Dimapilis-Baldoz vs. Commission on Audit

A government employee who has been administratively dismissed from service is not entitled to receive salaries and benefits from the date of such dismissal, and the disallowance of such payments should be reckoned from that date. However, a public officer who approves disbursements in good faith, without knowledge of any impropriety, and who acts promptly upon learning of the irregularity, cannot be held personally liable for the refund of disallowed amounts; personal liability attaches only to those directly responsible for the unlawful expenditures.

Petitioner Rosalinda Dimapilis-Baldoz was the Administrator of the Philippine Overseas Employment Administration (POEA), a government agency tasked with regulating overseas employment. Respondent Commission on Audit (COA) is the constitutional body vested with the power to examine, audit, and settle all accounts pertaining to government funds and property, and to disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. Leonel P. Labrador was the former Chief of the POEA's Employment Services Regulation Division (ESRD), who was dismissed from service and later convicted of direct bribery. The case concerns the COA's authority to disallow government disbursements and the extent of personal liability of public officers who approve such disbursements.

Leonel P. Labrador was the former Chief of the POEA's Employment Services Regulation Division (ESRD). On May 2, 1997, then Labor Secretary Leonardo A. Quisumbing ordered his dismissal from service after Labrador was found to have bribed Madoline Villapando, an overseas Filipino worker, in the amount of ₱6,200.00 to expedite the issuance of her overseas employment certificate. Labrador's dismissal was affirmed on appeal by the Civil Service Commission through CSC Resolution No. 03-0339 dated March 12, 2003, and his subsequent motion for reconsideration was denied through CSC Resolution No. 040547 dated May 17, 2004.

Aside from the administrative proceedings, a criminal case for direct bribery was instituted against Labrador. On August 31, 1999, the Sandiganbayan convicted him and sentenced him to an indeterminate penalty of six months of arresto mayor, as minimum, to two years of prision correccional, as maximum; a fine of ₱3,000.00; temporary special disqualification from public office; and costs. His motion for reconsideration was denied on November 17, 1999, prompting him to elevate the matter to the Supreme Court. In a Resolution dated January 26, 2000, the Court affirmed Labrador's conviction and denied his motion for reconsideration with finality on March 15, 2000. A subsequent motion for leave to file a second motion for reconsideration was denied on June 28, 2000, resulting in the entry of judgment. On October 26, 2000, the Sandiganbayan received copies of the resolution and entry of judgment, with a directive to submit proof of execution within fifteen days.

On February 26, 2001, Labrador's counsel de oficio manifested in open court that Labrador desired to apply for probation under Presidential Decree No. 968, as amended. The Sandiganbayan granted his application on September 28, 2001, upon favorable recommendation of the Parole and Probation Office, and cancelled his bail bond. At the end of Labrador's probation period, a Probation Officer's Final Report dated November 4, 2003 recommended termination of probation and discharge from its legal effects. The Sandiganbayan, however, withheld approval and issued a Resolution dated March 2, 2004, stating that Labrador's application for probation was erroneously granted due to his previous appeal from his judgment of conviction, in violation of Section 4 of the Probation Law. The Sandiganbayan also noted that Labrador continued to hold the position of POEA ESRD Chief despite his sentence of temporary special disqualification, and directed that copies of the Resolution be furnished to Dimapilis-Baldoz and the CSC Chairman.

On March 9, 2004, Dimapilis-Baldoz received a copy of the Sandiganbayan's March 2, 2004 Resolution and thereupon issued a Notice/Order of Separation dated March 11, 2004, relieving Labrador of his duties effective immediately. Almost a year later, on February 7, 2005, COA State Auditor IV Crescencia L. Escurel issued Audit Observation Memorandum No. 2005-011, noting that the accounts for Government Equity, Salaries and Wages-Regular, Additional Compensation, Representation and Transportation Allowances, and Other Personnel Benefits were overstated by ₱1,626,956.05, ₱57,143.03, ₱3,000.00, ₱16,050.00, and ₱11,800.00, respectively, due to payment of salaries and benefits to Labrador from August 31, 1999 to March 15, 2004, contrary to the Sandiganbayan Decision. Based on these observations, the COA issued a Notice of Disallowance on January 18, 2006, finding Dimapilis-Baldoz, among other POEA employees, personally liable for the salaries and other benefits unduly received by Labrador in the amount of ₱1,740,124.08, paid through various checks issued from August 1999 to March 15, 2004.

