De Guzman v. Commission on Audit
REITERATIONFacts
The Antecedents: Petitioners, who were the General Manager, Finance Manager, and Board Directors of the Baguio Water District (BWD), received per diems amounting to P33,600 each for the month of September 2004. These payments were based on Local Water Utilities Administration (LWUA) Memorandum Circular (MC) No. 004-02, which allowed P8,400 per meeting for up to four meetings. However, on August 31, 2004, President Gloria Macapagal-Arroyo issued Administrative Order (AO) No. 103, which directed the continued adoption of austerity measures and capped the per diems of GOCC governing boards at P20,000 per month. AO 103 was published in the Malaya Newspaper on September 3, 2004. Procedural History: Following a routine audit, the Commission on Audit-Cordillera Administrative Region (COA-CAR) issued Audit Observation Memorandum No. 04-003 and Notice of Disallowance (ND) No. 06-026, disapproving the per diems in excess of the P20,000 limit (a total of P68,000). COA-CAR sustained the disallowance in Decision No. 2009-012. On appeal, the COA-Commission Proper (COA-CP) affirmed the disallowance in Decision No. 2012-150, ruling that AO 103 effectively superseded the LWUA circular. The Petition: Petitioners filed a Petition for Certiorari under Rule 64, arguing that the Commission on Audit (COA) erred in applying AO 103 over Presidential Decree (PD) No. 198 (as amended by Republic Act (RA) No. 9286). They contended that PD 198, being a law, should prevail over a mere executive issuance like AO 103. They further argued that they received the per diems in good faith and should not be required to refund the excess amounts, especially since they only received a copy of AO 103 on September 16, 2004.
Issue(s)
Whether Administrative Order No. 103 is inconsistent with Presidential Decree No. 198 and whether the President can validly overrule a Local Water Utilities Administration Memorandum Circular. Whether petitioners are liable to refund the disallowed per diems despite their claim of good faith.
Ruling
The petition is DISMISSED. The Decision and Resolution of the Commission on Audit are AFFIRMED. Petitioners are ordered to reimburse the amount received in excess of the allowed P20,000, totaling P13,600 each or an aggregate of P68,000.
Ratio Decidendi
On Issue 1: The Court held that there is no irreconcilable conflict between Presidential Decree (PD) No. 198 and Administrative Order (AO) No. 103. PD 198 allows the Baguio Water District (BWD) to prescribe per diems greater than P150 subject to Local Water Utilities Administration (LWUA) approval, while AO 103 merely imposes a monthly cap of P20,000 on the total amount received. The actual conflict exists between AO 103 and LWUA Memorandum Circular (MC) No. 004-02. Under Section 17, Article VII of the 1987 Constitution, the President exercises the power of control over all executive departments and offices, including Government-Owned and Controlled Corporations (GOCCs) like LWUA. This power of control, as explained in Province of Negros Occidental v. Commissioners, Commission on Audit, includes the authority to alter, modify, or set aside the acts of subordinates and substitute the President's judgment for theirs. Consequently, the President validly overruled MC No. 004-02 by issuing AO 103, and directors of GOCCs can no longer receive per diems exceeding the P20,000 limit. On Issue 2: The Court rejected the petitioners' defense of good faith and ordered the refund of the excess per diems. AO 103 specifically provided in Section 7 that it would take effect immediately upon its publication in two newspapers of general circulation, which occurred on September 3, 2004. The Court emphasized that the effectivity of the AO does not depend on the actual receipt of a copy by the affected offices; thus, it was already in force when the third and fourth checks were issued on September 15 and 16, 2004. Unlike the cases of Blaquera v. Alcala and De Jesus v. Commission on Audit, where the rules were either issued after payment or involved ambiguous legal terms, AO 103 was categorical and clear in ordering the discontinuance of per diems in excess of P20,000. Applying the logic in Casal v. Commission on Audit, the Court found that because the AO was already effective and its mandate was unambiguous, the petitioners' failure to adhere to it cannot be excused by a claim of good faith. Therefore, each director must reimburse the P13,600 received in excess of the P20,000 cap.
Main Doctrine
Under Section 17, Article VII of the 1987 Constitution, the President exercises the power of control over all executive departments, bureaus, and offices, including Government-Owned and Controlled Corporations (GOCCs). This power allows the President to modify or set aside the rulings and issuances of subordinate agencies, such as the Local Water Utilities Administration (LWUA). When an Administrative Order (AO) imposes a cap on compensation that conflicts with an agency's prior Memorandum Circular (MC), the AO effectively abrogates the MC. Furthermore, the defense of good faith in audit disallowances is unavailable when the restrictive issuance is clear, categorical, and has already become effective through publication, regardless of when the agency actually received a copy.