Title
Bayron vs. Commission on Audit
Case
G.R. No. 253127
Decision Date
Feb 27, 2024
The case involves the denial of a petition for certiorari against the Commission on Audit regarding disallowance of payments under an early retirement incentive program. The court ruled that the items were illegal expenditures, affirming COA's decision.
audit commission
local government
separation pay
A

Case Summary (G.R. No. 253127)

Factual Background: The EVSIP and the COA Disallowances

The City Government of Puerto Princesa enacted Ordinance No. 438 and adopted Resolution No. 850-2010 in 2010 to establish the EVSIP. The program was designed to provide incentive benefits to officials and employees who opted for early and voluntary separation. Following implementation, COA auditors issued several NDs in 2013 in relation to disbursements for EVSIP benefits, with the amounts reaching PHP 89,672,400.74.

Petitioners, identified in COA’s NDs as persons found liable, pursued the administrative appellate process within COA. The process ended with the COA En Banc denial of their administrative appeals, affirming the NDs, and forwarding the case records to the Office of the Ombudsman for proper investigation and case buildup.

Petitioners’ Judicial Recourse and the Court’s November 29, 2022 Decision

After COA En Banc denied their appeals, petitioners did not file a motion for reconsideration within COA. Instead, they proceeded directly to the Court for relief through an original petition for certiorari.

In its Decision dated November 29, 2022, the Court En Banc made several rulings. First, it held that the remaining question of fact—petitioners’ invocation of good faith regarding the enactment and implementation of PPCG appropriations for the EVSIP—was already properly cognizable before the Office of the Ombudsman due to COA’s forwarding of the records. Accordingly, the Court could still rule on the remainder of the petition because it involved pure questions of law.

Second, the Court ruled that Ordinance No. 438 and Resolution No. 850-2010 were ultra vires and contrary to Commonwealth Act No. 186, as amended by Republic Act No. 4968, because the EVSIP functioned as a separate, parallel, and supplementary early retirement plan for Puerto Princesa City officials and employees. The Court emphasized that there was no express exception in the national law for local government units (LGUs) to create parallel retirement incentive schemes, and there was no enabling law granting LGUs authority to establish independent incentive packages that effectively supplement the retirement benefits regulated by the Government Service Insurance Act.

Third, the Court applied the operative fact doctrine but deferred discussion of petitioners’ good faith arguments, again in deference to the Ombudsman’s statutorily and constitutionally defined jurisdiction, given the forwarding of the case records.

Fourth, the Court affirmed COA Decision No. 2020-100 and declared both the local ordinance and resolution null and void.

The Motion for Reconsideration: Petitioners’ Arguments

In their Motion for Reconsideration, petitioners sought review and possible reversal, advancing three principal contentions.

First, they argued that COA’s NDs constituted collateral attacks on Ordinance No. 438 and Resolution No. 850-2010 because the NDs effectively invalidated the local legislation, allegedly amounting to grave abuse of discretion on COA’s part. They also attached the NDs and pointed to the uniform wording in which the NDs explicitly declared Ordinance No. 438 null and void.

Second, petitioners relied on City of General Santos v. Commission on Audit, arguing that the EVSIP should be viewed as a temporary one-time adjunct to a reorganization plan with validity for only about two and a half years, rather than a supplementary early retirement plan prohibited by law.

Third, petitioners invoked the presumption of good faith and asserted that the Court need not wait for the Ombudsman’s action before ruling that they were excused from refunding the disallowed amounts. To support this claim, they submitted letters from the DBM Regional Office IV-B concerning review of appropriation ordinances. One letter, dated April 26, 2011, allegedly made no mention of the EVSIP. Another, dated April 23, 2012, purportedly first mentioned EVSIP while referencing compliance with R.A. No. 6683 and the different retirement schemes under GSIS. A third letter, dated March 26, 2013, reportedly stated that the general appropriation ordinance was operative in its entirety except for the EVSIP provision for lack of legal basis. Petitioners argued that the belated DBM notice supported their good faith and noted that COA, through the Office of the Solicitor General, allegedly supported their good-faith position in earlier pleadings.

COA’s Opposition to the Motion for Reconsideration

COA, through the OSG, opposed the Motion for Reconsideration and reiterated that its actions were proper. COA argued that it did not commit grave abuse of discretion in issuing COA Decision No. 2020-100, as the disallowance of EVSIP benefits was correct and was affirmed and discussed by the Court in its prior Decision.

