G.R. No. 145726 - People vs. Antonio

Case Summary (G.R. No. 145726)

Factual Background and Origin of the Disallowance

On July 21, 2015, COA audit officials issued ND No. NPC-15-008(14) for lack of factual and legal bases for the payment of GHLIP premiums totaling PHP 34,047,188.03 for the covered period. COA stated three principal grounds. First, the payments were allegedly contrary to Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968, which provides that no insurance or retirement plans shall be created by any employer, and declares previously in-force supplementary retirement or pension plans inoperative or abolished, subject only to the protection of those already eligible to retire thereunder. Second, COA held that the payments violated COA Resolution No. 2005-001, which explicitly prohibited the securing of health insurance from private insurance agencies because government already provides health insurance for its employees through the Philippine Health Insurance Corporation (PHIC). Third, COA ruled that the expenditure could not be charged against the thirty percent (30%) Maintenance and Other Operating Expenses savings under Section 7.1.2 of DBM Budget Circular No. 2013-4.

As a consequence of the disallowance, COA pronounced liability on specified individuals occupying roles in the approval, certification, and monitoring of the disbursement, including approving officers and beneficiaries. Petitioners appealed, explaining the sequence of events leading to the questioned benefit. They narrated that on November 26, 2013, NPC and the PGEA-NPC signed a Collective Negotiation Agreement (CNA) for 2013–2016, under which the Labor Management Consultative Committee (LMCC) was tasked to discuss, agree, prioritize, and agree on the initiation of employee benefits upon approval of both parties.

Petitioners also relied on DBM Budget Circular No. 2013-4 issued on November 25, 2013, which allowed the allocation of portions of qualified savings for the CNA incentive and for the improvement of working conditions and other programs. Petitioners asserted that NPC conducted a comprehensive review of financial records and identified unencumbered savings for the relevant year, which were allocated according to the prescribed percentages under the circular. They further claimed that on December 17, 2013, the NPC Board issued Resolution No. 2013-25, approving the grant of a CNA incentive for fiscal year 2013, including a maximum amount per qualified employee, covering the targeted NPC employees. Petitioners maintained that the GHLIP premium payments were made in accordance with this DBM allocation framework and with LMCC imprimatur, and therefore should not be treated as irregular.

Proceedings Before the COA Corporate Government Sector-Cluster 3

The appeal was denied by the COA Corporate Government Sector-Cluster 3 in a Decision dated June 27, 2016. COA affirmed ND No. NPC 15-008(14) and upheld the disallowance of the premium payments. The Sector-Cluster ruling treated the premium payments for GHLIP members as a form of additional allowance and compensation that directly contravened COA Resolution No. 2005-001.

Proceedings Before the COA En Banc

COA En Banc later denied petitioners’ petition for review in a Decision dated January 24, 2022. COA En Banc affirmed the disallowance and sustained the liability framework it had adopted below. It specifically ordered further verification regarding the participation of NPC Board members who issued the resolution approving the benefit, and LMCC members who issued the LMCC resolution authorizing PGEA-NPC to enter into a contract with an insurance company, with the possibility of a supplemental ND if warranted.

In justifying the disallowance, COA treated the premium payments as illegal expenditures under Section 12 of Republic Act No. 6758. COA applied the Salary Standardization Law’s consolidation principle: allowances and compensation of government personnel are consolidated into standardized salary rates, and only limited exceptions exist. COA reasoned that the GHLIP procurement for NPC employees constituted additional compensation that was not included in the exception from integration, and that authority for receiving additional compensation not integrated into standardized salary rates applied only to incumbents as of July 1, 1989, a fact COA found unproven for the recipients.

COA additionally invoked COA Circular No. 2012-003 (updated guidelines on preventing and disallowing irregular expenditures), finding that premium payments for health insurance without prior authority from the Office of the President were irregular expenditures. COA also held that good faith could not shield the involved officers because an express prohibition had been violated. For the passive recipients, COA required return of the amounts received, citing principles of unjust enrichment and solutio indebiti under the Civil Code.

COA later denied the motion for reconsideration by Resolution dated December 7, 2023, ruling that petitioners failed to present new matters or sufficient grounds to alter the January 24, 2022 decision.

The Parties’ Contentions and Issues Raised

Petitioners pursued certiorari, alleging that COA acted with grave abuse of discretion in affirming ND No. NPC-15-008(14). They argued first that NPC was not covered by the Salary Standardization Law, citing Republic Act No. 7648 (the Electric Power Crisis Act) and its enabling authority for the President to upgrade NPC compensation through Memorandum Order No. 198, effective January 1, 1994. Second, they contended that the GHLIP premium payments were not a “new benefit” but rather part of a program for improvement of working conditions under the DBM CNA incentive framework. Third, they asserted that the approving and certifying officers acted in good faith on the belief that the payments were lawful. Fourth, they maintained that the doctrine of unjust enrichment should not apply to passive recipients, thus the beneficiaries should not be made to return the amounts they received.

