[G.R. No. 133511.

October 10, 2000]

HON. WILLIAM G. PADOLINA, In his capacity as Secretary of the Department of Science

& Technology (DOST) and DR. LEONCIO A. AMADORE, in his Capacity as
Director, Philippine Atmospheric, Geographical and Astronomical Services
Administration (PAGASA), petitioners, vs. OFELIA D. FERNANDEZ, respondent.

RESOLUTION
DE LEON, JR., J.:

Petitioners William G. Padolina and Dr. Leoncio A. Amadore, as Secretary of the Department
of Science and Technology (DOST) and Director of the Philippine Atmospheric, Geophysical, and
Astronomical Services Administration (PAGASA) respectively, move for the reconsideration of
our Resolution dated July 14, 1999,[1] affirming the Decision of the Court of Appeals in CA-G.R.
SP No. 44541[2] which declared as void ab initio DOST Special Order No. 129, S. 1996
(hereinafter referred to as SO 129) insofar as it affected respondent Ofelia D. Fernandez.
The pertinent facts are as follows:
Respondent Ofelia D. Fernandez was the PAGASA Finance and Management Division Chief
of the DOST. On April 2, 1996, petitioner Padolina issued SO 129 providing for the reassignment
of Branch/Division/Section Chiefs and other personnel in PAGASA. Pursuant to this order,
respondent was reassigned to the Finance and Management Service Director's Office in Bicutan,
Taguig, Metro Manila.
Respondent requested petitioner Padolina to lift SO 129 stating that such order was
tantamount to her constructive dismissal, thus, a violation of her security of tenure. However,
petitioner Padolina denied the said request inasmuch as he found no compelling reason to lift SO
129. Instead, he advised the respondent to comply with the order of reassignment.
Respondent appealed to the Civil Service Commission (CSC) praying that SO 129 be declared
ineffective and that she be restored to her former position, but the CSC dismissed the appeal for
lack of merit.
On December 18, 1996, petitioner Padolina issued DOST Special Order No. 557, S. 1996,
which directed the return of certain PAGASA officials/employees to their units as of March 30,
1996. Likewise, it ordered the retention of other PAGASA personnel, including respondent, at
their current assignments in accordance with SO 129.
In the meantime, a fact-finding committee was formed to look into the reason behind her
refusal to accept her reassignment. After an ex-parte evaluation of pertinent documents, the
committee recommended that a formal charge of insubordination be filed against the respondent.
When the committee on investigation conducted a hearing, respondent did not appear. Hence,
the case was heard in absentia. After the hearing, a report was submitted by the committee finding
the respondent guilty of insubordination. The committee recommended that a penalty of
suspension of one (1) month and one (1) day without pay be imposed on the respondent. On May
13, 1997, petitioner Padolina issued a decision adopting the committee's findings and
recommendation.
On June 5, 1997, CSC Director Nelson L. Acebedo wrote to respondent, and directed her to
immediately report to her place of reassignment in accordance with the resolution of the CSC
which denied the latter's appeal before said body.[3]
Meanwhile, respondent moved for reconsideration of the CSC Resolution denying her
appeal. Her motion for reconsideration was also denied, but the CSC ruled that respondent was
entitled to Representation and Travel Allowance (RATA) during the period of her reassignment.
Not satisfied with the decision of the CSC, respondent elevated the case to the Court of
Appeals (CA). The CA decided in favor of respondent declaring that SO 129 is void ab
initio.According to the CA, such order adversely affected the position of respondent who should
be restored to all the rights and privileges of her office; and that respondent's reassignment has
effectively demoted her in rank, status and salary for a triple violation of the Administrative Code
of 1987.
Consequently, petitioners filed a Petition for Review on Certiorari[4] before this Court
assailing the Decision of the CA.
On July 14, 1999, we dismissed the petition and affirmed the Decision of the CA. We held
that SO 129 was indeed void ab initio insofar as it adversely affected the position of the
respondent; and that security of tenure is a fundamental and constitutionally-guaranteed feature of
our Civil Service. The mantle of protection of the Civil Service extends not only to employees
removed without cause but also to cases of unconsented transfers which are tantamount to illegal
removal from office.
Section 10, Rule 7 of the Omnibus Rules implementing Book 5 of the Administrative Code
of 1987 (Executive Order No. 292) provides that:

(7) Reassignment - A reassignment is a movement of an employee from one organizational unit

to another in the same department or agency which does not involve a reduction in rank, status or
salary and does not require the issuance of an appointment.

