Favila v. Commission on Audit
MODIFICATIONFacts
The Antecedents: During the period from 2008 to 2010, 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 of the Trade and Investment Development Corporation of the Philippines (TIDCORP). From 2005 to 2007, TIDCORP's Board 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. Subsequently, on July 13, 2012, the Commission on Audit (COA) issued a Notice of Disallowance (ND) No. 2012-001, disallowing PHP 4,539,835.02 in disbursements for these benefits, citing a violation of the constitutional prohibition against double compensation for public officers serving in an ex-officio capacity. Petitioner Favila was among those found liable, having allegedly received PHP 454,598.28 in benefits from October 2008 to May 2010. Procedural History: TIDCORP appealed the disallowance to the COA, arguing that its charter expressly granted the Board the power to fix remuneration and that the benefits were granted in good faith, also asserting a violation of due process due to the lack of a prior Notice of Suspension. The COA Audit Team Leader and Supervising Auditor countered that RA 8494, Section 7, pertained to officers and employees, not ex-officio board members, and that Section 13 limited benefits to per diem. Favila then filed a Petition for Review with the COA Proper, which affirmed the disallowance in Decision No. 2019-001, holding ex-officio members not entitled to additional compensation. Motions for Reconsideration were denied in Resolution No. 2020-177. Favila subsequently elevated the case to the Supreme Court via a Petition for Certiorari under Rule 64, in relation to Rule 65 of the Rules of Court. The Petition: In his Petition for Certiorari, Favila argued that he was entitled to the benefits as they were granted pursuant to duly issued Board Resolutions and the TIDCORP Charter, that he received the disallowed amounts in good faith and should not be ordered to refund them, and that the ND violated his right to procedural due process. The COA, in its Comment, contended that it did not commit grave abuse of discretion, did not violate due process, and that Favila benefited from an unlawful grant and should refund the amount. The Supreme Court, in its November 29, 2022 Decision, dismissed the petition, affirming the COA's findings and holding Favila solidarily liable for the entire disallowed amount. Favila then filed the present Motion for Reconsideration, insisting he was neither an approving nor certifying officer, reiterating his good faith, and asserting entitlement based on Board Resolutions and the TIDCORP Charter, noting the long-standing practice of granting such benefits. The Supreme Court, in its Resolution, partly granted the motion, modifying its previous decision to hold Favila liable only for the amount he personally received, PHP 454,598.28, based on the principle of solutio indebiti and the Madera ruling, clarifying he was not an approving officer but a recipient.
Issue(s)
Whether Favila can be held solidarily liable as an approving officer for the total disallowed amount of PHP 4,539,835.02. Whether Favila is liable to return the PHP 454,598.28 he personally received as a recipient.
Ruling
The Motion for Reconsideration is PARTLY GRANTED. The November 29, 2022 Decision is MODIFIED. Peter B. Favila is directed to settle ONLY the amount of PHP 454,598.28 which he actually received.
Ratio Decidendi
On Issue 1: The Court ruled that Favila cannot be held solidarily liable for the total disallowed amount. Under the rules established in Madera v. COA, solidary liability for the net disallowed amount only attaches to approving and certifying officers who acted with bad faith, malice, or gross negligence. The records clearly show that the subject Board Resolutions were approved between 2005 and 2007, whereas Favila only joined the TIDCORP Board in 2008. Consequently, he had no participation in the approval or certification of the grants. Since he was neither an approving nor a certifying officer for the disallowed benefits, the determination of his good or bad faith in an official capacity is immaterial, and he cannot be held liable for the portions received by others. On Issue 2: The Court held Favila liable to return the specific amount he received under the principle of solutio indebiti. Applying Madera Rule 2(c), recipients are liable to return disallowed amounts regardless of good faith, unless they show the amounts were genuinely given for services rendered or are excused by social justice. In this case, the benefits lacked legal basis because Presidential Decree No. 1080 only authorized per diems for TIDCORP Board members. Furthermore, as an ex-officio member, Favila's services were already compensated by his principal office at the DTI. The Court found no humanitarian or social justice considerations to excuse the return. Therefore, as a passive recipient of funds to which he was not legally entitled, he is obligated to return the PHP 454,598.28 he individually received.
Main Doctrine
The Court clarifies the application of the 'Madera Rules' regarding the refund of disallowed amounts. Specifically, an individual cannot be held solidarily liable as an approving officer if they had no participation in the approval or certification of the disallowed benefits, such as when they joined the agency after the resolutions were passed. Nevertheless, such individuals remain liable as recipients under the principle of solutio indebiti to return the specific amounts they personally received, as good faith is generally not a defense for payees unless the amounts were genuinely given in consideration of services rendered or excused by social justice.