Reyes vs. Commission on Audit

Government counterpart contributions to a provident fund that is dissolved without attaining its purpose do not vest in the employee-members and must revert to the government agency, where the contributions were conditional and lacked statutory authority.

Joseph H. Reyes served as a member of the Board of Trustees of the Technology and Livelihood Research Center Provident Fund. The compensation regime for TLRC officers and employees was governed by Republic Act No. 6758, the Salary Standardization Law, and its implementing Corporate Compensation Circular No. 10, which allowed fringe benefits only with statutory authority, while Republic Act No. 4537 authorized provident funds in government-owned or controlled banking institutions.

By Resolution No. 89-003 dated June 30, 1989, the TLRC Executive Committee created a Provident Fund whose primary purpose was to augment the retirement benefits of TLRC officers and employees. The Fund also provided additional benefits in the form of salary, real estate, motor vehicle, educational, emergency and other loans, and disability and death benefits, in accordance with policies approved by the Board of Trustees. Its capital came from each member's contribution of 2% of gross monthly salary, TLRC's counterpart share equivalent to 10% of the member's gross monthly salary, earnings of the fund, and others.

On June 3, 1993, Corporate Auditor Adelaida S. Flores suspended the transfer of funds from TLRC to the Provident Fund for the years 1990-1991 amounting to P11,065,715.84 under Notice of Suspension No. 93-006. The suspension rested on Paragraph 5.4 of Corporate Compensation Circular No. 10 issued under Republic Act No. 6758, which allowed fringe benefits only where covered by statutory authority, and on the ground that all Provident Funds were covered by Republic Act No. 4537, to which TLRC did not qualify. Thereafter, on September 14, 1993, the Provident Fund Board of Trustees issued Resolution No. 93-2-21 discontinuing collection of contributions from both TLRC and members and ordering immediate refund of members' personal contributions collected from March 1, 1993 until September 15, 1993.

On September 21, 1993, the Board issued Resolution No. 93-2-22 dissolving the Provident Fund and ordering distribution of the personal and corporate shares to members on or before October 31, 1993. On December 2, 1993, the Corporate Auditor issued Notice of Disallowance No. 93-003 disallowing in audit the P11,065,715.84 representing the government's share paid to the Fund and refunded to members for 1990 to 1991, including all amounts transferred after 1991. Petitioner Joseph H. Reyes, as Board member, appealed to the Commission on Audit, which on October 12, 1995 denied the appeal in Decision No. 95-571 on the ground that the government share must revert to TLRC since the primary purpose was not realized, and on May 2, 1996 denied reconsideration in Decision No. 96-236.

• Divestment and Trust: Petitioner argued that when TLRC made its contributions to the Provident Fund, it divested itself of ownership, the money became a trust fund for the benefit of members, and upon dissolution legal and equitable titles merged in the members as beneficiaries.
• Vested Right and Equity: Petitioner maintained that dissolution did not render distribution of the government share illegal, that members had a vested right not only to personal contributions but to the government share as well, and that since pretermination was not due to members' fault, deprivation would be unfair and greatly prejudicial.

• Reviewability of COA Decisions: Whether a decision of the Commission on Audit may be elevated to the Supreme Court by appeal by certiorari under Rule 44 of the Revised Rules of Court.
• Disallowance and Vested Right: Whether the Commission on Audit committed grave abuse of discretion in disallowing the distribution of the government share in the dissolved TLRC Provident Fund to its members despite claimed vested rights.

• Reviewability of COA Decisions: No. Judgments and final orders of the Commission on Audit are reviewable only by certiorari under Rule 65 for lack or excess of jurisdiction, pursuant to Article IX-A, Section 7 of the Constitution.
• Disallowance and Vested Right: No. The disallowance was proper because the government contributions were conditional on augmenting retirement benefits, the purpose failed upon dissolution for lack of statutory basis, and no vested right accrued.

