Development Bank of the Philippines vs. Commission on Audit

The compensation of Board members of government-owned and controlled corporations is limited to the per diem expressly provided by their respective charters, and the authority of the Board, with the approval of the President, to "set" compensation refers only to the amount of per diem, not to the grant of additional benefits. The doctrine of expressio unius est exclusio alterius applies: where a statute expressly mentions only per diem as compensation, all other benefits are excluded, and the Board cannot unilaterally grant additional benefits without legislative action.

The Development Bank of the Philippines (DBP) is a government-owned and controlled corporation created under Executive Order No. 81, as amended by Republic Act No. 8523 (the DBP Charter). Section 8 of the DBP Charter governs the composition, tenure, and per diems of the DBP Board of Directors, providing that members shall be paid a per diem of ₱1,000.00 for each Board meeting actually attended, subject to a monthly cap of ₱7,500.00, unless otherwise set by the Board and approved by the President. The Commission on Audit (COA) exercises audit jurisdiction over DBP's accounts pursuant to its constitutional mandate. The case involves the scope of the Board's authority to grant compensation and benefits to its members beyond what the DBP Charter expressly provides.

The Development Bank of the Philippines (DBP) is a government-owned and controlled bank whose Board of Directors is governed by Section 8 of Executive Order No. 81, as amended by Republic Act No. 8523 (the DBP Charter). On March 29, 2006, the DBP Board passed Resolution No. 0121 approving, among others, the entitlement of the DBP Chairman and Board members, except for the DBP President and Chief Executive Officer, to: (a) ₱1,000.00 per diem for every Board/ExCom meeting attended, not to exceed ₱7,500.00 per month; (b) reimbursement of reasonable actual transportation and representation expenses, including entertainment, promotions, gifts to corporate clients, donations, travel expenses, convention fees, membership fees in civic and professional organizations, subscriptions to periodicals, and personal medical, dental, and optical expenses; (c) benefits under the Motor Vehicle Lease Purchase Plan; (d) benefits under the DBP Health Care Plan; and (e) other benefits that may be allowed pursuant to the Bank's Charter.

On August 23, 2006, the DBP Board passed Resolution No. 0037 approving guidelines for determining entitlement to per diems and other benefits, providing that: (1) Board members shall continue to be entitled to ₱1,000.00 for each Board meeting actually attended; (2) Board members shall be compensated at rates comparable to DBP consultants for work undertaken for the Bank, including Committee assignments, representation in DBP activities, client calls, consultations, and provision of technical resources; (3) a record of compensable hours shall be kept by relevant bank officers as the basis for payments; and (4) costs to represent the Bank shall be reimbursed to Board members.

On September 20, 2006, the DBP Board sent a Memorandum to the President of the Philippines requesting approval of Resolution No. 0037. DBP alleged that then President Gloria Macapagal Arroyo attached a Note stating "No objection" on the said memorandum. DBP thereafter paid its Board members benefits which were accounted as Representation and Entertainment - Others, as well as rice subsidy and anniversary bonuses. According to the DBP Schedule of Allowance granted to Chairman and Members of the Board as of December 31, 2006, DBP paid the Board members rice subsidy, anniversary bonuses, and representation and entertainment expenses totaling ₱16,656,200.09.

Upon post-audit of DBP's accounts, the COA Supervising Auditor issued Audit Observation Memorandum No. HO-BODCAOM-2006-001 dated March 20, 2007, stating that the Board's compensations were contrary to Section 8 of the DBP Charter, which entitles Board members only to per diem. DBP submitted its Comment arguing that there is no prohibition under the law in granting additional benefits to its Board members and that it secured the approval of President Arroyo. Not satisfied, the Supervising Auditor issued Notice of Disallowance No. BOD-2006-007(06) disallowing ₱16,565,200.09, stating that the approval of the President under Section 8 of the DBP Charter only refers to the increase of the per diem for each meeting attended, and citing COA Decision No. 2001-026 which provided that granting additional compensation to Board members other than those prescribed requires legislative action.

