Abrenica vs. COA

An administrative issuance that contravenes the express provisions of its enabling statute is void and cannot serve as legal basis for government disbursements, and the Supreme Court's interpretation of law in an adversarial administrative proceeding constitutes binding jurisprudence forming part of the legal system; however, recipients of disallowed amounts may be excused from refunding on equitable grounds when the benefits were genuinely given in consideration of hazardous services actually rendered and the disallowance stemmed from the agency's irregular implementation rather than the recipients' fault.

Petitioners are employees of San Lazaro Hospital (SLH) with Salary Grades 20 to 26, entitled to hazard allowances under Republic Act No. 7305, "The Magna Carta of Public Health Workers." Section 21 of RA No. 7305 prescribes hazard allowances equivalent to at least five percent (5%) of the monthly basic salary for health workers with SG 20 and above, and at least twenty-five percent (25%) for those with SG 19 and below — rates that are salary-proportioned. The DOH, pursuant to its rule-making authority under Section 35 of the same law, issued Administrative Order No. 2006-0011, which fixed hazard pay for SG 20 and above at a flat rate of ₱4,989.75 per month, a scheme that deviated from the salary-proportioned minimum prescribed by the statute. The Court had previously ruled on the invalidity of this fixed rate in A.M. No. 03-9-02-SC, entitled "Re: Entitlement to Hazard Pay of SC Medical and Dental Clinic Personnel," promulgated in 2008.

Petitioners are employees of San Lazaro Hospital (SLH) with Salary Grades 20 to 26. From January to June 2009, they received hazard allowances pegged at ₱4,989.75 per month, a rate fixed under Department of Health (DOH) Administrative Order No. 2006-0011 dated May 16, 2006, which prescribed the mechanics of payment for hazard pay to public health workers. Under that issuance, hazard pay for SG 20 and above was set at a flat amount of ₱4,989.75 with no increase, while hazard pay for SG 1 to SG 19 was set at 25% of the actual present salary received.

This flat rate was found to be inconsistent with Section 21 of Republic Act No. 7305, "The Magna Carta of Public Health Workers," and Section 7.1.5.a, Rule XV of its Revised Implementing Rules and Regulations, both of which prescribe hazard allowances equivalent to at least five percent (5%) of the monthly basic salary for health workers with SG 20 and above — a salary-proportioned rate rather than a fixed amount. The aggregate amount of ₱1,094,188.98, representing hazard pay paid beyond five percent (5%) of the health workers' basic salaries, was disallowed in Notice of Disallowance No. 09-006-101(MDS)-(09) dated November 23, 2009. The Notice charged several SLH personnel with liability: Arturo B. Cabanban, Medical Center Chief II, who approved the payments; Evelyn A. Abueg, Administrative Officer V, who signed the Obligation Request; Normita A. Palisoc, Chief Accountant, who certified the supporting documents; and all petitioners as recipients.

Petitioners sought relief before the COA NGS Cluster C – Social Services through a Letter of Appeal dated January 4, 2010 and an Appeal Memorandum dated February 10, 2010, arguing that the hazard pay was given pursuant to DOH AO No. 2006-0011 and that they honestly believed they were entitled to the benefits because they occupied positions and worked in areas classified as high risk. The COA NGS denied the appeal in Decision No. 2010-003 dated April 16, 2010, citing the Court's pronouncement in A.M. No. 03-9-02-SC that DOH AO No. 2006-0011 is "void on its face," and rejecting petitioners' claim of good faith because that ruling had already been promulgated when the questioned grant was given. Petitioners then elevated the matter to the COA Proper, which affirmed the COA NGS ruling in Decision No. 2014-158 dated August 15, 2014.

Petitioners received Decision No. 2014-158 on August 28, 2014 and filed a motion for reconsideration on September 29, 2014 — the next business day after September 27, 2014, a Saturday, which was the last day of the 30-day reglementary period under the amended 2009 RRPC. The COA Proper nonetheless dismissed the motion in its Resolution dated February 27, 2015 for being filed out of time, holding that the decision had already attained finality under the doctrine of immutability of final judgment. Petitioners received the denial of their MR on April 23, 2015 and filed the present petition for certiorari on May 25, 2015.

