1. Lokin Jr.
Lokin Jr. vs COMELEC, 621 SCRA 385 Following the close of the polls, or on June 20, 2007, Villanueva sent
EN BANC
G.R. Nos. 179431-32 June 22, 2010
LUIS K. LOKIN, JR., as the second nominee of CITIZENS BATTLE
AGAINST CORRUPTION (CIBAC),Petitioner,
vs.
COMMISSION ON ELECTIONS and the HOUSE OF
REPRESENTATIVES, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 180443
LUIS K. LOKIN, JR., Petitioner,
vs.
COMMISSION ON ELECTIONS (COMELEC), EMMANUEL JOEL J.
VILLANUEVA, CINCHONA C. GONZALES and ARMI JANE R.
BORJE, Respondents.
DECISION
BERSAMIN, J.:
The principal question posed in these consolidated special civil
actions for certiorari and mandamus is whether the Commission on
Elections (COMELEC) can issue implementing rules and regulations
(IRRs) that provide a ground for the substitution of a party-list
nominee not written in Republic Act (R.A.) No. 7941, 1 otherwise
known as the Party-List System Act, the law that the COMELEC
thereby implements.
Common Antecedents
The Citizens’ Battle Against Corruption (CIBAC) was one of the
organized groups duly registered under the party-list system of
representation that manifested their intent to participate in the May
14, 2007 synchronized national and local elections. Together with its
manifestation of intent to participate,2 CIBAC, through its president,
Emmanuel Joel J. Villanueva, submitted a list of five nominees from
which its representatives would be chosen should CIBAC obtain the
required number of qualifying votes. The nominees, in the order
that their names appeared in the certificate of nomination dated
March 29, 2007,3 were: (1) Emmanuel Joel J. Villanueva; (2) herein
petitioner Luis K. Lokin, Jr.; (3) Cinchona C. Cruz-Gonzales; (4)
Sherwin Tugna; and (5) Emil L. Galang. The nominees’ certificates of
acceptance were attached to the certificate of nomination filed by
CIBAC. The list of nominees was later published in two newspapers
of general circulation, The Philippine Star News4 (sic) and The
Philippine Daily Inquirer.5
Prior to the elections, however, CIBAC, still through Villanueva, filed
a certificate of nomination, substitution and amendment of the list
of nominees dated May 7, 2007,6 whereby it withdrew the
nominations of Lokin, Tugna and Galang and substituted Armi Jane
R. Borje as one of the nominees. The amended list of nominees of
CIBAC thus included: (1) Villanueva, (2) Cruz-Gonzales, and (3) Borje.
a letter to COMELEC Chairperson Benjamin Abalos,7 transmitting
therewith the signed petitions of more than 81% of the CIBAC
members, in order to confirm the withdrawal of the nomination of
Lokin, Tugna and Galang and the substitution of Borje. In their
petitions, the members of CIBAC averred that Lokin and Tugna were
not among the nominees presented and proclaimed by CIBAC in its
proclamation rally held in May 2007; and that Galang had signified
his desire to focus on his family life.
On June 26, 2007, CIBAC, supposedly through its counsel, filed with
the COMELEC en banc sitting as the National Board of Canvassers a
motion seeking the proclamation of Lokin as its second
nominee.8 The right of CIBAC to a second seat as well as the right of
Lokin to be thus proclaimed were purportedly based on Party-List
Canvass Report No. 26, which showed CIBAC to have garnered a
grand total of 744,674 votes. Using all relevant formulas, the motion
asserted that CIBAC was clearly entitled to a second seat and Lokin
to a proclamation.
The motion was opposed by Villanueva and Cruz-Gonzales.
Notwithstanding Villanueva’s filing of the certificate of nomination,
substitution and amendment of the list of nominees and the
petitions of more than 81% of CIBAC members, the COMELEC failed
to act on the matter, prompting Villanueva to file a petition to
confirm the certificate of nomination, substitution and amendment
of the list of nominees of CIBAC on June 28, 2007.9
On July 6, 2007, the COMELEC issued Resolution No.
8219,10 whereby it resolved to set the matter pertaining to the
validity of the withdrawal of the nominations of Lokin, Tugna and
Galang and the substitution of Borje for proper disposition and
hearing. The case was docketed as E.M. No. 07-054.
In the meantime, the COMELEC en banc, sitting as the National
Board of Canvassers, issued National Board of Canvassers (NBC)
Resolution No. 07-60 dated July 9, 200711 to partially proclaim the
following parties, organizations and coalitions participating under
the Party-List System as having won in the May 14, 2007 elections,
namely: Buhay Hayaan Yumabong, Bayan Muna, CIBAC, Gabriela
Women's Party, Association of Philippine Electric Cooperatives,
Advocacy for Teacher Empowerment Through Action, Cooperation
and Harmony Towards Educational Reforms, Inc., Akbayan! Citizen's
Action Party, Alagad, Luzon Farmers Party, Cooperative-Natco
Network Party, Anak Pawis, Alliance of Rural Concerns and Abono;
and to defer the proclamation of the nominees of the parties,
organizations and coalitions with pending disputes until final
resolution of their respective cases.
The COMELEC en banc issued another resolution, NBC Resolution
No. 07-72 dated July 18, 2007,12 proclaiming Buhay Hayaan
Yumabong as entitled to 2 additional seats and Bayan Muna, CIBAC,
Gabriela Women's Party, and Association of Philippine Electric
Cooperatives to an additional seat each; and holding in abeyance
the proclamation of the nominees of said parties, organizations and
coalitions with pending disputes until the final resolution of their
respective cases.
With the formal declaration that CIBAC was entitled to an additional
seat, Ricardo de los Santos, purportedly as secretary general of
CIBAC, informed Roberto P. Nazareno, Secretary General of the
House of Representatives, of the promulgation of NBC Resolution
Rule 64 Full Text Cases andm1 of 37
No. 07-72 and requested that Lokin be formally sworn in by Speaker
Jose de Venecia, Jr. to enable him to assume office. Nazareno
replied, however, that the request of Delos Santos could not be
granted because COMELEC Law Director Alioden D. Dalaig had
notified him of the pendency of E.M. 07-054.
On September 14, 2007, the COMELEC en banc resolved E.M. No.
07-05413 thuswise:
WHEREFORE, considering the above discussion, the Commission
hereby approves the withdrawal of the nomination of Atty. Luis K.
Lokin, Sherwin N. Tugna and Emil Galang as second, third and fourth
nominees respectively and the substitution thereby with Atty.
Cinchona C. Cruz-Gonzales as second nominee and Atty. Armi Jane
R. Borje as third nominee for the party list CIBAC. The new order of
CIBAC's nominees therefore shall be:
1. Emmanuel Joel J. Villanueva
2. Cinchona C. Cruz-Gonzales
3. Armi Jane R. Borje
SO ORDERED.
The COMELEC en banc explained that the actions of Villanueva in his
capacity as the president of CIBAC were presumed to be within the
scope of his authority as such; that the president was charged by
Section 1 of Article IV of the CIBAC By-Laws to oversee and direct the
corporate activities, which included the act of submitting the party's
manifestation of intent to participate in the May 14, 2007 elections
as well as its certificate of nominees; that from all indications,
Villanueva as the president of CIBAC had always been provided the
leeway to act as the party's representative and that his actions had
always been considered as valid; that the act of withdrawal,
although done without any written Board approval, was
accomplished with the Board’s acquiescence or at least
understanding; and that the intent of the party should be given
paramount consideration in the selection of the nominees.
As a result, the COMELEC en banc proclaimed Cruz-Gonzales as the
official second nominee of CIBAC.14 Cruz-Gonzales took her oath of
office as a Party-List Representative of CIBAC on September 17,
2007.15
Precís of the Consolidated Cases
In G.R. No. 179431 and G.R. No. 179432, Lokin seeks through
mandamus to compel respondent COMELEC to proclaim him as the
official second nominee of CIBAC.
In G.R. No. 180443, Lokin assails Section 13 of Resolution No. 7804
promulgated on January 12, 2007;16 and the resolution dated
September 14, 2007 issued in E.M. No. 07-054 (approving CIBAC’s
withdrawal of the nominations of Lokin, Tugna and Galang as
CIBAC’s second, third and fourth nominees, respectively, and the
substitution by Cruz-Gonzales and Borje in their stead, based on the
right of CIBAC to change its nominees under Section 13 of Resolution
No. 7804).17 He alleges that Section 13 of Resolution No. 7804
expanded Section 8 of R.A. No. 7941.18the law that the COMELEC
seeks to thereby implement.
In its comment, the COMELEC asserts that a petition for certiorari is
an inappropriate recourse in law due to the proclamation of Cruz-
Gonzales as Representative and her assumption of that office; that
Lokin’s proper recourse was an electoral protest filed in the House
of Representatives Electoral Tribunal (HRET); and that, therefore,
the Court has no jurisdiction over the matter being raised by Lokin.
For its part, CIBAC posits that Lokin is guilty of forum shopping for
filing a petition for mandamus and a petition for certiorari,
considering that both petitions ultimately seek to have him
proclaimed as the second nominee of CIBAC.
Issues
The issues are the following:
(a) Whether or not the Court has jurisdiction over the
controversy;
(b) Whether or not Lokin is guilty of forum shopping;
(c) Whether or not Section 13 of Resolution No. 7804 is
unconstitutional and violates the Party-List System Act;
and
(d) Whether or not the COMELEC committed grave abuse
of discretion amounting to lack or excess of jurisdiction in
approving the withdrawal of the nominees of CIBAC and
allowing the amendment of the list of nominees of CIBAC
without any basis in fact or law and after the close of the
polls, and in ruling on matters that were intra-corporate in
nature.
Ruling
The petitions are granted.
A
The Court has jurisdiction over the case
The COMELEC posits that once the proclamation of the winning
party-list organization has been done and its nominee has assumed
office, any question relating to the election, returns and
qualifications of the candidates to the House of Representatives falls
under the jurisdiction of the HRET pursuant to Section 17, Article VI
of the 1987 Constitution. Thus, Lokin should raise the question he
poses herein either in an election protest or in a special civil action
for quo warranto in the HRET, not in a special civil action for
certiorari in this Court.
We do not agree.
An election protest proposes to oust the winning candidate from
office. It is strictly a contest between the defeated and the winning
candidates, based on the grounds of electoral frauds and
irregularities, to determine who between them has actually
obtained the majority of the legal votes cast and is entitled to hold
the office. It can only be filed by a candidate who has duly filed a
certificate of candidacy and has been voted for in the preceding
elections.
Rule 64 Full Text Cases andm2 of 37
A special civil action for quo warranto refers to questions of
disloyalty to the State, or of ineligibility of the winning candidate.
The objective of the action is to unseat the ineligible person from
the office, but not to install the petitioner in his place. Any voter
may initiate the action, which is, strictly speaking, not a contest
where the parties strive for supremacy because the petitioner will
not be seated even if the respondent may be unseated.
The controversy involving Lokin is neither an election protest nor an
action for quo warranto, for it concerns a very peculiar situation in
which Lokin is seeking to be seated as the second nominee of CIBAC.
Although an election protest may properly be available to one party-
list organization seeking to unseat another party-list organization to
determine which between the defeated and the winning party-list
organizations actually obtained the majority of the legal votes,
Lokin’s case is not one in which a nominee of a particular party-list
organization thereby wants to unseat another nominee of the same
party-list organization. Neither does an action for quo warranto lie,
considering that the case does not involve the ineligibility and
disloyalty of Cruz-Gonzales to the Republic of the Philippines, or
some other cause of disqualification for her.
Lokin has correctly brought this special civil action for certiorari
against the COMELEC to seek the review of the September 14, 2007
resolution of the COMELEC in accordance with Section 7 of Article
IX-A of the 1987 Constitution, notwithstanding the oath and
assumption of office by Cruz-Gonzales. The constitutional mandate
is now implemented by Rule 64 of the 1997 Rules of Civil Procedure,
which provides for the review of the judgments, final orders or
resolutions of the COMELEC and the Commission on Audit. As Rule
64 states, the mode of review is by a petition for certiorari in
accordance with Rule 65 to be filed in the Supreme Court within a
limited period of 30 days. Undoubtedly, the Court has original and
exclusive jurisdiction over Lokin’s petitions for certiorari and for
mandamus against the COMELEC.
B action for certiorari and the action for mandamus did not violate the
Petitioner is not guilty of forum shopping
Forum shopping consists of the filing of multiple suits involving the
same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment.
Thus, forum shopping may arise: (a) whenever as a result of an
adverse decision in one forum, a party seeks a favorable decision
(other than by appeal or certiorari) in another; or (b) if, after having
filed a petition in the Supreme Court, a party files another petition in
the Court of Appeals, because he thereby deliberately splits appeals
"in the hope that even as one case in which a particular remedy is
sought is dismissed, another case (offering a similar remedy) would
still be open"; or (c) where a party attempts to obtain a writ of
preliminary injunction from a court after failing to obtain the writ
from another court.19
What is truly important to consider in determining whether forum
shopping exists or not is the vexation caused to the courts and the
litigants by a party who accesses different courts and administrative
agencies to rule on the same or related causes or to grant the same
or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different
fora upon the same issue.20
The filing of identical petitions in different courts is prohibited,
because such act constitutes forum shopping, a malpractice that is
proscribed and condemned as trifling with the courts and as abusing
their processes. Forum shopping is an improper conduct that
degrades the administration of justice.21
Nonetheless, the mere filing of several cases based on the same
incident does not necessarily constitute forum shopping. The test is
whether the several actions filed involve the same transactions and
the same essential facts and circumstances. 22 The actions must also
raise identical causes of action, subject matter, and
issues.23 Elsewise stated, forum shopping exists where the elements
of litis pendentia are present, or where a final judgment in one case
will amount to res judicata in the other.24
Lokin has filed the petition for mandamus to compel the COMELEC
to proclaim him as the second nominee of CIBAC upon the issuance
of NBC Resolution No. 07-72 (announcing CIBAC’s entitlement to an
additional seat in the House of Representatives), and to strike down
the provision in NBC Resolution No. 07-60 and NBC Resolution No.
07-72 holding in abeyance "all proclamation of the nominees of
concerned parties, organizations and coalitions with pending
disputes shall likewise be held in abeyance until final resolution of
their respective cases." He has insisted that the COMELEC had the
ministerial duty to proclaim him due to his being CIBAC’s second
nominee; and that the COMELEC had no authority to exercise
discretion and to suspend or defer the proclamation of winning
party-list organizations with pending disputes.
On the other hand, Lokin has resorted to the petition for certiorari
to assail the September 14, 2007 resolution of the COMELEC
(approving the withdrawal of the nomination of Lokin, Tugna and
Galang and the substitution by Cruz-Gonzales as the second
nominee and Borje as the third nominee); and to challenge the
validity of Section 13 of Resolution No. 7804, the COMELEC’s basis
for allowing CIBAC’s withdrawal of Lokin’s nomination.
Applying the test for forum shopping, the consecutive filing of the
rule against forum shopping even if the actions involved the same
parties, because they were based on different causes of action and
the reliefs they sought were different.
C
Invalidity of Section 13 of Resolution No. 7804
The legislative power of the Government is vested exclusively in the
Legislature in accordance with the doctrine of separation of powers.
As a general rule, the Legislature cannot surrender or abdicate its
legislative power, for doing so will be unconstitutional. Although the
power to make laws cannot be delegated by the Legislature to any
other authority, a power that is not legislative in character may be
delegated.25
Under certain circumstances, the Legislature can delegate to
executive officers and administrative boards the authority to adopt
and promulgate IRRs. To render such delegation lawful, the
Legislature must declare the policy of the law and fix the legal
principles that are to control in given cases. The Legislature should
set a definite or primary standard to guide those empowered to
execute the law. For as long as the policy is laid down and a proper
standard is established by statute, there can be no unconstitutional
delegation of legislative power when the Legislature leaves to
selected instrumentalities the duty of making subordinate rules
within the prescribed limits, although there is conferred upon the
Rule 64 Full Text Cases andm3 of 37
executive officer or administrative board a large measure of
discretion. There is a distinction between the delegation of power to
make a law and the conferment of an authority or a discretion to be
exercised under and in pursuance of the law, for the power to make
laws necessarily involves a discretion as to what it shall be.26
The authority to make IRRs in order to carry out an express
legislative purpose, or to effect the operation and enforcement of a
law is not a power exclusively legislative in character, but is rather
administrative in nature. The rules and regulations adopted and
promulgated must not, however, subvert or be contrary to existing
statutes. The function of promulgating IRRs may be legitimately
exercised only for the purpose of carrying out the provisions of a
law. The power of administrative agencies is confined to
implementing the law or putting it into effect. Corollary to this is
that administrative regulation cannot extend the law and amend a
legislative enactment. It is axiomatic that the clear letter of the law
is controlling and cannot be amended by a mere administrative rule
issued for its implementation. Indeed, administrative or executive
acts shall be valid only when they are not contrary to the laws or the
Constitution.27
To be valid, therefore, the administrative IRRs must comply with the
following requisites to be valid:28
1. Its promulgation must be authorized by the Legislature;
2. It must be within the scope of the authority given by the
Legislature;
3. It must be promulgated in accordance with the
prescribed procedure; and
4. It must be reasonable.
The COMELEC is constitutionally mandated to enforce and
administer all laws and regulations relative to the conduct of an
election, a plebiscite, an initiative, a referendum, and a recall. 29 In
addition to the powers and functions conferred upon it by the
Constitution, the COMELEC is also charged to promulgate IRRs
implementing the provisions of the Omnibus Election Code or other
laws that the COMELEC enforces and administers.30
The COMELEC issued Resolution No. 7804 pursuant to its powers
under the Constitution, Batas Pambansa Blg. 881, and the Party-List
System Act.31 Hence, the COMELEC met the first requisite.
The COMELEC also met the third requisite. There is no question that
Resolution No. 7804 underwent the procedural necessities of
publication and dissemination in accordance with the procedure
prescribed in the resolution itself.
Whether Section 13 of Resolution No. 7804 was valid or not is thus
to be tested on the basis of whether the second and fourth
requisites were met. It is in this respect that the challenge of Lokin
against Section 13 succeeds.
As earlier said, the delegated authority must be properly exercised.
This simply means that the resulting IRRs must not be ultra vires as
to be issued beyond the limits of the authority conferred. It is basic
that an administrative agency cannot amend an act of
Congress,32 for administrative IRRs are solely intended to carry out,
not to supplant or to modify, the law. The administrative agency
issuing the IRRs may not enlarge, alter, or restrict the provisions of
the law it administers and enforces, and cannot engraft additional
non-contradictory requirements not contemplated by the
Legislature.33
Section 8 of R.A. No. 7941 reads:
Section 8. Nomination of Party-List Representatives.-Each registered
party, organization or coalition shall submit to the COMELEC not
later that forty-five (45) days before the election a list of names, not
less than five (5), from which party-list representatives shall be
chosen in case it obtains the required number of votes.
A person may be nominated in one (1) list only. Only persons who
have given their consent in writing may be named in the list. The list
shall not include any candidate of any elective office or a person
who has lost his bid for an elective office in the immediately
preceding election. No change of names or alteration of the order of
nominees shall be allowed after the same shall have been submitted
to the COMELEC except in cases where the nominee dies, or
withdraws in writing his nomination, becomes incapacitated in
which case the name of the substitute nominee shall be placed last
in the list. Incumbent sectoral representatives in the House of
Representatives who are nominated in the party-list system shall not
be considered resigned.
The provision is daylight clear. The Legislature thereby deprived the
party-list organization of the right to change its nominees or to alter
the order of nominees once the list is submitted to the COMELEC,
except when: (a) the nominee dies; (b) the nominee withdraws in
writing his nomination; or (c) the nominee becomes incapacitated.
The provision must be read literally because its language is plain and
free from ambiguity, and expresses a single, definite, and sensible
meaning. Such meaning is conclusively presumed to be the meaning
that the Legislature has intended to convey. Even where the courts
should be convinced that the Legislature really intended some other
meaning, and even where the literal interpretation should defeat
the very purposes of the enactment, the explicit declaration of the
Legislature is still the law, from which the courts must not
depart.34 When the law speaks in clear and categorical language,
there is no reason for interpretation or construction, but only for
application.35Accordingly, an administrative agency tasked to
implement a statute may not construe it by expanding its meaning
where its provisions are clear and unambiguous.36
The legislative intent to deprive the party-list organization of the
right to change the nominees or to alter the order of the nominees
was also expressed during the deliberations of the Congress, viz:
MR. LAGMAN: And again on Section 5, on the nomination of party
list representatives, I do not see any provision here which prohibits
or for that matter allows the nominating party to change the
nominees or to alter the order of prioritization of names of
nominees. Is the implication correct that at any time after
submission the names could still be changed or the listing altered?
MR. ABUEG: Mr. Speaker, that is a good issue brought out by the
distinguished Gentleman from Albay and perhaps a perfecting
amendment may be introduced therein. The sponsoring committee
will gladly consider the same.
Rule 64 Full Text Cases andm4 of 37
MR. LAGMAN: In other words, what I would like to see is that after
the list is submitted to the COMELEC officially, no more changes
should be made in the names or in the order of listing.
MR. ABUEG: Mr. Speaker, there may be a situation wherein the
name of a particular nominee has been submitted to the
Commission on Elections but before election day the nominee
changed his political party affiliation. The nominee is therefore no
longer qualified to be included in the party list and the political party
has a perfect right to change the name of that nominee who
changed his political party affiliation.
MR. LAGMAN: Yes of course. In that particular case, the change can
be effected but will be the exception rather than the rule. Another
exception most probably is the nominee dies, then there has to be a
change but any change for that matter should always be at the last
part of the list so that the prioritization made by the party will not
be adversely affected.37
The usage of "No" in Section 8 – "No change of names or alteration
of the order of nominees shall be allowed after the same shall have
been submitted to the COMELEC except in cases where the nominee
dies, or withdraws in writing his nomination, or becomes
incapacitated, in which case the name of the substitute nominee
shall be placed last in the list" – renders Section 8 a negative law,
and is indicative of the legislative intent to make the statute
mandatory. Prohibitive or negative words can rarely, if ever, be
directory, for there is but one way to obey the command "thou shall
not," and that is to completely refrain from doing the forbidden
act,38 subject to certain exceptions stated in the law itself, like in this
case.
Section 8 does not unduly deprive the party-list organization of its
right to choose its nominees, but merely divests it of the right to
change its nominees or to alter the order in the list of its nominees’
names after submission of the list to the COMELEC.
The prohibition is not arbitrary or capricious; neither is it without
reason on the part of lawmakers. The COMELEC can rightly presume
from the submission of the list that the list reflects the true will of
the party-list organization. The COMELEC will not concern itself with
whether or not the list contains the real intended nominees of the
party-list organization, but will only determine whether the
nominees pass all the requirements prescribed by the law and
whether or not the nominees possess all the qualifications and none
of the disqualifications. Thereafter, the names of the nominees will
be published in newspapers of general circulation. Although the
people vote for the party-list organization itself in a party-list system
of election, not for the individual nominees, they still have the right
to know who the nominees of any particular party-list organization
are. The publication of the list of the party-list nominees in
newspapers of general circulation serves that right of the people,
enabling the voters to make intelligent and informed choices. In
contrast, allowing the party-list organization to change its nominees
through withdrawal of their nominations, or to alter the order of the
nominations after the submission of the list of nominees
circumvents the voters’ demand for transparency. The lawmakers’
exclusion of such arbitrary withdrawal has eliminated the possibility
of such circumvention.
D
Exceptions in Section 8 of R.A. 7941 are exclusive
Section 8 of R.A. No. 7941 enumerates only three instances in which
the party-list organization can substitute another person in place of
the nominee whose name has been submitted to the COMELEC,
namely: (a) when the nominee dies; (b) when the nominee
withdraws in writing his nomination; and (c) when the nominee
becomes incapacitated.
The enumeration is exclusive, for, necessarily, the general rule
applies to all cases not falling under any of the three exceptions.
When the statute itself enumerates the exceptions to the
application of the general rule, the exceptions are strictly but
reasonably construed. The exceptions extend only as far as their
language fairly warrants, and all doubts should be resolved in favor
of the general provision rather than the exceptions. Where the
general rule is established by a statute with exceptions, none but the
enacting authority can curtail the former. Not even the courts may
add to the latter by implication, and it is a rule that an express
exception excludes all others, although it is always proper in
determining the applicability of the rule to inquire whether, in a
particular case, it accords with reason and justice.391avvphi1
The appropriate and natural office of the exception is to exempt
something from the scope of the general words of a statute, which is
otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the
intent that the statute shall apply to all cases not excepted.
Exceptions are subject to the rule of strict construction; hence, any
doubt will be resolved in favor of the general provision and against
the exception. Indeed, the liberal construction of a statute will seem
to require in many circumstances that the exception, by which the
operation of the statute is limited or abridged, should receive a
restricted construction.
E
Section 13 of Resolution No. 7804 expanded
the exceptions under Section 8 of R.A. No. 7941
Section 13 of Resolution No. 7804 states:
Section 13. Substitution of nominees. – A party-list nominee may be
substituted only when he dies, or his nomination is withdrawn by
the party, or he becomes incapacitated to continue as such, or he
withdraws his acceptance to a nomination. In any of these cases,
the name of the substitute nominee shall be placed last in the list of
nominees.
No substitution shall be allowed by reason of withdrawal after the
polls.
Unlike Section 8 of R.A. No. 7941, the foregoing regulation provides
four instances, the fourth being when the "nomination is withdrawn
by the party."
Lokin insists that the COMELEC gravely abused its discretion in
expanding to four the three statutory grounds for substituting a
nominee.
We agree with Lokin.
The COMELEC, despite its role as the implementing arm of the
Government in the enforcement and administration of all laws and
Rule 64 Full Text Cases andm5 of 37
regulations relative to the conduct of an election,40 has neither the
authority nor the license to expand, extend, or add anything to the
law it seeks to implement thereby. The IRRs the COMELEC issues for
that purpose should always accord with the law to be implemented,
and should not override, supplant, or modify the law. It is basic that
the IRRs should remain consistent with the law they intend to carry
out.41
Indeed, administrative IRRs adopted by a particular department of
the Government under legislative authority must be in harmony
with the provisions of the law, and should be for the sole purpose of
carrying the law’s general provisions into effect. The law itself
cannot be expanded by such IRRs, because an administrative agency
cannot amend an act of Congress.42
The COMELEC explains that Section 13 of Resolution No. 7804 has
added nothing to Section 8 of R.A. No. 7941,43because it has merely
reworded and rephrased the statutory provision’s phraseology.
The explanation does not persuade.
To reword means to alter the wording of or to restate in other
words; to rephrase is to phrase anew or in a new form.44 Both terms
signify that the meaning of the original word or phrase is not
altered.
However, the COMELEC did not merely reword or rephrase the text
of Section 8 of R.A. No. 7941, because it established an entirely new
ground not found in the text of the provision. The new ground
granted to the party-list organization the unilateral right to
withdraw its nomination already submitted to the COMELEC, which
Section 8 of R.A. No. 7941 did not allow to be done. Neither was the
grant of the unilateral right contemplated by the drafters of the law,
who precisely denied the right to withdraw the nomination (as the
quoted record of the deliberations of the House of Representatives
has indicated). The grant thus conflicted with the statutory intent to
save the nominee from falling under the whim of the party-list
organization once his name has been submitted to the COMELEC,
and to spare the electorate from the capriciousness of the party-list
organizations.
We further note that the new ground would not secure the object of
R.A. No. 7941 of developing and guaranteeing a full, free and open
party-list electoral system. The success of the system could only be
ensured by avoiding any arbitrariness on the part of the party-list
organizations, by seeing to the transparency of the system, and by
guaranteeing that the electorate would be afforded the chance of
making intelligent and informed choices of their party-list
representatives.
The insertion of the new ground was invalid. An axiom in
administrative law postulates that administrative authorities should
not act arbitrarily and capriciously in the issuance of their IRRs, but
must ensure that their IRRs are reasonable and fairly adapted to
secure the end in view. If the IRRs are shown to bear no reasonable
relation to the purposes for which they were authorized to be
issued, they must be held to be invalid and should be struck down.45
F
Effect of partial nullity of Section 13 of Resolution No. 7804
An IRR adopted pursuant to the law is itself law.46 In case of conflict
between the law and the IRR, the law prevails. There can be no
question that an IRR or any of its parts not adopted pursuant to the
law is no law at all and has neither the force nor the effect of
law.47 The invalid rule, regulation, or part thereof cannot be a valid
source of any right, obligation, or power.
Considering that Section 13 of Resolution No. 7804 – to the extent
that it allows the party-list organization to withdraw its nomination
already submitted to the COMELEC – was invalid, CIBAC’s
withdrawal of its nomination of Lokin and the others and its
substitution of them with new nominees were also invalid and
ineffectual. It is clear enough that any substitution of Lokin and the
others could only be for any of the grounds expressly stated in
Section 8 of R.A. No. 7941. Resultantly, the COMELEC’s approval of
CIBAC’s petition of withdrawal of the nominations and its
recognition of CIBAC’s substitution, both through its assailed
September 14, 2007 resolution, should be struck down for lack of
legal basis. Thereby, the COMELEC acted without jurisdiction, having
relied on the invalidly issued Section 13 of Resolution No. 7804 to
support its action.
WHEREFORE, we grant the petitions for certiorari and mandamus.
We declare Section 13 of Resolution No. 7804 invalid and of no
effect to the extent that it authorizes a party-list organization to
withdraw its nomination of a nominee once it has submitted the
nomination to the Commission on Elections.
Accordingly, we annul and set aside:
(a) The resolution dated September 14, 2007 issued in E.
M. No. 07-054 approving Citizens’ Battle Against
Corruption’s withdrawal of the nominations of Luis K.
Lokin, Jr., Sherwin N. Tugna, and Emil Galang as its second,
third, and fourth nominees, respectively, and ordering
their substitution by Cinchona C. Cruz-Gonzales as second
nominee and Armi Jane R. Borje as third nominee; and
(b) The proclamation by the Commission on Elections of
Cinchona C. Cruz-Gonzales as a Party-List Representative
representing Citizens’ Battle Against Corruption in the
House of Representatives.
We order the Commission on Elections to forthwith proclaim
petitioner Luis K. Lokin, Jr. as a Party-List Representative
representing Citizens’ Battle Against Corruption in the House of
Representatives.
We make no pronouncements on costs of suit.
SO ORDERED.
2. Fortune Life Insurance Company, Inc. vs COA Proper; COA
Regional Office No. IV-Western Visayas; Audit Group LGS-
B, Province of Antique; and Provincial Government of
Antique, G.R. No. 213525, January 27, 2015
EN BANC
G.R. No. 213525 January 27, 2015
Rule 64 Full Text Cases andm6 of 37
FORTUNE LIFE INSURANCE COMPANY, INC., Petitioner,
vs.
COMMISSION ON AUDIT (COA) PROPER; COA REGIONAL OFFICE
NO. VI-WESTERN VISAYAS; AUDIT GROUP LGS-B, PROVINCE OF
ANTIQUE; AND PROVINCIAL GOVERNMENT OF
ANTIQUE, Respondents.
RESOLUTION
BERSAMIN, J.:
Petitioner Fortune Life Insurance Company, Inc. seeks the
Reconsideration1 of the resolution promulgated on August 19,
2014,2 whereby the Court dismissed its petition for certiorari under
Rule 64 in relation to Rule 65 of the Rules of Courtdue to its non-
compliance with the provisions of Rule 64, particularly for:(a) the
late filing of the petition; (b) the non-submission of the proof of
service and verified declaration; and (c) the failure to show grave
abuse of discretion on the part of the respondents.3
Antecedents
Respondent Provincial Government of Antique (LGU) and the
petitioner executed a memorandum of agreement concerning the
life insurance coverage of qualified barangaysecretaries, treasurers
and tanod, the former obligating ₱4,393,593.60for the premium
payment, and subsequently submitting the corresponding
disbursement voucher to COA Antique for pre-audit.4 The latter
office disallowed the payment for lack of legal basis under Republic
Act No. 7160 (Local Government Code). Respondent LGU appealed
but its appeal was denied.
Consequently, the petitioner filed its petition for money claim in the
COA.5 On November 15, 2012, the COA issued its decision denying
the petition,6 holding that under Section 447 and Section 458 of the
Local Government Code only municipal or city governments are
expressly vested with the power to secure group insurance coverage
for barangayworkers; and noting the LGU’s failure to comply with
the requirement of publication under Section 21 of Republic Act No.
9184 (Government Procurement Reform Act).
The petitioner received a copy of the COA decision on December 14,
2012,7 and filed its motion for reconsideration on January 14,
2013.8 However, the COA denied the motion,9 the denial being
received by the petitioner on July 14, 2014.10
Hence, the petitioner filed the petition for certiorari on August 12,
2014, but the petition for certiorari was dismissed as earlier stated
through the resolution promulgated on August 19,2014 for (a) the
late filing of the petition; (b) the non-submission of the proof of
service and verified declaration; and (c) the failure to show grave
abuse of discretion on the part of the respondents.
Issues
In its motion for reconsideration, the petitioner submits that it filed
the petition for certiorari within the reglementary period following
the fresh period rule enunciated in Neypes v. Court of
Appeals;11 and that the petition for certiorari included an affidavit of
service in compliance with Section 3, Rule 13 of the Rules of Court. It
admits having overlooked the submission of a verified declaration;
and prays that the declaration attached to the motion for
reconsideration be admitted by virtue of its substantial compliance
with the Efficient Use of Paper Rule12 by previously submitting a
compact disc (CD) containing the petition for certiorari and its
annexes. It disagrees with the Court, insisting that it showed and
proved grave abuse of discretion on the part of the COA in issuing
the assailed decision.
Ruling
We deny the motion for reconsideration for being without merit.
I
Petitioner did not comply with
the rule on proof of service
The petitioner claims that the affidavit of service attached to the
petition for certiorari complied with the requirement on proof of
service.
The claim is unwarranted. The petitioner obviously ignores that
Section 13, Rule 13 of the Rules of Court concerns two types of proof
of service, namely: the affidavit and the registry receipt, viz: Section
13. Proof of Service. – x x x. If service is made by registered mail,
proof shall be made by such affidavit and the registry receipt issued
by the mailing office. The registry return card shall be filed
immediately upon its receipt by the sender, or in lieu thereof the
unclaimed letter together with the certified or sworn copy of the
notice given by the postmaster to the addressee. Section 13 thus
requires that if the service is done by registered mail, proof of
service shall consist of the affidavit of the person effecting the
mailing and the registry receipt, both of which must be appended to
the paper being served. A compliance withthe rule is mandatory,
such that
there is no proof of service if either or both are not submitted.13
Here, the petition for certiorari only carried the affidavit of service
executed by one Marcelino T. Pascua, Jr., who declared that he had
served copies of the petition by registered mail "under Registry
Receipt Nos. 70449, 70453, 70458,70498 and 70524 attached tothe
appropriate spaces found on pages 64-65 of the petition."14 The
petition only bore, however, the cut print-outs of what appeared to
be the registry receipt numbers of the registered matters, not the
registry receipts themselves. The rule requires to be appended the
registry receipts, nottheir reproductions. Hence, the cut print-outs
did not substantially comply with the rule. This was the reason why
the Court held in the resolution of August 19, 2014 that the
petitioner did not comply with the requirement of proof of service.15
II
Fresh Period Ruleunder Neypes
did not apply to the petition for certiorari
under Rule 64 of the Rules of Court
The petitioner posits that the fresh period rule applies because its
Rule 64 petition is akin to a petition for review brought under Rule
42 of the Rules of Court; hence, conformably with the fresh period
rule, the period to file a Rule 64 petition should also be reckoned
from the receipt of the order denying the motion for
reconsideration or the motion for new trial.16
Rule 64 Full Text Cases andm7 of 37
The petitioner’s position cannot be sustained.
There is no parity between the petition for review under Rule 42 and
the petition for certiorari under Rule 64.
As to the nature of the procedures, Rule 42 governs an appeal from
the judgment or final order rendered by the Regional Trial Court in
the exercise of its appellate jurisdiction. Such appeal is on a question
of fact, or of law, or of mixed question of fact and law, and is given
due course only upon a prima facie showing that the Regional Trial
Court committed an error of fact or law warranting the reversal or
modification of the challenged judgment or final order.17 In contrast,
the petition for certiorari under Rule 64 is similar to the petition for
certiorari under Rule 65, and assails a judgment or final order of the
Commission on Elections (COMELEC), or the Commission on Audit
(COA). The petition is not designed to correct only errors of
jurisdiction, not errors of judgment.18 Questions of fact cannot be
raised except to determine whether the COMELEC or the COA were
guilty of grave abuse of discretion amounting to lack or excess of
jurisdiction.
The reglementary periods under Rule42 and Rule 64 are different. In
the former, the aggrieved party is allowed 15 days to file the petition
for review from receipt of the assailed decision or final order, or
from receipt of the denial of a motion for new trial or
reconsideration.19 In the latter, the petition is filed within 30 days
from notice of the judgment or final order or resolution sought to be
reviewed. The filing of a motion for new trial or reconsideration, if
allowed under the procedural rules of the Commission concerned,
interrupts the period; hence, should the motion be denied, the
aggrieved party may file the petition within the remaining period,
which shall not be less than five days in any event, reckoned from
the notice of denial.20
The petitioner filed its motion for reconsideration on January 14,
2013, which was 31 days after receiving the assailed decision of the
COA on December 14, 2012.21 Pursuant to Section 3 of Rule 64, it
had only five days from receipt of the denial of its motion for
reconsideration to file the petition. Considering that it received the
notice of the denial on July 14, 2014, it had only until July19, 2014 to
file the petition. However, it filed the petition on August 13, 2014,
which was 25 days too late.
We ruled in Pates v. Commission on Elections22 that the belated
filing of the petition for certiorari under Rule 64 on the belief that
the fresh period ruleshould apply was fatal to the recourse. As such,
the petitioner herein should suffer the same fate for having wrongly
assumed that the fresh period rule under Neypes23 applied. Rules of
procedure may be relaxed only to relieve a litigant of an injustice
that is not commensurate with the degree of his thoughtlessness in
not complying with the prescribed procedure.24 Absent this reason
for liberality, the petition cannot be allowed to prosper.
III
Petition for certiorari further lacked merit
The petition for certiorari is also dismissible for its lack of merit.
The petitioner insists on having fully shown that the COA committed
grave abuse of discretion, to wit: (1) the challenged decision was
rendered by a divided COA proper; (2) the COA took almost a year
before promulgating its decision, and more thana year in resolving
the motion for reconsideration, in contravention of the express
mandate of the Constitution; (3) the resolution denying the motion
for reconsideration was made up of only two sentences; (4) the
matter involved a novel issue that called for an interpretation of the
pertinent provisions of the Local Government Code; and (5) in
issuing the resolution, COA Commissioners Grace Pulido-Tan and
Heidi L. Mendoza made it appear that they knew the Local
Government Code better than former Senator Aquilino Pimentel
who offered an opinion on the matter.25
Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as to be equivalent to lack or excess of
jurisdiction; in other words, power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice, or personal
hostility; and such exercise is so patent or so gross as to amount to
an evasion of a positive duty or to a virtual refusal either to perform
the duty enjoined or to act at all in contemplation of law.26
A close look indicates that the petition for certioraridid not
sufficiently disclose how the COA committed grave abuse of its
discretion. For sure, the bases cited by the petitioner did not
approximate grave abuse of discretion. To start with, the supposed
delays taken by the COA in deciding the appeal were neither
arbitrary nor whimsical on its part. Secondly, the mere terseness of
the denial of the motion for reconsideration was not a factor in
demonstrating an abuse of discretion. And, lastly, the fact that
Senator Pimentel, even if he had been the main proponent of the
Local Government Codein the Legislature, expressed an opinion on
the issues different from the COA Commissioners’ own did not
matter, for it was the latter’s adjudication that had any value and
decisiveness on the issues by virtue of their being the
Constitutionally officials entrusted with the authority for that
purpose.
It is equally relevant to note that the COA denied the money claim of
the petitioner for the further reason of lack of sufficient publication
as required by the Government Procurement Act. In that light, the
COA acted well within its authority in denying the petitioner’s claim.
IV
Petitioner and its counsel
exhibited harshness and disrespect
towards the Court and its Members
The petitioner contends that the Court erred in appreciating the
petitioner’s non-compliance with the requirement of the proof of
service, alleging that even "a perfunctory scrutiny" of the petition
for certiorari and its annexes could have easily shown that it had
attached an affidavit of service to the petition. It goes on to make
the following statements, viz:
25. Apparently, the staff of the Justice-in-charge failed to verify the
PETITION and its annexes up to its last page, thus, the erroneous
finding that there was non-submission of the proof of service; 26. In
turn, the same omission was hoisted upon the other members of
this Honorable Court who took the observation from the office of
the Justice-in-charge, to be the obtaining fact, when in truth and in
fact, it is not;27
The petitioner and its counsel thereby exhibited their plain inability
to accept the ill consequences of their own shortcomings, and
instead showed an unabashed propensity to readily lay blame on
Rule 64 Full Text Cases andm8 of 37
others like the Court and its Members. In doing so, they employed
harsh and disrespectful language that accused the Court and its
Members of ignorance and recklessness in the performance of their
function of adjudication.
We do not tolerate such harsh and disrespectful language being
uttered against the Court and its Members. We consider the
accusatory language particularly offensive because it was unfounded
and undeserved. As this resolution earlier clarifies, the petition for
certiorari did not contain a proper affidavit of service.We do not
need to rehash the clarification. Had the petitioner and its counsel
been humbler to accept their self-inflicted situation and more
contrite, they would have desisted from their harshness and
disrespect towards the Court and its Members. Although we are not
beyond error, we assure the petitioner and its counsel that our
resolutions and determinations are arrived at or reached with much
care and caution, aware that the lives, properties and rights of the
litigants are always at stake. If there be errors, they would be
unintended, and would be the result of human oversight. But in this
instance the Court and its Members committed no error. The
petition bore only cut reproductions of the supposed registry
receipts, which even a mere "perfunctory scrutiny" would not pass
as the original registry receipts required by the Rules of Court.
Accordingly, the petitioner and its counsel, Atty. Eduardo S.
Fortaleza, should fully explain in writing why they should not be
punished for indirect contempt of court for their harsh and
disrespectful language towards the Court and its Members; and, in
his case, Atty. Fortaleza should further show cause why he should"
not be disbarred.
WHEREFORE, the Court DENIES the Motion for Reconsideration for
its lack of merit; ORDERS the petitioner and its counsel, Atty.
Eduardo S. Fortaleza, to show cause in writing within ten (10) days
from notice why they should not be punished for indirect contempt
of court; and FURTHER DIRECTS Atty. Fortaleza to show cause in the
same period why he should not be disbarred.
SO ORDERED.
3. Maritime Industry Authority vs COA G.R. No. 201042,
June 16, 2015
If based sa title, eto ang case
EN BANC
G.R. No. 185812, January 13, 2015
MARITIME INDUSTRY AUTHORITY, Petitioner, v. COMMISSION ON
AUDIT, Respondents.
DECISION
LEONEN, J.:
This case involves the validity of the grant of allowance and
incentives to the officers and employees of petitioner Maritime
Industry Authority. We revisit the interpretation and application of
Section 12 of the Compensation and Position Classification Act of
1989.1
The Resident Auditor issued notices of disallowance on the
allowances and incentives received by the officers and employees of
Maritime Industry Authority.2 The Legal and Adjudication Office of
the Commission on Audit upheld the notices of disallowance
issued.3 The Commission on Audit affirmed the notices of
disallowance.4 Thus, this petition for certiorari was filed by Maritime
Industry Authority.
Maritime Industry Authority is an attached agency of the
Department of Transportation and Communication and created
under Presidential Decree No. 474.5
On July 1, 1989, Republic Act No. 6758, otherwise known as “An Act
Prescribing a Revised Compensation and Position Classification
System in the Government and For Other Purposes” took effect. The
law standardizes the salary rates of government officials and
employees.
Section 12 of Republic Act No. 6758 provides:
Section 12. Consolidation of Allowances and Compensation. - All
allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance
of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service
personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined
by the DBM, shall be deemed included in the standardized salary
rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of
July 1, 1989 not integrated into the standardized salary rates shall
continue to be authorized.
Existing additional compensation of any national government official
or employee paid from local funds of a local government unit shall
be absorbed into the basic salary of said official or employee and
shall be paid by the National Government.
On September 30, 1989, the Department of Budget and
Management issued National Compensation Circular Nos. 56 6 and
597 implementing Republic Act No. 6758.
Maritime Industry Authority discontinued the grant of several
allowances and incentives to its officials and employees allegedly
due to the issuance of National Compensation Circular Nos. 56 and
59.8
In the memorandum dated February 10, 2000, the Administrator of
Maritime Industry Authority recommended to then President Joseph
Ejercito Estrada the approval and/or restoration of financial
incentives, benefits, or allowances to the officers and employees of
Maritime Industry Authority.9
The allowances and incentives received by the employees and
officers of Maritime Industry Authority as of the date of the
memorandum and needing approval of the President are the
following:10
(1) Per diems and commutable allowance received by the members
of the Board of Maritime Industry Authority;11
(2) Rice subsidy allowance;12 and
(3) Medical allowance.13
Rule 64 Full Text Cases andm9 of 37
The allowances and incentives sought to be restored are the Anniversary Bonus
following:14 Anniversary Allowance

