Title
Supreme Court
Seares, Jr. vs. National Electrification Administration Board
Case
G.R. No. 254336
Decision Date
Nov 18, 2021
GM Seares, ABRECO's General Manager, faced NEAB charges for financial mismanagement but was exonerated by the Supreme Court due to lack of substantial evidence, reinstated with full benefits.

Case Summary (G.R. No. 254336)

Appointment and Responsibilities of Petitioner as General Manager

Loreto P. Seares, Jr. was appointed as General Manager of ABRECO in October 2007. Under ABRECO’s bylaws, the General Manager’s duties include overseeing daily business operations, implementing plans approved by the Board of Directors (BOD) and the General Assembly (GA), representing ABRECO in official transactions, providing monthly reports to the BOD, and ensuring compliance with regulatory requirements. The General Manager also acts as an ex-officio member of the BOD without voting rights.

NEA’s Supervisory Powers Over Electric Cooperatives

RA 10531 grants the National Electrification Administration Board (NEAB) supervisory and disciplinary powers over all electric cooperatives, including authority to conduct investigations, issue orders, and impose preventive or disciplinary measures such as suspension or removal of officers and board members. This power is exercisable motu proprio or upon petition, but due process must be observed.

Audit and Findings on Petitioner’s Management of ABRECO

NEA’s Electric Cooperative Audit Department conducted an audit covering July 1, 2013, to October 31, 2016, which revealed operational deterioration of ABRECO due to mounting financial obligations, including large debts to several power sector entities and private creditors. Key findings included:

  • Accumulation of arrears on power bills and loan amortizations, delayed remittance of mandatory government contributions (SSS, PhilHealth, Pag-IBIG), high-interest loans from private creditors, and unfavorable financial margins largely attributed to overcharging consumers.
  • System losses above allowable caps and suboptimal collection efficiency.
  • Lack of internal control evidenced by indiscriminate cash disbursements not deposited in official accounts, deviations from prescribed procurement procedures such as premature payments and absence of required bidding, and questionable reimbursements for vehicle parts and expenses.
  • Failure to submit proper documentation for subsidy fund utilization and non-compliance with procurement rules under RA 9184.

NEAB’s Preventive Suspension and Administrative Action

Based on the audit findings, NEAB imposed a preventive suspension on petitioner for 30 days, later extended, and established a task force to act as ABRECO’s interim board. NEAB treated the audit report as a formal complaint and directed petitioner and others involved to file answers.

Petitioner’s Defensive Assertions

Petitioner argued that:

  • He implemented BOD-approved policies, specifically Board Resolution No. 48 of 2015, which set a fixed generation rate higher than the Energy Regulatory Commission’s (ERC) prescribed formula, as a necessary measure to manage price volatility in the Wholesale Electricity Spot Market.
  • NEAB failed to provide requested financial assistance, compelling ABRECO to secure high-interest loans to maintain operations.
  • Delays in meter reading and billing were due to defective equipment, affecting collections beyond his control.
  • The responsibility for remitting employee premium contributions lay with ABRECO’s Human Resources Department, not him personally, and related complaints were withdrawn by employees.
  • ABRECO was enjoined from depositing collections in designated depository banks due to labor-related garnishment orders.
  • Procurement procedures followed RA 9184 in good faith.

NEAB’s Decision and Imposition of Penalties

On May 7, 2018, NEAB found petitioner guilty of grave misconduct, dishonesty, and gross incompetence based on:

  • Charging an unauthorized higher generation rate to consumers.
  • Violation of procurement laws, including premature payments and awarding contracts without proper bidding and evaluation.
  • Mismanagement resulting in financial retrogression and unpaid obligations.
  • Approval of dubious reimbursements inconsistent with the specifications of cooperative-owned vehicles.
  • Failure to ensure timely remittance of employee contributions.

NEAB imposed the penalty of removal from service with accessory penalties including perpetual disqualification from re-employment in any electric cooperative and forfeiture of retirement benefits. Petitioner’s motion for reconsideration was denied.

Appeal to the Court of Appeals

Petitioner filed an appeal arguing NEAB exceeded its authority, as such powers belonged to the Cooperative Development Authority (CDA) under RA 9520. He reiterated his defenses and challenged the sufficiency of evidence against him.

The Court of Appeals affirmed petitioner’s liability but reclassified some charges, absolving petitioner of grave misconduct regarding the procurement irregularities attributed exclusively to the Bids and Awards Committee. It still found gross negligence for failure to ensure compliance with procurement procedures and maintained other findings of grave misconduct and serious dishonesty.

Supreme Court’s Analysis: NEAB’s Jurisdiction and Authority

The Supreme Court reiterated and clarified NEAB’s authority to supervise and discipline officers of electric cooperatives notwithstanding the existence of the CDA. Citing PD 269 as amended, and RA 10531, the Court emphasized NEAB’s broad powers to conduct investigations, impose disciplinary actions including suspension or removal, and oversee cooperative boards to achieve rural electrification goals.

The Court distinguished supervisory and registration functions, observing that while CDA handles registration, NEAB retains regulatory and disciplinary jurisdiction over cooperatives.

Due Process Concerns Regarding NEAB’s Decision

The Court found that NEAB’s decision failed to clearly delineate which specific charges or factual findings corresponded to each alleged administrative infraction (grave misconduct, dishonesty, gross incompetence). This omission violated Section 14, Article VIII of the 1987 Constitution, which requires all decisions to state clearly and distinctly the facts and law on which they are based, as an essential component of due process.

Failure to specify the grounds of liability left the petitioner unable to adequately defend himself or prepare a focused appeal, prejudicing his right to fair administrative proceedings.

Insufficiency of Substantial Evidence Supporting Petitioner’s Liability

Upon reviewing the evidence, the Court found that NEAB and the Court of Appeals failed to present substantial evidence to prove petitioner’s guilt beyond mere allegations. Specifically:

  • Charge on Fixed Generation Rate: Petitioner merely implemented the BOD’s expressly approved rate, performing a ministerial duty incapable of constituting grave misconduct.
  • Incurring Loans at High Interest: Petitioner reasonably resorted to loans from private creditors with high interest because NEAB declined repeated requests for financial assistance. The burden was on NEAB to prove otherwise, which it failed to do, including specifying loan details.
  • Delayed Remittance of Premium Contributions: The audit lacked details on timing, amounts, and reasons for delay, and petitioner's non-liability was supported by withdrawn complaints and delegation of remittance duties to Human Resources.
  • Alternative Deposit of Funds: The decision to deposit funds in banks not designated by ABRECO was a legitimate measure to protect cooperative funds from garnishment orders, with no evidence of self-enrichment or malfeasance.
  • Approval of Reimbursements: Petitioner relied on finance department documents and disallowance notices issued by the cooperative itself. Absent evidence of malice or bad faith, such approvals did not amount to dishonesty.

The Court emphasized that mere errors without corrupt intent, willful law violation, or disregard of established rules do not suffice to

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