Lozada vs. Commission on Audit

A regulation prescribing solidary liability for persons found liable under a notice of disallowance is constitutional where it merely echoes the statutory rule on joint and several liability for illegal expenditures, and a petition assailing such regulation must specify the constitutional provision violated and allege with particularity the facts constituting the breach—bare assertions of oppression or unconscionability are insufficient to overcome the presumption of validity.

Petitioners are officials of the Manila International Airport Authority (MIAA) who had been previously adjudged liable for various disbursements disallowed in audit by the Commission on Audit (COA). Upon finality of the disallowances, the COA issued Orders of Execution directing MIAA to enforce payment against the concerned officials. The legal framework governing the settlement of accounts and the liability of persons responsible for disallowed disbursements is found in COA Circular No. 006-09, promulgated on September 15, 2009, which prescribes the rules and regulations on the settlement of accounts. Section 16.3 thereof declares the liability of persons determined to be liable under a notice of disallowance or notice of chargeback to be solidary, authorizing the Commission to proceed against any person liable without prejudice to the latter's claim against the rest.

Petitioners Carlos B. Lozada, Ricardo L. Medalla, Jr., Llewelyn A. Villamor, Rowena DL San Gabriel, and Octavio F. Lina are among the MIAA officials previously adjudged liable for various disbursements disallowed in audit by the COA. Upon finality of the disallowances, the COA sought to execute the judgment through Orders of Execution (COEs) dated March 13, 2015 and April 30, 2015. Acting on these COEs, MIAA proceeded to enforce payment against the concerned officials. At the time of enforcement, however, a number of the persons involved had already resigned from service.

MIAA sought clarification from the COA on selected matters relating to the COEs' implementation. In response, the COA pointed out that the liability for the disallowances was solidary, such that MIAA could claim the full amount from any one of the persons liable, without prejudice to the latter's right to reimbursement. The COA maintained that the disallowances were already final and could no longer be altered. Thereafter, MIAA proceeded to withhold directly the payment of the salaries of those who remained as MIAA employees and to refer the collection from resigned officials to its legal department for proper action and enforcement.

By letter dated January 12, 2016, MIAA informed Lozada about the impending salary deductions. The letter stated that, pursuant to the COE dated April 30, 2015 issued for the disallowance under Notice of Disallowance No. (CNC) 01-00-101-(99) dated October 8, 2001, MIAA would withhold payment of his salaries for the settlement of his liability, computed to the extent of the disallowed amount where he had participated, amounting to ₱2,659,752.00. The letter further advised that the liability of the persons named was solidary, and that MIAA could go against any person liable without prejudice to the latter's claim against the rest. The Accounting Division would deduct from his salary an amount reducing his net take-home pay to ₱1,500.00 per payday or ₱3,000.00 per month until full settlement. MIAA certified that it began imposing salary deductions on February 15, 2016.

Aggrieved, Lozada, in his capacity and as attorney-in-fact of his co-petitioners, filed the present petition directly before the Supreme Court to strike down Section 16.3 of COA Circular No. 006-09. Petitioners filed the petition on March 27, 2017—over a year after the COEs were issued and after salary deductions had commenced.

• Constitutionality of Section 16.3: Petitioners argued that Section 16.3 of COA Circular No. 006-09 is unconstitutional for being "excessive, unreasonable, and unconscionable to human dignity" and "against the law, the fundamental law," insofar as it allows the COA/MIAA to enforce liability only against incumbent officials to the exclusion of those who have resigned, retired, or died.
• Meaning of Solidary Liability: Petitioners maintained that "solidary" should mean coherence and oneness in nature, relations, or interest, and that it would be just and fair for MIAA to go against all named persons, including those no longer in service, retired, or deceased, who are equally liable.
• Demand for Equal Liability: Petitioners argued that the names of Robert Uy, Florencio Montalbo, Raymond J. Anatalio, Freddie Cano, Antonio Gana, Oscar Paras, Edgardo C. Manda, Elpidio L. Mendoza, Alfredo V. Patricio—who are no longer in service—and the payee Business Royale Services should be included and held equally liable.