The COA-CGS affirmed the Notice of Disallowance, holding that Section 8 of the DBP Charter mentions only per diems and no other compensation, and questioning the authenticity of the alleged approval of President Arroyo because her signature appeared in a separate note rather than on the DBP's memorandum. The COA En Banc affirmed, citing DBM Circular Letter No. 2002-02 which provides that Board members of agencies are non-salaried officials not entitled to benefits unless expressly provided by law, and further questioning the approval because the signature was on a separate note and the memorandum was not in the file of the Malacañang Records Office.

• Scope of Board Authority: DBP argued that the authority of the Board under Section 8 of the DBP Charter is not limited to the amount of per diem that may be granted to the Board, emphasizing the phrase "[u]nless otherwise set by the Board and approved by the President of the Philippines."
• Presidential Approval: DBP argued that the President's note containing the words "No objection" is tantamount to her approval of the DBP Memorandum, and that such approval should be accorded due respect and credence, especially since the Supervising Auditor did not dispute said approval.
• Due Process Violation: DBP argued that the Notice of Disallowance violated its right to due process because the Supervising Auditor added COA Decision No. 2001-026 as a ground for disallowance even though it was never mentioned in the Audit Observation Memorandum.
• Estoppel by COA General Counsel's Opinion: DBP averred that the COA General Counsel's opinion — that the affairs and properties of the DBP should be managed by the Board — renders COA estopped from assailing the Board's benefits.
• Good Faith Defense: DBP argued that, assuming there was a legal basis for disallowing the subject compensation and other benefits, the Board and all accountable officers should not be held liable to refund the same since they relied in good faith on the pertinent provisions of the DBP Charter and the presidential approval.

• Grave Abuse of Discretion Not Proven: The OSG countered that DBP failed to prove that there was grave abuse of discretion on the part of the COA.
• Expressio Unius Est Exclusio Alterius: The OSG contended that Section 8 of the DBP Charter indicates only per diem as compensation of the Board, and that when a statute mentions one person, thing, or consequence, it implies the exclusion of all others.
• Presidential Approval Unverified: The OSG highlighted that the alleged approval of President Arroyo deserves scant consideration because it was written on a separate sheet of paper and its authenticity was unverified.
• Due Process Not Violated: The OSG argued that DBP's right to due process was not violated because it could still appeal the assailed Notice of Disallowance.
• COA General Counsel's Opinion Inapplicable: The OSG argued that the COA General Counsel's opinion is not applicable because it pertained to staff assistance and incidental expense of the Board, not to additional compensation.
• No Good Faith: The OSG argued that the Board and its officers cannot claim good faith because the DBP Charter states that the Board is only entitled to per diem.

• Scope of Board Authority: Whether the authority of the Board under Section 8 of the DBP Charter, with the approval of the Philippine President, is limited to the amount of the per diem that may be granted to the Board of Directors.
• Validity of Presidential Approval: Whether the notation "No objection" of then President Gloria Macapagal Arroyo in the Memorandum dated September 20, 2006 of the DBP Board requesting approval of Board Resolution No. 0037 is tantamount to a stamp of approval and should be accorded due respect and credence.
• Due Process: Whether the Notice of Disallowance violated the right of DBP to due process since the Supervising Auditor added as a ground for disallowance COA Decision No. 2001-026 which was never mentioned in the Audit Observation Memorandum.
• Estoppel: Whether the subject transactions were supported by the favorable opinion of the then COA General Counsel on issues similar to the instant case, rendering COA estopped from assailing the Board's benefits.
• Good Faith: Whether, assuming there was a legal basis in disallowing the subject compensation and other benefits, the Board of Directors and all accountable officers should be held liable to refund the same notwithstanding their reliance in good faith on the pertinent provisions of the DBP Charter and the presidential approval.

