Title
National Power Corp. Board of Directors vs. Commission on Audit
Case
G.R. No. 218052
Decision Date
Jan 26, 2021
NPC officials and employees granted PIB in 2009 despite net loss; COA disallowed for lack of presidential approval, extravagance, and untimely appeal. SC upheld COA, holding petitioners liable for refund.
presidential approval
extravagance
disallowed amounts

Case Summary (G.R. No. 218052)

Factual Background

On February 1, 2010, the NPC Board of Directors confirmed and ratified Board Resolution No. 2009-72 dated December 18, 2009, which granted CY 2009 Performance Incentive Benefits equivalent to five and one-half monthly basic salaries to NPC NMA-SPUG/Watershed and OMA Head Office and Engineering officials and employees. To implement the grant, the NPC President and CEO, Froilan A. Tampinco, approved NPC Circular No. 2009-58 dated December 21, 2009. The NPC released a total of P327,272,424.91 for this purpose.

On February 15, 2012, the NPC Audit Team issued a Notice of Suspension, requiring NPC to explain why the PIB should not be disallowed, citing two main grounds: first, the grant allegedly lacked prior presidential approval as required under Section 3 of AO No. 103; and second, the grant was allegedly extravagant under Section 3.4 of COA Circular No. 85-55A, considering that NPC incurred a net loss of P2,874,144,564.00 in CY 2009.

In response, NPC management rationalized the grant in a letter dated April 10, 2012, pointing to privatization initiatives, a High Very Satisfactory (VS) corporate performance rating under a balanced scorecard, and organizational right-sizing in 2010. However, petitioners invoked no law or presidential issuance as the basis of the grant at that stage.

Consequently, COA Audit Team issued ND No. NPC 12-007 (09,10) dated October 15, 2012, disallowing the PIB for lack of presidential approval and for being extravagant. The ND addressed the disallowed payment scheme to the NPC Board through Tampinco and indicated other responsible officers, including Loma T. Dy (Vice President, Human Resources Administration and Finance) as the noted attention addressee. Tampinco received the ND on October 23, 2012.

Proceedings Before COA Corporate Government Sector

On April 11, 2013, petitioners filed an appeal to COA’s Corporate Government Sector (CGS) Cluster 3 Public Utilities. They asserted for the first time that presidential authority existed via MO No. 198 issued on March 24, 1994, allegedly issued pursuant to Republic Act (RA) No. 7648, and they characterized the PIB as “pay for performance” incorporated into the NPC Compensation Plan under Section 2.2 of MO No. 198. Petitioners also argued that, even apart from MO No. 198, the presidential approval requirement was satisfied because the NPC Board was composed of cabinet secretaries who were the President’s alter egos.

On the extravagance issue, petitioners maintained that the officials and employees deserved the incentive based on mandated privatization efforts under RA No. 9136 (the Electric Power Industry Reform Act of 2001), the High VS rating in 2009, and right-sizing implemented in 2010. They also asserted that the disbursement conformed to the four-month basic salary limitation under Section 2.2 of MO No. 198, reasoning that the amounts released in 2009 were equivalent to only four months basic salary and that the remaining one and one-half months were released only in 2010.

COA CGS Cluster 3 Public Utilities affirmed the disallowance in Decision No. 2014-03 dated February 28, 2014, holding that AO No. 103 had already superseded MO No. 198 regarding the suspension of new or additional benefits, and that even assuming MO No. 198 applied, the PIB failed to satisfy Section 2.2 of MO No. 198, particularly because it was not shown to be based on a Productivity Enhancement Program (PEP). The COA CGS further found that, under Section 3.4 of COA Circular No. 85-55A, granting PIB equivalent to five and one-half months basic salary for the year was extravagant given NPC’s net loss of more than P2.87 Billion in CY 2009.

Petitioners received the COA CGS decision on March 14, 2014. On March 26, 2014, they filed a Petition for Review before the COA Proper, reiterating their arguments.

COA Proper: Dismissal for Being Filed Out of Time

In its Decision No. 2015-108 dated April 6, 2015, the COA Proper dismissed petitioners’ Petition for Review for being filed beyond the reglementary period. The COA Proper relied on Section 48 of PD No. 1445 (the Government Auditing Code of the Philippines) and the COA Revised Rules of Procedure, finding that the Petition for Review was late and hence improper.