Through a letter dated March 3, 2006, Dimapilis-Baldoz sought reconsideration of the Notice of Disallowance, asserting that the POEA should not be held liable for the refund since Labrador's employment was fully and promptly terminated upon receipt of the Sandiganbayan's March 2, 2004 Resolution. On October 29, 2009, the COA issued Decision No. 2009-121 affirming the Notice of Disallowance, reiterating that the amount covering Labrador's salaries and benefits should not have been paid from August 1999 to March 31, 2004 pending final resolution of the criminal case. The COA pointed out that Labrador should not have reported for work while under probation since probation did not obliterate the crime for which he was convicted, more so his penalty of dismissal from service. On January 26, 2010, the POEA moved for reconsideration, but the COA no longer entertained the motion in view of the issuance of a Notice of Finality of Decision dated January 7, 2010, stating that the COA Decision had already become final and executory. Dimapilis-Baldoz then filed the instant petition for certiorari.

• Reckoning Point of Disallowance: Dimapilis-Baldoz argued that the disallowance of the amounts pertaining to Labrador's salaries and benefits should have been reckoned only from March 2, 2004, the time the Sandiganbayan set aside its initial resolution granting Labrador's application for probation and directed him to finally serve the penalties imposed, particularly his temporary special disqualification from public office.
• Good Faith and Lack of Notice: Dimapilis-Baldoz argued that she and her office were not officially notified of the orders, resolutions, and decisions of the Sandiganbayan or the Court affirming Labrador's conviction, and that Labrador's 201 file was bereft of any records regarding the Sandiganbayan case. She maintained that she acted in good faith and lawfully exercised her duties when she approved the payment of Labrador's salaries and benefits, having no knowledge that such payments were improper.
• Prompt Termination: Dimapilis-Baldoz asserted that the POEA should not be held liable for the refund since Labrador's employment was fully and promptly terminated upon receipt of the Sandiganbayan's March 2, 2004 Resolution.

• Authority to Disallow: The COA argued that it has the constitutional and statutory authority to disallow illegal disbursements of government funds, and that the salaries and benefits paid to Labrador from August 1999 to March 31, 2004 should not have been paid pending final resolution of the criminal case against him.
• Reckoning Point of Disallowance: The COA argued that the period of disallowance should be reckoned from May 3, 2000, the date the Sandiganbayan's August 31, 1999 Decision had become final and executory, since Labrador should have stopped reporting for work as early as June 28, 2000 when the denial of his appeal rendered his conviction final.
• Effect of Probation: The COA argued that Labrador should not have reported for work while he was under probation since his probation did not obliterate the crime for which he was convicted, more so his penalty of dismissal from the service.

• Grave Abuse of Discretion — Reckoning Point: Whether grave abuse of discretion attended the COA's fixing of the reckoning point of the period of disallowance at May 3, 2000, rather than May 2, 1997, the date of Labrador's administrative dismissal.
• Grave Abuse of Discretion — Personal Liability: Whether grave abuse of discretion attended the COA's holding of Dimapilis-Baldoz personally liable for the disallowed amounts despite her alleged good faith and lack of knowledge of Labrador's conviction.

• Grave Abuse of Discretion — Reckoning Point: No grave abuse of discretion can be attributed to the COA in fixing the reckoning point at May 3, 2000, since records are bereft of any showing that it had knowledge of Labrador's prior dismissal on May 2, 1997. However, the Court cannot sanction the erroneous finding that the disallowance should only be reckoned from May 3, 2000 when Labrador was, in fact, already dismissed as early as May 2, 1997; the COA must correct its issuances to reflect the actual date of dismissal.
• Grave Abuse of Discretion — Personal Liability: Yes. The COA gravely abused its discretion in holding Dimapilis-Baldoz personally liable. Her actuations were impressed with good faith, which negates her personal liability, since she had no knowledge or any reasonable indication that the payment of salaries to Labrador was actually improper, and she promptly issued the Separation Order upon being apprised of his situation.