Section 24 (g) of Presidential Decree No. 807 authorizes reassignment by providing that an
employee may be reassigned from one organizational unit to another in the same agency but such
reassignment shall not involve a reduction in rank, status or salary. A diminution in rank, status,
or salary, is enough to invalidate such a reassignment.
We held that SO 129 violated the security of tenure of respondent and hence, invalid. An
examination of SO 129 also shows that the questioned order contains no definite date or duration
of the reassignment. In fact, in No. 4 of the Implementing Guidelines of SO 129, it is stated therein
that "the return of the various Branch/Division/Section Chiefs and other personnel concerned to
their respective Units shall be the subject of a separate DOST Special Order," which means that
the respondent's duration of service in the office of the DOST-FMS Director shall be for an
indefinite date, dependent on the time when the DOST shall issue a new special order which may
or may not even include respondent. As a matter of fact, she was not one of those returned to their
original units per DOST Special Order No. 557. Accordingly, we held that such a situation is
indeed tantamount to a floating assignment, which results in a diminution of status or rank. We
also ruled that respondent was deprived of the emoluments attached to her former position like
RATA and similar allowances which signified a diminution in compensation that is proscribed by
the rule on re-assignment. Finally, we also held that the status of respondent has been adversely
affected inasmuch as her reassignment to the DOST-FMS Director's Office reduced her to a mere
subordinate without authority to supervise anyone; in effect, she was demoted in rank and status.
In their instant motion for reconsideration, petitioners reiterate their arguments in the main
petition which were already considered in our Resolution. Petitioners argue that respondent's
reassignment was not indefinite. However, petitioners fail to present any evidence to prove that
the reassignment of respondent was for a definite period.
A careful examination of SO 129 shows that it contains no definite date or duration of
reassignment. As previously stated, this is tantamount to a floating assignment that results in a
diminution in rank. Although SO No. 557 was later issued ordering the return of some of the other
reassignees, subject of SO 129 eight (8) months after their reassignment, this belated act cannot
cure the defect of SO 129.
Petitioners maintain that the reassignment of respondent did not reduce her to a mere
subordinate. Petitioners aver that respondent's "movement" from the original organization unit
(Finance and Management Division, PAGASA) to another (Financial Management Services) in
the same department (DOST) meets the requirements of a valid reassignment and that the
circumstances that she may have "temporarily lost" supervision of forty-one (41) employees is an
incidental, albeit temporary, consequence of the reassignment and cannot be considered a
demotion.
We are not impressed. Such reassignment in fact removes from respondent's power of
supervision over forty-one (41) employees who are part of her staff and subordinates, thereby
resulting in a diminution of her status. Petitioners, however, insist that the reassignment is just
temporary. The reassignment resulting in a diminution of the status of respondent may have been
temporary but it is a diminution nonetheless. Besides, there was no definite duration of the
reassignment which fact added to respondent's reluctance to accept such reassignment.
Petitioners stated in their motion for reconsideration that respondent was not paid her salaries,
RATA and similar allowances simply because of her continued refusal to report to her place of
reassignment from the very start. On this point, we rule in favor of the petitioners. There is no
evidence in the records which clearly show that respondent will be deprived of RATA and other
emoluments. Such alleged diminution must be proven. In fact, the CSC clearly ordered that
respondent should be given her RATA during the period of her reassignment. Hence, she was
supposed to receive her RATA had she not refused to accept the order of her
reassignment. However, there need not be a diminution in salary for actual demotion to be present
in the instant case. Under Section 11, Rule VII of the Omnibus Rules implementing Book V of
Executive Order No. 292, demotion is defined "as the movement from one position to another
involving the issuance of an appointment with diminution in duties, responsibilities, status or rank
which may or may not involve reduction in salary." A diminution in any one of those categories is
sufficient to constitute a demotion, and hence, tantamount to a virtual dismissal.
 WHEREFORE, the motion for reconsideration of the Court's Resolution dated July 14, 1999
is hereby DENIED for lack of merit.
SO ORDERED.
G.R. No. 152833 May 9, 2005

CIVIL SERVICE COMMISSION, petitioner,

vs.
JOCELYN S. GENTALLAN, respondent.

G.R. No. 154961 May 9, 2005

THE MUNICIPALITY OF JASAAN, Represented by the Municipal Mayor HUBERTO C.

PAUROM, petitioner,
vs.
JOCELYN S. GENTALLAN, respondent.

DECISION

QUISUMBING, J.:

Before us are two consolidated petitions for review on certiorari, i.e., G.R. No. 152833 filed by
the Civil Service Commission, and G.R. No. 154961 filed by the Municipality of Jasaan,
Misamis Oriental, represented by Mayor Huberto C. Paurom. Both assail the Decision1 dated
November 26, 2001 of the Court of Appeals, which has set aside the Resolutions dated May 27,
2000 and October 11, 2000 of the Civil Service Commission (CSC). The CSC had earlier held
that the respondent Jocelyn Gentallan was not entitled to back salaries, representation and travel
allowance (RATA) and bonuses which she was claiming against the municipality.

The facts in the present controversy are undisputed.

On December 14, 1994, then Mayor Jose Salcedo appointed Jocelyn Gentallan as local civil
registrar of the Municipality of Jasaan, Misamis Oriental. Commissioner Thelma Gaminde of the
CSC, when queried about Gentallan’s qualifications, confirmed that Gentallan’s work experience
was more than enough to meet the minimum requirement of three (3) years’ experience for the
position of local civil registrar. After the lapse of fifteen (15) days without any action rendered
by the Sangguniang Bayan of Jasaan, the appointment was eventually deemed approved. On
January 5, 1995, the Civil Service Commission Regional Office No. 10 (CSCRO-10) approved
her appointment as permanent.

However, Rosalina Asis, a research aide in the Office of the Local Civil Registrar, filed a protest.
It was dismissed by the CSC in CSC Resolution No. 95-5317 dated August 31, 1995, because the
protestant was not a qualified next-in-rank.

In the same resolution, however, the CSC reviewed the appointment of respondent Jocelyn
Gentallan. It held that Gentallan was not qualified as she failed to fulfill the required three-year
experience relevant to the position of local civil registrar. Her motion for reconsideration was
denied in CSC Resolution No. 96-0582, dated January 25, 1996. She then filed a petition for
review docketed as CA G.R. SP No. 40482 before the Court of Appeals.
Meanwhile, Mayor Paurom, pursuant to the CSC resolutions, ordered respondent to vacate the
post as Local Civil Registrar and directed her to assume her former position as Assistant
Registration Officer.

In its Decision2 dated October 22, 1997, the Court of Appeals set aside the questioned
resolutions and found respondent qualified to the position. The decision became final and
executory on November 15, 1997.3

On September 2, 1998,4 Regional Director Jose T. Soria of CSCRO-10 informed the Mayor of
the appellate court’s decision and advised him to implement the same and reinstate respondent to
the position of Local Civil Registrar. However, the mayor did not. Respondent, through her
counsel, wrote the CSCRO-10 requesting for an order directing the municipality to reinstate her
and pay her backwages.5 Still, respondent was not reinstated.

