[ G.R. No. 232199. December 01, 2020 ] 891 Phil. 107
EN BANC
[ G.R. No. 232199. December 01, 2020 ]
NATIONAL TRANSMISSION CORPORATION, PETITIONER, VS. COMMISSION ON AUDIT AND COA CHAIRPERSON MICHAEL G. AGUINALDO, RESPONDENTS. D E C I S I O N
INTING, J.:
This resolves the Petition for Certiorari[1] under Rule 65, in relation to Rule 64, of the Rules of Court filed by the relational Transmission Corporation (TRANSCO) assailing the Decision No. 2017-154[2] dated May 18, 2017 of the Commission on Audit (COA). In the assailed Decision, the COA Proper upheld the Notice of Disallowance No. (ND) TC-10-004(09) dated June 16, 2010 on the payment of excessive separation benefits to Mr. Sabdullah T. Macapodi (Macapodi) amounting to P883,341.63.[3]
The Antecedents
Congress enacted Republic Act No. (RA) 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA),[4] to install reforms in the electric power industry which is composed of four sectors, viz.: generation, transmission, distribution, and supply.[5] The EPIRA paved the way for the privatization of National Power Corporation (NPC)’s assets and liabilities. Pursuant to this objective, the EPIRA created the following entities: (1) TRANSCO, which shall acquire NPC’s transmission assets and be responsible “for the planning, construction and centralized operation and maintenance of its high voltage transmission facilities, including grid interconnections and ancillary services;"[6] and (2) Power Sector Assets and Liabilities Management Corporation (PSALM), a government-owned and controlled corporation (GOCC), “which shall take ownership of all existing NPC generation assets, liabilities, [independent power producer] contracts, real estate and all other disposable assets."[7] PSALM was tasked to initiate TRANSCO’s privatization and “award, in open competitive bidding, the transmission facilities, including grid interconnections and ancillary services to a qualified party either through an outright sale or a concession contract."[8] In view of this, PSALM entered into a 25-year concession contract with the National Grid Corporation of the Philippines (NGCP).[9] In turn, Congress enacted RA 9511,[10] granting a franchise to NGCP to take over TRANSCO’s transmission functions and assets[11] which it had previously acquired from NPC. Upon the concession contract’s formal implementation, TRANSCO’s employees were separated from service, effective June 30, 2009. The displacement or separation of NPC and TRANSCO employees was part and parcel of the EPIRA’s objective of privatizing NPC’s generation and transmission assets. Thus, the law granted separation pay to those employees affected by the electric power industry reorganization, viz.:
Sec. 63. Separation Benefits of Officials and Employees of Affected Agencies. — National Government employees displaced or separated from the service as a result of the restructuring of the electricity industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a separation pay and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges provided under a separation plan which shall be one and one-half month salary for every year of service in the government: Provided, however, That those who avail of such privileges shall start their government service anew if absorbed by any government-owned successor company. In no case shall there be any diminution of benefits under the separation plan until the full implementation of the restructuring and privatization. Displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of the privatized companies. The salaries of employees of NPC shall continue to be exempt from the coverage of Republic Act No. 6758, otherwise known as “The Salary Standardization Act.” With respect to employees who are not related by NPC, the Government, through the Department of Labor and Employment, shall endeavor to implement re-training, job counseling, and job placement programs. (Italics supplied.)