(2002) Reimbursable representation allowance for
members of the Board of Maritime Industry Authority;15
(2) Performance incentives allowance;16
(3) Economic/efficiency/financial assistance/benefit;17
(4) Hearing allowance;18 and
(5) Birthday month/off month/employment date
anniversary allowances.19
The request to restore these benefits or allowances was premised
on “inflation-caused difficulties resulting to [sic] the exodus of
technically/specially trained personnel into the private sector or
abroad who shall carry on the delicate and unique functions of the
agency and in consideration of the additional functions of the
agency.”20 The request to restore was also made to “further
enhance/provide/promote employees’ welfare/productivity and
deter graft and corruption activities.”21
The memorandum was then allegedly stamped with “approved” on
October 16, 2000 with the signature of the President of the
Philippines below the stamp.22 Relying on the alleged approval of
the President of the Philippines, Maritime Industry Authority
granted the allowances and incentives to its officers and employees
starting January 2001.23
The Resident Auditor disallowed the grant of the allowances on the
ground that it constituted double compensation to public officers
and employees proscribed by Article IX(b) of the 1987 Constitution,
in relation to Section 229 of the Government Accounting and
Auditing Manual or GAAM Volume 1.31 Further, the President’s
approval of the memorandum was not the law contemplated by the
Constitution as an exception to the prohibition on double
compensation.32
On October 25, 2002, Maritime Industry Authority filed a request for
reconsideration on the notices of disallowance before the
Commission on Audit Director of the Legal and Adjudication Office.33
The request for reconsideration was denied in the decision dated
June 23, 2003.34 It was ruled that the incentives/allowances, except
for medical allowance and per diems of the members of the Board,
were integrated in the basic salary pursuant to the Salary
Standardization Law and National Compensation Circular No.
59.35 On the other hand, the grant of medical allowance and per
diems to the members of the Board is proscribed by Article VII,
Section 13 of the 1987 Constitution on double
compensation.36chanroblesvirtuallawlibrary

