G.R. No. 209712 , February 16, 2021.
RIZAL M. ADVINCULA, ET AL., PETITIONERS, VS. THE COMMISSION ON AUDIT, CHAIRPERSON MA. GRACIA M. PULIDO-TAN, COMMISSIONER HEIDI L. MENDOZA AND COMMISSIONER ROWENA V. GUANZON, RESPONDENTS.

FACTS

Petitioners are employees of Bases Conversion and Development Authority Management and Holdings, Inc. (BMHI), a subsidiary of the Bases Conversion and Development Authority (BCDA). On September 18, 2003, the BCDA Board of Directors approved Resolution No. 2003-09-186 authorizing the grant of Annual Gift Checks (AGCs) of at least P35,000.00 net of tax to its regular personnel, contractual officers and employees, members of the Board, office-based consultants, and those on detail from other government agencies. Relying on this parent company resolution, BMHI management released AGCs to its own employees and board members through Disbursement Vouchers dated September 23, 2003, totaling P2,912,000.00. The payments were certified by BMHI officials and approved by its President.
The Commission on Audit (COA) issued a Notice of Disallowance (ND) dated November 4, 2004, disallowing P2,158,000.00 of the total amount. The COA disallowed P1,835,000.00 paid to BMHI employees for being in excess of the rate authorized under the Department of Budget and Management (DBM)-approved corporate budget and P323,000.00 paid to BMHI board members as non-salaried personnel contrary to DBM Circular No. 2002-2. The COA Legal and Adjudication Office-Corporate later issued a Supplemental ND dated March 26, 2008, completely disallowing the entire P2,912,000.00, stating that BMHI, as a separate juridical entity from BCDA, could not rely on BCDA’s board resolution and that the BMHI Board itself did not pass a resolution authorizing the grant. The COA Commission Proper upheld the disallowance, initially absolving the payee-employees from liability but later, in a Resolution dated September 27, 2013, reversed this and held all payees liable to refund the amounts received based on principles of implied trust and unjust enrichment. Petitioners, the payee-employees, filed this Petition for Certiorari.

ISSUE

Did the COA Proper commit grave abuse of discretion amounting to lack or excess of jurisdiction in upholding the disallowance and holding the petitioners/payees, the BMHI Board, and other approving/certifying officials liable therefor?

RULING

No, the COA Proper did not commit grave abuse of discretion. The Supreme Court upheld the disallowance and the liability of the payees.
First, the Court found that the disallowance had attained finality. The petitioners’ appeal to the COA Proper from the Director’s Decision was filed on September 19, 2008, which was beyond the six-month reglementary period from their receipt of the decision on March 19, 2008. Consequently, the Director’s Decision became final and executory, and the COA Proper should not have entertained the appeal. The Court’s review is limited to determining grave abuse of discretion by the COA Proper, and its act of giving due course to a belated appeal, while erroneous, did not amount to such grave abuse as it did not violate the petitioners’ right to due process; they were able to fully argue their case.
Second, on the merits, the disallowance was proper. BMHI is a separate juridical entity from its parent company, BCDA. The BCDA Board Resolution could not justify BMHI’s grant of AGCs to its own employees; BMHI’s own Board was required to authorize such expenditure. No such BMHI Board resolution existed at the time of the grant. Furthermore, the grant lacked the requisite approval from the Office of the President as required by Administrative Order No. 37, which prohibits government-owned and -controlled corporations from granting additional incentives unless authorized. Therefore, the disbursement was illegal for lack of a specific statutory authority and proper approval, violating Sections 4(1) and 4(5) of Presidential Decree No. 1445 (Government Auditing Code).
Finally, the liability of the payees to refund the disallowed amounts was correctly imposed. Following jurisprudence, recipients of disallowed benefits are liable to return them based on the principle of solutio indebiti and to prevent unjust enrichment, regardless of their good faith. Good faith is not a defense against the obligation to refund but may be considered in the execution of the refund order. The approving and certifying officers were also correctly held liable for their gross negligence in approving a disbursement without legal basis.