EN BANC
G.R. No. 210631, March 12, 2019
SOLITO TORCUATOR, GENERAL MANAGER, POLOMOLOK WATER DISTRICT AND EMPLOYEES OF POLOMOLOK WATER DISTRICT, REPRESENTED BY CECIL MIRASOL, PETITIONERS, v. COMMISSION ON AUDIT, AND POLOMOLOK WATER DISTRICT AUDIT TEAM LEADER ALIA ARUMPAC-MASBUD, RESPONDENTS.
R E S O L U T I O N
GESMUNDO, J.:
This is a petition for certiorari seeking to annul and set aside the November 26, 2012 Decision1 and November 20, 2013 Resolution2 of the Commission on Audit (COA) in Decision No. 2012-222 and Resolution No. 2013-194, respectively. The COA affirmed the Decision3 of the COA Regional Office XII (Region XII) in COA XII Decision No. 09-05 dated March 16, 2009 which affirmed Notice of Disallowance (ND) Nos. 07-001-(06), 07-002-(06), 07-003-(06), and 07-004-(06)4 dated October 4, 2007.
Polomolok Water District (PWD) is a government-owned and controlled corporation organized under Presidential Decree No. 198, as amended. Prior to November 1, 1989, the employees of PWD were receiving medical, food and rice allowances, and cost of living allowance (COLA). However, these benefits were discontinued under Republic Act (R.A.) No. 6758.5
To implement R.A. No. 6758, the Department of Budget and Management (DBM) issued Corporate Compensation Circular (CCC) No. 10. It provided, among others, the discontinuance of all allowances and fringe benefits, including COLA, of government officers and employees over and above their basic salaries starting July 1, 1989.
On the basis of DBM-CCC No. 10, PWD stopped paying its officers and employees COLA and other fringe benefits. Llowever, on August 12, 1998, the Court promulgated De Jesus v. Commission on Audit6 (De Jesus) stating that DBM-CCC No. 10 was ineffective due to its non-publication in the Official Gazette or in a newspaper of general circulation in the country, as required by law. Subsequently, DBM-CCC No. 10 dated February 15, 1999, was re-issued and properly published.7
In its Letter8 dated November 8, 2000, the DBM stated that local water districts shall be allowed to continue the grant of allowances/fringe benefits that are found to be an established practice as of December 31, 1999. In another Letter9 dated April 27, 2001, the DBM reiterated that the grant of allowances and fringe benefits that have been established and granted as of December 31, 1999 shall form part of the compensation being regularly received by the local water district personnel.
Thus, PWD issued Board Resolution No. 02-27 authorizing the payment of COLA and other allowances for the inclusive period of 1992-1999, pursuant to the ruling in De Jesus. In 2006, the COLA, medical, food gift, and rice allowances were released to the officers and employees on staggered basis.
The Notice of Disallowance
On October 4, 2007, the COA Audit Team Leader assigned to PWD issued the following NDs:
In their Memorandum,15 petitioners assert that since De Jesus invalidated DBM-CCC No. 10 for non-publication, then there was no implementing rule that determined the benefits incorporated in the salaries of government employees until said circular was re-published in 1999. Thus, they argue that PWD sufficiently relied on De Jesus when it released the COLA, medical, food gift, and rice allowances of the employees for the inclusive years of 1992 to 1999. They also aver that De Jesus was reiterated in Philippine Ports Authority Employees Hired after July 1, 1989 v. Commission on Audit, et al.16 (PPA Employees), which stated that employees of Government-Owned and Controlled Corporations (GOCCs) are entitled to COLA and other fringe benefits during the time that DBM-CCC No. 10 was in legal limbo.I.
THE COMMISSION ON AUDIT ERRED AND GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE FINDINGS OF COA FIELD AUDITORS IN ND NO. 07-001-(06), DISALLOWING PAYMENT OF MEDICAL, FOOD GIFT AND RICE ALLOWANCES TO THE EMPLOYEES OF POLOMOLOK WATER DISTRICT IN 2006 DESPITE CLEARANCE FROM THE DEPARTMENT [OF] BUDGET AND MANAGEMENT;II.
THE COMMISSION ON AUDIT ERRED AND GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE FINDINGS OF COA FIELD AUDITORS IN ND NO. 07-004-(06), DISALLOWING PAYMENT OF COLA TO THE EMPLOYEES OF POLOMOLOK WATER DISTRICT FOR THE YEARS 1992 THROUGH 1999 DESPITE THE PREVAILING CASE LAW AT THE TIME OF PAYMENT IN 2006;III.
