SSS vs. COA

A petition for certiorari under Rule 64 must be filed within the remaining period (not less than five days) after denial of a motion for reconsideration, and the COA's denial of a motion for reconsideration through a Notice in the format prescribed by COA Resolution No. 2013-018 validly restarts the reglementary period for filing such petition. Furthermore, CNA incentives may be granted only to rank-and-file employees who are members of the collective negotiating unit, and high-level managerial, confidential, coterminous, and contractual employees, lawyers, and executives are not entitled thereto.

The Social Security System (SSS) is a government-owned and controlled corporation whose employees are organized into a collective negotiating unit for purposes of collective negotiation under the public sector labor relations framework. Collective Negotiation Agreement (CNA) incentives are benefits arising from the execution of a CNA, governed by a web of executive issuances and regulations — including Presidential Decree No. 1597, Executive Order No. 180, Administrative Order No. 103 (2004), PSLMC Resolutions No. 4 (2002) and No. 2 (2003), Administrative Order No. 135 (2005), and DBM Budget Circular No. 2006-1 — which collectively restrict CNA benefits to rank-and-file employees who are members of the negotiating unit. The Commission on Audit (COA) exercises post-audit authority over government expenditures and may issue notices of disallowance for expenditures made in violation of law.

On 6 July 2005, the Social Security Commission (SSC), the governing board of the Social Security System (SSS), issued Resolution No. 259, Series of 2005, granting two categories of benefits. First, a ₱20,000.00 Collective Negotiation Agreement (CNA) incentive was granted to each SSS employee covered within the collective negotiating unit as of 31 December 2004 who had at least three months prior service. Second, a counterpart benefit of equivalent amount was extended to SSS personnel who were not covered by the collective negotiating unit, including confidential, coterminous, and contractual employees, lawyers, and executives.

On post-audit, the SSS Supervising Auditor issued Notice of Disallowance No. SSS-2007-001 (2005), dated 9 January 2007, disallowing the second category of benefits — the counterpart CNA benefit — in the aggregate amount of ₱6,180,000.00. The disallowance was grounded on Section 3(b) of Administrative Order No. 103 (2004) and Section 3 of Executive Order No. 180 (1987), which prohibit the grant of CNA benefits to high-level and confidential employees and to those ineligible to join the organization of rank-and-file government employees, since CNA benefits arise out of membership in the collective negotiating unit.

Citing the contributions of confidential, coterminous, contractual employees, lawyers, and executives to the overall efficiency of the agency, SSS appealed the disallowance to the Legal Services Sector (LSS) of the COA. The LSS denied the appeal in LSS Decision No. 2010-025, dated 5 August 2010, holding that only rank-and-file employees are entitled to benefits arising from the execution of the CNA, and that high-level employees, not being parties-in-interest to the CNA, are not entitled thereto. SSS then filed a petition for review before the COA Commission Proper En Banc on 3 January 2011.

On 8 May 2014, the COA Commission Proper En Banc rendered Decision No. 2014-069, denying the petition for review for lack of merit and affirming the LSS Decision and the Notice of Disallowance. SSS received the decision on 15 May 2014. SSS filed a motion for reconsideration on 11 June 2014, which was denied by the COA Commission Proper En Banc per its Resolution of 20 November 2014. SSS received the Notice of denial on 4 February 2015. On 13 February 2015, SSS filed a Manifestation with Motion for Clarification requesting a certified true copy of the purported resolution and minutes of the meeting. On 12 March 2015, the COA responded with a letter stating that the resolution was copied verbatim in the Notice and that the format was expressly allowed by COA Resolution No. 2013-018. SSS filed the instant petition for certiorari under Rule 64 on 20 March 2015.

• Contrary to Facts, Laws, and Fair Play: SSS argued that the COA's Decision affirming the Notice of Disallowance and its purported Resolution dismissing the motion for reconsideration, as mentioned in the Notice from the COA Commission Secretary, were contrary to facts, laws, and the basic notion of fair play.
• Violation of Due Process: SSS contended that the COA's refusal to disclose and furnish it with the purported Resolution dated 20 November 2014 and the minutes of the meeting signed by the members of the Commission was violative of due process and amounted to grave abuse of discretion amounting to lack or excess of jurisdiction.