• Grave Abuse of Discretion — Reckoning Point: The Court held that neither the COA's position (reckoning from May 3, 2000) nor Dimapilis-Baldoz's position (reckoning from March 2, 2004) adopted a proper perspective. The undisputed fact is that Labrador had already been administratively dismissed on May 2, 1997, long before the Sandiganbayan convicted him on August 31, 1999. Under Section 47(2), Chapter 6, Subtitle A, Title I, Book V of the Administrative Code of 1987, a department secretary's decision confirming the removal of an officer under his authority is immediately executory, even pending further remedy by the dismissed public officer. The Court cited Bangalisan vs. CA, De la Cruz vs. CA, and Hon. Gloria vs. CA in affirming the immediate effect of administrative sanctions upon final order by the department secretary or head of agency. Thus, Labrador should not have been allowed to report for work from May 2, 1997, much less receive any salary or benefit accruing from his previous post. The Court further held that neither the grant nor subsequent revocation of Labrador's probation should hold any relevance to his disqualification from office, citing Office of the Court Administrator vs. Librado for the proposition that probation does not obliterate the crime for which the probationer has been convicted. However, no grave abuse of discretion can be attributed to the COA in fixing the reckoning point at May 3, 2000, since records do not show it had knowledge of Labrador's prior dismissal. Nevertheless, the Court cannot sanction the erroneous finding, as public funds are the property of the people and must be used prudently. The COA must correct its issuances to reflect the actual date of dismissal as the proper reckoning point.

• Grave Abuse of Discretion — Personal Liability: The Court found Dimapilis-Baldoz's defense of good faith well-taken. It is a standing rule that every public official is entitled to the presumption of good faith in the discharge of official duties, and in the absence of proof that a public officer acted with malice or bad faith, he should not be charged with personal liability for damages that may result from the performance of an official duty. The Court observed that Dimapilis-Baldoz's actuations were impressed with good faith, which negates her personal liability. Two important incidents impel this conclusion: first, Labrador's 201 File with the POEA was without any record of the Sandiganbayan case; and second, Dimapilis-Baldoz was only apprised of his conviction when her office was furnished a copy of the Sandiganbayan's March 2, 2004 Resolution. Her good faith is further strengthened by the fact that she lost no time in issuing the Separation Order as soon as she was apprised of Labrador's situation. The Court stressed that personal liability does not automatically attach to a public officer simply because he is the final approving authority; liability attaches only to those directly responsible for the unlawful expenditures, citing Salva vs. Carague. As Dimapilis-Baldoz's direct responsibility had not been demonstrated, there is no cogent factual or legal basis to hold her personally liable.

• Immediate Executory Effect of Dismissal Orders — Under Section 47(2), Chapter 6, Subtitle A, Title I, Book V of the Administrative Code of 1987, a department secretary's decision confirming the removal of an officer under his authority is immediately executory, even pending further remedy by the dismissed public officer. The Court applied this doctrine to hold that Labrador's dismissal on May 2, 1997 was immediately executory, and he should not have been allowed to report for work or receive salaries from that date.
• Probation Does Not Obliterate Conviction — Unlike pardon, probation does not obliterate the crime for which the probationer has been convicted. The reform and rehabilitation of the probationer cannot justify his retention in the government service. The Court applied this doctrine to hold that the grant of probation to Labrador did not justify his retention in the POEA, and the concomitant effects of his conviction, particularly his disqualification to hold public office, remained.
• Presumption of Good Faith in Official Conduct — Every public official is entitled to the presumption of good faith in the discharge of official duties. In the absence of proof that a public officer acted with malice or bad faith, he should not be charged with personal liability for damages that may result from the performance of an official duty. The burden of proving bad faith lies on the party alleging it. The Court applied this doctrine to absolve Dimapilis-Baldoz of personal liability, finding that she acted in good faith and without knowledge of Labrador's conviction.
• Personal Liability of Public Officers for Unlawful Expenditures — Although a public officer may be the final approving authority and the employees who processed the transaction were directly under his supervision, personal liability does not automatically attach to him but only upon those directly responsible for the unlawful expenditures. The Court applied this doctrine to hold that Dimapilis-Baldoz could not be held personally liable absent a demonstration of her direct responsibility for the disallowed payments.

• "While indeed the purpose of the Probation Law (P.D. No. 968, as amended) is to save valuable human material, it must not be forgotten that unlike pardon probation does not obliterate the crime [for] which the person under probation has been convicted. The reform and rehabilitation of the probationer cannot justify his retention in the government service." — This passage, quoted from Office of the Court Administrator v. Librado, articulates the doctrine that probation does not erase the effects of conviction, particularly disqualification from public office, and was central to the Court's analysis of Labrador's continued service.
• "It is a standing rule that every public official is entitled to the presumption of good faith in the discharge of official duties, such that, in the absence of any proof that a public officer has acted with malice or bad faith, he should not be charged with personal liability for damages that may result from the performance of an official duty." — This passage states the controlling doctrine on the presumption of good faith of public officers, which the Court applied to absolve Dimapilis-Baldoz of personal liability.
• "Case law exhorts that although a public officer is the final approving authority and the employees who processed the transaction were directly under his supervision, personal liability does not automatically attach to him but only upon those directly responsible for the unlawful expenditures." — This passage, citing Salva v. Carague, establishes the principle that personal liability for unlawful expenditures attaches only to those directly responsible, not merely to the final approving authority.