Thus, respondent was constrained to file a case for mandamus with damages, and indirect
contempt before the Regional Trial Court of Misamis Oriental. Consequently, the parties reached
an agreement. On December 21, 1998, the mayor issued a memorandum,6 directing respondent
to assume office as the local civil registrar, and a notice7 of respondent’s salary adjustment was
issued.

Thereafter, respondent asked the CSCRO-10 if she was entitled to back salaries, RATA and
bonuses. The CSCRO-10 through Regional Director Annabelle B. Rosell, in an Order8 dated
June 14, 1999, granted the entitlements. When consulted by the mayor, the provincial attorney
agreed that respondent was indeed entitled pursuant to the Court of Appeals’ decision that had
already become final.

However, the mayor still did not give respondent her back salaries, RATA and bonuses. The
Sangguniang Bayan of Jasaan in Resolution No. 302-99 deleted the items of appropriations for
her salaries and instead, appropriated the same for the operation of the Active Night Assistance
Center (ANAC).9 Respondent requested the CSC for the execution of the CSCRO-10 Order but
the CSC reversed it in CSC Resolution No. 001264 dated May 24, 2000.10 It said that respondent
was not entitled to back salaries and other emoluments as she was not illegally dismissed from
the service. Said the CSC:

As culled from the records, Mayor Paurom issued the Memorandum dated March 8,
1996, reverting Gentallan to her former position, Assistant Registration Officer, to
execute the CSC Resolution Nos. 95-5317 and 96-0582. Hence, Gentallan cannot be
considered to have been illegally dismissed from the service since her reversion to her
former position was a result of a lawful order of the Commission.11

The motion for reconsideration of respondent was denied in CSC Resolution No. 002305 dated
October 11, 2000.12

Gentallan then filed before the Court of Appeals a petition for review assailing the resolutions.
The appellate court set aside the CSC Resolutions Nos. 001264 and 002305, and reinstated the
Order of CSCRO-10.13 The Municipality of Jasaan sought reconsideration but it was denied. The
CSC likewise filed a motion for reconsideration but the same was denied for lack of standing.

Hence, the instant petitions.

Petitioner CSC in G.R. No. 152833, assigns the following errors:

I. THE COURT OF APPEALS ERRED IN FINDING THAT THE CIVIL SERVICE

COMMISSION HAS NO LEGAL STANDING TO QUESTION THE DECISION.

II. THE COURT OF APPEALS ERRED IN FINDING THAT REINSTATEMENT

NECESSARILY IMPLIES THE GRANT OF BACK SALARIES AND
DIFFERENTIAL BONUSES.14

In the second petition, G.R. No. 154961, the Municipality of Jasaan raises the following issues in
its memorandum:

A. WHETHER OR NOT RESPONDENT GENTALLAN WAS, IN EFFECT,

ILLEGALLY REMOVED FROM OFFICE, HENCE ENTITLED TO BACKWAGES?

B. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

REVERSING AND SETTING ASIDE RESOLUTIONS NOS. 001264 & 002305 OF
THE CSC?15

Simply put, the basic issue in the instant petitions is whether or not respondent Jocelyn Gentallan
is entitled to back salaries, RATA and bonuses.

In G.R. No. 152833, the CSC contends that the payment of the money claims of Gentallan,
whose appointment was previously revoked, would impair the effectiveness of government. The
CSC questions whether in cases of reinstatement, the grant of differential backwages, RATA and
differential bonuses would necessarily follow.16

Respondent Gentallan, for herself, claims that CSC has no standing to bring this petition as the
CSC could not be a party that would be adversely affected by the review and reversal of its
decision.17 But the CSC citing Civil Service Commission v. Dacoycoy18 insists that it has
standing to appeal the case.

Petitioner municipality, in G.R. No. 154961, contends that Gentallan was not illegally removed
from her position; that the mayor was only following the lawful orders of the CSC when he
directed the reversion of respondent to her former position as Assistant Registration Officer; and
that the resolutions of the CSC were immediately executory even pending appeal, unless a higher
court issues a temporary restraining order or preliminary injunction. Thus, according to the
municipality, Gentallan was not improperly denied of her position as local civil registrar, hence
there is no basis to claim the award of back salaries, RATA and bonuses.
Furthermore, the petitioner municipality maintains that Gentallan’s appointment as Local Civil
Registrar had become ineffective by virtue of the CSC resolutions, at least until the Court of
Appeals reversed them. Therefore, her salaries and other emoluments must be reckoned only
from the time she actually assumed the said office.

Petitioner municipality also insists that respondent did not render service, actual or constructive,
as local civil registrar at the time, thus she was not entitled to compensation. She would,
however, be compensated properly as Assistant Registration Officer when she re-assumed said
position.

Respondent, on the other hand, claims that her removal from office as Local Civil Registrar was
not only highly irregular but also tainted with malice and bad faith. As she was illegally
dismissed, she should be entitled to backwages, RATA, and other bonuses. She said that her
removal was the direct consequence of the protest filed by Rosalina Asis, not because of any
administrative disciplinary action, such that the immediate execution of the orders to oust her as
local civil registrar was unnecessary.

Gentallan maintains that it was already late for the petitioner municipality to question the
conclusion of the appellate court in CA G.R. SP No. 40482 that she was illegally removed from
her position. The municipality did not appeal the said decision, and it had already become final.
The finality of said decision was also the basis of the Court of Appeals when it granted her
backwages, RATA and other bonuses.

