Bases Conversion and Development Authority vs. Commission on Audit

Where a statute specifies the compensation of board members as a per diem and limits its amount, the board members are entitled only to the per diem authorized by law and no other compensation or allowance in whatever form.

Congress enacted Republic Act No. 7227 creating the Bases Conversion and Development Authority (BCDA), vesting its corporate powers in a Board of Directors. Section 9 of the statute limited Board member compensation to a per diem of not more than ₱5,000 per meeting, capped at four meetings per month. Section 10 authorized the Board to adopt a compensation and benefit scheme at least equivalent to that of the Bangko Sentral ng Pilipinas (BSP). Relying on Section 10, the BCDA Board adopted a compensation scheme in 1996 that included a ₱10,000 year-end benefit (YEB) for contractual employees, regular permanent employees, and Board members, which was approved by then President Ramos. When the BSP increased its YEB to ₱30,000 in 2000, the BCDA Board correspondingly increased its own YEB to ₱30,000, extending the benefit to full-time consultants as well.

• Statutory Framework: Republic Act No. 7227 created the BCDA. Section 9 provided that Board members shall receive a per diem of not more than ₱5,000 per meeting, limited to four meetings per month, with increases vested in the President. Section 10 authorized the Board to adopt a compensation and benefit scheme at least equivalent to the BSP.
• Grant of Year-End Benefit: In 1996, the BCDA Board adopted a compensation scheme granting a ₱10,000 YEB to employees and Board members, approved by President Ramos. Following BSP's increase of its YEB to ₱30,000, the BCDA Board increased its YEB to ₱30,000 in 2000 and 2001. In 2002, the Board passed Resolution No. 2002-10-193 approving the release of the ₱30,000 YEB. Full-time consultants also received the YEB.
• Nature of Consultant Contracts: The consultancy contracts explicitly stated that no employer-employee relationship existed between the BCDA and the consultants, and that the consultants would be paid a fixed contract price per month (e.g., ₱20,000 for 16 hours/week) for their services.
• COA Disallowance: COA disallowed the YEB for Board members and full-time consultants pursuant to DBM Circular Letter No. 2002-2, which clarified that non-salaried Board members and fringe benefits paid in addition to basic salaries are not entitled to YEB unless expressly provided by law.

• Board Authority to Adopt Scheme: Petitioner argued that Section 10 of RA 7227 authorized the Board to adopt a compensation and benefit scheme equivalent to the BSP, thereby empowering it to grant the YEB.
• Constitutional Infirmity: Petitioner contended that denying the YEB violated Sections 5 and 18, Article II of the Constitution, which pertain to the promotion of general welfare and labor as a primary social economic force.
• Equal Protection: Petitioner asserted that denying the benefit to Board members and full-time consultants while granting it to regular employees violated the equal protection clause, arguing that both groups have the same basic human needs ("mouths to feed and stomachs to fill").
• Absence of Express Prohibition: Petitioner maintained that RA 7227 did not expressly prohibit the Board from granting the YEB to its members.
• Presidential Approval and Vested Practice: Petitioner claimed that the YEB was approved by President Ramos and had been received by the recipients since 1997, thereby entitling them to the benefit.

• Statutory and Regulatory Limitations: Respondent countered that the YEB grant was limited by Section 9 of RA 7227, which specifies per diem as the sole compensation for Board members, and by DBM Circular Letter No. 2002-2, which denies YEB to non-salaried officials and personnel without an employer-employee relationship.
• Lack of Good Faith: Respondent argued that the presumption of good faith did not apply because the Board enacted the 2002 YEB resolution despite the DBM's clarification in January 2002 that Board members were not entitled to YEB, and because consultants knew their compensation was limited by contract.

• Board Member Compensation: Whether BCDA Board members are entitled to receive a year-end benefit in addition to the per diem specified in Section 9 of RA 7227.
• Consultant Eligibility: Whether full-time consultants are entitled to a year-end benefit despite the absence of an employer-employee relationship and the payment of a contract price instead of a basic salary.
• Constitutional Validity: Whether the denial of the year-end benefit violates the equal protection clause or the state policies under Article II of the Constitution.
• Good Faith and Refund: Whether the Board members and full-time consultants are required to refund the year-end benefits they previously received.

