National Transmission Corporation v. Commission on Audit
REITERATIONFacts
1. The Antecedents: The National Transmission Corporation (TransCo), a government-owned entity, implemented an early separation program for its employees following its privatization under the Electric Power Industry Reform Act (EPIRA). The program provided separation pay calculated as basic salary multiplied by length of service, with a multiplier of 1.5. A key provision allowed for the rounding up of any fraction of a year of service, equivalent to six months or more, to a full year. This resulted in certain disbursements being disallowed by the Commission on Audit (COA) either because they were paid to contractual employees not considered in government service or because they represented excess payments due to the rounding-off of the length of service. 2. Procedural History: The disallowances were initially appealed to the COA Corporate Government Sector (CGS)-Cluster 3 Director, who partially granted the appeals, ordering only the Board of Directors and certain officers to refund amounts received. Upon automatic review, the COA Proper affirmed the disallowances but modified the liability, exempting most officials from refunding the disallowed amounts due to good faith, except for the excess payments resulting from the rounding-off of service length, which remained a solidary liability for certain officers. TransCo then filed a petition for certiorari with the Supreme Court, challenging the disallowance of the excess separation pay and the solidary liability of the approving and certifying officers. 3. The Petition: TransCo filed a Petition for Certiorari under Rule 64, in relation to Rule 65 of the Revised Rules of Court, assailing the COA Proper's Decision No. 2018-329. TransCo argued that the rounding-off of the length of service to one whole year for every six months or more was permissible under its Board's power to grant additional benefits, citing jurisprudence and Article 287 (now 302) of the Labor Code. It also contended that the approving and certifying officers should be absolved from solidary liability for the excess payments due to good faith, as there was no controlling jurisprudence at the time of disbursement and the officers were merely implementing Board resolutions. The petition specifically questioned the disallowance of P1,488,278.00 representing the excess separation pay due to the rounding-off method and the imposition of solidary liability on the officers.
Issue(s)
Whether the COA Proper gravely abused its discretion in affirming the disallowance of the excess payment of separation pay amounting to P1,488,278.00, which resulted from the rounding-off of the fractional length of service equivalent to six months or more to one whole year. Whether the COA Proper gravely abused its discretion in holding the approving and certifying officers solidarily liable for the return of such excess payment.
Ruling
The Supreme Court partly granted the petition. It affirmed the disallowance of the P1,488,278.00 excess separation pay due to the rounding-off of the length of service, finding no legal basis for such practice in government employment without presidential approval. However, it modified the ruling by absolving the approving and certifying officers from solidary liability for this disallowed amount, recognizing their good faith in implementing board resolutions in the absence of clear jurisprudence at the time.
Ratio Decidendi
On the Propriety of the Disallowance: The Court reiterated that any disbursement of government funds contrary to law is illegal and shall be disallowed. The rounding-off scheme used by TransCo to compute separation pay, which resulted in an undue increase in benefits by considering a fraction of six months or more as a whole year, was found to have no legal basis. This practice effectively increased the separation benefits beyond what was provided by law. Section 64 of RA No. 9136 clearly mandates that any increase in emoluments and benefits for TransCo personnel requires the approval of the President of the Philippines. TransCo failed to present proof of such presidential approval. The Court distinguished this from private employment, noting that the Labor Code provisions cited by TransCo pertain to retirement pay, not separation pay, and that government employment is governed by Civil Service Law and specific charters, not the Labor Code. Therefore, the disallowance of the excess payment due to the rounding-off method was proper. On the Liability to Refund: The Court noted that the passive recipients of the separation pay were already absolved by the COA Proper on the ground of good faith, and TransCo did not contest this. The Court's determination was limited to the liability of the approving and certifying officers for the P1,488,278.00 disallowed amount. The Court held that these officers were acting in good faith. They relied on the TransCo Board of Directors' resolutions and circulars in approving and certifying the release of funds. At the time of the disbursements (2009-2010), there was no controlling jurisprudence from the Supreme Court explicitly disallowing the rounding-off method in government employment, and some case law in private employment even sanctioned it. The Court recognized that the issue involved a difficult question of law, and it was only in the August 2018 TransCo Case that the Supreme Court definitively declared the illegality of the rounding-off method for TransCo employees. Given this context, the approving and certifying officers were absolved from solidary liability for the disallowed amount.
Main Doctrine
The rounding-off of the length of service for separation pay computation, which results in an undue increase in benefits, is illegal and unjustified without the explicit approval of the President, as required by Section 64 of RA No. 9136. Approving and certifying officers may be absolved from liability for such disallowed amounts if they acted in good faith, relying on board resolutions and in the absence of controlling jurisprudence at the time of disbursement.