At the outset, it should be noted that the Civil Service Commission, under the Constitution, is the
central personnel agency of the government charged with the duty of determining questions of
qualifications of merit and fitness of those appointed to the civil service.19 Thus, the CSC, as an
institution whose primary concern is the effectiveness of the civil service system, has the
standing to appeal a decision which adversely affects the civil service.20 We hold, at this
juncture, that CSC has the standing to appeal and/or to file its motion for reconsideration.

After a careful review of the circumstances in these consolidated petitions, we are in agreement
with the Court of Appeals that respondent was qualified and eligible for the position of local civil
registrar, and there was no factual nor legal basis for her removal from said position. The CA
order to reinstate her had become final and executory. The CA decision ought to be upheld.

As a permanent appointee to the position, she enjoys security of tenure. She is likewise entitled
to all benefits, rights and privileges attached to the position. She cannot be removed or dismissed
from the service without just cause and without observing the requirements of due process.21

An illegally dismissed government employee who is later ordered reinstated is entitled to

backwages and other monetary benefits from the time of her illegal dismissal up to her
reinstatement. This is only fair and just because an employee who is reinstated after having been
illegally dismissed is considered as not having left her office and should be given the
corresponding compensation at the time of her reinstatement.22
In the instant case, we note that there is no finding that malice or bad faith attended the illegal
dismissal and refusal to reinstate Gentallan by her superior officers. Thus, they cannot be held
personally accountable for her back salaries. The municipal government, therefore, should
disburse funds to answer for her claims resulting from dismissal.23

WHEREFORE, the assailed Decision of the Court of Appeals dated November 26, 2001 is
hereby MODIFIED. The Civil Service Commission is declared with legal standing to file its
appeal and/or motion for reconsideration in this case. But we hereby sustain the decision of the
Court of Appeals insofar as it declares that Jocelyn S. Gentallan should be reinstated to her
position with backwages, RATA, and bonuses to be paid by the Municipality of Jasaan, Misamis
Oriental.

SO ORDERED.
 RONNIE H. LUMAYNA, G.R. No. 185001
ROMEO O. CHULANA,
HELEN A. BONHAON, Present:
PETER G. LAHINA, JR.,
JUANITO O. LICHNACHAN, JR., PUNO,* C. J.,
SAMMY C. CHANG-AGAN, QUISUMBING,*
BONIFACIO L. BAICHON, YNARES-SANTIAGO,**
REYNALDO B. UCHAYAN, CARPIO,*
JOHN L. MARTIN, CORONA,
AUGUSTA C. PANITO, CARPIO MORALES,
ROSENDO P. BONGYO, JR., CHICO-NAZARIO,
KLARISA MAE C. CHAWANA, VELASCO, JR.,
Petitioners, NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
- versus - BERSAMIN,
DEL CASTILLO, and
ABAD, JJ.

COMMISSION ON AUDIT, Promulgated:

Respondent. September 25, 2009
x--------------------------------------------------x

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Certiorari under Rule 64 in relation to Rule 65 of the Rules of
Court is the Decision No. 2005-071[1] dated 29 December 2005 of the Commission on Audit
(COA) affirming the Notice of Disallowance[2] of the 5% salary increase of the municipal
personnel of the Municipality of Mayoyao, Ifugao covering the period 15 February to 30
September 2002, in the amount of P895,891.50, and requiring petitioners to refund the same. Also
assailed is the COA Decision No. 2007-040[3] dated 25 October 2007 denying the Motion for
Reconsideration.

On 15 June 2001, the Department of Budget and Management (DBM) issued Local Budget
Circular No. 74[4] (LBC No. 74), authorizing the grant of a maximum of 5% salary adjustment to
personnel in the Local Government Units (LGUs) effective 1 July 2001, pursuant to Republic Act
No. 9137[5] dated 8 June 2001.
 On 13 May 2002, the Sangguniang Bayan of Mayoyao, Ifugao, (Sangguniang Bayan)
enacted Resolution No. 41, s. 2002,[6] approving the 2002 Annual Municipal Budget, and
appropriating the amount of P1,590,376.00 thereof for the salaries and benefits of 17 newly created
positions in the municipality.[7] Upon review by the Sangguniang Panlalawigan of the Province
of Ifugao (Sangguniang Panlalawigan), the 2002 Annual Municipal Budget of Mayoyao, Ifugao
was declared operative subject to the conditions that the creation of 17 new positions shall in no
case be made retroactive and that the filling up of such positions be made strictly in accordance
with the Civil Service rules and regulations.[8]

On 8 July 2002, the Sangguniang Bayan approved Resolution No. 66, s. 2002, adopting a
first class salary scheme for the municipality and implementing a 5% salary increase for its
personnel in accordance with LBC No. 74.[9] For this purpose, it enacted Resolution No. 94, s.
2002, re-aligning the amount of P1,936,524.96[10] from the 2002 municipal budget originally
appropriated for the salaries and benefits of the 17 new positions.[11]

On 12 July 2002, DBM issued Local Budget Circular No. 75[12] (LBC No. 75) providing
guidelines on personal services limitation, pursuant to Section 325(a) of the Local Government
Code of 1991 (LGC).

On 16 December 2002, the Sangguniang Bayan through Resolution No. 144, s. 2002,
approved the 2003 Annual Municipal Budget stated in Appropriation Ordinance No. 03.[13] This
was reviewed by the Sangguniang Panlalawigan and approved on 10 February
2003 via Resolution No. 2003-808.[14] The Sangguniang Panlalawigan, however, disallowed the
5% salary increase and the re-alignment of funds pursuant to Resolution No. 94, s. 2002, of
the Sangguniang Bayan on the ground that the re-alignment is not sufficient in form to implement
a salary increase.