• Timeliness of Motion for Reconsideration: Petitioners argued that their MR was filed within the reglementary period of 30 days prescribed under Section 10, Rule X of the 2009 Revised Rules of Procedure of the COA (RRPC), as amended by COA Resolution No. 2011-006, and that Decision No. 2014-158 could not have attained finality because the MR was timely.
• Validity of DOH AO No. 2006-0011: Petitioners maintained that the hazard pay granted was in accordance with RA No. 7305 and duly supported by DOH AO No. 2006-0011, as well as subsequent DOH and DBM issuances, and that they received the benefits in good faith.
• Non-Binding Nature of A.M. No. 03-9-02-SC: Petitioners contended that A.M. No. 03-9-02-SC cannot serve as jurisprudential basis to render DOH AO No. 2006-0011 void because its "constitutionality" was not the issue in that case. They argued that the Court's resolution in the administrative matter was not a product of judicial review but merely of administrative supervision over its employees, and thus the DOH issuance still enjoys the presumption of validity.

• Finality of Decision: The OSG countered that Decision No. 2014-158 is already final and immutable because the MR was not filed within the remainder of the 180-day reglementary period to appeal an ND under the unamended provisions of the 2009 RRPC.
• No Grave Abuse of Discretion: The OSG maintained that no grave abuse of discretion could be imputed against the COA Proper in citing A.M. No. 03-9-02-SC when it affirmed the ND, as the Court's determination that the DOH exceeded its authority in prescribing a fixed rate of hazard pay was a valid and binding jurisprudential precedent.
• Nature of the Issue: The OSG argued that there is no constitutionality issue in this case; rather, the issue is merely the validity of the exercise of an administrative agency's rule-making power, which the Court had already determined in A.M. No. 03-9-02-SC, a determination made in the discharge of the Court's constitutional mandate to interpret the law with binding effect transcending the administrative query raised.

• Timeliness of MR and Petition: Whether the MR of Decision No. 2014-158 was timely filed, and consequently whether the present petition was seasonably filed.
• Validity of Disallowance: Whether the amounts of hazard pay given beyond the minimum rate prescribed by RA No. 7305 were validly disallowed.
• Liability to Refund: Whether petitioners were validly held liable to refund the disallowed amounts.

• Timeliness of MR and Petition: The MR was timely filed, but the present petition was filed out of time. Under Section 10, Rule X of the 2009 RRPC as amended, petitioners had 30 days from receipt of the decision to file an MR, and the filing on September 29, 2014 was timely because September 27, 2014 fell on a Saturday. However, the petition for certiorari was filed 27 days beyond the remaining period under Section 3, Rule 64 of the Revised Rules of Court, which grants only the remaining period — not less than five days — from notice of denial of the MR.
• Validity of Disallowance: Yes. The amounts of hazard pay exceeding the five percent (5%) minimum rate under Section 21 of RA No. 7305 were properly disallowed because DOH AO No. 2006-0011, which fixed the rate at ₱4,989.75 for SG 20 and above, was void for being ultra vires and contrary to the salary-proportioned scheme mandated by the law.
• Liability to Refund: No. Petitioners should not be held liable to return the disallowed amounts, as equitable considerations — their undisputed entitlement to hazard pay, the clear connection of the pay to their hazardous duties, and the DOH's irregular implementation — warrant excusing the refund under the doctrine in Madera vs. Commission on Audit.

• Timeliness of MR and Petition: The COA Proper gravely abused its discretion in dismissing the MR outright. Section 10, Rule X of the 2009 RRPC, as amended by COA Resolution No. 2011-006, allows the filing of an MR within 30 days from notice of the decision — not merely within the remaining period of the 180-day appeal window, as the COA Proper erroneously applied. Petitioners received Decision No. 2014-158 on August 28, 2014, giving them until September 27, 2014 to file their MR; because that date fell on a Saturday, the filing on September 29, 2014 was timely. The present petition, however, was procedurally infirm. Petitioners mistakenly assumed they had a fresh 30-day period from receipt of the MR denial to file the petition, based on a fragmentary reading of Section 1, Rule XII of the 2009 RRPC. Read in conjunction with Section 3, Rule 64 of the Revised Rules of Court, the filing of the MR interrupted the period but did not reset it. Because petitioners filed their MR on the last day of the reglementary period, they had only five days from receipt of the denial on April 23, 2015 — or until April 28, 2015 — to file the petition. The petition filed on May 25, 2015 was 27 days late. Despite this procedural lapse, the Court relaxed the rules on finality of judgments to address the substantive issues, citing strong considerations of substantive justice, the prima facie showing of petitioners' entitlement, and the necessity to resolve the lingering confusion on the validity of the fixed rate of hazard pay affecting all similarly-situated public health workers.

