Case Summary (G.R. No. 244128)
Petitioners and Respondent
– Petitioners challenge COA decisions disallowing four types of allowances granted in 2013—Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Assistance (ACA), and Mitigation Allowance to Municipal Employees (MAME).
– Respondent upholds disallowance and holds petitioners jointly and severally liable for refund, except passive recipients in good faith.
Key Dates
– December 2013: SB Ordinance No. 08 and Resolutions Nos. 41–48 series of 2013 grant ECA, MAMA, ACA, MAME.
– February 20, 2014: COA Audit Team issues 11 Notices of Disallowance totaling ₱7,706,253.10.
– January 8, 2015: Petitioners appeal to COA Regional Director.
– July 14, 2015: COA Regional Office Decision affirms disallowances.
– December 27, 2017: COA Proper Decision affirms with modification (excusing passive recipients).
– August 16, 2018: COA denies Motion for Reconsideration.
– January 11, 2019: Petition for certiorari filed (out of the 30-day Rule 64 period).
– September 8, 2020: Supreme Court decision en banc.
Applicable Law
– 1987 Philippine Constitution (post-1990 case).
– Republic Act No. 6758 (“Salary Standardization Law”), Section 12 (consolidation of allowances).
– Republic Act No. 7160 (“Local Government Code”), Sections 322, 327, 447.
– COA Circular No. 2013-003 (allowances list).
– Executive Order No. 292 (Administrative Code of 1987), in particular:
• Section 38–39, Book I, Chapter 9 (civil liability of public officers: requires “clear showing of bad faith, malice or gross negligence” to impose liability).
• Section 40, Book VI, Chapter 5 (certificate of availability of funds requirement).
• Section 43, Book VI, Chapter 5 (solidary liability for illegal expenditures).
– Civil Code, Article 2154 (solutio indebiti), Article 22 (unjust enrichment).
– COA Circular No. 2009-006 (Rules and Regulations on Settlement of Accounts), Rule 16 (criteria for liability) and Rule 13 (enforcement).
Facts
– SB Ordinance and Resolutions granted four crisis/mitigation allowances totalling ₱7.7 million to municipal officials/employees and national employees in Mondragon, citing inflation, typhoon Yolanda impacts, vulnerability to calamities.
– Audit Team issued 11 Notices of Disallowance (NDs) on February 20, 2014, disallowing the allowances for violating:
1. Section 12, RA 6758 (allowances integrated into salary rates);
2. COA Circular No. 2013-003 (allowances not authorized);
3. CSC Resolution (job orders/contractuals not entitled).
– Petitioners (including those who also received some allowances) appealed and were affirmed by COA Regional Office and COA Proper, the latter excusing passive recipients in good faith but holding approving officers and active recipients solidarily liable.
Notices of Disallowance and Appeals
– Petitioners argued: LGC empowers local governments to grant allowances; LGC repealed or supersedes SSL; COA Circular allows “other allowances” with legal basis; customary scheme; humanitarian response to Yolanda; validity until annulled by SP, DBM, or COA.
– COA RD (July 14, 2015) affirmed NDs: allowances integrated into SSL; appropriation ordinances invalid for violating LGC Sections 322 & 327; custom cannot create vested right; good intention insufficient.
– COA Proper (Dec 27, 2017) affirmed with modification: passive recipients in good faith need not refund; approving officers and recipients who knowingly participated to refund. MR denied.
Issues Presented
– Whether the petition was timely filed.
– Whether COA gravely abused discretion in disallowing the allowances.
– Whether petitioners should be held liable to refund disallowed amounts despite good faith.
Court’s Ruling on Timeliness
– Rule 64 (not Rule 65) applies: 30-day reglementary period from notice of decision, interrupted by MR.
– Petition due December 7, 2018; filed January 11, 2019 (35 days late).
– Supreme Court relaxed procedural rules in interest of substantial justice and judicial economy to resolve conflicting jurisprudence.
