National Transmission Corporation v. Commission on Audit
REITERATIONFacts
The Antecedents: The National Transmission Corporation (TRANSCO) paid separation benefits to Mr. Sabdullah T. Macapodi amounting to P2,988,618.75. This payment was based on TRANSCO's Circular No. 2009-0010, which incorporated an additional multiplier for length of service beyond what was provided in Republic Act No. (RA) 9136 (EPIRA). The Commission on Audit (COA) issued a Notice of Disallowance (ND) No. TC-10-004(09) disallowing P883,341.63 of this amount, finding it excessive and illegal. Procedural History: The COA Proper upheld the disallowance in Decision No. 2017-154 dated May 18, 2017. The COA Proper ruled that employees are entitled to separation benefits under EPIRA or RA 1616, but not both. It also found that TRANSCO's policy of rounding up fractional years of service and the use of additional multipliers were without legal basis. While the COA Proper initially held Macapodi liable, it modified the ruling to state that he need not refund the amount, but other officers, including the Board of Directors, remained liable. The Petition: TRANSCO filed a Petition for Certiorari under Rule 65, in relation to Rule 64, of the Rules of Court, assailing the COA Proper's Decision. TRANSCO argued that the use of multipliers under RA 1616 in addition to the EPIRA rate was lawful and that the Board and management acted in good faith.
Issue(s)
Did the COA Proper gravely abuse its discretion in issuing its assailed Decision? Who shall be liable for the disallowed amount, if any?
Ruling
The Supreme Court held that the COA Proper did not commit grave abuse of discretion. The Court affirmed the disallowance of P883,341.63 as excessive and illegal separation benefits paid to Macapodi. However, the Court modified the ruling on liability: Sabdullah T. Macapodi is liable to return the disallowed amount, while the members of TRANSCO's Board, Susana H. Singson, and Jose Mari M. Ilagan are absolved from liability. The ruling is without prejudice to any appropriate action against TRANSCO President and CEO Arthur N. Aguilar.
Ratio Decidendi
On the issue of grave abuse of discretion by the COA Proper: The Court found that the COA Proper did not commit grave abuse of discretion. The disallowance was proper because the payment of separation benefits to Macapodi violated Sections 63 and 12(c) of the EPIRA. Section 63 mandates that separation pay shall be "one and one-half month salary for every year of service in the government," indicating a formula with only three components: base amount, a 1.5 multiplier, and length of service. TRANSCO's formula, however, used two multipliers: a Length of Service Multiplier and the Basic Salary Multiplier under EPIRA, which effectively credited Macapodi with more years of service than he actually had. Furthermore, Section 12(c) of EPIRA vests the power to fix compensation, allowances, and benefits of TRANSCO employees upon its Board. The additional Length of Service Multiplier was incorporated through a Circular issued by the President and CEO, not a Board Resolution, thus exceeding the authority granted by law. The disbursement of funds contrary to law is an illegal expenditure and shall be disallowed. On the issue of liability for the disallowed amount: The Court held that Macapodi is liable to return the disallowed amount based on the principle of unjust enrichment and solutio indebiti (payment by mistake), as provided in Articles 2154 and 22 of the Civil Code. The Court clarified that while COA rules hold payees liable for failure to submit required documents, Macapodi's liability here stems from the illegality of the expenditure itself, not from any deficiency in documentation. The Court emphasized that the payee's obligation to return arises because the payment was a clear mistake, and he has no right to retain the amount, irrespective of his good faith. The Court cited Madera v. Commission on Audit to underscore that the payee's liability for disallowed expenses applies basic civil law principles regardless of good faith, and exceptions require truly exceptional circumstances. The Court absolved Singson and Ilagan, the verifier and certifier, respectively, from liability. It reasoned that their roles were subordinate to the superior officer's directive to disburse funds, and they performed their duties based on the honest belief that the disbursement was supported by a valid exercise of corporate powers. Absent proof of bad faith or malice, public officers are presumed to have performed their duties regularly and in good faith. The Court also exonerated the members of the Board of Directors, finding that the root of the illegal disbursement was Circular No. 2009-0010 issued by the President and CEO, not a Board Resolution. The Board resolutions echoed the EPIRA formula, and it was only the circular that incorporated the unauthorized Length of Service Multiplier. Therefore, the Board members were not civilly liable, without prejudice to any action against the President and CEO.
Main Doctrine
The overpayment of separation benefits to a government employee, even if received in good faith, constitutes an illegal expenditure and is subject to disallowance by the Commission on Audit. The payee is civilly liable to return the disallowed amount based on the principle of unjust enrichment, unless truly exceptional circumstances warrant otherwise. Public officers who approve or authorize such illegal expenditures may be held liable, but their liability is determined based on their specific roles and the absence of bad faith or negligence.