• Validity of Disallowance: Section 21 of RA No. 7305 and Section 7.1.5.a of its Revised IRR prescribe minimum hazard allowance rates that are salary-proportioned: at least 25% for SG 19 and below, and at least 5% for SG 20 and above. DOH AO No. 2006-0011, however, fixed hazard pay for SG 20 and above at a flat ₱4,989.75, distorting the scalar allocation of hazard allowances that the law intended. The Court had already ruled in A.M. No. 03-9-02-SC that this provision of the DOH AO is void on its face for being ultra vires and unreasonable, as the DOH exceeded its limited power of implementation by fixing an exact amount inconsistent with the law's salary-proportioned scheme. Petitioners' contention that A.M. No. 03-9-02-SC was merely an exercise of administrative supervision and not judicial review was rejected. Although the administrative matter originated from a request by the Court's medical staff, the conflicting propositions of the FMBO and OCAT on the validity of DOH AO No. 2006-0011 put the issue in inquiry, giving the administrative matter an adversary character that necessitated the Court's exercise of its constitutional mandate to interpret and apply the governing law. The Court's ruling on the invalidity of the fixed rate was the ratio decidendi — not obiter dictum — because it was absolutely essential to determining whether the Court could grant its medical staff's request to conform with the DOH AO. Pursuant to Article 8 of the New Civil Code, judicial decisions applying or interpreting the laws form part of the legal system, and the interpretation placed upon a law by the Court has the force of law. The COA Proper committed no grave abuse of discretion in adhering to this pronouncement, as it merely acted pursuant to its constitutional mandate to disallow illegal disbursements of public funds. An administrative rule may be valid only if it conforms to the enabling law; when a discrepancy occurs, the basic law prevails. The presumption of validity enjoyed by the DOH issuance was effectively overturned when the Court found it to have patently contravened RA No. 7305. Subsequent DOH and DBM issuances recognizing the fixed rate cannot validate it, as practice contrary to law cannot give rise to vested rights.

• Liability to Refund: Under the doctrine in Madera vs. Commission on Audit, the liability of recipients of disallowed amounts is grounded on the principles of solutio indebiti and unjust enrichment, and the recipients' good faith or bad faith is inconsequential to the determination of liability. However, such liability may be excused upon a showing that the benefits were genuinely given in consideration of services rendered, or when excused by the Court on the basis of undue prejudice, social justice considerations, and other bona fide exceptions. Three factual circumstances justified excusing petitioners' liability. First, petitioners were undisputedly entitled to hazard allowances under RA No. 7305 for being public health workers performing functions in a high-risk area — only the basis of the amount was invalidated. Second, while the Court could not give judicial imprimatur to the grant based merely on the minimum rate (as this would allow unbounded amounts), the hazard pay was technically within the amount authorized by the law. Third, the clear, direct, and reasonable connection of the hazard pay to the actual performance of petitioners' functions as public health workers in a high-risk area was undeniable, as hazard allowances are concomitant to the performance of duties exposing employees to great danger and occupational risks. The disallowance stemmed from the DOH's irregular implementation, not from any fault of the recipients. Requiring refund would cause social injustice and undue prejudice to deserving public health workers who endured life-threatening risks in the performance of their duties.

• Ultra Vires Administrative Issuance — An administrative agency cannot amend, modify, expand, or subtract from the law it is intended to implement. An administrative rule or regulation is valid only if it conforms to, and does not contradict, the provisions of the enabling law. If a discrepancy occurs between the basic law and an implementing rule, the former prevails. In this case, DOH AO No. 2006-0011 was void for fixing a flat rate of hazard pay contrary to the salary-proportioned minimum prescribed by Section 21 of RA No. 7305.