On 9 June 2003, the Sangguniang Bayan enacted Resolution No. 73, s. 2003,[15] earnestly
requesting the Sangguniang Panlalawigan to reconsider its Resolution.[16]Finding good faith on
the part of the officials of the municipality, the Sangguniang Panlalawigan in its Resolution No.
2004-1185 reconsidered its earlier position. Thus, the Sangguniang Panlalawigan allowed the
adoption of a first class salary schedule and the 5% salary increase of
the Municipality of Mayoyao, Ifugao.

Meanwhile, the Regional Legal and Adjudication Office (RLAO) of the COA-Cordillera
Administrative Region (COA-CAR) issued a Notice of Disallowance dated 16 May 2003 of the
amount of P895,891.50, representing payments for salary increases of municipal personnel, for the
period 15 February - 30 September 2002. According to COA-CAR, the grant of the increase was
not in accordance with Sections 325 and 326 of the LGC; that the limitation on personal services
had been exceeded; and that the Sangguniang Bayan resolution was not the appropriate manner of
granting the increase. Pursuant thereto, the following persons, petitioners herein, were ordered to
refund the said amount:

Helen A. Bonhain Budget Officer

Peter G. Lahina, Jr. Municipal Accountant
Ronnie H. Lumayna Municipal Mayor
Romeo O. Chulana
Juanito O. Lichnachan, Jr.
Sammy C. Chang-agan
Bonifacio L. Baichon
Reynaldo B. Uchayan
John L. Martin
Augusta C. Panitio
Rosendo P. Bongyo, Jr.
Klarisa Mae C. Chawana

Petitioners requested a reconsideration, which was denied on 5 August 2003 by the RLAO-
COA-CAR.[17] Thus, petitioners filed a Notice of Appeal before the Director, LAO-Local of COA
but it was denied on 10 November 2003 in Decision No. 2003-104.

Hence, petitioners filed a Petition for Review before respondent COA assailing LAO-Local
Decision No. 2003-104.

On 29 December 2005, the COA rendered the herein assailed Decision No. 2005-
[18]
071 denying the petition for lack of merit, and affirming the disallowance in the amount
of P895,891.50. The COA held thus:
After a careful evaluation, this Commission answers in the negative subject to the
extended discussions hereunder.

Anent the first assignment of error, the same has been judiciously passed upon in
LAO-Local Decision No. 2003-104. While the Municipality of Mayoyao may
grant salary increases pursuant to LBC No. 74, such grant should comply with the
limitations provided by law, specifically Section 325 (a) of R.A. No. 7160. There
is no doubt that in the grant of the 5% salary increase to the officials and employees
of the Municipality of Mayoyao, the limitation for PS in the annual budget of said
Municipality had been exceeded. In fact, in a recomputation made Ms. Virginia B.
Farro, Provincial Budget Officer of Ifugao, as embodied in her letter dated July 04,
2003, it was revealed that the Annual Budget of the Municipality exceeded the PS
 limit by P3,944,568.05.Furthermore, Mr. Julian L. Pacificador, Jr., Regional
Director, DBM-CAR, in his letter dated December 3, 3003 asserted that the grant
of the increase through the adoption of higher salary class schedule is not included
in the list of items and activities whereby PS limitation may be waived under LBC
No. 75. It must also be noted that the Municipalitys budget adopted the salary rates
under LBC No. 69 and not the salary rates under LBC No. 74.

Anent the second assignment of error, the same will not suffice to over-turn the
other grounds for the audit disallowance. The fact remains that the grant of the 5%
salary increase contravened the limitation of the law as explicitly provided under
item (a) of section 325 of R.A. No. 7160.

Anent the third assignment of error, while the Sanggguniang Panlalawigan of

Ifugao, in its resolution No. 2002-556, has declared operative the 2002 Annual
Budget of Mayoyao, the review of said Sanggunian was only limited to the
provisions stated in the said budget which contained, among others, provisions for
the funding of the 17 newly created positions and not the salary increases. Thus,
the declaration of the Sangguniang Panlalawigan of Ifugao that the 2002 annual
budget was operative did not include the grant of the 5% salary increase because
the same was not actually contained in the said budget but in SB Resolution No.
66, series of 2002.

Anent the 4th assignment of error, the disallowance is not based solely on the results
of the favorable review of the Sangguniang Panlalawigan of Ifugao since there are
other grounds which would justify and uphold the disallowance. [19]

Petitioners filed a Motion for Reconsideration but it was denied by respondent COA on 25
October 2007 in its Decision No. 2007-040.[20]

Hence, this petition[21] under Rule 64 of the Rules of Court raising the
following issues:

1. RESOLUTION NO. 66, S. 2002 ADOPTING A 5% INCREASE IN THE

SALARY OF THE PERSONNEL OF LGU MAYOYAO PURSUANT TO
DBM LBC 74, AND RESOLUTION NO. 94, S. 2002 PROVIDING THE
FUND TO IMPLEMENT THE FORMER ARE VALID EXERCISES OF
LOCAL LEGISLATIVE PREROGATIVE BY THE SANGGUNIANG
BAYAN OF MAYOYAO, IFUGAO. THERE IS SUFFICIENT PROOF
THAT THE BUDGET OF THE MUNICIPALITY OF MAYOYAO FOR 2002
DID NOT EXCEED THE PS LIMITATIONS FOR THAT PARTICULAR
YEAR. IN THE SAME MANNER, THE REALIGNMENT OF FUNDS
PURSUANT TO RESOLUTION NO. 94, S. 2002 DID NOT CREATE ANY
INCREASE IN THE PERSONAL SERVICES ALLOCATION OF THE
AFORESAID MUNICIPALITY FOR THAT PARTICULAR YEAR
BECAUSE THE REALIGNMENT PERTAINS TO A REALIGNMENT OF
 AN EXISTING PERSONAL SERVICES FUND PARTICULARLY THE
AMOUNT ORIGINALLY INTENDED FOR THE SEVENTEEN
POSITIONS WHICH WERE VACATED AND/OR ABOLISHED, TO FUND
THE SALARY INCREASE WHICH IN ITSELF IS A PERSONAL SERVICE
EXPENDITURE. THE HONORABLE COMMISSION ON AUDIT,
THEREFORE, GRAVELY ABUSED ITS DISCRETION WHEN IT HELD
THAT THE REALIGNMENT PURSUANT TO RESOLUTION NO. 94, S.
2002 CAUSED THE LGU OF MAYOYAO TO EXCEED THE PS
LIMITATIONS FOR 2002 AS PRESCRIBED BY LAW AND
CONSEQUENTLY DECLARING AS INVALID RESOLUTION NO. 66 S.
2002 OF THE SANGGUNIANG BAYAN OF MAYOYAO, IFUGAO.