The Resident Auditor24 of Maritime Industry Authority then issued Maritime Industry Authority filed a petition for review before the
the following notices of disallowance with a total amount of Commission on Audit.37
?5,565,445.02 for the allowances or benefits received by the officers
or employees from January to May 2001:25 In the decision38 dated March 3, 2005, the Commission on Audit
denied the petition for review except as to the per diem and
Notice of Date Amount Allowance/Benefit monthly commutable allowance of the members of the Board of
Disallowance Disallowed Disallowed Maritime Industry Authority at the rate of ?500.00 for each member
No. per month.39
2002-002- April 9, 2002 P586,500.00 Rice and Medical
101(01) 26 Allowance The Commission on Audit held that the disallowed allowances are
Allowances of Board integrated in the standardized salary rates under Section 12 of
Members and Secretary Republic Act No. 6758.
2002-005- April 9, 2002 P30,800.00 Rice and Medical
101(01) 27 Allowance Further, the alleged approval of the President for the restoration or
Representation Allowance grant of benefits falls short of a law, as required by the Constitution
of Board Members and for the grant of additional allowance or incentive. 41 Even assuming
Secretary that the approval of the President is sufficient to grant additional
2002-006- August 7, P1,635,376.08 Rice and Medical allowance to officers and employees of Maritime Industry Authority,
101(01)28 2002 Allowance the authenticity of the memorandum bearing the alleged approval
Performance Incentive of the President presented by Maritime Industry Authority was not
Allowance for February established.42 Only a photocopy of the memorandum was
Birthday and Employment presented. A copy of the memorandum was also not on file in the
Anniversary Bonus Malacañang Records Office.
Representation Allowance
of Board Members and Maritime Industry Authority’s motion for reconsideration was
Secretary denied in COA Resolution No. 2008-117 dated December 9, 2008.
2002-007- August 8, P1,694,008.14 Rice and Medical
101(01)29 2002 Allowance Thus, this petition for certiorari was filed by Maritime Industry
Performance Incentive Authority assailing the Commission on Audit's decision and
Allowance resolution affirming the notices of disallowance.
Birthday and Employment
Anniversary Bonus In compliance with the orders45 of this court, the Commission on
2002-008- August 8, P1,618,760.80 Rice and Medical Audit filed a comment on the petition for certiorari on June 22,
101(01)30 2002 Allowance 2009.46 Maritime Industry Authority filed a reply to the comment on
Performance Incentive August 24, 2009.
Allowance
Birthday and Employment