• Constitutionality of the Regulation: Whether Section 16.3 of COA Circular No. 006-09, prescribing solidary liability for persons found liable under a notice of disallowance, is unconstitutional.
• Scope of Solidary Liability: Whether the enforcement of solidary liability against incumbent officials to the exclusion of resigned, retired, or deceased co-liable persons violates the constitutional rights of petitioners.

• Constitutionality of the Regulation: No. The petition failed to establish a prima facie case of constitutional violation, petitioners having relied on vague accusations and mere conclusions of law without specifying any constitutional provision violated.
• Scope of Solidary Liability: No. Solidary liability allows the creditor to proceed against any one debtor, and MIAA in fact proceeded against all liable persons simultaneously through different modes—salary deductions for incumbents and referral to the Legal Office for collection from resigned officials.

• Constitutionality of the Regulation: Every statute or regulation is presumed valid, and to justify nullification, there must be a clear and unequivocal breach of the Constitution—not one that is doubtful, speculative, or argumentative. A party invoking the Court's power to declare a regulation unconstitutional is duty-bound to clearly establish the basis for such declaration. Petitioners' averments—that the circular was "excessive, unreasonable, and unconscionable to human dignity" and "against the law"—were mere conclusions of law. They failed to cite the constitutional provision relied upon or allege with particularity the facts constituting the breach of their fundamental right. Bare assertions of inconvenience or burden do not automatically give rise to a prima facie case of constitutional violation. Reliance on emphatic but unfounded legal conclusions and motherhood statements, coupled with the failure to specify the constitutional right or provision violated, is insufficient to overcome the presumption of validity.

• Scope of Solidary Liability: Under Article 1207 of the Civil Code, when the law expressly declares an obligation to be solidary, there is only one debt despite the plurality of parties. Section 43, Chapter 5, Book VI of the Administrative Code of 1987 provides that every official or employee authorizing or making an illegal payment, or taking part therein, and every person receiving such payment, shall be jointly and severally liable to the Government for the full amount so paid or received. The assailed COA Circular merely echoes this statutory principle. Solidary liability, under Article 1216 of the Civil Code, allows the creditor to proceed against any one of the solidary debtors or some or all of them simultaneously. In the present case, MIAA proceeded simultaneously against all personnel found liable—through salary deductions against incumbents and through referral to the Legal Office for collection from resigned or retired officials. While the obligation of solidary debtors is cumbersome, the debtor who pays has the right to demand reimbursement from co-debtors in proportion to each one's share under Article 1217 of the Civil Code, establishing that the liability among debtors is fundamentally joint or equal. The law and circular which petitioners sought to nullify already provided what they demanded. Furthermore, the petition was filed belatedly—over a year after the COEs were issued and implemented—suggesting it was a mere afterthought to resist salary deductions rather than a genuine constitutional challenge.

• Presumption of Validity of Statutes and Regulations — Every statute or regulation shall be presumed valid. To justify nullification, there must be a clear and unequivocal breach of the Constitution, not one that is doubtful, speculative, or argumentative. The party challenging the regulation must cite the constitutional provision relied upon and allege with particularity the facts constituting the breach. Bare assertions of oppression, excessiveness, or unconscionability, without specifying the constitutional right violated, are insufficient to overcome the presumption.

• Solidary Liability for Illegal Expenditures — Under Section 43 of the Administrative Code of 1987, every official or employee authorizing or making an illegal payment, or taking part therein, and every person receiving such payment, shall be jointly and severally liable to the Government for the full amount so paid or received. The relationship among the persons found liable is solidary, meaning the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The debtor who pays the solidary debt has the right to demand reimbursement from co-debtors in proportion to each one's share.