2. THE PERSONAL SERVICES ALLOCATION FOR THE MUNICIPALITY

OF MAYOYAO, IFUGAO FOR FY 2002 WAS COMPUTED IN
ACCORDANCE WITH DBM LBC 74 IN RELATION TO DBM LBC 69
WHICH WERE THE CIRCULARS IN EFFECT AT THE TIME THE
BUDGET OF THE LGU FOR FY 2002 WAS REVIEWED, APPROVED
AND DECLARED OPERATIVE BY THE SANGGUNIANG
PANLALAWIGAN OF THE PROVINCE OF IFUGAO THROUGH
RESOLUTION NO. 2002-556. SOON THEREAFTER DBM LBC 75 WAS
ISSUED WITH A CLEAR EFFECTIVITY CLAUSE EXEMPTING FROM
ITS OPERATION BUDGETS WHICH HAVE ALREADY BEEN
REVIEWED PRIOR TO ITS ISSUANCE. NOTICE OF DISALLOWANCE
(ND) NO. 03-006 DATED MAY 16, 2003 IS PREMISED ON A
RECOMPUTATION OF THE ALLOWABLE PS LIMITATION OF THE
LGU BASED ON RATES STATED IN DBM LBC 75 CONTRARY TO THE
CLEAR LANGUAGE OF ITS EFFECTIVITY CLAUSE. THE
HONORABLE COMMISSION, THEREFORE, GRAVELY ABUSED ITS
DISCRETION WHEN IT UPHELD THE NOTICE OF DISALLOWANCE
(ND) NO. 03-007 WHICH DIRECTED THE HEREIN PETITIONERS TO
REFUND THE AMOUNT DISALLOWED THEREIN.

3. PUBLIC OFFICERS ENJOY THE PRESUMPTION OF REGULARITY OF

PERFORMANCE OF OFFICIAL FUNCTIONS AND DUTIES. FOR THIS
REASON AND MORE, THE HONORABLE SUPREME COURT UPHELD
CERTAIN NOTICES OF DISALLOWANCE ISSUED BY THE
HONORABLE COMMISSION TO CERTAIN GOVERNMENT AGENCIES
BUT DECLINED TO LET THE PERSONS LIABLE THEREFORE TO
REFUND THE AMOUNT DISALLOWED ON THE GROUND OF GOOD
FAITH. IN RESOLUTION NO. 2004-1185 OF THE SANGGUNIANG
PANLALAWIGAN OF IFUGAO RECOGNIZED THE GOOD FAITH OF
LGU MAYOYAO AND THE NOBLE INTENTIONS OF THE OFFICERS
THEREOF TO GIVE THE EMPLOYEES A DECENT PAY. THE
HONORABLE COMMISSION ON AUDIT, THEREFORE GRAVELY
ABUSED ITS DISCRETION, WHEN IT FAILED TO CONSIDER THE
GOOD FAITH OF THE OFFICERS WHO APPROVED THE QUESTIONED
 RESOLUTIONS AND DEMANDED THE REFUND BY HEREIN
PETITIONERS OF THE WHOLE AMOUNT DISALLOWED THEREIN
EVEN IF THE SAID AMOUNTS WERE ALREADY RECEIVED BY THE
EMPLOYEES.[22]

The foregoing boils down to the core issue of whether the COA committed grave abuse of
discretion in affirming the disallowance of the amount of P895,891.50, representing the 5% salary
increase of the personnel of the municipality of Mayoyao for the period 15 February to 30
September 2002, and in ordering petitioners to refund the same.

We first dispense with the procedural issue of whether the petition was timely filed.

Respondent, through the Office of the Solicitor General, argues that the petition should be
dismissed outright for being filed beyond the reglementary period to appeal.[23]Respondent
maintains that since petitioners received a copy of Decision No. 2005-071 on 29 August 2006,
they only had 30 days or until 28 September 2006 within which to file a Motion for
Reconsideration or a Petition for Review on Certiorari with the Supreme Court. As the Motion for
Reconsideration was filed only on 2 October 2006, the COA Decision No. 2005-71 already
attained finality.[24]

On the other hand, petitioners allege that this argument on belated filing is misplaced
considering that respondent COA already gave due course to their Motion for Reconsideration, the
resolution of which was embodied in its Decision No. 2007-040. At any rate, petitioners argue that
their failure to file the Motion for Reconsideration with respondent COA on 28 September
2006 was justified because the government offices in Metro Manila were closed due to typhoon
Feria.[25]

Petitioners contention has merit. Records show that COA gave due course to the Motion
for Reconsideration without stating in its Decision No. 2007-040[26] that it was filed out of
time. For this reason, we find that the issue of whether the petitioners timely filed the Motion for
Reconsideration has become moot.