• Scope of Board Authority: No. The authority of the Board under Section 8 of the DBP Charter, with the approval of the President, is limited to setting the amount of per diem only. The doctrine of expressio unius est exclusio alterius applies — the express mention of per diem as the Board's compensation excludes all other benefits.
• Validity of Presidential Approval: Immaterial. Even assuming the approval of President Arroyo was authentic, the President's approval of the DBP Memorandum is immaterial because the Board cannot grant additional benefits to its members other than per diems under the DBP Charter.
• Due Process: No. DBP was not deprived of due process because COA Decision No. 2001-026 was not the sole basis in denying DBP's petition, and DBP still had the opportunity to question the same through an appeal before the Director of the COA-CGS and, subsequently, to the COA En Banc.
• Estoppel: No. The COA General Counsel's opinion does not refer to the grant of additional compensation to the Board members other than per diem; rather, it involves the entitlement of qualified staff and other resources to the Board members, and is therefore inapplicable.
• Good Faith: Yes. The Board members and accountable officers acted in good faith and cannot be held liable to refund the disallowed amounts, because they believed they could disburse the amounts based on the DBP Charter provisions and the President's approval, and there was no prior jurisprudence or administrative order prohibiting such disbursements at the time.

• Scope of Board Authority: Section 8 of the DBP Charter only mentions per diem as the compensation of the members of its Board. The heading of the provision states that Section 8 only refers to the Board, their composition, tenure, and per diems. Under the doctrine of expressio unius est exclusio alterius, where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. The phrase "[u]nless otherwise set by the Board and approved by the President of the Philippines" refers to the authority of the Board, with the approval of the President, to increase the per diems of Board members only. The second sentence, which states that the total amount of per diems for every single month shall not exceed ₱7,500.00, bolsters the interpretation that the provision only refers to the per diem and not to any additional benefit. The Court applied the ruling in Bases Conversion and Development Authority vs. COA, which held that 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. DBM Circular Letter No. 2002-02 likewise provides that members of the Board of Directors of agencies are non-salaried officials not entitled to benefits unless expressly provided by law. To adopt DBP's view would render Section 8 inoperative and ineffective, and would result in unbridled grant of benefits to the Board members with no discernable safeguards, setting a dangerous precedent. The recourse of the Board, if it believes the existing compensation is no longer reasonable, is to lobby before Congress for the amendment of the DBP Charter, not the unilateral grant or increase of benefits.

• Validity of Presidential Approval: The COA doubted the alleged approval of President Arroyo because it was placed in a separate note, while DBP insisted on its authenticity. Nevertheless, considering that the Board cannot grant additional benefits to its members other than per diems, the President's approval of the DBP Memorandum is immaterial. Under the DBP Charter, only the per diems of its members may be increased by the Board with the approval of the President. In BCDA vs. COA, the compensation and benefit scheme was approved by then President Fidel V. Ramos, but the Court still affirmed the disallowance of additional benefits because the BCDA Charter only allowed per diems as compensation of the Board members.

• Due Process: DBP's argument that it was deprived of due process because the Notice of Disallowance mentioned COA Decision No. 2001-026 even though it was not included in the Audit Observation Memorandum is specious. It is apparent from the assailed decision that COA Decision No. 2001-026 was not the sole basis in denying DBP's petition. Assuming arguendo that the decision was cited in the Notice of Disallowance, it did not violate DBP's right to due process because it still had the opportunity to question the same through an appeal before the Director of the COA-CGS and, subsequently, to the COA En Banc.

• Estoppel: The COA General Counsel's opinion does not refer to the grant of additional compensation to the Board members other than per diem; rather, it involves the entitlement of qualified staff and other resources to the Board members. The compensation of the Board members is not the subject of the said opinion. Thus, it is evidently inapplicable.