• Civil Liability of Approving or Certifying Officers in Disallowance Cases — An approving or certifying officer's civil liability over a disallowance hinges upon a clear showing that his participation in the unlawful transaction is tainted with bad faith or gross negligence. Absent such proof, civil liability may not be enforced against him, as he is presumed to have performed official duties regularly and in good faith.

• "To be sure, there can be no 'clear and unequivocal breach' if the petition is based on broad allegations that a person or tribunal's oppressive, excessive, or unconscionable acts have violated one's rights." — This passage articulates the standard for establishing a prima facie case of constitutional violation, requiring specificity in pleading rather than broad allegations of oppression.

• "When a disbursement is adjudged to be illegal, the law defines the relationship between and/or among the persons found liable therefor as solidary. The assailed COA Circular merely echoes this principle." — This establishes that Section 16.3 of COA Circular No. 006-09 is not an independent rule but a restatement of the statutory solidary liability under the Administrative Code of 1987, undermining the petitioners' constitutional challenge.

• "While there is but a single debt in a solidary obligation, this proration establishes that the liability among the debtors is fundamentally joint or equal." — This clarifies that the internal relationship among solidary debtors remains joint or equal, with the right of reimbursement ensuring proportionate contribution, thus refuting the petitioners' claim that solidary liability is unfair or unequal.

• Tantuico, Jr. vs. Republic of the Philippines, 281 Phil. 487 (1991) — Cited for the proposition that vague accusations of unconstitutionality are mere conclusions of law insufficient to overcome the presumption of validity.

• Arceta vs. Judge Mangrobang, 476 Phil. 106 (2004) — Cited for the principle that to justify nullification of a law or regulation, there must be a clear and unequivocal breach of the Constitution, not one that is doubtful, speculative, or argumentative.

• Madera vs. Commission on Audit, G.R. No. 244128, September 8, 2020 — Cited for the doctrine that an approving or certifying officer's civil liability over a disallowance hinges upon a clear showing of bad faith or gross negligence.

• National Transmission Corp. vs. Commission on Audit, G.R. No. 232199, December 1, 2020 — Cited for the presumption that official duties are performed regularly and in good faith, absent proof of bad faith or gross negligence.

• Section 16.3, COA Circular No. 006-09 — Declares the liability of persons determined to be liable under a notice of disallowance or notice of chargeback to be solidary, authorizing the Commission to go against any person liable without prejudice to the latter's claim against the rest. The Court found this provision to merely echo the statutory rule on solidary liability and upheld its constitutionality.

• Section 43, Chapter 5, Book VI, Administrative Code of 1987 — Provides that every official or employee authorizing or making an illegal payment, or taking part therein, and every person receiving such payment, shall be jointly and severally liable to the Government for the full amount so paid or received. This was identified as the statutory basis for the solidary-liability rule in the COA Circular.

• Article 1207, Civil Code of the Philippines — Provides that when the law expressly declares an obligation to be solidary, there is only one debt despite the plurality of parties. Applied to confirm that the liability under the COA Circular and Administrative Code constitutes a single solidary obligation.

• Article 1208, Civil Code of the Philippines — Provides that in a single obligation where two or more creditors and/or debtors concur, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, unless the law expressly declares otherwise. Cited to distinguish the default rule of joint liability from the expressly declared solidary liability for illegal expenditures.

• Article 1216, Civil Code of the Philippines — Provides that the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. Applied to validate MIAA's choice to proceed against incumbent officials through salary deductions.

• Article 1217, Civil Code of the Philippines — Provides that the debtor who pays the solidary debt has the right to demand reimbursement from co-debtors in proportion to each one's share. Applied to show that solidary debtors are not without recourse and that the internal liability among them is fundamentally joint or equal.

Gesmundo, C.J., Perlas-Bernabe, Leonen, Hernando, Carandang, Lazaro-Javier, Zalameda, M. Lopez, Gaerlan, Rosario, and J. Lopez, JJ., concurred. Caguioa, J., filed a concurring opinion.