Title
Philippine Health Insurance Corp. vs. Commission on Audit
Case
G.R. No. 235832
Decision Date
Nov 3, 2020
PHIC benefits disallowed due to lack of OP approval; COA affirmed, requiring refunds by officials and recipients, citing procedural lapses and fiscal autonomy limits.
disallowance of benefits
explicit authorization
fiscal autonomy

Case Summary (G.R. No. 235832)

Notices of Disallowance and Their Grounds

The Resident Auditor issued multiple NDs against benefits granted by PHIC’s Board of Directors to PHIC personnel and other concerned recipients. The NDs covered the following items and amounts: PHIC ND Nos. 2008-056(07) (Birthday Gift, CY 2007) for P5,974,572.83; 2008-057(07) (Special Event Gift, CY 2007) for P8,714,500,00; 2008-058(07) (Nominal Gift, CY 2007) for P29,519,296.78; 2008-059(07) (Educational Assistance Allowance, CY 2007) for P49,285,894.89; and 2008-060(07) (Project Completion Benefit, CY 2007) for P4,986,122.35. It also issued HO 2009-001 (Payment of liability insurance premium for PHIC Board of Directors and Officers, CY 2007) for P638,000.00; HO 2009-002 (Corporate Transition and Achievement Premium, CY 2008) for P81,059,403.54; HO 2009-003 (Medical Mission Critical Allowance, CY 2008) for P7,916,205.82; and HO 2009-005-725(08) (Efficiency Gift) for P16,275,578.16.

With the exception of ND No. HO 2009-001, the Resident Auditor disallowed the questioned benefits on the ground that these covered benefits were granted to PHIC officers and employees without the approval from the Office of the President (OP) allegedly required under Memorandum Order No. 20 and Administrative Order No. 103. For ND No. HO 2009-001, the Resident Auditor disallowed the payment of the liability insurance premium for PHIC’s Board and officers because the payment allegedly violated Section 73 of Republic Act No. 9184 and GPPB Resolution No. 21-05.

The Resident Auditor therefore held liable both the concerned PHIC officers and employees and the payees for the disallowed amounts.

Appeals to the COA-CGS and COA Proper

After the denial of its motion for reconsideration on the NDs 2008-056(07) to 2008-060(07), PHIC filed a consolidated memorandum of appeal before the COA Corporate Government Sector A on December 18, 2009. It also filed separate consolidated memoranda of appeal for HO 2009-001 to HO 2009-003 on January 29, 2010 and March 4, 2010.

On July 12, 2012, the COA-CGS denied PHIC’s appeals and affirmed the NDs in the total amount of P204,072,574.37. PHIC then sought review before the COA Proper.

COA Proper’s Decision: Merits for One ND, Dismissal for Late Filing for Others

In Decision No. 2016-436 dated December 27, 2016, the COA Proper dismissed PHIC’s petition for review as to ND No. 09-005-725(08) for lack of merit, and dismissed the petition as to the remaining NDs for late filing.

The COA Proper ruled that PHIC failed to file its petition for review within the reglementary period of 180 days or six months. It held that, as a result, the COA-CGS decision sustaining the NDs had become final and executory. The COA Proper also noted that while PHIC filed a motion for extension of time to file its petition, the COA Proper did not act on it; thus, PHIC could not assume that the belated filing had been justified.

As to ND No. 09-005-725(08) covering the payment described as an “Efficiency Gift” for CY 2007 in the amount of P16,275,578.16, the COA Proper denied PHIC’s review for lack of merit. It ruled that the questioned payment lacked OP approval as required. The COA Proper further emphasized that even if PHIC enjoyed fiscal autonomy, it still had to report to the OP through the DBM its position classification and compensation plans. The COA Proper reasoned that prior OP approval did not remove from PHIC’s Board the power to fix compensation and allowances, but required PHIC to submit its plans to the OP through the DBM to comply with law and standards.

The COA Proper also concluded that the PHIC officials who authorized, approved, or certified the grants could not be deemed in good faith because the law required prior OP approval, and because the COA had previously affirmed similar disallowances in COA Decision Nos. 2014-332 and 2014-665 dated September 12, 2014 involving similar benefits.

Regarding the recipient-employees, the COA Proper stated that, even assuming good faith, the principle of solutio indebiti required the recipients to return what they received by mistake.