THE COMMISSION ON AUDIT ERRED AND GRAVELY ABUSED ITS DISCRETION IN RETROACTIVELY APPLYING THE 2010 DECISION IN THE CASE OF GUTIERREZ V. DBM IN THE ACTUAL DISBURSEMENT IN 2006 AND IN MISAPPLYING THE SAME TO A GOVERNMENT[-]OWNED AND CONTROLLED CORPORATION.14
SECTION 12. Consolidation of Allowances and Compensation. — All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.In Maritime Industry Authority v. Commission on Audit18 (MIA) the Court explained the provision of Sec. 12, to wit:
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.
The clear policy of Section 12 is "to standardize salary rates among government personnel and do away with multiple allowances and other incentive packages and the resulting differences in compensation among them." Thus, the general rule is that all allowances are deemed included in the standardized salary. However, there are allowances that may be given in addition to the standardized salary. These non-integrated allowances are specifically identified in Section 12, to wit:Pursuant to R.A. No. 6758, DBM-CCC No. 10 was issued, which provided, among others, the discontinuance without qualification of all allowances and fringe benefits, including COLA, of government employees over and above their basic salaries.20 In 1998, the Court declared in the case of De Jesus that DBM-CCC No. 10 is without force and effect on account of its non-publication in the Official Gazette or in a newspaper of general circulation, as required by law. In 1999, DBM re-issued its DBM-CCC No. 10 in its entirety and submitted it for publication in the Official Gazette.In addition to the non-integrated allowances specified in Sec. 12, the Department of Budget and Management is delegated the authority to identify other allowances that may be given to government employees in addition to the standardized salary.19
- representation and transportation allowances;
- clothing and laundry allowances;
- subsistence allowance of marine officers and crew on board government vessels;
- subsistence allowance of hospital personnel;
- hazard pay; and
- allowances of foreign service personnel stationed abroad.
There is no merit in the claim of PITC that R.A. No. 6758, particularly Section 12 thereof is void because DBM-Corporate Compensation Circular No. 10, its implementing rules, was nullified in the case of De Jesus v. Commission on Audit, for lack of publication. The basis of COA in disallowing the grant of SFI was Section 12 of R.A. No. 6758 and not DBM-CCC No. 10. Moreover, the nullity of DBM-CCC No. 10, will not affect the validity of R.A. No. 6758. It is a cardinal rule in statutory construction that statutory provisions control the rules and regulations which may be issued pursuant thereto. Such rules and regulations must be consistent with and must not defeat the purpose of the statute. The validity of R.A. No. 6758 should not be made to depend on the validity of its implementing rules.22 (emphasis supplied; citations omitted)In NAPOCOR Employees Consolidated Union, et at v. National Power Corporation, et al.,23 the Court reiterated that while DBM-CCC No. 10 was nullified in De Jesus, there is nothing in that decision suggesting or intimating the suspension of the effectivity of R.A. No. 6758 pending the publication of DBM-CCC No. 10 in the Official Gazette.
The drawing up of the above list is consistent with Section 12 above. R.A. [No.] 6758 did not prohibit the DBM from identifying for the purpose of implementation what fell into the class of "all allowances." With respect to what employees' benefits fell outside the term apart from those that the law specified, the DBM, said this Court in a case, needed to promulgate rules and regulations identifying those excluded benefits. This leads to the inevitable conclusion that until and unless the DBM issues such rules and regulations, the enumerated exclusions in items (1) to (6) remain exclusive. Thus so, not being an enumerated exclusion, COLA is deemed already incorporated in the standardized salary rates of government employees under the general rule of integration.In MIA, the Court emphasized that R.A. No. 6758 deems all allowances and benefits received by government officials and employees as incorporated in the standardized salary, unless excluded by law or an issuance by the DBM. The integration of the benefits and allowances is by legal fiction.25
x x x x
Clearly, COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and employees of the government in the performance of their official functions. It is not payment in consideration of the fulfillment of official duty. As defined, cost of living refers to "the level of prices relating to a range of everyday items" or "the cost of purchasing those goods and services which are included in an accepted standard level of consumption." Based on this premise, COLA is a benefit intended to cover increases in the cost of living. Thus, it is and should be integrated into the standardized salary rates.24 (emphasis supplied; citations omitted)
In order to settle any confusion, we abandon any other interpretation of our ruling in Philippine Ports Authority (PPA) Employees Hired after July 1, 1989 with regard to the entitlement of the NAPOCOR officers and employees to the back payment of COLA and AA during the period of legal limbo. To grant any back payment of COLA and AA despite their factual integration into the standardized salary would cause salary distortions in the Civil Service. It would also provide unequal protection to those employees whose COLA and AA were proven to have been factually discontinued from the period of Republic Act No. 6758's effectivity.In this case, however, the PWD officers and employees that received the disallowed benefits were uniformly hired after July 1, 1989.31 Thus, PPA Employees does not apply in all fours in the present case. Sec. 12 of R.A. No. 6753 should be applied to the said officers and employees. At the time they were hired, there was no diminution of benefits as these benefits were deemed integrated in the standardized salaries. To reiterate, petitioners cannot invoke the legal limbo of DBM-CCC No. 10 because the integration of allowances under Sec. 12 is self-executory even without any implementing rule.