While the EPIRA provided the computation for separation pay, the law empowered TRANSCO’s Board of Directors (Board) to fix the compensation, allowance, and benefits of TRANSCO employees.[12] Pursuant to this, thru Resolution No. 2009-005 dated February 26, 2009, the Board implemented an Early Leavers Program to facilitate the payment of separation pay due to employees separated from TRANSCO.[13] In Resolution No. TC 2009-007[14] dated February 26, 2009, the Board reiterated the separation pay computation provided by the EPIRA, viz.:
Separation Pay = Basic Salary x Length of Service x 1.5 Where: Basic Salary shall include 13th month pay (equivalent to 1 1/2 Monthly Basic Salary [Sec. 3 of Rule 33 of the EPIRA IRR]) Length of Service - multiplier is defined as number of years of government service. A fraction of one (1) year, equivalent to six months or more, shall be considered as one (1) whole year. The Separation Benefit package shall be exempt from taxes in accordance with the relevant prevailing Bureau of Internal Revenue (BIR) laws, rule: and regulations.[15]
Subsequently, TRANSCO President and Chief Executive Officer Arthur N. Aguilar issued Circular No. 2009-0010[16] dated May 6, 2009 setting forth the rules and regulations in implementing the separation program. In addition to the 1.5 multiplier to be applied to the basic salary as provided by the EPIRA (Basic Salary Multiplier), Circular No. 2009-0010 granted another 1.5 multiplier to be applied in the computation of length of service (Length of Service Multiplier), to wit:
3.2 Separation Pay Formula. x x x x x x x On exceptional cases, employees who came from government offices other than NPC, NEA or ERB, their length of service shall be converted based in the following:
Government Service
Conversion Factor
First 20 years
1.0
21 years to 30 years
1.5
31 years and above
2.0[17]
When TRANSCO implemented its separation program, Macapodi was a legal researcher receiving a basic salary of P30,150.00 per month.[18] On October 21, 2009, as payment for his separation benefits, TRANSCO issued a check payable to Macapodi amounting to P2,988,618.75, computed as follows:
Basic salary
P30,150.00
Add 13th month pay (basic salary divided by 12)
2,512.50
Subtotal
P32,662.50
Multiply by length of service
61.00000
P1,992,412.50
Multiply by Basic Salary Multiplier under the EPIRA
1.50
————————————————————————— Amount paid to Macapodi
P2,988,618.75
TRANSCO credited Macapodi with 61 years of service, by applying the Length of Service Multiplier to his 42.97032 actual service years. However, upon post-audit, COA Supervising Auditor Corazon V. Españo (COA Auditor Españo) issued ND TC-10-004(09)[19] dated June 16, 2010, addressed to the TRANSCO President and CEO,[20] disallowing a portion of Macapodi’s separation benefits amounting to P883,341.63 computed as follows:
Basic salary
P30,150.00
Add 13th month pay (basic salary divided by 12)
2,512.50
Subtotal
P32,662.50
Multiply by Actual length of service
42.97032
P1,403,518.08
Multiply by Basic Salary Multiplier under the EPIRA
1.50
Adjusted amount of separation pay
P2,105,277.12
Less Amount paid to Macapodi
2,988,618.75
Disallowed amount
P883,341.63
In arriving at the adjusted amount of separation pay, COA Auditor Españo used Macapodi’s actual length of service. Españo did not round up any fractional figures or multiply such length of service with 1.5. Españo reasoned out that “the adoption of multipliers [in addition to the] 1.5 monthly salary per year of service” effectively increased the employee’s length of service. As a result, COA Auditor Españo held Macapodi liable for receiving an amount of separation benefits in excess of what is provided under the law. Apart from Macapodi, Españo also found the following individuals liable for the disallowed amount: (1) Susana H. Singson (Singson), Division Manager, General Accounting and Financial Reporting, for verifying that the disbursement voucher covering the subject check was supported by the necessary documents; and (2) Jose Mari M. Ilagan (Ilagan), Manager, Administrative Department, for certifying that the subject expense was necessary, lawful, and incurred under his direct supervision. TRANSCO, through its Vice President and General Counsel Noel Z. De Leon,[21] appealed the disallowance to the COA Director.
