savings without first establishing statutory prerequisites was held unconstitutional insofar as withdrawals were treated as savings prematurely. Whether particular withdrawals were reissued (thus indicating no final discontinuance) is a factual question for proper tribunals; the legal rule: withdrawal-plus-reissue generally forecloses treatment as savings.

Section 39 (Administrative Code) and Cross-border Transfers

  • Section 39 of the Administrative Code (authorizing use of any savings in regular appropriations for programs and projects of any department to cover deficits in any other item, with Presidential approval) was found in conflict with Article VI, Section 25(5). Section 39 purports to permit cross-border transfers that the Constitution forbids; it therefore cannot justify cross-border transfers under the DAP.
  • Cross-border transfers of savings (i.e., moving savings generated in one department/branch to augment appropriations of another department/branch) are constitutionally impermissible. Augmentation is limited to the official’s own appropriations as authorized by law.

Definition of “Item” and Clarification on Augmentation (Item vs. Allotment Class)

  • The Court clarified that “item” (the object of augmentation under Section 25(5)) means the distinct program, activity or project in the GAA (a line-item), not the expense category or allotment class (PS, MOOE, CO). The President’s item-veto power and augmentation authority relate to line-items (singular-purpose appropriations), not to vetoing or augmenting expense categories independently.
  • Consequently, augmentations may lawfully be made to an item (i.e., a PAP) even if the item’s particular allotment class originally had zero funding, provided the augmentation complies with the constitutional and statutory requisites.
  • However, the Court emphasized that augmentation presupposes that the item is deficient — augmentation implies supplementation of an existing appropriation shown to be deficient. Whether the DAP-funded PAPs had appropriation cover and valid deficiencies is a factual matter outside Rule 65 scope and subject to further fact-finding.

Unprogrammed Fund: Release Conditions and Statutory Interpretation

  • The Court held that releases from the Unprogrammed Fund must comply with the special provisions in the GAAs. In the July 1, 2014 Decision the Court construed the GAA proviso requiring that “revenue collections exceed the original revenue targets” to mean aggregate revenue collections must exceed aggregate revenue targets before Unprogrammed Funds may be used; this was a statutory interpretation (not a constitutional ruling) and thus should be given prospective effect.
  • The Court clarified that aggregate revenue-surplus construction was a statutory interpretation of ambiguous GAA language and thus applied prospectively only. The respondents’ argument that the GAA’s provisos envisioned per-source or quarterly assessments was discussed; the Court allowed quarterly monitoring and reporting mechanisms (DBM/COA reports and DBCC quarterly targets) to determine revenue surpluses in practice, but maintained that prior releases under DAP without appropriate certification breached GAA conditions. The Decision voided use of Unprogrammed Funds absent a National Treasurer certification that revenue targets were exceeded for the relevant year(s).

Operative Fact Doctrine and Presumption of Good Faith

  • The Court applied the operative fact doctrine to preserve effects of certain DAP-funded programs and projects when undoing them would cause inequity or injustice — specifically to projects and beneficiaries who relied in good faith on the DAP before its invalidation. The Court thereby avoided unwinding completed or irretrievable projects whose beneficiaries acted in good-faith reliance.
  • The Court clarified that the doctrine does not validate the unconstitutional acts themselves nor immunize authors/proponents/implementors of the unconstitutional measures. Operative fact protection generally does not apply to those who authored, proposed, or implemented NBC No. 541/DAP (e.g., DBM Secretary, President) because they did not “rely” on the acts; they were the originators. Those officials remain subject to separate civil, criminal, or administrative proceedings where good faith is a question for proper tribunals.
  • The Decision reaffirmed the presumption of good faith and presumption of regularity for public officers as legal presumptions; these presumptions are rebuttable and questions of good or bad faith are factual matters for the appropriate forums.

Scope of Relief and Factual Determinations Reserved

  • The Court did not en m
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