Pagkaliwangan v. Commission on Audit

Flying Risk Pay under Section 30 of RA 776 is confined to airmen and other authorized personnel whose duties inherently involve regular and frequent aerial flights in connection with their duties; administrative personnel who travel merely as passengers are not entitled, even if the agency head authorizes the payment. When a disallowance is upheld, good-faith approving and certifying officers are not solidarily liable, but recipient-payees must return the amounts they received under solutio indebiti unless a Madera exception applies.

Petitioners are officers and employees of the Civil Aviation Authority of the Philippines (CAAP), a government agency whose personnel include airmen and administrative staff. The Commission on Audit (COA) is the constitutionally mandated auditing institution. Section 30 of Republic Act No. 776 authorizes an increase in compensation to rated and/or licensed airmen and such other authorized personnel required to undertake or perform regular and frequent aerial flights in connection with their duties, while Section 315(c) of the Government Accounting and Auditing Manual (GAAM) Volume 1 restricts flying risk pay to airmen performing duties inherent in aircraft operation while in flight and excludes passengers. Before the 2011 payments, COA Decision No. 2009-125 had lifted a prior disallowance of similar FRP payments, interpreting “such other authorized personnel” to extend beyond airmen.

The CAAP granted Flying Risk Pay to selected officials and personnel who took flights to international and/or domestic destinations in connection with their official CAAP functions. On January 17, 2011, CAAP Board Resolution No. 2011-007, Series of 2011, authorized the CAAP Director General to grant FRP/flying pay to qualified personnel who had rendered at least four hours of flight per month at the rate of 50% of their basic monthly salary. Pursuant to this, Col. Ramon S. Gutierrez, then Director General of CAAP, issued Authority Order No. 320-11 dated November 2, 2011, granting FRP to CAAP officials and personnel occupying different positions. The order provided that, given the nature of their jobs, the Chief of Staff (Corporate Executive Officer V–SG 27) and the Head Executive Assistant (Corporate Executive Officer IV–SG 26) were entitled to monthly flying pay with minimum required hours of four and six, respectively; that by virtue of their positions and ranks (Assistant Director General II–SG 27), the Chiefs of the non-technical CAAP Security and Intelligence Service, the Enforcement and Legal Service, and the Administrative and Finance Service were also entitled to flying pay after completing the minimum six-hour requirement; and that other personnel on official travel, except for training or participation in conferences, symposia, and the like, may be entitled to flying pay provided that claims did not exceed six times a year and the following were complied with: approval by the Director General of the request for entitlement with a clear showing of the minimum number of flying time hours in one calendar month; endorsement for entitlement from the respective Service Head and certification on the availability of funds from the Finance Department; and submission of Travel Order and Travel Report.

In line with AO No. 320-11, CAAP paid FRP to nine employees on account of their travel. Napoleon Garcia, Deputy Director General for Administration/Office of the Director General, was paid for travel to attend the Global Airports Council International-International Civil Aviation International Organization Airport Management Professional Accreditation Program in Beijing, China. Ramon S. Gutierrez, Director General, was paid for travel to conduct airport and flight inspection of Laoag and Basco airports and Navaids/Visual-Aids facilities. Jose Tapnio, CEO IV/Office of the Director General, was paid for travel to conduct airport and flight inspection of Laoag and Basco airports and Navaids/Visual-Aids facilities; inspect Davao airport; attend a meeting regarding the Puerto Princesa Underground River; verify cases against CAAP filed in Puerto Princesa; and attend the 17th ASEAN Transport Minister Meeting/32nd Senior Transport Officials Meeting from December 11 to 17, 2011 in Phnom Penh, Cambodia. Atty. Rodrigo G. Artuz, CEO V/Office of the Director General, was paid for travel to attend the 13th Cooperative Development of Operational Safety and Continuing Airworthiness Program Steering Committee Meeting from November 29 to December 1, 2011 in Yangon, Myanmar. Abner Bondoc, Chief Financial Officer/Office of the Director General, was paid for travel to conduct inspection of the Gender and Development Project in Kalibo and Legazpi airports and Davao International airport; conduct ocular inspection on the effect of Typhoon Sendong in Cagayan de Oro; and conduct the oath-taking ceremony for newly appointed employees of Area Center V (Iloilo).

