Almadovar vs. Pulido-Tan

Local water districts are covered by the Salary Standardization Law, and R.A. No. 9286 did not repeal it; their boards may fix the general manager's compensation only within SSL limits unless the charter expressly exempts them. Disbursements for private-lawyer retainers and honoraria without the required OGCC approval and COA concurrence are improper, but a disallowed salary increase may be excused from refund where received in good faith.

Isabela Water District (ISAWAD) is a government-owned or controlled corporation created under P.D. No. 198, the Provincial Water Utilities Act of 1973, as amended by R.A. No. 9286. Almadovar served as ISAWAD's General Manager. The dispute implicated R.A. No. 6758, the Salary Standardization Law; COA Circular No. 95-011 on the engagement of private lawyers; E.O. No. 878 on designations of OGCC legal staff; and CBC No. 18 and NBC No. 498 on RATA rates.

ISAWAD is a government-owned or controlled corporation created under P.D. No. 198, the Provincial Water Utilities Act of 1973, as amended by R.A. No. 9286. Almadovar was its General Manager. On January 25, 2007, Catalino S. Genel, Audit Team Leader for ISAWAD, Isabela City, issued Notices of Disallowance for various payments: (a) ND No. 2006-001(2005), payment of salary increase for the General Manager from ₱20,823.00 to ₱35,574.00 per month from August to December 2005 without legal basis, amounting to ₱73,755.00; (b) ND No. 2006-002(2005), payment of legal retainer's fee at ₱4,000.00 per month from January to December 2005 without proper authority from the OGCC and the written concurrence of the COA, amounting to ₱48,000.00; (c) ND No. 2006-003(2005), payment of honorarium to an OGCC lawyer without express authority from the OGCC and proof of service rendered to ISAWAD, amounting to ₱24,000.00; and (d) ND No. 2006-004(2005), payment of RATA to the General Manager over and above the authorized rate of the DBM under CBC No. 18 and NBC No. 498, amounting to ₱6,000.00.

The record showed that ISAWAD first engaged Atty. Esguerra under a retainership contract for one year effective November 1, 2003, with the written concurrence of the OGCC and the COA. The following year, another retainership contract was executed effective one year from November 1, 2004, with the concurrence of the OGCC but not the COA. Again, in the following year, a retainership contract was executed for another one year effective November 1, 2005, with the written concurrence of both the OGCC and the COA. As to Atty. Operario, E.O. No. 878 allows any member of the OGCC's legal staff to be designated in a concurrent capacity to act as a corporate officer of the GOCC being serviced by the OGCC when the exigency of the service so requires, provided the Government Corporate Counsel approves the designation. Petitioner admitted that the authority of Atty. Operario to render services for ISAWAD was issued only on July 11, 2006.

On April 26, 2007, petitioner filed an appeal with the Regional Cluster Director, Cluster III-Public Utilities, Corporation Government Sector, which was indorsed to the COA Regional Office. Petitioner insisted that the increase in her salary and her RATA was in accordance with R.A. No. 9286. She further claimed that the engagement of a private counsel, Atty. Esguerra, and the designation of OGCC lawyer, Atty. Operario, were in accordance with the procedure set forth by law, and that the payments made to them were appropriate.

On October 28, 2010, the COA Regional Office rendered a decision affirming with modification the assailed NDs. It explained that the compensation of the GMs of local water districts was still subject to R.A. No. 6758, the Salary Standardization Law. Thus, the increase in petitioner's salary was improper. It also agreed that the disallowance of petitioner's RATA was correct because it exceeded the allowable RATA for her position under CBC No. 18 and NBC No. 498. The COA Regional Office also agreed that the payment of honoraria to Atty. Operario had no basis because it constituted an unnecessary and excessive expenditure. The disallowed amount in ND No. 2006-002(2005) was reduced from ₱48,000.00 to ₱40,000.00 because Atty. Esguerra's services from November to December 2005 were covered by a retainership contract duly approved by the OGCC and with the written concurrence of the COA.