Rule 64 Full Text Cases andm10 of 37

The sole issue in this case is whether the allowance or incentives
granted to the officers and employees of Maritime Industry
Authority have legal basis.
We deny the petition.
I allowances, except for representation and transportation
Commission on Audit did not
commit grave abuse of discretion
The aggrieved party can assail the decision of the Commission on
Audit through a petition for certiorari under Rule 64 before this
court. A petition under Rule 64 may prosper only after a finding that
the administrative agency committed grave abuse of discretion
amounting to lack or excess of jurisdiction. Not all errors of the
Commission on Audit is reviewable by this court. Thus,
A Rule 65 petition is a unique and special rule because it commands
limited review of the question raised. As an extraordinary remedy,
its purpose is simply to keep the public respondent within the
bounds of its jurisdiction or to relieve the petitioner from the public
respondent’s arbitrary acts. In this review, the Court is
confined solely to questions of jurisdiction whenever a tribunal,
board or officer exercising judicial or quasi-judicial function acts
without jurisdiction or in excess of jurisdiction, or with grave abuse
of discretion amounting to lack or excess of jurisdiction. . . .
The limitation of the Court’s power of review over COA rulings
merely complements its nature as an independent constitutional
body that is tasked to safeguard the proper use of the government
and, ultimately, the people’s property by vesting it with power to (i)
determine whether the government entities comply with the law
and the rules in disbursing public funds; and (ii) disallow legal
disbursements of these funds.48 (Emphasis in the original)
Reviewing the rationale for this standard of judicial review:
[t]his court has consistently held that findings of administrative
agencies are generally respected, unless found to have been tainted
with unfairness that amounted to grave abuse of discretion:
It is the general policy of the Court to sustain the decisions of
administrative authorities, especially one which is constitutionally-
created not only on the basis of the doctrine of separation of powers
but also for their presumed expertise in the laws that they are
entrusted to enforce. Findings of administrative agencies are
accorded not only respect but also finality when the decision and
order are not tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion. It is only when the COA has
acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, that this Court
entertains a petition questioning its rulings. There is grave abuse of
discretion when there is an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law or to act in contemplation
of law as when the judgment rendered is not based on law and
evidence but on caprice, whim and despotism. 49
We find that no grave abuse of discretion amounting to lack or
excess of jurisdiction may be attributed to the Commission on Audit
in this case.
II
Position of the parties
Petitioner Maritime Industry Authority argues that the allowances
and incentives granted to its officers and employees are not
integrated in the standardized salary.50 It relies on the last clause of
the first sentence of Section 12 of Republic Act No. 6758:
Section 12. Consolidation of Allowances and Compensation. - All
allowances; clothing and laundry allowances; subsistence allowance
of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service
personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined
by the DBM, shall be deemed included in the standardized salary
rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of
July 1, 1989 not integrated into the standardized salary rates shall
continue to be authorized.
Existing additional compensation of any national government official
or employee paid from local funds of a local government unit shall
be absorbed into the basic salary of said official or employee and
shall be paid by the National Government. (Emphasis supplied)
Petitioner Maritime Industry Authority understands the clause as
requiring a subsequent issuance by the Department of Budget and
Management so that other allowances or benefits not specifically
enumerated in the provision will be excluded. It insists that a circular
must be issued by the Department of Budget and Management for a
specific allowance to be deemed integrated in the standardized
salary pursuant to Section 12 of Republic Act No. 6758.
Since the National Compensation Circular No. 59, the circular issued
by the Department of Budget and Management implementing
Section 12, was not published, there can be no allowance deemed
integrated in the standardized salary rates.52 It relies on Philippine
Ports Authority hired after July 1, 1989 v. Commission on
Audit53 where this court held the following:
However, because of its lack of publication in either the Official
Gazette or in a newspaper of general circulation, DBM-CCC No. 10
was declared ineffective on August 12, 1998, in De Jesus v. COA,
which we quote:
In the present case under scrutiny, it is decisively clear that D[B]M-
CCC No. 10, which completely disallows payment of allowances and
other additional compensation to government officials and
employees, starting November 1, 1989, is not a mere interpretative
or internal regulation. It is something more than that. And why not,
when it tends to deprive government workers of their allowances
and additional compensation sorely needed to keep body and soul
together. At the very least, before the said circular under attack may
be permitted to substantially reduce their income, the government
officials and employees concerned should be apprised and alerted
by the publication of the subject circular in the Official Gazette or in
a newspaper of general circulation in the Philippines – to the end
that they be given amplest opportunity to voice out whatever
opposition they may have, and to ventilate their stance on the
subject matter. This approach is more in keeping with democratic
precepts and rudiments of fairness and transparency.
In other words, during the period that DBM-CCC No. 10 was in legal
limbo, the COLA and the amelioration allowance were not
effectively integrated into the standardized salaries.
Rule 64 Full Text Cases andm11 of 37
Hence, it would be incorrect to contend that because those
allowances were not effectively integrated under the first sentence,
then they were “non-integrated benefits” falling under the second
sentence of Section 12 of RA 6758. Their characterization must be
deemed to have also been in legal limbo, pending the effectivity of
DBM-CCC No. 10. Consequently, contrary to the ruling of the COA,
the second sentence does not apply to the present case. By the
same token, the policy embodied in the provision — the non-
diminution of benefits in favour of incumbents as of July 1, 1989 —
is also inapplicable.
The parties fail to cite any law barring the continuation of the grant
of the COLA and the amelioration allowance during the period when
DBM-CCC No. 10 was in legal limbo.54
On the other hand, respondent Commission on Audit interprets
Section 12 of Republic Act No. 6758 differently. It considers all
allowances as deemed included in the standardized salary except
those specifically enumerated in Section 12 of Republic Act No.
6758.55 The issuance of a circular by the Department of Budget and
Management is necessary only for the grant of allowance other than
those enumerated under Section 12 of Republic Act No. 6758 in
addition to the standardized salary.56Respondent Commission on
Audit relies on PPA Employees Hired After 01 July 1989 v. COA57 and
NAPOCOR Employees Consolidated Union v. National Power
Corporation.
In PPA Employees Hired After 01 July 1989 v. COA, et al., 59 this court
held that the Department of Budget and Management’s issuance is
only for the purpose of identifying additional non-integrated
benefits, over and above the standardized salary rates.
Then in NAPOCOR Employees Consolidated Union v. National Power
Corporation,60 this court stated:
Section 12 of Rep. Act No. 6758 lays down the general rule that all
allowances of state workers are to be included in their standardized
salary rates. Exempted from integration to the standardized salary
rates, as specified in the aforequoted provision of Section 12 of Rep.
Act No. 6758, are only the following allowances:
(1) representation and transportation allowances (RATA);
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board
government vessels;
(4) subsistence allowance of hospital personnel;
(5) hazard pay;
(6) allowance of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified
herein as may be determined by the DBM.
Otherwise stated, the foregoing are the only allowances which
government employees can continue to receive in addition to their
standardized salary rates. The employee welfare allowance of NPC
personnel is clearly not among the allowances listed above which
State workers can continue to receive under Rep. Act No. 6758 over
and above their standardized salary rates. We must emphasize that
Rep. Act No. 6758 does not require that DBM should first define
those allowances that are to be integrated with the standardized
salary rates of government employees before NPC could integrate
the employee welfare allowance into its employees’ salaries. Thus,
despite our ruling in De Jesus which thwarted the attempt of DBM in
DBM-CCC No. 10 to complete the list of allowances exempted from
integration, NPC is allowed under Rep. Act No. 6758 to integrate
employee welfare allowance into the employees’ standardized
salary rates.61
Respondent Commission on Audit argues that the alleged lack of
publication of National Compensation Circular No. 59 does not affect
the integration of allowances into the standardized salary.62 Section
12 of Republic Act No. 6758 is in itself executory in that allowances
and benefits are deemed integrated in the standardized salary
except those specifically exempted.
Further, the nature of the allowances and incentives in this case is
not similar to that of the enumerated exceptions in Section 12 of
Republic Act No. 6758.63 As held in Bureau of Fisheries and Aquatic
Resources Employees Union v. Commission on Audit,64 the “benefits
excluded from the standardized salary rates are the ‘allowances’ or
those which are usually granted to officials and employees of the
government to defray or reimburse the expenses incurred in the
performance of their official functions.”
Finally, respondent Commission on Audit points out that there is no
law that authorizes the grant of the allowances and incentives in
addition to the salaries of the officers and employees of petitioner
Maritime Industry Authority.
Respondent Commission on Audit points out that the alleged
approval of the President was contained in a mere photocopy of the
memorandum dated February 10, 2000. It purportedly bears the
approval and signature of the President for the grant of the
allowances and incentives.67 The original was not presented during
the proceedings.
III
The concept of integration of allowances
The consolidation of allowances in the standardized salary in Section
12 of Republic Act No. 6758 is a new rule in the Philippine position
classification and compensation system. The previous laws68 on
standardization of compensation of government officials and
employees do not have this provision.
Presidential Decree No. 985,69 as amended by Presidential Decree
No. 1597,70 the law prior to Republic Act No. 6758, repealed all laws,
decrees, executive orders, and other issuances or parts thereof that
authorize the grant of allowances of certain positions and
employees.71 Under Presidential Decree No. 985, allowances,
honoraria, and other fringe benefits may only be granted to
government employees upon approval of the President with the
recommendation of the Commissioner of the Budget Commission.
Being a new rule, Section 12 of Republic Act No. 6758 raised several
questions among government employees. Petitions were filed
before this court involving the Commission on Audit’s disallowance
of the grant of allowances and incentives to government employees.
This court already settled the issues and matters raised by petitioner
Maritime Industry Authority.
The clear policy of Section 12 is “to standardize salary rates among
government personnel and do away with multiple allowances and
other incentive packages and the resulting differences in
compensation among them.”73 Thus, the general rule is that all
allowances are deemed included in the standardized
salary.74 However, there are allowances that may be given in
addition to the standardized salary. These non-integrated
allowances are specifically identified in Section 12, to wit:
Rule 64 Full Text Cases andm12 of 37
 1. representation and transportation allowances;
2. clothing and laundry allowances;
3. subsistence allowance of marine officers and crew on
board government vessels;
4. subsistence allowance of hospital personnel;
5. hazard pay; and
6. allowances of foreign service personnel stationed
abroad.75
In addition to the non-integrated allowances specified in Section 12,
the Department of Budget and Management is delegated the
authority to identify other allowances that may be given to
government employees in addition to the standardized salary.
Action by the Department of Budget and Management is not
required to implement Section 12 integrating allowances into the
standardized salary.77 Rather, an issuance by the Department of
Budget and Management is required only if additional non-
integrated allowances will be identified. Without this issuance from
the Department of Budget and Management, the enumerated non-
integrated allowances in Section 12 remain exclusive.
This court has repeatedly clarified the last clause of the first
sentence of Section 12: “and such other additional compensation
not otherwise specified herein as may be determined by the DBM.”
In Abellanosa v. Commission on Audit,79 this court held that:
R.A. 6758 further reinforced this policy by expressly decreeing that
all allowances not specifically mentioned therein, or as may be
determined by the DBM, shall be deemed included in the
standardized salary rates prescribed.80
In Napocor Employees Consolidation Union v. The National Power
Corporation,81 this court held that Section 12 of Republic Act No.
6758 is self-executing. It is not required that allowances must be
listed for these to be considered integrated in the standardized
salary. This court said:
Otherwise stated, the foregoing are the only allowances which
government employees can continue to receive in addition to their
standardized salary rates. The employee welfare allowance of NPC
personnel is clearly not among the allowances listed above which
State workers can continue to receive under Rep. Act No. 6758 over
and above their standardized salary rates. We must emphasize that
Rep. Act No. 6758 does not require that DBM should first define
those allowances that are to be integrated in the standardized
salary rates of government employees before NPC could integrate
the employee welfare allowance into its employees' salaries. Thus,
despite our ruling in De Jesus which thwarted the attempt of DBM-
CCC No. 10 to complete the list of allowances exempted from
integration, NPC is allowed under Rep. Act No. 6758 to integrate the
employee welfare allowance into the employees' standardized
salary rates.82 (Emphasis supplied)
In Benguet State University v. Commission on Audit,83 this court held
that the rice subsidy and health care allowance “were not among
the allowances listed in Section 12 which State workers can continue
to receive under R.A. No. 6758 over and above their standardized
salary rates.”
We cannot subscribe to petitioner Maritime Industry Authority’s
contention that due to the non-publication of the Department of
Budget and Management’s National Compensation Circular No. 59,
it is considered invalid that results in the non-integration of
allowances in the standardized salary.
The Department of Budget and Management’s National
Compensation Circular No. 59 issued on September 30, 1989
enumerates the allowances/additional compensation of government
employees that are deemed integrated into the basic salary. It does
not identify an allowance that should not be deemed as integrated
in the basic salary of government employees.
As held in Philippine International Trading Corporation v.
Commission on Audit,85 the non-publication of the Department of
Budget and Management’s issuance enumerating allowances that
are deemed integrated in the standardized salary will not affect the
execution of Section 12 of Republic Act No. 6758. Thus:
There is no merit in the claim of PITC that R.A. No. 6758, particularly
Section 12 thereof is void because DBM-Corporate Compensation
Circular No. 10, its implementing rules, was nullified in the case
of De Jesus v. Commission on Audit, for lack of publication. The basis
of COA in disallowing the grant of SFI was Section 12 of R.A. No.
6758 and not DBM-CCC No. 10. Moreover, the nullity of DBM-CCC
No. 10 will not affect the validity of R.A. No. 6758. It is a cardinal rule
in statutory construction that statutory provisions control the rules
and regulations which may be issued pursuant thereto. Such rules
and regulations must be consistent with and must not defeat the
purpose of the statute. The validity of R.A. No. 6758 should not be
made to depend on the validity of its implementing rules.86
In Gutierrez v. Department of Budget and Management,87 this court
held that:
“all allowances” were deemed integrated into the standardized
salary rates except the following:chanRoblesvirtualLawlibrary
(1) representation and transportation allowances;
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board
government vessels;
(4) subsistence allowances of hospital personnel;
(5) hazard pay;
(6) allowances of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in
Section 12 as may be determined by the DBM.
But, while the provision enumerated certain exclusions, it also
authorized the DBM to identify such other additional compensation
that may be granted over and above the standardized salary rates.
In Philippine Ports Authority Employees Hired After July 1, 1989 v.
Commission on Audit, the Court has ruled that while Section 12
could be considered self-executing in regard to items (1) to (6), it
was not so in regard to item (7). The DBM still needed to amplify
item (7) since one cannot simply assume what other allowances
were excluded from the standardized salary rates. It was only upon
the issuance and effectivity of the corresponding implementing rules
and regulations that item (7) could be deemed legally completed.
In this case, the DBM promulgated NCC 59 [and CCC 10]. But,
instead of identifying some of the additional exclusions that Section
12 of R.A. 6758 permits it to make, the DBM made a list of what
allowances and benefits are deemed integrated into the
standardized salary rates. More specifically, NCC 59 identified the
following allowances/additional compensation that are deemed
integrated:
Rule 64 Full Text Cases andm13 of 37
The drawing up of the above list is consistent with Section 12 above.
R.A. 6758 did not prohibit the DBM from identifying for the purpose
of implementation what fell into the class of “all allowances.” With
respect to what employees’ benefits fell outside the term apart from
those that the law specified, the DBM, said this Court in a case,
needed to promulgate rules and regulations identifying those
excluded benefits. This leads to the inevitable conclusion that until
and unless the DBM issues such rules and regulations, the
enumerated exclusions in items (1) to (6) remain exclusive. Thus so,
not being an enumerated exclusion, COLA is deemed already
incorporated in the standardized salary rates of government
employees under the general rule of integration.88
Petitioner Maritime Industry Authority’s reliance on Philippine Ports
Authority Employees Hired After July 1, 1989 v. Commission on
Audit is misplaced. As this court clarified in Napocor Employees
Consolidated Union v. National Power Corporation,89 the ruling in
Philippine Ports Authority Employees Hired After July 1, 1989 was
limited to distinguishing the benefits that may be received by
government employees who were hired before and after the
effectivity of Republic Act No. 6758. Thus:
[t]he Court has, to be sure, taken stock of its recent ruling
in Philippine Ports Authority (PPA) Employees Hired After July 1, 1989
vs. Commission on Audit. Sadly, however, our pronouncement
therein is not on all fours applicable owing to the differing factual
milieu. There, the Commission on Audit allowed the payment of
back cost of living allowance (COLA) and amelioration allowance
previously withheld from PPA employees pursuant to the heretofore
ineffective DBM – CCC No. 10, but limited the back payment only to
incumbents as of July 1, 1989 who were already then receiving both
allowances. COA considered the COLA and amelioration allowance
of PPA employees as “not integrated”within the purview of the
second sentence of Section 12 of Rep. Act No. 6758, which,
according to COA confines the payment of “not integrated” benefits
only to July 1, 1989 incumbents already enjoying the allowances.
In setting aside COA’s ruling, we held in PPA Employees that there
was no basis to use the elements of incumbency and prior receipt as
standards to discriminate against the petitioners therein. For, DBM-
CCC No. 10, upon which the incumbency and prior receipt
requirements are contextually predicated, was in legal limbo from
July 1, 1989 (effective date of the unpublished DBM-CCC No. 10) to
March 16, 1999 (date of effectivity of the heretofore unpublished
DBM circular). And being in legal limbo, the benefits otherwise
covered by the circular, if properly published, were likewise in legal
limbo as they cannot be classified either as effectively integrated or
not integrated benefits.90
Similar to what was stated in Napocor Employees Consolidated
Union, the “element of discrimination between incumbents as of
July 1, 1989 and those joining the force thereafter is not obtaining in
this case.” The second sentence of the first paragraph of Section 12,
Republic Act No. 6758 is not in issue.
V incurred in the performance of their official functions.
Additional allowances that
may be identified and granted
to government employees
Other than those specifically enumerated in Section 12, non-
integrated allowances, incentives, or benefits, may still be identified
and granted to government employees. This is categorically allowed
in Republic Act No. 6758. This is also in line with the President’s
power of control over executive departments, bureaus, and offices.
These allowances, however, cannot be granted indiscriminately.
Otherwise, the purpose and mandate of Republic Act No. 6758 will
be defeated.
Republic Act No. 6758 was enacted to promote “the policy of the
State to provide equal pay for substantially equal work and to base
differences in pay upon substantive differences in duties and
responsibilities, and qualification requirements of the
positions.”91 The law lists down the factors that should guide the
Department of Budget and Management in preparing the index of
occupational services, to wit:
1. the education and excellence required to perform the duties and
responsibilities of the position;
2. the nature and complexity of the work to be performed;
3. the kind of supervision received;
4. mental and/or physical strain required in the completion of the
work;
5. nature and extent of internal and external relationships;
6. kind of supervision exercised;
7. decision-making responsibility;
8. responsibility for accuracy of records and reports;
9. accountability for funds, properties, and equipment; and
10. hardship, hazard, and personal risk involved in the job.92
The factors to determine the salary grades corresponding to each
position of a government employee do not take into consideration
the peculiar characteristics of each government office where
performance of the same work may entail different necessary
expenses for the employee. For instance, some employees in the
Bureau of Customs may require expenses pertaining to security to
properly execute their duties as compared to employees in the
Department of Trade and Industry. Republic Act No. 6758 recognizes
this when it allowed certain allowances in addition to the
standardized salary due to the nature of the office. Section 12 of the
law excludes from the standardized salary allowances to be given to
marine officers and crew on board government vessels and hospital
personnel, and foreign service personnel stationed abroad.
Thus, it must be shown that additional non-integrated allowances
are given to government employees of certain offices due to the
unique nature of the office and of the work performed by the
employee.
Further, the non-integrated allowances that may be granted in
addition to those specifically enumerated in Section 12 of Republic
Act No. 6758 should be in the nature similar to those enumerated in
the provision, that is, they are amounts needed by the employee in
the performance of his or her duties.94chanroblesvirtuallawlibrary
[T]he benefits excluded from the standardized salary rates are the
“allowances” or those which are usually granted to officials and
employees of the government to defray or reimburse the expenses
In Philippine Ports Authority v. Commission on Audit, we explained
that if these allowances were consolidated with the standardized
salary rates, then government officials or employees would be
compelled to spend their personal funds in attending to their
duties.95
In National Tobacco Administration v. Commission on Audit,96 this
Rule 64 Full Text Cases andm14 of 37
court held that educational assistance is not an allowance that may
be granted in addition to the standardized salary.
Analyzing No. 7, which is the last clause of the first sentence of
Section 12, in relation to the other benefits therein enumerated, it
can be gleaned unerringly that it is a “catch-all proviso.” Further
reflection on the nature of subject fringe benefits indicates that all
of them have one thing in common - they belong to one category of
privilege called allowances which are usually granted to officials and
employees of the government to defray or reimburse the expenses
incurred in the performance of their official functions. In Philippine
Ports Authority vs. Commission on Audit, this Court rationalized
that “if these allowances are consolidated with the standardized
rate, then the government official or employee will be compelled to
spend his personal funds in attending to his duties.”
The conclusion - that the enumerated fringe benefits are in the
nature of allowance - finds support in sub-paragraphs 5.4 and 5.5 of
CCC No. 10.
Sub-paragraph 5.4 enumerates the allowance/fringe benefits which
are not integrated into the basic salary and which may be continued
after June 30, 1989 subject to the condition that the grant of such
benefit is covered by statutory authority, to wit:
(1) RATA;
(2) Uniform and Clothing allowances;
(3) Hazard pay;
(4) Honoraria/additional compensation for employees on detail with
special projects or inter-agency undertakings;
(5) Honoraria for services rendered by researchers, experts and
specialists who are of acknowledged authorities in their fields of
specialization;
(6) Honoraria for lectures and resource persons or speakers;
(7) Overtime pay in accordance to Memorandum Order No. 228;
(8) Clothing/laundry allowances and subsistence allowance of
marine officers and crew on board GOCCs/GFIs owned vessels and
used in their operations, and of hospital personnel who attend
directly to patients and who by nature of their duties are required to
wear uniforms;
(9) Quarters Allowance of officials and employees who are presently
entitled to the same;
(10) Overseas, Living Quarters and other allowances presently
authorized for personnel stationed abroad;
(11) Night differential of personnel on night duty;
(12) Per Diems of members of the governing Boards of GOCCs/GFIs
at the rate as prescribed in their respective Charters;
(13) Flying pay of personnel undertaking aerial flights;
(14) Per Diems/Allowances of Chairman and Members or Staff of
collegial bodies and Committees; and
(15) Per Diems/Allowances of officials and employees on official
foreign and local travel outside of their official station.
In addition, sub-paragraph 5.5 of the same Implementing Rules
provides for the other allowances/fringe benefits not likewise
integrated into the basic salary and allowed to be continued only for
incumbents as of June 30, 1989 subject to the condition that the
grant of the same is with appropriate authorization either from the
DBM, Office of the President or legislative issuances, as follows:
(1) Rice Subsidy;
(2) Sugar Subsidy;
(3) Death Benefits other than those granted by the GSIS;
(4) Medical/Dental/Optical Allowances/Benefits;
(5) Children’s Allowances;
(6) Special Duty Pay/Allowance;
(7) Meal Subsidy;
(8) Longevity Pay; and
(9) Teller’s Allowance.
On the other hand, the challenged financial incentive is awarded by
the government in order to encourage the beneficiaries to pursue
further studies and to help them underwrite the expenses for the
education of their children and dependents. In other words, subject
benefit is in the nature of financial assistance and not of
an allowance. For the former, reimbursement is not necessary while
for the latter, reimbursement is required. Not only that, the former
is basically an incentive wage which is defined as “a bonus or other
payment made to employees in addition to guaranteed hourly
wages” while the latter cannot be reckoned with as a bonus or
additional income, strictly speaking.
It is indeed decisively clear that the benefits mentioned in the first
sentence of Section 12 and sub-paragraphs 5.4 and 5.5 of CCC No.
10 are entirely different from the benefit in dispute, denominated as
Educational Assistance. The distinction elucidated upon is material in
arriving at the correct interpretation of the two seemingly
contradictory provisions of Section 12.
Cardinal is the rule in statutory construction “that the particular
words, clauses and phrases should not be studied as detached and
isolated expressions, but the whole and every part of the statute
must be considered in fixing the meaning of any of its parts and in
order to produce a harmonious whole. A statute must so construed
as to harmonize and give effect to all its provisions whenever
possible.” And the rule - that statute must be construed as a whole -
requires that apparently conflicting provisions should be reconciled
and harmonized, if at all possible. It is likewise a basic precept in
statutory construction that the intent of the legislature is
the controlling factor in the interpretation of the subject statute.
With these rules and the foregoing distinction elaborated upon, it is
evident that the two seemingly irreconcilable propositions are
susceptible to perfect harmony. Accordingly, the Court concludes
that under the aforesaid “catch-all proviso,” the legislative intent is
just to include the fringe benefits which are in the nature
of allowances and since the benefit under controversy is not in the
same category, it is safe to hold that subject educational assistance
is not one of the fringe benefits within the contemplation of the first
sentence of Section 12 but rather, of the second sentence of Section
12, in relation to Section 17 of R.A. No. 6758, considering
that (1) the recipients were incumbents when R.A. No. 6758 took
effect on July 1, 1989, (2) were, in fact, receiving the same, at the
time, and (3) such additional compensation is distinct and separate
from the specific allowances above-listed, as the former is not
integrated into the standardized salary rate. Simply stated, the
challenged benefit is covered by the second sentence of Section 12
of R.A. No. 6758, the application of sub-paragraphs 5.4 and 5.5 of
CCC No. 10 being only confined to the first sentence of Section 12,
particularly the last clause thereof which amplifies the “catch-all
proviso.”97 (Citations omitted)
In Bureau of Fisheries and Aquatic Resources Employees Union v.
Commission on Audit,98 this court affirmed the disallowance of the
grant of the food basket allowance in the amount of P10,000.00 to
employees of the Bureau of Fisheries and Aquatic Resources. This
court held:
In the instant case, the Food Basket Allowance is definitely not in the
nature of an allowance to reimburse expenses incurred by officials
and employees of the government in the performance of their
Rule 64 Full Text Cases andm15 of 37
official functions. It is not payment in consideration of the fulfilment
of official duty. It is a form of financial assistance to all officials and
employees of BFAR. Petitioner itself stated that the Food Basket
Allowance has the purpose of alleviating the economic condition of
BFAR employees.99
VI
Who identifies and grants
Respondent Commission on Audit argues that the alleged approval
by the President is not a law that would allow the grant of
allowances and benefits to the employees of petitioner Maritime
Industry Authority.
Section 12 of Republic Act No. 6758 does not require the enactment
of a law to exclude benefits or allowances from the standardized
salary. What is required is a determination by the Department of
Budget and Management of the non-integrated benefits or
allowances. In Abakada Guro Party List v. Purisima:
Congress has two options when enacting legislation to define
national policy within the broad horizons of its legislative
competence. It can itself formulate the details or it can assign to the
executive branch the responsibility for making necessary marginal
decisions in conformity with those standards. In the latter case, the
law must be complete in all its essential terms and conditions when
it leaves the hands of the legislature. Thus, what is left for the
executive branch or the concerned administrative agency when it
formulates rules and regulations implementing the law is to fill up
details (supplementary rule-making) or ascertain facts necessary to
bring the law into actual operation (contingent rule-
making).101 (Citations omitted)
The law delegated to the executive branch the filling in of other
allowances and benefits that should be excluded from the
standardized salary. It specifically identifies the Department of
Budget and Management to carry out the task. However, this does
not exclude the President from identifying the excluded allowances
or benefits himself, the Secretary of the Department of Budget and
Management being an alter ego of the President. Of course, the
performance of this task must still be in accordance with the
parameters laid down in Republic Act No. 6758.102 As this court held
in Chavez v. Romulo:
at the apex of the entire executive officialdom is the President.
Section 17, Article VII of the Constitution specifies his power as Chief
Executive, thus: “The President shall have control of all the
executive departments, bureaus and offices. He shall ensure that
the laws be faithfully executed.” As Chief Executive, President
Arroyo holds the steering wheel that controls the course of her
government. She lays down policies in the execution of her plans
and programs. Whatever policy she chooses, she has her
subordinates to implement them. In short, she has the power of
control. Whenever a specific function is entrusted by law or
regulation to her subordinate, she may act directly or merely direct
the performance of a duty. Thus, when President Arroyo directed
respondent Ebdane to suspend the issuance of PTCFOR, she was just
directing a subordinate to perform an assigned duty. Such act is well
within the prerogative of her office.104 (Emphasis in the original)
VII
Constitutional and Fiscal
Autonomy Group
We must, however, differentiate the guidelines for the grant of
allowances and benefits to officials and employees of members of
the Constitutional and Fiscal Autonomy Group. The judiciary, Civil
Service Commission, Commission on Audit, Commission on
Elections, and the Office of the Ombudsman are granted fiscal
autonomy by the Constitution.105 The fiscal autonomy enjoyed by
the Constitutional and Fiscal Autonomy Group is an aspect of the
members’ independence guaranteed by the Constitution.106Their
independence is a necessary component for their existence and
survival in our form of government.
In Bengzon v. Drilon,107 this court said:
As envisioned in the Constitution, the fiscal autonomy enjoyed by
the Judiciary, the Civil Service Commission, the Commission on
Audit, the Commission on Elections, and the Office of the
Ombudsman contemplates a guarantee of full flexibility to allocate
and utilize their resources with the wisdom and dispatch that their
needs require. It recognizes the power and authority to levy, assess
and collect fees, fix rates of compensation not exceeding the highest
rates authorized by law for compensation and pay loans of the
government and allocate and disburse such sums as may be
provided by law or prescribed by them in the course of the discharge
of their functions.108
As this court held in Re: COA Opinion on the Computation of the
Appraised Value of the Properties Purchased by the Retired
Chief/Associate Justices of the Supreme Court,109 “real fiscal
autonomy covers the grant to the Judiciary of the authority to use
and dispose of its funds and properties at will, free from any outside
control or interference.”110 This includes the judgment to use its
funds to provide additional allowances and benefits to its officials
and employees deemed to be necessary and relevant in the
performance of their functions in the office. Due to the nature of the
functions of the Constitutional and Fiscal Autonomy Group and the
constitutional grant of fiscal autonomy, an issuance by the
Department of Budget and Management or any other agency of the
government is not necessary to exclude an allowance or benefit
from the standardized salary.
The entity entrusted by Republic Act No. 6758 to determine the
benefits and allowances that are not deemed integrated is the
Department of Budget and Management. It studies the necessity
and reasonableness of the grant of the allowance and, more
importantly, its practicability, that is, whether the government has
enough budget to grant the allowance. This is in line with our form
of government where the “sound management and effective
utilization of financial resources of government are basically
executive functions.”111 On the other hand, the budget of the
Constitutional and Fiscal Autonomy Group is constitutionally
mandated to be released regularly. How these constitutional bodies
manage and utilize their budget is within their prerogative and
authority to determine. The officials of the Constitutional and Fiscal
Autonomy Group can determine whether the budget allocated and
released by the government to them can deliver the allowances and
benefits its employees will receive. The executive cannot interfere
with how funds will be used or disbursed without violating the
separation of powers.
Rule 64 Full Text Cases andm16 of 37
Allowing the President or his or her alter ego to dictate the
allowances or benefits that may be received by the officers and
employees of the Constitutional and Fiscal Autonomy Group will
undermine their independence. This arrangement is repugnant to
their autonomy enshrined by the Constitution. As said in Velasco v.
Commission on Audit,112 the grant or regulation of the grant of
productivity incentive allowance or similar benefits are in the
exercise of the President’s power of control over these entities. Not
being under the President’s power of control, the Constitutional and
Fiscal Autonomy Group should be able to determine the allowances
or benefits that suit the functions of the office.
Nonetheless, expenditures of government funds by the
Constitutional and Fiscal Autonomy Group are still audited by the
Commission on Audit on a post-audit basis.
VIII
No proof of grant of allowance
by the President or the Department
of Budget and Management
Petitioner Maritime Industry Authority relies on the alleged approval
by then President Estrada of its memorandum dated February 10,
2000. Respondent Commission on Audit counters that the original
memorandum was not presented by petitioner Maritime Industry
Authority. Further, the alleged approval is not a law authorizing the
grant of additional compensation or benefits to government
employees.
Article VI, Section 29 of the 1987 Constitution provides, “[n]o money
shall be paid out of the Treasury except in pursuance of an
appropriation made by law.”
Further, before public funds may be disbursed for salaries and
benefits to government officers and employees, it must be shown
that these are commensurate to the services rendered and
necessary or relevant to the functions of the office. “Additional
allowances and benefits must be shown to be necessary or relevant
to the fulfillment of the official duties and functions of the
government officers and employees.”
In Yap v. Commission on Audit,115 this court laid down two general
requisites before a benefit may be granted to government officials
or employees. First is that the allowances and benefits were
authorized by law and second, that there was a direct and
substantial relationship between the performance of public
functions and the grant of the disputed allowances. Thus:
[t]o reiterate, the public purpose requirement for the disbursement
of public funds is a valid limitation on the types of allowances and
benefits that may be granted to public officers. It was incumbent
upon petitioner to show that his allowances and benefits were
authorized by law and that there was a direct and substantial
relationship between the performance of his public functions and
the grant of the disputed allowances to him.116
The burden of proving the validity or legality of the grant of
allowance or benefits is with the government agency or entity
granting the allowance or benefit, or the employee claiming the
same. After the Resident Auditor issues a notice of disallowance, the
aggrieved party may appeal the disallowance to the Director within
six (6) months from receipt of the decision.117 At this point, the
government agency or employee has the chance to prove the
validity of the grant of allowance or benefit. If the appeal is denied,
a petition for review may be filed before the Commission on Audit
Commission Proper.118 Finally, the aggrieved party may file a
petition for certiorari before this court to assail the decision of the
Commission on Audit Commission Proper.
Our laws and procedure have provided the aggrieved party several
chances to prove the validity of the grant of the allowance or
benefit.
To prove the validity of the allowances granted, petitioner Maritime
Industry Authority presented a photocopy of the memorandum with
an “approved” stamped on the memorandum. Below the stamp is
the signature of then President Estrada.
We cannot rule on the validity of the alleged approval by the then
President Estrada of the grant of additional allowances and benefits.
Petitioner Maritime Industry Authority failed to prove its existence.
The alleged approval of the President was contained in a mere
photocopy of the memorandum dated February 10, 2000. The
original was not presented during the proceedings. A copy of the
document is not in the Malacañang Records Office.
IX
The grant of allowances and
benefits amounts to double
compensationproscribed by
Article IX(B), Section 8 of
the 1987 Constitution
Article IX(B), Section 8 of the 1987 Constitution provides:
Section 8. No elective or appointive public officer or employee shall
receive additional, double, or indirect compensation, unless
specifically authorized by law, nor accept without the consent of the
Congress, any present, emolument, office, or title of any kind from
any foreign government.
Pensions or gratuities shall not be considered as additional, double,
or indirect compensation.
Petitioner Maritime Industry Authority argues that the rule against
double compensation does not apply because National
Compensation Circular No. 59 is ineffectual due to its non-
publication.
Respondent Commission on Audit counters that the disallowed
allowances is tantamount to additional compensation proscribed by
Article IX(B), Section 8 of the 1987 Constitution.121 This is because
these allowances are not authorized by law.
Republic Act No. 6758 deems all allowances and benefits received by
government officials and employees as incorporated in the
standardized salary, unless excluded by law or an issuance by the
Department of Budget and Management. The integration of the
benefits and allowances is by legal fiction.
The disallowed benefits and allowances of petitioner Maritime
Industry Authority’s officials and employees were not excluded by
law or an issuance by the Department of Budget and Management.
Thus, these were deemed already given to the officials and
employees when they received their basic salaries. Their receipt of
Rule 64 Full Text Cases andm17 of 37
the disallowed benefits and allowances was tantamount to double
compensation.
X 19.1.3. Public officers who approve or authorize transactions
Petitioner Maritime Industry
Authority was not denied due
process in the disallowance of
the allowances and benefits
Petitioner Maritime Industry Authority argues that it was denied
administrative due process.123Respondent Commission on Audit
affirmed the notices of disallowance on the basis of provisions of
law that are different from the bases cited in the notices of
disallowance.
Respondent Commission on Audit does not deny that other grounds
were relied upon to affirm the disallowance of the allowances given
to the officers and employees of petitioner Maritime Industry
Authority. However, it argues that this is pursuant to its mandate
under Article IX(D), Section 2 of the 1987 Constitution125 and is a
necessary incident of its appellate jurisdiction as provided in Rule II,
Section 4 of the 1997 COA Revised Rules of Procedure.
This court already settled that:
[the Commission on Audit] is not required to limit its review only to
the grounds relied upon by a government agency's auditor with
respect to disallowing certain disbursements of public funds. In
consonance with its general audit power, respondent Commission
on Audit is not merely legally permitted, but is also duty-bound to
make its own assessment of the merits of the disallowed
disbursement and not simply restrict itself to reviewing the validity
of the ground relied upon by the auditor of the government agency
concerned. To hold otherwise would render COA's vital
constitutional power unduly limited and thereby useless and
ineffective.127
The disallowance of the grant of benefits and allowances by
respondent Commission on Audit is proper. We proceed to
determine whether officers and employees of petitioner Maritime
Industry Authority are liable and/or should refund the disallowed
allowances.
XII
Refund of the amounts received
and liability of approving officers
Presidential Decree No. 1445 provides for a general liability for
unlawful expenditures:
Section 103. General liability for unlawful expenditures.
Expenditures of government funds or uses of government property
in violation of law or regulations shall be a personal liability of the
official or employee found to be directly responsible therefor.128
Section 19 of the Manual of Certificate of Settlement and Balances,
Commission on Audit Circular No. 94-001 provides:
19.1. The liability of public officers and other persons for audit
disallowances shall be determined on the basis of: (a) the nature of
the disallowance; (b) the duties, responsibilities or obligations of the
officers/persons concerned; (c) the extent of their participation or
involvement in the disallowed transaction; and (d) the amount of
losses or damages suffered by the government thereby. The
following are illustrative examples:
involving the expenditure of government funds and uses of
government properties shall be liable for all losses arising out of
their negligence or failure to exercise the diligence of a good father
of a family.
Generally, the public officer’s good faith does not excuse his or her
personal liability over the unauthorized disbursement. This court
said:
Section 103 of P.D. 1445 declares that expenditures of government
funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee
found to be directly responsible therefor. The public official’s
personal liability arises only if the expenditure of government funds
was made in violation of law. In this case, petitioner’s act of entering
into a contract on behalf of the local government unit without the
requisite authority therefor was in violation of the Local
Government Code. While petitioner may have relied on the opinion
of the City Legal Officer, such reliance only serves to buttress his
good faith. It does not, however, exculpate him from his personal
liability under P.D. 1445.129
However, with regard to the disallowance of salaries, emoluments,
benefits, and allowances of government employees, prevailing
jurisprudence130 provides that recipients or payees need not refund
these disallowed amounts when they received these in good
faith.131 Government officials and employees who received benefits
or allowances, which were disallowed, may keep the amounts
received if there is no finding of bad faith and the disbursement was
made in good faith.
On the other hand, officers who participated in the approval of the
disallowed allowances or benefits are required to refund only the
amounts received when they are found to be in bad faith or grossly
negligent amounting to bad faith.
In Philippine Economic Zone Authority v. Commission on Audit,134 this
court defined good faith relative to the requirement of refund of
disallowed benefits or allowances.
In common usage, the term “good faith” is ordinarily used to
describe that state of mind denoting “honesty of intention, and
freedom from knowledge of circumstances which ought to put the
holder upon inquiry; an honest intention to abstain from taking any
unconscientious advantage of another, even through technicalities
of law, together with absence of all information, notice, or benefit or
belief of facts which render transaction unconscientious.”135
The assailed notices of disallowance enumerate the following
persons as liable for the disallowed disbursements:
Elenita Delgado – Approving Officer136
Oscar Sevilla- Approving Officer 137
Yolanda Quiñones – Chief Accountant138
Agrifina Lacson – Certifying Officer139
Erlinda Baltazar - Cashier140
Myrna Colag – Alternative Approving Officer141
Miriam Dimayuga – Alternate Approving Officer142
Rule 64 Full Text Cases andm18 of 37
 Marietto A. Director 5,700.00 allowance of
The recipients of the disallowed allowances under the assailed Enecio P500.00/mo
notices of disallowance are the following: pursuant to Sec. 7
Ruben Ciron Director 5,700.00
of P.D. 474) for
Payee Position Amount Allowance/Benefit Alfonso Cusi Director 5,700.00 March 2001.
Disallowed Disallowed Gloria Bañas [not indicated 3,000.00
Notice of Disallowance No. 2002-002-101(01)143 in rollo]

Erlinda Cashier 550,000.00 Rice and Medical Notice of Disallowance No. 2002-007-101(01)146
Baltazar Allowance and Erlinda Cashier 561,000.00 Rice and Medical
Allowances of Baltazar Allowance for
Oscar Sevilla Administrator 5,000.00
Board Members April 2001
Pedro Director 5,700.00 and Secretary (net
Mendoza Renita Bautista [not indicated 30,800.00 Rice/Med for
of allowable
in rollo] March 2001
Marietto Director 5,700.00 allowance of
Enecio P500.00/mo Chona Verceles [not indicated 2,200.00 Rice/Med for
pursuant to Sec. 7 in rollo] March 2001
Juan Peña Director 5,700.00 of P.D. 474) for Alfonso [not indicated 4,698.00 Performance
Gloria Bañas [not indicated 3,000.00 January 2001. Rulloda in rollo] Incentive
in rollo] Allowance for
G. Mendoza Director 5,700.00 Feb. 2001
Ruben Ciron Director 5,700.00 Renita Bautista [not indicated 15,400.00 Rice[/][M]ed for
in rollo] April 2001
Notice of Disallowance No. 2002-005-101(01)144
Erlinda Cashier 893,910.14 Performance
Oscar Sevilla Administrator 5,000.00 Rice and Medical
Baltazar Incentive
Pedro Director 5,700.00 Allowance,
Allowance for
Representation
Mendoza April 2001
Allowance of
Marietto Director 5,700.00 Board Members Erlinda Cashier 186,000.00 Birthday and
Enecio and Secretary (net Baltazar Employment
Alfonso Cusi Director 5,700.00 of allowable Anniversary
allowance of Bonus for April
Ruben Ciron Director 5,700.00 P500.00/mo 2001
Gloria Bañas [not indicated 3,000.00 pursuant to Sec. 7 Notice of Disallowance No. 2002-008-101(01)147
in rollo] of P.D. 474) for
February 2001. Erlinda Cashier 552,200.00 Rice and Medical
Baltazar Allowance for
Notice of Disallowance No. 2002-006-101(01)145 May 2001
Erlinda Cashier 565,400.00 Rice and Medical Renita Bautista [not indicated 30,669.50 Performance
Baltazar Allowance in rollo] Incentive
Chona [not indicated 1,591.50 Performance Allowance for
[illegible] in rollo] Incentive April 2001
[illegible] [not indicated 2,508.25 Allowance for Liberato [not indicated 2,200.00 Rice/Med for April
Feb. 2001 [illegible] in rollo] 2001
in rollo]
Erlinda Cashier 139,000.00 Birthday and Emperatriz [not indicated 1,098.75 Performance
Baltazar Employment Aquino in rollo] Incentive
Anniversary Allowance for
Bonus for Feb. 2001
February 2001 Alfonso [not indicated 4,698.00 Performance
Erlinda Cashier 835,376.33 Performance Rulloda in rollo] Incentive
Baltazar Incentive Allowance for
Allowance for March 2001
March 2001 Chona Verceles [not indicated 1,591.50 Performance
Jovino G. [not indicated 5,000.00 Employment in rollo] Incentive
Tamayo in rollo] Anniversary Allowance for
Bonus March 2001
Oscar M. Administrator 5,000.00 Representation Emperatriz [not indicated 2,232.75 Performance
Sevilla Allowance of Aquino in rollo] Incentive
Board Members Allowance for
Jose T. Tale Director 5,700.00
and Secretary (net March 2001
Pedro V. Director 5,700.00 of allowable Jesus [not indicated 2,200.00 Rice[/][M]ed for
Mendoza

Rule 64 Full Text Cases andm19 of 37

Manongdo in rollo] May 2001 Authority relied on the alleged approval of the President of the
Philippines in granting the benefits and allowances.
Erlinda Cashier 124,000.00 Birthday and
Baltazar Employment Respondent Commission on Audit said that there were “exchanges
Anniversary
of communications between the auditor and Atty. Oscar M. Sevilla,
Bonus [Maritime Industry Authority]’s Administrator, pointing out to the
for May 2001
latter, in letter of April 4, 2001, that continuous grant of the
Roberto [not indicated 3,000.00 Anniversary allowances in question would not only contradict the provisions of
[illegible] in rollo] Allowance Administrative Order no. 5 issued by the Office of the President and
Budget Circular No. 2001-1 but would likewise negate the objective
Renita Bautista [not indicated 11,600.00 Rice/Med for May
in rollo] 2001 of generating savings.”

