Corvera-Cirunay and De Guzman vs. COA

Trust funds held by a government agency must be spent only for the specific purpose for which the trust was created or the funds received, and an approving officer who palpably disregards this principle is solidarily liable for the disallowed amounts, while a certifying officer performing a merely ministerial function is absolved from return liability.

Taganito Mining Corporation (TMC) and Taganito HPAL Nickel Corporation (THPAL) entered into a Memorandum of Agreement (MOA) with the Mamanwa Tribes of Surigao del Norte and the NCIP for the construction and operation of a nickel mineral processing plant within the ancestral domain. Under the MOA, THPAL was obligated to provide financial assistance to the NCIP, to be exclusively used for socio-economic projects for the indigenous peoples, with payments to be made to a Trust Account established by the NCIP.

In November 2009, TMC, THPAL, the Mamanwa Tribes, and the NCIP executed a MOA for the construction and operation of a nickel mineral processing plant within the ancestral domain of the Mamanwa Tribes. Under Item 5.6 of the MOA, THPAL agreed to provide financial assistance of ₱2,000,000.00 per year to the NCIP, to be exclusively used for socio-economic projects for the indigenous peoples of Surigao del Norte. The payments were to be made to a Trust Account established by the NCIP.

In March 2012, the Mamanwa Tribe passed Resolusyon No. 14, which endorsed an annual socio-economic program to the NCIP En Banc. The resolution provided for the use of the financial assistance to hire community organizers, fund tribal meetings, and defray the general operating expenses of the NCIP Regional Office No. XIII, such as rental, capital outlay, equipment, and supplies. Subsequently, from January 2013 to August 2014, the NCIP disbursed a total of ₱1,573,227.83 from the financial assistance to cover its operating expenses, including salaries, rent, and travel.

The COA issued Audit Observation Memoranda flagging the misuse of the financial assistance. After the NCIP failed to comply with Notices of Suspension requiring either an accomplishment report or an addendum to the MOA, five Notices of Disallowance were issued on May 26, 2015. Among those held liable were petitioners Roselle A. Corvera-Cirunay, the NCIP Accountant III who certified the availability of funds, and Ligaya Q. De Guzman, the NCIP Chief of the Finance and Administrative Division who approved the transactions.

In September 2016, the parties executed an Addendum to the MOA, amending Item 5.6 to allow the financial assistance to be used for NCIP operations, capital outlay, and wages, with retroactive application to past transactions. The NCIP officers appealed the disallowances, but the COA Proper reversed the Regional Director's ruling and affirmed the notices of disallowance, prompting the petition before the Supreme Court.

• Applicable Law: Petitioners argued that the COA Proper erred in applying Republic Act No. 7942 (the Mining Act); instead, Republic Act No. 8371 (the IPRA) should govern because it specifically protects indigenous peoples' rights and, being a later enactment, repealed the Mining Act.
• Nature of the Funds: Petitioners invoked Section 62 of NCIP Administrative Order No. 3, series of 2012, which allows royalty payments to be used for any purpose redounding to the well-being of the ICCs/IPs. They contended that the disallowed amounts were financial assistance, not royalty payments under Section 17 of RA 7942.
• Exemption from Liability: Petitioners asserted that if the disallowances were upheld, they should be exempted from liability because no bad faith was determined against them.

• Purpose of the Fund: Respondent COA Proper argued that Resolusyon No. 14 was inconsistent with the purpose for which the fund was created under Section 17 of RA 7942.
• Trust Fund Principle: Respondent maintained that disbursements for administrative and operating expenses are not socio-economic purposes and should have been charged against the NCIP's appropriation for maintenance and other operating expenses, citing Section 4(3) of PD 1445, which restricts trust funds to their specific purpose.

• Grave Abuse of Discretion: Whether the COA Proper committed grave abuse of discretion in affirming the notices of disallowance against the use of financial assistance for NCIP operating expenses.
• Liability of Officers: Whether the petitioners, as approving and certifying officers, should be held solidarily liable for the disallowed amounts.

• Grave Abuse of Discretion: No. The COA Proper did not commit grave abuse of discretion, as the use of the trust fund for operating expenses violated the specific purpose for which it was created.
• Liability of Officers: Yes, as to Ligaya, who was held solidarily liable for gross negligence; No, as to Roselle, who was absolved because her duty to certify the availability of funds was merely ministerial.