Ruling of the COA Director
In Corporate Government Sector - Cluster 3 Decision No. 12[22] dated August 4, 2014, COA Director IV Rufina S. Laquindanum (Laquindanum) denied TRANSCO’s appeal.[23] in affirming the ND, Laquindanum reiteraced that applying “the multiplier under RA 1616 on top of the 1.5 monthly salary per year of service provided under [EPIRA] in the computation of Mr. Macapodi’s separation benefits is unwarranted and without legal basis."[24] Aggrieved, TRANSCO brought the matter before the COA Proper via a petition for review.[25]
Ruling of the COA Proper
In the assailed Decision[26] dated May 18, 2017, the COA Proper upheld the disallowance, viz.:
WHEREFORE, premises considered, the Petition for Review of National Transmission Corporation, Quezon City, through counsel, is DENIED for lack of merit. Accordingly, Notice of Disallowance (ND) No. TC-10-004(09) dated June 16, 2010, on the payment of excessive separation benefits to Mr. Sabdullah T. Macapodi in the total amount of P883,341.63, is hereby AFFIRMED with MODIFICATION, in that Mr. Macapodi need not refund the said amount. The other persons named liable in the ND shall remain liable, including the members of the Board of Directors, who authorized the payment of the disallowed separation benefits. The Audit Team Leader and Supervising Auditor are instructed to issue a Supplemental ND to include the members of the Board of Directors, who approved the resolutions authorizing said retirement/separation payment scheme, as persons liable.[27]
The COA Proper ruled as follows: first, as ruled in Herrera, et al. v. National Power Commission, et al.,[28] employees separated from TRANSCO are entitled to either separation benefits under the EPIRA or retirement benefits under RA 1616,[29] but not to both.[30] Second, TRANSCO’s policy allowing the fraction of one year to be considered as one whole year (round up) in the computation of length of service does not have legal basic.[31] Third, the following are jointly and severally liable for the amount disallowed: (a) Singson and Ilagan as approving officers; and (b) TRANSCO’s Board for issuing resolutions allowing the excessive payment of separation benefits.[32] However, Macapodi is no longer required to refund the amount, he being a mere passive recipient thereof.[33] Undaunted, TRANSCO, represented by the Office of the General Counsel,[34] filed the present petition.
Issues
The Court shall resolve two issues: (1) Did the COA Proper gravely abuse its discretion in issuing its assailed Decision? (2) Who shall be liable for the disallowed amount, if any? TRANSCO insists that: (a) the use of multipliers under RA 1616 in addition to the EPIRA rate (i.e., 1.5 monthly salary per year of service) was lawful; and (b) the Board and management exercised utmost good faith, and acted within their powers in issuing the subject board resolutions.
The Court s Ruling
The Court holds that the COA Proper did not commit grave abuse of discretion, but modifies its ruling as to the liability of the persons involved.
The COA properly disallowed a portion of the separation benefits paid to Macapodi for violating the EPIRA.
The law mandates that “[n]o money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority."[35] A disbursement of government funds that is contrary to law shall be disallowed, for being an illegal expenditure.[36] The overpayment of Macapodi’s separation benefits to the extent of P883,341.63 is illegal because it violated Sections 63 and 12(c) of the EPIRA. First, Section 63 of the EPIRA provides that an affected employee’s separation pay shall be equal to “one and one-half month salary for every year of service in the government.” In other words, the formula only has three components, viz.: (a) base amount consisting of the monthly salary; (b) multiplier of one and one-half or 1.5; and (c) length of service.[37] Contrary to the EPIRA formula, which has only one multiplier, TRANSCO’s formula uses two multipliers: (a) the Length of Service Multiplier crediting Macapodi with 61.0000 instead of only 42.9703 years; and (b) the Basic Salary Multiplier under the EPIRA, granting him a base amount equal to one and one-half of his basic salary. And second, under Section 12(c) of the EPIRA, the power to fix the compensation, allowance, and benefits of TRANSCO employees rests upon its Board.[38] In other words, to be valid, salaries and benefits of TRANSCO employees must be determined via a board resolution. However, to recall, the Length of Service Multiplier was incorporated to TRANSCO’s separation pay computation thru Circular No. 2009-0010 issued by TRANSCO’s President and CEO. Certainly, the Length of Service Multiplier results in excessive benefits and was prescribed without the requisite authority, in direct contravention of the EPIRA. Thus, the COA properly disallowed the payment of P883,341.63 for being illegal.