• Binding Force of Supreme Court Interpretations — Decisions of the Supreme Court, although not laws themselves, are evidence of what the laws mean. The interpretation placed upon a written law by a competent court has the force of law (legis interpretatio legis vim obtinet). Pursuant to Article 8 of the New Civil Code, judicial decisions applying or interpreting the laws form part of the legal system, whether rendered in a judicial matter or in adversarial administrative proceedings. The Court's ruling in A.M. No. 03-9-02-SC on the invalidity of the fixed rate under DOH AO No. 2006-0011 was the ratio decidendi of that disposition and thus formed part of the legal system.

• Separation of Powers and Delegated Rule-Making — The legislative branch makes laws; the executive enforces them; the judiciary interprets and applies them. When the legislature delegates rule-making power to an administrative agency, the agency cannot exceed its delegated authority. The judiciary's power to interpret laws serves as a necessary corollary of the system of checks and balances to ensure the executive does not go beyond its delegated power. Administrative issuances, while enjoying a presumption of validity, remain subject to the Supreme Court's constitutional power to interpret the law.

• Liability of Recipients in COA Disallowances (Madera Doctrine) — The recipients' good faith or bad faith is inconsequential in determining liability for disallowed amounts, as such liability is grounded on solutio indebiti and unjust enrichment. However, liability may be excused: (1) when the benefits were genuinely given in consideration of services rendered; or (2) when excused by the Court on the basis of undue prejudice, social justice considerations, and other bona fide exceptions. Factors such as "ostensible statutory/legal cover" for the grant and its "clear, direct, and reasonable connection to the actual performance of the payee-recipients' official work and functions" must be considered. These exceptions are limited to disbursements adequately supported by factual and legal bases but nonetheless disallowed on account of procedural infirmities.

• Relaxation of Procedural Rules — While procedural rules should be treated with utmost respect, the Court may relax their strict application when stubborn obedience would defeat the ends of justice. The Court considers: (1) matters of life, liberty, honor, or property; (2) existence of special or compelling circumstances; (3) the merits of the case; (4) a cause not entirely attributable to the fault or negligence of the party favored; (5) lack of any showing that the review sought is merely frivolous and dilatory; and (6) that the other party will not be unjustly prejudiced.

• "Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution." — This passage, quoting Article 7 of the New Civil Code, articulates the fundamental principle that administrative issuances must conform to their enabling statutes, the doctrinal basis for voiding DOH AO No. 2006-0011.

• "Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, x x x. The interpretation placed upon a written law by this Court constitutes, in a way, a part of the law as of the date that law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate." — This passage states the canonical formulation of the doctrine that Supreme Court interpretations have the force of law, the principle relied upon to hold that the ruling in A.M. No. 03-9-02-SC was binding jurisprudence.

• "Just as the power of the DOH to issue rules and regulations is confined to the clear letter of the law, the Court's hands are likewise tied to interpreting and applying the law. In other words, the Court cannot infuse vitality, let alone a semblance of validity, to an issuance which on its face is inconsistent with the law and therefore void, by adopting its terms and in effect implementing the same — lest we otherwise validate an undue exercise by the DOH of its delegated and limited power of implementation." — This quotation from A.M. No. 03-9-02-SC, as quoted in the decision, articulates the ratio decidendi on the invalidity of DOH AO No. 2006-0011 and the limits of delegated rule-making power.

• "This is one of the cases wherein social injustice and undue prejudice will pervade should we oblige the deserving recipients to refund the disallowed amounts, which were purposely given to compensate the life-threatening risks that they had to endure in the performance of their duties and service to the public." — This passage states the equitable rationale for excusing the refund, applying the Madera doctrine's social justice exception to the recipients' liability.

• A.M. No. 03-9-02-SC (Re: Entitlement to Hazard Pay of SC Medical and Dental Clinic Personnel), 592 Phil. 389 (2008) — Controlling precedent. The Court's ruling that DOH AO No. 2006-0011 is void on its face for being ultra vires insofar as it fixed a flat rate of hazard pay contrary to the salary-proportioned scheme under RA No. 7305 was held to be the ratio decidendi of that administrative matter and thus binding jurisprudence.