On December 29, 2011, the COA rendered the assailed decision affirming the ruling of the COA Regional Office. It stressed that before a private lawyer may be hired by the GOCC, the written conformity of the OGCC and the written concurrence of the COA must first be secured, which also applied in cases of contract renewal. The COA ruled that the payments to Atty. Esguerra from January to October 2005 were improper because his services were retained without the necessary conformity and concurrence of both the OGCC and the COA. Only the retainership contract for a period of one year effective on November 1, 2005 was with the conformity and concurrence of both the OGCC and the COA. Petitioner moved for reconsideration, but her motion was denied by the COA En Banc in its resolution dated April 4, 2014.

• Salary Increase and SSL Coverage: Petitioner insisted that her salary increase was proper because local water districts were exempt from the Salary Standardization Law; Section 23 of R.A. No. 9286, a later law, empowered the board of directors of local water districts to fix the salary of its General Manager, thereby impliedly repealing R.A. No. 6758. She also claimed that her salary was within the scale provided by the Office of the Philippine Association of Water Districts, Inc.
• RATA Refund: Petitioner claimed that she need not refund the alleged overpaid RATA because she acted in good faith, having stopped claiming the same after the Notices of Disallowance were issued.
• Atty. Esguerra Retainer: Petitioner argued that the payments to Atty. Esguerra from January to October 2005 were valid because the OGCC concurred with the retainership contract for one year effective November 1, 2004; that the COA acted belatedly on the request for conformity; and that the written concurrence of the COA applies only to the engagement or hiring of a private lawyer, not to the renewal of the retainership. She maintained that the retainership had been effected on a yearly basis starting November 1, 2003, so subsequent renewals should be in November of the succeeding year.
• Atty. Operario Honorarium: Petitioner faulted the OGCC for the delay in issuing the necessary authority for Atty. Operario, stating that as early as 2004 the board of directors of ISAWAD had requested the authority, but it was given only on July 11, 2006. She averred that denying the lawyers remuneration for their services would be tantamount to unjust enrichment.
• Good Faith and Refund: Citing Mendoza vs. COA, petitioner claimed that she acted in good faith in making all the disbursements and should not be made to refund them because they were given under an honest belief that the payees were entitled to the remunerations and in consideration for services rendered.
• Injunctive Relief: Petitioner prayed for the issuance of a Writ of Preliminary Injunction and/or TRO because she stood to suffer grave injustice and great irreparable injury.

• SSL Coverage: The COA countered that local water districts were covered by R.A. No. 6758, the Salary Standardization Law; that R.A. No. 9286 did not expressly repeal it; and that implied repeal, as claimed by petitioner, was disfavored by law.
• Retainer Renewal: The COA contended that the renewal of retainership contracts required the written concurrence of the COA.
• Atty. Operario Honorarium: The COA insisted that the payments of honorarium to Atty. Operario were improper because at the time he rendered his services, the OGCC had yet to issue any authority. It noted that OGCC approval and COA concurrence were required to ensure that there was basis for the engagement of a private lawyer.
• Good Faith: The COA argued that petitioner could not claim good faith because the case cited by her, allowing the defense of good faith, was premised on the fact that there was no prior case or rule that settled the applicability of R.A. No. 6758 to local water districts.
• Injunctive Relief: The COA opined that petitioner failed to state factual allegations to support the issuance of a writ of Preliminary Injunction and/or TRO.

• Disbursements: Whether the disbursements under the Notices of Disallowance were improper.
• Refund: In the event the disbursements were improper, whether petitioner is liable to refund the same.
• Injunctive Relief: Whether petitioner is entitled to the issuance of a writ of preliminary injunction and/or temporary restraining order.