Propriety of the Disallowance
– Petitioners failed to demonstrate sufficient legal basis for the allowances.
– COA properly applied LGC and SSL: Section 447(a)(1)(viii) of LGC grants power to set allowances but cannot prevail over SSL Section 12, RA 6758.
– Allowances not expressly authorized; necessity to link benefits to official duties absent.
– Disbursement violated policy limiting allowances to those enumerated in SSL.
– Supreme Court upholds COA disallowance.
Liability for Return of Disallowed Amounts
– Civil liability under Administrative Code if official authorizing illegal expenditure acted in bad faith, malice, or gross negligence (Sections 38–39, Book I).
– Solidary liability under Section 43, Book VI: “every official or employee authorizing or making such payment … and every person receiving such payment shall be jointly and severally liable for the full amount so paid or received.”
– Passive recipients generally liable under solutio indebiti and unjust enrichment (Civil Code Article 2154 and Article 22): no right to demand payment; mistake in payment; must return.
– Exception for passive recipients in good faith recognized by jurisprudence, but results in undue burden on approving officers and is inconsistent with solutio indebiti and unjust enrichment.
Bases for Liability and Good Faith
- Administrative Code:
• Bad faith, malice, or gross negligence required to impose civil liability on public officers (Section 38).
• Good faith presumption: acts done in performance of official duties not civilly liable absent clear indication of bad faith.
• Gross negligence = want of slight care, conscious indifference. - COA Rules:
• Liability determined by nature of disallowance, duties of persons concerned, extent of participation, amount of loss (Rule 16.1).
• Certificates of Availability of Funds (Section 40, Admin Code).
• In-house or DOJ legal opinion.
• No prior disallowance or contradictory jurisprudence.
• Long-standing practice without prior censure.
• Ambiguity of law—reasonable textual interpretation.
Payees’ Liability under Civil Law Principles
– Payees’ liability is civil (quasi-contract of solutio indebiti), not administrative: they must return amounts they received by mistake.
– Good faith is no defense to solutio indebiti (mistaken payment).
– Exception: amounts genuinely given in consideration of services rendered (e.g., performance incentiv
Case Syllabus (G.R. No. 244128)
Facts
- In December 2013, Mondragon, Northern Samar approved SB Ordinance No. 08 and SB Resolutions Nos. 41, 42, 43, and 48 (all series of 2013) granting four allowances to local and national employees.
- The allowances were: Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Assistance (ACA), and Mitigation Allowance to Municipal Employees (MAME).
- Total allowances granted amounted to P7,706,253.10, disbursed by municipal check numbers specified in 11 Notices of Disallowance dated February 20, 2014.
- COA auditors disallowed the payments on grounds that:
- Section 12 of RA 6758 (Salary Standardization Law) consolidates all unlisted allowances into basic salary.
- COA Circular No. 2013-003 does not authorize the subject allowances.
- CSC Resolution No. 02-0790 excludes job order/contractual personnel from benefits.
- Notices of Disallowance held liable:
- Mayor (certification and approval)
- Municipal Accountant (voucher certification)
- Municipal Treasurer (fund availability)
- Municipal Budget Officer (appropriation certification)
- All payees as recipients of disallowed amounts
COA Regional Office Decision
- Decision dated July 14, 2015 affirmed all NDs.
- Ruled that LGUs are not exempt from RA 6758; SB Ordinance and Resolutions were insufficient legal basis.
- Held RA 7160 did not repeal RA 6758; customary practice cannot override law.
- Found violations of Sections 327 and 322 of RA 7160 on ordinance review and use of savings.
- All approving officers and payees held solidarily liable to refund full amounts.
COA Proper Decision
- Decision dated December 27, 2017 largely affirmed COA Regional Office ruling with modification:
- Approving officers and those who took part in the disbursement must refund full amounts.
- Passive recipients who received disallowed allowances in good faith are excused from refund.
- Motion for reconsideration filed February 28, 2018; denied August 1