• Reviewability of COA Decisions: Decisions, orders or rulings of the Commission on Audit are brought to the Supreme Court on certiorari by the aggrieved party under Article IX-A, Section 7, implemented by Rule 64 in relation to Rule 65, not by ordinary writ of error or appeal by certiorari under Rule 44 or 45. The 1964 Rule 44 mode for the General Auditing Office was removed by SC Circular 1-91 and not restored for COA by SC Circular 1-95. Although the petition was filed June 17, 1996 before the 1997 Rules, the constitutional mode was already certiorari under Rule 65, available only upon grave abuse of discretion; the procedural error was set aside pro hac vice and the petition treated as Rule 65.
• Disallowance and Vested Right: The government contributions were made on the condition that they would be used to augment retirement and other benefits of TLRC employees. Since that purpose was not attained due to the question on the validity of the Fund and its discontinuance and dissolution, the employees were not entitled to the counterpart contribution, otherwise public funds would be used outside the specific purpose appropriated. No vested right, defined as absolute, complete, unconditional, immediate and perfect and not dependent on contingency, was acquired because the contributions were subject to that condition. Moreover, the Fund was dissolved due to lack of statutory basis, rendering the contributions unauthorized, if not unlawful.

• Judicial review of Commission on Audit decisions — Judgments and final orders of the Commission on Audit are not reviewable by ordinary appeal or appeal by certiorari under Rule 44 or 45; under Article IX-A, Section 7 of the Constitution, they are brought to the Supreme Court only on certiorari under Rule 65, and only when the Commission acted without or in excess of jurisdiction or with grave abuse of discretion. The rule was applied to treat the erroneously filed Rule 44 appeal as a Rule 65 petition pro hac vice.
• Vested right — A vested right is absolute, complete and unconditional, with no obstacle to its exercise, immediate and perfect in itself and not dependent upon a contingency. The doctrine was applied to reject the claim over the government share, which remained subject to the condition that it augment retirement and fringe benefits, a condition that failed when the Fund was dissolved.
• Conditional use of public funds — Government contributions conditioned on a specific purpose cannot be diverted to another use when the purpose fails, otherwise public funds would be used outside the specific purpose for which appropriated. The doctrine was applied to require reversion of the government share to TLRC rather than distribution to members upon dissolution of the unauthorized Fund.

• "Only when the Commission on Audit acted without or in excess of jurisdiction, may this Court entertain a petition for certiorari under Rule 65." — States the threshold for Supreme Court review of COA decisions and rejects appeal by certiorari under Rule 44.
• "A vested right is one which is absolute, complete and unconditional, to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon a contingency." — Provides the canonical definition used to deny a vested claim to conditional government contributions.
• "We are not impressed. We deny the petition." — Expresses rejection of the divestment, trust, and equity arguments advanced to justify distribution of the government share.

• Bulilan vs. Commission on Audit, G.R. No. 130057, December 22, 1998 — Cited as authority that COA decisions are brought to the Supreme Court on certiorari under Rule 65 pursuant to Article IX-A, Section 7, not by appeal under Rule 44 or 45.
• Philippine Ports Authority vs. COA, 214 SCRA 653, 661 — Cited as source of the definition of vested right applied to deny members' claim to the government share.
• Development Bank of the Philippines vs. Court of Appeals, 96 SCRA 359 — Cited through Philippine Ports Authority vs. COA as original source of the vested-right definition.

• Section 7, Article IX-A, 1987 Constitution — Provides that decisions, orders or rulings of the Commission on Audit may be brought to the Supreme Court on certiorari by the aggrieved party; applied to hold Rule 65 the exclusive mode of review.
• Section 2, Rule 64, 1997 Rules of Civil Procedure in relation to Rule 65 — Provides that a judgment or final order of the Commission on Audit is brought to the Supreme Court on certiorari under Rule 65; applied although the petition predated the 1997 Rules because the constitutional mode was already Rule 65.
• Paragraph 5.4, Corporate Compensation Circular No. 10, implementing Republic Act No. 6758 (Salary Standardization Law) — Allows fringe benefits only where covered by statutory authority; applied by the auditor to suspend transfers for lack of authorizing law.
• Republic Act No. 4537 — Authorizes establishment of a provident fund in government-owned or controlled banking institutions; applied to support the finding that TLRC did not qualify and the Fund lacked statutory basis.

Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Purisima, Buena and Gonzaga-Reyes, JJ., concur. No separate concurring opinion with additional reasoning appears in the text.