• Good Faith: Good faith is a state of mind denoting "honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious." Based on the cases of Zamboanga City Water District vs. COA, Mendoza vs. COA, SSS vs. COA, Silang vs. COA, and MWSS vs. COA, good faith may be appreciated in favor of the responsible officers under the Notice of Disallowance provided they comply with the following requisites: (1) that they acted in good faith believing that they could disburse the disallowed amounts based on the provisions of the law; and (2) that they lacked knowledge of facts or circumstances which would render the disbursements illegal, such as when there is no similar ruling by this Court prohibiting a particular disbursement or when there is no clear and unequivocal law or administrative order barring the same. Here, the DBP believed in good faith that they could grant additional benefits to the Board members based on Section 8 of the DBP Charter. When the Board issued DBP Resolution Nos. 0121 and 0037, they honestly believed they were entitled to the said compensation. More so, the DBP claimed that the additional benefits had the imprimatur of President Arroyo. At the time of the issuance of the said DBP resolutions on March 29, 2006 and August 23, 2006, there was still no existing jurisprudence or administrative order or regulation expressly prohibiting the disbursement of benefits and compensation to the DBP Board members aside from per diems. It was only on February 26, 2009 that the Court promulgated BCDA vs. COA prohibiting the grant of compensation other than per diems to Board members. The Court noted that it is only in the present case that it is given the opportunity to construe Section 8 of the DBP Charter, and thus the Board members and the accountable officers cannot be faulted for their flawed interpretation of the law.

• Expressio unius est exclusio alterius — The express mention of one person, thing, act, or consequence excludes all others. Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. The rule proceeds from the premise that the legislature would not have made specified enumerations in a statute had the intention been not to restrict its meaning and to confine its terms to those expressly mentioned. The Court applied this doctrine to hold that Section 8 of the DBP Charter, which mentions only per diem as the Board's compensation, excludes all other benefits.

• Good faith as a defense to refund of disallowed disbursements — Good faith is a state of mind denoting "honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious." The Court established the following requisites for good faith to absolve responsible officers from refunding disallowed amounts: (1) that they acted in good faith believing that they could disburse the disallowed amounts based on the provisions of the law; and (2) that they lacked knowledge of facts or circumstances which would render the disbursements illegal, such as when there is no similar ruling by this Court prohibiting a particular disbursement or when there is no clear and unequivocal law or administrative order barring the same.

• Non-entitlement of GOCC Board members to benefits not expressly provided by law — Members of the Board of Directors of government agencies are non-salaried officials of the government. As non-salaried officials, they are not entitled to benefits such as PERA, ADCOM, YEB, and retirement benefits unless expressly provided by law. 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.

• "The law only mentions per diem as the Board's compensation. Section 8 of the DBP Charter only mentions per diem as the compensation of the members of its Board. It does not declare any additional benefit, other than per diems, which the said members of the Board may receive." — This passage states the core statutory interpretation that underlies the disallowance of the additional benefits, establishing that the DBP Charter's express mention of per diem excludes all other compensation.

• "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. Had Congress intended to allow the Board members to receive other benefits, it would have expressly stated so." — This quotation from BCDA v. COA, adopted by the Court in the present case, articulates the canonical formulation of the expressio unius doctrine as applied to GOCC board compensation.

• "Good faith is a state of mind denoting 'honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.'" — This passage defines the controlling standard of good faith applied to absolve the DBP Board members and accountable officers from refunding the disallowed amounts.

• "To prevent the possibility of abuse in the grant of compensation, the law must be followed and it plainly states that the DBP Board is entitled solely to per diems. In the event that the Board believes the existing compensation of its members to be no longer reasonable under the present circumstances, the recourse is to lobby before Congress for the amendment of the DBP Charter and not the unilateral grant or increase of benefits." — This passage articulates the policy rationale for strictly construing the compensation provisions of GOCC charters and identifies the proper remedy for Board members seeking increased compensation.

