G.R. No. 218363 , May 31, 2016
ENGR. ARTEMIO A. QUINTERO, JR., GENERAL MANAGER, CAUAYAN CITY WATER DISTRICT (CCWD) CAUAYAN CITY, ISABELA, Petitioner, vs. COMMISSION ON AUDIT, Respondent.

FACTS

On March 28, 2008, the Board of Directors (BOD) of Cauayan City Water District (CCWD) passed Board Resolution No. 004, Series of 2008, upgrading the monthly salary of its General Manager (GM), petitioner Engr. Artemio A. Quintero, Jr., from P25,392.00 to P45,738.00. This was based on Section 2 of Republic Act (R.A.) No. 9286, which amended Section 23 of Presidential Decree (P.D.) No. 198 (The Provincial Water Utilities Act of 1973). The CCWD submitted its Plantilla of Personnel and Salary Adjustment to the Department of Budget and Management (DBM) for approval. The DBM, in response, informed Quintero that while Section 2 of R.A. No. 9286 empowered the BOD of Local Water Districts (LWDs) to fix the GM’s compensation, it must comply with the compensation standardization policy under R.A. No. 6758 , the Salary Standardization Law (SSL). Following an audit and advice from the Commission on Audit (COA), Quintero voluntarily stopped receiving his adjusted salary in December 2009. On March 9, 2010, the COA Auditor issued Notice of Disallowance (ND) No. 2010-01-101, disallowing the overpayment in Quintero’s adjusted salary amounting to P364,659.50. Quintero appealed to the COA Regional Office, which upheld the ND in its April 25, 2011 Decision, stating the BOD must consider the SSL’s provisions and that no vested right arises from a salary increase made contrary to law. Quintero further appealed to the COA Proper, which affirmed the Regional Office’s decision in its July 18, 2014 Decision and denied his motion for reconsideration in a March 9, 2015 Resolution. Quintero then filed this petition for certiorari.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in upholding the disallowance of the salary increase granted to the General Manager of Cauayan City Water District, and consequently, whether petitioner is liable to refund the disallowed amount.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed Commission on Audit decisions. The salary increase was rightfully disallowed, but petitioner Engr. Artemio A. Quintero, Jr. is ABSOVLED from refunding the disallowed amount.
1. On the Authority of the Board of Directors and the Applicability of the Salary Standardization Law (SSL): The Court ruled that while Section 23 of P.D. No. 198, as amended by R.A. No. 9286 , empowers the BOD of a Local Water District to appoint and fix the compensation of its General Manager, this power is not absolute and must be exercised within the standards and limitations set by existing laws, particularly R.A. No. 6758 or the SSL. The amendment introduced by R.A. No. 9286 pertained only to the security of tenure of the GM (“shall not be removed from office, except for cause and after due process”) and did not alter or expand the BOD’s power to set salaries beyond the SSL’s mandates. The Court, citing Mendoza v. COA, held that LWDs are government-owned or controlled corporations (GOCCs) without original charters and are therefore covered by the SSL. The BOD’s authority to fix salaries is subject to the policies, rules, and regulations issued by the DBM, and any compensation set above the SSL-prescribed rates is unauthorized and illegal.
2. On Implied Repeal and Inconsistency: The Court rejected petitioner’s argument that R.A. No. 9286 , being a later law, impliedly repealed the SSL. An implied repeal is disfavored. The provisions of R.A. No. 9286 amending P.D. No. 198 are not inconsistent with the SSL. The SSL establishes a general compensation framework for government employees, while P.D. No. 198, as amended, delegates administrative authority to the BOD to set the GM’s pay within that framework. The two laws can be harmonized. Furthermore, Joint Congressional Resolution No. 4 (cited by petitioner) did not declare R.A. No. 9286 inconsistent with the SSL; it merely authorized the adjustment of compensation for LWD personnel pursuant to the SSL.
3. On Liability for Refund: The Court applied the doctrine of good faith to absolve petitioner from the refund. Good faith is presumed. Petitioner received the increased salary because the CCWD BOD granted it pursuant to its interpretation of R.A. No. 9286 . There was no finding that petitioner participated in the approval of the resolution or that he was in bad faith. He voluntarily stopped receiving the adjusted salary upon the COA’s advice. Following precedent (Mendoza v. COA), recipients of disallowed payments who are not shown to be guilty of misconduct, bad faith, or negligence in the approval or processing of the transaction are not liable to refund. The liability to refund rests on the approving officers who authorized the illegal payment.