Torcuator v. Commission on Audit
REITERATIONFacts
1. The Antecedents: The Polomolok Water District (PWD) employees received medical, food and rice allowances, and cost of living allowance (COLA) prior to November 1, 1989. These benefits were discontinued following the issuance of Republic Act No. 6758 and its implementing circular, DBM-CCC No. 10. However, the Supreme Court's ruling in De Jesus v. Commission on Audit declared DBM-CCC No. 10 ineffective due to lack of publication. Subsequently, the DBM issued letters allowing local water districts to continue granting allowances and fringe benefits that were established practices as of December 31, 1999. PWD then authorized the payment of COLA and other allowances for the period of 1992-1999, and these were released in 2006. The Commission on Audit (COA) subsequently issued Notices of Disallowance (NDs) for these payments, citing violations of various circulars and laws, and holding approving officials and recipients liable. 2. Procedural History: The COA Audit Team Leader issued ND Nos. 07-001-(06), 07-002-(06), 07-003-(06), and 07-004-(06) on October 4, 2007, disallowing payments for medical, food gift, rice allowances, year-end financial assistance, cash gifts, and COLA. Petitioners appealed ND Nos. 07-001-(06), 07-003-(06), and 07-004-(06) to the COA Regional Office XII. In a Decision dated February 3, 2009, affirmed by a March 16, 2009 decision denying reconsideration, COA Region XII affirmed the disallowances. The case was then transmitted to the COA proper. The COA, in a Decision dated November 26, 2012, denied the appeal, and this denial was further affirmed by a Resolution dated November 20, 2013, upon denial of the motion for reconsideration. 3. The Petition: This petition for certiorari seeks to annul the COA's decisions disallowing the payment of medical, food gift, and rice allowances (ND No. 07-001-(06)) and COLA (ND No. 07-004-(06)) to PWD employees. Petitioners argue that they relied on the De Jesus ruling, which invalidated DBM-CCC No. 10, and subsequent DBM letters permitting established practices. They also contend that the Supreme Court's ruling in Gutierrez v. DBM, which was promulgated after the disbursements, should not be applied retroactively and is inapplicable to GOCCs. Petitioners assert that the Philippine Ports Authority Employees Hired after July 1, 1989 case supports their claim. The petition raises issues regarding the COA's alleged error and grave abuse of discretion in upholding the disallowances, particularly concerning reliance on DBM clearances, prevailing case law at the time of payment, and the retroactive application of Gutierrez.
Issue(s)
Whether the Commission on Audit erred and gravely abused its discretion in upholding the disallowance of medical, food gift, and rice allowances to the employees of Polomolok Water District in 2006. Whether the Commission on Audit erred and gravely abused its discretion in upholding the disallowance of COLA to the employees of Polomolok Water District for the years 1992 through 1999. Whether the Commission on Audit erred and gravely abused its discretion in retroactively applying the 2010 decision in Gutierrez v. DBM to disbursements made in 2006 and in misapplying the same to a government-owned and controlled corporation.
Ruling
The petition is partially granted. The disallowances in Notice of Disallowance Nos. 07-001-(06) and 07-004-(06) dated October 4, 2007, are affirmed with modification, meaning the disallowed amounts need not be paid by the petitioners.
Ratio Decidendi
On the issue of whether the Commission on Audit erred in upholding the disallowance of medical, food gift, and rice allowances: The Court found that Section 12 of R.A. No. 6758 is self-executory and mandates the integration of all allowances and benefits into standardized salary rates, unless specifically excluded. The nullification of DBM-CCC No. 10 in De Jesus did not invalidate R.A. No. 6758 itself, as statutory provisions control implementing rules. The Court reiterated in Gutierrez and Maritime Industry Authority (MIA) v. Commission on Audit that COLA and other benefits are deemed integrated into standardized salary rates. Since medical, food gift, and rice allowances were not among the enumerated exceptions in Section 12 of R.A. No. 6758 or identified by the DBM as non-integrated, they are presumed to be integrated into the salaries. The petitioners failed to cite any specific implementing rule that would allow these allowances to be granted separately. Therefore, the general rule of integration applies. On the issue of whether the Commission on Audit erred in upholding the disallowance of COLA for the years 1992 through 1999: The Court reiterated that Section 12 of R.A. No. 6758 is self-executory and that COLA is deemed integrated into the standardized salary rates of government employees. The ruling in Philippine Ports Authority Employees Hired after July 1, 1989 v. Commission on Audit (PPA Employees), which allowed COLA back payment during the period DBM-CCC No. 10 was in legal limbo, was distinguished. The PPA Employees ruling was found inapplicable because it primarily dealt with distinguishing between employees hired before and after July 1, 1989, and the PWD employees in this case were all hired after July 1, 1989. Furthermore, the Court clarified in later cases that the PPA Employees ruling should not be invoked to grant back payments that would cause salary distortions or when benefits were factually integrated. The integration of allowances under Section 12 is effective even without a specific DBM issuance. On the issue of whether the Commission on Audit erred in retroactively applying Gutierrez and misapplying it to a GOCC: The Court found that petitioners exercised good faith in granting the disallowed benefits. At the time the disbursements were made in 2006, there was no definitive jurisprudence clearly prohibiting the integration of COLA, medical, food gift, and rice allowances, as Gutierrez was promulgated in 2010 and MIA in 2015. Petitioners also relied in good faith on DBM letters dated November 8, 2000, and April 27, 2001, which allowed local water districts to continue granting established allowances as of December 31, 1999. Although these letters contravened R.A. No. 6758, petitioners could not be faulted for relying on the DBM's opinion. The Court reiterated that recipients who received disallowed benefits in good faith, without knowledge of any illegality and without bad faith, need not refund the amounts. The principle of good faith was appreciated in favor of the petitioners, excusing them from refunding the disallowed benefits.
Main Doctrine
Section 12 of Republic Act No. 6758, the Compensation and Position Classification Act of 1989, is self-executory, mandating that all allowances and benefits, except those specifically enumerated, are deemed integrated into the standardized salary rates of government employees. The nullification of DBM-CCC No. 10 for non-publication does not affect the validity of RA 6758. Government officials and employees who received disallowed benefits in good faith, relying on DBM letters or in the absence of clear jurisprudence prohibiting such disbursements, need not refund the amounts.