Philippine Mining Development Corporation v. Aguinaldo
MODIFICATIONFacts
The Antecedents: Philippine Mining Development Corporation (PMDC) awarded a contract to Fortune Medicare, Inc. (FortuneCare) for medical insurance services for its officers and employees, amounting to P602,810.00. Subsequently, the Commission on Audit (COA) auditors issued Notice of Disallowance (ND) No. 2013-001 (12), disallowing P582,617.10 of this disbursement. The disallowance was based on the grounds that the expenditure was contrary to Section 8, Article IX-B of the 1987 Constitution, COA Resolution No. 2005-001, and COA Circular No. 2012-003. The ND also held PMDC officers Atty. Lito A. Mondragon, Atty. Jaime T. De Veyra, Zenaida A. Alfonso, and Ma. Nieves D. Santos liable for the transaction. Procedural History: Following the issuance of the ND, PMDC and its officers appealed, arguing that COA Resolution No. 2005-001 did not apply to PMDC as a GOCC without an original charter and that disallowing the benefits would violate the Labor Code's prohibition against diminution of benefits. The Corporate Government Sector (CGS) of the COA denied the appeal, affirming the ND and citing the need for prior approval from the Office of the President under Presidential Decree No. 1597 (PD 1597). Petitioners then elevated the matter to the Commission Proper (COA-CP) via a Petition for Review, raising for the first time a violation of due process, as the CGS based its denial on a ground not stated in the ND. The COA-CP denied the petition for review, affirming the disallowance but modifying it to excuse employees who received benefits in good faith from refunding. The COA-CP en banc subsequently denied the motion for reconsideration. Petitioners then filed the present Petition for Certiorari with the Supreme Court. The Petition: Petitioners filed a Petition for Certiorari under Rule 64, in relation to Rule 65 of the Rules of Court, seeking to annul the COA's Decision No. 2018-043 and Resolution No. 20-19-020, alleging grave abuse of discretion. They argued that the COA erred in disallowing the payment for medical insurance, contending that PMDC, as a government-owned and controlled corporation (GOCC) without an original charter, is not covered by PD 1597, which requires presidential approval for such benefits. They also asserted that disallowing the benefits would violate the principle of non-diminution of benefits under the Labor Code and that the CGS's reliance on PD 1597, a ground not raised in the original ND, violated their right to due process. The petition seeks the lifting of the Notice of Disallowance.
Issue(s)
Whether COA gravely abused its discretion when it disallowed PMDC's payment of P582,617.10, representing payment of membership fees for the health care program provided to its officers and employees for calendar year 2012. Whether Presidential Decree No. 1597 (PD 1597) continues to be in force and covers government-owned and controlled corporations (GOCCs) with or without original charters, thus applying to PMDC. Whether the disallowance violated the rule on non-diminution of benefits. Whether there was a violation of due process as petitioners were given ample opportunity to be heard. Whether COA's ruling on petitioners' civil liability must be revisited in light of Madera v. Commission on Audit and other recent pronouncements.
Ruling
The Court DISMISSED the instant petition. The Decision No. 2018-043 dated January 22, 2018 and the Resolution No. 2019-020 dated November 26, 2018 of the Commission on Audit Proper were AFFIRMED with MODIFICATION in that petitioners Atty. Lito A. Mondragon, Atty. Jaime T. De Veyra, Zenaida A. Alfonso, and Ma. Nieves Marives D. Santos are jointly and severally liable for the return of the net disallowed amount, which excludes the amounts excused to be returned by the recipient employees.