Issues Raised in the Petition

The petition to the Court raised three core issues: first, whether COA acted with grave abuse of discretion in dismissing the appeal for being filed beyond the reglementary period; second, whether COA acted with grave abuse of discretion in affirming the disallowance; and third, if the disallowance stood, whether COA acted with grave abuse of discretion in ordering petitioners to refund the disallowed amounts.

Petitioners’ Contentions

Petitioners argued that the running of the time to appeal had not commenced because they were not individually served with the ND. They claimed that constructive service on Tampinco was improper because the ND imposed personal liability on each petitioner. They insisted that they remained unaware of the disallowance and had allegedly been denied an opportunity to be heard. They urged the Court to resolve the case on its merits and apply liberality in procedural treatment.

On the merits, petitioners continued to assert that the PIB did not violate AO No. 103 because the grant was allegedly authorized by the President through MO No. 198 and/or by the NPC Board as the President’s alter egos. They further argued that they acted in good faith in disbursing and receiving the PIB.

COA’s Position

COA countered that petitioners’ failure to file within the reglementary period rendered the COA CGS decision final and immutable. COA defended the validity of constructive service under COA’s rules, specifically pointing to service provisions that allow notice to be accomplished through the accountant or responsible officer when there are several payees and personal service is impracticable. On the merits, COA maintained that the PIB was properly disallowed for noncompliance with AO No. 103 and MO No. 198, and for being extravagant under the applicable COA standards in light of NPC’s net loss. COA also argued that, regardless of good faith, petitioners should be held liable to refund under the principles governing unjust enrichment, including solutio indebiti.

Ruling of the Court: No Grave Abuse of Discretion

The Court held that the petition lacked merit. It first sustained the finality of the disallowance due to the lapse of the period to appeal to the COA Proper. It then upheld the substantive propriety of the disallowance. Finally, it affirmed the liability for refund in accordance with the statutory and jurisprudential rules on disallowed government payments.

Legal Basis: Finality of the Disallowance and Jurisdictional Nature of Timely Appeal

The Court examined COA’s 2009 Revised Rules of Procedure on appeals. It noted that the Auditor’s decision becomes final unless appealed within prescribed periods, and that appeals must be filed within six months after receipt. The Court applied Section 48 of PD No. 1445, which provides that a COA decision becomes final and executory if not appealed as provided.

Based on the records, the Court found that the ND had already attained finality for failure to timely appeal to the COA Proper. Tampinco received the ND on October 23, 2012, while petitioners filed their appeal to COA CGS on April 11, 2013, meaning that 170 days of the 180-day appeal period had already lapsed before the first appeal. Thus, petitioners effectively had only ten days remaining after receipt of the adverse decision to complete the next step by filing a Petition for Review with the COA Proper.

The Court further found that after receiving the CGS Director’s Decision on March 14, 2014, petitioners filed the Petition for Review on March 26, 2014, or twelve days after receipt of the COA CGS decision. The Court held that this filing exceeded the 180-day reglementary period, and therefore fell outside COA’s and PD No. 1445’s jurisdictional timing requirements.

In rejecting petitioners’ plea for liberality, the Court emphasized that the doctrine is strict because the perfection of an appeal within the period allowed by law is both mandatory and jurisdictional. It was not persuaded by petitioners’ claim that the time to appeal had not commenced because of alleged improper individual notice.

Service of the Notice of Disallowance: Valid Constructive Service

The Court addressed the due process and notice contentions by applying COA’s specific service rules. Under Section 7, Rule IV of the 2009 Revised Rules of Procedure of COA, the ND must be served to each person liable/responsible, but where there are several payees, service to the accountant responsible for informing all payees constitutes constructive service to all payees listed in the payroll. The Court found that this was mirrored in Section 12.1 of COA Circular No. 2009-006.

Applying these provisions, the Court cited jurisprudence in National Power Corporation v. Commission on Audit (G.R. No. 240519, February 19, 2019), where the Court sustained constructive service of the ND on responsible officers for practical purposes where personal service to numerous recipients was impossible. The Court held that the ND was properly served upon Tampinco, who had the duty to inform other responsible persons or direct the named responsible officer to discharge such duty. The Court also noted that petitioners were able to file an appeal to the COA CGS on time, albeit belatedly at the COA Proper level. For these reasons, it found no factual or legal basis for the complaint of lack of opportunity to be heard and, correspondingly, no grave abuse of discretion in dismissing the Petition for Review as untimely.

Substantive Grounds for Disallowance: Presidential Approval, MO No. 198 Requirements, and Extravagance

Even assuming procedural leniency, the Court held that the petition still had no merit on the substantive legality of the PIB grant.

On presidential approv

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms