Casal vs. The Commission on Audit

Public officers who approve or authorize the grant of incentive benefits in patent disregard of presidential issuances and civil service directives are liable for refund of the amounts disallowed, their conduct amounting to gross negligence notwithstanding the absence of dishonest purpose. However, rank-and-file employees who merely received the benefits without participating in their approval, and who relied in good faith on the imprimatur of the approving officers, cannot be compelled to refund the same.

The National Museum granted a ₱4,000 incentive award to each of its officials and employees in December 1993, totaling ₱1,162,333.35, pursuant to Provision No. 8 of its Employees Suggestions and Incentive Awards System (ESIAS), which the Civil Service Commission (CSC) approved on December 21, 1992. The grant was governed by Administrative Order No. 268, issued February 21, 1992, which strictly prohibited heads of agencies from authorizing or granting productivity incentive benefits for Calendar Year 1992 and future years pending a comprehensive study by the Office of the President, the CSC, and the Department of Budget and Management (DBM). Administrative Order No. 29, issued January 19, 1993, reiterated this prohibition and required prior approval and authorization via Administrative Order by the Office of the President. Presidential Decree No. 1177, Section 55, required DBM approval for the use of savings from appropriations for personal services.

The National Museum, sometime in December 1993, granted an incentive award of ₱4,000 to each of its officials and employees, totaling ₱1,162,333.35, pursuant to Provision No. 8 of its Employees Suggestions and Incentive Awards System (ESIAS), which the Civil Service Commission (CSC) had approved on December 21, 1992. The COA Resident Auditor at the National Museum, State Auditor III Fe Marie H. Dorado, subsequently inquired from the Department of Budget and Management (DBM) whether it had granted authority to the National Museum to use its savings from its appropriation for personal services to pay the incentive award. By letter dated June 7, 1994, DBM Director Loida S. Abellera of the Budget and Finance Bureau informed Resident Auditor Dorado that no such request for authorization had been received and that, in any event, the grant would not be given due course for lack of legal basis, citing Section 7 of Administrative Order No. 268 and Section 2 of Administrative Order No. 29, which prohibited the grant of productivity incentive benefits or other allowances of similar nature unless authorized by the Office of the President.

Resident Auditor Dorado thus disallowed the incentive award through Notice of Disallowance No. 94-02-101 P(93) dated July 19, 1994, for being violative of Section 7 of A.O. No. 268 and Section 2 of A.O. No. 29, and for lack of the requisite authorization from the DBM pursuant to Section 55 of P.D. No. 1177. Named in the Notice of Disallowance as "liable" to reimburse were petitioner Gabriel S. Casal, petitioner Cecilio Salcedo, Mrs. Alma Cabrera, and Mrs. Corbina Vergara, for their respective roles in the approval and release of the 1993 Incentive Award, and all National Museum employees who received the award. Specifically, Salcedo was held liable for approving the payroll and vouchers, Cabrera for certifying that cash advances drawn for official purposes and expenditures were under her authority, direction, and supervision, Vergara for certifying adequate availability of funds and that supporting documents appeared legal and proper, and Casal as signatory on the check.

Petitioner Casal appealed the disallowance to the COA, which denied the appeal by Decision dated June 22, 1999. His Motion for Reconsideration was likewise denied by Resolution dated August 3, 2001. On September 17, 2001, petitioners filed the instant petition before the Supreme Court. The Office of the Solicitor General (OSG), in its Manifestation and Motion in Lieu of Comment, stated that it was unable to sustain the questioned COA Decision and prayed that the same, as well as the Resolution and the Notice of Disallowance, be set aside. The COA filed its own Comment on June 13, 2002, to which petitioners filed a reply.

The Court found that while the Blaquera ruling could be invoked by the employees who received the subject award in good faith, it provided no refuge for the petitioners-approving officers due to significant factual distinctions. First, the incentive benefits in Blaquera were for CY 1992 and paid prior to the issuance of A.O. 29 on January 19, 1993, whereas the incentive awards in the instant case were released in December 1993, when A.O. 29 had already been in effect for nearly a year. Second, unlike in Blaquera, the prohibition in Section 7 of A.O. 268 was brought to the attention of the approving officers by the CSC even prior to the issuance of A.O. 29. In a letter dated December 21, 1992 addressed to petitioner Casal, then CSC Chairman Patricia A. Sto. Tomas, replying to Casal's request for approval of the Museum's ESIAS, stated that the Commission approved the same provided that the grant of productivity incentive award be made subject to the result of a comprehensive study being undertaken by the Office of the President in coordination with the CSC and the DBM, as embodied under Section 7 of A.O. No. 268. This proviso was annotated on the National Museum's ESIAS itself, just below the name and signature of Chairman Sto. Tomas.