Erlinda Cashier 877,270.30 Performance
Baltazar Incentive
Allowance for
May 2001
Feliciano Tira, [not indicated 4,400.00 Rice/Med For
Jr. in rollo] April and May
2001
The records do not show the reason why Erlinda Baltazar, petitioner
Maritime Industry Authority’s cashier, received high amounts for the
allowances as shown in the notices of disallowance.
The amount given to Erlinda Baltazar is exorbitant especially when
contrasted with the other officers and employees of petitioner
Maritime Industry Authority receiving the same allowance. The
disparity in the amounts given to Erlinda Baltazar compared to the
other officers and employees is too substantial to consider her and
the approving officers to be in good faith when Erlinda Baltazar
received the amounts. Thus, Erlinda Baltazar and the approving
officers are solidarily liable to refund all amounts received by Erlinda
Baltazar based on what was disallowed by respondent Commission
on Audit. This solidary liability is in accordance with Book VI, Chapter
V, Section 43 of the Administrative Code, which provides:
Liability for Illegal Expenditures. – Every expenditure or obligation
authorized or incurred in violation of the provisions of this Code or
of the general and special provisions contained in the annual
General or other Appropriations Act shall be void. Every payment
made in violation of said provisions shall be illegal and every official
or employee authorizing or making such payment, or taking part
therein, and every person receiving such payment shall be jointly
and severally liable to the Government for the full amount so paid or
received.
The amount Erlinda Baltazar received as allowance for one month
should have alerted her and the approving officers on the validity
and legality of the grant of the allowance. Good faith dictates that
the approving officers deny the grant and Erlinda Baltazar refrain
from receiving the amount that is clearly and on its face invalid.
Erlinda Baltazar and the approving officers’ positions dictate that
they are familiar and knowledgeable of the usual amounts allowed
for allowances and benefits.
As to the directors, officers, and other employees of petitioner
Maritime Industry Authority who received the disallowed benefits,
they are presumed to have acted in good faith when they allowed
and/or received them.
Respondent Commission on Audit failed to show bad faith on the
part of the approving officers in disbursing the disallowed benefits
and allowances. Further, the officers of petitioner Maritime Industry
However, the checks for the disallowed benefits and allowances
were issued prior to April 4, 2001. It does not appear that petitioner
Maritime Industry Authority’s directors and officers were informed
prior to the disbursement of the amounts disallowed that these
allowances and benefits were in violation of existing law, and rules
and regulations.
WHEREFORE, the decision of respondent Commission on Audit
dated March 3, 2005 and resolution dated December 9, 2008
are AFFIRMED with MODIFICATION. The approving officers and
Erlinda Baltazar are solidarily liable to refund the disallowed
amounts received by Erlinda Baltazar. The other payees need not
refund the amounts received.
SO ORDERED.
If based sa citation, mao ni ang case
EN BANC
G.R. No. 201042 June 16, 2015
DARAGA PRESS, INC., Petitioner,
vs.
COMMISSION ON AUDIT and DEPARTMENT OF
EDUCATIONAUTONOMOUS REGION IN MUSLIM
MINDANAO, Respondents.
DECISION
DEL CASTILLO, J.:
Absent a clear showing of grave abuse of discretion, the factual
findings of the Commission on Audit (COA) must be accorded great
respect and finality.1
This Petition for Certiorari2 assails the Decision3 dated September
29, 2010 of the respondent COA, which denied petitioner Daraga
Press, Inc.’s (DPI) money claim in the amount of 63,638,032.00.
Likewise assailed is the Resolution4 dated December 29, 2011 of the
respondent COA, denying petitioner DPI’s Motion for
Reconsideration.5
Factual Antecedents
On November 15, 2007, pursuant to Section 196 of Republic Act No.
9401,7 then Department of Budget and Management (DBM)
Secretary Rolando G. Andaya, Jr. requested the respondent COA to
validate and evaluate the request of then Regional Governor of the
Autonomous Region in Muslim Mindanao (ARMM) Nur Misuari for

Rule 64 Full Text Cases andm20 of 37

the release of funds to cover the region’s alleged unpaid obligation
to petitioner DPI for textbooks delivered in 1998.8
In response to the request, the respondent COA issued Local
Government Sector (LGS) Office Order No. 2007-058 dated
December 7, 2007, creating a team of auditors to validate and
evaluate the alleged unpaid obligation.9
On April 29, 2008, Assistant Commissioner Gloria S. Cornejo of the
LGS issued a Memorandum10 expressing serious doubts on the
validity of the obligation as the actual receipt of the subject
textbooks could not be ascertained.11
On September 22, 2008, petitioner DPI filed with the respondent
COA a money claim12 for the payment of textbooks it allegedly
delivered on July 3, 1998 to the respondent Department of
Education (DepEd)-ARMM, formerly the Department of Education,
Culture and Sports (DECS)-ARMM.13
Pursuant to a directive of the Commission Proper, the Fraud Audit
and Investigation Office (FAIO), Legal Services Sector(LSS) conducted
further validation of petitioner DPI’s money claim, which yielded the
same result.14 The findings of the FAIO complemented and
corroborated the initial observations/ findings of the audit team
created under LGS Office Order No. 2007-058 dated December 7,
2007.15
Ruling of the Commission on Audit
Based on the Memorandum dated April 29, 2008 and the LSS-FAIO
Report No. 2010-001,16 the respondent COA rendered the assailed
Decision dated September 29, 2010. It denied the money claim
because it found no convincing proof that the subject textbooks
were delivered.17 It noted that there was no showing that the Supply
Officer actually inspected and received the said delivery;18 that there
was a violation of the rules on internal control on segregation of
duties and responsibilities as the receipt/acceptance/inspection of
the alleged deliveries was done by the DECS-ARMM Regional
Secretary, who was also the one who approved the Requisition and
Issue Voucher (RIV)19 and recommended the approval of the
Purchase Order (PO);20 and that the audited Final Trial Balances21 of
DECS-ARMM and the audited Financial Statements22 of petitioner
DPI did not reflect any transaction in the amount of
₱63,638,032.00.23 The respondent COA also pointed out
discrepancies, inconsistencies, and inaccuracies in the documents
submitted, to wit:
1. There were three (3) copies of [Purchase Orders] PO No.
075-PTB issued, which were all dated June 15, 1998
addressed to [petitioner] DPI. The first one with the
amount of ₱63,638,750.00 was received undated by White
Orchids Printing and Publishing with an unidentified
signature, while the other two (2) POs, which bear the
amount of ₱63,638,975.00 and ₱63,638,032.00, were
received undated by [petitioner] DPI. The POs did not
indicate the mode of procurement and the place and date
of delivery;
2. There were two (2) sets of [Sales Invoice] SI Nos. 5806
and 5808 and two (2) sets of [Delivery Receipt] (DR)Nos.
5206 and 5207, all dated July 3, 1998, bearing similar serial
numbers but with different signatories on the received
portion thereof, which indicates possible falsification of
public documents;
3. Two (2) Certifications, which were purportedly issued by
Sulpicio Lines, differed as to the date of delivery and
receipt, casting doubt on the authenticity of the delivery of
textbooks;
4. Five (5) contradicting reports on receipt and acceptance
of deliveries and three (3) sets of Inspection Reports by
the Regional Secretary of ARMM, indicate doubtful
invoices and [DRs]; and
5. The figures in the PO, DR, Memorandum Receipts, and
Certification and Affidavit of Supply Officer differ.24
These discrepancies, inconsistencies and inaccuracies, as well as the
lack of appropriation for the purchase of the subject textbooks
considering that the Special Allotment Release Order (SARO)25 for
the amount of ₱63,638,750.00,26 upon which petitioner DPI
anchored its claim, pertained to the payment of personal services
(payment of salaries of teachers), not for the purchase of
textbooks,27 led the respondent COA to conclude that there was no
substantial evidence to grant the money claim.28 And since the
actual delivery of the subject textbooks was not established, the
respondent COA likewise ruled that the equitable principle of
quantum meruit could not be applied.29
Aggrieved, petitioner DPI moved for reconsideration but the
respondent COA denied the same in its Resolution dated December
29, 2011.
Issue
Hence, petitioner DPI filed the instant Petition raising the issue of
whether the respondent COA committed grave abuse of discretion
in denying the money claim.30
Petitioner DPI’s Arguments
Petitioner DPI ascribes grave abuse of discretion on the part of the
respondent COA in denying the money claim solely on sheer
doubt.31 Petitioner DPI claims there were funds available for the
procurement of the subject textbooks but were inadvertently
reverted to the National Treasury because the said amount was
twice obligated under Personal Service.32 And although there were
typographical errors and minor inconsistencies in the documents
submitted, petitioner DPI contends that it was still able to prove its
entitlement to the money claim. It insists that the letters and
certifications33 from former ARMM Governors and high-ranking
officials of the DepEd Central Office, as well as the
Certification34 issued by COA Auditor Dagaranao Saripada, all
validate its money claim.35 And if ever there was a breach on
standard government procedure, petitioner DPI asserts that it could
still recover the reasonable value of the subject textbooks
conformably with the principle of quantum meruit.36
Respondents’ Arguments
The respondents, through the Office of the Solicitor General, argue
that the respondent COA committed no grave abuse of discretion in
denying the money claim as the denial is supported by the evidence
Rule 64 Full Text Cases andm21 of 37
on record.37 They maintain that there is no credible evidence to
show that the subject textbooks were delivered and that without
any proof of delivery, there is no basis for petitioner DPI to recover
even under the principle of quantum meruit.38
Our Ruling
The Petition must fail.
Decisions and resolutions of the respondent COA may be reviewed
and nullified only on the ground of grave abuse of discretion
amounting to lack or excess of jurisdiction. 39 Grave abuse of
discretion exists when there is an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim, and despotism.40
The respondent COA committed no
grave abuse of discretion in denying the
money claim.
In this case, petitioner DPI imputes grave abuse of discretion on the
part of the respondent COA in doubting and disregarding petitioner
DPI’s documentary evidence and in adopting the findings and
recommendations contained in the Memorandum dated April 29,
2008 and the LSS-FAIO Report No. 2010-001. A careful reading of the
assailed decision and resolution, however, negates any
capriciousness or arbitrariness in the exercise of judgment of the
respondent COA as the denial of petitioner DPI’s money claim is
supported by the evidence on record.
There are inconsistencies, discrepancies,
and inaccuracies in the dates and figures
stated in the documents.
Contrary to the claim of petitioner DPI, there is sufficient reason for
the respondent COA to doubt and disregard the documentary
evidence presented by petitioner DPI as the FAIO found
inconsistencies, discrepancies, and inaccuracies in the dates and
figures stated in the POs, DRs, SIs, and other documents. Pertinent
portions of the LSS-FAIO Report No. 2010-001 are quoted below:
2) Various inconsistencies/inaccuracies were noted in the
verification of documents submitted/attached to the claim showing
different dates, amounts, and signatories, casting doubt on the
authenticity of the documents and the transaction.
a) Three (3) copies of POs were issued with the same number but
with three different amounts, received undated by [petitioner] DPI
and White Orchids Printing, indicating the absence of safeguards
against irregularities in the handling or substitution of vital
documents like PO.
There were three copies of PO No. 075-PTB issued, all dated June 15,
1998 addressed to [petitioner DPI], one with a total amount of
₱63,638,750x x x was received undated by White Orchids Printing
and Publishing with an unidentified signature while the other two
copies with two different amounts of ₱63,638,975 x x x and
₱63,638,032 x x x were received also undated by the [petitioner
DPI]. The PO did not indicate the mode of procurement and the
place and date of delivery;
b) There were two sets of [SI] Nos. 5806 and 5808 and two (2) sets
of [DRs] Nos. 5206 and 5207, all dated July 3, 1998, bearing similar
serial numbers but with different signatories on the received portion
thereof, indicating possible falsification of public documents.
x x x The first set of SIs x x x and DRs x x x was signed on the received
portion by DECS-ARMM [Regional] Secretary x x x while the second
set of SIs and DRs x x x was signed by x x x, Supply Officer I.
The owner of [petitioner] DPI, x x x sought to explain the two sets of
SIs and DRs in his letter dated November 26, 2009 x x x in response
to our letter dated November 9, 2009 x x x; that this came about
when the then DECS-ARMM informed his Office that the SIs and DRs
signed by DECS-ARMM [Regional] Secretary x x x [were] not in
accordance with their practice that it is the Supply Officer who is
supposed to sign these documents; that to rectify this, another set
was signed by x x x, Supply Officer I, thus resulting in two different
signatories in the same set of SIs and DRs.
The said explanation is untenable. To give due course to the
explanation is tantamount to allowing the substitution of facts that
did not actually happen and can be considered falsification of public
documents.
c) Two Certifications purportedly issued by Sulpicio Lines differed in
dates of delivery and receipt, casting doubt on the authenticity of
the delivery of textbooks.
There were two Certifications with no official logo on the
[letterhead] purportedly issued by Sulpicio Lines, Inc., Cotabato City
Branch upon the request of [petitioner] DPI both dated 8th day of
September 1999 but bearing different delivery and receipt dates as
follows:
Date of Date delivered by Sulpicio Annex
Certification Lines and received by [the
Regional Secretary of
ARMM]
September 8,
June 23, 1998 24
1999
September 8,
July 2, 1998 25
1999
Moreover, the dates of delivery and receipt in the said Certifications
do not agree with the dates of the two copies of Bill of Lading (BOL)
of June 25, 1998 and June 29, 1998 x x x. The BOL states that the
books are supplementary books and reference materials and not
textbooks as alleged;
d) Five contradicting reports on receipt and acceptance of deliveries
and three sets of Inspection Reports by the Regional Secretary of
ARMM, indicate doubtful invoices and [DRs].
Four (4) sets of Reports on Receipt and Acceptance of the books by
Regional Secretary x x x, DECS-ARMM, dated July 5, 1998 and July 7,
1998, contained contradictory/conflicting facts and dates, as
follows:
Date of Delivery Date of Sales Date of Annex
Report on Receipt DR Invoice SI
Rule 64 Full Text Cases andm22 of 37
 Receipt (DR) No. (SI) No. The figures on the PO and DRs x x x do not agree with the figures on
and the totals of Memorandum Receipt (MRs) x x x for Equipment, Semi-
Acceptance expendable, and Non-expendable Property and Invoice Receipts
(IRs) x x x signed by the respective Supply Officers of Maguindanao,
July 5, 5206- June 5808- July 2, 28 Sulu I and II, Tawi-Tawi, and Lanao Sur I and II. Neither do these
1998 5207 30, 5806 1998 figures agree with the figures certified to have been allegedly
1998 received on July 2, 1998 by x x x, Supply Officer II, in his Certification
dated July 24, 1998 and Affidavit of August 28, 2008, respectively x x
July 7, 5098- June 5508- July 2, 29 x.
1998 5099 30, 3509 1998
1998
Moreover, the volume of the books allegedly delivered
July 7, [5208]- July 3, 5809- July 3, 30 notwithstanding, all the foregoing receipt and acceptance of
1998 5209 1998 5810 1998 deliveries by DECS-ARMM x x x were not witnessed by any of the
Auditors or Technical Audit Specialists of COA assigned in the DECS-
July 7, 5206- July 3, 5806- July 3, 31 ARMM Division Schools concerned. 3) Review supporting documents
1998 5207 1998 5808 1998 on requisition, purchase order, receipt and acceptance and invoice
of property shows an unwarranted override of functions and
responsibility by an approving official, violating internal control on
In addition, his Affidavit dated July 1998 still states another date of
segregation of duties and responsibilities. Examination shows that
receipt/inspection/ acceptance of the subject deliveries to be July
21, 1998. x x x despite the substantial amount of ₱63,638,032.60, the RIV x x x was
certified by x x x Supply Officer I, instead of by x x x Supply Officer II,
and approved by DECSARMM Secretary x x x. The PO was
Also noted is a Certification dated December 15, 1998 x x x that recommended for approval by Regional Secretary x x x and
[petitioner] DPI has fully delivered assorted elementary books approved by the ARMM Governor, x x x.
amounting to 63,638,032.00 on July 3, 1998 under [DR] No. 5206
and on July 5, 1998 under DR No. 5207, and that the deliveries were
On the alleged delivery of books, examination of invoices and
duly received and accepted by DECS-ARMM Regional Secretary x x x.
The Certification is under the letterhead of [the DepEd], which was receipts revealed that it was DECS Regional Secretary x x x and not
the Supply Officer II who received the books as shown by his
renamed only in 2001 instead of [DECS], which was its designated
signature on the [SI] Nos. 5806 and 5808 x x x and [DR] Nos. 5206
name in 1998 when the transaction reportedly occurred, indicating
and 5207 x x x all dated July 3, 1998. Thereafter, he issued five
that it was antedated, casting doubt on the documents and the
reports on receipt and acceptance of deliveries, and upon
transaction.
inspection, three Inspection Reports, as discussed in Finding #2.d
hereof.
Moreover, DECS Regional Secretary x x x issued three Inspection
Reports bearing different serial numbers of [SI] and dates, as
Also, the undated and unnumbered MRs and IRs x x x signed by the
follows:
respective Supply Officers of Maguindanao, Sulu I and II, Tawi-Tawi,
and Lanao Sur I and II, state that the alleged textbooks have all been
Date of Inspection Date of Sales received by them from DECS-ARMM Secretary x x x, indicating that it
Sales Invoice No. Annex
Report Invoice was really [the] Secretary x x x who received the books. The [IRs] x x
x however are under the letterhead of the Department of Science
July 5, 1998 5508-5509 July 2, 1998 34 and Technology (DOST) instead of DECS-ARMM and are not signed
July 7, 1998 5806-5808 July 3, 1998 35 by the secretary who transferred the books to the respective Supply
Officers.
July 7, 1998 5809-5810 July 3, 1998 36
It is significant to note that receipt/acceptance of deliveries in
government is normally a responsibility of the Administrative/
e) Four different quantities of books ordered and delivered in PO,
Supply/Property Officer. The receipt/acceptance and inspection of
MRs, and Certification/ Affidavit of receipt by Supply Officer II, none
alleged deliveries by the DECS-ARMM Secretary who also approved
of which were witnessed by COA Auditor/TAS, casting doubt on the
the RIV and recommended the approval of the purchase order, [are]
alleged delivery.
not in accordance with standard government procurement
procedure as [they violate] internal control on segregation of duties
Examination of documents shows that there were different an functions. The involvement of senior [officials] at almost all
quantities or copies of books received per documents submitted, as stages of the transaction is not in order, and signifies override of
follows: function and responsibility which belong to the Supply/Property
Officer.
Per PO DR MRs/I Certifica Affidavit of
Document Rs tion SO II 4) Copies of excerpts of audited Balance Sheet of DECS-ARMM as of
of SO II December 31, 1999 and 2000 show no Inventory of Books
amounting to ₱63,638,032, belying the MRs/IRs for books issued by
Quantity 543,030/ 543,0 542,7 542,822 593,022 the Supply Officers of six division schools. x x x
(in copies) 543,022 22 22
Verification of the copies of the excerpts of the audited Final Trial
Balance of DECS-ARMM, Cotabato City as of December 31, 1999 and

