Mendoza v. Commission on Audit
REITERATIONFacts
The Antecedents: Petitioner Manolito P. Mendoza served as the General Manager (GM) of the Talisay Water District (TWD) in Negros Occidental, a quasi-public corporation formed under Presidential Decree (PD) No. 198. Between 2005 and 2006, Mendoza received a salary fixed by the TWD Board of Directors. However, the Commission on Audit (COA) later audited these payments and found that the salary rates exceeded those prescribed under Republic Act (RA) No. 6758, also known as the Salary Standardization Law (SSL). Furthermore, the COA noted that Mendoza's appointment had not been duly attested by the Civil Service Commission (CSC). Procedural History: On May 28, 2007, the COA issued a Notice of Disallowance (ND) for the amount of P380,208.00. The ND was received by the TWD Agency Head and Accountant on May 29, 2007. On July 6, 2009, the COA issued a 'Notice of Finality of COA Decision' after no appeal was filed within the six-month reglementary period. Mendoza filed a Motion for Reconsideration (MR) on September 10, 2009, arguing he never personally received the ND and that TWD was exempt from the SSL under Section 23 of PD 198. The COA denied the MR, ruling that service to the Agency Head constituted constructive service and that PD 198 does not provide an SSL exemption. The Petition: Mendoza filed a Petition for Certiorari under Rule 65, alleging that the COA committed grave abuse of discretion. He contended that the lack of personal service of the ND violated his right to due process, preventing the ND from becoming final. Substantively, he argued that Section 23 of PD 198 grants the Board of Directors absolute authority to fix the GM's salary as an exception to the SSL. Finally, he invoked the defense of good faith, asserting that he should not be required to refund the disallowed amounts as he merely relied on the Board's resolution.
Issue(s)
Whether the Notice of Disallowance became final and executory despite the alleged lack of personal service on the petitioner. Whether the salary of a water district's general manager is covered by the Salary Standardization Law (RA 6758). Whether the petitioner's good faith reliance on Section 23 of PD 198 excuses him from the obligation to refund the disallowed amounts.
Ruling
The Petition is PARTLY MERITORIOUS. The Court AFFIRMED the COA Decision regarding the applicability of the SSL but MODIFIED it by ruling that petitioner Mendoza need not refund the disallowed amount of P380,208.00 due to good faith.
Ratio Decidendi
On Issue 1: The Notice of Disallowance (ND) became final and executory. Under the 1997 Revised Rules of Procedure of the COA, an ND becomes final unless a request for reconsideration or appeal is filed within six months of notice to the parties. In this case, the ND was received by the 'Agency Head' and 'Accountant' in May 2007, which constitutes sufficient service under administrative rules. Furthermore, the essence of due process is simply the opportunity to be heard; since Mendoza was able to file a Motion for Reconsideration which the COA considered on its merits, any alleged defect in the initial service was cured. Applying Gannapao v. Civil Service Commission, the Court held that as long as a party is given the opportunity to defend their interests, there is no denial of due process. On Issue 2: The salary of a water district's General Manager (GM) is strictly covered by the Salary Standardization Law (SSL). Water Districts (WDs) are Government-Owned or Controlled Corporations (GOCCs) with original charters created pursuant to PD 198, as established in Davao City Water District v. CSC. RA 6758 applies to all government positions, including GOCCs, unless a specific law provides an express exemption. While Section 23 of PD 198 allows the Board to 'fix' the GM's compensation, it does not expressly exempt the position from the SSL. In contrast, the charters of entities like the Social Security System (SSS) and Land Bank of the Philippines (LBP) contain explicit 'exempt from SSL' clauses. Without such express language, the Board's power to fix compensation must be exercised within the salary grades (maximum SG 30 for GMs) and position classifications defined by the SSL. On Issue 3: Petitioner Mendoza is excused from refunding the disallowed amount due to the principle of good faith. The Court observed that Mendoza had no hand in fixing his own salary, as that power belonged exclusively to the Board of Directors under Section 23 of PD 198. At the time the salaries were received (2005-2006), there was no definitive jurisprudence specifically stating that WD GMs were not exempt from the SSL. Following the precedent in De Jesus v. Commission on Audit, where the Court excused refunds for allowances received before the clarification of the law, Mendoza's reliance on the Board's apparent authority was deemed to be in good faith. Therefore, while the payment was technically illegal, the recipient is not required to restitute the funds to the government.
Main Doctrine
The salary of a water district's general manager is covered by the Salary Standardization Law (SSL) despite Section 23 of the Provincial Water Utilities Act of 1973. While the law grants water districts the power to fix the compensation of their respective general managers, such power must be exercised consistent with Republic Act No. 6758. Unless a government-owned or controlled corporation's charter specifically and expressly exempts it from the SSL, the compensation fixed by its board must conform to the position classification system and salary grade limits (maximum Salary Grade 30 for General Managers) set by the Department of Budget and Management (DBM).