• Bases Conversion and Development Authority vs. COA, 599 Phil. 455 (2009) — Controlling precedent. The Court applied this case, which held that the BCDA Charter's specification of per diem as the Board's compensation and the omission of a provision allowing other benefits indicate that Congress intended to limit the compensation of Board members to the per diem authorized by law and no other. The Court also applied its ruling that the Board members acted in good faith and were not required to refund the disallowed benefits.

• Zamboanga City Water District vs. COA, 779 Phil. 225 (2016) — Followed. The Court cited this case for the proposition that approving officers could be absolved from refunding the disallowed amount if there was a showing of good faith, and that lack of knowledge of a similar ruling by the Court prohibiting a particular disbursement is a badge of good faith.

• Mendoza vs. COA, 717 Phil. 491 (2013) — Followed. The Court cited this case for the holding that the lack of a similar ruling disallowing a certain expenditure is a basis of good faith.

• Social Security System vs. COA, G.R. No. 210940, September 6, 2016 — Followed. The Court cited this case for the proposition that good faith may be appreciated because the approving officers did not have knowledge of any circumstance or information which would render the disallowed expenditure illegal or unconscientious.

• Silang vs. COA, 742 Phil. 327 (2015) — Distinguished. The Court cited this case as an example where the approving officers were ordered to refund disbursed incentives because they were found to be in bad faith, contrasting it with the present case where good faith was established.

• MWSS vs. COA, G.R. Nos. 195105 & 220729, November 21, 2017 — Distinguished. The Court cited this case as an example where the Board members did not act in good faith because they approved benefits that patently contravened R.A. No. 6758, which clearly and unequivocally stated that governing boards of GOCCs can no longer fix compensation and allowances of their officials or employees.

• DBP vs. COA, G.R. Nos. 216538 & 216954, April 18, 2017 — Followed. The Court cited this case where the disallowance of the MVLPP subsidy was affirmed but the officers of DBP, including its Board members, were absolved from liability in good faith because there was no specific provision prohibiting the manner in which DBP implemented the plan.

• Commissioner of Customs vs. Court of Tax Appeals, 296 Phil. 549 (1993) — Cited in support of the expressio unius est exclusio alterius doctrine.

• San Pablo Manufacturing Corp. vs. Commissioner of Internal Revenue, 525 Phil. 281 (2006) — Cited in support of the expressio unius est exclusio alterius doctrine.

• Section 8, Executive Order No. 81 (The 1986 Revised Charter of the Development Bank of the Philippines), as amended by Republic Act No. 8523 — The provision governs the composition, tenure, and per diems of the DBP Board of Directors. The Court interpreted this provision to mean that Board members are entitled only to per diem as compensation, and that the phrase "[u]nless otherwise set by the Board and approved by the President of the Philippines" refers only to the authority to increase the amount of per diem, not to grant additional benefits.

• Section 9, Republic Act No. 7227 (BCDA Charter) — Cited in BCDA vs. COA and applied by analogy to the present case. The provision specifies that BCDA Board members shall receive a per diem of not more than ₱5,000 for every board meeting, with limitations on the monthly total and the frequency of increases, and does not state that Board members may receive other benefits.

• DBM Circular Letter No. 2002-02 — The circular provides that members of the Board of Directors of agencies are non-salaried officials of the government and are not entitled to PERA, ADCOM, YEB, and retirement benefits unless expressly provided by law. The Court applied this circular to hold that the DBP Board members are not entitled to the additional benefits disallowed by the COA.

• Section 13, Article VIII, 1987 Constitution — Cited in the Certification portion of the decision, pursuant to which the Acting Chief Justice certified that the conclusions in the decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

Sereno, J. (on leave), Carpio, J., Velasco, Jr., J., Leonardo-De Castro, J., Peralta, J., Bersamin, J., Del Castillo, J., Perlas-Bernabe, J., Leonen, J., Jardeleza, J., Caguioa, J., Martires, J., Tijam, J., and Reyes, Jr., J. concurred in the decision. Carpio, J. signed the Certification as Acting Chief Justice per Special Order No. 2539, dated February 28, 2018.