Case Summary (G.R. No. 176492)
Key Dates and Procedural Posture
Ordinances/resolutions and payments: December 2013. Notices of Disallowance (eleven NDs): dated February 20, 2014. COA Regional Director Decision: July 14, 2015 (affirming NDs). COA Proper Decision: December 27, 2017 (affirmed with modification excusing recipient-payees in good faith). Motion for Reconsideration denied: August 16, 2018; notice received November 12, 2018. Petition for certiorari filed January 11, 2019. Supreme Court disposition: petition partially granted; COA Decision affirmed with modification that petitioners need not refund the disallowed amount.
Applicable Law and Legal Framework
Constitutional and statutory basis applied: 1987 Philippine Constitution (given decision date >1990), Local Government Code (R.A. 7160), Salary Standardization Law (R.A. 6758, Section 12), Administrative Code of 1987 (EO No. 292), Government Auditing Code (PD 1445), Budget Reform Decree (PD 1177), COA circulars and COA Rules (COA Circulars Nos. 2013-003, 2009-006, 94-001; Manual on Certificate of Settlement and Balances), and related jurisprudence addressing disallowances, solutio indebiti, and unjust enrichment.
Factual Background — Allowances and Beneficiaries
The Municipality granted: Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Assistance (ACA), and Mitigation Allowance to Municipal Employees (MAME). Recipients included regular, casual and job order/contractual municipal employees, barangay workers (tanods, BNS, DCW, BHW), public elementary and high school teachers, and national employees assigned to the municipality. The SB resolutions framed the grants as financial assistance in response to inflation, high interest loans, agricultural shortages after Typhoon Yolanda, and disaster mitigation needs.
Notices of Disallowance — Grounds and Persons Charged
COA Audit Team issued eleven NDs (Feb. 20, 2014) disallowing the subject allowances amounting to P7,706,253.10. Grounds: (a) violation of Section 12, R.A. 6758 (consolidation of allowances into standardized salary rates); (b) not authorized under COA Circular No. 2013-003’s list of authorized allowances; (c) inapplicability of benefits to contract/job-order personnel under CSC Resolution No. 02-0790. Persons charged included the municipal approving and certifying officers (Mayor, Municipal Accountant, Treasurer, Budget Officer) for their respective certification/approval roles and all payees as claimants/recipients.
Administrative Review — COA Regional Director Ruling
On appeal to the COA Regional Director, the RD (July 14, 2015) affirmed the NDs. The RD held the municipality’s authority under Section 447(a)(1)(viii) of R.A. 7160 could not override Section 12 of R.A. 6758; the appropriation ordinance was insufficient legal basis; the LGC did not repeal Section 12 of R.A. 6758; custom did not validate an otherwise illegal grant; the ordinance and resolutions were not shown to have been transmitted to the Sangguniang Panlalawigan for review under Section 327, R.A. 7160; and appropriations from savings/unappropriated balances violated Section 322, R.A. 7160.
COA Proper Decision and Modification
COA Proper (Dec. 27, 2017) affirmed the disallowances but modified liability: approving officers who passed and approved the ordinance/resolutions and those who certified/approved payments were ordered to refund the entire disallowed benefits; however, officials and employees who unwittingly received the disallowed benefits were excused from reimbursement as recipient-payees in good faith. COA acknowledged the inequity of making approving officers shoulder the full burden and the tension with solutio indebiti and unjust enrichment but applied the exception recognizing passive recipients in good faith based on existing jurisprudence.
Issue Before the Supreme Court
Whether COA committed grave abuse of discretion in affirming the NDs and in imposing liability on petitioners to refund disallowed amounts — and specifically whether petitioners could be held personally liable given their asserted good faith in approving the disbursements.
Timeliness and Court’s Discretion to Hear the Petition
Petition was filed late because Rule 64 prescribes 30 days from notice of COA decision (interruptible by MR). The petition arrived 35 days after the last day to file. The Court nonetheless exercised liberal application of procedural rules to address substantial issues and to harmonize conflicting jurisprudence on refund liability, invoking its role to prevent inequitable outcomes and to clarify rules for future cases.
Propriety of the Disallowances — Court’s Conclusion
The Court upheld the COA’s disallowances. The allowances were not authorized under R.A. 6758 and COA Circular No. 2013-003; they were not validated by sufficient legal basis; and the grant could not be justified merely as a gesture of gratitude. The Court quoted Section 447, R.A. 7160 (compensation-setting power) but held it could not prevail over Section 12 of R.A. 6758. Prior jurisprudence (e.g., Luciano Veloso) supports the limitation that additional allowances must be necessary or relevant to official duties, which was not demonstrated.
Civil, Administrative and Criminal Liability Framework
The Court reiterated statutory bases (PD 1177, PD 1445, Administrative Code, COA circulars) establishing that unlawful expenditures give rise to civil liability to refund, and that approving/certifying officers have supervisory responsibilities. Sections 38–39 (Administrative Code) require a clear showing of bad faith, malice, or gross negligence before holding public officers civilly liable for acts done in performance of official duties; Section 43 prescribes joint and several (solidary) liability for illegal expenditures. COA rules define liability and prescribe civil enforcement procedures (withholding, referral to OSG, etc.).
