National Power Corporation Board of Directors vs. Commission on Audit

A GOCC’s grant of new or additional benefits must have prior approval of the President pursuant to Memorandum Order No. 20, Administrative Order No. 103, and P.D. No. 1597; the doctrine of qualified political agency does not apply to cabinet secretaries acting in an ex officio capacity as members of a GOCC’s board of directors; and recipients of disallowed benefits are constructively trustees who must refund the amounts received under the principle of unjust enrichment, regardless of good faith.

The National Power Corporation (NPC) Board of Directors, through Board Resolution No. 2009-52 dated September 10, 2009, authorized the payment of Employee Health and Wellness Program and Related Financial Assistance (EHWPRFA) — a monthly cash benefit of P5,000 released quarterly — to qualified officials and employees. The Commission on Audit (COA) subsequently issued Notice of Disallowance No. NPC-11-004-10, disallowing P29,715,000.00 in EHWPRFA payments for the first quarter of 2010 on the ground that it was a new benefit granted without prior approval of the Office of the President as required by Memorandum Order No. 20 dated June 25, 2001. The NPC Board challenged the disallowance.

• Parties: Petitioners are the members of the NPC Board of Directors: Margarito B. Teves, Rolando G. Andaya, Jr., Peter B. Favila, Arthur C. Yap, Eleazar P. Quinto, Ronaldo V. Puno, Augusto B. Santos, and Froilan A. Tampinco. Respondent is the Commission on Audit.

• Nature of the Action: A Petition for Certiorari under Rule 64 assailing the COA’s Decision and Resolution that affirmed the Notice of Disallowance (ND) of the EHWPRFA, on grounds of grave abuse of discretion.

• The Disallowed Benefit: On September 10, 2009, the NPC Board, through Board Resolution No. 2009-52, authorized the payment of the Employee Health and Wellness Program and Related Financial Assistance (EHWPRFA). The EHWPRFA was a straight cash benefit of P5,000.00 monthly, released quarterly, to qualified officials and employees. It was paid for the first quarter of 2010, totaling P29,715,000.00.

• The Audit Disallowance: On September 26, 2011, COA issued ND No. NPC-11-004-10 disallowing the Q1 2010 EHWPRFA payments. The disallowance was premised on the ground that the EHWPRFA was a new benefit granted without prior approval of the Office of the President as required by Memorandum Order (M.O.) No. 20 dated June 25, 2001.

• Previous NPC Benefits: Prior to the EHWPRFA, NPC had an Enhanced Comprehensive Health Benefit Program (CHBP) implemented under NPC Circular No. 2000-55 dated September 11, 2000. The CHBP provided: reimbursement of medical, dental and optical expenses; medical assistance for employees suffering from dreaded diseases; Annual Physical Examination; and Annual Executive Check-Up. The CHBP involved no direct cash grants.

• Alleged Basis for EHWPRFA: Petitioners asserted that the EHWPRFA was introduced because the amounts under the CHBP had become inadequate due to the exorbitant increase in medicine prices, and that a preventive approach to wellness would benefit the workforce more.

• Liability Determinations by COA: The COA Decision on reconsideration exempted “passive recipients” — employees who merely received the benefit without participating in its approval — from refunding the disallowed amounts, finding they acted in good faith. The approving and certifying officers were held liable to refund.

• Not a New Benefit: Petitioners maintained that the EHWPRFA was not a new benefit but an expansion of the existing wellness benefits under the CHBP. They argued that similar benefits had been granted in the past and that the EHWPRFA merely increased the amounts because the CHBP’s reimbursements were no longer feasible given rising medical costs.

• Presidential Approval Obtained Through the DBM Secretary: Petitioners contended that presidential approval was impliedly secured because the Secretary of the Department of Budget and Management (DBM) was a member of the National Power Board and voted to approve the grant. Invoking the doctrine of qualified political agency, they argued that the DBM Secretary acted as the President’s alter ego, rendering separate presidential approval unnecessary. They asserted that requiring a separate approval by the DBM Secretary after the board’s vote would result in the absurd situation where one member could overrule the board’s majority decision.