• Disbursements: Yes. The salary increase contravened the Salary Standardization Law; the RATA exceeded allowable rates under CBC No. 18 and NBC No. 498; the payments to Atty. Esguerra lacked the required COA concurrence; and the honorarium to Atty. Operario lacked prior OGCC authority.
• Refund: Only in part. Petitioner must refund the disallowed RATA and the payments to Attys. Esguerra and Operario, but is absolved from refunding the salary increase because it was received in good faith.
• Injunctive Relief: No. Petitioner failed to show a clear legal right and sufficient reasons for injunctive relief, the disbursements having been without legal basis.

• Disbursements: The salary increase was correctly disallowed because it contravened the Salary Standardization Law. R.A. No. 6758 applies to all government positions, including those in government-owned or controlled corporations, without qualification; the exception is a charter that specifically exempts the corporation. Mendoza vs. COA ruled that the salaries of general managers of local water districts are subject to the SSL. Section 23 of P.D. No. 198, as amended, does not exempt water utilities from the SSL; it grants the board power to fix compensation, but the compensation must conform to the position classification system under the SSL. R.A. No. 9286 did not expressly repeal the SSL, and implied repeal is not favored and requires irreconcilable inconsistency, which was absent. The RATA disallowance was likewise correct because the amount exceeded the allowable RATA for petitioner's position under CBC No. 18 and NBC No. 498. As to Atty. Esguerra, COA Circular No. 95-011 requires the written conformity and acquiescence of the OGCC and the written concurrence of the COA before a private lawyer is engaged when the need for legal services cannot be avoided or is justified under extraordinary or exceptional circumstances; failure to secure the written concurrence makes the engagement unauthorized. Petitioner did not deny that no written COA concurrence existed when Atty. Esguerra rendered legal services from January to October 2005. The retainership was first effective November 1, 2003 with both OGCC and COA concurrence; the next contract, effective November 1, 2004, had OGCC concurrence but no COA concurrence; the contract effective November 1, 2005 had both. Each renewal constituted a hiring because the engagement terminated after one year, so each renewal for another one-year term required the COA's written conformity. Petitioner's claim that the COA acted belatedly was a bare assertion; no document showed that a request for the COA's written concurrence was made. Only the OGCC written approval dated September 5, 2005 of the retainership effective November 1, 2004 was presented, and it reminded ISAWAD to seek the COA's conformity, which it failed to do. As to Atty. Operario, E.O. No. 878 allows an OGCC legal staff member to be designated in a concurrent capacity as a corporate officer of the GOCC being serviced by the OGCC when the exigency of the service requires, provided the Government Corporate Counsel approves the designation. Petitioner admitted that authority was issued only on July 11, 2006; Atty. Operario had no authority to provide legal services before that approval and was not entitled to the honorarium. The unjust enrichment argument fails because the Notices of Disallowance directed the responsible officers of ISAWAD who made the disbursements, including petitioner, and not the lawyers, to refund. The Law Firm of Laguesma Magsalin Consulta and Gastardo vs. COA upheld a disallowance despite actual services rendered where the law firm was unauthorized for failure to secure the COA's concurrence.
• Refund: Mendoza vs. COA excused the erring officials from refunding the amounts subject of the notice of disallowance. There, the salaries were fixed by the water district's board under Section 23 of P.D. No. 198; the official had no hand in fixing the amount; and at the time he received the disputed amount in 2005 and 2006, no jurisprudence had yet ruled that water utilities were not exempt from the SSL. Pursuant to de Jesus vs. Commission on Audit, he received the disallowed salaries in good faith and need not refund. Here, the payment of the erroneous increase in petitioner's salary was made in good faith: the increase was computed in accordance with the scale provided by the Office of the Philippine Association of Water Districts, Inc., which also made an erroneous opinion that R.A. No. 9286 repealed the SSL; and at the time the disbursement was made, no categorical pronouncement similar to Mendoza that local water districts are subject to the SSL had been issued. Petitioner is therefore absolved from refunding the salary increase. Good faith cannot be appreciated in the other disbursements. Petitioner knowingly approved the payments to Atty. Esguerra and Atty. Operario despite the lack of the necessary approval by the government offices concerned. Petitioner's failure to claim her excessive RATA after the Notices of Disallowance were issued did not evince good faith because, at that time, CBC No. 18 and NBC No. 498 already provided the allowable RATA for general managers of local water districts. Those disallowed amounts must be refunded.
• Injunctive Relief: Calawag vs. University of the Philippines Visayas requires, for a writ of preliminary injunction, that (a) the invasion of the right sought to be protected be material and substantial; (b) the complainant's right be clear and unmistakable; and (c) there be an urgent and permanent necessity for the writ to prevent serious damage. When the complainant's right is doubtful or disputed, there is no clear legal right and injunctive relief is improper. Petitioner failed to show sufficient reasons for the injunctive relief. The disbursements were without legal basis because they either exceeded the limits provided by law or were issued without authority.