Badges of Good Faith for Approving/Certifying Officers
Adopting Justice Leonen’s proposed factors, the Court set illustrative "badges" to assess whether an authorizing officer exercised the diligence of a good father of a family: (1) certificate of availability of funds under Section 40 (Administrative Code); (2) in-house or DOJ legal opinion; (3) absence of precedent disallowing similar cases; (4) long-standing institutional practice without prior disallowance; (5) a reasonable textual interpretation of legality. Presence of such factors tends to uphold the presumption of good faith and may exculpate approving/certifying officers from civil liability.
Jurisprudential Treatment of Good Faith and Payee Liability
The Court reviewed cases: Blaquera (1998) excused return by good-faith parties; NEA (2002) imposed solidarity liability where officials blatantly violated directives; Casal (2006), MIAA (2012), TESDA (2014), Silang (2015), and others reflect evolving approaches distinguishing approving officers and passive recipients and varying the extent of refund. The Court recognized inconsistent outcomes and the need to harmonize rules, noting concern that excusing passive recipients can unfairly shift the entire burden to approving officers and may conflict with solutio indebiti and unjust enrichment principles.
Civil Principles — Solutio Indebiti and Unjust Enrichment Applied to Payees
The Court explained that payees’ liability is grounded in civil law principles (solutio indebiti, unjust enrichment under Article 22 and Article 2154 Civil Code): where funds were received without legal basis, even if by mistake and in good faith, the obligation to return generally arises. Exceptions exist where disallowed amounts were genuinely paid in consideration for services rendered (e.g., legitimate performance incentives) or
...continue readingCase Syllabus (G.R. No. 176492)
Procedural Posture and Relief Sought
- Petition for certiorari under Rule 64 in relation to Rule 65 of the Rules of Court, filed by Mario M. Madera, Beverly C. Mananguite, Carissa D. Galing, and Josefina O. Pelo (petitioners).
- Petition assails COA Decision dated December 27, 2017 and COA Resolutions dated August 16, 2018, which affirmed Notices of Disallowance (NDs) dated February 20, 2014.
- Petitioners sought relief from COA’s affirmance of disallowances and challenged the imposition of personal liability to refund disallowed allowances.
Facts — Legislative Acts and Allowances Granted
- In December 2013 the Municipality of Mondragon, Northern Samar passed and approved:
- Sangguniang Bayan Ordinance No. 08, series of 2013; and
- Sangguniang Bayan Resolutions Nos. 41, 42, 43, and 48, all series of 2013.
- The legislative acts authorized grants of four categories of allowances/financial assistance in 2013:
- Economic Crisis Assistance (ECA);
- Monetary Augmentation of Municipal Agency (MAMA);
- Agricultural Crisis Assistance (ACA); and
- Mitigation Allowance to Municipal Employees (MAME).
- The SB resolutions’ Whereas clauses described purposes:
- ECA: to alleviate effect of worldwide inflation on low-income salaried employees and to provide assistance to officials/employees.
- MAMA: to help lighten financial burden from inflation and high-interest loans.
- ACA: to provide agricultural assistance after shortages caused by Typhoon Yolanda and to help buy seeds/farm facilities.
- MAME: to provide mitigation capability and financial assistance to lessen adverse impacts of hazards and disasters.
Amounts, Recipients, and Aggregate Disallowance
- Total amount of questioned allowances: P7,706,253.10.
- Breakdown by allowance and listed recipients:
- ECA — P3,865,203.10; recipients included regular officials/employees; casual and job order/contractual employees; Barangay Tanods; Barangay Nutrition Scholars (BNS); Day Care Workers (DCW); Barangay Health Workers (BHW); public elementary and high school teachers; and national employees stationed in the municipality.
- MAMA — P1,245,000.00; recipients included regular officials/employees and casual employees.
- ACA — P1,771,550.00; recipients included regular officials/employees, casual employees, and job order/contractual employees.
- MAME — P824,500.00; recipients included regular officials/employees, casual employees, job order/contractual employees, BNSs, DCWs, and BHWs.
- On post-audit the Audit Team Leader and Supervising Auditor issued 11 Notices of Disallowance dated February 20, 2014 (ND Nos. 14-004-101(2013) to 14-015-101(2013)) itemizing individual check payments and summing to P7,706,253.10.
Grounds Cited in the Notices of Disallowance
- COA grounds for disallowance included:
- Violation of Section 12 of R.A. 6758 (Salary Standardization Law) — consolidation/integration of allowances into standardized salary rates, except enumerated exceptions.
- Item II of COA Circular No. 2013-003 — the subject allowances were not among the listed authorized allowances and other allowances require sufficient legal basis beyond mere ordinance.