• EHWPRFA Is a New Cash Benefit: The COA countered that the EHWPRFA was a new benefit, not an increase of CHBP benefits, because it was a straight cash allowance, whereas the CHBP consisted solely of non-cash reimbursements and medical services. Even if it were an increase, M.O. No. 20 and A.O. No. 103 require presidential approval for any grant of new or additional benefits.

• No Presidential Approval; Qualified Political Agency Inapplicable: The COA argued that the required presidential approval was never obtained. It emphasized that the doctrine of qualified political agency does not extend to acts performed by cabinet secretaries in their ex officio capacity as board members of GOCCs; the DBM Secretary sat on the NPC Board by operation of law, not as the President’s alter ego.

• Character of the Benefit: Whether the COA gravely abused its discretion in ruling that the EHWPRFA was a new benefit requiring prior presidential approval.

• Applicability of Qualified Political Agency: Whether the COA gravely abused its discretion in holding that the grant of the EHWPRFA needed separate presidential approval notwithstanding the participation of the DBM Secretary as a member of the NPC Board.

• Character of the Benefit: The EHWPRFA was properly classified as a new benefit. A comparison of the CHBP under Circular No. 2000-55 and the EHWPRFA revealed that the CHBP provided only reimbursement of expenses, medical assistance for dreaded diseases, and annual physical and executive check-ups — all non-cash benefits. In contrast, the EHWPRFA was a monthly P5,000 cash grant given to employees irrespective of any medical condition. The two programs are fundamentally different in nature; thus, the EHWPRFA could not be considered a mere increase in existing benefits. Even assuming it were an increase, both M.O. No. 20 and A.O. No. 103 expressly cover the increase of existing salary or compensation as well as the grant of new or additional benefits, all of which require prior presidential approval. No grave abuse of discretion attended COA’s finding.

• Applicability of Qualified Political Agency: The doctrine of qualified political agency — under which department secretaries are considered alter egos of the President and their official acts are presumptively the President’s — does not extend to actions taken by cabinet secretaries in their ex officio capacity as members of a GOCC’s board of directors. Under Republic Act No. 9136, the DBM Secretary sits on the National Power Board by operation of law, not by direct presidential appointment. Accordingly, when the DBM Secretary voted to approve the EHWPRFA, he acted as a board member pursuant to statute, not as the President’s alter ego. The approval of the National Power Board did not, therefore, dispense with the independent requirement of presidential approval under M.O. No. 20. No absurdity results from this separation: the DBM Secretary’s ex officio vote is a board act, whereas the required subsequent approval represents the President’s own, separate exercise of executive authority. Hence, COA committed no grave abuse of discretion in upholding the disallowance.

• Liability of Passive Recipients: The COA gravely abused its discretion in absolving passive recipients from refunding the disallowed benefits on the ground of good faith. Under the principle of unjust enrichment, a person who receives a benefit without legal basis at the expense of another must return it. The EHWPRFA was granted without presidential approval and therefore without any valid legal claim. The recipients thus became constructive trustees of the disallowed amounts, obliged to restore them to the government. Recent jurisprudence — including Dubongco v. COA, Department of Public Works and Highways v. COA, and Rotoras v. COA — uniformly holds that the defense of good faith is unavailing to passive recipients in such cases because the focus of unjust enrichment is on the absence of a legal basis for the benefit, not on the recipient’s intent. Consequently, all NPC employees who received the EHWPRFA are liable to refund the amounts they personally received.

• Qualified Political Agency — Ex Officio Acts Excluded — The doctrine of qualified political agency, which treats the acts of department secretaries as those of the President, does not apply to actions performed by cabinet members in their ex officio capacity as members of a GOCC’s board of directors. When a secretary sits on the board by mandate of law, not by appointment of the President, the secretary acts as a responsible board member, not as the President’s alter ego. (Atty. Manalang-Demigillo v. Trade and Investment Development of the Philippines Corporation, 705 Phil. 331, applied.)