Rule 64 Full Text Cases andm23 of 37

2000 furnished by the COA ARMM x x x showed the balance of the
account Fixed Assets-Furniture, Fixtures, Equipment and Books to be
only ₱4,624,023.46 and 4,705,693.46, respectively, indicating that
no books costing ₱63,638,032 were purchased/delivered in 1998.
xxxx
5) Certified copies of the audited Financial Statements of the
[petitioner] DPI for 1997-1998 and 2000-2001, furnished by the SEC
to the FAIO do not show that the ₱63,638,032 transaction transpired
in 1998, casting doubt on the veracity of the money claim.41
We believe that these inconsistencies, discrepancies, and
inaccuracies are enough reasons for the respondent COA to deny
the money claim.
It bears stressing that petitioner DPI has the burden to show, by
substantial evidence, that it is entitled to the money claim.
Corollarily, it has to prove the actual delivery of the subject
textbooks by presenting substantial evidence or "evidence [that] a
reasonable mind might accept as adequate to support [such]
conclusion."42 However, petitioner DPI’s documentary evidence
could hardly be considered substantial evidence as these contain so
many inconsistencies, discrepancies, and inaccuracies, which would
cause a reasonable person to doubt the veracity and authenticity of
the money claim.
It is significant that in the LSS-FAIO Report No. 2010-001,the
explanation given by the owner as to why there are two sets of DRs
and SIs is not consistent with the one offered by petitioner DPI in
the instant Petition. In the LSS-FAIO Report No. 2010-001, the owner
explained:
x x x that this came about when the then DECS-ARMM informed his
Office that the SIs and DRs signed by DECS-ARMM [Regional]
Secretary xxx was not in accordance with their practice that it is the
Supply Officer who is supposed to sign these documents; that to
rectify this, another set was signed by x x x, Supply Officer I, thus
resulting in two different signatories in the same set of SIs and
DRs.43
However, in the instant Petition, the counsel for petitioner DPI
reasoned that:
x x x Considering the volume of the textbooks delivered, it is not
difficult to appreciate that there were two representatives or
responsible officers of the agency who worked together to receive
the textbooks. It is not difficult to appreciate either that one officer
signed the first copy of the [DR] while the other signed the second
copy of the receipt. x x x44
If, indeed, there was an actual delivery of the subject textbooks, we
cannot understand why petitioner DPI would have two versions of
the story.1âwphi1 Clearly, this is another reason to doubt the
truthfulness of petitioner DPI’s money claim.
There was no appropriation for the
purchase of the subject textbooks.
Aside from these inconsistencies, discrepancies, and inaccuracies,
there was also no appropriation for the purchase of the subject
textbooks as the SARO in the amount of ₱63,638,750.00, upon
which petitioner DPI anchors its claim, pertains to the payment of
personal services or salaries of the teachers, not for the purchase of
textbooks.45
Anent petitioner DPI’s claim that there were funds available for the
procurement of the subject textbooks but the funds were
inadvertently reverted to the National Treasury because the said
amount was twice obligated under Personal Service, this has been
addressed by the Assistant Commissioner Gloria S. Cornejo of the
LGS in the Memorandum dated April 29, 2008, to wit:
a. There are no records to show that the funds were
available when DECSARMM entered into contract with
[petitioner DPI] because SARO No. B-98-03383 dated
October 10, 1998 was released by DBM for payment of
salaries and compensation benefits of 490 positions for
Teacher I, but without the corresponding Notice of Cash
Allocation thus the allotment obligated became a prior
year’s accounts payable of the Department;
b. The DBM issued two (2) Notices of Cash Allocation
(NCA) for the SARO cited in (a) above. NCA No. 091427
dated May 5, 1999 was transferred to DECS-ARMM under
ADA No. 99-7-049 for payment of salaries, while NCA No.
091094 dated April 22, 1999 was reverted to the Bureau of
Treasury on December 31, 1999. As stated by the DepEd
Secretary, only one accounts payable was recorded in the
OSEC books chargeable against the SARO to cover
payment of personal services only.46
Since there was no appropriation for the purchase of the subject
textbooks, the respondent COA had reason to deny the money claim
as Section 29(1), Article VI of the 1987 Constitution provides that:
"No money shall be paid out of the Treasury except in pursuance of
an appropriation made by law."
The letters and certifications issued by
high-ranking officials do not prove the
actual delivery of the subject textbooks.
To dispute the findings of the respondent COA, petitioner DPI
attached to the instant Petition copies of letters and certifications
issued by high-ranking officials attesting to the validity of the money
claim. Said letters and certifications, however, are not sufficient to
prove that there was an actual delivery of the subject textbooks as
the persons who signed these letters and certifications were not
present during the delivery nor were they privy to the transaction. In
fact, COA Auditor Dagaranao Saripada in a letter47 dated August 15,
2011 denied executing the undated Certification. According to him,
at the time the transaction transpired in 1998, he was not yet the
Unit Head of the said Department.
Moreover, these letters and certifications cannot outweigh the
findings and recommendations contained in the Memorandum
dated April 29, 2008 issued by Assistant Commissioner Gloria S.
Cornejo of the LGS and in the LSS-FAIO Report No. 2010-001
prepared by the State Auditor IV Filomena D. Ilagan, reviewed by
Director III Nelia C. Villeza, and approved by Leonor F. Boado, as the
findings and recommendations in the memorandum and in the
report were arrived at as a result of an exhaustive and extensive
investigation conducted by the auditors.
Rule 64 Full Text Cases andm24 of 37
The principle of quantum meruit does
not apply.
Petitioner DPI’s invocation of the equitable principle of quantum
meruit must also fail. The principle of quantum meruit allows a party
to recover "as much as he reasonably deserves."48 However, as aptly
explained by the respondent COA, the principle of quantum meruit
presupposes that an actual delivery of the goods has been made. In
this case, petitioner DPI failed to present any convincing evidence to
prove the actual delivery of the subject textbooks. Thus, the
principle of quantum meruit invoked by petitioner DPI cannot be
applied.
All told, we find no grave abuse of discretion on the part of the
respondent COA in denying petitioner DPI’s money claim for failure
to present substantial evidence to prove the actual delivery of the
subject textbooks. Without a doubt, the inconsistencies and
discrepancies in the documents submitted by petitioner DPI and the
lack of appropriation for purchase of the subject textbooks lead only
to one inescapable conclusion: that there was no actual delivery of
the subject textbooks.
The factual findings of the respondent
COA must be accorded great respect
and finality.
In the absence of grave abuse of discretion, the factual findings of
the respondent COA, which are undoubtedly supported by the
evidence on record, must be accorded great respect and finality. The
respondent COA, as the duly authorized agency to adjudicate money
claims against government agencies and instrumentalities, pursuant
to Section 2649 of Presidential Decree No. 1445,50 has acquired
special knowledge and expertise in handling matters falling under its
specialized jurisdiction. And as we have often said:
[I]t is the general policy of the Court to sustain the decisions of
administrative authorities, especially one that was constitutionally
created like herein respondent COA, not only on the basis of the
doctrine of separation of powers, but also of their presumed
expertise in the laws they are entrusted to enforce. It is, in fact, an
oft-repeated rule that :findings of administrative agencies are
accorded not only respect but also :finality when the decision and
order are not tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion. x x x51
Such is the situation in the instant case.
WHEREFORE, the Petition is hereby DISMISSED for lack of merit. The
assailed Decision dated September 29, 2010 and the Resolution
dated December 29, 2011 of the respondent COA are hereby
AFFIRMED.
SO ORDERED.
4. Reyna vs COA, 642 SCRA 210, 226-227
EN BANC
G.R. No. 167219 February 8, 2011
RUBEN REYNA and LLOYD SORIA, Petitioners,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
PERALTA, J.:
Before this Court is a Petition for certiorari,1 under Rule 64 of the
Rules of Court, seeking to set aside Resolution No. 2004-046,2 dated
December 7, 2004, of the Commission on Audit (COA).
The facts of the case are as follows:
The Land Bank of the Philippines (Land Bank) was engaged in a
cattle-financing program wherein loans were granted to various
cooperatives. Pursuant thereto, Land Bank’s Ipil, Zamboanga del Sur
Branch (Ipil Branch) went into a massive information campaign
offering the program to cooperatives.
Cooperatives who wish to avail of a loan under the program must fill
up a Credit Facility Proposal (CFP) which will be reviewed by the Ipil
Branch. As alleged by Emmanuel B. Bartocillo, Department Manager
of the Ipil Branch, the CFP is a standard and prepared form provided
by the Land Bank main office to be used in the loan application as
mandated by the Field Operations Manual.3 One of the conditions
stipulated in the CFP is that prior to the release of the loan, a
Memorandum of Agreement (MOA) between the supplier of the
cattle, Remad Livestock Corporation (REMAD), and the cooperative,
shall have been signed providing the level of inventory of stocks to
be delivered, specifications as to breed, condition of health, age,
color, and weight. The MOA shall further provide for a buy-back
agreement, technology, transfer, provisions for biologics
requirement and technical visits and replacement of sterile,
unproductive stocks.4 Allegedly contained in the contracts was a
stipulation that the release of the loan shall be made sixty (60) days
prior to the delivery of the stocks.5
The Ipil Branch approved the applications of four cooperatives. R.T.
Lim Rubber Marketing Cooperative (RT Lim RMC) and Buluan
Agrarian Reform Beneficiaries MPC (BARBEMCO) were each granted
two loans. Tungawan Paglaum Multi-Purpose Cooperative
(Tungawan PFMPC) and Siay Farmers’ Multi-Purpose Cooperative
(SIFAMCO) were each granted one loan. Pursuant to the terms of
the CFP, the cooperatives individually entered into a contract with
REMAD, denominated as a "Cattle-Breeding and Buy-Back Marketing
Agreement."6
In December 1993, the Ipil Branch granted six loans to the four
cooperative borrowers in the following amounts:
Date of Name of Amount of Amount Amount
Release Borrower Loan of Paid to
Livestock Cattle
Insurance Supplier
(REMAD)
12-10-93 RTLim RMC ₱ 795,305 ₱ 62,305 ₱ 733,000
12-10-93 BARBEMCO 482,825 37,825 445,000
12-16-93 Tungawan 482,825 37,825 445,000
Rule 64 Full Text Cases andm25 of 37

