Favila v. Commission on Audit
REITERATIONFacts
1. The Antecedents: Petitioner Peter B. Favila, then Secretary of the Department of Trade and Industry (DTI), served as an ex-officio member of the Board of Directors (BOD) of the Trade and Investment Development Corporation of the Philippines (TIDCORP) from 2008 to 2010. During the period of 2005 to 2007, TIDCORP's BOD approved eight resolutions granting various monetary benefits, including productivity enhancement pay, developmental contribution bonuses, corporate guaranty, grocery subsidy, and anniversary bonuses, to its board members and their alternates. Subsequently, on July 13, 2012, the Commission on Audit (COA) issued Notice of Disallowance (ND) No. 2012-001, disallowing PHP 4,539,835.02 in disbursements for these benefits, citing a violation of Section 8, Article IX-B of the 1987 Philippine Constitution, which prohibits public officers from receiving additional, double, or indirect compensation unless specifically authorized by law. The COA opined that the benefits constituted double compensation as the board members received them in an ex-officio capacity, and petitioner Favila was identified as having received PHP 454,598.28 in benefits from October 2008 to May 2010. 2. Procedural History: TIDCORP appealed the disallowance to the COA Corporate Government Sector (CGS), arguing that Section 7 of Republic Act No. 8494 granted the BOD exclusive power to fix remuneration and that the benefits were granted in good faith. TIDCORP also claimed a denial of due process for lack of a prior notice of suspension. The COA-CGS, in a Decision dated October 8, 2015, affirmed the disallowance, citing Civil Liberties Union v. Executive Secretary and holding that ex-officio members were not entitled to additional compensation beyond authorized per diems. The COA-CGS also found non-compliance with Memorandum Order No. 20, series of 2001, requiring presidential approval for benefit increases. TIDCORP's subsequent Petition for Review before the Commission Proper was denied in a Decision dated January 30, 2019, which also noted that the petition was filed beyond the 180-day period for appeal, rendering the COA-CGS decision final and executory. Petitioner Favila's and his co-respondents' Motions for Reconsideration were denied by the COA in a Resolution dated January 29, 2020. 3. The Petition: Petitioner Peter B. Favila filed a Petition for Certiorari under Rule 64, in relation to Rule 65, of the Rules of Court, assailing the January 30, 2019 Decision and January 29, 2020 Resolution of the COA. Favila anchors his petition on the same grounds raised by his co-respondents in G.R. No. 253584 (Suratos), namely: (1) entitlement to the benefits granted pursuant to Board Resolutions and the TIDCORP Charter; (2) receipt of the disallowed amount in good faith, precluding refund; and (3) violation of his right to procedural due process in the issuance of the ND. The COA, in its Comment, averred that it did not commit grave abuse of discretion, that Favila's appeal was filed out of time, that his right to due process was not violated, and that the assailed decision was in consonance with law and jurisprudence, asserting that Favila, as a recipient of unlawful grants, should refund the amount received.
Issue(s)
Whether the grant of bonuses and benefits to ex-officio members of the TIDCORP Board was legal. Whether Favila's right to procedural due process was violated by the COA. Whether Favila's claim of good faith exempts him from the obligation to refund the disallowed amounts.
Ruling
The Supreme Court DISMISSED the petition and AFFIRMED the COA Decision. Peter B. Favila was held solidarily liable as an approving officer and recipient, and was directed to settle the disallowed amount of PHP 4,539,835.02 immediately.
Ratio Decidendi
On the Legality of Benefits: The Court ruled that the TIDCORP Charter (PD 1080, as amended) only specifically authorizes the payment of per diems to Board members for meetings attended. Applying the doctrine in Land Bank of the Philippines v. Commission on Audit, the Court held that unless the charter specifically allows other allowances, only per diems are permitted. As an ex-officio member, Favila's services were already compensated by his salary as DTI Secretary; thus, receiving additional benefits from TIDCORP violated the constitutional prohibition against double compensation under Section 8, Article IX-B of the 1987 Constitution. Furthermore, the Board resolutions granting these benefits lacked the required Presidential approval under Memorandum Order No. 20, rendering them illegal. On Procedural Due Process: The Court found no violation of due process. It reiterated the ruling in Saligumba v. Commission on Audit that administrative due process is satisfied when a party is notified of the charges and given an opportunity to explain their side. Favila actively participated in the COA proceedings, filed an appeal, and even sought reconsideration of the adverse ruling. The Court held that the essence of due process is the fair and reasonable opportunity to be heard, which was fully afforded to the petitioner in this case. On the Defense of Good Faith: The Court rejected the defense of good faith. It noted that since the 1991 case of Civil Liberties Union v. Executive Secretary, it has been settled jurisprudence that ex-officio members are prohibited from receiving additional compensation. Favila, as a high-ranking official, is presumed to know this prevailing jurisprudence. Additionally, Favila was not a mere passive recipient; he was an approving officer who participated in passing the resolutions that authorized the illegal disbursements. Following the ruling in the companion case of Suratos v. COA, the Court held that such participation and the circumvention of Memorandum Order No. 20 preclude a finding of good faith.
Main Doctrine
Under the 'ex-officio' rule, an official who holds a position by virtue of their primary office is prohibited from receiving additional, double, or indirect compensation for the second position, unless specifically authorized by law. This is because the functions of the ex-officio position are deemed an extension of the primary office. In the context of government-owned or controlled corporations (GOCCs), unless the charter explicitly provides for benefits beyond per diems, any additional grant is illegal. Furthermore, any increase in compensation for GOCCs not following the Salary Standardization Law (SSL) requires prior Presidential approval under Memorandum Order No. 20.