Raul G. Glorioso, Acting Chief of the Engineering Department/Aerodrome Development and Management Service, was paid for travel to attend the 2nd SOCCSKSARGEN ADP Board Committee Meeting in General Santos City; conduct ocular inspection and acceptance of a project undertaken by PMS-DOTC at Siargao Airport and research on Lot No. 884-A and Lot No. 891-A owned by Antonio Y. Tandan at Surigao Airport; conduct inspection of aircraft movement areas and other facilities at Cagayan de Oro airport; confer with the Area Manager, Area Center V, on the proposed implementation of the increase of terminal fee at Caticlan airport; conduct inspection and acceptance by DOTC-PMS at Maasin airport; conduct joint inspection with Airphil Express in connection with its proposed commercial flight operation at Pagadian airport; conduct research in connection with the issuance of a Special Patent by the Department of Environment and Natural Resources for properties occupied by General Santos airport and assess the intention of Sagittarius Mines, Inc. to improve General Santos airport appearance through reforestation; and conduct inspection and acceptance of a project undertaken by DOTC-PMS at Antique airport. Nepthali G. Velasco, Communication, Navigation and Surveillance Systems Officer IV of the Aerodrome and Air Navigation Service Safety Oversight Office, was paid for travel to conduct safety inspection at SUMIFRU, Davao City; conduct orientation briefing on Aerodrome Safety reporting at the Lepanto Aerodrome, Mankayan, Benguet; conduct safety inspection at Steag State Power Heliport; and conduct re-inspection at TADECO I & II Aerodrome, Davao. Deogracios A. Pulmano Jr., Supervising Air Traffic Controller of AANSOO, was paid for travel to conduct final safety inspection at Dapco, Lunga-og Neda and Maragusan Aerodrome, Davao del Norte, and aerodrome safety inspection at the BUGSUK AIRSTRIP, Balabac, Palawan. B. Alex Balde, CNS Systems Officer IV of AANSOO, was paid for travel to conduct re-inspection at TADECO I & II Aerodrome, Davao; safety inspection at Steag State Power Heliport; follow-up site inspection on Riotuba Aerodrome; safety inspection at SUMIFRU, Davao City; and orientation briefing on Aerodrome Safety Reporting at the Lepanto Aerodrome, Mankayan, Benguet.

On post-audit, the FRP payments to these CAAP officials and personnel, totaling PHP 323,579.50, were tagged as irregular expenditures in ND No. 13-002 (2011) dated March 18, 2013. The ND stated two grounds: the payment of FRP was not in accordance with Section 30 of RA 776 and Section 315 of the GAAM Volume 1; and the positions held by the recipients were not included in the DBM-approved Corporate Operating Budget for 2011, which specified the positions allowed to be granted the FRP.

The ND determined the payees and the approving and/or certifying officers liable for the disallowance. Ramon S. Gutierrez, Director General, was liable for approving the payment; certifying that the payment be charged to appropriation/allotment necessary, lawful, and under his direct supervision and that its supporting documents were valid, proper, and legal; and receiving the FRP. Regino V. Hofileña, Acting Department Manager III, was liable for approving the payment, signing the checks, and signing the Authority to Debit/Credit Account. Raul P. Eusebio, OIC-Accounting Division, was liable for certifying that the supporting documents were complete, cash was available, and subject to Authority to Debit Account when applicable. Fe L. Evangelista, Acting Assistant Chief of the Budget Section, was liable for certifying that budget was available and obligated for the purpose indicated. Rosario V. Nalugon, OIC Budget Division, and Inocencio T. Yncierto, Chief of AANSOO, were also listed among the approving and/or certifying officers. Edgardo L. Costes, Assistant Director General II (ADMS), was liable for certifying that payment be charged to appropriation/allotment necessary, lawful, and under direct supervision and that supporting documents were valid, proper, and legal. Jocelyn L. Ching, Acting Finance Department Manager, was liable for signing the checks and the Authority to Debit/Credit Account. Elvira O. Sieja, Chief Checking Account Unit, was liable for signing the checks and the Authority to Debit/Credit Account. Concordia S. Pagkaliwangan, OIC Administrative and Finance Service, was liable for signing the Authority to Debit/Credit Account. The COA found that the FRP was granted to petitioners whose functions and responsibilities merely involve administrative and financial matters, and that their travels consisted of conferences and seminars, airport inspections, public hearings, pre-bid conferences, and the like.