PFMPC
12-22-93 SIFAMCO 983,010 77,010 906,000
12-22-93 RTLim RMC 187,705 14,705 173,000
12-22-93 BARBEMCO 448,105 35,105 413,000
TOTAL ₱3,375,775 264,775 3,115,0007
As alleged by petitioners, the terms of the CFP allowed for pre-
payments or advancement of the payments prior to the delivery of
the cattle by the supplier REMAD. This Court notes, however, that
copies of the CFPs were not attached to the records of the case at
bar. More importantly, the very contract entered into by the
cooperatives and REMAD, or the "Cattle-Breeding and Buy-Back
Marketing Agreement"8 did not contain a provision authorizing
prepayment.
Three checks were issued by the Ipil Branch to REMAD to serve as
advanced payment for the cattle. REMAD, however, failed to supply
the cattle on the dates agreed upon.
In post audit, the Land Bank Auditor disallowed the amount of
₱3,115,000.00 under CSB No. 95-005 dated December 27, 1996 and
Notices of Disallowance Nos. 96-014 to 96-019 in view of the non-
delivery of the cattle.9Also made as the basis of the disallowance
was the fact that advanced payment was made in violation of bank
policies and COA rules and regulations. Specifically, the auditor
found deficiencies in the CFPs, to wit:
The Auditor commented that the failure of such loan projects
deprived the farmer-beneficiaries the opportunity to improve their
economic condition.
From the Credit Facilities Proposals (CFP), the Auditor noted the
following deficiencies.
xxxx
4. No. 1 of the loan terms and conditions allowed prepayments
without taking into consideration the interest of the Bank. Nowhere
in the documents reviewed disclosed about prepayment scheme with
REMAD, the supplier/dealer.
There was no justification for the prepayment scheme. Such is a clear
deviation from existing procedures on asset financing under which
the Bank will first issue a "letter guarantee" for the account of the
borrower. Payment thereof will only be effected upon delivery of
asset, inspection and acceptance of the same by the borrower.
The prepayment arrangement also violates Section 88 of
Presidential Decree (PD) No. 1445, to quote:
Prohibition against advance payment on government – Except with
the prior approval of the President (Prime Minister), the government
shall not be obliged to make an advance payment for services not
yet rendered or for supplies and materials not yet delivered under
any contract therefor. No payment, partial or final shall be made on
any such contract except upon a certification by the head of the
agency concerned to have effect that the services or supplies and
materials have been delivered in accordance with the terms of the
contract and have been duly inspected and accepted.
Moreover, the Manual on FOG Lending Operations (page 35)
provides the systems and procedures for releasing loans, to quote:
Loan Proceeds Released Directly to the Supplier/Dealer – Proceeds
of loans granted for the acquisition of farm machinery equipment;
and sub-loan components for the purchase of construction
materials, farm inputs, etc. shall be released directly to the
accredited dealers/suppliers. Payment to the dealer shall be made
after presentation of reimbursement documents (delivery/ official
receipts/ purchase orders) acknowledged by the authorized LBP
representative that same has been delivered.
In cases where supplier requires Cash on Delivery (COD), the checks
may be issued and the cooperative and a LBP representative shall
release the check to the supplier and then take delivery of the object
of financing."10
The persons found liable by the Auditor for the amount of
₱3,115,000.00 which was advanced to REMAD were the following
employees of the Ipil Branch:
1. Emmanuel B. Bartocillo – Department Manager II
2. George G. Hebrona – Chief, Loans and Discounts
Division
3. Petitioner Ruben A. Reyna – Senior Field Operations
Specialist
4. Petitioner Lloyd V. Soria – Loans and Credit Analyst II
5. Mary Jane T. Cunting11 – Cash Clerk IV
6. Leona O. Cabanatan – Bookkeeper III/Acting
Accountant.12
The same employees, including petitioners, were also made
respondents in a Complaint filed by the COA Regional Office No. IX,
Zamboanga City, before the Office of the Ombudsman for Gross
Negligence, Violation of Reasonable Office Rules and Regulations,
Conduct Prejudicial to the Interest of the Bank and Giving
Unwarranted Benefits to persons, causing undue injury in violation
of Section 3(e) of Republic Act (R.A.) No. 3019, otherwise known as
the Anti-Graft and Corrupt Practices Act.13
On January 28, 1997, petitioners filed a Joint Motion for
Reconsideration claiming that the issuance of the Notice of
Disallowance was premature in view of the pending case in the
Office of the Ombudsman. The Motion was denied by the Auditor.
Unfazed, petitioners filed an appeal with the Director of COA
Regional Office No. IX, Zamboanga City. On August 29, 1997, the
COA Regional Office issued Decision No. 97-001 affirming the
findings of the Auditor. On February 4, 1998, petitioners filed a
Motion for Reconsideration, which was denied by the Regional
Office in Decision No. 98-00514 issued on February 18, 1998.
Petitioners did not file a Petition for Review or a Notice of Appeal
from the COA Regional Office Decision as required under Section 3,
Rule 64 Full Text Cases andm26 of 37
Rule VI15 of the 1997 Revised Rules of Procedure of the COA. Thus,
the Decision of the Director of COA Regional Office No. IX became
final and executory pursuant to Section 5116 of the Government
Auditing Code of the Philippines. Consequently, on April 12, 1999,
the Director of the COA Regional Office No. IX issued a
Memorandum to the Auditor directing him to require the
accountant of the Ipil Branch to record in their books of account the
said disallowance.17
On July 12, 1999, the Auditor sent a letter to the Land Bank Branch
Manager requiring him to record the disallowance in their books of
account. On August 10, 1999, petitioners sent a letter18 to COA
Regional Office No. IX, seeking to have the booking of the
disallowance set aside, on the grounds that they were absolved by
the Ombudsman in a February 23, 1999 Resolution,19 and that the
Bangko Sentral ng Pilipinas had approved the writing off of the
subject loans.
The February 23, 1999 Resolution of the Ombudsman was approved
by Margarito P. Gervacio, Jr. the Deputy Ombudsman for Mindanao,
the dispositive portion of which reads:
WHERFORE, premises considered, the instant complaint is hereby
dismissed for lack of sufficient evidence.
SO ORDERED.20
COA Regional Office No. IX endorsed to the Commission proper the
matter raised by the petitioners in their August 10, 1999 letter. This
is contained in its February 28, 2000 letter/endorsement,21 wherein
the Director of COA Regional Office No. IX maintained his stand that
the time for filing of a petition for review had already lapsed. The
Regional Director affirmed the disallowance of the transactions since
the same were irregular and disadvantageous to the government,
notwithstanding the Ombudsman resolution absolving petitioners
from fault.
In a Notice22 dated June 29, 2000, the COA requested petitioners to
submit a reply in response to the letter/endorsement of the
Regional Office Director. On August 10, 2000, petitioners submitted
their Compliance/ Reply23, wherein they argued that the
Ombudsman Resolution is a supervening event and is a sufficient
ground for exemption from the requirement to submit a Petition for
Review or a Notice of Appeal to the Commission proper. Petitioners
also argued that by invoking the jurisdiction of the Commission
proper, the Regional Director had waived the fact that the case had
already been resolved for failure to submit the required Petition for
Review.
On July 17, 2003, the COA rendered Decision No. 2003-
10724 affirming the rulings of the Auditor and the Regional Office, to
wit:
WHEREFORE, foregoing premises considered, this Commission
hereby affirms both the subject disallowance amounting to
₱3,115,000 and the Order of the Director, COA Regional Office No.
IX, Zamboanga City, directing the recording of subject disallowance
in the LBP books of accounts. This is, however, without prejudice to
the right of herein appellants to run after the supplier for
reimbursement of the advance payment for the cattle.25
In denying petitioners request for the lifting of the booking of the
disallowance, the COA ruled that after a circumspect evaluation of
the facts and circumstances, the dismissal by the Office of the
Ombudsman of the complaint did not affect the validity and
propriety of the disallowance which had become final and
executory.26
On August 22, 2003, petitioners filed a Motion for Reconsideration,
which was, however, denied by the COA in a Resolution27 dated
December 7, 2004.
Hence, herein petition, with petitioners raising the following
grounds in support of the petition, to wit:
RESPONDENT COA COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
DECLARING THE PREPAYMENT STIPULATION IN THE
CONTRACT BETWEEN THE BANK AND REMAD PROSCRIBED
BY SECTION 103 OF P.D. NO. 1445, OTHERWISE KNOWN
AS THE STATE AUDIT CODE OF THE PHILIPPINES.
RESPONDENT COA COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION FOR
HOLDING THE PETITIONERS ADMINISTRATIVELY LIABLE
FOR HAVING PROCESSED THE LOANS OF THE BORROWING
COOPERATIVES IN ACCORDANCE WITH THE BANK’S
MANUAL (FOG) LENDING OPERATIONS.
RESPONDENT COA COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN IT HELD THE PETITIONERS LIABLE AND, THEREFORE,
IN EFFECT LIKEWISE OBLIGATED TO REFUND THE
DISALLOWED AMOUNT EVEN AS AMONG OTHER THINGS
THEY ACTED IN EVIDENT GOOD FAITH. MORE SO, AS THE
COLLECTIBLES HAVE BEEN ALREADY EFFECTIVELY
WRITTEN-OFF.28
The petition is not meritorious.
I.
Anent the first issue raised by petitioners, the same is without merit.
Petitioners argue said issue on three points: first, the COA is
estopped from declaring the prepayment stipulation as
invalid;29 second, the prepayment clause in the Land Bank-REMAD
contract is valid;30 and third, it is a matter of judicial knowledge that
is not unusual for winning bidders involving public works to enter
into contracts with the government providing for partial prepayment
of the contract price in the form of mobilization funds.31
As to their contention that the COA is estopped from declaring the
prepayment stipulation as invalid, petitioners argue in the wise:
xxxx
The CATTLE BREEDING AND BUY BACK MARKETING AGREEMENT
sample of which is attached as Annex "I" was a Contract prepared by
the bank and REMAD, it was agreed to by the cooperatives. It was a
standard Contract used in twenty two (22) Land Bank branches
throughout the country. It provided in part:
6.1 That the release of the loan shall be made directly to the supplier
60 days prior to the delivery of stocks per prepayment term of
Rule 64 Full Text Cases andm27 of 37
REMAD LIVESTOCK COPORATION (supplier). Inspection shall be done
before the 60th day/delivery of the stocks.
Again, these Contracts were standard bank forms from Land Bank
head office. None of the Petitioners participated in the drafting of
the same.32
In the absence of grave abuse of discretion, questions of fact cannot
be raised in a petition for certiorari, under Rule 64 of the Rules of
Court. The office of the petition for certiorari is not to correct simple
errors of judgment; any resort to the said petition under Rule 64, in
relation to Rule 65, of the 1997 Rules of Civil Procedure is limited to
the resolution of jurisdictional issues.33 Accordingly, since the
validity of the prepayment scheme is inherently a question of fact,
the same should no longer be looked into by this Court.
In any case, even assuming that factual questions may be
entertained, the facts do not help petitioners' cause for the
following reasons: first, the supposed Annex "I" does not contain a
stipulation authorizing a pre-payment scheme; and second,
petitioners clearly violated the procedure of releasing loans
contained in the Bank's Manual on Field Office Guidelines on
Lending Operations (Manual on Lending Operations).
A perusal of the aforementioned Annex "I,"34 the Cattle-Breeding
and Buy-Back Marketing Agreement, would show that stipulation
"6.1" which allegedly authorizes prepayment does not exist. To
make matters problematic is that nowhere in the records of the
petition can one find a document which embodies such a
stipulation. It bears stressing that the Auditor noted in his report
that, "nowhere in the documents reviewed disclosed about
prepayment scheme with REMAD, the supplier/dealer."
Moreover, it is surprising that one of petitioners’ defense is that
they processed the cooperatives' applications in accordance with
their individual job descriptions as provided in the Bank’s Manual on
Field Office Guidelines on Lending Operations35 when, on the
contrary, petitioners seem to be oblivious of the fact that they
clearly violated the procedure in releasing loans which is embodied
in the very same Manual on Lending Operations, to wit:
Loan Proceeds Released Directly to the Supplier/Dealer – Proceeds of
loans granted for the acquisition of farm machinery equipment; and
sub-loan components for the purchase of construction materials,
farm inputs, etc. shall be released directly to the accredited
dealers/suppliers. Payment to the dealer shall be made after
presentation of reimbursement documents (delivery/ official
receipts/ purchase orders) acknowledged by the authorized LBP
representative that same has been delivered.36
However, this Court is not unmindful of the fact that petitioners
contend that the Legal Department of Land Bank supposedly passed
upon the issue of application of Section 88 of PD 1445. Petitioners
argue that in an alleged August 22, 1996 Memorandum issued by
the Land Bank, it opined that Section 88 of PD 1445 is not
applicable.37Be that as it may, this Court is again constrained by the
fact that petitioners did not offer in evidence the alleged August 22,
1996 Land Bank Memorandum. Therefore, the supposed tenor of
the said document deserves scant consideration. In any case, even
assuming arguendo that petitioners are correct in their claim, they
still cannot hide from the fact that they violated the procedure in
releasing loans embodied in the Manual on Lending Operations as
previously discussed.
To emphasize, the Auditor noted that "nowhere in the documents
reviewed disclosed about prepayment scheme with REMAD." It is
well settled that findings of fact of quasi-judicial agencies, such as
the COA, are generally accorded respect and even finality by this
Court, if supported by substantial evidence, in recognition of their
expertise on the specific matters under their jurisdiction. 38 If the
prepayment scheme was in fact authorized, petitioners should have
produced the document to prove such fact as alleged by them in the
present petition. However, as stated before, even this Court is at a
loss as to whether the prepayment scheme was authorized as a
review of "Annex I," the document to which petitioners base their
authority to make advance payments, does not contain such a
stipulation or provision. Highlighted also is the fact that petitioners
clearly violated the procedure in releasing loans found in the Manual
on Lending Operations which provides that payments to the dealer
shall only be made after presentation of reimbursement documents
acknowledged by the authorized LBP representative that the same
has been delivered.
In addition, this Court notes that much reliance is made by
petitioners on their allegation that the terms of the CFP allowed for
prepayments or advancement of the payments prior to the delivery
of the cattle by the supplier REMAD. It appears, however, that a
CFP, even if admittedly a pro forma contract and emanating from
the Land Bank main office, is merely a facility proposal and not the
contract of loan between Land Bank and the cooperatives. It is in
the loan contract that the parties embody the terms and conditions
of a transaction. If there is any agreement to release the loan in
advance to REMAD as a form of prepayment scheme, such a
stipulation should exist in the loan contract. There is, nevertheless,
no proof of such stipulation as petitioners had failed to attach the
CFPs or the loan contracts relating to the present petition.
Based on the foregoing, the COA should, therefore, not be faulted
for finding that petitioners facilitated the commission of the
irregular transaction. The evidence they presented before the COA
was insufficient to prove their case. So also, even this Court is at a
loss as to the truthfulness and veracity of petitioners' allegations as
they did not even present before this Court the documents that
would serve as the basis for their claims.
II.
Anent the second ground raised by petitioners, the same is again
without merit. Petitioners impute on the COA grave abuse of
discretion when it held petitioners administratively liable for having
processed the loans of the borrowing cooperatives. This Court
stresses, however, that petitioners cannot rely on their supposed
observance of the procedure outlined in the Manual on Lending
Operations when clearly the same provides that "payment to the
dealer shall be made after presentation of reimbursement
documents (delivery/official receipts/purchase orders)
acknowledged by the authorized LBP representative that the same
has been delivered." Petitioners have not made a case to dispute the
COA's finding that they violated the foregoing provision. Any
presumption, therefore, that public officials are in the regular
performance of their public functions must necessarily fail in the
presence of an explicit rule that was violated.
There is no grave abuse of discretion on the part of the COA as
petitioners were given all the opportunity to argue their case and
present any supporting evidence with the COA Regional Director.
Moreover, it bears to point out that even if petitioners' period to
appeal had already lapsed, the COA Commission Proper even
Rule 64 Full Text Cases andm28 of 37
resolved their August 10, 1999 letter where they raised in issue the
favorable ruling of the Ombudsman.
III.
Anent, the last issue raised by petitioners, the same is without merit.
Petitioners contend that respondent’s Order, requiring them to
refund the
disallowed transaction, is functus officio, the amount having been
legally written-off.39
A perusal of the records would show that Land Bank Vice-President
Conrado B. Roxas sent a Memorandum40dated August 5, 1998 to the
Head of the Ipil Branch, advising them that the accounts subject of
the present petition have been written-off, to wit:
We are pleased to inform you that Bangko Sentral ng Pilipinas (BSP)
in its letter dated July 20, 1998 has approved the write-off of your
recommended Agrarian Reform Loan Accounts and Commercial
Loan Accounts as covered by LBP Board Resolution Nos. 98-291 and
98-292, respectively, both dated June 18, 1998 x x x.41
The Schedule of Accounts for Write-Off42 attached to the August 5,
1998 Memorandum shows that the same covered the two loans
given to BARBEMCO, the two loans given to RTLim RMC, and the
only loan given to Tungawan PFPMC. The total amount approved for
write-off was ₱2,209,000.00.43 Moreover, petitioners contend that
the last loan given to SIFAMCO was also the subject of a write-off in
a similar advice given to the Buug Branch. The total approved write-
off in the second Memorandum44 was for ₱906,000.00.
In its Comment,45 the COA argues that the fact that the audit
disallowance was allegedly written-off is of no moment. Respondent
maintains that Section 66 of PD 144546 expressly granted unto it the
right to compromise monetary liabilities of the government.47 The
COA, thus, theorizes that without its approval, the alleged write-off
is ineffectual. The same argument was reiterated by the COA in its
Memorandum.48
The COA’s argument deserves scant consideration.
A write-off is a financial accounting concept that allows for the
reduction in value of an asset or earnings by the amount of an
expense or loss. It is a means of removing bad debts from the
financial records of the business.
In Land Bank of the Philippines v. Commission on Audit,49 this Court
ruled that Land Bank has the power and authority to write-off loans,
to wit:
LBP was created as a body corporate and government
instrumentality to provide timely and adequate financial support in
all phases involved in the execution of needed agrarian reform (Rep.
Act No. 3844, as amended, Sec. 74). Section 75 of its Charter vests in
LBP specific powers normally exercised by banking institutions, such
as the authority to grant short, medium and long-term loans and
advances against security of real estate and/or other acceptable
assets; to guarantee acceptance(s), credits, loans, transactions or
obligations; and to borrow from, or rediscount notes, bills of
exchange and other commercial papers with the Central Bank. In
addition to the enumeration of specific powers granted to LBP,
Section 75 of its Charter also authorizes it:
12. To exercise the general powers mentioned in the Corporation
Law and the General Banking Act, as amended, insofar as they are
not inconsistent or incompatible with this Decree.
One of the general powers mentioned in the General Banking Act is
that provided for in Section 84 thereof, reading:
xxxx
Writing-off loans and advances with an outstanding amount of one
hundred thousand pesos or more shall require the prior approval of
the Monetary Board (As amended by PD 71).
It will, thus, be seen that LBP is a unique and specialized banking
institution, not an ordinary "government agency" within the scope
of Section 36 of Pres. Decree No. 1445. As a bank, it is specifically
placed under the supervision and regulation of the Central Bank of
the Philippines pursuant to its Charter (Sec. 97, Rep. Act No. 3844, as
amended by Pres. Decree No. 251). In so far as loans and advances
are concerned, therefore, it should be deemed primarily governed
by Central Bank Circular No. 958, Series of 1983, which vests the
determination of the frequency of writing-off loans in the Board of
Directors of a bank provided that the loans written-off do not
exceed a certain aggregate amount. The pertinent portion of that
Circular reads:
b. Frequency/ceiling of write-off. The frequency for writing-off loans
and advances shall be left to the discretion of the Board of Directors
of the bank concerned. Provided, that the aggregate amount of
loans and advances which may be written-off during the year, shall
in no case exceed 3% of total loans and investments; Provided,
further, that charge-offs are made against allowance for possible
losses, earnings during the year and/or retained earnings. 50
While the power to write-off is not expressly granted in the charter
of the Land Bank, it can be logically implied, however, from the Land
Bank's authority to exercise the general powers vested in banking
institutions as provided in the General Banking Act (Republic Act
337). The clear intendment of its charter is for the Land Bank to be
clothed not only with the express powers granted to it, but also with
those implied, incidental and necessary for the exercise of those
express powers.51
In the case at bar, it is thus clear that the writing-off of the loans
involved was a valid act of the Land Bank. In writing-off the loans,
the only requirement for the Land Bank was that the same be in
accordance with the applicable Bangko Sentral circulars, it being
under the supervision and regulation thereof. The Land Bank
recommended for write-off all six loans granted to the cooperatives,
and it is worthy to note that the Bangko Sentral granted the same.
The write-offs being clearly in accordance with law, the COA should,
therefore, adhere to the same, unless under its general audit
jurisdiction under PD 1445, it finds that under Section 25(1) the
fiscal responsibility that rests directly with the head of the
government agency has not been properly and effectively
discharged.
On this note, the reliance of respondent on Section 66 of PD 1445 is
baseless as a reading thereof would show that the same does not
Rule 64 Full Text Cases andm29 of 37
pertain to the COA’s power to compromise claims. Probably, what
respondent wanted to refer to was Section 36 which provides:
Section 36. Power to compromise claims. -
1. When the interest of the government so requires, the
Commission may compromise or release in whole or in
part, any claim or settled liability to any government
agency not exceeding ten thousand pesos and with the
written approval of the Prime Minister, it may likewise
compromise or release any similar claim or liability not
exceeding one hundred thousand pesos, the application
for relief therefrom shall be submitted, through the
Commission and the Prime Minister, with their
recommendations, to the National Assembly.
2. The respective governing bodies of government-owned
or controlled corporations, and self-governing boards,
commissions or agencies of the government shall have
the exclusive power to compromise or release any similar
claim or liability when expressly authorized by their
charters and if in their judgment, the interest of their
respective corporations or agencies so requires. When the
charters do not so provide, the power to compromise shall
be exercised by the Commission in accordance with the
preceding paragraph.
x x x x52
Under Section 36, the use of the word "may" shows that the power
of the COA to compromise claims is only permissive, and not
mandatory. Further, the second paragraph of Section 36 clearly
states that respective governing bodies of government-owned or
controlled corporations, and self-governing boards, commissions or
agencies of the government shall have the exclusive power to
compromise or release any similar claim or liability when expressly
authorized by their charters. Nowhere in Section 36 does it state
that the COA must approve a compromise made by a government
agency; the only requirement is that it be authorized by its charter.
It, therefore, bears to stress that the COA does not have the
exclusive prerogative to settle and compromise liabilities to the
Government.
The foregoing pronouncements notwithstanding, this Court rules
that writing-off a loan does not equate to a condonation or release
of a debt by the creditor.
As an accounting strategy, the use of write-off is a task that can help
a company maintain a more accurate inventory of the worth of its
current assets. In general banking practice, the write-off method is
used when an account is determined to be uncollectible and an
uncollectible expense is recorded in the books of account. If in the
future, the debt appears to be collectible, as when the debtor
becomes solvent, then the books will be adjusted to reflect the
amount to be collected as an asset. In turn, income will be credited
by the same amount of increase in the accounts receivable.
Write-off is not one of the legal grounds for extinguishing an
obligation under the Civil Code.53 It is not a compromise of liability.
Neither is it a condonation, since in condonation gratuity on the part
of the obligee and acceptance by the obligor are required.54 In
making the write-off, only the creditor takes action by removing the
uncollectible account from its books even without the approval or
participation of the debtor.
Furthermore, write-off cannot be likened to a novation, since the
obligations of both parties have not been modified.55 When a write-
off occurs, the actual worth of the asset is reflected in the books of
accounts of the creditor, but the legal relationship between the
creditor and the debtor still remains the same – the debtor
continues to be liable to the creditor for the full extent of the unpaid
debt.
Based on the foregoing, as creditor, Land Bank may write-off in its
books of account the advance payment released to REMAD in the
interest of accounting accuracy given that the loans were already
uncollectible. Such write-off, however, as previously discussed, does
not equate to a release from liability of petitioners.
Accordingly, the Land Bank Ipil Branch must be required to record in
its books of account the Php3,115,000.00 disallowance, and
petitioners, together with their four co-employees,56 should be
personally liable for the said amount. Such liability, is, however,
without prejudice to petitioners’ right to run after REMAD, to whom
they illegally disbursed the loan, for the full reimbursement of the
advance payment for the cattle as correctly ruled by the COA in its
July 17, 2003 Decision.57
On a final note, it bears to point out that a cursory reading of the
Ombudsman's resolution will show that the complaint against
petitioners was dismissed not because of a finding of good faith but
because of a finding of lack of sufficient evidence. While the
evidence presented before the Ombudsman may not have been
sufficient to overcome the burden in criminal cases of proof beyond
reasonable doubt,58 it does not, however, necessarily follow, that
the administrative proceedings will suffer the same fate as only
substantial evidence is required, or that amount of relevant
evidence which a reasonable mind might accept as adequate to
justify a conclusion.59
An absolution from a criminal charge is not a bar to an
administrative prosecution or vice versa.60 The criminal case filed
before the Office of the Ombudsman is distinct and separate from
the proceedings on the disallowance before the COA. So also, the
dismissal by Margarito P. Gervacio, Jr., Deputy Ombudsman for
Mindanao, of the criminal charges against petitioners does not
necessarily foreclose the matter of their possible liability as
warranted by the findings of the COA.
In addition, this Court notes that the Ombudsman's Resolution relied
on an alleged "April 6, 1992 Memorandum of the Field Loans Review
Department" which supposedly authorized the Field Offices to
undertake a prepayment scheme. On the other hand, the same
Ombudsman's Resolution also made reference to a "January 19,
1994 Memorandum of EVP Diaz" and a "May 31, 1994
Memorandum of VP FSD" which tackled the prohibition on advance
payment to suppliers. All these documents, however, were again not
attached to the records of the case at bar. Particularly, the supposed
"April 6, 1992 Memorandum of the Field Loans Review Department"
was not even mentioned nor raised by petitioners as a defense in
herein petition.1awphil
The decisions and resolutions emanating from the COA did not
tackle the supposed April 6, 1992 Memorandum of the Field Loans
Review Department which allegedly authorized the Field Offices to
Rule 64 Full Text Cases andm30 of 37
undertake a pre-payment scheme. While it is possible that such
document would have shown that petitioners were in good faith,
the same should have been presented by them in the proceedings
before the Commission proper - an act which they were not able to
do because of their own negligence in allowing the period to file an
appeal to lapse. The April 6, 1992 Memorandum of the Field Loans
Review Department would have been the best evidence to free
petitioners from their liability. It appears, however, that they did not
present the same before the COA and it is already too late in the day
for them to present such document before this Court.
Petitioners' allegation of grave abuse of discretion by the COA
implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction or, in other words, the exercise of
the power in an arbitrary manner by reason of passion, prejudice, or
personal hostility; and it must be so patent or gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law.61 It is
imperative for petitioners to show caprice and arbitrariness on the
part of the COA whose exercise of discretion is being assailed. Proof
of such grave abuse of discretion, however, is wanting in this case.
WHEREFORE, premises considered, the petition is DENIED. Decision
No. 2003-107 dated July 17, 2003 and Resolution No. 2004-046
dated December 7, 2004, of the Commission on Audit, are hereby
AFFIRMED.
SO ORDERED.
5. Same lang sa no. 2
6. The Law Firm of LaguesmaMagsalinConsulta and
Gastardo vs COA G.R. No. 185544, January 13, 2015
EN BANC
G.R. No. 185544 January 13, 2015
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND
GASTARDO, Petitioner,
vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and
JUANITO G. ESPINO, JR. in their capacities as Chairman and
Commissioner, respectively, Respondents.
DECISION
LEONEN, J.:
When a government entity engages the legal services of private
counsel, it must do so with the necessary authorization required by
law; otherwise, its officials bind themselves to be personally liable
for compensating private counsel’s services.
This is a petition1 for certiorari filed pursuant to Rule XI, Section 1 of
the 1997 Revised Rules of Procedure of the Commission on Audit.
The petition seeks to annul the decision2 dated September 27, 2007
and resolution3 dated November 5, 2008 of the Commission on
Audit, which disallowed the payment of retainer fees to the law firm
of Laguesma Magsalin Consulta and Gastardo for legal services
rendered to Clark Development Corporation.4
Sometime in 2001, officers of Clark Development Corporation,5 a
government-owned and controlled corporation, approached the law
firm of Laguesma Magsalin Consulta and Gastardo for its possible
assistance in handling the corporation’s labor cases.6
Clark Development Corporation, through its legal officers and after
the law firm’s acquiescence, "sought from the Office of the
Government Corporate Counsel [‘OGCC’] its approval for the
engagement of [Laguesma Magsalin Consulta and Gastardo] as
external counsel."7
On December 4, 2001, the Office of the Government Corporate
Counsel denied the request.8 Clark Development Corporation then
filed a request for reconsideration.9
On May 20, 2002, the Office of the Government Corporate Counsel,
through Government Corporate Counsel Amado D. Valdez
(Government Corporate Counsel Valdez), reconsidered the request
and approved the engagement of Laguesma Magsalin Consulta and
Gastardo.10 It also furnished Clark Development Corporation a copy
of a pro-forma retainership contract11 containing the suggested
terms and conditions of the retainership.12 It instructed Clark
Development Corporation to submit a copy of the contract to the
Office of the Government Corporate Counsel after all the parties
concerned have signed it.13
In the meantime, Laguesma Magsalin Consulta and Gastardo
commenced rendering legal services to Clark Development
Corporation. At this point, Clark Development Corporation had yet
to secure the authorization and clearance from the Office of the
Government Corporate Counsel or the concurrence of the
Commission on Audit of the retainership contract. According to the
law firm, Clark Development Corporation’s officers assured the law
firm that it was in the process of securing the approval of the
Commission on Audit.14
On June 28, 2002, Clark Development Corporation, through its Board
of Directors, approved Laguesma Magsalin Consulta and Gastardo’s
engagement as private counsel.15 In 2003, it also approved the
assignment of additional labor cases to the law firm.16
On July 13, 2005, Clark Development Corporation requested the
Commission on Audit for concurrence of the retainership contract it
executed with Laguesma Magsalin Consulta and
Gastardo.17 According to the law firm, it was only at this pointwhen
Clark Development Corporation informed them that the Commission
on Audit required the clearance and approval of the Office of the
Government Corporate Counsel before it could approve the release
of Clark Development Corporation’s funds to settle the legal fees
due to the law firm.18
On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark
Development Corporation that itsrequest for clearance could not be
acted upon until the Office of the Government Corporate Counsel
approves the retainership contract with finality.19
On August 10, 2005, Clark Development Corporation sent a
letterrequest to the Office of the Government Corporate Counsel for
the final approval of the retainership contract, in compliance with
the Commission on Audit’s requirements.20
On December 22, 2005, GovernmentCorporate Counsel Agnes VST
Devanadera (Government Corporate Counsel Devanadera) denied
Rule 64 Full Text Cases andm31 of 37
Clark Development Corporation’s request for approval on the
ground that the proforma retainership contract given to them was
not "based on the premise that the monthly retainer’s fee and
concomitant charges are reasonable and could pass in audit by
COA."21 She found that Clark Development Corporation adopted
instead the law firm’s proposals concerning the payment of a
retainer’s fee on a per case basis without informing the Office of the
Government Corporate Counsel. She, however, ruled that the law
firm was entitled to payment under the principle of quantum
meruitand subject to Clark Development Corporation Board’s
approval and the usual government auditing rules and regulations. 22
On December 27, 2005, Clark Development Corporation relayed
Government Corporate Counsel Devanadera’s letter to the
Commission’s Audit Team Leader, highlighting the portion on the
approval of payment to Laguesma Magsalin Consulta and Gastardo
on the basis of quantum meruit.23
On November 9, 2006, the Commission on Audit’s Office of the
General Counsel, Legal and Adjudication Sector issued a "Third
Indorsement"24 denying Clark Development Corporation’s request
for clearance, citing its failure to secure a prior written concurrence
of the Commission on Audit and the approval with finality of the
Office of the Government Corporate Counsel.25 It also stated that its
request for concurrence was made three (3) years after engaging the
legal services of the law firm.26
On December 4, 2006, Laguesma Magsalin Consulta and Gastardo
appealed the "Third Indorsement"to the Commission on Audit. On
December 12, 2006, Clark Development Corporation also filed a
motion for reconsideration.27
On September 27, 2007, the Commission on Audit rendered the
assailed decision denying the appeal and motion for
reconsideration. It ruled that Clark Development Corporation
violated Commission on Audit Circular No. 98-002 dated June 9,
1998 and Office of the President Memorandum Circular No. 9 dated
August 27, 1998 whenit engaged the legal services of Laguesma
Magsalin Consulta and Gastardo without the final approval and
written concurrence of the Commission on Audit. 28 It also ruled that
it was not the government’s responsibility to pay the legal fees
already incurred by Clark Development Corporation, but rather by
the government officials who violated the regulations on the
matter.29
Clark Development Corporation and Laguesma Magsalin Consulta
and Gastardo separately filed motions for reconsideration,30 which
the Commission on Audit denied in the assailed resolution dated
November 5, 2008. The resolution also disallowed the payment of
legal fees to the law firm on the basis of quantum meruitsince the
Commission on Audit Circular No. 86-255 mandates that the
engagementof private counsel without prior approval "shall be a
personal liability of the officials concerned."31
Laguesma Magsalin Consulta and Gastardo filed this petition for
certiorari on December 19, 2008.32 Respondents, through the Office
of the Solicitor General, filed their comment33 dated May 7, 2009.
The reply34 was filed on September 1, 2009.
The primordial issue to be resolved by this court is whether the
Commission on Audit erred in disallowing the payment of the legal
fees to Laguesma Magsalin Consulta and Gastardo as Clark
Development Corporation’s private counsel.
To resolve this issue, however, several procedural and substantive
issues must first be addressed:
Procedural:
1. Whether the petition was filed on time; and
2. Whether petitioner is the real party-in-interest.
Substantive:
1. Whether the Commission on Audit erred in denying
Clark Development Corporation’s requestfor clearance in
engaging petitioner as private counsel;
2. Whether the Commission on Audit correctly cited
Polloso v. Gangan35 and PHIVIDEC Industrial Authority v.
Capitol Steel Corporation36 in support of its denial; and
3. Whether the Commission on Audit erred in ruling that
petitioner should not be paid on the basis of quantum
meruitand that any payment for its legal services should
be the personal liability of Clark Development
Corporation’s officials.
Petitioner argues that Pollosoand PHIVIDEC are not applicable to the
circumstances at hand because in both cases, the government
agency concerned had failed to secure the approval of both the
Office of the Government Corporate Counsel and the Commission
on Audit.37 Petitioner asserts that it was able to secure authorization
from the Office of the Government Corporate Counsel prior to
rendering services to Clark Development Corporation for all but two
(2) of the labor cases assigned to it.38 It argues that the May 20,
2002 letter from Government Corporate Counsel Valdez was
tantamount to a grant of authorization since it granted Clark
Development Corporation’s request for reconsideration.39
In their comment,40 respondents argue that petitioner is not a real
party-in-interest to the case.41 They argue that it is Clark
Development Corporation, and not petitioner, who isa real party-in-
interest since the subject of the assailed decision was the denial of
the corporation’s request for clearance.42
Respondents also allege that it was only on July 13, 2005, or three
(3) years after the hiring of petitioner, when Clark Development
Corporation requested the Commission on Audit’s concurrence of
the retainership contract between Clark Development Corporation
and petitioner.43 They argue that the retainership contract was not
approved with finality by the Office of the Government Corporate
Counsel.44 Further, Polloso and PHIVIDE Care applicable to this case
since both cases involve the "indispensability of [the] prior written
concurrence of both [the Office of the Government Corporate
Counsel] and the [Commission on Audit] before any [government-
owned and controlled corporation] can hire an external counsel."45
In its reply,46 petitioner argues that it is a real party-in-interest since
"it rendered its services to [Clark Development Corporation], which
ultimately redounded to the benefit of the Republic"47 and that "it
deserves to be paid what is its due as a matter of right."48 Petitioner
also reiterates its argument that Polloso and PHIVIDE Care not
applicable to this case since the factual antecedents are not the
same.49
Rule 64 Full Text Cases andm32 of 37
The petition is denied.
The petition was filed out of time
Petitioner states that it filed this petition under Rule XI, Section 1 of
the 1997 Revised Rules of Procedure of the Commission on
Audit.50 The rule states:
RULE XI
JUDICIAL REVIEW SECTION
1. Petition for Certiorari.— Any decision, order or resolution of the
Commission may be brought to the Supreme Court on certiorari by
the aggrieved party within thirty (30) days from receipt of a copy
thereof in the manner provided by law, the Rules of Court51 and
these Rules.
This rule is based on Article IX-A, Section 7 of the Constitution, which
states:
Section 7. Each Commission shall decide by a majority vote of all its
Members, any case or matter brought before it within sixty days
from the date of its submission for decision or resolution. A case or
matter is deemed submitted for decision or resolution upon the
filing of the last pleading, brief, or memorandum required by the
rules of the Commission or by the Commission itself. Unless
otherwise provided by this Constitution or by law, any decision,
order, or ruling of each Commission may be brought to the Supreme
Court on certiorari by the aggrieved party within thirty days from
receipt of a copy thereof. (Emphasis supplied)
Ordinarily, a petition for certiorari under Rule 65 of the Rules of
Court has a reglementary period of 60 days from receipt of denial of
the motion for reconsideration. The Constitution, however, specifies
that the reglementary period for assailing the decisions, orders, or
rulings of the constitutional commissions is thirty (30) days from
receipt of the decision, order, or ruling. For this reason, a separate
rule was enacted in the Rules of Court.
Rule 64 of the Rules of Civil Procedure provides the guidelines for
filing a petition for certiorari under this rule. Section 2 of the rule
specifies that "[a] judgment or final order or resolution of the
Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court on certiorari
under Rule 65, except as hereinafter provided."
The phrase, "except as hereinafter provided," specifies that any
petition for certiorari filed under this rule follows the same
requisites as those of Rule 65 except for certain provisions found
only in Rule 64. One of these provisions concerns the time given to
file the petition.
Section 3 of Rule 64 of the Rules of Civil Procedure states:
SEC. 3. Time to file petition. — The petition shall be filed within
thirty (30) days from notice of the judgment or final order or
resolution sought to be reviewed. The filing of a motion for new trial
or reconsideration of said judgment or final order or resolution, if
allowed under the procedural rules of the Commission concerned,
shall interrupt the period herein fixed. If the motion is denied, the
aggrieved party may file the petition within the remaining period,
but which shall not be less than five (5) days in any event, reckoned
from notice of denial.(Emphasis supplied)
Under this rule, a party may file a petition for review on certiorari
within 30 days from notice of the judgment being assailed. The
reglementary period includes the time taken to file the motion for
reconsideration and is only interrupted once the motion is filed. If
the motion is denied, the party may filethe petition only within the
period remaining from the notice of judgment.
The difference between Rule 64 and Rule 65 has already been
exhaustively discussed by this court in Pates v. Commission on
Elections:52
Rule 64, however, cannot simply be equated to Rule 65 even if it
expressly refers to the latter rule. They exist as separate rules for
substantive reasons as discussed below. Procedurally, the most
patent difference between the two – i.e., the exception that Section
2, Rule 64 refers to – is Section 3 which provides for a special period
for the filing of petitions for certiorari from decisions or rulings of
the COMELEC en banc. The period is 30 days from notice of the
decision or ruling (instead of the 60 days that Rule 65 provides), with
the intervening period used for the filing of any motion for
reconsideration deductible from the originally granted 30 days
(instead of the fresh period of 60 days that Rule 65
provides).53 (Emphasis supplied)
In this case, petitioner received the decision of the Commission on
Audit on October 16, 2007.54 It filed a motion for reconsideration on
November 6, 2007,55 or after 21 days. It received notice of the denial
of its motion on November 20, 2008.56 The receipt of this notice
gave petitioner nine (9) days, or until November 29, 2008, to file a
petition for certiorari. Since November 29, 2008 fell on a Saturday,
petitioner could still have filed on the next working day, or on
December 1, 2008. It, however, filed the petition on December 19,
2008,57 which was well beyond the reglementary period.
This petition could have been dismissed outright for being filed out
of time. This court, however, recognizes that there are certain
exceptions that allow a relaxation of the procedural rules. In
Barranco v. Commission on the Settlement of Land Problems:58
The Court is fully aware that procedural rules are not to be belittled
or simply disregarded for these prescribed procedures insure an
orderly and speedy administration of justice. However, it is equally
true that litigation is not merely a game of technicalities. Law and
jurisprudence grant to courts the prerogative to relax compliance
with procedural rules of even the most mandatory character,
mindful of the duty to reconcile both the need to put an end to
litigation speedily and the parties’ right to an opportunity to be
heard.
In Sanchez v. Court of Appeals, the Court restated the reasons which
may provide justification for a court to suspend a strict adherence to
procedural rules, such as: (a) matters of life, liberty, honor or
property[,] (b) the existence of special or compelling circumstances,
(c) the merits of the case, (d) a cause not entirely attributable to the
fault or negligence of the party favored by the suspension of the
rules, (e) a lack of any showing that the review sought is merely
frivolous and dilatory, and (f) the other party will not be unjustly
prejudiced thereby.59 (Emphasis supplied)
Rule 64 Full Text Cases andm33 of 37
Considering that the issues in thiscase involve the right of petitioner
to receive due compensation on the one hand and respondents’
duty to prevent the unauthorized disbursement of public funds on
the other, a relaxation of the technical rules is in order.
Petitioner is a real party-in-interest
Respondents argue that it is Clark Development Corporation, and
not petitioner, which is the real party-in-interest since the subject of
the assailed decision and resolution was the corporation’s request
for clearance to pay petitioner its legal fees. Respondents argue that
any interest petitioner may have in the case is merely
incidental.60This is erroneous.
Petitioner is a real party-in-interest, as defined in Rule 3, Section 2 of
the 1997 Rules of Civil Procedure:
SEC. 2. Parties in interest.— A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended
in the name of the real party in interest.
Petitioner does not have a "mere incidental interest,"61
and its
interest is not "merely consequential."62 Respondents mistakenly
narrow down the issue to whether they erred in denying Clark
Development Corporation’s request for clearance of the retainership
contract.63 In doing so, they argue that the interested parties are
limited only to Clark Development Corporation and respondents.64
The issue at hand, however, relates to the assailed decision and
resolution of respondents, which disallowed the disbursement of
public funds for the payment of legal fees to petitioner.
Respondents admit that legal services were performed by petitioner
for which payment of legal fees are due. The question that they
resolved was which among the parties, the government, or the
officials of Clark Development Corporation were liable.
The net effect of upholding or setting aside the assailed Commission
on Audit rulings would be to either disallow or allow the payment of
legal fees to petitioner. Petitioner, therefore, stands to either be
benefited or injured by the suit, or entitled to its avails. It is a real
party-in-interest. Clark Development Corporation’s Board of
Directors, on the other hand, should have been impleaded inthis
case as a necessary party.
A necessary party is defined as "onewho is not indispensable but
who ought to be joined as a party if complete relief is to be accorded
as to those already parties, or for a complete determination or
settlement of the claim subject of the action."65
The actions of the Board of Directors precipitated the issues in this
case. If the petition is granted, then the officers are relieved of
liability to petitioner. If the rulings of respondents are upheld, then
it is the Board of Directors that will be liable to petitioner. Any relief
in this case would be incomplete without joining the members of the
Board of Directors.
The Commission on Audit did not
commit grave abuse of discretion in
denying the corporation’s request
for clearance to engage the services
of petitioner as private counsel
Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of
1987 provides:
Section. 10. Office of the Government Corporate Counsel. - The
Office of the Government Corporate Counsel (OGCC) shall act as the
principal law office of all government-owned or controlled
corporations, their subsidiaries, other corporate off-springs and
government acquired asset corporations and shall exercise control
and supervision over all legal departments or divisions maintained
separately and such powers and functions as are now or may
hereafter be provided by law. In the exercise of such control and
supervision, the Government Corporate Counsel shall promulgate
rules and regulations toeffectively implement the objectives of this
Office. (Emphasis supplied)
The Office of the Government Corporate Counsel is mandated by
law to provide legal services to government-owned and controlled
corporations such as Clark Development Corporation.
As a general rule, government-owned and controlled corporations
are not allowed to engage the legal services of private counsels.
However, both respondent and the Office of the President have
made issuances that had the effect of providing certain exceptions
to the general rule, thus: Book IV, Title III, Chapter 3, Section 10 of
Executive Order No. 292, otherwise known as the Administrative
Code of 1987, provides that the Office of the Government Corporate
Counsel (OGCC) shall act as the principal law office of all GOCCs,
their subsidiaries, other corporate off-springs, and government
acquired asset corporations. Administrative Order No. 130, issued by
the Office of the President on 19 May 1994, delineating the
functions and responsibilities of the OSG and the OGCC, clarifies that
all legal matters pertaining to GOCCs, their subsidiaries, other
corporate off[-]springs, and government acquired asset corporations
shall be exclusively referred to and handled by the OGCC, unless
their respective charters expressly name the OSG as their legal
counsel. Nonetheless, the GOCC may hire the services of a private
counsel in exceptional cases with the written conformity and
acquiescence of the Government Corporate Counsel, and with the
concurrence of the Commission on Audit (COA).66 (Emphasis
supplied)
The rules and regulations concerning the engagement of private
counsel by government-owned and controlled corporations is
currently provided for by Commission on Audit Circular No. 86-
25567 dated April 2, 1986, and Office of the President Memorandum
Circular No. 9 dated August 27, 1998.
Commission on Audit Circular No. 86-255, dated April 2, 1986, as
amended, states:
Accordingly and pursuant to this Commission's exclusive authority to
promulgate accounting and auditing rules and regulations, including
for the prevention and disallowance of irregular, unnecessary,
excessive, extravagant and/or unconscionable expenditure or uses
of public funds and property (Sec. 2-2, Art. IX-D, Constitutional,
public funds shall not be utilized for payment of the services of a
private legal counsel or law firm to represent government agencies
and instrumentalities, including government-owned or controlled
corporations and local government units in court or to render legal
services for them. In the event that such legal services cannot be
Rule 64 Full Text Cases andm34 of 37
avoided or isjustified under extraordinary or exceptional
circumstances for government agencies and instrumentalities,
including government-owned or controlled corporations, the written
conformity and acquiescence of the Solicitor General or the
Government Corporate Counsel, as the case maybe, and the written
concurrence of the Commission on Audit shall first be secured
before the hiring or employment of a private lawyer or law
firm.(Emphasis supplied)
The Office of the President Memorandum Circular No. 9, on the
other hand, states:
SECTION 1.All legal matters pertainingto government-owned or
controlled corporations, their subsidiaries, other corporate
offsprings and government acquired asset corporations (GOCCs)
shall be exclusively referred to and handled by the Office of the
Government Corporate Counsel (OGCC).
GOCCs are thereby enjoined from referring their cases and legal
matters to the Office of the Solicitor General unless their respective
charters expressly name the Office of the Solicitor General as their
legal counsel.
However, under exceptional circumstances, the OSG may represent
the GOCC concerned, Provided: This is authorized by the President;
or by the head of the office concerned and approved by the
President.
SECTION 2. All pending cases of GOCCs being handled by the OSG,
and all pending requests for opinions and contract reviews which
have been referred by saidGOCCs to the OSG, may be retained and
acted upon by the OSG; but the latter shall inform the OGCC of the
said pending cases, requests for opinions and contract reviews, if
any, to ensure proper monitoring and coordination.
SECTION 3. GOCCs are likewise enjoined to refrain from hiring
private lawyers or law firms to handle their cases and legal matters.
But in exceptional cases, the written conformity and acquiescence of
the Solicitor General or the Government Corporate Counsel, as the
case may be, and the written concurrence of the Commission on
Audit shall first be secured before the hiring or employment of a
private lawyer or law firm. (Emphasis supplied)
According to these rules and regulations, the general rule is that
government-owned and controlled corporations must refer all their
legal matters to the Office of the Government Corporate Counsel. It
is only in "extraordinary or exceptional circumstances" or
"exceptional cases" that it is allowed to engage the services of
private counsels.
Petitioner claims that it was hired by Clark Development
Corporation due to "numerous labor cases which need urgent
attention[.]"68 In its request for reconsideration to the Office of the
Government Corporate Counsel, Clark Development Corporation
claims that it was obtaining the services of petitioner "acting
through Atty. Ariston Vicente R. Quirolgico, known expert in the field
of labor law and relations."69
The labor cases petitioner handled were not of a complicated or
peculiar nature that could justify the hiring of a known expert in the
field. On the contrary, these appear to be standard labor cases of
illegal dismissal and collective bargaining agreement
negotiations,70 which Clark Development Corporation’s lawyers or
the Office of the Government Corporate Counsel could have
handled.
Commission on Audit Circular No. 86-255 dated April 2, 1986 and
Office of the President Memorandum Circular No. 9 also require that
"before the hiring or employment"of private counsel, the "written
conformity and acquiescence of the [Government Corporate
Counsel] and the written concurrence of the Commissionon Audit
shall first be secured. . . ."
In this case, Clark Development Corporation had failed to secure the
final approval of the Office of the Government Corporate Counsel
and the written concurrence of respondent before it engaged the
services of petitioner.
When Government Corporate Counsel Valdez granted Clark
Development Corporation’s request for reconsideration, the
approval was merely conditional and subject to its submission of the
signed pro-forma retainership contract provided for by the Office of
the Government Corporate Counsel. In the letter dated May 20,
2002, Government Corporate Counsel Valdez added:
For the better protection of the interests of CDC, we hereby furnish
you with a Pro-Forma Retainership Agreement containing the
suggested terms and conditions of the retainership, which you may
adopt for this purpose.
After the subject Retainership Agreement shall have been executed
between your corporation and the retained counsel, please submit a
copy thereof to our Office for our information and file.71
Upon Clark Development Corporation’s failure to submit the
retainership contract, the Office of the Government Corporate
Counsel denied Clark Development Corporation’s request for final
approval of its legal services contracts, including that of petitioner.
In the letter72 dated December 22, 2005, Government Corporate
Counsel Devanadera informed Clark Development Corporation that:
[i]t appears, though, that our Pro-Forma Retainership Agreement
was not followed and CDC merely adopted the proposal of aforesaid
retainers/consultants. Also, this Office was never informed that CDC
agreed on payment of retainer’s fee on a per case basis.73
In view of Clark Development Corporation’s failure to secure the
final conformity and acquiescence of the Office of the Government
Corporate Counsel, its retainership contract with petitioner could
not have been considered as authorized.
The concurrence of respondents was also not secured by Clark
Development Corporation priorto hiring petitioner’s services. The
corporation only wrote a letter-request to respondents three (3)
years after it had engaged the services of petitioner as private legal
counsel.
The cases that the private counsel was asked to manage are not
beyond the range of reasonable competence expected from the
Office of the Government Corporate Counsel. Certainly, the issues
do not appear to be complex or of substantial national interest to
merit additional counsel. Even so, there was no showing that the
delays in the approval also were due to circumstances not
attributable to petitioner nor was there a clear showing that there
was unreasonable delay in any action of the approving authorities.
Rule 64 Full Text Cases andm35 of 37
Rather, it appears that the procurement of the proper
authorizations was mere afterthought.
Respondents, therefore, correctly denied Clark Development
Corporation’s request for clearance in the disbursement of funds to
pay petitioner its standing legal fees.
Polloso v. Ganganand PHIVIDEC
Industrial Authority v. Capitol Steel
Corporationapply in this case
Petitioner argues that Polloso does not apply since the denial was
based on the "absence of a written authority from the OSG or
OGCC[.]"74 It also argues that the PHIVIDEC case does not apply since
"the case [was] represented by a private lawyer whose engagement
was secured without the conformity of the OGCC andthe
COA."75 Petitioner argues that, unlike these cases, Clark
Development Corporation was able to obtain the written conformity
of the Office of the Government Corporate Counsel to engage
petitioner’s services.
In Polloso, the legal services of Atty. Benemerito A. Satorre were
engaged by the National Power Corporation for its Leyte-Cebu and
Leyte Luzon Interconnection Projects.76 The Commission on Audit
disallowed the payment of services to Atty. Satore on the basis of
quantum meruit, citing Commission on Audit Circular No. 86-255
dated April 2, 1986.77 In upholding the disallowance by the
Commission on Audit, this court ruled:
It bears repeating that the purpose of the circular is to curtail the
unauthorized and unnecessary disbursement of public funds to
private lawyers for services rendered to the government. This is in
line with the Commission on Audit’s constitutional mandate to
promulgate accounting and auditing rules and regulations including
those for the prevention and disallowance of irregular, unnecessary,
excessive, extravagant or unconscionable expenditures or uses of
government fundsand properties. Having determined the intent of
the law, this Court has the imperative duty to give it effect even if
the policy goes beyond the letter or words of the statute.
Hence, as the hiring of Atty. Satorre was clearly done without the
prior conformity and acquiescence of the Office of the Solicitor
General or the Government Corporate Counsel, as well as the
written concurrence of the Commission on Audit, the payment of
fees to Atty. Satorre was correctly disallowed in audit by the COA. 78
In PHIVIDEC, this court found the engagement by PHIVIDEC
Industrial Authority, a government-owned and controlled
corporation, of Atty. Cesilo Adaza’s legal services to be unauthorized
for the corporation’s failure to secure the written conformity of the
Office of the Government Corporate Counsel and the Commission
on Audit.79Citing the provisions of Office of the President
Memorandum Circular No. 9, this court ruled that:
[i]t was only with the enactment of Memorandum Circular No. 9 in
1998 that an exception to the general prohibition was allowed for
the first time since P.D. No. 1415 was enacted in 1978. However,
indispensable conditions precedent were imposed before any hiring
of private lawyer could be effected. First, private counsel can be
hired only in exceptional cases. Second, the GOCC must first secure
the written conformity and acquiescence of the Solicitor General or
the Government Corporate Counsel, as the case may be, before any
hiring can be done. And third, the written concurrence of the COA
must also be secured prior to the hiring.80 (Emphasis supplied)
The same ruling was likewise reiterated in Vargas v. Ignes,81 wherein
this court stated:
Under Section 10, Chapter 3, Title III, Book IV of the Administrative
Code of1987, it is the OGCC which shall act as the principal law office
of all GOCCs. And Section 3 of Memorandum Circular No. 9, issued
by President Estrada on August 27, 1998, enjoins GOCCs to refrain
from hiring private lawyers or law firms to handle their cases and
legal matters. But the same Section 3 provides that in exceptional
cases, the written conformity and acquiescence of the Solicitor
General or the Government Corporate Counsel, as the case may be,
and the written concurrence of the COA shall first be secured before
the hiring or employment of a private lawyer or law firm. In Phividec
Industrial Authority v. Capitol Steel Corporation, we listed three (3)
indispensable conditions before a GOCC can hirea private lawyer: (1)
private counsel can only be hired in exceptional cases; (2) the GOCC
must first secure the written conformity and acquiescence of the
Solicitor General or the Government Corporate Counsel, as the case
may be; and (3) the written concurrence of the COA must also be
secured.82 (Emphasis supplied) On the basis of Pollosoand PHIVIDEC,
petitioner’s arguments are unmeritorious.
Petitioner fails to understand that Commission on Audit Circular No.
86-255 requires not only the conformity and acquiescence of the
Office of the Solicitor General or Office of the Government
Corporate Counsel but also the written conformity of the
Commission on Audit. The hiring of private counsel becomes
unauthorized if it is only the Office of the Government Corporate
Counsel that gives its conformity. The rules and jurisprudence
expressly require that the government-owned and controlled
corporation concerned must also secure the concurrence of
respondents.
It is also erroneous for petitioner to assume that it had the
conformity and acquiescence of the Office of the Government
Corporate Counsel since Government Corporate Counsel Valdez’s
approval of Clark Development Corporation’s request was merely
conditional on its submission of the retainership contract. Clark
Development Corporation’s failure to submit the retainership
contract resulted in itsfailure to securea final approval.
The Commission on Audit did not
commit grave abuse of discretion in
disallowing the payment to
petitioner on the basis of quantum
meruit
When Government Corporate Counsel Devanadera denied Clark
Development Corporation’s request for final approval of its legal
services contracts, she, however, allowed the payment to petitioner
for legal services already rendered on a quantum meruitbasis.83
Respondents disallowed Clark Development Corporation from
paying petitioner on this basis as the contract between them was
executed "in clear violation of the provisions of COA Circular No. 86-
255 and OP Memorandum Circular No. 9[.]"84 It then ruled that the
retainership contract between them should be deemed a private
contract for which the officials of Clark Development Corporation
should be liable, citing Section 10385 of Presidential Decree No.
Rule 64 Full Text Cases andm36 of 37
1445, otherwise known as the Government Auditing Code of the
Philippines.86
In National Power Corporation v. Heirs of Macabangkit Sangkay,
quantum meruit:87
— literally meaning as much as he deserves — is used as basis for
determining an attorney’s professional fees in the absence of an
express agreement. The recovery ofattorney’s fees on the basis of
quantum meruitis a device that prevents an unscrupulous client
from running away with the fruits of the legal services of counsel
without paying for it and also avoids unjust enrichment on the part
of the attorney himself. An attorney must show that he is entitled to
reasonable compensation for the effort in pursuing the client’s
cause, taking into account certain factors in fixing the amount of
legal fees.88
Here, the Board of Directors, acting on behalf of Clark Development
Corporation, contracted the services of petitioner, without the
necessary prior approvals required by the rules and regulations for
the hiring of private counsel. Their actions were clearly
unauthorized.
To fill the gap created by the amendment of Commission on Audit
Circular No. 86-255, respondents correctly held that the officials of
Clark, Development Corporation who violated the provisions of
Circular No. 98-002 and Circular No. 9 should be personally liable to
pay the legal fees of petitioner, as previously provided for in Circular
No. 86-255.
This finds support in Section 103 of the Government Auditing Code
of the Philippines,91 which states:
SEC. 103. General liability for unlawful expenditures. -Expenditures
of government funds or uses of government property in violation of
law or regulations shall be a personal liability of the official or
employee found to be directly responsible therefor.
This court has also previously held in Gumaru v. Quirino State
College92 that:
the fee of the lawyer who rendered legal service to the government
in lieu of the OSG or the OGCC is the personal liability of the
government official who hired his services without the prior written
conformity of the OSG or the OGCC, as the case may be.93