TRANSCO’s President and CEO and Macapodi shall be liable for the illegal disbursement.
Book VI, Chapter V, Section 43 of Executive Order No. 292, or the Administrative Code of 1987, enumerates the persons liable for an illegal expenditure, to wit:
Sec. 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall he void. Every payment made in violation of said provisions shall he illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.
Thus, the general rule is that “public officials who are directly responsible for, or participated in making the illegal expenditures, as well as those who actually received the amounts therefrom shall be solidarity liable for their reimbursement."[39] In turn, the COA determines the extent of one’s liability for each illegal expenditure of follows:[40]
Sec. 16. Determination of Persons Responsible/Liable. — 16.1 The Liability of public officers and other persons for audit disallowances/charges shall be determined on the basis of (a) the nature of the disallowance/charge; (b) the duties and responsibilities or obligations of officers/employees concerned; (c) the extent of their participation in the disallowed/charged transaction; and (d) the amount of damage or loss to the government, thus:
16.1.1
x x x
16.1.2
Public officers who certify as to the necessity, legality and availability of funds or adequacy of documents shall be liable according to their respective certifications.
16.1.3
Public officers who approve or authorize expenditures shall be liable for losses arising out of their negligence or failure to exercise the diligence of a good father of a family.
16.1.4
x x x
16.1.5
The payee of an expenditure shall be personally liable for a disallowance where the ground thereof is his failure to submit the required documents, and the Auditor is convinced that the disallowed transaction did not occur or has no basis in fact.
Based on these rules, the following may be held jointly and severally liable for the overpayment of separation benefits in this case: (1) Macapodi, as the payee or recipient of the amount; (2) Singson and Ilagan, as the officers who approved and certified the specific transaction, respectively; and (3) the members of TRANSCO’s Board and/or its President and CEO, as the officials who issued directives to pay separation benefits. 1. Macapodi’s liability The Court holds Macapodi liable for the disallowed amount. Notably, the CO A Rules and Regulations on Settlement of Accounts holds a payee personally liable for a disallowed amount, provided the following conditions concur: (a) The payee failed to submit required documents, and (b) the disallowance was grounded on such failure. However, wt cannot impute liability to Macapodi based on this rule. The disallowance here was grounded on the expenditure’s illegality (i.e., violating the EPIRA), not on Macapodi’s failure to submit documents. Macapodi’s liability to return the disallowed amount is grounded not on the COA rules as cited above, but on the basic principle that no one can be unjustly enriched by money mistakenly paid to him.[41] To be sure, a government instrumentality’s disbursement of salaries that contravenes the law is a payment through error or mistake. A person who receives such erroneous payment has the quasi-contractual obligation to return it[42] because no one shall be unjustly enriched at the expense of another,[43] especially if public funds are at stake. The law constitutes the person receiving money through mistake a trustee of a constructive trust for the benefit of the person from whom the property comes,[44] which, in this case, is the government.[45] That the amount was already released to the employee through no fault of his own does not diminish the payment’s patent illegality or cure its defect. His obligation to return arose because the payment was a clear mistake. He has no right to retain the amount, irrespective of his good faith in receiving it. In the recent case of Madera v. Commission on Audit[46] (Madera), the Court “returned lo the basic premise that the responsibility to return is a civil obligation to which fundamental civil law principles, such as unjust enrichment and ‘solutio indebiti’ apply regardless of the good faith of passive recipients.” In the absence of bona fide exceptions manifest on the record, the Court shall remain stringent in appreciating the defense of good faith when determining a payee’s liability over disallowed expenses. Following the Court’s pronouncement in Madera, it is clear that we shall no longer settle with the lax notion that a payee’s receipt, coupled by an honest belief that he is entitled to the payment, amounts to good faith, which exonerates him from his obligation. To be sure, the Court’s decision to excuse a civil servant from his liability to refund the salaries clearly received by virtue of a patently illegal directive to disburse and, thus, by mistake must rest on “truly exceptional circumstances."