GR 223625; (November, 2016) (Digest)
G.R. No. 223625 November 22, 2016
NATIONAL TRANSMISSION CORPORATION, Petitioner vs. COMMISSION ON AUDIT (COA) and COA CHAIRPERSON MICHAEL G. AGUINALDO, Respondents
FACTS
The National Transmission Corporation (TransCo), a GOCC, engaged Benjamin B. Miranda as a contractual Senior Engineer from April 1, 2003, to March 21, 2004, under a Service Agreement stipulating no employer-employee relationship and that his service would not be credited as government service. Following the privatization of TransCo’s operations and the turnover to the National Grid Corporation of the Philippines, Miranda and other personnel were terminated on June 30, 2009. Pursuant to a TransCo Board Resolution, Miranda received separation pay, which included compensation for his contractual service period.
The COA issued a Notice of Disallowance for the portion of Miranda’s separation benefits covering his contractual period, amounting to ₱55,758.26. The COA Corporate Government Sector and, on appeal, the Commission Proper, affirmed the disallowance. They ruled that under the EPIRA law and its Implementing Rules, separation benefits for casual or contractual employees required that their appointments be approved or attested to by the Civil Service Commission (CSC), a condition Miranda’s contract lacked. The COA held the disbursement was contrary to law and that Miranda and the approving TransCo officers were solidarily liable for the refund.
ISSUE
Whether the COA committed grave abuse of discretion in affirming the disallowance of separation benefits paid to a former contractual employee of TransCo.
RULING
The Supreme Court GRANTED the petition, REVERSED the COA rulings, and ordered the Notice of Disallowance DISMISSED. The legal logic proceeded on two key points. First, the Court distinguished the case from the general rule requiring CSC approval for contractual government employees to be entitled to benefits. It cited Lopez v. MWSS, which held that where an individual has rendered continuous service under the control and supervision of a government agency, an employer-employee relationship exists as a matter of fact, regardless of contractual stipulations to the contrary. Miranda’s service was integral to TransCo’s operations, making him a de facto employee entitled to separation benefits upon the privatization-caused termination of his service.
Second, the Court absolved Miranda from liability to refund the disallowed amount based on the principle of good faith. Applying precedents like Silang v. COA, the Court ruled Miranda was a “passive recipient” who had no participation in the Board’s decision to grant the benefits and honestly believed he was legally entitled to receive them. Consequently, while the disbursement was technically irregular for lacking CSC approval, the recipient’s good faith precludes a refund obligation. The COA thus committed grave abuse of discretion in upholding the disallowance and imposing solidary liability.