GR 218072; (March, 2016) (Digest)
G.R. No. 218072 . March 08, 2016.
METROPOLITAN NAGA WATER DISTRICT, ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.
FACTS
The Board of Directors of petitioner Metropolitan Naga Water District (MNWD) passed a resolution in 2002 granting the payment of accrued Cost of Living Allowance (COLA) for the period 1992-1999 to its employees, relying on jurisprudence and opinions from the Office of the Government Corporate Counsel. The COLA was disbursed in installments. In 2009, the COA Audit Team Leader issued a Notice of Disallowance for the 2007 payments totaling ₱3,499,681.14, citing lack of documentation. The COA Regional Office and, subsequently, the Commission on Audit proper affirmed the disallowance. COA ruled that MNWD failed to prove its employees were receiving COLA prior to July 1, 1989, a prerequisite for entitlement under relevant rules, and that the cited case of PPA Employees was inapplicable.
ISSUE
Whether the Commission on Audit committed grave abuse of discretion in disallowing the payment of accrued COLA to MNWD employees for the period 1992-1999.
RULING
The Supreme Court ruled that the COA did not commit grave abuse of discretion in disallowing the payment, but modified the ruling regarding refund. The legal logic proceeds as follows: First, Local Water Districts are indeed covered by Letter of Implementation (LOI) No. 97. However, entitlement to the payment of accrued COLA under the relevant legal framework requires proof that the employees were already receiving the allowance as of July 1, 1989. This requirement, established in jurisprudence, was not met by MNWD, as it admitted it had not previously paid COLA and only began disbursements in 2002. The disallowance was therefore proper.
Second, on the liability for refund, the Court applied the principle of solutio indebiti and the doctrine of good faith. The approving officers and the recipient employees acted in good faith. The officers relied in good faith on a board resolution and existing OGCC opinions at the time of disbursement. The employees passively received the benefits believing they were entitled. Consequently, while the disbursement was correctly disallowed for non-compliance with legal requirements, the recipients and approving officers are not liable to refund the amounts, as demanding repayment under these circumstances would be unjust. The COA decision was affirmed but modified to absolve all parties from the refund obligation.