COA also maintained that it did not collaterally attack the local legislation, asserting that COA was well within its authority to disallow government disbursements that were contrary to law. COA further contended that the pending certiorari proceedings were adequate to allow the Court to invalidate Ordinance No. 438 and Resolution No. 850-2010. Finally, COA conceded that the Court’s deferral of the good-faith determination due to the Ombudsman’s ongoing investigation was appropriate.

COA added that the language in Ordinance No. 438 showed the EVSIP’s true character as essentially a supplementary retirement plan, and it affirmed that it agreed with the Court’s deferral of the good-faith determination pending the Ombudsman’s investigation.

Issues for Resolution in the Motion for Reconsideration

The Court identified three issues. First, whether COA’s NDs, as issued relative to Ordinance No. 438 and Resolution No. 850-2010, were in fact collateral attacks that amounted to grave abuse of discretion. Second, whether the EVSIP was a supplementary early retirement plan proscribed by existing law. Third, whether the Court may decide on petitioners’ asserted good faith regarding the enactment and implementation of the EVSIP.

Court’s Ruling on the First Issue: The Language in NDs Did Not Constitute Grave Abuse

In partially granting reconsideration, the Court addressed first the contention that COA’s NDs were collateral attacks due to their phrasing declaring the local legislation null and void.

The Court held that the relatively recent case of Abella v. Commission on Audit Proper applied. In Abella, the Court had sustained COA’s disallowance of disbursements based on local appropriations that contravened national law and could not be insulated by local autonomy. The Court in Abella had explained that COA’s authority includes disallowing government disbursements that violate law, and that local autonomy does not preclude national supervision through instruments such as DBM and the COA’s plenary auditing power. The Court adopted the same framework here.

While acknowledging that COA’s Regional Office No. IV-B had used court-like invalidating language in the initial NDs, the Court characterized this as merely an immoderate or facetiously incorrect use of legal parlance, rather than a true collateral attack. The Court reasoned that COA’s NDs were still essentially a determination that the EVSIP disbursements lacked legal basis because they contravened national law—without COA actually exercising the judicial power reserved to courts to annul legislative enactments. The Court stressed that only courts may review and strike down local legislation, and COA’s wording did not reach the level of grave abuse of discretion requiring correction.

Thus, the Court advised COA to use more appropriate language in future NDs involving local budgetary legislation. It nevertheless rejected petitioners’ premise that the NDs’ invalidating phrasing automatically transformed COA’s audit action into a collateral attack.

Court’s Ruling on the Second Issue: EVSIP Was a Prohibited Supplementary Retirement Scheme

On the second issue, the Court found petitioners’ reliance on City of General Santos unavailing. The Court explained that City of General Santos dealt with a specific ordinance, its context, and its organizational development and reorganization background rooted in executive issuances. The Court had carefully differentiated provisions within the ordinance based on their substantive nature, including the disallowance of certain benefits characterized as supplementary retirement incentives pegged to years of service.

Applying the reasoning and distinctions from City of General Santos, the Court found that petitioners’ contention that the EVSIP was simply a temporary adjunct was unsupported on the record. The Court emphasized that there was nothing indicating that Ordinance No. 438 was enacted in the serious context of a reorganizational plan. Instead, the ordinance contained generalities and only perfunctory references to planned reorganization, which the Court treated as an afterthought to the EVSIP incentives.

Most importantly, the Court observed that the EVSIP benefits were pegged to an employee’s years of service and were multiplied by integers on a progressive scale with corresponding multipliers based on basic monthly salary. The Court held that such benefits were not lump sums or mere healthcare-related or separations unrelated to retirement character. The pervasive language of Ordinance No. 438 revealed an intent to reward loyalty and satisfactory public service, with eligibility anchored on years of service (at least ten years). This structure negated any notion that the program was outside the retirement framework contemplated by national law.

The Court therefore reaffirmed its earlier conclusion that the EVSIP and its legal basis were contrary to national statutes that proscribe parallel and supplementary retirement benefits for government officials and employees.

Court’s Ruling on the Third Issue: Good Faith Could Excuse Some Petitioners but Not Others

On the third issue, the Court revisited petitioners’ good-faith arguments in light of applicable

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