The issues submitted to the Court were: (1) whether the issuance of ND No. NPC-15-008(14) on the payment of GHLIP premiums was proper; (2) whether the NPC’s certifying and approving officers were liable to return the paid premiums; and (3) whether the passive recipients or beneficiaries were also liable to return the amounts corresponding to their premiums.

Legal Basis and Reasoning of the Court

The Court began by reaffirming COA’s constitutional role. COA is the guardian of public funds and is vested with broad powers over government accounts involving revenue, expenditures, the use of public funds and property, and the determination of the scope, techniques, and methods of its audit and examination, including its accounting and auditing rules and regulations. The Court emphasized that it generally sustains COA’s decisions in deference to COA’s expertise and only corrects them when the COA action reflects grave abuse of discretion amounting to lack or excess of jurisdiction.

Salary Standardization Law: Coverage of NPC and GHLIP as Non-Exempt Compensation

The Court rejected petitioners’ position that NPC was exempt from the Salary Standardization Law. It ruled that the emergency authority under Republic Act No. 7648 was temporary in nature. It cited Article VI, Section 23(2) of the Constitution, which permits Congress to authorize the President, for a limited period, to exercise emergency powers necessary to carry out a declared national policy. The Court held that “limited” denotes restriction within positive bounds, and that emergency powers must be temporary or cannot be said to be emergency. The Court underscored that Section 7 of the EPCA fixed the grant of powers for one year from effectivity, unless withdrawn earlier, and stated that EPCA did not carve out a permanent exception from the Salary Standardization Law.

The Court also performed statutory comparison. It noted that Republic Act No. 9136 (EPIRA) expressly exempted the salaries and benefits of employees of certain entities such as TRANSCO, PSALM, and the Energy Regulatory Commission (ERC) from Republic Act No. 6758. It observed that those exemptions were explicit and comprehensive, while Section 63 of EPIRA concerning NPC declared only that the salaries of NPC employees continue to be exempt from the Salary Standardization Law. Applying the plain-meaning rule (verba legis non est recedendum), the Court held that only salary was exempt, not other distinct benefits.

The Court further explained how “salary” under EPIRA’s implementing rules was defined. Under Rule 33, Section 3(e) of EPIRA’s implementing rules, salary includes basic pay including the 13th month pay pursuant to appointment, but excludes per diems, bonuses, overtime pay, honoraria, allowances, and other emoluments received in addition to basic pay. Applying this framework, the Court held that ND No. NPC-15-008(14) concerned the payment of GHLIP premiums, which were separate and distinct from salary. Consequently, GHLIP premium payments were subject to the Salary Standardization Law.

GHLIP Premium Payments as Irregular Expenditure Under CA No. 186 and COA Issuances

The Court affirmed COA’s findings that payment of GHLIP premiums constituted an irregular expenditure. It anchored the prohibition on Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968, and on COA Resolution No. 2005-001, which categorically treated procurement of private health insurance by government agencies as irregular and unnecessary use of public funds. The Court held that even if DBM Budget Circular No. 2013-4 allowed CNA incentives and allocation for improvement of working conditions, the circular could not be construed so broadly as to violate existing laws and issuances. The Court stated that the NPC Board’s power to issue resolutions increasing employee benefits was not a blanket authority.

The Court drew support from jurisprudence in similar contexts, including rulings that

Case Syllabus (G.R. No. 145726)

Parties and Procedural Posture

Cruz-Sta. Rita et al., as petitioners, assailed the Commission on Audit (COA) dispositions on Notice of Disallowance (ND) No. NPC-15-008(14).
The respondent COA denied the petitioners’ request for reversal through an En Banc decision and later through a motion-for-reconsideration resolution.
The petitioners filed a Petition for Certiorari under Rule 64 in relation to Rule 65 to challenge the COA’s disallowance and related return liabilities.
The COA first affirmed the ND through the COA Corporate Government Sector-Cluster 3 decision dated June 27, 2016.
The COA En Banc denied review through a decision dated January 24, 2022.
The COA En Banc denied the petitioners’ Motion for Reconsideration through a resolution dated December 7, 2023.
The Court reviewed whether COA acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