• Unjust Enrichment in Disallowed Benefits — Constructive Trust — Recipients of disallowed government benefits are deemed constructive trustees of the amounts received if the grant lacked legal basis. The receipt of such benefits at government expense without valid justification constitutes unjust enrichment under Article 22 of the Civil Code, imposing an obligation to return them. The recipient’s good faith is immaterial; the crux is the absence of a valid claim to the benefit. (Dubongco v. COA, G.R. No. 237813; DPWH v. COA, G.R. No. 237987; Rotoras v. COA, G.R. No. 211999, followed.)

• On the limits of qualified political agency: “But the doctrine of qualified political agency could not be extended to the acts of the Board of Directors of TIDCORP despite some of its members being themselves the appointees of the President to the Cabinet. Such Cabinet members sat on the Board of Directors of TIDCORP ex officio, or by reason of their office or function, not because of their direct appointment to the Board by the President. Evidently, it was the law, not the President, that sat them in the Board.” (Quoting Manalang-Demigillo v. TIDCORP)

• On unjust enrichment as a basis for refund by passive recipients: “Every person who, through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. … If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.” (Quoting Dubongco v. COA)

• On the inapplicability of good faith defense: “In other words, good faith is not a valid defense for passive recipients because they are deemed trustees of a constructive trust for having received benefits they were never entitled to in the first place. In addition, the doctrine of unjust enrichment only concerns the question of whether an individual was benefited without legal basis at the expense of another — the belief or intent of the party placed at an advantage is immaterial.” (Decision, p. 15)

• Atty. Manalang-Demigillo v. Trade and Investment Development of the Philippines Corporation, 705 Phil. 331 (2013) — Applied to distinguish between cabinet secretaries’ acts as alter egos and acts performed ex officio as board members; the doctrine of qualified political agency does not attach to the latter.

• Dubongco v. Commission on Audit, G.R. No. 237813, March 5, 2019 — Followed in holding that passive recipients must refund disallowed benefits under the principle of unjust enrichment, irrespective of good faith.

• Department of Public Works and Highways v. Commission on Audit, G.R. No. 237987, March 19, 2019 — Followed for the proposition that employees who received disallowed CNA incentives are obliged to return the amounts under unjust enrichment; the Court further applied the rationale to EHWPRFA.

• Rotoras v. Commission on Audit, G.R. No. 211999, August 20, 2019 — Followed for the unequivocal rule that the defense of good faith is no longer available to rank-and-file employees in the refund of disallowed benefits, and that the obligation to return is limited to what was actually received.

• Government Service Insurance System v. Commission on Audit, 694 Phil. 518 (2012) — Cited to show that unjust enrichment applies even outside the CNA context; employees who received retirement plan benefits without legal basis were ordered to return them.

• Memorandum Order No. 20 (June 25, 2001), Sections 1 and 3 — Section 1 imposed the immediate suspension of the grant of any salary increase and new or increased benefit; Section 3 provided that any increase in salary or compensation shall be subject to the approval of the President. Applied to require presidential approval for the EHWPRFA.

• Administrative Order No. 103 (August 31, 2004), Section 3(b) — Directed GOCCs to suspend the grant of new or additional benefits to officials and employees. Applied to reinforce the requirement of prior approval.

• Presidential Decree No. 1597, Section 6 — Mandates that adjustments in compensation and benefits of government personnel, including those in GOCCs, are subject to approval of the President through the DBM. Cited by COA as a general legal basis for the requirement.

• Republic Act No. 9136 (Electric Power Industry Reforms Act of 2001) — Provided for the ex officio membership of the Secretary of the DBM on the National Power Board. This statutory basis was key in holding that the DBM Secretary’s board acts are not covered by the qualified political agency doctrine.

Peralta (C.J.), Perlas-Bernabe, Caguioa, A. Reyes, Jr., Gesmundo, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concurred. Justice Leonen filed a separate concurring and dissenting opinion, the contents of which were not included in the provided text.

• Leonen, J., concurring and dissenting — The opinion was not reproduced in the case materials; no further details available.