PITC vs. COA

A government-owned and controlled corporation's car plan benefits granted to incumbent officers prior to the effectivity of RA 6758 may continue to be enjoyed under Sections 12 and 17 thereof, and an administrative circular that discontinues such benefits is void for lack of publication in the Official Gazette or a newspaper of general circulation.

PITC is a government-owned and controlled corporation created under Presidential Decree No. 252 on July 21, 1973, primarily to promote and develop Philippine trade, with its charter subsequently amended by PD 1071, EO 756, and EO 1067. On October 19, 1988, the PITC Board of Directors approved a Car Plan Program for qualified officers, under which PITC would shoulder 50% of the vehicle's cost while the officer paid the remaining 50% through salary deduction over five years, with PITC also reimbursing 50% of annual car registration, insurance premiums, and chattel mortgage registration costs for the same period. Republic Act No. 6758, which prescribed a revised compensation and position classification system for the government, took effect on July 1, 1989, and the DBM issued Corporate Compensation Circular No. 10 to implement it, discontinuing certain allowances and fringe benefits effective November 1, 1989.

The Philippine International Trading Corporation (PITC) is a government-owned and controlled corporation created under Presidential Decree No. 252 on July 21, 1973, primarily for the purpose of promoting and developing Philippine trade in pursuance of national economic development. Its charter was subsequently amended by PD 1071 dated January 25, 1977, EO 756 dated December 29, 1981, and EO 1067 dated November 25, 1985. On October 19, 1988, the PITC Board of Directors approved a Car Plan Program for qualified PITC officers through Resolution No. 10-88-03. Under the program, an eligible officer was entitled to purchase a vehicle, with 50% of the value shouldered by PITC and the remaining 50% shouldered by the officer through salary deduction over five years. The maximum vehicle value ranged from ₱200,000 to ₱350,000, depending on the officer's position. In addition, PITC would reimburse the officer 50% of the annual car registration, insurance premiums, and costs of registration of the chattel mortgage over the car for five years from the date of purchase. The terms and conditions were embodied in a Car Loan Agreement. Per the car plan guidelines, the purpose was to provide financial assistance to qualified employees in purchasing their own transportation facilities for official work, representation, and personal use, facilitating greater mobility during official trips without reliance on PITC vehicles, taxis, or cars for hire.

On July 1, 1989, Republic Act No. 6758 took effect, prescribing a revised compensation and position classification system in the government. Section 12 of RA 6758 provided for the consolidation of allowances and additional compensation into standardized salary rates, except for certain enumerated allowances such as representation and transportation allowances. The second sentence of Section 12 likewise provided that other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 and not integrated into the standardized salary rates, shall continue to be authorized. To implement RA 6758, the Department of Budget and Management (DBM) issued Corporate Compensation Circular No. 10 (DBM-CCC No. 10). Paragraph 5.6 thereof discontinued, effective November 1, 1989, all allowances and fringe benefits granted on top of basic salary not enumerated under paragraphs 5.4 and 5.5 of the circular, and declared payments made for such benefits after said date as illegal disbursements of public funds.

On post audit, the resident COA auditor disallowed the payment and reimbursement of the 50% share of PITC in the yearly car registration, insurance premiums, and chattel mortgage registration costs made after November 1, 1989, on the ground that the car plan benefits were not among the fringe benefits allowed to continue under paragraph 5.6 of DBM-CCC No. 10. PITC appealed the auditor's disallowance to the COA, which denied the appeal in Decision No. 2447 dated July 27, 1992, finding that the Car Plan was a fringe benefit governed by DBM-CCC No. 10 and that, since it was not mentioned in sub-paragraphs 5.4 and 5.5 of the circular, the reimbursement should not be allowed. PITC's motion for reconsideration was denied by the COA in Decision No. 98-048 dated January 27, 1998.

