G.R. No. 244816 - Gonzaga vs. Commission on Audit

Case Summary (G.R. No. 244816)

Key Dates

Notable dates in the administrative process include: Notices of Disallowance (NDs) dated December 6, 2013; COA Director Decision No. 2015-06 dated June 30, 2015; COA-Commission Proper Decision No. 2017-487 dated December 28, 2017 and Resolution No. 2019-002 dated September 27, 2018; Supreme Court final decision (reported here) dated June 29, 2021. The contested benefits covered calendar years 2010–2011 (with reference to PICCI’s net losses in 2009–2010).

Applicable Law and Precedents

Primary authorities applied: 1987 Philippine Constitution (COA’s constitutional mandate over public funds), P.D. No. 520 (establishing PICCI and authorizing BSP to organize it), Section 30 of the Corporation Code (limitations on directors’ compensation), DBM Circular Letter No. 2002-02 (treatment of board members as non-salaried officials and exclusion from certain personnel benefits), RA No. 6758 (Compensation and Position Classification Act) including statutory recognition of certain allowances like RATA, COA Circular No. 2012-003, and jurisprudence cited in the decision (notably Singson; Tetangco, Jr. v. COA; Madera; PhilHealth v. COA; and other authorities on COA’s latitude and rules on return of disallowed amounts).

Facts: Governance, By-Laws, and Payments

PICCI was organized under P.D. No. 520 and adopted 1994 By-Laws (amended in 2000). The Amended By-Laws provided that directors "shall not receive any salary for their services but shall receive a per diem and allowances in such amounts as may be fixed by a majority of all the members of the Board ... and approved by the Monetary Board." For 2010–2011 five board members received representation allowance (RATA), medical reimbursements, Christmas bonuses, and anniversary bonuses. Total disallowance targeted P882,902.06. Gonzaga approved the January 2011 representation allowance; Bernardo certified the payments as necessary and properly documented; Berciles approved payments administratively.

Audit Findings and Notices of Disallowance

COA audit noted PICCI had net losses for 2009 and 2010. The Supervising Auditor and Audit Team Leader issued Audit Observation Memorandum No. PICCI-2012-04 (March 22, 2013) and subsequently issued five NDs (December 6, 2013) disallowing the listed benefits for 2010–2011 as irregular and contrary to Section 30 of the Corporation Code, on the ground that no net income in the preceding year existed to support compensation other than per diems.

Administrative Appeals and COA Director Ruling

Petitioners appealed to the Office of the Cluster Director (OCD-CGS-1). The COA Director denied the appeal (Decision No. 2015-06) finding the payments lacked legal basis: (1) RATA payments were fixed amounts lacking liquidation/receipts; (2) board members are not salaried employees under DBM issuances and thus not entitled to Christmas/Anniversary bonuses; and (3) medical reimbursement constituted indirect compensation lacking justification as unavoidable official expenses. The Director rejected good-faith defenses and applied solutio indebiti principles.

COA-Commission Proper Decision and Rationale

COA-CP affirmed the Director’s ruling. It characterized PICCI as a GOCC whose funds are public in character and subject to applicable law and DBM rules; it invoked P.D. No. 520’s provision for the suppletory application of the Corporation Code (including Section 30). COA-CP held that: (a) the Amended By-Laws and Monetary Board approval did not overcome the Section 30 requirement of prior-year net income for compensation other than per diems; (b) board members are not entitled to standard personnel benefits under DBM Circular Letter No. 2002-02; (c) fixed RATA without receipts was improperly granted; and (d) petitioners could not invoke good faith in light of prior jurisprudence and the duty of management to know governing law. COA-CP directed issuance of supplemental NDs to board members and approving/certifying officers for the P882,902.06.

Petitioners’ Contentions Before the Court

Petitioners sought certiorari alleging grave abuse of discretion by COA-CP, arguing (i) PICCI and BSP are not subject to DBM rules due to BSP fiscal autonomy; (ii) DBM Circular Letter No. 2002-02 does not apply to PICCI because P.D. No. 520 exempts PICCI officials from Civil Service laws; (iii) Section 30 of the Corporation Code does not apply to PICCI or was satisfied because By-Laws and Monetary Board approval authorized the allowances; (iv) representation allowances were substantiated by certifications; and (v) petitioners acted in good faith and thus should not be made liable or solidarily liable for refunds.

OSG/COA Response and Procedural Objections

The Office of the Solicitor General defended COA-CP, raising procedural defects (alleged improper verification and incomplete attachments) and arguing on the merits that COA-CP did not commit grave abuse. The OSG maintained Section 30 and DBM circulars applied; petitioners failed to prove that By-Laws fixes were properly adopted and BSP approved them; BSP fiscal autonomy did not absolve PICCI of compliance with applicable laws; certification without supporting receipts was insufficient to justify RATA; and good faith was negated by existing Supreme Court precedent.

Court’s Procedural Findings: Substantial Compliance

The Supreme Court applied a substantial-compliance standard. Although petitioner Gonzaga omitted some attorney identification details in the pleadings and signed the verification/certification of non-forum shopping alone, the Court found these defects did not warrant dismissal: Gonzaga appears on the Court’s lawyer list; the co-petitioners shared a common interest and defense; and the required documents attached were sufficiently relevant to support the petition. The Court emphasized liberal construction of procedural rules to allow adjudication on the merits.