The COA Proper denied PHIC’s motion for reconsideration through Resolution No. 2017-050 on September 7, 2017.

Grounds for the Petition and the Parties’ Arguments

PHIC moved the Court for relief through a petition for certiorari, asserting that the COA Proper committed grave abuse of discretion amounting to lack or excess of jurisdiction in dismissing its petition for review on procedural technicalities. Substantively, PHIC contended that there was legal basis for the benefits.

PHIC argued, among others, that Section 16(n) of RA No. 7875, as amended, expressly bestowed upon PHIC fiscal autonomy or independence to fix the compensation of its personnel, a position allegedly confirmed through earlier OGCC opinions, letters of then President Gloria Arroyo, and legislative deliberations. It further asserted that this fiscal authority had been confirmed by then President Arroyo in 2006 and 2008, and that PHIC, being a government financial institution (GFI), should receive fiscal autonomy comparable to other GFIs as recognized by the Court in Central Bank Employees Association Inc. vs. Bangko Sentral ng Pilipinas. PHIC also maintained that the benefits were granted pursuant to a duly executed collective negotiation agreement (CNA) between PHIC management and PHIC Employees Association (PHICEA). As to liability insurance coverage, PHIC asserted that validity had been confirmed through the GPPB through NPM No. 24-2008. It additionally argued that PHIC officials and employees acted in good faith, and therefore, even if disallowance was sustained, refund should not be compelled.

The respondents countered that the COA Proper correctly dismissed the petition for review due to late filing. They argued that the filing of a motion for extension did not automatically extend the time to file a petition. They stressed that perfection of an appeal within the period and in the manner prescribed by law is jurisdictional, and thus the failure to file on time warranted dismissal.

On the merits, respondents contended that PHIC’s reliance on fiscal autonomy was misplaced in light of prior jurisprudence involving PHIC, specifically Philippine Health Insurance Corp. v. Commission on Audit, which reiterated that PHIC’s authority to fix compensation and allowances remains subject to applicable laws and standards. They invoked the Salary Standardization Law, asserting that allowances not expressly enumerated under Section 12 of that law are deemed included in standardized salary rates. They also argued that PHIC officers and the Board could not claim good faith because their positions required them to be knowledgeable of the governing rules. They further maintained that PHIC officials previously disallowed similar expenses could not plausibly claim good faith.

A temporary restraining order issued by the Court on January 30, 2018 restrained respondents from executing the COA decisions pending resolution of the petition.

The Court’s Ruling: No Grave Abuse for Dismissal Based on Late Filing; Substantive Limits on PHIC Benefits

The Court treated the petition as one under Rule 64 in relation to Rule 65, meaning that it would only determine whether the COA Proper committed grave abuse of discretion amounting to lack or excess of jurisdiction. The Court’s review was thus limited to arbitrariness or whimsical action involving the COA Proper’s jurisdiction.

Dismissal for Late Filing

The Court held that the COA Proper did not commit grave abuse of discretion in dismissing PHIC’s appeal as to ND Nos. 2008-056(07) to 2008-060(07) and HO 2009-001 to 2009-003 for late filing.

The Court relied on Section 4, Rule V of the 2009 COA Revised Rules of Procedure, which required that an appeal must be filed within six months after receipt of the decision appealed from, and on Section 3, Rule VII of the COA Rules, which required the appeal before the COA Proper to be taken within the remaining six-month period, taking into account interruptions of the running of time under Section 5 of the same Rule.

The Court found that the parties did not dispute PHIC’s failure to timely file. The Court rejected PHIC’s sole excuse—that PHIC filed a motion for extension—because the COA Proper did not act on the motion. Accordingly, PHIC could not assume that the COA Proper granted the extension.

The Court found PHIC’s reliance on “substantial justice” insufficient. It reiterated the rule that procedural rules on the time for appeals are indispensable to prevent delay and to promote the speedy and orderly administration of justice. The Court also applied the doctrine that perfection of appeal within the period and manner is not only mandatory but jurisdictional, and failure to perfect renders the judgment final and executory, with limited exceptions such as correction of clerical errors, nunc pro tunc entries with no prejudice, void judgments, or when circumstances after finality make execution unjust and inequitable. The Court found that none of these exceptions applied.

The Court therefore held that the COA-CGS decision sustaining the disallowed amounts for the late-filed NDs had attained finality and could not be disturbed.

Merits for the Efficiency Gift ND

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