• Refund Liability Absent Bad Faith: Petitioners faulted the COA for ordering the officials and employees of the National Museum to refund the subject incentive awards or bonuses even in the absence of any bad faith or malice on the part of the Museum's workforce.
• Application of Blaquera: Petitioners argued that the COA erred in not adhering to and applying the leading case of Blaquera vs. Alcala on the non-refund of benefits or bonuses received in good faith by government personnel despite "violations" by their superior officials of existing administrative orders and issuances regulating the grant of such incentives.
• Good Faith of Approving Officers: Petitioners asserted that their failure to observe the relevant administrative orders were mere lapses consistent with the presumption of good faith, and that the Blaquera ruling should apply to them as well.

• Sustaining the Disallowance: The COA, through its Comment filed on June 13, 2002, defended its Decision and Resolution, maintaining the disallowance of the incentive award and the liability of the named officers and recipient employees.
• Violation of Administrative Orders: The COA's Notice of Disallowance was grounded on the violation of Section 7 of A.O. No. 268 and Section 2 of A.O. No. 29, and the lack of the requisite authorization from the DBM pursuant to Section 55 of P.D. No. 1177.

• Application of Blaquera to Approving Officers: Whether the Blaquera vs. Alcala ruling on non-refund of benefits received in good faith applies to the petitioners-approving officers who authorized the grant of the incentive award.
• Liability of Recipient Employees: Whether the rank-and-file employees who merely received the incentive award without participating in its approval may be compelled to refund the same.
• Gross Negligence of Approving Officers: Whether the failure of the approving officers to observe the relevant administrative orders and CSC directives constitutes gross negligence making them liable for the refund.

• Application of Blaquera to Approving Officers: No. The Blaquera ruling provides no refuge for the petitioners-approving officers due to significant factual distinctions. The subject award was released in December 1993, nearly a year after A.O. 29 had taken effect, and the prohibition in Section 7 of A.O. 268 had been brought to their attention by the CSC even prior to the issuance of A.O. 29.
• Liability of Recipient Employees: No. The employees who received the incentive award without participating in its approval cannot be said to have acted in bad faith or with gross negligence. The imprimatur given by the approving officers on the award tended to give it a color of legality from the perspective of these employees, and following Blaquera, they cannot be compelled to refund the benefits.
• Gross Negligence of Approving Officers: Yes. The patent disregard of the issuances of the President and the directives of the CSC amounts to gross negligence, making the approving officers liable for the refund thereof, even if the grant of the incentive award were not for a dishonest purpose.

• Application of Blaquera to Approving Officers: The Court distinguished Blaquera on two material grounds. First, in Blaquera, the incentive benefits were for CY 1992 and paid prior to the issuance of A.O. 29 on January 19, 1993, so the heads of departments and agencies did not then have the benefit of the categorical pronouncement of the President reiterating the prohibition. In the instant case, the subject award was released in December 1993, when A.O. 29 had already been in effect for nearly a year. Second, unlike in Blaquera, the prohibition stated in Section 7 of A.O. 268 was brought to the attention of the approving officers by the CSC even prior to the issuance of A.O. 29, through a letter dated December 21, 1992 addressed to petitioner Casal from then CSC Chairman Patricia A. Sto. Tomas, and through an annotation on the National Museum's ESIAS itself. When petitioner Casal and the approving officers authorized the subject award, they disregarded a prohibition that was not only declared by the President through A.O. 268 but also brought to their attention by the CSC by a letter specifically addressed to petitioner Casal and by annotation on the Museum's ESIAS. Above all, at the time the same officers approved the award, the prohibition in A.O. 268 had already been reiterated by the President via A.O. 29. The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather, even if the grant of the incentive award were not for a dishonest purpose as they claimed, the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof. The Court quoted National Electrification Administration vs. COA, emphasizing that executive officials who are subordinate to the President should not trifle with the President's constitutional power of control over the executive branch, and that there is only one Chief Executive who directs and controls the entire executive branch.
• Liability of Recipient Employees: As to the employees who received the incentive award without participating in the approval thereof, it cannot be said that they were either in bad faith or grossly negligent in so doing. The imprimatur given by the approving officers on such award certainly tended to give it a color of legality from the perspective of these employees. Being in good faith, they cannot, following Blaquera, be compelled to refund the benefits already granted to them.
• Gross Negligence of Approving Officers: The Court applied the standard from Albert vs. Gangan that a public officer cannot be held civilly liable for acts performed in the discharge of official duties unless there is a clear showing of bad faith, malice, or gross negligence. The approving officers' patent disregard of the issuances of the President and the directives of the CSC constituted gross negligence, satisfying this standard and rendering them liable for the refund.