Key Factual Allegations

On July 21, 2015, the Audit Team Leader and Supervising Auditor issued ND No. NPC-15-008(14) for lack of factual and legal bases regarding payments of Group Hospitalization and Life Insurance Plan (GHLIP) premiums.
The disallowed amount totalled PHP 34,047,188.03 covering the period April 1, 2014 to March 31, 2015 for the benefit of members of Power Generation Employees Association, Inc.-National Power Corporation (PGEA-NPC).
The ND found the payments to be contrary to Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968.
The ND also found the payments to violate COA Resolution No. 2005-001 prohibiting securing health insurance from private insurance agencies.
The ND further found the expenditure improperly charged to 30% Maintenance and Other Operating Expenses savings pursuant to Section 7.1.2 of DBM Budget Circular No. 2013-4.
Upon issuance of the ND, approving officers, certifying officers, and beneficiaries were pronounced liable for return, depending on their participation.
The petitioners invoked the existence of a Collective Negotiation Agreement (CNA) between NPC and PGEA-NPC for 2013-2016, including a responsibility vested on an LMCC to discuss and agree on employee benefits.
The petitioners relied on DBM Budget Circular No. 2013-4 (November 25, 2013), particularly the allocation of 30% of savings for improvement of working conditions and other programs and/or as part of the CNA incentive.
The petitioners narrated that NPC’s financial review established unencumbered savings for 2013 and that the savings were apportioned in accordance with the DBM Circular.
The petitioners asserted that the NPC Board issued Resolution No. 2013-25 approving a CNA incentive for fiscal year 2013, with each employee receiving up to a maximum amount under the DBM Circular.
The petitioners argued that the GHLIP premium payments were made with LMCC imprimatur and in accordance with the DBM Circular, hence the payments were not irregular.
For liabilities, the petitioners argued good faith by the approving and certifying officers, and they denied the application of unjust enrichment to passive recipients.

COA’s Basis for Disallowance

The COA En Banc treated the GHLIP premium payments as illegal expenditures under Section 12 of Republic Act No. 6758.
The COA reasoned that allowances and compensation of government personnel were consolidated into the standardized salary under the Salary Standardization Law (SSL).
The COA held that the procurement of GHLIP for NPC employees constitutes additional compensation not covered by any express exception.
The COA ruled that an exception allowing additional compensation applies only to those receiving it as of July 1, 1989, and the petitioners failed to prove that the GHLIP recipients were incumbents as of that date.
The COA further relied on COA Circular No. 2012-003, which it treated as requiring prior Office of the President authority for certain health insurance premium payments; it considered the absence of such authority an irregularity.
The COA ruled that the approving and certifying officers could not avoid liability by invoking good faith because an express prohibition in the applicable rules and issuances had been violated.
The COA required beneficiaries to return amounts received, applying principles of unjust enrichment and solutio indebiti under the Civil Code.

Petitioners’ Contentions

The petitioners challenged the COA’s affirmance of the ND on the premise that NPC is not covered by the Salary Standardization Law.
They argued that, after the enactment of Republic Act No. 7648 or the Electric Power Crisis Act (EPCA), the President had authority to upgrade NPC compensation at rates comparable to private utilities.
They relied on Memorandum Order No. 198 allegedly implementing a different position classification and compensation plan for NPC employees effective January 1, 1994.
The petitioners contended that the GHLIP payment was not a “new benefit” but rather a program implemented for the improvement of working conditions under the DBM Circular.
They asserted that the approving and certifying officers believed in good faith that the payments complied with law and issuances, and thus should not be made to return.
They argued that unjust enrichment does not apply to passive recipients, so they should not be ordered to return the amounts they received.

Issues Framed

The first issue asked whether the issuance of ND No. NPC-15-008(14) on GHLIP premium payments was proper.
The second issue asked whether the certifying and approving officers were liable to return the disallowed amounts.
The third issue asked whether the passive recipients or beneficiaries were also liable to return the amounts corresponding to GHLIP premium payments.

Scope of COA Power

The Court emphasized that COA is constitutionally vested with broad powers over all accounts, including the exclusive authority to define the scope of audit and examination and to promulgate accounting and auditing rules.
The Court reiterated that COA may determine, prevent, and disallow illegal, irregular, unnecessary, excessive, extravagant, or unconscionable expenditures.
The Court stated that COA audit power serves as a constitutional mechanism enabling check and balance.
The Court held that COA determinations receive deference unless tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.

Salary Standardization Coverage

The Court rejected the petitioners’ argument that NPC was outside the SSL because of the EPCA and Memorandum Order No. 198.
The Court explained that the EPCA granted emergency powers to the President to address a nationwide electric power crisis.
The Court invoked Article VI, Section 23(2) of the 1987 Constitution to stress that emergency powers must be exercised for a limited period unless sooner withdrawn by Congress.
The Court noted that Section 7 of the EPCA specified a one-year duration for the authority granted to the President.
The Court held that the EPCA did not carve out a permanent exception from SSL coverage.
The Court traced the statutory context of NPC’s corporate evolution and the later reforms under Republic Act No. 9136 (EPIRA).
The Court observed that EPIRA expressly exempted SSL coverage for the salaries and benefits of employees in TRANSCO, PSALM, and ERC.
The Court held that the express legislative pattern in EPIRA mattered because the provisions exempted more broadly for those entities than for NPC.
The Court applied Section 63 of EPIRA, which provided that the salaries of NPC employees continue to be exempt from SSL coverage.
The Court held that EPIRA’s clause exempted only the salary, not other benefits more broadly, unlike the comprehensive exemptions provided for TRANSCO, PSALM, and ERC.
The Court invoked the plain-meaning rule and applied verba legis to give the statutory language its literal effect.
The Court treated Rule 33, Section 3(e) of EPIRA’s Implementing Rules and Regulations as defining “salary” to exclude per diems, bonuses, overtime pay, honoraria, allo