• Petition Filed Out of Time: The COA, through the Office of the Solicitor General, countered that the petition for certiorari was filed out of time in violation of the pertinent provisions of the Rules of Court and the 2009 Revised Rules of Procedure of the Commission on Audit.
• No Grave Abuse of Discretion — Merits: The COA argued that it did not commit grave abuse of discretion in rendering the assailed decisions, as they were in consonance with prevailing laws, rules, and regulations and established jurisprudence, and that there were no legal and factual bases for SSS to grant counterpart CNA benefits to employees not covered by the collective negotiating unit.
• Valid Denial of Motion for Reconsideration: The COA maintained that it validly rendered its decision on SSS' motion for reconsideration and that SSS had received a copy of the Commission Proper En Banc Resolution dated 20 November 2014.

• Timeliness of Petition: Whether the instant petition was timely filed within the reglementary period prescribed under Section 3, Rule 64 of the Rules of Court.
• Validity of the Notice: Whether the COA committed grave abuse of discretion in denying SSS' motion for reconsideration through the assailed Notice dated 4 February 2015.
• Validity of Disallowance: Whether the COA committed grave abuse of discretion in upholding the disallowance of the grant of CNA incentives to non-members of the negotiating unit.

• Timeliness of Petition: No. The petition was filed 39 days beyond the reglementary period, rendering the COA's 8 May 2014 Decision final and executory.
• Validity of the Notice: No. The COA did not commit grave abuse of discretion in denying the motion for reconsideration through the Notice, which conformed to the format prescribed by COA Resolution No. 2013-018 amending Section 12, Rule X of the 2009 RRPC.
• Validity of Disallowance: No. The COA committed no grave abuse of discretion in upholding the disallowance, as prevailing laws and regulations clearly restrict CNA benefits to rank-and-file employees who are members of the negotiating unit.

• Timeliness of Petition: Under Section 3, Rule 64, the petition must be filed within 30 days from notice of the judgment or final order sought to be reviewed. The filing of a motion for reconsideration interrupts the period, and if the motion is denied, the aggrieved party may file the petition within the remaining period, which shall not be less than 5 days in any event, reckoned from notice of denial. SSS received the COA Decision on 15 May 2014, making the original 30-day period end on 14 June 2014. The filing of the motion for reconsideration on 11 June 2014 interrupted the period, leaving 3 days extended to 5 days by the Rule. SSS received the Notice of denial on 4 February 2015, giving it until 9 February 2015 to file the petition. The petition was filed only on 20 March 2015, or 39 days late. Even if the Court adopted 12 March 2015 (the date of COA's letter response to SSS' Manifestation) as the reckoning point, SSS would still have had only 5 more days, or until 17 March 2015, making the 20 March 2015 filing still late.

• Validity of the Notice: COA Resolution No. 2013-018, dated 30 September 2013, amending Section 12, Rule X of the 2009 Revised Rules of Procedure of the COA, prescribes the format of the Notice when the Commission Proper denies a motion for reconsideration. The Notice shall inform the parties of the Resolution of the Commission Proper and shall be in the form attached as Annex "A" to the Resolution. The Notice received by SSS on 4 February 2015 conformed exactly to this prescribed format, which states that the Commission Proper en banc issued a Resolution and quotes the resolution verbatim. SSS' rejection of this officially prescribed Notice, while conveniently adopting a mere letter dated 12 March 2015 as the reckoning point, highlighted its awareness that the petition was filed beyond the reglementary period.

• Validity of Disallowance: Judicial review of COA decisions is limited to errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, as the Constitution vests the broadest latitude in the COA as guardian of public funds. Grave abuse of discretion means an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, such as when the assailed decision is not based on law and evidence but on caprice, whim, and despotism. The COA committed no such abuse. Multiple laws and regulations — PD No. 1597 (requiring presidential approval for allowances), EO No. 180 (excluding high-level employees from rank-and-file organizations), AO No. 103 s. 2004 (suspending new benefits except CNA incentives upon strict compliance with PSLMC Resolutions), PSLMC Resolution No. 4 s. 2002 and No. 2 s. 2003 (limiting CNA benefits to rank-and-file employees), AO No. 135 (reiterating the limit), and DBM Budget Circular 2006-1 (defining rank-and-file employees as those who are not managerial, not coterminous, and not highly confidential) — collectively and clearly establish that high-level managerial and confidential employees are not entitled to CNA benefits because they cannot become members of the negotiating unit. It is of no moment that such employees contributed to agency efficiency. Furthermore, the grant of a fixed ₱20,000.00 "counterpart" CNA incentive violated Section 5.6 of DBM Budget Circular No. 2006-1, which prescribes that no incentive amount shall be predetermined in the CNAs, as the amount must depend on the cost-cutting measures specified under the CNA.

