Wycoco v. Aquino

A GOCC benefit that is not among the exceptions in Section 12 of RA 6758 and is granted without the required presidential or DBM authorization is properly disallowed by the COA; on liability, approving/certifying officers who acted in good faith are not civilly liable to return, but passive recipients—including approving/certifying officers who received the benefit as payees—must return the disallowed amounts under solutio indebiti unless a Madera Rule 2c or 2d exception applies.

The NFA is a government-owned or controlled corporation whose power to grant compensation and allowances is subject to RA 6758, DBM Budget Circular No. 16, s. 1998, and Administrative Order No. 103. COA is the constitutional audit body tasked to audit and disallow unauthorized disbursements of government funds. Prior related litigation, Escarez vs. Commission on Audit, had already ruled the grant of FGI improper for lack of presidential authorization. The present consolidated petitions involve NFA Region IX and NFA-Agusan del Norte Provincial Office officials and employees who received the FGI.

In December 1998, then NFA Administrator Eduardo Nonato Joson wrote to President Joseph Estrada asking for approval of the grant of food assistance and emergency allowance in the amount of Php7,000.00 to all NFA officials and employees. President Estrada granted the request. Five years thereafter, during the term of President Gloria Macapagal-Arroyo, then Chief Presidential Management Staff Ricardo Saludo issued on 04 November 2003 a Memorandum addressed to the heads of government financial institutions and government-owned or controlled corporations to exercise moderation when granting bonuses to their employees. This prompted then NFA Administrator Arthur Y. Yap to request the Office of the Government Corporate Counsel (OGCC) to render an opinion on whether it was proper for the agency to grant its employees food/grocery incentives every Christmas season. On 24 November 2003, the OGCC issued Opinion No. 21910 answering in the affirmative; it opined that Secretary Saludo's Memorandum effectively recognized the authority of heads of GFIs and GOCCs to grant Christmas or year-end bonuses.

Allegedly pursuant to these "presidential issuances" and the OGCC opinion, the NFA Council approved Resolution No. 226-2K5 on 18 May 2005 authorizing the annual grant of FGI in the amount of Php20,000.00 to every NFA official and employee, payable in two tranches. In 2007, then NFA Administrator Jessup P. Navarro issued Memorandum AO-2K&-02-024 encapsulating the Revised Guidelines, continuing the grant of the benefit in four tranches. Consequently, the annual release of FGI triggered COA's issuance of several NDs prohibiting the same, including those challenged in these consolidated petitions.

In G.R. No. 237874, the COA Audit Team Leader and Supervising Auditor issued ND No. 11-003-GOF(10) disallowing the amount of Php660,000.00 representing the FGI granted to the officials and employees of NFA-Zamboanga Regional Office. In G.R. No. 239036, ND No. 2014-01(12) was issued to disallow the grant of FGI to the officials and employees of NFA-Agusan Del Norte Provincial Office (ADNPO) for CY 2012, and petitioners were ordered to refund the amount of Php480,000.00. In G.R. No. 237874, the FGI was disallowed because its grant was found to have violated RA 6758, the 2010 General Appropriations Act, and DBM Budget Circular No. 16, series of 1998. In G.R. No. 239036, the ND was issued on the ground that the Governance Commission for Government-Owned and Controlled Corporation had denied presidential imprimatur to the grant.

Among those found liable in G.R. No. 239036 were the Provincial Manager and Senior Accounting Specialist of NFA-ADNPO as approving/certifying officers, and all officers and employees of NFA-ADNPO who received the benefit. Petitioners' respective appeals all suffered the same denial, prompting them to elevate the matter before the COA Proper. The COA Proper noted that previous NDs had been issued against the grant of FGI and that the employees signed an undertaking consenting to salary deduction should the FGI be disallowed. Petitioners' motions for reconsideration were denied, and they filed these consolidated petitions.

• Presidential Authorization: Petitioners argued that the annual grant of FGI was sanctioned by the "presidential imprimaturs" of President Estrada in 1998 and President Arroyo, through Secretary Saludo, in 2003, and that these prior presidential authorizations were the legal basis for NFA Council Resolution No. 226-2K5.
• Equity and Non-Diminution: Petitioners maintained that disallowing the FGI, which had been traditionally given, would violate equity principles and considerations, as well as the principle of non-diminution of benefits.
• Good Faith and Liability: Petitioners asserted that neither the NFA officials who authorized the grant nor the employees who merely received it should be required to return the disallowed amount on the ground of good faith.

• Grave Abuse of Discretion: Whether the COA Proper committed grave abuse of discretion in sustaining the disallowance of petitioners' FGI.
• Liability of Approving/Certifying Officers: Whether the approving/certifying officers are civilly liable to return the disallowed FGI.
• Liability of Recipients: Whether the passive recipients, including approving/certifying officials who received the FGI as payees, must return the disallowed amounts.