• Madera vs. Commission on Audit, G.R. No. 244128, September 8, 2020 — Controlling precedent on the liability of recipients in disallowed transactions. Established that recipients' liability is grounded on solutio indebiti and unjust enrichment, and may be excused on equitable grounds including undue prejudice and social justice considerations.

• Abellanosa vs. Commission on Audit (Resolution), G.R. No. 185806, November 17, 2020 — Followed. Supplemented Madera by clarifying that exceptions to refund liability shall be limited to disbursements adequately supported by factual and legal bases but nonetheless disallowed on account of procedural infirmities.

• Cawad vs. Abad, 764 Phil. 705 (2015) — Followed. The Court therein struck down rates in DBM-DOH Joint Circular No. 1 as invalid for being contrary to RA No. 7305 and its Revised IRR, reinforcing the principle that hazard pay rates must comply with the minimum prescribed by law.

• Kapisanan ng mga Manggagawa sa GSIS (KMG) vs. COA, 480 Phil. 861 (2004) — Followed. Held that practice contrary to law cannot give rise to vested rights, and erroneous application of the law by public officers does not estop the Government from correcting such errors.

• Fortune Life Insurance Company, Inc. vs. COA Proper, 752 Phil. 97 (2015) — Cited for the principle that the 2009 RRPC should be read in conjunction with relevant laws and rules, including the Revised Rules of Court.

• Section 21, Republic Act No. 7305 (Magna Carta of Public Health Workers) — Prescribes hazard allowances equivalent to at least 25% of monthly basic salary for health workers with SG 19 and below, and at least 5% for those with SG 20 and above. Applied as the governing law to determine the minimum salary-proportioned rate of hazard pay, against which the flat rate in DOH AO No. 2006-0011 was found to be inconsistent.

• Section 35, Republic Act No. 7305 — Authorizes the Secretary of Health to formulate and prepare rules and regulations to implement the provisions of the Act. Identified as the source of the DOH's delegated rule-making power, which was exceeded in issuing DOH AO No. 2006-0011.

• Section 7.1.5.a, Rule XV, Revised IRR of RA No. 7305 — Mirrors the salary-proportioned minimum rates of hazard pay under Section 21 of RA No. 7305. Applied alongside the law to confirm that the prescribed rates are minimum and salary-proportioned.

• Article 7, New Civil Code — Provides that administrative or executive acts, orders, and regulations shall be valid only when they are not contrary to the laws or the Constitution. Applied as the doctrinal basis for voiding DOH AO No. 2006-0011.

• Article 8, New Civil Code — Provides that judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. Applied to hold that the Court's ruling in A.M. No. 03-9-02-SC constitutes binding jurisprudence.

• Articles 2154 and 22, New Civil Code — Article 2154 establishes the obligation to return something received when there is no right to demand it and it was unduly delivered through mistake (solutio indebiti). Article 22 prohibits unjust enrichment. Applied as the legal basis for recipients' liability to refund disallowed amounts, subject to equitable exceptions.

• Section 3, Rule 64, Revised Rules of Court — Provides that a petition for certiorari shall be filed within 30 days from notice of the judgment, and that the filing of an MR interrupts the period, with the aggrieved party having the remaining period — but not less than five days — from notice of denial to file the petition. Applied to determine that the present petition was filed out of time.

• Section 10, Rule X, 2009 Revised Rules of Procedure of the COA (RRPC), as amended by COA Resolution No. 2011-006 — Allows the filing of an MR within 30 days from notice of the decision. Applied to hold that petitioners' MR was timely filed.

• Section 51, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Provides that a decision of the Commission or any auditor, if not appealed, shall be final and executory. Applied to confirm that the denial of the MR became final and executory due to the late filing of the petition.

• Section 12, Republic Act No. 6758 (Compensation and Position Classification Act of 1989) — Excludes hazard pay from the consolidation of allowances into standardized salary rates, confirming its nature as a non-integrated benefit distinct from bonuses. Applied to support the characterization of hazard pay as an allowance granted to defray expenses incurred in the performance of official functions.

Gesmundo, C.J., Perlas-Bernabe, S.A.J., Leonen, Caguioa, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Gaerlan, Rosario, and J. Lopez, JJ., concurred.