Madera v. Commission on Audit
NEW DOCTRINEFacts
The Antecedents: The Municipality of Mondragon, Northern Samar, passed Sangguniang Bayan (SB) Ordinance No. 08 and SB Resolutions Nos. 41, 42, 43, and 48 in 2013, granting various allowances: Economic Crisis Assistance (ECA), Monetary Augmentation of Municipal Agency (MAMA), Agricultural Crisis Assistance (ACA), and Mitigation Allowance to Municipal Employees (MAME). These allowances totaled P7,706,253.10. Procedural History: On post-audit, the Audit Team Leader and Supervising Auditor issued 11 Notices of Disallowance (NDs) dated February 20, 2014, disallowing these allowances for allegedly violating Republic Act (R.A.) No. 6758 (Salary Standardization Law), COA Circular No. 2013-003, and Civil Service Commission (CSC) Resolution No. 02-0790. The NDs held the approving officers (Mayor Madera, Accountant Mananguite, Treasurer Galing, Budget Officer Pelo) and the recipients liable. Petitioners appealed to the COA Regional Director (RD), who affirmed the NDs. The Commission on Audit (COA) Proper affirmed the RD's decision but modified it by excusing recipient-payees in good faith from reimbursement, holding the municipal officials who authorized the grant liable for the entire disallowed amount. Petitioners' Motion for Reconsideration was denied. Aggrieved, they filed a petition for certiorari with the Supreme Court. The Petition: Petitioners assailed the COA's decision and resolution, arguing that the allowances were legal and, in the alternative, that they should not be held liable for refunding the disallowed amounts due to their good faith in approving the disbursements. They contended that the Local Government Code (LGC) allowed municipalities to grant additional allowances and that the disallowances were not based on law and evidence but on caprice.
Issue(s)
Whether the Commission on Audit (COA) committed grave abuse of discretion in issuing the assailed Decision and Resolution affirming the disallowance of the subject allowances. Whether the petitioners should be held liable for the refund of the disallowed amounts.
Ruling
The petition is PARTIALLY GRANTED. The Commission on Audit Decision No. 2017-454 dated December 27, 2017, affirming the Notice of Disallowance Nos. 14-004-101(2013) to 14-008-101(2013) and 14-010-101(2013) to 14-015-101(2013) in the total amount of P7,706,253.10 is AFFIRMED with MODIFICATION that petitioners need not refund the said disallowed amount.
Ratio Decidendi
On the propriety of the disallowance: The Court upheld the disallowances. It found that the municipality's power to grant allowances under R.A. 7160 could not override Section 12 of R.A. 6758, which integrated most allowances into standardized salary rates. The Court noted that the subject allowances were not among the exceptions provided by law and that any grant of benefits must be necessary or relevant to the performance of official duties, which was not demonstrated. The claim of customary practice was deemed insufficient to justify illegal grants. Thus, the COA did not commit grave abuse of discretion in affirming the disallowances. The Court also considered the timeliness of the petition, opting for a liberal application of the rules due to the substantial merits of the case and the need to settle conflicting jurisprudence. On the liability of the petitioners for the refund: The Court, after extensively discussing the evolution of jurisprudence on the refund of disallowed amounts, laid down new rules. It found that the petitioners, as approving and certifying officers, acted in good faith. Their good faith was evidenced by the fact that the allowances were granted as financial assistance after Typhoon Yolanda, that such grants were customary and had not been previously disallowed, and that they relied on SB Resolutions and Ordinances. The Court concluded that, under Section 38 of the Administrative Code of 1987, they were not civilly liable for acts done in the performance of official duties unless there was a clear showing of bad faith, malice, or gross negligence, which was absent. The Court also noted that the COA Proper had excused the recipients' liability, and even if they were liable, the return was excused due to undue prejudice and humanitarian considerations. Therefore, the petitioners were not required to refund the disallowed amounts.
Main Doctrine
The Supreme Court clarified the rules governing the refund of disallowed government expenditures, establishing a framework that harmonizes previous jurisprudence. It held that while the Commission on Audit (COA) correctly disallowed the allowances for violating Section 12 of Republic Act No. 6758 (Salary Standardization Law), the approving and certifying officers in this specific case need not refund the disallowed amounts due to their demonstrated good faith. The Court emphasized that liability for disallowed amounts should be determined on a case-to-case basis, considering the nature of the disallowance, the roles of the parties, and the application of civil law principles, while also recognizing exceptions based on services rendered, social justice, and humanitarian considerations.