• Grave Abuse of Discretion: No. The COA Proper's decisions upholding the FGI disallowance were supported by sufficient legal bases, and petitioners failed to show capricious or whimsical exercise of judgment.
• Liability of Approving/Certifying Officers: No. Approving and certifying officers who acted in good faith are not civilly liable to return under Section 38 of the Administrative Code; the SC found badges of good faith.
• Liability of Recipients: Yes. Passive recipients, including approving/certifying officials who received the FGI as payees, must refund the amounts they respectively received under solutio indebiti; no Madera Rule 2c or 2d exception applies.

• Grave Abuse of Discretion: The SC applied the settled standard that grave abuse of discretion means capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, and the burden is on the petitioner to prove not merely reversible error but grave abuse of discretion. Findings of administrative agencies are accorded respect and finality absent unfairness or arbitrariness. The COA Proper's decisions had sufficient legal bases. The SC held that Escarez vs. Commission on Audit already ruled the grant of FGI improper for lack of presidential authorization; this was res judicata or conclusiveness of judgment on the propriety of the disallowance, even if the present petitions involved different NDs. The FGI was not among the exceptions in Section 12 of RA 6758, so it was deemed integrated into the standardized salary unless sanctioned by the DBM or authorized by the President. DBM BC No. 16, s. 1998 prohibited food, rice, gift checks, or other incentives/allowances except those authorized by Administrative Order from the Office of the President; AO 103 suspended new or additional benefits to GOCC employees except CNA incentives and those expressly provided by presidential issuance. No DBM approval was alleged. The Estrada letter approved FAEA of Php7,000.00 for Christmas 1998, not an annual FGI; the Saludo memorandum only asked GFI and GOCC heads to moderate bonuses and did not authorize a specific benefit or a perpetual FGI. The OGCC opinion did not give the NFA unbridled authority to violate DBM BC No. 16 and AO 103; Section 7(f) of PD 1770 subjected the NFA Council's power to fix allowances to pertinent compensation law and regulations. Tradition did not create a vested right; National Tobacco was inapplicable because the FGI began in 2005, after RA 6758, and there was no proof of diminution. The fiscal autonomy clarification did not cover the NFA.
• Liability of Approving/Certifying Officers: Under Madera vs. Commission on Audit, if a Notice of Disallowance is upheld, approving and certifying officers who acted in good faith, in the regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return under Section 38 of the Administrative Code of 1987. Bad faith, malice, or gross negligence must be clearly shown. The SC found badges of good faith: the FGI had been traditionally given; the OGCC opinion indicated that the NFA Council issued Resolution No. 226-2K5 under the mistaken but innocent belief that it had authority to authorize the FGI's annual grant; and Escarez was only promulgated in 2016, so when the FGI was released in 2010 and 2012, there was still no precedent disallowing a similar case. The SC therefore exonerated the approving/certifying officers from solidary liability.
• Liability of Recipients: Under Madera, 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; the SC may also excuse return based on undue prejudice, social justice considerations, and other bona fide exceptions. The liability of payees is based on the Civil Code provisions on solutio indebiti or unjust enrichment; receipt by mistake creates an obligation to return, and good faith is not a defense. The SC strictly applies the general rule; Rule 2c is limited to benefits supported by factual and legal bases but disallowed due to procedural infirmities, while Rule 2d applies only in highly exceptional circumstances. The FGI lacked legal and factual bases; it contravened RA 6758, AO 103, and DBM BC No. 16, s. 1998. It had no direct and reasonable connection to the functions performed by the employees because it was intended as an additional benefit or bonus during the Christmas season. No highly exceptional reason existed; the employees were aware of the likelihood of disallowance because they signed an undertaking consenting to salary deduction should the FGI be disallowed. Thus, all passive recipients, including approving/certifying officials who received the FGI as payees, were ordered to refund.

• Presidential/DBM authorization for GOCC benefits — Under Section 12 of RA 6758, DBM BC No. 16, s. 1998, and AO 103, a GOCC benefit not among the statutory exceptions requires presidential or DBM authorization. The SC applied this rule to uphold the disallowance of the FGI.
• Res judicata / conclusiveness of judgment — A prior judgment is conclusive on the issues actually adjudicated between the same parties or their privies; conclusiveness of judgment does not require identity of causes of action but only identity of parties, and substantial identity suffices where there is a community of interest. The SC applied Escarez to bar relitigation of the propriety of the FGI disallowance despite different NDs, but not to the liability under the specific NDs.
• Madera Rules on Return — If a Notice of Disallowance is set aside, no return is required. If upheld: (a) approving and certifying officers who acted in good faith, in the 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; (b) approving and certifying officers shown to have acted in bad faith, malice, or gross negligence are solidarily liable only for the net disallowed amount; (c) recipients, whether approving or certifying officers or mere 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 considerations, and other bona fide exceptions. The SC applied these rules to exonerate the officers and order the recipients to refund.
• Solutio indebiti / unjust enrichment — A payment made when there is no binding relation between the payor and the recipient, and made through mistake rather than liberality, creates an obligation to return. Good faith is not a defense against an obligation under solutio indebiti. The SC applied this to the passive recipients of the FGI.
• Good faith of approving/certifying officers — Public officers are presumed to act regularly and are not civilly liable for official acts absent bad faith, malice, or gross negligence. Recognized badges of good faith include a certificate of availability of funds, an in-house or Department of Justice legal opinion, the absence of precedent disallowing a similar case, traditional practice within the agency with no prior disallowance, and a reasonable textual interpretation of the law. The SC applied these badges to exonerate the NFA approving/certifying officers.
• No vested right from tradition/practice — Customs, practice, and tradition, regardless of length of time, cannot produce a vested right if they lack a legal anchor; erroneous application and enforcement of the law by public officers do not estop the government from correcting the error. The SC applied this to reject the claim that the long-standing FGI grant created a vested right.
• Fiscal autonomy — Constitutional bodies enjoying fiscal autonomy—the Judiciary, Civil Service Commission, Commission on Audit, Commission on Elections, and Office of the Ombudsman—have the flexibility to allocate and utilize their resources. The requirement of presidential or DBM approval for new or additional benefits applies only to agencies whose compensation powers are subject to statutory and budgetary limitations, not to these constitutional bodies. The SC applied this as a clarification; the NFA is not among these bodies.

