G.R. No. 207281 & G.R. No. 210922, March 5, 2019
ELAINE R. ABANTO, et al., Petitioners, vs. THE BOARD OF DIRECTORS OF THE DEVELOPMENT BANK OF THE PHILIPPINES, Respondents.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. COMMISSION ON AUDIT, Respondent.

FACTS

1. The Development Bank of the Philippines (DBP) Board approved the Early Retirement Incentive Program (ERIP) IV in 2003, with a 10-year implementation period (2003-2012) and two tranches (2003-2008 and 2008-2012). The program’s general objective was to ensure the bank’s vitality and attune it to advances in banking technology.
2. On February 19, 2007, the Commission on Audit (COA), through its Supervising Auditor, issued an Audit Observation Memorandum (AOM) stating that DBP’s ERIP IV-2003 was implemented contrary to Republic Act No. 8523 . The AOM recommended that DBP secure the approval of the Secretary of Finance, suspend the ERIP IV implementation, and require recipients to return excess benefits.
3. On May 17, 2007, COA issued a Notice of Disallowance (ND) disallowing the payment of retirement benefits under ERIP IV-2003 for lack of approval from the Secretary of Finance and the President as required under Section 34 of the DBP Charter and Memorandum Order No. 20.
4. DBP appealed the ND to the COA Office of the Corporate Auditor. Subsequently, DBP secured the approval of the Secretary of Finance (January 14, 2009) and the confirmation of then President Gloria Macapagal-Arroyo (April 22, 2010), though COA argued the President’s approval was valid only until June 30, 2010.
5. On June 16, 2010, during the pendency of its appeal, the DBP Board approved the resumption of ERIP IV through Board Resolution No. 0167 (ERIP IV-2010), setting an application period until December 31, 2011 and an effective retirement date no later than December 31, 2012.
6. On November 12, 2010, DBP issued an Advisory moving the deadline for filing applications under ERIP IV-2010 from December 31, 2011 to December 31, 2010. The petitioners-retirees (141 former DBP employees) availed of the retirement benefits under this program.
7. On December 28, 2010, the COA Corporate Government Sector (CGS) issued a Decision affirming the ND. DBP’s subsequent motions for reconsideration were denied by the COA Commission Proper in its Decision dated October 17, 2012 and Resolution dated December 3, 2013.
8. The consolidated petitions were filed: (a) G.R. No. 207281 , a Petition for Mandamus by the retirees to compel the DBP Board to release their ERIP benefits; and (b) G.R. No. 210922, a Petition for Certiorari by DBP assailing the COA’s disallowance of the ERIP IV payments.

ISSUE

Whether the Early Retirement Incentive Program IV-2010 (ERIP IV-2010) of the Development Bank of the Philippines is valid and its benefits properly payable, notwithstanding the Commission on Audit’s disallowance of earlier tranches for lack of required presidential approval.

RULING

The Supreme Court DISMISSED the petitions.
1. The ERIP IV-2010 is invalid for lack of the required presidential approval. Section 34 of Executive Order No. 81 (the Revised DBP Charter) mandates that any supplementary retirement, pension, or gratuity plan proposed by the DBP Board for its personnel shall be subject to the approval of the Secretary of Finance and confirmation by the President of the Philippines. The Court held that ERIP IV-2010 is a supplementary retirement plan, as it provides benefits over and above those in the existing DBP Gratuity Plan. The approval secured from the Secretary of Finance and President Arroyo in 2009 and 2010, respectively, pertained to the earlier ERIP IV-2003/2006/2007 tranches. There was no separate presidential confirmation for the ERIP IV-2010 implemented under Board Resolution No. 0167 dated June 16, 2010. The absence of this mandatory presidential confirmation rendered the program void.
2. The Court rejected the argument that the President’s prior approval for the earlier tranches extended to ERIP IV-2010. The approval letters from the Secretary of Finance and President Arroyo were specific to the ERIP IV implemented from 2003 to 2008. The Court noted COA’s position that the President’s approval was effective only until June 30, 2010. The DBP Board’s act of approving a new resolution (No. 0167) in June 2010 to “resume” the program effectively created a new iteration of the plan requiring fresh presidential confirmation, which was not obtained.
3. The petitioners-retirees are not entitled to the payment of ERIP IV-2010 benefits. Since the program itself is invalid for non-compliance with a mandatory statutory requirement, no rights to the supplementary benefits accrued in favor of the employees who availed of it. The Court emphasized that the requirement of presidential confirmation is a substantive condition imposed by law for the validity of such plans in government-owned or controlled corporations like DBP.
4. The COA did not commit grave abuse of discretion in issuing the Notice of Disallowance. The Court found that COA correctly applied the law in disallowing the payments for lack of the requisite approval. Its actions were in accordance with its constitutional mandate to audit government expenditures and ensure they are in compliance with law.
Therefore, the ERIP IV-2010 benefits were properly disallowed, and the petitioners-retirees are not entitled to receive them. The DBP Board cannot be compelled via mandamus to release payments under an invalid program.