• Bangalisan vs. CA, 342 Phil. 586 (1997) — Cited as controlling authority for the immediate executory effect of a department secretary's decision dismissing or suspending public officers under Section 47(2) of the Administrative Code.
• De la Cruz vs. CA, 364 Phil. 786 (1999) — Cited as subsequent authority affirming the import of Section 47(2) on the immediate effect of administrative sanctions upon final order by the department secretary or head of agency.
• Hon. Gloria vs. CA, 365 Phil. 744 (1999) — Cited as subsequent authority affirming the immediate effect of administrative sanctions under Section 47(2).
• Office of the Court Administrator vs. Librado, 329 Phil. 432 (1996) — Cited as controlling authority for the doctrine that probation does not obliterate the crime for which the probationer has been convicted and cannot justify retention in government service.
• Yap vs. COA, G.R. No. 158562, April 23, 2010, 619 SCRA 154 — Cited for the proposition that the COA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds, and that public funds must be used prudently.
• Salva vs. Carague, G.R. No. 157875, December 19, 2006, 511 SCRA 258 — Cited for the principle that personal liability for unlawful expenditures does not automatically attach to the final approving authority but only to those directly responsible.
• Blaquera vs. Alcala, G.R. No. 109406, September 11, 1998, 295 SCRA 366 — Cited for the presumption of good faith in the discharge of official duties.
• Yulo vs. Civil Service Commission, G.R. No. 94125, March 3, 1993, 219 SCRA 470 — Cited for the rule that a public officer should not be charged with personal liability absent proof of malice or bad faith.
• Farolan vs. Solmac Marketing Corporation, G.R. No. 83589, March 13, 1991, 195 SCRA 168 — Cited for the rule that he who alleges bad faith bears the burden of proof.
• Tavera-Luna, Inc. vs. Nable, 67 Phil. 340 (1939) — Cited for the principle that not every error in proceedings constitutes grave abuse of discretion.
• Chua Huat vs. CA, G.R. Nos. 53851 and 63863, July 9, 1991, 199 SCRA 1 — Cited for the definition of grave abuse of discretion as a patent or gross abuse constituting an evasion of a positive duty or a virtual refusal to perform the duty.

• Section 2, Article IX-D, 1987 Constitution — Vests the COA with the power, authority, and duty to examine, audit, and settle all accounts pertaining to government funds and property, and to promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. The Court relied on this provision to affirm the COA's authority to disallow the payments to Labrador.
• Section 11, Chapter 4, Subtitle B, Title I, Book V, Executive Order No. 292 (Administrative Code of 1987) — Echoes the constitutional mandate of the COA's general audit jurisdiction. The Court cited this provision in affirming the COA's authority.
• Section 47(2), Chapter 6, Subtitle A, Title I, Book V, Executive Order No. 292 (Administrative Code of 1987), as amended — Provides that decisions of department secretaries in disciplinary actions are executory pending appeal, except when the penalty is removal, in which case the same shall be executory only after confirmation by the Secretary concerned. The Court applied this provision to hold that Labrador's dismissal on May 2, 1997 was immediately executory.
• Section 4, Presidential Decree No. 968 (Probation Law), as amended by PD 1990 — Provides that no application for probation shall be entertained or granted if the defendant has perfected the appeal from the judgment of conviction. The Court noted this provision in the context of the Sandiganbayan's revocation of Labrador's probation.
• Section 52, Book V, Title I, Subtitle B, Chapter 9, EO 292 and Section 103, PD 1445 — Cited in the COA Audit Memo, providing that expenditures of government funds in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible. The Court applied this provision in the context of determining personal liability.
• Section 27, Article II, 1987 Constitution — Declares the policy of the State to maintain honesty and integrity in the public service and take positive and effective measures against graft and corruption. The Court cited this provision in emphasizing the responsibility of government agencies to know matters pertaining to the conduct of their own employees.

Sereno, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Abad, Villarama, Jr., Perez, Mendoza, and Reyes, JJ., concurred. Brion and Leonen, JJ., were on leave.