Going now to the merits of the case, petitioners contend that Resolution Nos. 66 and 94, s. 2002,
are valid exercise of legislative prerogative in accordance with DBM LBC No. 74, which gave
them the authority to grant a maximum of 5% salary adjustment to personnel in the LGU effective
1 July 2001. Petitioners cite as basis Resolution No. 2002-556 of the Sangguniang
Panlalawigan which declared as operative the 2002 Annual Budget of
the Municipality of Mayoyao, Ifugao on 10 June 2002.

Petitioners also claim that the amount allocated in the 2002 municipal budget for personal services
is within the allowable limits prescribed by law. In declaring that the municipality exceeded the
personal services limitation set by law, respondent COA based its finding on a computation using
the rates prescribed in LBC No. 75, and not LBC No. 74, in relation to LBC No. 69, on which the
municipality based its computation. Petitioners further explain that when the municipality enacted
Resolution No. 94, s. 2002, re-aligning the amount appropriated for the 17 newly created positions
to the 5% salary increase of the municipal personnel, it did so with the understanding that the 17
newly created positions were vacated and/or abolished. Thus, the re-alignment of the aforesaid
amount was done without decreasing the whole amount originally earmarked for personal services.

Claiming good faith, petitioners insist that Resolution No. 66, s. 2002 was enacted on 2 July 2002,
while LBC No. 75 was issued by DBM on 12 July 2002 and was received by them at a much later
date; that Notice of Disallowance No. 03-006 was issued only on 16 May 2003, after the
municipality had already implemented the 5% salary increase pursuant to Resolution Nos. 66 and
94, s. 2002; and that the Sangguniang Panlalawigan recognized the good faith of the municipality
when it enacted Resolution No. 2004-1185 where it reconsidered its earlier Resolution No. 2003-
808.

We PARTIALLY GRANT the petition.

The COA disallowed the amount of P895,891.50 on the ground that the 5% salary increase
exceeded the total allowable appropriations of the municipality for personal services provided by
law, specifically Section 325(a)[27] of the LGC. It based its finding on the recomputation made by
Ms. Virginia B. Farro, Provincial Budget Officer of Ifugao, which showed that the Annual Budget
of the municipality exceeded the personal services limit by P3,944,568.05.[28] According to the
COA, the municipalitys budget adopted the salary rates under LBC No. 69 instead of the salary
rates prescribed under LBC No. 74 which is the applicable circular in this case.[29]

As regards petitioners reliance on Resolution No. 2002-556 of

the Sangguniang Panlalawigan, the COA in its Decision No. 2005-071 made it clear that the
review of the 2002 municipal budget by the Sangguniang Panlalawigan was only limited to the
provisions stated in the said budget which contained, among others, provisions for the funding of
the 17 newly created positions, and not its re-alignment to the 5% salary increase. Consequently,
the declaration by the Sangguniang Panlalawigan in the said Resolution that the 2002 municipal
budget was operative did not include the grant of the 5% salary increase, as the same was not
contained in the said budget but in Resolution No. 66, s. 2002.[30]

We find that the COA correctly affirmed the disallowance of the amount of P895,891.50.

At the outset, it must be stressed that factual findings of administrative bodies charged with
their specific field of expertise, are afforded great weight by the courts, and in the absence of
substantial showing that such findings were made from an erroneous estimation of the evidence
presented, they are conclusive, and in the interest of stability of the governmental structure, should
not be disturbed.[31]

In this case, the assailed Decisions of the COA clearly presented the factual findings and
adequately explained the legal basis for disallowing the said amount. Indeed, as computed by Ms.
Virginia Farro, the Provincial Budget Officer of Ifugao, the annual budget of Mayoyao for 2002
exceeded the limit for personal services as prescribed in Section 325(a) of the LGC
by P3,944,568.05. Further, it was established that the grant of the increase through the adoption of
higher salary class schedule is not among the list of items and activities whereby the limitation for
personal services may be waived pursuant to LBC No. 75. Finally, the municipality adopted the
salary rates under LBC No. 69 and not the salary rates under LBC No. 74. No grave abuse of
discretion amounting to lack or excess of jurisdiction can thus be attributed to respondent
COA. Grave abuse of discretion exists where an act of a court or tribunal is performed with a
capricious or whimsical exercise of judgment equivalent to lack of jurisdiction, or where the power
is exercised in an arbitrary or despotic manner by reason of passion or personal hostility which
must be so patent and gross as to amount to an invasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law mere abuse of discretion is not
enough.[32]

However, we find that petitioners should not be ordered to refund the disallowed amount
because they acted in good faith.

In Abanilla v. Commission on Audit,[33] the Board of Directors of the Metropolitan Cebu

Water District (MCWD) issued several resolutions giving benefits and privileges to its personnel
which included hospitalization privileges, monetization of leave credits, Christmas bonus, and
longevity allowance. MCWD likewise entered into a collective bargaining agreement (CBA) with
the employees union providing for benefits, such as cash advances, 13th month pay, mid-year
bonus, Christmas bonus, vacation and leave credits, hospitalization, medicare, uniform privileges
and water allowance.

However, the COA disallowed the amount of P12,221,120.86 representing hospitalization

benefits, mid-year bonus, 13th month pay, Christmas bonus and longevity pay on the ground that
the compensation package of MCWD personnel may no longer be subject of a CBA, as its officers
and employees were covered by the Civil Service laws, and not by the Labor Code.

On petition for certiorari before this Court, the disallowance by COA was sustained;
however, the MCWD personnel who received those benefits were no longer required to refund the
same. The Court held, thus:

While we sustain the disallowance of the above benefits by respondent

COA, however, we find that the MCWD affected personnel who received the above
mentioned benefits and privileges acted in good faith under the honest belief that
the CBA authorized such payment. Consequently, they need not refund them.