• Legislative Intent to Preserve Incumbent Benefits: Petitioner argued that the legislature did not intend to revoke existing benefits being received by incumbent government employees as of July 1, 1989, including the subject car plan benefits, when RA 6758 was passed.
• Impairment of Contracts: Petitioner maintained that the Car Loan Agreements signed between PITC and its officers pursuant to the Car Plan Program, duly executed prior to the effectivity of RA 6758, constitute the law between the parties and are protected by Section 10, Article III of the 1987 Philippine Constitution, which prohibits the impairment of contracts.
• Exemption from OCPC Coverage: Petitioner contended that the provisions of PD 985 do not apply to PITC, inasmuch as under its Revised Charter — PD 1071 as amended by EO 756 and EO 1067 — PITC is expressly exempted from OCPC rules and regulations, and its Board of Directors was expressly authorized to adopt compensation policies and related benefits without need for further approval by any government office, agency, or authority.
• General Law Cannot Repeal Special Law by Implication: Petitioner argued that RA 6758, being a law of general application, cannot repeal provisions of the Revised Charter of PITC and its amendatory laws that expressly exempt PITC from OCPC coverage, those being special laws.

• Car Plan as Fringe Benefit Governed by DBM-CCC No. 10: Respondent countered that the Car Plan was undeniably a fringe benefit as it appeared in PITC's Compensation Policy under the heading "Other Fringe Benefits," and that as a GOCC, the grant of the Car Plan should be governed by DBM-CCC No. 10 implementing RA 6758, which discontinued such benefits not enumerated in sub-paragraphs 5.4 and 5.5.
• Repeal of PITC's Exemption: Respondent argued that the exemption granted to PITC from OCPC coverage had been repealed and revoked by the repealing provisions of RA 6758, particularly Section 16 thereof, which expressly repealed all corporate charters that exempt agencies from the coverage of the compensation and position classification system.

• Continuation of Incumbent Benefits: Whether PITC officials who were incumbents as of July 1, 1989 may continue to receive car plan benefits notwithstanding the effectivity of RA 6758 and DBM-CCC No. 10.
• Validity of DBM-CCC No. 10: Whether DBM-CCC No. 10, which was the basis for the COA's disallowance, is valid and enforceable notwithstanding its non-publication in the Official Gazette or in a newspaper of general circulation.
• Repeal of PITC's Charter Exemption: Whether PITC's exemption from OCPC rules and regulations under its Revised Charter was repealed by RA 6758, a law of general application.

• Continuation of Incumbent Benefits: Yes. PITC officials who were incumbents as of July 1, 1989 were legally entitled to continue enjoying car plan benefits within the five-year period from the date of vehicle purchase, pursuant to Sections 12 and 17 of RA 6758, which preserved existing allowances and fringe benefits of incumbents.
• Validity of DBM-CCC No. 10: No. DBM-CCC No. 10 was declared without force and effect due to the absence of publication in the Official Gazette or in a newspaper of general circulation, as required under the doctrine in Tañada vs. Tuvera and De Jesus vs. Commission on Audit. Its subsequent submission for publication could not cure the defect retroactively.
• Repeal of PITC's Charter Exemption: Yes. The repeal by Section 16 of RA 6758 of all corporate charters exempting agencies from the coverage of the compensation and position classification system was clear and expressed, necessarily to achieve the standardization of salaries in GOCCs. PITC is henceforth covered by RA 6758, without prejudice to the non-diminution of pay of incumbents as of July 1, 1989.

• Continuation of Incumbent Benefits: The Court had previously confirmed in Philippine Ports Authority vs. Commission on Audit the legislative intent to protect incumbents receiving salaries and/or allowances above those authorized by RA 6758, allowing them to continue receiving the same even after the law took effect. Sections 12 and 17 of RA 6758, while referring respectively to allowances not integrated into standardized salaries and to salaries and additional compensation or fringe benefits, were both intended to protect incumbents receiving said emoluments at the time the law took effect. There was no dispute that the PITC officials who availed of the car plan benefits were incumbents as of July 1, 1989. The Court also found rational corporate basis for PITC's 50% participation: PITC had an insurable interest in the vehicle up to 50% of its value, and the registration of the chattel mortgage secured PITC's repayment of the Car Loan Agreement. Moreover, the vehicle was actually used for corporate purposes, as the officer was no longer entitled to utilize company-owned vehicles for official business once he availed of the car plan.