• Grave Abuse of Discretion: Petitioners maintained that the COA committed grave abuse of discretion amounting to lack or excess of jurisdiction when it affirmed ND No. 13-002 (2011).
• Statutory Interpretation of Section 30: Petitioners argued that the flying pay under Section 30 of RA 776 and the FRP under Section 315(c) of GAAM Volume 1 pertain to two completely different sets of recipients, so the GAAM cannot be interpreted to limit the application of RA 776; “such other authorized personnel” may be granted flying pay at the discretion of the head of office regardless of whether their functions or responsibilities are related to aerial and flight missions.
• COA Decision No. 2009-125: Petitioners argued that under COA Decision No. 2009-125, flying pay was granted to lawyers and/or administrative personnel whose work was not directly related to aerial and flight missions but was necessarily performed in relation to strengthening the operations of different Air Transportation Office satellites; by analogy, petitioners, although administrative personnel, were entitled to flying pay for performing functions in relation to strengthening CAAP operations.
• Good Faith / No Refund: Citing Madera vs. Commission on Audit, petitioners insisted that CAAP officials and personnel received the disallowed benefits in good faith and should not be made liable to refund them.
• TRO/WPI: Petitioners prayed for a Temporary Restraining Order and/or Writ of Preliminary Injunction to preserve the status quo until the merits could be heard.

• Statutory Interpretation: Respondent COA contended that under both Section 30 of RA 776 and Section 315(c) of GAAM Volume 1, the grant of FRP is predicated on aerial and flight missions requiring performance of duties inherent in aircraft operations; because petitioners’ duties were limited to administrative and financial matters, they were not entitled to FRP.
• Inapplicability of COA Decision No. 2009-125: Respondent argued that COA Decision No. 2009-125 was inapplicable because the payees therein were given FRP because their duties were related to aircraft operations and flight missions, unlike petitioners who merely performed administrative and financial duties excluded from aircraft operations and/or aerial missions.
• Good Faith: Respondent argued that petitioners cannot claim good faith to exempt them from liability to refund the disallowed amounts they received.
• TRO/WPI: Respondent averred that petitioners failed to establish a clear and unmistakable right to the grant of FRP and did not substantiate the urgency or necessity of the reliefs prayed for.

• Flying Risk Pay Entitlement: Whether the FRP payments to CAAP officials and personnel for 2011 are sanctioned by Section 30 of RA 776, Section 315(c) of GAAM Volume 1, and the DBM-approved Corporate Operating Budget for 2011.
• Liability to Return: Whether, if the FRP payments are disallowed, the approving and certifying officers, as well as the recipient-payees, are liable to return the disallowed amount.

• Flying Risk Pay Entitlement: No. The FRP payments were contrary to Section 30 of RA 776, Section 315(c) of GAAM Volume 1, and the DBM-approved Corporate Operating Budget for 2011 because FRP is confined to airmen and other authorized personnel whose duties inherently involve regular and frequent aerial flights, not administrative personnel who travel as passengers.
• Liability to Return: Yes as to recipient-payees, but no as to good-faith approving and certifying officers. The officers are not solidarily liable, while the recipients remain individually liable to return the amounts they respectively received under solutio indebiti.