• "Customs, practice, and tradition regardless of length of time, so long as it lacked legal anchor, could not produce any vested right." — The SC rejected the claim that the NFA's long-standing grant of FGI created a vested right in the recipients.
• "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 exonerate the NFA approving and certifying officers from solidary liability.
• "As it stands, the Court reiterates Its policy to strictly apply the general rule that passive recipients are required to return the amounts they received as benefits when the same were correctly and validly disallowed by COA." — The SC used this to order the FGI recipients to refund, rejecting a broad good-faith exemption.
• "The grant of the FGI cannot be considered as genuinely given in consideration of actual services rendered as it lacked legal and factual bases." — The SC found no Madera Rule 2c exception for the recipients because the FGI was not tied to actual services rendered.

• Escarez vs. Commission on Audit, G.R. No. 217818, 31 May 2016 — Controlling precedent; ruled the grant of FGI improper for lack of presidential authorization and was applied as res judicata or conclusiveness of judgment on the propriety of the disallowance.
• Madera vs. Commission on Audit, G.R. No. 244128, 08 September 2020 — Controlling precedent; laid down the Madera Rules on return, which the SC applied to exonerate the approving/certifying officers and order the recipients to refund.
• National Tobacco Administration vs. Commission on Audit, G.R. No. 119385, 05 August 1999 — Distinguished; involved financial assistance received before RA 6758 and the vested rights of incumbents, unlike the FGI granted after RA 6758.
• Metropolitan Waterworks and Sewerage System vs. Commission on Audit, G.R. No. 195105, 21 November 2017 — Relied on for the July 1, 1989 qualifying date and the rule that practice contrary to law cannot create vested rights.
• Bengzon vs. Drilon, G.R. No. 103524, 15 April 1992 — Relied on for the fiscal autonomy of constitutional bodies; cited to clarify the scope of the ruling.
• Abellanosa vs. Commission on Audit, G.R. No. 185806, 17 November 2020 — Relied on for the strict application of Madera Rules 2c and 2d; the exceptions apply only in truly exceptional cases.
• Cruz vs. Court of Appeals, G.R. No. 164797, 13 February 2006 — Relied on for the rule that only substantial identity of parties is required for res judicata.
• Nabus vs. Court of Appeals, G.R. No. 91670, 07 February 1991 — Relied on for limiting conclusiveness of judgment to issues actually adjudicated in the prior case.

• Section 12, Republic Act No. 6758 — All allowances except those enumerated are deemed integrated into the standardized salary; the FGI was not among the exceptions, so its separate grant required DBM sanction or presidential authorization. Applied to uphold the disallowance.
• DBM Budget Circular No. 16, series of 1998 — Prohibits the grant of food, rice, gift checks, or any other form of incentives or allowances except those authorized via Administrative Order by the Office of the President. Applied because no such Administrative Order existed.
• Administrative Order No. 103 — Suspended the grant of new or additional benefits to GOCC officials and employees except CNA incentives and those expressly provided by presidential issuance. Applied because the FGI was not covered by either exception.
• Sections 38 and 39, Administrative Code of 1987 — A public officer is not civilly liable for acts done in the performance of official duties absent bad faith, malice, or gross negligence; a subordinate officer is not liable for good-faith acts. Applied to exonerate the approving/certifying officers.
• Civil Code provisions on solutio indebiti or injust enrichment — Payment made through mistake creates an obligation to return. Applied to the passive recipients of the FGI.
• Section 7(f), Presidential Decree No. 1770 — The NFA Council may fix remunerations, emoluments, allowances, and other fringe benefits subject to pertinent compensation law and regulations. Applied to show that the NFA Council still needed presidential or DBM authority.
• Rule 64 in relation to Rule 65, Rules of Court — Governs the consolidated petitions for certiorari and the grave abuse of discretion standard. Applied in reviewing the COA Proper's decisions.
• 1987 Constitution, fiscal autonomy of constitutional bodies — The SC clarified that the requirement of presidential or DBM approval does not cover the Judiciary, CSC, COA, COMELEC, and Ombudsman; the NFA is not such a body.

• Justice Perlas-Bernabe (Concurring) — Separate opinion; its text is not included.