• Validity of DBM-CCC No. 10: The Court relied on De Jesus vs. Commission on Audit, which declared DBM-CCC No. 10 as without force and effect due to absence of publication. Following the doctrine in Tañada vs. Tuvera, publication in the Official Gazette or in a newspaper of general circulation is required for administrative circulars that enforce or implement an existing law. DBM-CCC No. 10 was not a mere interpretative or internal regulation; it substantially reduced the income of government workers by completely disallowing payment of allowances and additional compensation. The Court rejected the argument that the subsequent re-issuance and submission for publication of DBM-CCC No. 10 in 1999 could cure the defect retroactively, because publication is a condition precedent to the effectivity of a law — its purpose is to inform the public of the contents of laws before their rights and interests are affected. From the time the COA disallowed the expenses up to the filing of the petition, the circular remained in legal limbo due to its non-publication. Because the very basis of the disallowance was void, the disallowance itself could not stand.

• Repeal of PITC's Charter Exemption: While the general rule of statutory construction provides that a special law cannot be repealed, amended, or altered by a subsequent general law by mere implication, and that a statute general in character is not to be construed as repealing a special enactment unless the legislative purpose to do so is manifested, the Court found that Section 16 of RA 6758 expressly repealed all corporate charters that exempt agencies from the coverage of the compensation and position classification system. The repeal was clear and expressed, not implied, and was necessary to achieve the purposes of the law — the standardization of salaries of all employees in GOCCs to achieve "equal pay for substantially equal work." Accordingly, PITC's exemption from OCPC coverage was deemed repealed, and PITC is now covered by RA 6758, subject to the non-diminution of pay protection for incumbents as of July 1, 1989.

• Publication Requirement for Administrative Rules — Administrative circulars and regulations that enforce or implement an existing law must be published in the Official Gazette or in a newspaper of general circulation in the Philippines before they become effective and enforceable. Publication is a condition precedent to the effectivity of such rules, and non-publication renders them without force and effect. Subsequent publication cannot cure the defect retroactively, as the purpose of publication is to inform the public of the contents of laws before their rights and interests are affected, and omission would offend due process. Applied here to declare DBM-CCC No. 10 null for lack of publication, thereby invalidating the COA's disallowance predicated on that circular.

• Non-Diminution of Pay for Incumbents — Under Sections 12 and 17 of RA 6758, incumbents of government positions receiving salaries, allowances, and additional compensation or fringe benefits as of July 1, 1989, the aggregate of which exceeds the standardized salary rate, shall continue to receive such excess compensation. The legislature manifested its intent to gradually phase out this privilege without upsetting the policy of non-diminution of pay and consistent with the rule that laws should be applied prospectively. Applied here to hold that PITC officials who were incumbents as of July 1, 1989 could continue receiving car plan benefits within the five-year period allowed by their Car Loan Agreements.

• Express Repeal of Special Law by General Law — While a special law cannot be repealed by a subsequent general law by mere implication, and a general statute is not construed as repealing a specific enactment unless the legislative purpose is manifested, an express repeal in the general law of the special law's provisions is valid and effective. Applied here to hold that Section 16 of RA 6758 expressly repealed all corporate charters — including PITC's — that exempted agencies from the coverage of the compensation and position classification system.

• "Following the doctrine enunciated in Tañada, publication in the Official Gazette or in a newspaper of general circulation in the Philippines is required since DBM-CCC No. 10 is in the nature of an administrative circular the purpose of which is to enforce or implement an existing law." — This passage states the controlling rule on the publication requirement for administrative circulars, forming the basis for declaring DBM-CCC No. 10 null and the COA disallowance void.

• "From the time the COA disallowed the expenses in audit up to the filing of herein petition the subject circular remained in legal limbo due to its non-publication." — This establishes that the defect of non-publication could not be cured retroactively by subsequent publication, because the circular was without legal effect during the entire period of the disallowance.