x x x x
Furthermore, Philippine Ports Authority (PPA) Employees Hired after July 1, 1989 only applies if the compensation package of those hired before the effectivity of Republic Act No. 6758 actually decreased; or in the case of those hired after, if they received a lesser compensation package as a result of the deduction of COLA or AA.30
Second, the back payment of the COLA and AA need not be refunded because at the time they were paid, there was no similar ruling like the MIA case, where it was held that integration was the general rule and, therefore, benefits were deemed integrated notwithstanding the absence of a DBM issuance. Prior to MIA, there had been no categorical pronouncement that, by virtue of Section 12 of the SSL, benefits were deemed integrated, without a need of a subsequent issuance from the DBM. Consequently, the officers who authorized the back payment of the COLA and AA and the employees who received them believing to be entitled thereto need not refund the same. They were in good faith as they were oblivious that the said payments were improper.37Recently, in Metropolitan Naga Water District v. Commission on Audit,38 which also deals with a local water district, it was ruled that the employees need not refund the amounts corresponding to the COLA they received because they had no participation in the approval thereof and were mere passive recipients without knowledge of any irregularity. Further, good faith was also appreciated in favor of the officers who approved the same because they merely acted in accordance with the resolution passed by its board authorizing the back payment of COLA to the employees. Moreover, at the time the disbursements were made, no ruling similar to MIA was yet made declaring that the COLA was deemed automatically integrated into the salary notwithstanding the absence of a DBM issuance.
| Very truly yours, |
(SGD) EDGAR O. ARICHETA | |
Clerk of Court |
Endnotes:
1Rollo, pp. 26-36; concurred by Chairperson Ma. Gracia M. Pulido Tan and Commissioners Juanito G. Espino, Jr. and Heidi L. Mendoza.
2 Id. at 37-39; concurred by Chairperson Ma. Gracia M. Pulido Tan and Commissioners Heidi L. Mendoza and Rowena V. Guanzon.
3 Id. at 97; penned by Atty. Usmin P. Diamel, Regional Director.
4 Id. at 98-113.
5 Also known as the Compensation and Position Classification Act of 1989.
6 355 Phil. 584 (1998).
7 See rollo, p. 28.
8 Id. at 57-59.
9 Id. at 60-61.
10 See id. at 27-28.
11 Id. at 96.
12 630 Phil. 1 (2010).
13Rollo, p. 22.
14 Id. at 13.
15 Id. at 221-232.
16 506 Phil. 382 (2005).
17Rollo, pp. 184-199 and 211-219.
18 750 Phil. 288 (2015).
19 Id. at 314-315.
20 See rollo, p. 9.
21 461 Phil. 737 (2003).
22 Id. at 749-750.
23 519 Phil. 372 (2006).
24 Supra note 12, at 16-17.
25 Supra note 18, at 332.
26 Id. at 320.
27 779 Phil, 225 (2016).
28Metropolitan Naga Water District, et al. v. COA, 782 Phil. 281, 290 (2016).
29 805 Phil. 294 (2017).
30 Id. at 338-339.
31Rollo, pp. 111-113.
32 Id. at 196.
33The Public Schools District Supervisors Association v. De Jesus, et al., 524 Phil. 366, 386 (2006).
34Maritime Industry Authority v. Commission on Audit, supra note 18 at 337, citing Philippine Economic Zone Authority v. Commission on Audit, 690 Phil. 104, 115 (2012).
35 G.R. No. 221706, March 13, 2018.
36 See supra note 18, at 342.
37 Supra note 27, at 250.
38 Supra note 28.
39Philippine Economic Zone Authority v. Commission on Audit, et al., 797 Phil. 117, 142 (2016).