Case Summary (A.M. No. MTJ-06-1623, MTJ-06-1624, MTJ-06-1625, MTJ-06-1627, P-09-2693, MTJ-06-1638)
Applicable Law
The governing legal framework includes the 1987 Philippine Constitution, particularly its provisions on due process and fiscal management, the Corporation Code of the Philippines, and relevant COA regulations.
Antecedents of the Case
LBP is a government financial institution established under Republic Act No. 3844, as amended. It has multiple wholly-owned subsidiaries. In its 2003 Annual Audit Report, the COA indicated that certain LBP officials were receiving additional compensation through these subsidiaries, in violation of constitutional prohibitions against double compensation. In response, the COA issued Notice of Disallowance No. LBP-Subs. 2008-015 which disallowed additional allowances and benefits amounting to P5,133,830.02.
Grounds for Disallowance
COA's disallowance rested on two primary bases: first, that compensation for directors not expressly authorized by stockholders was not permissible under Section 30 of the Corporation Code; and second, that the Constitution forbids double compensation for public officials unless specifically authorized by law and approved by the President. The COA concluded that the subjects of disallowance did not meet these criteria.
Petition for Review and Arguments
The petitioners contested the disallowance on multiple grounds, alleging denial of due process as no Audit Observation Memorandum (AOM) was issued prior to the Notice of Disallowance. They also argued that the payments were justified as being in the context of the subsidiaries being private corporations and that their actions were within the authority granted by the appropriate by-laws and stockholder approvals.
Ruling of the COA Proper
The COA Proper upheld the disallowance after finding no grave abuse of discretion in the COA’s actions. It stated that an AOM is not mandatory for due process and highlighted the existence of substantial evidence supporting the COA's decision. Moreover, the authority to approve additional compensation under corporate governance was not properly satisfied, as no formal approval from stockholders was rendered.
Review of Due Process
The Court found that petitioners were afforded due process as the COA communicated its findings adequately, allowing the LBP and its subsidiaries a chance to contest the disallowance through a review process. The absence of an AOM did not constitute a violation of their rights.
Jurisdiction Issues
The Court affirmed that the COA retains jurisdiction over the funds even if the payments came from the subsidiaries incorporated under the Corporation Code, reasoning that the funds, ultimately benefiting public officers, are considered public funds under the Constitution.
Legal Basis for Disallowance Analysis
The Court analyzed the claims regarding unauthorized benefits against the backdrop of the policies outlined in the Office of the President's Memorandum Order No. 20, ruling that the payments indeed represented new or increased benefits without the necessary executive approval, corroborating the disallowance.
Board Member Compensation
The Court reiterated that compensation for Board members of subsidiaries requires stock
...continue readingCase Syllabus (A.M. No. MTJ-06-1623, MTJ-06-1624, MTJ-06-1625, MTJ-06-1627, P-09-2693, MTJ-06-1638)
Case Overview
- This case involves a petition for certiorari filed by the Land Bank of the Philippines (LBP) and its subsidiaries challenging the Commission on Audit’s (COA) decision regarding the disallowance of payments made to members of the board of directors of LBP's subsidiaries.
- The COA had disallowed payments amounting to P5,133,830.02 made as additional allowances and benefits to officials of LBP who also served as board members of its subsidiaries, citing violations of laws that prohibit double compensation and lack of legal basis for such payments.
Antecedents
- LBP is a government financial institution established under Republic Act No. 3844, with several wholly-owned subsidiaries.
- The 2003 Annual Audit Report by COA revealed that certain individuals served simultaneously as officers of LBP and as board members of its subsidiaries, receiving various allowances and benefits that violated constitutional prohibitions against double compensation.
- In response to a COA report, the subsidiaries claimed to have discontinued some of the payments and justified the benefits as token compensation for their contributions.
- Despite this, COA issued a Notice of Disallowance, leading to the petitioners filing a Petition for Review with COA to contest the disallowance.
Ruling of the COA Proper
- COA upheld the disallowance, ruling that the payments made violated Section 30 of the Corporation Code which restricts compensation to reasonable per diems unless approved by stockholders.
- It also noted that the payments violated constitutional prohibitions against double compensation unless authorized by law and with presidential approval.
- The COA found that the subsidiaries did not provide any legal basis for the additional allowances and