• Flying Risk Pay Entitlement: The SC began with the text of Section 30 of RA 776, which limits FRP to “all rated and/or licensed airmen and such other authorized personnel … who may be required to undertake or perform regular and frequent aerial flights in connection with their duties.” Section 3(l) defines “airman” as any individual who engages as person in command or as pilot, mechanic, flight radio operator, or member of the crew in the navigation of aircraft while under way; any individual directly in charge of inspection, maintenance, overhauling, or repair of aircraft, aircraft engine, propellers, or appliances; and any individual serving as aircraft dispatcher or air-traffic control operator. These positions involve functions inherently connected to aircraft operation and navigation. For the second group, the critical statutory condition is that the personnel must be required to undertake or perform regular and frequent aerial flights in connection with their duties; the law imposes a functional limitation based on the nature of the duties performed and their connection to aerial operations, not on the agency head’s designation or discretion. The SC used the definitions of “undertake” and “perform” to show actual execution of duties which, by their nature, necessitate regular and frequent aerial flights, and applied verba legis non est recedendum. Under noscitur a sociis, “such other authorized personnel” must be read with “airmen” and refers to those performing duties akin to airmen—technical and operational in nature, involving exposure to flight risks. GAAM Section 315(c) reinforces the limitation by restricting flying risk pay to airmen performing duties inherent in the operation of the aircraft while in flight and such other airmen required to fly with the aircraft, excluding passengers as such. The SC also noted a survey of statutes and issuances granting flying pay showing a consistent legislative and administrative intent to grant it as a form of hazard pay for airmen and personnel directly involved in aircraft operation and navigation. Applying this, the CAAP officials and personnel held managerial, administrative, and financial positions bearing no relation to participation in, supervision of, or direct involvement in aircraft operations. Their travels—attending international conferences and meetings, inspecting airports and facilities, verifying legal cases, and overseeing projects and ceremonies—were legitimate and work-related but did not entail regular and frequent aerial flights; they boarded aircraft solely as passengers. Their positions were also not among those authorized by the DBM in CAAP’s Corporate Operating Budget for 2011, which confined FRP-eligible positions to personnel directly engaged in aircraft operations, such as those under the Aircraft Accident Investigation and Inquiry Board, Flight Inspection and Calibration Group, Flight Standards Inspectorate Service, Airworthiness Department, Flight Operations Department, Licensing and Certification Department, Airmen Examination Board, Office of the Flight Surgeon, and Air Traffic Service. The deliberate inclusion of these positions and exclusion of administrative and managerial offices showed DBM’s intent to restrict FRP to personnel whose regular functions expose them to flight-related hazards. The SC rejected petitioners’ reliance on COA Decision No. 2009-125 because the payees therein were qualified to receive FRP since their accumulated flight time was related to aircraft operations and flight missions, unlike petitioners whose accumulated flight time was incurred on activities related to administrative and financial matters only. Thus COA did not gravely abuse its discretion in affirming the disallowance.
• Liability to Return: The SC held that affirming the disallowance did not automatically make the approving and certifying officers liable to return the disallowed amounts. Under Madera vs. Commission on Audit, if a Notice of Disallowance is upheld: (a) approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable under Section 38 of the Administrative Code of 1987; (b) approving and certifying officers clearly shown to have acted in bad faith, malice, or gross negligence are solidarily liable to return only the net disallowed amount; (c) recipients, whether approving or certifying officers or mere passive recipients, are liable to return the disallowed amounts respectively received unless they show that the amounts were genuinely given in consideration of services rendered; and (d) the SC may excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions on a case-to-case basis. The SC adopted the badges for determining whether an approving or certifying officer exercised the diligence of a good father of the family: (1) Certificates of Availability of Funds pursuant to Section 40 of the Administrative Code; (2) in-house or Department of Justice legal opinion; (3) no precedent disallowing a similar case in jurisprudence; (4) traditional practice within the agency and no prior disallowance; and (5) a reasonable textual interpretation on the legality of the disbursement. Badges (3) and (5) applied. First, when the FRP was granted in 2011 under Board Resolution No. 2011-007 and AO No. 320-11, jurisprudence had no case squarely interpreting Section 30 of RA 776; the prevailing administrative guidance was COA Decision No. 2009-125, which lifted a prior disallowance of similar FRP payments. The approving and certifying officers could not be faulted for relying on COA’s pronouncement, which carried persuasive and controlling weight in matters of public expenditure and supplied a colorable legal basis for the grant. Second, Section 30 was susceptible of differing interpretations, as shown by COA Decision No. 2009-125, which construed “airmen” and “such other authorized personnel” as two different classes of individuals and reasoned that limiting the latter to those similar to airmen would render the statutory text redundant and superfluous; although later rejected, that interpretation was a plausible textual reading of Section 30. Thus the approving and certifying officers acted in good faith and should not be held liable for an act performed under a then-existing administrative construction later overturned. For the recipients, Madera makes payees liable to return the disallowed amount regardless of good faith or the passive nature of their receipt under the principle of unjust enrichment or solutio indebiti. They may be excused only when (1) they show that the amounts received were genuinely given in consideration of services rendered under Rule 2c of Madera, or (2) the SC excuses them based on undue prejudice, social justice considerations, or bona fide exceptions under Rule 2d. Abellanosa vs. Commission on Audit clarified that Rule 2c requires the concurrence of: (a) the personnel incentive or benefit has proper basis in law but is only disallowed due to irregularities that are merely procedural in nature; and (b) the benefit has a clear, direct, and reasonable connection to the actual performance of the payee-recipient’s official work and functions for which the benefit was intended as further compensation. None of these circumstances obtained: the disallowance was not a mere procedural irregularity; the payees were not entitled to FRP because their positions did not involve the performance of aerial flight duties; the absence of legal entitlement negated any claim that the amount received was legitimately earned; and no bona fide exceptions appeared on record. Thus the recipient-payees remained individually liable to return the amounts they respectively received.