Court’s Threshold on Review of COA Rulings

The Court reiterated that review under Rule 65 is limited to determining grave abuse of discretion amounting to lack or excess of jurisdiction. It emphasized COA’s constitutional role and expertise in auditing and disallowing irregular government expenditures, and noted that COA factual findings are accorded respect when supported by substantial evidence.

Legal Characterization of PICCI and Applicability of Section 30

The Court held PICCI is a GOCC subsidiary organized under the Corporation Code (per P.D. No. 520 and subsequent incorporation process), thereby subject to the Corporation Code’s provisions, including Section 30. P.D. No. 520’s grant of authority to the Board to fix compensation did not confer unbridled discretion and expressly allowed suppletory application of the Corporation Code. The limitation in Section 30 (compensation other than per diems permissible only if stockholders representing a majority vote and within 10% of prior-year net income) thus applies to PICCI directors.

RATA (Representation and Transportation Allowance): Distinction and Holding

The Court clarified that RATA is distinct from salary: it is an allowance to defray unavoidable representation and transportation expenses inherent to an office, not direct compensation for services. Consequently, requiring receipts/invoices to substantiate RATA is legally unwarranted where the allowance is granted by authority and is the consequence of the holder assuming office. The Court referenced RA No. 6758 and Section 47 of the 2010 GAA authorizing RATA at specified rates and relied on precedent (Singson; Tetangco, Jr.) upholding RATA grants to PICCI directors. Given the Court’s decision in Tetangco, Jr. (conclusive as to RATA for PICCI directors in the same period), res judicata and stare decisis principles applied, and COA’s disallowance of RATA in this case was erroneous. Accordingly, RATA portions need not be returned and petitioner Gonzaga (who approved RATA release) was absolved of liability for that allowance.

Disallowance of Christmas/Anniversary Bonuses and Medical Reimbursement

The Court upheld COA’s disallowance of Christmas and Anniversary bonuses and medical reimbursements. Unlike RATA, bonuses constitute compensation for services or consider

Case Syllabus (G.R. No. 244816)

Nature of the Case and Relief Sought

Petition for Certiorari under Rule 65 (in relation to Rule 64) filed by Melpin A. Gonzaga (for himself and on behalf of co-petitioners) assailing:
- Commission on Audit (COA) Decision No. 2017-487 dated December 28, 2017; and
- COA Resolution No. 2019-002 dated September 27, 2018.
Relief sought: annulment/reversal of COA-CP’s affirmation of Notices of Disallowance (NDs) Nos. PICCI-13-002-(12), PICCI-13-003-(12), PICCI-13-004-(12), PICCI-13-005-(12) and PICCI-13-006-(12) (all dated December 6, 2013) disallowing unwarranted benefits/allowances paid to members of the Board of Directors of Philippine International Convention Center, Inc. (PICCI) for calendar years 2010–2011 in the total amount of P882,902.06.

Parties, Roles and Basis for Solidary Liability as Summarized by COA-CP

Petitioners and their roles (as summarized in the COA-CP decision):
- Victoria C. Berciles — Director, Administrative Department — approved the payment.
- Antonio A. Bernardo, Jr. — Comptroller — certified expenses were necessary, lawful, appropriate and that supporting documents were complete.
- Melpin A. Gonzaga — Corporate Secretary — approved the January 2011 Representation Allowance.
- Eloisa A. Lim, Shirley S. Ong, Socorro R. Quirino, Araceli E. Villanueva, Ruby C. Tuason — Board of Directors — recipients of the benefits.
COA-CP held petitioners solidarily liable to the extent of amounts they authorized and/or certified because without their authorization the benefits could not have been disbursed.

Relevant Statutory and Regulatory Framework (as applied in the case)

P.D. No. 520 (as amended by P.D. No. 710):
- Created PICCI with Bangko Sentral ng Pilipinas (BSP) as sole stockholder.
- Section 2: Board of Directors vested with governing powers; Board may promulgate By-Laws.
- Section 3 (quoted in petitioners’ argument): Chairman, with confirmation of the Board, may appoint officers with compensation fixed by the Board; officials and employees exempt from Civil Service laws and rules.
- Section 6: Corporation Code provisions apply suppletorily insofar as they are not inconsistent with P.D. No. 520.
Corporation Code, Section 30 (Compensation of directors):
- In absence of by-laws fixing compensation, directors shall receive only reasonable per diems.
- Any compensation other than per diems may be granted by vote of stockholders representing at least a majority of outstanding capital stock.
- Total yearly compensation of directors shall not exceed 10% of net income before income tax of the corporation during the preceding year.
DBM Circular Letter No. 2002-02 (Jan. 2, 2002):
- Members of Boards of Directors are not salaried officials; as non-salaried officials they are not entitled to PERA, ADCOM, YEB, and retirement benefits unless expressly provided by law.
COA Circular No. 2012-003 (cited as proscribing irregular transactions).
2010 General Appropriations Act (R.A. No. 9970), Section 47 (Representation and Transportation Allowances — RATA): specified rates and limitations for RATA.