- Items 4 and 5 of Section 1.a of CSC Resolution No. 02-0790 (June 5, 2002) — contract/job order employees do not enjoy certain government benefits; services rendered thereunder are not considered government service.
Persons Identified as Liable in the Notices of Disallowance
- Individuals named in the NDs with stated participation:
- Mario M. Madera — Municipal Mayor: certified appropriation/allotment necessity, approved payments.
- Beverly C. Mananguite — Municipal Accountant: certified completeness of supporting documents in vouchers.
- Carissa D. Galing — Municipal Treasurer: certified availability of funds.
- Josefina O. Pelo — Municipal Budget Officer: certified existence of available appropriation.
- All other payees listed in the NDs: identified as claimants/recipients.
Administrative Appeals and COA Regional Director Ruling
- Petitioners appealed to the COA Regional Director on January 8, 2015.
- Key arguments by petitioners on appeal:
- R.A. 7160 (Local Government Code) allows LGUs to grant additional allowances/financial assistance when finances permit; argued it repealed or rendered inapplicable Section 12 of R.A. 6758.
- COA Circular No. 2013-003 permits other allowances if sufficient legal basis exists; claimed the ordinance/resolutions provided legal basis.
- Customary municipal practice and post-Typhoon Yolanda intent to assist employees.
- Resolutions and ordinances had not been invalidated by SP, DBM, or COA.
- COA Regional Director Decision dated July 14, 2015:
- Affirmed NDs; held Section 12 of R.A. 6758 remained controlling and the subject allowances were integrated into standardized salary rates.
- Ruled the appropriation ordinance was not a sufficient legal basis for the allowances.
- Rejected argument that R.A. 7160 repealed Section 12.
- Rejected reliance on municipal custom; practice contrary to law cannot create vested rights.
- Noted ordinances/resolutions showed no transmission to Sangguniang Panlalawigan per Section 327 and that appropriations used savings/unexpended allotments in violation of Section 322 of R.A. 7160.
- Affirmed liability of payees and municipal officials as specified in the NDs.
COA Proper Decision and Modification
- COA Proper Decision dated December 27, 2017:
- Affirmed COA Regional Office’s Decision with modification.
- Declared approving officers and officials who passed and approved the Ordinance and Resolutions and those who approved/certified payment were to refund the entire disallowed benefits.
- Recognized precedent exception for passive recipient-payees who received disallowed benefits in good faith; such unwitting payees were excused from reimbursement.
- Acknowledged that excusing recipient-payees in good faith produces an inequitable burden on approving officers but applied the exception in deference to Supreme Court precedent (e.g., Silang v. COA).
- Petitioners filed Motion for Reconsideration (MR) February 28, 2018; MR denied August 16, 2018; copy of denial received by petitioners November 12, 2018.
Petition to the Supreme Court — Timeliness and Court’s Discretion
- Petitioners filed certiorari with the Supreme Court on January 11, 2019.
- Rule 64, Section 3 provides a 30-day period from notice of the judgment/final order/resolution for filing a petition for review of COA decisions; this period is interrupted by filing of MR and resumes from notice of denial.
- Court found petition was filed out of time (petitioners mistakenly used Rule 65’s 60-day period); timeline:
- COA Decision promulgated Dec 27, 2017; petitioners received copy Feb 23, 2018.
- MR filed Feb 28, 2018; MR denied Aug 16, 2018; petitioners received denial Nov 12, 2018.
- Petitioners had until Dec 7, 2018 (25 days from Nov 12) to file; actual filing Jan 11, 2019 was 35 days late.
- Court nonetheless applied liberal application of procedural rules and entertained the petition because the case presented significant issues warranting clarification of conflicting jurisprudence.
Central Issue Presented
- Whether the COA committed grave abuse of discretion in issuing the December 27, 2017 Decision and August 16, 2018 Resolution — specifically whether petitioners (approving/certifying officers) were correctly held liable to refund the disallowed amounts.
Court’s Ultimate Ruling (Disposition)
- The petition was PARTIALLY GRANTED.
- The Supreme Court affirmed COA Decision No. 2017-454 dated December 27, 2017 with MODIFICATION:
- The Notices of Disallowance totaling P7,706,253.10 were AFFIRMED as properly disallowed.
- Modification: petitioners (Madera, Mananguite, Galing, Pelo) need not refund the disallowed amounts.
- Court’s reasoning: COA did not gravely abuse its discretion in affirming the substance of the disallowances, but the approving and certifying officers involved acted in good faith and other equitable considerations (including humanitarian/social justice implications after Typhoon Yolanda) justified excusing their civil refund liability.
- Decision rendered September 8, 2020 (G.R. No. 244128).
Court’s Analysis — Propriety of the Disallowance
- The Court upheld COA’s legal basis for disallowance:
- Section 12 of R.A. 6758 (Salary Standardization Law) integrates all allowances into standardized salary rates except specified exceptions; subject allowances were not among exceptions.
- LGU powers under Section 447(a)(1)(viii) of R.A. 7160 do not supersede the SSL’s consolidation rule.
- Reliance on S