It was, thus, erroneous for Government Corporate Counsel WHEREFORE, the petition is DISMISSED without prejudice to
Devanadera to bind Clark Development Corporation, a government petitioner filing another action against the proper parties.
entity, to pay petitioner on a quantum meruit basis for legal
services, which were neither approved nor authorized by the
SO ORDERED.
government. Even granting that petitioner ought to be paid for
services rendered, it should not be the government’s liability, but
that of the officials who engaged the services of petitioner without
the required authorization. The amendment of Commission on

Audit Circular No. 86-255 by

Commission on Audit Circular No.
98-002 created a gap in the law

Commission on Audit Circular No. 86-255 dated April 2, 1986

previously stated that: [a]ccordingly, it is hereby directed that,
henceforth, the payment out of public funds of retainer fees to
private law practitioners who are so hired or employed without the
prior written conformity and acquiescence of the Solicitor General
or the Government Corporate Counsel, as the case may be, as well
as the written concurrence of the Commission on Audit shall be
disallowed in audit and the same shall be a personal liability of the
officials concerned. (Emphasis supplied) However, when
Commission on Audit Circular No. 86-255 was amended by
Commission on Audit Circular No. 98-002 on June 9, 1998, it failed to
retain the liability of the officials who violated the circular.89 This gap
in the law paves the way for both the erring officials of the
government owned and controlled corporations to disclaim any
responsibility for the liabilities owing to private practitioners.

It cannot be denied that petitioner rendered legal services to Clark

Development Corporation.1âwphi1 It assisted the corporation in
litigating numerous labor cases90 during the period of its
engagement. It would be an injustice for petitioner not to be
compensated for services rendered even if the engagement was
unauthorized.

The fulfillment of the requirements of the rules and regulations was

Clark Development Corporation’s responsibility, not petitioner’s. The
Board of Directors, by its irresponsible actions, unjustly procured for
themselves petitioner’s legal services without compensation.

Rule 64 Full Text Cases andm37 of 37