Factual Background (material facts as found in record)

PICCI:
- A GOCC created under P.D. No. 520 and amended by P.D. No. 710; BSP is sole stockholder.
- Issued 1994 By-Laws (directors receive no salary, only per diem for meetings attended).
- Amended By-Laws (2000) — Section 8: directors “shall not receive any salary… but shall receive a per diem and allowances in such amounts as may be fixed by a majority of all the members of the Board … and approved by the Monetary Board.”
Financial condition:
- PICCI incurred net losses for CYs 2009 and 2010.
Budget and approvals:
- PICCI Board submitted Proposed Budget for 2010 (Nov. 24, 2009) containing Director’s Allowance, Director’s Per Diem, Director’s Christmas Bonus, Director’s Anniversary Bonus.
- BSP Monetary Board approved Proposed 2010 Budget on December 29, 2009.
Benefits actually received by certain directors (Jan 2010–Jan 2011) — aggregate P882,902.06, broken down as:
- Representation Allowance total P650,000.00 (P130,000.00 each for five BOD members).
- Medical Reimbursement total P107,902.06 (various amounts per director).
- Christmas Bonus total P75,000.00 (P15,000.00 each).
- Anniversary Bonus total P50,000.00 (P10,000.00 each).
- Individual totals listed in record for Lim, Ong, Quirino, Villanueva, Tuason; total combined P882,902.06.
Approvals and certifications:
- Melpin A. Gonzaga approved payment of January 2011 Representation Allowance.
- Antonio A. Bernardo, Jr. certified bonuses and allowances were necessary, lawful, appropriate and substantiated by receipts.
- Victoria Berciles approved the payment as Director of Administrative Department.
Audit and COA action:
- Supervising Auditor (SA) and Audit Team Leader (ATL) issued Audit Observation Memorandum No. PICCI-2012-04 (Mar. 22, 2013) flagging grant of Representation Allowance, Medical Reimbursement, Christmas and Anniversary Bonuses as irregular — contravening Corporation Code Section 30 because PICCI had no net income in preceding years.
- ND Nos. PICCI-13-002-(12) to PICCI-13-006-(12) (all dated Dec. 6, 2013) issued disallowing payments totaling P882,902.06; Gonzaga received the NDs on Dec. 11, 2013.
Administrative appeals:
- Petitioners appealed to Office of the Cluster Director, Corporate Government Sector-Cluster 1 (OCD-CGS-1); COA Director Emelita R. Quirante denied appeal in Decision No. 2015-06 dated June 30, 2015.
- Petition for review to COA-Commission Proper (COA-CP) — Decision No. 2017-487 (Dec. 28, 2017) affirmed disallowances; Motion for Reconsideration denied by Resolution No. 2019-002 (Sept. 27, 2018).
- Petitioners elevated matter to Supreme Court by certiorari.

Procedural Issues Raised and Court’s Procedural Findings

Petitioners’ procedural arguments:
- Alleged defects in Verification and Certification of Non-Forum Shopping (Gonzaga’s signature alone; alleged non-disclosure of lawyer details).
- Alleged failure to attach all material and relevant documents.
OSG preliminary objections:
- Petition allegedly defective because Gonzaga’s Verification/Certification suggested he might not be a member of the Bar; Gonzaga signed for others without proof of authority; missing attachments.
Supreme Court’s procedural rulings:
- Substantial compliance standard applied: Court finds petition substantially complied with formal requirements; rules should secure not defeat justice.
- Gonzaga’s omission of Roll of Attorneys No., IBP receipt, PTR, MCLE certificate noted but not fatal — contemporary rule favors sanction of counsel, not dismissal.
- Signature of Gonzaga alone on Verification/Certification of Non-Forum Shopping was substantial compliance because petitioners shared common interest and common cause — Gonzaga had sufficient knowledge to verify.
- Attachments: first set (duplicate original/certified true copy of decision) present; second set (copies of pleadings/documentary portions relevant and pertinent) substantially complied with — Court exercised discretion to deem provided attachments sufficient for prima facie showing.
- Conclusion: procedural objections do not warrant dismissal; petition proceeds to merits.

Issues Presented on Merits

Procedural aspect:
- Whether petition defective for lack of proper Verification and Certification of Non-Forum Shopping.
- Whether petition defective for failure to attach copies of pleadings/material portions of record.
Substantive aspect:
- Whether benefits received by petitioners were unauthorized and should be disallowed.
- If disallowed, whether petitioners are solidarily liable for return of disallowed amount.

Standard of Review and COA’s Institutional Role (as articulated by Court)

Scope of Supreme Court review over COA rulings under Rule 65 is limited to grave abuse of discretion amounting to lack or excess of jurisdiction.
Grave abuse of discretion means evasion of a positive duty, virtual refusal to perform a duty enjoined by law, or judgment not based on law and evidence but on caprice.
COA is a constitutional, independent body with broad powers to safeguard public funds; it has expertise and its findings of fact are accorded respect if supported by