• Verba legis non est recedendum — From the words of a statute there should be no departure. The SC applied it to reject the expansive reading of “such other authorized personnel” because Section 30 expressly requires regular and frequent aerial flights in connection with the personnel’s duties.
• Noscitur a sociis — An ambiguous word or phrase is clarified by the company of words with which it is associated. The SC read “such other authorized personnel” alongside “airmen,” limiting FRP to personnel with technical or operational duties involving flight risks, not administrative staff who travel as passengers.
• Flying Risk Pay as hazard pay for flight-related duties — FRP under Section 30 of RA 776 and Section 315(c) of GAAM Volume 1 is a hazard allowance for airmen and other authorized personnel whose duties inherently involve regular and frequent aerial flights or aircraft operation while in flight; passengers as such are excluded. The SC applied this to disallow FRP for CAAP managerial, administrative, and financial personnel whose travels were merely incidental.
• Madera Rules on Return — When a COA disallowance is upheld: (a) approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable; (b) those in bad faith, malice, or gross negligence are solidarily liable for the net disallowed amount; (c) recipients, whether approving or certifying officers or passive recipients, are liable to return the amounts respectively received unless the amounts were genuinely given in consideration of services rendered; and (d) the SC may excuse return based on undue prejudice, social justice, and other bona fide exceptions on a case-to-case basis. The SC applied it to absolve the officers but require the payees to refund.
• Good-faith badges for approving and certifying officers — The SC may consider: (1) Certificates of Availability of Funds under Section 40 of the Administrative Code; (2) in-house or Department of Justice legal opinion; (3) no precedent disallowing a similar case in jurisprudence; (4) traditional practice within the agency with no prior disallowance; and (5) a reasonable textual interpretation on the legality of the disbursement. The SC found badges (3) and (5) present because no SC precedent had squarely interpreted Section 30 and COA Decision No. 2009-125 supplied a plausible textual reading.
• Solutio indebiti / unjust enrichment for payees — Recipients of disallowed amounts must return what they respectively received regardless of good faith or passive receipt, unless a Madera exception applies. Abellanosa vs. Commission on Audit requires for Rule 2c that (a) the benefit has proper basis in law but is disallowed only for procedural irregularities and (b) it has a clear, direct, and reasonable connection to the actual performance of the payee’s official work. The SC applied this because the payees had no legal entitlement to FRP; the disallowance was not a mere procedural irregularity, and no bona fide exception was shown.