• Board Member Compensation: The grant of YEB to Board members was disallowed because the specification and limitation of compensation to a per diem in Section 9 of RA 7227 excludes other forms of compensation. The principle of expressio unius est exclusio alterius applies; had Congress intended to allow other benefits, it would have expressly stated so, as it did in other statutes like RA 9286. Allowing the Board to grant itself other benefits would render the per diem limitations in Section 9 inoperative.
• Consultant Eligibility: Full-time consultants are not entitled to YEB because they are not salaried employees of BCDA. DBM Circular Letter No. 2002-2 provides that YEB is a fringe benefit paid only when the basic salary is also paid. The consultancy contracts expressly disclaimed an employer-employee relationship and stipulated a contract price rather than a basic salary.
• Constitutional Validity: The equal protection challenge was rejected because Board members and consultants are not similarly situated with regular salaried employees; the argument that both groups "have mouths to feed and stomachs to fill" was found to be fatuous. The invocation of Sections 5 and 18, Article II of the Constitution was dismissed because these provisions are non-self-executing and constitute mere statements of general principles, not sources of enforceable rights.
• Good Faith and Refund: The recipients are not required to refund the disallowed YEB. Good faith was established because the Board members relied on Section 10 of RA 7227, the lack of an express prohibition in the law, and the approval of the compensation scheme by the President. The consultants relied on the Board's authority to adopt the scheme. The State is not estopped from correcting an erroneous application of a statute, but an unlawful practice cannot give rise to a vested right; however, good faith excuses the recipients from refunding.

• Expressio unius est exclusio alterius — The expression of one thing implies the exclusion of another. In the context of statutory compensation, the specification of compensation and limitation of the amount of compensation in a statute indicate that board members are entitled only to the per diem authorized by law and no other compensation or allowance in whatever form. The omission of a provision allowing board members to receive other benefits leads to the inference that Congress intended to limit compensation to the per diem.
• Non-self-executing constitutional provisions — Article II of the Constitution, entitled "Declaration of Principles and State Policies," is a statement of general ideological principles and policies, not a source of enforceable rights. Sections 5 and 18 thereof are not self-executing.
• Good faith in receipt of disallowed benefits — Public officers who receive disallowed benefits in good faith, relying on statutory authority, the lack of express prohibition, and executive approval, are not required to refund the amounts received. The State is not estopped from correcting an erroneous application of a statute, and an unlawful practice cannot give rise to a vested right, but good faith shields the recipient from the obligation to return.

• "By specifying the compensation which a director is entitled to receive and by limiting the amount he/she is allowed to receive in a month, x x x the law quite clearly indicates that directors x x x are authorized to receive only the per diem authorized by law and no other compensation or allowance in whatever form."
• "The specification that Board members shall receive a per diem of not more than ₱5,000 for every meeting and the omission of a provision allowing Board members to receive other benefits lead the Court to the inference that Congress intended to limit the compensation of Board members to the per diem authorized by law and no other. Expressio unius est exclusio alterius."
• "The claim that there is no difference between regular officials and employees, and Board members and full-time consultants because both groups 'have mouths to feed and stomachs to fill' is fatuous. Surely, persons are not automatically similarly situated — thus, automatically deserving of equal protection of the laws — just because they both 'have mouths to feed and stomachs to fill.' Otherwise, the existence of a substantial distinction would become forever highly improbable."

• Magno v. Commission on Audit — Followed in holding that statutory specification of compensation limits board members to per diem only, and that good faith recipients of disallowed benefits need not refund them.
• Baybay Water District v. Commission on Audit — Followed in reiterating that directors are authorized to receive only the per diem authorized by law and no other compensation.
• Tondo Medical Center Employees Association v. Court of Appeals — Followed in ruling that Sections 5 and 18, Article II of the Constitution are non-self-executing provisions.
• Abakada Guro Party List v. Purisima — Followed in emphasizing that a law enjoys the strong presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution.

• Section 9, Republic Act No. 7227 — Provides that Board members shall receive a per diem of not more than ₱5,000 per meeting, limited to four meetings per month. Applied to demonstrate legislative intent to limit Board compensation exclusively to per diem, excluding additional fringe benefits like the YEB.
• Section 10, Republic Act No. 7227 — Authorizes the BCDA Board to adopt a compensation and benefit scheme at least equivalent to the BSP. Cited by petitioner as basis for granting YEB, but interpreted not as an unlimited power to grant benefits in contravention of Section 9's specific limitations.
• DBM Circular Letter No. 2002-2 — Clarifies that fringe benefits like YEB are paid only when basic salary is also paid, and that non-salaried Board members are not entitled to YEB unless expressly provided by law. Applied to deny YEB to both Board members and full-time consultants.
• Section 1, Article III, 1987 Constitution — The Equal Protection Clause. Invoked by petitioner but found inapplicable because Board members and consultants are not similarly situated with regular salaried employees.
• Sections 5 and 18, Article II, 1987 Constitution — State policies on maintenance of peace and order and affirmation of labor as a primary social economic force. Held to be non-self-executing and not a source of enforceable rights.

Reynato S. Puno (Chief Justice), Leonardo A. Quisumbing, Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Dante O. Tinga, Minita V. Chico-Nazario, Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, Arturo D. Brion, Teresita J. Leonardo-De Castro, Diosdado M. Peralta.