Velasquez v. Commission on Audit
REITERATIONFacts
The Antecedents: The underlying dispute concerns the disallowance of funds by the Commission on Audit (COA) for the grant of a quarterly rice subsidy and the Kalampusan Award to employees of Cebu Normal University (CNU). The CNU Board of Regents (BOR), including the petitioners, approved these expenditures through Board Resolutions in 2003 and 2004. The COA issued Notices of Disallowance (NDs) on the grounds that these disbursements lacked legal basis and violated provisions of Presidential Decree No. 1597 and Presidential Decree No. 1445, which govern allowances, honoraria, fringe benefits, and the proper disbursement of public funds. Procedural History: Following the issuance of the NDs, the petitioners appealed to the COA's Legal Services Sector (LSS), which affirmed the disallowances and held the petitioners liable for refund. The petitioners then filed a petition for review with the COA Proper. The COA Proper initially dismissed the petition for being filed out of time but later clarified that the filing was within the reglementary period. However, it still denied the motion for reconsideration, upholding the disallowances and the petitioners' solidary liability for the refund, citing that the BOR acted beyond its powers and in bad faith. The Petition: The petitioners seek relief from the COA's decision through a Petition for Certiorari, arguing that the COA committed grave abuse of discretion. They contend that at the time the Board Resolutions were issued, there was no definitive ruling on the extent of the governing board's authority to provide incentives, and that the subsequent Supreme Court ruling in Benguet State University v. Commission on Audit should be applied prospectively. Petitioners maintain they acted in good faith and should not be held solidarily liable for the refund, invoking the principle of good faith and the potential for undue prejudice to recipients.
Issue(s)
Whether the Commission on Audit (COA) correctly disallowed the quarterly rice subsidy and the Kalampusan Award. Whether the petitioners and the recipients are solidarily liable to refund the disallowed amounts.
Ruling
The Petition is PARTLY GRANTED. The Decision and Resolution of the Commission on Audit (COA) are AFFIRMED with MODIFICATION. While the disallowances are upheld, the petitioners and the recipients are NOT liable to refund the disallowed amounts.
Ratio Decidendi
On Issue 1: The Court held that the Commission on Audit (COA) correctly disallowed the benefits because the Board of Regents (BOR) exceeded its authority under Section 4(d) of Republic Act (R.A.) No. 8292. Applying the statutory construction doctrine of ejusdem generis, the Court ruled that the power to disburse university income is limited to instruction, research, extension, or other programs of a similar academic nature. Rice subsidies and performance awards do not fall under these categories. The Court rejected the argument for prospective application of the Benguet State University v. COA (2007) ruling, explaining that judicial interpretations are generally retroactive as they define the law from its original passage. Since the Benguet case did not overturn an existing doctrine but merely clarified the statute, it applied to the 2003 and 2004 resolutions. Consequently, the grant of these benefits was ultra vires and lacked legal basis. On Issue 2: Regarding the liability to refund, the Court applied the 'Rules on Return' established in Madera v. COA (2020). The Court found that the petitioners, as approving officers, acted in good faith because they were convinced at the time that the incentives were legal and promoted employee efficiency. There was no settled jurisprudence like the Benguet case in 2003 to guide their actions, thus negating bad faith or gross negligence. As for the recipients, the Court excused the return of the rice subsidy as a reasonable form of financial assistance under social justice considerations. The Kalampusan Award was also excused because it was given in consideration of services rendered, specifically the exemplary performance of the university's graduates. Finally, the Court noted that requiring a refund 16 years after the receipt of the benefits would result in undue prejudice to the payees. Therefore, following the Madera framework, neither the approving officers nor the passive recipients are required to return the disallowed funds.
Main Doctrine
The power of the Board of Regents (BOR) of a state university to disburse its generated income is limited by Section 4(d) of Republic Act (R.A.) No. 8292 to programs and projects intended for instruction, research, and extension. Under the doctrine of ejusdem generis, 'other programs/projects' must be of a similar nature to academic programs. While judicial interpretations of these limits apply retroactively to the date of the law's enactment, the liability of officers and employees to refund disallowed amounts is governed by the Madera Rules on Return. These rules excuse approving officers who acted in good faith and recipients who received benefits for services rendered or where a refund would cause undue prejudice.