• "In reserving the benefit to incumbents, the legislature has manifested its intent to gradually phase out this privilege without upsetting the policy of non-diminution of pay and consistent with the rule that laws should only be applied prospectively in the spirit of fairness and justice." — This articulates the legislative intent behind Sections 12 and 17 of RA 6758, protecting incumbent government employees from diminution of existing benefits upon the effectivity of the standardized compensation law.

• Philippine Ports Authority vs. Commission on Audit, 214 SCRA 653 — Controlling precedent followed for the proposition that the legislature intended to protect incumbents receiving salaries and allowances above those authorized by RA 6758, allowing them to continue receiving the same even after the law took effect.

• De Jesus vs. Commission on Audit, G.R. No. 109023, August 12, 1998 — Controlling precedent directly on point, declaring DBM-CCC No. 10 as without force and effect due to absence of publication, which the Court applied to invalidate the COA's disallowance.

• Tañada vs. Tuvera, 146 SCRA 453 — Foundational doctrine on the publication requirement for laws and administrative rules, cited as the basis for the rule that publication in the Official Gazette or a newspaper of general circulation is indispensable for the effectivity of administrative circulars.

• Laguna Lake Development Authority vs. Court of Appeals, 251 SCRA 42 — Cited for the rule of statutory construction that a special law cannot be repealed, amended, or altered by a subsequent general law by mere implication.

• Commissioner of Internal Revenue vs. Court of Appeals, 207 SCRA 487 — Cited for the rule that a statute general in character is not to be construed as repealing a special or specific enactment unless the legislative purpose to do so is manifested.

• Agujetas vs. Court of Appeals, 258 SCRA 17 — Cited for the rule that if repeal of a particular or specific law is intended, the proper step is to so express it.

• Erectors, Inc. vs. National Labor Relations Commission, 256 SCRA 629 — Cited in connection with the policy of non-diminution of pay and prospective application of laws.

• Section 12, Republic Act No. 6758 — Provides for the consolidation of allowances and additional compensation into standardized salary rates, except for enumerated allowances, and states that other additional compensation being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized. Applied to hold that PITC officials who were incumbents as of July 1, 1989 could continue receiving car plan benefits.

• Section 17, Republic Act No. 6758 — Provides that incumbents presently receiving salaries and additional compensation/fringe benefits exceeding the standardized salary rate shall continue to receive such excess as transition allowance, reduced by future salary adjustments. Applied in conjunction with Section 12 to protect incumbents from diminution of pay.

• Section 16, Republic Act No. 6758 — Repeals all laws, decrees, executive orders, corporate charters, and other issuances that exempt agencies from the coverage of the compensation and position classification system or that authorize position classifications, salaries, pay rates, or allowances inconsistent with the system. Applied to hold that PITC's charter-based exemption from OCPC coverage was expressly repealed.

• Section 23, Republic Act No. 6758 — Mandates the DBM to issue the necessary guidelines to implement the Act within sixty days after its approval. This provision was the statutory basis for the issuance of DBM-CCC No. 10.

• Paragraph 5.6, DBM Corporate Compensation Circular No. 10 — Discontinued all allowances and fringe benefits not mentioned in sub-paragraphs 5.4 and 5.5 effective November 1, 1989, and declared payments for such benefits after said date as illegal disbursements. This was the provision relied upon by the COA for the disallowance, declared null for lack of publication.

• Section 10, Article III, 1987 Philippine Constitution — Prohibits the impairment of the obligation of contracts. Petitioner invoked this provision to protect the Car Loan Agreements, but the Court deemed it unnecessary to discuss this issue in light of the nullity of DBM-CCC No. 10.

• Section 28, PD 1071; Section 6, EO 756; Section 3, EO 1067 — Provisions of PITC's Revised Charter and amendatory laws that exempted PITC from OCPC rules and regulations and authorized its Board of Directors to adopt compensation policies without further approval. These exemptions were held to have been expressly repealed by Section 16 of RA 6758.

Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima, Pardo, and Ynares-Santiago, JJ., concurred. Panganiban and Buena, JJ., on leave.