G.R. No. 262193 , July 11, 2023
DEVELOPMENT BANK OF THE PHILIPPINES, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

On March 7, 2005, the Development Bank of the Philippines (DBP) issued Circular No. 10, amending its policy to compute the money value of leave credits (MVLC) of its officials and employees based on their “gross monthly cash compensation” (including basic salary, allowances, and other benefits) instead of the “highest monthly salary received.” The Corporate Auditor (CA) of DBP issued an Audit Observation Memorandum on July 31, 2006, stating this computation was contrary to Civil Service Commission rules and Presidential Decree No. 1146, which defines “salary” as basic pay excluding allowances. On February 28, 2007, the CA issued Notices of Disallowance (NDs) totaling ₱26,182,467.36 for MVLC payments from March to December 2005. DBP argued its Revised Charter empowered its Board of Directors to fix remuneration, exempting it from laws like the Salary Standardization Law. DBP’s motions for reconsideration were denied. DBP appealed, citing subsequent approval of its Compensation Plan by then-President Gloria Macapagal-Arroyo and invoking good faith. The COA Commission Proper, in Decision No. 2018-197 dated January 30, 2018, affirmed the NDs but held passive recipient employees need not refund. It modified this in Decision No. 2022-072 dated January 24, 2022, ordering all payees to refund based on the “solutio indebiti” principle. DBP filed this Petition for Certiorari.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the payment of the money value of leave credits of DBP officials and employees computed based on their gross monthly cash compensation.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed Commission on Audit Decision No. 2022-072. The Court held that the COA did not commit grave abuse of discretion. The disallowance was proper because DBP Circular No. 10, which based MVLC computation on gross monthly cash compensation, contravened existing laws, rules, and regulations. Specifically, the Court cited CSC Memorandum Circular No. 41, series of 1998, and PD No. 1146 (as amended by RA No. 8291 ), which define the “monthly salary” for leave monetization as the “basic monthly salary,” excluding allowances. The Court ruled that DBP’s authority under its Revised Charter to fix compensation is not absolute and remains subject to general laws and rules promulgated by the CSC, DBM, and COA. The Court also rejected DBP’s claim of good faith, stating that ignorance of the law excuses no one. Applying the principle of solutio indebiti, all payees—both approving officers and passive recipients—are liable to refund the disallowed amounts, as they received payments without a lawful basis. The Court found no basis to excuse the recipients from refunding, as the payments were not authorized by law.