Title
Uy vs. Commission on Audit
Case
G.R. No. 130685
Decision Date
Mar 21, 2000
Employees dismissed by Agusan del Sur's governor for alleged lack of funds filed for reinstatement, claiming political motivation. MSPB ruled dismissal illegal, ordered reinstatement and back pay. COA disallowed payment, holding governor personally liable. Supreme Court ruled COA overstepped, upheld MSPB decision, and held provincial government liable for back salaries.

Case Summary (G.R. No. 130685)

Petitioners

Permanent PEO employees dismissed pursuant to Administrative Order No. 88-1 (February 26, 1988) when Governor Paredes assumed office; they filed a petition for reinstatement before the Merit Systems Protection Board (MSPB) on July 11, 1988, alleging politically motivated dismissals and improper replacement by casual hires.

Respondent

Commission on Audit (COA) exercised its audit power and, in Decision No. 96-351 (July 2, 1996) and Decision No. 97-497 (August 28, 1997) denying reconsideration, disallowed further disbursement of back wages by the Provincial Government and declared the payment of petitioners’ claims to be the personal liability of former Governor Paredes.

Key Dates and Procedural History

  • Administrative Order No. 88-1: February 26, 1988 (reduction in PEO workforce).
  • Petition for reinstatement filed with MSPB: July 11, 1988.
  • Governor’s Memorandum Order No. 3-A (hiring casuals): March 20, 1989.
  • MSPB hearings concluded; MSPB decision holding dismissal unlawful: January 29, 1993.
  • MSPB order directing payment of back salaries: April 19, 1993 (motion for clarification).
  • Order directing reinstatement: June 24, 1993; reinstatement effected after indirect contempt proceedings were initiated (CSC Resolution No. 94-1567).
  • Partial payment by Provincial Treasurer: December 12, 1995 (P2,291,423.34).
  • COA Decision No. 96-351 finding the former governor personally liable and allowing payment (but disallowing further Provincial Government disbursements): July 2, 1996; denial of reconsideration in Decision No. 97-497: August 28, 1997.
  • Special civil action for certiorari filed in the Supreme Court; Supreme Court decision reviewed herein.

Applicable Law and Legal Framework

Primary constitutional framework: the 1987 Constitution (Article IX-D governs COA). Statutory and regulatory provisions applied by lower bodies and reviewed by the Court include Section 29 of Executive Order No. 292 (Reduction in Force) and Section 14 of the Rules on Personnel Actions and Policies (reemployment list and retention credits). COA’s audit and settlement authority derives from statutes implementing its constitutional mandate (PD No. 1445 and relevant provisions cited in the records).

Central Issue Presented

Whether the Commission on Audit, in exercising its power to audit and adjudicate money claims against the government, may disallow and thereby prevent the Provincial Government of Agusan del Sur from paying back wages and other monetary benefits to employees whose reinstatement and entitlement to back pay were decreed by a final and executory decision of the Merit Systems Protection Board (subsequently enforced through the Civil Service Commission).

Facts Found by Administrative Bodies

The MSPB found that the reduction in force was carried out without the required comparison of employees “in terms of relative fitness, efficiency and length of service” as mandated by Section 29 of EO 292 and that the hiring of casual employees under Memorandum Order No. 3-A was violative of Section 14 of the Rules on Personnel Actions and Policies. The MSPB concluded the dismissals were illegal on procedural grounds and ordered reinstatement and back wages. The MSPB did not, however, make a categorical factual finding that former Governor Paredes acted in bad faith nor did it explicitly decree his personal liability for the monetary claims.

Petitioners’ Assignments of Error

Petitioners argued, inter alia, that (A) COA gravely abused its discretion and acted without jurisdiction by declaring payment of back wages to be the personal liability of Governor Paredes while the MSPB/CSC decisions were final and partially executed; (B) COA lacks appellate power to revise final decisions of MSPB/CSC; (C) MSPB/CSC orders had been partially executed by the Provincial Government already; and (D) cited jurisprudence by COA in support of its action was distinguishable and not controlling.

Supreme Court’s Analytical Framework

The Court examined: (1) whether COA’s finding of bad faith was supported by the record and whether COA had the requisite factual basis to hold Paredes personally liable; (2) the scope and limits of COA’s quasi‑judicial power to audit and adjudicate money claims, including procedural due process requirements; (3) the finality and conclusive effect of the MSPB/CSC decisions and whether COA could disallow payments that implement those decisions; and (4) equitable considerations, including the policy of social justice and potential prejudice to low‑income employees.

First Analytical Point — Bad Faith and Burden of Proof

The Court observed that COA’s ruling rested on a conclusion of bad faith by the former governor. The record, however, shows the MSPB did not make an explicit finding of bad faith nor did it order personal liability against Governor Paredes. The Court reaffirmed the legal principle that bad faith cannot be presumed and that the party alleging bad faith bears the burden of proof. On the record before COA, the MSPB’s findings did not satisfy the quantum of proof necessary to impose personal liability on Paredes.

Second Analytical Point — COA’s Quasi‑Judicial Audit Power and Due Process

The Court acknowledged COA’s broad constitutional and statutory authority to examine, audit, and settle claims involving government funds, including an adjudicative function that entails evidentiary weighing and decisionmaking. Nonetheless, the Court emphasized that quasi‑judicial administrative proceedings must observe fundamental requirements of procedural due process. In this case, former Governor Paredes was not made a party to or served notice of the COA proceedings that would make him personally liable, denying him the opportunity to be heard and present evidence. The absence of notice and the opportunity to defend rendered COA’s imposition of personal liability procedurally infirm.

Third Analytical Point — Finality of MSPB/CSC Decision and Limits on COA’s Power

The Court stressed the paramountcy of final administrative judgments and the public policy favoring finality of controversies. The MSPB decision had become final and executory (no timely appeal) and had been partially executed by the Provincial Government through partial payment and reinstatement. The Court concluded that COA, in the exercise of its audit power, could not indirectly set aside, modify, or amend a final MSPB decision by disallowing the payment ordered by that decision. COA’s audit function is meant to guard against irregular or unconscionable expenditures; it is not a vehicle to overturn or neutralize the substantive rights created by final administrative adjudications.

Fourth Analytical Point — Equitable Considerations and Remedies

The Court considered the policy implications of strict application of the rule that estoppel does not bind the State. It observed the long delay, hardship, and prejudice petitioners suffered and invoked principles of social justice that counsel flexibility to afford remedy to economically disadvantaged government employees. The Court concluded that the Provincial Government is not without remedy against any official who may have acted in bad faith; the province may pursue appropriate civil actions against such an offic

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