• Grave Abuse of Discretion: While the Court distinguished the financial assistance from the royalty payments under RA 7942, it held that the financial assistance nonetheless constituted a trust fund as expressly stated in the MOA. Under Section 4(3) of PD 1445, trust funds must be spent only for the specific purpose for which the trust was created. The MOA explicitly restricted the financial assistance to socio-economic projects. Using the funds for the NCIP's basic running costs—rent, equipment, and salaries—violated this principle. Resolusyon No. 14 was merely a recommendatory tribal issuance and could not unilaterally change the tripartite trust agreement. The Addendum executed in 2016 could not legitimize the disbursements made in 2013 and 2014, as it was an afterthought that would circumvent the trust fund principle. Thus, the COA Proper correctly affirmed the disallowances.
• Liability of Officers: Public officers are presumed to perform their duties in good faith, but palpable disregard of the law amounts to gross negligence, negating this presumption. Ligaya, as the approving officer, displayed gross negligence by disregarding the long-established principle that trust funds must be used for their specific purpose. Conversely, Roselle, as the certifying officer, performed a merely ministerial duty in certifying the availability of funds. Citing jurisprudence, an officer who merely certifies to the availability of funds is not liable for the disallowance unless falsification or bad faith is shown. No bad faith or gross negligence was imputed against Roselle.

• Trust Fund Doctrine — Trust funds held by any government agency must be spent only for the specific purpose for which the trust was created or the funds received. The Court applied this doctrine to hold that the financial assistance from THPAL, explicitly placed in a Trust Account for socio-economic projects, could not be used for the NCIP's operating expenses.
• Liability of Approving and Certifying Officers — Approving and certifying officers acting in good faith are not civilly liable to return disallowed amounts, while those acting in bad faith, malice, or gross negligence are solidarily liable. The Court held that palpable disregard of the law constitutes gross negligence, making the approving officer liable, while the certifying officer performing a ministerial function was absolved.

• "spent only for the specific purpose for which the trust was created or the funds received." — This passage articulates the core principle of the Trust Fund Doctrine under Section 4(3) of PD 1445, which served as the basis for upholding the notices of disallowance.
• "Those performing ministerial duties may be excused from the solidary liability to return. Specifically, the duty to certify the availability of funds and the completeness of signatures and supporting documents prior to payment is merely ministerial." — This quotation defines the scope of liability for certifying officers, distinguishing ministerial duties from those requiring discretion, and providing the rationale for absolving the Accountant III.

• Madera vs. Commission on Audit, 882 Phil. 744 (2020) — Cited for the rule that approving and certifying officers acting in good faith are not liable, while those in bad faith, malice, or gross negligence are solidarily liable.
• Abrigo vs. Commission on Audit, 921 Phil. 1067 (2022) — Relied upon to establish that the liability of officers should be based on the extent of their certifications and their specific participation.
• Celeste vs. Commission on Audit, 904 Phil. 199 (2021) — Cited in Abrigo to support the proposition that officers performing merely ministerial duties may be excused from solidary liability.
• Estalilla vs. Commission on Audit, 862 Phil. 77 (2019) — Followed for the rule that an officer who merely certifies the availability of funds is not liable for the disallowance unless the certification was falsified.
• Ancheta vs. Commission on Audit, 895 Phil. 347 (2021) — Cited for the principle that palpable disregard of laws and jurisprudence amounts to gross negligence, negating the presumption of good faith.

• Section 4(3), Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Provides that trust funds may be spent only for the specific purpose for which they were created. The Court applied this to hold that the financial assistance in the Trust Account could not be used for NCIP operating expenses.
• Section 17, Republic Act No. 7942 (Philippine Mining Act of 1995) — Requires royalty payments to form part of a trust fund for the socio-economic well-being of the indigenous cultural community. The Court clarified that this provision applies to royalties, not the financial assistance in question, but the trust fund principle still governed the latter.
• Section 43, NCIP Administrative Order No. 1, series of 2006 (FPIC Guidelines) — Requires that terms and conditions of mining agreements on ancestral lands be embodied in a MOA executed among the ICCs/IPs, the applicant, and the NCIP. The Court used this to show that Resolusyon No. 14 alone could not amend the MOA.

Gesmundo, C.J., Leonen, SAJ., Caguioa, Lazaro-Javier, Zalameda, Dimaampao, and Kho, Jr., JJ., concurred. Hernando and Inting, JJ., on official business but left their votes. Gaerlan, Rosario, and Marquez, JJ., on official leave. J. Lopez, J., on official business. Singh, J., on leave.