• Coverage of Local Water Districts under the Salary Standardization Law — R.A. No. 6758 applies to all government positions, including those in government-owned or controlled corporations, without qualification. The exception is when the GOCC's charter specifically exempts it. Section 23 of P.D. No. 198, as amended, grants a water district's board the power to fix the general manager's compensation, but the compensation must conform to the position classification system under the SSL. R.A. No. 9286 did not expressly or impliedly repeal the SSL; implied repeal is disfavored and requires irreconcilable inconsistency. Applied to disallow the salary increase.
• Requisites for Engaging a Private Lawyer by a GOCC — Under COA Circular No. 95-011, when the need for a private lawyer cannot be avoided or is justified under extraordinary or exceptional circumstances, the written conformity and acquiescence of the OGCC and the written concurrence of the COA must first be secured. Failure to secure the written concurrence makes the engagement unauthorized. Each renewal of a retainership contract constitutes a hiring and requires the COA's written concurrence. Applied to Atty. Esguerra's January to October 2005 services.
• Prior Approval for Designation of OGCC Legal Staff — Under E.O. No. 878, series of 1983, a member of the OGCC's legal staff may be designated in a concurrent capacity to act as a corporate officer of a GOCC being serviced by the OGCC when the exigency of the service requires, provided the Government Corporate Counsel approves the designation. Without prior approval, the lawyer is not entitled to honorarium. Applied to Atty. Operario.
• Good Faith Exception to Refund of Disallowed Salaries — Following Mendoza vs. COA and de Jesus vs. Commission on Audit, an official who receives a disallowed salary in good faith need not refund it. Good faith was present where the salary was fixed by the board under Section 23 of P.D. No. 198, the official had no hand in fixing the amount, and no jurisprudence had yet ruled that water utilities were not exempt from the SSL. Applied to absolve petitioner from refunding the salary increase. Good faith was not appreciated for the unauthorized legal payments and excess RATA because the governing rules already existed.
• Requisites for a Writ of Preliminary Injunction — Under Calawag vs. University of the Philippines Visayas, the applicant must establish: (a) material and substantial invasion of the right sought to be protected; (b) a clear and unmistakable right; and (c) urgent and permanent necessity for the writ to prevent serious damage. A doubtful or disputed right does not justify injunctive relief. Applied to deny petitioner's prayer.
• Unjust Enrichment as a Defense — In The Law Firm of Laguesma Magsalin Consulta and Gastardo vs. COA, the Court upheld the disallowance of payment to a law firm despite actual services rendered because the firm was unauthorized to act for a GOCC for failure to secure COA concurrence. The disallowance directed the responsible officers who made the disbursements, not the lawyers, to refund. Applied to reject petitioner's unjust enrichment argument.