• Timeliness of Petition under Rule 64 — A petition for certiorari under Rule 64 must be filed within 30 days from notice of the judgment or final order sought to be reviewed. The filing of a motion for new trial or reconsideration interrupts the period. If the motion is denied, the aggrieved party may file the petition within the remaining period, which shall not be less than 5 days in any event, reckoned from notice of denial. Failure to file within this period renders the COA decision final and executory.

• Validity of COA Notice of Denial of Motion for Reconsideration — Under COA Resolution No. 2013-018 amending Section 12, Rule X of the 2009 RRPC, the Secretary of the Commission may issue a Notice in a prescribed format informing parties of the Commission Proper's Resolution denying a motion for reconsideration. Such Notice, quoting the resolution verbatim, validly restarts the reglementary period for filing a petition for certiorari.

• Scope of Judicial Review of COA Decisions — Judicial review of COA decisions is limited to errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion means an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, such as when the assailed decision is not based on law and evidence but on caprice, whim, and despotism. The Court generally sustains COA decisions in deference to its expertise.

• Eligibility for CNA Benefits — CNA incentives may be granted only to rank-and-file employees who are members of the collective negotiating unit. High-level managerial, confidential, coterminous, and contractual employees, lawyers, and executives are not eligible to join the organization of rank-and-file government employees and therefore are not entitled to CNA benefits. The amount of CNA incentive must not be predetermined but must depend on cost-cutting measures specified under the CNA.

• Liability for Disallowed Amounts (Madera Rules) — 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 diligence of a good father of the family are not civilly liable to return; (b) approving and certifying officers who acted in bad faith, malice, or gross negligence are solidarily liable to return 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 the amounts were genuinely given in consideration of services rendered; (d) the Court may excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions.

• Presumption of Good Faith in Public Officers — While there is a presumption that approving and certifying officers acted in good faith in the performance of their official duties, this presumption fails when an explicit law, rule, or regulation has been violated. Where the laws violated were already in force at the time the benefits were granted, good faith cannot be appreciated, and the officers must be made to return the disallowed amounts.

• Solutio Indebiti as Basis for Return by Recipients — Recipient employees are liable to return disallowed payments on the ground of solutio indebiti, as a result of the mistake in payment, where they are clearly disqualified from receiving the benefits and prejudice to the government would result if they do not return what they unduly received.

• "The Constitution vests the broadest latitude in the COA in discharging its role as the guardian of public funds and properties. In recognition of such constitutional empowerment, the Court has generally sustained the COA's decisions or resolutions in deference to its expertise in the implementation of the laws it has been entrusted to enforce." — This passage, quoted from Madera vs. Commission on Audit, articulates the doctrinal basis for the limited scope of judicial review of COA decisions, confining inquiry to grave abuse of discretion amounting to lack or excess of jurisdiction.

• "Taking all the foregoing provisions together, the inescapable conclusion is that high-level managerial and confidential employees are not entitled to CNA benefits because they cannot become members of the negotiating unit. It is of no moment that high-level managerial and confidential employees also contributed to the efficiency of the agency. The laws are very clear in stating that only rank-and-file employees who are members of the negotiating unit are entitled to CNA benefits." — This passage states the ratio decidendi on the substantive issue of CNA benefit eligibility, synthesizing the multiple legal bases into a single controlling rule.

• "While there is a presumption that the approving and certifying officers granted the disallowed benefits acted in good faith in the performance of their official duties, this presumption of good faith fails when an explicit law, rule, or regulation has been violated." — This passage defines the exception to the presumption of good faith for public officers in the context of disallowed expenditures, establishing that violation of explicit laws negates good faith.

• Madera vs. Commission on Audit, G.R. No. 244128, 8 September 2020 — Controlling precedent on two points: (1) the scope of judicial review of COA decisions, limited to grave abuse of discretion amounting to lack or excess of jurisdiction; and (2) the rules on liability of certifying and approving officers and recipient employees for disallowed amounts, including the good faith exception and the solutio indebiti basis for return by recipients.