• “The clear text of Section 30 of Republic Act No. 776 confines FRP to personnel whose duties inherently involve aerial operations” — This encapsulates the SC’s statutory reading that defeated petitioners’ claim to FRP.
• “To determine who constitute "such other authorized personnel" entitled to FRP under Section 30 of Republic Act No. 776, the critical statutory condition is that the personnel must be required to "undertake or perform regular and frequent aerial flights in connection with their duties."” — The SC used this condition to reject the argument that the agency head’s designation alone sufficed.
• “Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987.” — This Madera rule was applied to absolve CAAP’s approving and certifying officers.
• “As declared in Madera, payees shall be liable to return the disallowed amount, regardless of good faith or the passive nature of their receipt thereof, in accordance with the principle of unjust enrichment or solutio indebiti.” — This is the basis for requiring the recipient-payees to refund the FRP they respectively received.

• Madera vs. Commission on Audit, 882 Phil. 744 (2020) — Controlling precedent; supplied the Rules on Return applied to absolve good-faith approving and certifying officers and require recipient-payees to refund.
• Abellanosa vs. Commission on Audit, 890 Phil. 413 (2020) — Clarified Rule 2c of Madera; laid down the conditions for excusing recipients from return; applied to deny excuse.
• Chavez vs. Judicial and Bar Council, 691 Phil. 173 (2012) — Cited for the rule on noscitur a sociis and statutory construction; used to read “such other authorized personnel” with “airmen.”
• Philippine Economic Zone Authority vs. Commission on Audit, 797 Phil. 117 (2016) — Cited for the statement that it is unfair to penalize public officials based on overly stretched and strained interpretations of rules not readily capable of being understood at the time they acted in good faith; used to support good faith.
• Philippine Health Insurance Corp. vs. Commission on Audit, 930 Phil. 323 (2022) — Cited in support of the rule that payees are liable to return disallowed amounts under Madera; applied to require refund.
• National Transmission Corp. vs. Commission on Audit, 891 Phil. 107 (2020) — Cited for stringent appreciation of the good-faith defense when determining a payee’s liability over disallowed expenses; applied to deny excuse to recipients.

• Section 30, Republic Act No. 776 (Civil Aeronautics Act of the Philippines) — Limits flying pay/FRP to rated and/or licensed airmen and such other authorized personnel required to undertake or perform regular and frequent aerial flights in connection with their duties, with at least four flying hours per month; applied to disallow FRP for administrative personnel who traveled as passengers.
• Section 3(l), Republic Act No. 776 — Defines “airman” as pilot, mechanic, flight radio operator, crew member, person directly in charge of inspection/maintenance/overhaul/repair of aircraft or appliances, aircraft dispatcher, or air-traffic control operator; used to show FRP-eligible positions are inherently connected to aircraft operation and navigation.
• Section 315(c), Government Accounting and Auditing Manual Volume 1 — Restricts flying risk pay to airmen performing duties inherent in the operation of the aircraft while in flight and such other airmen required to fly with the aircraft, excluding passengers; applied to exclude the CAAP administrative personnel.
• DBM-approved Corporate Operating Budget for 2011 — Expressly enumerated FRP-eligible positions confined to personnel directly engaged in aircraft operations; the SC used the omission of petitioners’ positions as further support for the disallowance.
• Section 38, Administrative Code of 1987 — A public officer is not civilly liable for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence; applied through Madera to absolve the approving and certifying officers.
• Section 43, Administrative Code of 1987 — Makes every official or employee authorizing or making an illegal payment, and every person receiving such payment, jointly and severally liable to the Government for the full amount paid or received; referenced in the Madera rules for bad-faith officers and recipients, but the SC found no bad faith on the part of the approving and certifying officers.
• Rule 64 in relation to Rule 65, Rules of Court — Governed the Petition for Certiorari assailing the COA Decision and Resolution; the SC resolved the petition on the merits.

• Justice Caguioa (Concurring) — Concurred and set out the reasons for confining FRP to personnel whose duties inherently involve aerial operations. He elaborated that Section 3(l) of RA 776 covers three categories of airmen, all with functions inherently connected to aircraft operation and navigation; invoked noscitur a sociis; noted that CAAP Board Resolution No. 2011-007 itself recognized the hazard-based nature of FRP but its implementation exceeded the law’s scope; cited Development Bank of the Philippines vs. Commission on Audit and Torcuator vs. Commission on Audit on good faith; and clarified that while approving and certifying officers are absolved, payees—including Gutierrez as an approving and certifying officer who also received FRP—must return the amounts they personally received.