• "The Salary Standardization Law applies to all government positions, including those in government-owned or controlled corporations, without qualification. The exception to this rule is when the government-owned or controlled corporation's charter specifically exempts the corporation from the coverage of the Salary Standardization Law." — This passage, quoted from Mendoza vs. COA, states the coverage rule and its exception, which the Court applied to hold that local water districts remain subject to the SSL.
• "Each renewal constituted the hiring of Atty. Esguerra because after the lapse of one year, the engagement was terminated; and each renewal for another one-year term required the written conformity of the COA." — This is the ratio for rejecting petitioner's argument that COA concurrence was required only for the initial engagement and not for renewals of the retainership.
• "In this case, the Court is of the view that the payment of the erroneous increase in petitioner's salary was nonetheless made in good faith." — This states the good faith finding that excused petitioner from refunding the disallowed salary increase.
• "Good faith, however, cannot be appreciated in petitioner's other disbursements. Petitioner knowingly approved the payments to Atty. Esguerra and Atty. Operario in spite of the lack of the necessary approval by the government offices concerned." — This limits the good faith exception and explains why the other disallowed amounts remained refundable.

• Mendoza vs. COA, G.R. No. 195395, September 10, 2013, 705 SCRA 306 — Controlling precedent; ruled that salaries of general managers of local water districts are subject to the Salary Standardization Law and supplied the good faith exception applied to absolve petitioner from refunding her salary increase.
• The Law Firm of Laguesma Magsalin Consulta and Gastardo vs. COA, G.R. No. 185544, January 13, 2015 — Followed; upheld disallowance of payment to an unauthorized law firm despite actual services rendered, and rejected the unjust enrichment argument.
• Philippine International Trading Corporation vs. COA, 635 Phil. 447, 459 (2010) — Cited for the rule that repeal by implication is not favored and is resorted to only in case of irreconcilable inconsistency and repugnancy between the new law and the old law; applied to R.A. No. 9286 and the SSL.
• Calawag vs. University of the Philippines Visayas, G.R. No. 207412, August 7, 2013, 703 SCRA 373 — Cited for the requisites of a writ of preliminary injunction; applied to deny injunctive relief.
• de Jesus vs. Commission on Audit — Cited in Mendoza for the rule that a public official who receives disallowed salaries in good faith need not refund them; relied on to absolve petitioner from refunding the salary increase.

• Section 23, Presidential Decree No. 198, as amended — Empowers a water utility's board of directors to define the duties and fix the compensation of a general manager, but the compensation fixed must be in accordance with the position classification system under the Salary Standardization Law. Applied to hold that the board's power did not exempt ISAWAD from the SSL.
• Republic Act No. 6758 (Salary Standardization Law) — Applies to all government positions, including those in government-owned or controlled corporations, without qualification, unless the charter specifically exempts the corporation. Applied to disallow the salary increase.
• Republic Act No. 9286 — Amended the Provincial Water Utilities Act; it did not expressly or impliedly repeal the Salary Standardization Law. Applied to reject petitioner's argument that the later law empowered the board to fix her salary free of SSL limits.
• COA Circular No. 95-011, dated December 4, 1995 — Requires the written conformity and acquiescence of the OGCC and the written concurrence of the COA before a private lawyer may be engaged when the need for legal services cannot be avoided or is justified under extraordinary or exceptional circumstances. Applied to disallow payments to Atty. Esguerra for January to October 2005.
• Executive Order No. 878, series of 1983 — Allows any member of the OGCC's legal staff to be designated in a concurrent capacity to act as a corporate officer of the GOCC being serviced by the OGCC when the exigency of the service so requires, provided the Government Corporate Counsel approves the designation. Applied to disallow Atty. Operario's honorarium because approval came only on July 11, 2006.
• Corporate Budget Circular No. 18, dated April 1, 2005 and National Budget Circular No. 498, dated November 14, 2000 — Provide the allowable rates of RATA for national government officials and equivalent ranks. Applied to disallow the excess RATA paid to petitioner.
• Section 7, Rule V of the 2009 Revised Rules of Procedures of the COA — Governs automatic elevation of the case for review to the COA. Applied procedurally.
• Rule 64 of the Revised Rules of Court — Governs the petition for certiorari seeking review of the COA decision and resolution. Applied as the mode of review.

Sereno, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez, Reyes, Perlas-Bernabe, Leonen, and Jardeleza, JJ., concur.