Ratio Decidendi
On Issue 1: The Court found no grave abuse of discretion on the part of the Commission on Audit (COA). The Court reiterated its deference to COA's expertise in auditing public funds, emphasizing that judicial interference is warranted only upon a clear showing of arbitrary or despotic exercise of power, or acting without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioners failed to demonstrate that COA exercised its power in an arbitrary or despotic manner by reason of passion or of personal hostility, or that its act was so patent and gross as to amount to an evasion of a positive duty, or a virtual refusal to perform the duty enjoined by law, or to act at all in contemplation of law. The COA's decision to affirm the Notice of Disallowance (ND) was therefore upheld as being within its constitutional mandate and powers, as petitioners' arguments against the applicability of Presidential Decree No. 1597 (PD 1597) and the alleged due process violation were found unmeritorious. On Issue 2: The Court ruled that Presidential Decree No. 1597 (PD 1597) continues to be in force and covers government-owned and controlled corporations (GOCCs) with or without original charters, including Philippine Mining Development Corporation (PMDC). The Court clarified that the 1987 Constitution's provisions in Sections 2 and 5, Article IX-B, referring to GOCCs with original charters, do not imply that GOCCs without original charters are exempt from salary standardization laws. PD 1597, as amended by Republic Act No. 6758 (RA 6758) and Joint Resolution No. 4, requires presidential approval for allowances and benefits, a requirement PMDC failed to meet. The Court emphasized that if the intention was to exempt PMDC, its creating memorandum or subsequent legislation should have expressly stated so, which was not the case, unlike other government entities that have been expressly exempted. The Court also noted that PD 1597 was neither expressly revoked nor repealed by existing salary standardization laws and remains in full force and effect. On Issue 3: The Court held that the disallowance did not violate the rule on non-diminution of benefits under Article 100 of the Labor Code. The principle of non-diminution of benefits applies only if the benefit is based on an express policy, a written contract, or has ripened into a consistent company practice, which must be consistently and deliberately made by the employer over a long period of time. Petitioners' declaration that PMDC merely procured private medical insurance coverages from FortuneCare in addition to regular medical benefits belied any claim that the grant had ripened into a semblance of practice, classifying it as an isolated act. Furthermore, the Court reiterated the doctrine from Boncodin v. National Power Corporation Employees Consolidated Union that the non-diminution rule does not contemplate the continuous grant of unauthorized or irregular compensation, which the medical benefits were, due to the lack of prior presidential approval required by PD 1597. On Issue 4: The Court found no violation of due process. Petitioners were given ample opportunity to be heard, having timely received the Notice of Disallowance (ND) on November 27, 2013, filed an Appeal Memorandum to the Corporate Government Sector (CGS) on April 10, 2014, elevated the case to the Commission on Audit Commission Proper (COA-CP) via a Petition for Review on September 30, 2014, and filed a Motion for Reconsideration to the COA-CP En Banc on May 11, 2018. The Court stressed that the essence of due process in administrative proceedings is the opportunity to be heard and explain one's side, which was afforded to the petitioners. The COA-CP's ability to base its denial on a ground not initially raised in the ND was within its general audit power, allowing for an independent assessment beyond the auditors' initial findings, as COA is the guardian of public funds with broad powers over government revenue and expenditures. On Issue 5: The Court revisited the civil liability in light of Madera v. Commission on Audit and subsequent cases. While Madera generally instructs that recipient employees should be held liable to return disallowed payments on the ground of solutio indebiti, the Court respected the COA-CP's absolution of the recipient employees based on good faith, as this absolution was not questioned in the instant petition, citing Securities and Exchange Commission v. Commission on Audit and Social Security System v. Commission on Audit. However, the approving and certifying officers (petitioners) were found to have acted with gross negligence due to their patent disregard of Presidential Decree No. 1597 (PD 1597) and the mandatory requirement for presidential approval. Applying Section 43 of the Administrative Code of 1987 and Madera, they are held jointly and severally liable for the "net disallowed amount," which excludes the amounts excused to be returned by the recipient employees. The Court noted the absence of badges of good faith, such as a certificate of availability of funds or a legal opinion, which would have absolved them of liability.
Main Doctrine
This Court resolves the Petition for Certiorari under Rule 64, in relation to Rule 65 of the Rules of Court, filed by Philippine Mining Development Corporation (PMDC) and its employees, praying for the annulment of Commission on Audit (COA) decisions. The Court affirms that Presidential Decree No. 1597 (PD 1597) continues to be in force and covers government-owned and controlled corporations (GOCCs) with or without original charters, thus requiring prior presidential approval for the grant of allowances and benefits. It clarifies that the principle of non-diminution of benefits does not apply to unauthorized or irregular compensation. Furthermore, the Court applies the Madera v. Commission on Audit doctrine on civil liability, holding approving and certifying officers jointly and severally liable for the net disallowed amount due to gross negligence, while respecting the COA's absolution of recipient employees when such absolution is not challenged.