G.R. No. 258527, May 21, 2024
ARTHUR N. AGUILAR, MA. THERESA T. DEFENSOR, JEREMY Z. PARULAN, FERMIN S. LUSUNG, ANTONIO T. VILAR, ENRIQUE C. CUEJILO, JR., GUILLERMO N. HERNANDEZ, ROLANDO L. MACASAET, AND WILFREDO P. CU, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Philippine National Construction Corporation (PNCC), formerly the Construction Development Corporation of the Philippines (CDCP), was incorporated in 1966. After incurring substantial debts, the government, through a debt-to-equity conversion in 1983, became the owner of 76.8% of its authorized capital stock, making it a government-owned or controlled corporation (GOCC). In anticipation of the turnover of its tollway operations and the retrenchment/retirement of personnel, the PNCC Board of Directors passed several resolutions from 2005 to 2009 authorizing the grant of gratuity benefits to its directors and senior officers. Based on these resolutions, PNCC paid gratuity benefits totaling PHP 90,748,975.21 from 2007 to 2010 to its directors and officers. The Commission on Audit (COA) Post-Audit Team issued a Notice of Disallowance (ND) against these payments, citing violations of COA Circular No. 85-55-A and DBM Circular Letter No. 2002-2, and finding the payments excessive, unreasonable, extravagant, and illegal as the Board lacked authority to create the retirement fund. The COA Corporate Government Sector affirmed the ND. The COA Commission Proper, in Resolution No. 2020-479, affirmed the disallowance with modification regarding the liability of the payees. The petitioners, who are among the gratuity recipients and approving officers, filed this Petition for Certiorari.

ISSUE

Whether the COA committed grave abuse of discretion in affirming the disallowance of the gratuity benefits paid by PNCC to its directors and senior officers.

RULING

The Court DISMISSED the petition and AFFIRMED the assailed COA Resolution No. 2020-479. The COA did not commit grave abuse of discretion in disallowing the payments.
The Court ruled that PNCC is a GOCC subject to COA’s audit jurisdiction. The grant of gratuity benefits was properly disallowed for being contrary to law and regulations. Specifically, the payments violated DBM Circular Letter No. 2002-2, which prohibits the grant of additional compensation, allowances, or benefits to members of the Board of Directors of GOCCs beyond the authorized per diems. Furthermore, the required approval from the Office of the President, as mandated by its Memorandum Order No. 20, was not secured. The Court also found the Board Resolutions creating the retirement fund and authorizing the gratuities to be ultra vires, as the Board’s authority is limited by the Corporation Code and relevant administrative issuances governing GOCCs. The payments were deemed excessive and unreasonable, especially since PNCC was incurring losses during the period.
Regarding the liability of the petitioners, the Court applied the rules on return under the 2009 and 2015 COA Circulars. The approving officers (petitioners Aguilar, Defensor, and those who approved/signed the payments) are solidarily liable for the disallowed amount. The payee-recipients (all petitioners who received the benefits) are liable to return the amounts they received, except where they can prove that the amounts were genuinely given in consideration of services rendered. The Court found no basis to excuse the return, as the recipients received the payments based on invalid Board Resolutions and in violation of existing rules. The defense of good faith was not applicable to the approving officers, as they were expected to know the rules prohibiting such disbursements.