[47] 2. Singson and Ilagan’s liability The Court absolves Singson and Ilagan from liability. In the present case, Singson verified that the disbursement voucher covering the subject check was supported by the necessary documents. On the other hand, Ilagan certified that subject expense was necessary, lawful, and incurred under his direct supervision. The general rule is that a verifier and/or certifier of an illegal disbursement is/are liable for audit disallowances under the above-quoted provisions of Sections 16.1.2 and 16.1.3 of COA Circular No. 006-09, respectively. However, this liability does not “automatically attach simply because one took part in the disbursement approval process."[48] Significantly, a verifiers/certifier’s authority to approve a disbursement is subordinate only to a higher official’s authority to direct or instruct the payment per se.[49] Upon the higher authority’s instruction to disburse funds, a verifier shall evaluate the disbursement “in accordance with the applicable internal control procedures and rules mandated by the COA and/or the government instrumentality itself."[50] On the other hand, a certifier would independently review the transaction for purposes of attesting “that funds are available for the disbursement, x x x that the corresponding allotment may be charged, and x x x that the expense/disbursement is valid, authorized, and supported by sufficient evidence."[51] Thus, according to the nature of their participation, Singson and Ilagan performed their respective duties based on a superior officer’s directive. At that time, they approved the disbursement in the honest belief that it was supported by a valid exercise of corporate powers. Inasmuch as these personnel are public officers, they are presumed to have performed their duties regularly[52] and in good faith. Absent proof of “bad faith or malice, public officers are not personally liable for damages resulting from the performance of official duties."[53] In the present case, ’there is no evidence showing that either Ilagan or Singson performed their duties in bad faith or negligently. Thus, there is no reason for the Court to dispel the presumption of regularity and good faith favoring them. 3. The Board and/or the President/CEO’s liability The root of the illegal disbursement in the present case is a mere circular issued by the President and CEO, not a board resolution. A closer look at the Factual antecedents would reveal that the board resolutions related to TRANSCO’s separation program echoed the same formula under the EPIRA. It was only Circular No. 2009-0010 that incorporated the Length of Service Multiplier into TRANSCO’s computation of separation pay. Inasmuch as Circular No. 2009-0010 directly defied the EPIRA, the issuance thereof was ultra vires and negligent. That the act was unauthorized negates good faith in the performance of duties. As the flawed circular was, however, not issued by the members of the Board but by President and CEO Arthur N. Aguilar alone, who was not made a party to this case, We must modify the COA Proper Decision in that the former are exonerated from liability. To summarize, the COA properly disallowed the excessive and illegal payment of separation benefits to Macapodi in the amount of P883,341.63. However, the COA should not have excused him from reimbursing it. He is civilly liable to return the disallowed amount pursuant to the legal prohibition against unjust enrichment. In addition, the President and CEO’s Circular No. 2009-0010, not Board Resolution No. TC 2009-007, caused the illegal disbursement by prescribing a computation violate of the law. Consequently, the members of the Board are not civilly liable, without prejudice to the filing of the appropriate action against President and CEO Arthur N. Aguilar. WHEREFORE, the COA Proper Decision No. 2017-154 dated May 18, 2017 is AFFIRMED WITH MODIFICATION in that Sabdullah T. Macapodi is liable to return the disallowed amount of P883,341.63 via a mode of payment deemed just and proper by the Commission on Audit This pronouncement is without prejudice to the institution of the appropriate action against Arthur N. Aguilar, the official responsible for the illegal disbursement. The members of the Board, Susana H. Singson, and Jose Mari M. Ilagan are absolved from liability. SO ORDERED. Peralta, C. J., Caguioa, Gesmundo, Hernando, Carandang, Lazaro-Javier, Zalameda, Lopez, Gaerlan, and Rosario, JJ., concur. Perlas-Bernabe, J., on official leave. Left the concurring vote. Leonen, and Delos Santos, JJ., on official leave. Caguioa, J., Please See Concurring Opinion.