• Blaquera Doctrine on Good Faith Recipients — Government personnel who receive incentive benefits in good faith, without participating in the approval thereof, cannot be compelled to refund the same, even if the grant was later disallowed for violation of administrative issuances. The Court applied this doctrine to absolve the rank-and-file employees of the National Museum who merely received the 1993 incentive award, relying on the imprimatur of the approving officers which gave the award a color of legality.
• Gross Negligence of Approving Officers — A public officer may be held civilly liable for acts performed in the discharge of official duties upon a clear showing of bad faith, malice, or gross negligence. The Court held that the approving officers' patent disregard of the President's issuances (A.O. 268 and A.O. 29) and the CSC's directives, which were specifically brought to their attention, constituted gross negligence, making them liable for the refund of the disallowed incentive award.
• Presidential Power of Control Over the Executive Branch — Executive officials who are subordinate to the President should not trifle with the President's constitutional power of control over the executive branch. There is only one Chief Executive who directs and controls the entire executive branch, and all other executive officials must implement in good faith his directives and orders. The Court quoted this principle from National Electrification Administration vs. COA to underscore the gravity of the approving officers' disregard of presidential issuances.

• "The Court finds that while the Blaquera ruling maybe invoked by the employees who received the subject award in good faith, the same provides no refuge for the herein petitioners-approving officers due to significant factual distinctions between Blaquera and the instant case." — This passage articulates the Court's central distinction between the two classes of liable parties and frames the entire ratio decidendi of the case.
• "The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather, even if the grant of the incentive award were not for a dishonest purpose as they claimed, the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof." — This passage defines the standard of gross negligence applied to the approving officers and is the core of the Court's reasoning on their liability.
• "As to the employees who received the incentive award without participating in the approval thereof, it cannot be said that they were either in bad faith or grossly negligent in so doing. The imprimatur given by the approving officers on such award certainly tended to give it a color of legality from the perspective of these employees. Being in good faith, they cannot, following Blaquera, be compelled to refund the benefits already granted to them." — This passage states the Court's rationale for absolving the rank-and-file recipient employees and applies the Blaquera doctrine to the facts.
• "Executive officials who are subordinate to the President should not trifle with the President's constitutional power of control over the executive branch. There is only one Chief Executive who directs and controls the entire executive branch, and all other executive officials must implement in good faith his directives and orders." — This quoted passage from National Electrification Administration vs. COA underscores the constitutional basis for holding the approving officers liable for disregarding presidential issuances.

• Blaquera vs. Alcala, 356 Phil. 678 (1998) — Controlling precedent on the non-refund of incentive benefits received in good faith by government personnel. The Court applied it to absolve the rank-and-file recipient employees but distinguished it as providing no refuge for the approving officers due to significant factual distinctions.
• National Electrification Administration vs. COA, 427 Phil. 464, 485 (2002) — Followed and quoted for the principle that executive officials should not trifle with the President's constitutional power of control over the executive branch and must implement his directives and orders in good faith.
• Albert vs. Gangan, G.R. No. 126557, March 6, 2001 — Cited for the standard that a public officer cannot be held civilly liable for acts performed in the discharge of official duties unless there is a clear showing of bad faith, malice, or gross negligence.
• Petralba vs. Sandiganbayan, G.R. No. 81337, August 16, 1991, 200 SCRA 644 — Cited for the proposition that the liability of a deceased petitioner shall be charged against his estate.

• Section 7, Administrative Order No. 268 — Prohibited all heads of agencies from authorizing or granting productivity incentive benefits or other allowances of similar nature for Calendar Year 1992 and future years pending the result of a comprehensive study by the Office of the President, the CSC, and the DBM. The Court held that the approving officers disregarded this prohibition, which had been brought to their attention by the CSC.
• Section 2, Administrative Order No. 29 — Reiterated the prohibition under Section 7 of A.O. No. 268 and enjoined all heads of government offices and agencies from authorizing or granting Productivity Incentive Benefits or any and all similar forms of allowances/benefits without prior approval and authorization via Administrative Order by the Office of the President. The Court held that the subject award was released when this Order had already been in effect for nearly a year.
• Section 55, Presidential Decree No. 1177 — Required that savings in appropriations provided in the General Appropriations Act may be used for certain purposes only as may be approved by the Commissioner of the Budget in accordance with rules and procedures approved by the President. The Court noted the lack of the requisite DBM authorization as one of the grounds for the disallowance.
• Article VIII, Section 13, 1987 Constitution — Cited in the Certification to confirm that the conclusions in the decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Chief Justice Artemio V. Panganiban, Associate Justices Reynato S. Puno, Consuelo Ynares-Santiago, Leonardo A. Quisumbing, Angelina Sandoval-Gutierrez, Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Adolfo S. Azcuna, Romeo J. Callejo, Sr., Dante O. Tinga, Minita V. Chico-Nazario, Cancio C. Garcia, and Presbitero J. Velasco, Jr.