• SSS vs. COA, G.R. No. 244336, 6 October 2020 (SSS 2020) — Followed precedent enumerating the statutory provisions (Sections 43, 38, 39, and 52 of the 1987 Administrative Code; Sections 102 and 103 of the Government Auditing Code; Section 49 of PD 1177; and Section 19 of the Manual of Certificate of Settlement and Balances) that identify the persons liable to return disallowed amounts, and supporting the conclusion that the presumption of good faith fails when explicit laws are violated.

• Section 3, Rule 64, Rules of Court — Prescribes the 30-day reglementary period for filing a petition for certiorari under Rule 64, with interruption upon filing of a motion for reconsideration and a minimum remaining period of 5 days from notice of denial. Applied to find the petition belatedly filed.
• Section 12, Rule X, 2009 Revised Rules of Procedure of the COA (as amended by COA Resolution No. 2013-018) — Prescribes the format of the Notice when the Commission Proper denies a motion for reconsideration. Applied to validate the Notice received by SSS on 4 February 2015 as sufficient to restart the reglementary period.
• Section 5, Presidential Decree No. 1597 (1978) — Provides that allowances, honoraria, and other fringe benefits granted to government employees shall be subject to the approval of the President upon recommendation of the Commissioner of the Budget. Applied as one of the legal bases for disallowance.
• Section 3, Executive Order No. 180 (1987) — States that high-level employees whose functions are policy-making or managerial or whose duties are of a highly confidential nature shall not be eligible to join the organization of rank-and-file government employees. Applied to exclude high-level employees from CNA benefits.
• Section 3(b), Administrative Order No. 103 (2004) — Suspends the grant of new or additional benefits to full-time officials and employees, except for CNA Incentives given in strict compliance with PSLMC Resolutions No. 4 s. 2002 and No. 2 s. 2003. Applied as one of the legal bases for disallowance.
• PSLMC Resolution No. 4 s. 2002 and PSLMC Resolution No. 2 s. 2003 — Provide for the grant of CNA benefits only to rank-and-file employees of GOCCs, GFIs, NGAs, LGUs, and SUCs. Applied to restrict CNA benefits to rank-and-file employees.
• Section 2, Administrative Order No. 135 (2005) — Reiterates the limit of the grant of CNA benefits only to rank-and-file employees of the government. Applied as one of the legal bases for disallowance.
• Section 4.2, DBM Budget Circular No. 2006-1 — Defines rank-and-file employees as those who are not managerial, not coterminous, and not highly confidential employees. Applied to define the eligible class of employees.
• Section 5.6, DBM Budget Circular No. 2006-1 — Prescribes that no incentive amount shall be predetermined in the CNAs, as the amount must be dependent on cost-cutting measures specified under the CNA. Applied to invalidate the fixed ₱20,000.00 counterpart CNA incentive.
• Section 43, Chapter V, Book VI, 1987 Administrative Code — Provides that every payment made in violation of law shall be illegal and every official or employee authorizing or making such payment, and every person receiving such payment, shall be jointly and severally liable to the government. Applied to establish liability for return.
• Sections 38 and 39, Chapter 9, Book I, 1987 Administrative Code — Section 38 provides that a public officer shall not be civilly liable for acts done in the performance of official duties unless there is bad faith, malice, or gross negligence; Section 39 provides that a subordinate officer shall be liable for willful or negligent acts contrary to law even if acting under orders of superiors. Applied in the Madera framework for determining liability.
• Section 52, Chapter 9, Title I-B, Book V, 1987 Administrative Code — Provides that expenditures of government funds in violation of law shall be a personal liability of the official or employee found to be directly responsible. Applied to establish liability for return.
• Sections 102 and 103, Government Auditing Code of the Philippines — Section 102 makes the head of any agency primarily responsible for government funds and property pertaining to the agency; Section 103 provides that expenditures in violation of law shall be a personal liability of the official or employee found directly responsible. Applied to establish liability for return.
• Section 49, Presidential Decree No. 1177 (Budget Reform Decree of 1977) — Provides that every expenditure in violation of law shall be void and every official or employee authorizing or making such payment, and every person receiving such payment, shall be jointly and severally liable. Applied to establish liability for return.
• Section 19, Manual of Certificate of Settlement and Balances — Provides that the liability of public officers for audit disallowances shall be determined on the basis of the nature of the disallowance, duties and responsibilities, extent of participation, and amount of losses. Applied to establish the framework for determining liability.

Gesmundo, C.J., Perlas-Bernabe, Caguioa, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Lopez M., Delos Santos, Gaerlan, and Lopez J., JJ., concurred. Leonen, J., was on official leave.