In Querubin vs. Regional Cluster Director, Legal and Adjudication Office,

COA Regional Office VI, Pavia, Iloilo City, citing, De Jesus vs. Commission on
Audit, this Court held.:

Considering, however, that all the parties here acted in good

faith, we cannot countenance the refund of subject incentive benefits
for the year 1992, which amounts the petitioners have already
received. Indeed, no indicia of bad faith can be detected under the
attendant facts and circumstances. The officials and chiefs of offices
concerned disbursed such incentive benefits in the honest belief that
the amounts given were due to the recipients and the latter accept
the same with gratitude, confident that they richly deserve such
benefits.

x x x. Petitioners here received the additional allowances and

bonuses in good faith under the honest belief that the LWUA Board
Resolution No. 313 authorized such payment. At the time
petitioners received the additional allowances and bonuses, the
Court had not yet decided Baybay Water District. Petitioners had no
knowledge that such payment was without legal basis. Thus, being
in good faith, petitioners need not refund the allowances and
bonuses they received but disallowed by the COA.
In Blaquera v. Alcala,[35] petitioners who were officials and employees of several
government agencies were paid productivity incentive benefits for the year 1992 pursuant to
Executive Order No. 292, otherwise known as the Administrative Code of 1987. On 19 January
1993, then President Fidel V. Ramos issued Administrative Order No. 29 limiting the grant of
productivity incentive benefits for the year 1992 in the maximum amount of P1,000.00 and
enjoining the grant of said benefit without prior approval of the President.

Consequently, all agencies that authorized the payment of productivity incentive benefits
for the year 1992 in excess of P1,000.00 were directed to immediately cause the return/refund of
the excess amount. Thus, respondents therein caused the deduction, from petitioners salaries or
allowances, of the amounts needed to cover the alleged overpayments.

On petition before the Court, it was held that Administrative Order No. 29 limiting the
amount of incentive benefits and enjoining heads of government agencies from granting incentive
benefits without prior approval of the President, was a valid exercise of the Presidents power of
control and authority over executive departments. As regards petitioners contention that
respondents should be held personally liable for the refund in question, the Court held, thus:

Untenable is petitioners contention that the herein respondents be held

personally responsible for the refund in question. Absent a showing of bad faith or
malice, public officers are not personally liable for damages resulting from the
performance of official duties.

Every public official is entitled to the presumption of good faith in the

discharge of official duties. Absent any showing of bad faith and malice, there is
likewise a presumption of regularity in the performance of official duties.

In upholding the constitutionality of AO 268 and AO 29, the Court reiterates

the well-entrenched doctrine that in interpreting statutes, that which will avoid a
finding of unconstitutionality is to be preferred.

Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which
amounts the petitioners have already received. Indeed, no indicia of bad faith can
be detected under the attendant facts and circumstances. The officials and chiefs of
offices concerned disbursed such incentive benefits in the honest belief that the
amounts given were due to the recipients and the latter accepted the same with
gratitude, confident that they richly deserve such benefits.[36]

This ruling has been consistently applied in several cases.[37]

In the instant case, although the 5% salary increase exceeded the limitation for
appropriations for personal services in the Municipality of Mayoyao, this alone is insufficient to
overthrow the presumption of good faith in favor of petitioners as municipal officials. It must be
mentioned that the disbursement of the 5% salary increase of municipal personnel was done under
the color and by virtue of resolutions enacted pursuant to LBC No. 74, and was made only after
the Sangguniang Panlalawigan declared operative the 2002 municipal budget. In fact, the Notice
of Disallowance was issued only on 16 May 2003, after the municipality had already implemented
the salary increase.Moreover, in its Resolution No. 2004-1185,[38] the Sangguniang
Panlalawigan reconsidered its prior disallowance of the adoption of a first class salary schedule
and 5% salary increase of the Municipality of Mayoyao based on its finding that the municipal
officials concerned acted in good faith, thus:

WHEREAS, the Sangguniang Bayan of Mayoyao however justified that

their realignment of the amount of Php 1,936,524.96 and the adoption of a first
class salary was done in good faith and with the purpose of giving decent pay to
officials and employees of the said Municipality considering the high cost of living;

WHEREAS, this Body finding merit on the justification of the said

Municipality hereby reconsiders its earlier stand on the disallowed adoption of a
first class salary schedule and the 5% salary increase of the Municipality of
Mayoyao, Ifugao;

Furthermore, granting arguendo that the municipalitys budget adopted the incorrect salary
rates, this error or mistake was not in any way indicative of bad faith. Under prevailing
jurisprudence, mistakes committed by a public officer are not actionable, absent a clear showing
that he was motivated by malice or gross negligence amounting to bad faith. It does not simply
connote bad moral judgment or negligence. Rather, there must be some dishonest purpose or some
moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive
or intent, or ill will. It partakes of the nature of fraud and contemplates a state of mind affirmatively
operating with furtive design or some motive of self-interest or ill will for ulterior purposes.[40] As
we see it, the disbursement of the 5% salary increase was done in good faith. Accordingly,
petitioners need not refund the disallowed disbursement in the amount of P895,891.50.

WHEREFORE, the instant Petition is PARTIALLY GRANTED. The Decision of the

Commission on Audit No. 2005-071 dated 29 December 2005 and its Decision No. 2007-040
dated 25 October 2007 affirming the disallowance of the 5% salary increase of the municipal
personnel of Mayoyao, Ifugao, covering the period 15 February to 30 September 2002 in the
amount of P895,891.50, are AFFIRMED with MODIFICATION that petitioners need not
refund the said disallowed amount of P895,891.50.

SO ORDERED.